[Federal Register Volume 76, Number 170 (Thursday, September 1, 2011)]
[Rules and Regulations]
[Pages 54600-54635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22126]



[[Page 54599]]

Vol. 76

Thursday,

No. 170

September 1, 2011

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; Medicare Advantage and Prescription Drug Benefit 
Programs; Final Rule

  Federal Register / Vol. 76 , No. 170 / Thursday, September 1, 2011 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, and 423

[CMS-4131-F and CMS 4138-F]
RIN 0938-AP24 and 0938-AP52


Medicare Program; Medicare Advantage and Prescription Drug 
Benefit Programs

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

ACTION: Final rule.

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SUMMARY: This final rule finalizes revisions to the regulations 
governing the Medicare Advantage (MA) program (Part C), prescription 
drug benefit program (Part D) and section 1876 cost plans including 
conforming changes to the MA regulations to implement statutory 
requirements regarding special needs plans (SNPs), private fee-for-
service plans (PFFS), regional preferred provider organizations (RPPO) 
plans, and Medicare medical savings accounts (MSA) plans, cost-sharing 
for dual-eligible enrollees in the MA program and prescription drug 
pricing, coverage, and payment processes in the Part D program, and 
requirements governing the marketing of Part C and Part D plans.

DATES: Effective Date: Except as otherwise specified these regulations 
are effective on October 31, 2011.

FOR FURTHER INFORMATION CONTACT:

Vanessa Duran, (410) 786-8697 and Heather Rudo, (410) 786-7627, General 
information.
Christopher McClintick, (410) 786-4682, Part C issues.
Lisa Thorpe, (410) 786-3048, Part D issues.
Frank Szeflinski, (303) 844-7119, Part C payment issues.
Camille Brown, (410) 786-0274, Marketing issues.

SUPPLEMENTARY INFORMATION:

I. Background

    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 established the current MA 
program. The Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 (MMA) (Pub. L. 108-173) established the Part D program and 
made significant revisions to Part C provisions governing the Medicare 
Advantage (MA) program. The MMA directed that important aspects of the 
Part D program be similar to, and coordinated with, regulations for the 
MA program. Generally, the provisions enacted in the MMA took effect 
January 1, 2006. The final rules implementing the MMA for the MA and 
Part D prescription drug programs appeared in the January 28, 2005 
Federal Register on (70 FR 4588 through 4741 and 70 FR 4194 through 
4585, respectively).
    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. The Medicare Improvements for Patients and Providers Act 
(MIPPA) (Pub. L. 110-275), enacted on July 15, 2008, called upon the 
Secretary to revise the marketing requirements for Part C and Part D 
plans in several areas. MIPPA also enacted changes with respect to 
Special Needs Plans (SNPs), Private Fee-For-Service plans (PFFS), 
Quality Improvement Programs, the prompt payment of Part D claims, and 
the use of Part D data. With the exceptions noted in this final rule, 
MIPPA required that these new rules take effect at a date specified by 
the Secretary, but no later than November 15, 2008.
    Because several of these proposed regulatory revisions in our May 
16, 2008 proposed rule were overtaken by statutory provisions in MIPPA, 
the MIPPA provisions superseded our proposed rulemaking in these areas. 
For example, some provisions in our May 16, 2008 proposed rule 
addressed issues in areas in which MIPPA required that we establish 
marketing limits no later than November 15, 2008. As a result, we 
implemented all provisions addressed in our May 16, 2008 proposed rule, 
and later overtaken by MIPPA provisions, in our September 18, 2008 and 
November 14, 2008 interim final rules with comment (IFCs). We finalized 
the non-MIPPA related provisions of our May 16, 2008 proposed rule in 
our January 16, 2009 final rule with comment period.
    This final rule finalizes the MIPPA-related provisions of our 
September 18, 2008 IFC (73 FR 54226), our November 14, 2008 IFC (73 FR 
67406), our November 21, 2008 correction notice (73 FR 70598), and one 
provision on two SNP-related statutory definitions that was finalized 
with a comment period in our January 16, 2009 final rule with comment 
period (74 FR 2881).

II. Provisions of This Final Rule

    Revisions made in this final rule govern section 1876 cost contract 
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 that follows, we note when a provision affects both the MA 
and prescription drug benefit, and we include in section II.C. of this 
final rule, a table comparing the final 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
    Congress authorized special needs plans (SNPs) as a type of 
Medicare Advantage (MA) plan designed to enroll individuals with 
special needs. The three types of special needs individuals eligible 
for enrollment in a SNP identified in the MMA include--(1) 
Institutionalized individuals (defined in Sec.  422.2 as an individual 
continuously residing, or expecting to continuously 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 of the Act; or 
(3) other individuals with severe or disabling chronic conditions that 
would benefit from enrollment in a SNP.
    As of January 2011, there are 455 SNP plan benefit packages (PBPs) 
in operation nationwide. These SNP PBPs include 298 dual-eligible SNP 
(D-SNP) PBPs, 92 chronic care SNP (C-SNP) PBPs, and 65 institutional 
SNP (I-SNP) PBPs.
a. Model of Care (Sec.  422.101(f))
    Section 164 of MIPPA added 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 required dual-
eligible, institutional, and chronic condition SNPs to implement care 
management requirements which have two explicit components: an 
evidence-based model of care and a battery of care management services. 
While the revisions made in our September 18, 2008 IFC simply reflected 
the substance of the new MIPPA provisions, our May 16, 2008 proposed 
rule proposed other, related provisions which were finalized in our 
January 12, 2009 final rule.
    The first component of the new mandate enacted in section 164 of 
MIPPA is a requirement for an evidence-based model of care with an 
appropriate

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network of providers and specialists that meet the specialized needs of 
the SNP target population. We received a few comments on our September 
18, 2008 IFC about whether we would issue evidence-based guidelines for 
the model of care, but we did not in our September 18, 2008 IFC 
implement this mandate to endorse any particular set of evidence-based 
guidelines or protocols; instead, we expected that SNPs would develop 
such guidelines and protocols based on the specific elements to be 
included in the model of care as found in the 2008 and 2009 Call 
Letters. We expected that SNPs would be able to use resources such as 
the Agency for Healthcare Research and Quality (AHRQ, http://www.ahrq.gov/). AHRQ does not endorse any particular set of evidence-
based guidelines or protocols; however, 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 an 
individual's physical, psychosocial, and functional needs; (2) an 
individualized plan of care that includes goals and measurable 
outcomes, including specific services and benefits to be provided; and 
(3) an interdisciplinary team to manage care. In addition, MIPPA 
mandated a periodic audit of SNPs to ensure SNPs meet the model of care 
requirements.
    We also have issued guidance on the SNP model of care in our 2008 
and 2009 Call Letters. In addition, care coordination and the presence 
of a provider network comprised of clinical experts pertinent to a 
SNP's target population have long been the cornerstones of the SNP 
model of care.
    In this final rule, we are revising Sec.  422.101(f)(1), which was 
effective January 1, 2010, to correct a typo. The phrase that we are 
replacing is ``indentifying goals,'' and adding ``identifying goals'' 
in its place.
b. Definitions: Institutional-Equivalent and Severe or Disabling 
Chronic Condition (Sec.  422.2)
    Section 164 of MIPPA, inter alia, modified the requirements and 
definitions pertaining to an institutional special needs individual and 
a ``severe or disabling chronic condition'' special needs individual, 
without specifically defining the relevant terms. In response to our 
May 16, 2008 proposed rule regarding eligibility for institutional-
level individuals and severe or disabling chronic condition 
individuals, we received public comments that requested that we propose 
two additional SNP definitions. Accordingly, in our January 12, 2009 
final rule with comment period in which we added definitions based on 
comments from the May 16, 2008 proposed rule, we specified the 
following definitions for ``Institutional Equivalent'' and ``Disabling 
Chronic Condition.''
    ``Institutional-equivalent'' means, for the purpose of defining a 
special needs individual, an MA eligible individual who is living in 
the community, but requires an institutional level of care (LOC). The 
determination that the individual requires an institutional LOC must be 
made by--
     The use of a State assessment tool from the State in which 
the individual resides; and
     An assessment conducted by an impartial entity with the 
requisite knowledge and experience to accurately identify whether the 
beneficiary meets the institutional LOC criteria.
    In States and territories that do not have an existing 
institutional LOC tool, the individual must be assessed using the same 
methodology that specific State uses to determine institutional LOC for 
Medicaid nursing home eligibility.
    In our January 12, 2009 final rule with comment period, we 
specified that the determination of institutional LOC must be made 
using a State assessment tool because States have extensive experience 
in making LOC determinations. We also specified that this LOC 
determination also be made by an additional entity, other than the 
Medicare Advantage Organization (MAO), to ensure the impartially of the 
assessment.
    ``Severe or Disabling Chronic Condition'' means, for the purposes 
of defining a special needs individual, an MA eligible individual who 
has one or more co-morbid and medically complex chronic conditions that 
are substantially disabling or life-threatening; has a high risk of 
hospitalization or other significant adverse health outcomes; and 
requires specialized delivery systems across domains of care.
    We did not receive any comments on these definitions. As such, they 
are adopted without modification in this final rule.
c. Dual-Eligible SNPs and Contracts With States (Sec.  422.107)
    Section 164(c) of MIPPA modified section 1859(f)(3)(D) of the Act 
to require that, effective January 1, 2010, all MA organizations 
offering new dual-eligible SNPs (D-SNPs), or seeking to expand the 
service area of existing D-SNPs, have a contract with the State 
Medicaid agency(ies) in the State(s) in which the D-SNP operates to 
provide benefits, or to arrange for the provision of benefits to 
individuals entitled to receive medical assistance under title XIX of 
the Act. In order to implement this requirement, we specified in our 
(74 FR 54226) IFC published on September 18, 2008 that the contract 
with the State Medicaid agency(ies) must include, at minimum: (1) The 
MAO's responsibility to provide or arrange for Medicaid benefits; (2) 
the category(ies) of eligibility covered under the D-SNP; (3) the 
Medicaid benefits covered under the D-SNP; (4) the cost-sharing 
protections covered under the D-SNP; (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 D-SNP; and (8) the contract period for the 
D-SNP. We further clarified that States are not required to enter into 
these contracts with a particular plan or any SNP in the state at all, 
and that we would not permit D-SNPs without State contracts to expand 
their service areas in 2010. We also specified that, for contract year 
2010, MAOs with existing D-SNPs may continue to operate in their 
existing service area without a State Medicaid Agency contract, 
provided they meet all other statutory requirements, including care 
management and quality improvement program requirements. We set forth 
these requirements at Sec.  422.107.
    Comment: Many commenters supported requiring the collaboration 
between MAOs offering D-SNPs and State Medicaid agencies. However, the 
majority of comments that offered qualified support raised questions 
and concerns about operational issues related to the submission of 
these State Medicaid Agency contracts to CMS. Several commenters 
contended that variation in State contracting and procurement processes 
make it difficult for D-SNPs to obtain State Medicaid Agency contracts 
by CMS' deadline, and requested that we give D-SNPs additional time and 
flexibility, on a case by case basis, to meet our contracting 
deadlines.
    Response: We appreciate the commenters' support for the requirement 
that D-SNPs contract with the State Medicaid agencies in the States 
within which the D-SNPs operate. Although we appreciate the information 
about how D-SNPs are impacted by our State Medicaid Agency contract 
submission deadlines, we are not modifying the provision to address the 
operational issues that the commenters raised because we do not

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believe that rulemaking is the appropriate vehicle for addressing such 
issues. However, we note, that while we are not addressing these 
specific operational concerns in this final rule, we provided 
operational guidance to MAOs well in advance of the 2012 contract 
submission deadline. Additional guidance for the 2013 contract 
submission deadline will be included in the 2013 SNP Application, the 
Call Letter for CY 2013, and in any additional HPMS memoranda about the 
D-SNP-State Medicaid agency contract requirement.
    Comment: A number of commenters that submitted comments sought 
clarification on the States' obligations to contract with D-SNPs, 
including whether a State Medicaid agency is required to enter into 
contracts with all D-SNPs that seek to operate in its State. One 
commenter expressed concern about being able to contract with all of 
the D-SNPs that operate in its State because of budgetary concerns and 
contended that this MIPPA requirement to contract with D-SNPs conflicts 
with its established Medicaid managed care models. A few commenters 
suggested that CMS hold D-SNPs harmless if the D-SNP made a good faith 
effort to contract and the State Medicaid agencies either refused to 
contract with the D-SNP at all or refused to include the required 
provisions of Sec.  422.107(c) in the contract between the DSNP and the 
State Medicaid agency. Several of these commenters requested that CMS 
provide incentives and assistance to States to contract with D-SNPs and 
facilitate the contracting process between D-SNPs and the State 
Medicaid agencies. By contrast, one commenter recommended that CMS 
communicate with State Medicaid agencies about D-SNPs that seek to 
operate in its State so the State can let CMS know what SNPs it will 
not contract with, thereby alleviating CMS' burden of reviewing SNPs 
with which a State will not contract.
    Response: As explicitly provided in section 164(c)(4) of MIPPA, 
States are not under any obligations to contract with D-SNPs and can 
decline a D-SNP's request to enter into a contract for any reason. D-
SNPs must still comply with the State contract requirements as 
established in section 164(c) and our regulations at Sec.  422.107. 
However, as required by MIPPA and modified by the Affordable Care Act 
of 2010, to operate during contract year 2013 and beyond, all D-SNPs 
must secure a State Medicaid Agency contract containing, at minimum, 
all provisions listed in Sec.  422.107(c); existing D-SNPs that do not 
obtain a required contract with their State Medicaid agency(ies) will 
not be permitted to continue. We do not believe that Congress intended 
that we hold D-SNPs harmless if the D-SNP made a good faith effort to 
contract and the State Medicaid agencies either refused to contract 
with the D-SNP at all or refused to include the required provisions. As 
required by section 164(c) of MIPPA, and in an effort to facilitate the 
contracting process between State Medicaid agencies and D-SNPs, we have 
established a State Resource Center to provide States with helpful 
information as they engage in contract negotiations with D-SNPs. This 
State Resource Center is designed to facilitate integration and 
coordination of benefits, policies, and day-to-day business processes 
between State Medicaid agencies and D-SNPs, and was also developed to 
provide a forum for States to make inquiries and share information with 
CMS and each other about the coordination of State and Federal policies 
pertaining to SNPs. States and D-SNPs seeking assistance with these 
requirements may e-mail at [email protected], or 
visit the State Resource Center Web site at https://www.cms.hhs.gov/SpecialNeedsPlans/05_StateResourceCenter.asp. We are, therefore, 
finalizing this provision without further modification.
    Comment: Several commenters requested clarification on the meaning 
of ``providing benefits, or arranging for benefits to be provided'' 
under Sec.  422.107(b), which states that ``[t]he 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 * * *''. A few commenters 
sought confirmation that, with this language, CMS is not requiring D-
SNPs to provide the Medicaid benefits directly to the dual-eligible 
beneficiary; rather, these commenters suggested that they should be 
able to subcontract with another entity for the provision of the 
benefits. Additionally, one commenter questioned whether States may 
enter into a State Medicaid Agency contract with a D-SNP under which 
the SNP does not have a contractual obligation to provide any Medicaid 
benefits. As noted by this commenter, such an option would enable 
States to facilitate the continued operation of D-SNPs without creating 
a conflict with the State's existing managed care models.
    Response: D-SNPs may provide Medicaid benefits directly, or under 
contract with another entity, but must retain responsibility for the 
Medicaid benefits. States and D-SNPs identify the package of Medicaid 
benefits included under the D-SNP in their contract negotiations. The 
requirement that the D-SNP retain responsibility for the Medicaid 
benefits does not allow for a MIPPA compliant State Medicaid Agency 
contract under which the SNP does not have a contractual obligation to 
provide any Medicaid benefits. We are, therefore, finalizing this 
provision without further modification.
    Comment: Many commenters questioned and sought clarification on the 
minimum contract requirements specified in Sec.  422.107(c) and 
questioned whether various existing contracting arrangements between 
MAOs and States (that is, HIPAA business associate agreements or 
existing contracts between States and Medicaid managed care 
organizations) would satisfy the requirements of Sec.  422.107(c). 
Commenters also requested we clarify: (1) The meaning of ``provide or 
arrange for Medicaid benefits'' under Sec.  422.107(c)(1); (2) whether 
under Sec.  422.107(c)(2), the State Plan governs the categories of 
dual eligible beneficiaries to be specified under the State contract, 
and whether the D-SNP must serve all duals in a State as opposed to 
smaller subsets of the State's dual-eligible population; (3) the scope 
of Medicaid benefits to be covered under the SNP; (4) the meaning 
``cost sharing provisions under the SNP''; (5) the meaning of 
``identification and sharing of information on Medicaid provider 
participation''; (6) the meaning of ``verification of enrollee's 
eligibility for both Medicare and Medicaid''; (7) whether the Medicaid 
managed care contract service area must match up with the D-SNP service 
area; and (8) whether CMS will accept contracts with evergreen clauses.
    Response: In order to comply with the State Medicaid Agency 
contract requirements under section 164 of MIPPA, all contracts must, 
at minimum, contain the provisions outlined in Sec.  422.107(c). We are 
unable to make a blanket determination that certain agreements between 
SNPs and State Medicaid agencies do or do not contain all of the 
required provisions; rather, we will review each contract individually 
for each required element to determine compliance. To provide D-SNPs 
more information on these requirements, we released and will continue 
to update additional guidance through the Medicare Managed Care Manual 
and other guidance vehicles (that is, HPMS memos) on the minimum 
contract requirements specified in Sec.  422.107. Additionally, the 
following explanations provide some further

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clarification on the required contract provisions:
     The MA organization's responsibility, including financial 
obligations, to provide or arrange for Medicaid benefits: This 
requirement under Sec.  422.107(c) simply requires that the contract 
between the D-SNP and the State Medicaid agency clearly outline the 
process by which the D-SNP will provide or arrange for Medicaid 
benefits and specify how the Medicare and Medicaid benefits will be 
integrated and/or coordinated. The meaning of ``provide or arrange for 
Medicaid benefits'' is previously discussed in response to the previous 
comment regarding the meaning of these terms under Sec.  422.107(b).
     The category(ies) of eligibility for dual-eligible 
beneficiaries to be enrolled under the SNP, including the targeting of 
specific subsets: This contract provision must specify the population 
of dual-eligible beneficiaries eligible to enroll in the D-SNP, and any 
enrollment limitations for Medicare beneficiaries under this D-SNP must 
parallel any enrollment limitations under the Medicaid program and 
Medicaid State Plan. A D-SNP contract with a State Medicaid agency may 
be for the State's entire population of dual-eligible beneficiaries or 
may cover certain categories of dual-eligible individuals. To the 
extent a State Medicaid agency excludes specific groups of dual 
eligibles from their Medicaid contracts or agreements, those same 
groups must be excluded from enrollment in the SNP, provided that the 
enrollment limitations parallel the structure and care delivery of the 
State Medicaid program. For organizations that contract with the State 
as a Medicaid managed care plan, enrollment in the D-SNP must be 
limited to the dual-eligible beneficiaries permitted to enroll in that 
organization's Medicaid managed care contract.
     The Medicaid benefits covered under the SNP: This State 
contract provision must specify information on benefit design and 
administration, and delineate plan responsibility to provide or arrange 
for benefits. The contract should specify the Medicaid benefits offered 
under the State Plan as well as those benefits the D-SNP will offer 
that go beyond what is required under Original Medicare.
     The cost-sharing protections covered under the SNP: The 
State Medicaid Agency contract should include the limitation on out of 
pocket costs for the applicable categories of dual eligible 
beneficiaries (for example, full benefit dual-eligible individuals). D-
SNPs must enforce limits on out-of-pocket costs for dual-eligibles, and 
contracts between D-SNPs and State Medicaid agencies must specify that 
the D-SNP will not impose cost-sharing requirements on specified dual-
eligible individuals that would exceed the amounts permitted under the 
State Medicaid Plan if the individual were not enrolled in the D-SNP.
     The identification and sharing of information on Medicaid 
provider participation: Meeting this contracting element requires that 
the information provided include a process for the State to identify 
and share information on providers contracted with the State Medicaid 
agency for inclusion in the SNP provider directory. Although CMS does 
not require all providers to accept both Medicare and Medicaid, the D-
SNP's Medicare and Medicaid networks should meet the needs of the dual-
eligible population served.
     The verification of enrollee's eligibility for both 
Medicare and Medicaid: The contract must describe in detail how the 
State Medicaid agency will provide D-SNPs with access to real time 
information to verify eligibility of enrolled dual eligible members.
     The service area covered by the SNP: The State contract 
provision must clearly identify the covered service area in which the 
State has agreed the D-SNP may operate. The D-SNPs service area cannot 
exceed the service area specified in the State Medicaid Agency 
contract. By contrast, the Medicaid managed care service area can 
exceed or include more counties than the D-SNP service area.
     The contract period for the SNP: The State Medicaid Agency 
contract requires a contract term covering at least January 1 through 
December 31 of the relevant MA contract year. If the State is unable to 
meet this required contract term provision, the D-SNP may include an 
evergreen clause within the contract and provide information about when 
the State issues updates to its existing contracts with evergreen 
clauses. Therefore, we are finalizing this provision without 
modification.
    Comment: One commenter sought clarification about whether a D-SNP 
with authority to operate without a State Medicaid Agency contract can 
increase enrollment in the existing counties in its service area.
    Response: D-SNPs that are permitted to operate in contract year 
2012 without a State Medicaid Agency contract are also permitted to 
increase enrollment in the counties in their existing service area. 
Section 164(c) of MIPPA provided that all new D-SNPs must have 
contracts with the State Medicaid agencies in the States in which the 
D-SNPs operate. This provision allowed existing D-SNPs that were not 
seeking to expand their service areas the authority to continue 
operating without a State contract through the 2010 contract year. In 
2010, section 3205 of the Affordable Care Act extended this provision 
for existing, non-expanding D-SNPs through the end of the 2012 contract 
year. As such, for contract year 2012, D-SNPs are only required to have 
a signed State Medicaid Agency contract to operate if they: (1) Are 
offering a new D-SNP-type in CY 2012; (2) are expanding the service 
area of an existing D-SNP type in CY 2012; (3) offered a new D-SNP type 
in CY 2010 or CY 2011; or (4) expanded the service area of an existing 
D-SNP during either of these 2 contract years. Since our April 2011 
final rule (76 FR 21563) entitled, Medicare Program: Changes to the 
Medicare Advantage and the Medicare Prescription Drug Benefit Programs 
for Contract Year 2012 and Other Changes, finalized changes to Sec.  
422.107(d)(1)(ii) such that existing D-SNPs can operate without State 
Medicaid contracts through CY 2012, provided they do not expand their 
service areas, the regulatory text changes we made to Sec.  
422.107(d)(1)(ii) in our September 18, 2008 IFC have been superseded. 
Therefore, in this final rule, we are not finalizing the regulatory 
text changes to Sec.  422.107(d)(1)(ii) that we described in our 
September 18, 2008 IFC.
    Comment: Two commenters sought clarification on whether MIPPA's 
State Medicaid Agency contract requirement applies only to D-SNPs or to 
all SNPs types that serve and enroll dual-eligible beneficiaries. One 
commenter suggested this provision broadly apply to all SNP types.
    Response: Section 164(c) of MIPPA requires that D-SNPs contract 
with the State Medicaid agencies in the States in which the D-SNP 
operates to provide benefits, or arrange for benefits to be provided, 
for individuals entitled to receive medical assistance under title XIX. 
This requirement is found in section 164(c) of MIPPA under a subsection 
starting with the statutory text ``ADDITIONAL REQUIREMENTS FOR DUAL 
SNPS.'' Further, this provision specifically refers to a specialized MA 
plan for special needs individuals described in subsection 
(b)(6)(B)(ii), which we have interpreted in past guidance to mean D-
SNPs. As such, it is clear that Congress only intended that this State 
contract requirement apply to D-SNPs, and not C-SNPs and I-SNPs that 
enroll dual-eligible beneficiaries. Therefore, we are finalizing this 
provision without modification.

[[Page 54604]]

d. SNPs and Quality Improvement Program (Sec.  422.152)
    Section 164 of MIPPA amended section 1852(e)(3)(A) of the Act to 
add clause (ii) and added a new paragraph (6) to section 1857(d) of the 
Act. Section 1852(e)(3)(A)(ii) of the Act requires that data collected, 
analyzed, and reported as part of the plan's quality improvement (QI) 
program must measure health outcomes and other indices of quality at 
the plan level with respect to the model of care (MOC) as required in 
section 1859(f)(2) through (5) of the Act. As a Medicare Advantage (MA) 
plan, each SNP must implement a documented QI program for which all 
information is available for submission to CMS or for review during 
monitoring visits. The focus of the SNP QI program should be the 
monitoring and evaluation of the performance of its MOC (see Sec.  
422.101(f)). In the September 18, 2008 IFC, we stated that, no later 
than January 1, 2010, the program should be executed as a three-tier 
system of performance improvement.
    The first tier of this program consisted of collection and analysis 
of data on quality and outcome to enable beneficiaries to compare and 
select among health coverage options. As part of the first tier 
implementation and to pilot the development of comparative measures to 
facilitate beneficiary choice, SNPs were required to collect, analyze, 
and submit 13 Healthcare Effectiveness Data and Information Set 
(HEDIS[supreg]) measures and three National Committee on Quality 
Assurance (NCQA) structure and process measures in CY 2008. Since CY 
2008, we have required SNPs to submit eight HEDIS[supreg] and six NCQA 
structure and process measures.
    The second tier of the QI program for SNPs was effective on January 
1, 2010 and was implemented consistent with the requirements Sec.  
422.152(g). As we articulated in our September 18, 2008 IFC, Sec.  
422.152(g) reflects the requirement under section 1852(e)(3)(A)(ii) of 
the Act, added by MIPPA, that SNPs collect, analyze, and report data 
that measures the performance of their plan-specific MOC. SNPs may 
measure the effectiveness of their MOCs, as required under Sec.  
422.152(g), using a variety of plan-determined methodologies, such as 
claims data, record reviews, administrative data, clinical outcomes, 
and other existing valid and reliable measures (for example, Assessing 
Care of Vulnerable Elders (ACOVE) measures, Minimum Data Set (MDS), 
HEDIS[supreg], Health Outcomes Survey (HOS), and the Outcome and 
Assessment Information Set (OASIS)) at the plan level to evaluate the 
effectiveness of the process of care and clinical outcomes. 
Specifically, each SNP must measure the effectiveness of its MOC 
through the collection, aggregation, analysis, and reporting of data 
that demonstrate: Access to care; improvement in beneficiary health 
status; staff implementation of the MOC as evidenced by measures of 
care structure and process from the continuity of care domain; 
comprehensive health risk assessment; care management through an 
individualized plan of care; provision of specialized clinical 
expertise targeting its special needs population through a provider 
network; coordination and delivery of services and benefits through 
transitions across settings and providers; coordination and delivery of 
extra services and benefits that meet the needs of the most vulnerable 
beneficiaries; use of evidence-based practices and/or nationally 
recognized clinical protocols; and the application of integrated 
systems of communication. As we specified in our September 18, 2008 
IFC, 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. We further clarified that 
the 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. We also stated that SNPs must document 
all aspects of their QI program, including data collection and 
analysis, actions taken to improve the performance of the MOC, and the 
participation of the interdisciplinary team members and network 
providers in QI activities.
    We are currently implementing the third tier of the QI program, 
which is the required reporting of monitoring data, that consists of a 
prescribed sample of data that SNPs collect under the second tier of 
the QI program to measure their performance under their MOCs. MA 
organizations must currently collect and report ``data that permits the 
measurement of health outcomes and other indices of quality.'' 
Accordingly, MA organizations must collect and report data from the 
HEDIS[supreg], HOS, and CAHPS[supreg] instruments, as well as the SNP 
structure and process measures. We make these performance data 
available to the public (on a summary basis and at the plan level).
    The Affordable Care Act (ACA) requires that, starting in 2012, all 
SNPs be approved by the National Committee on Quality Assurance (NCQA) 
based on standards developed by the Secretary. In our April 2011 final 
rule (76 FR 21466-21448), we specified that the SNP MOC would be the 
basis of NCQA's approval of SNPs. We developed the standards and 
scoring criteria for each of the 11 elements of the MOC for the NCQA to 
use for the SNP approval process.
    Section 1857(d)(6) of the Act stipulates that we will conduct 
reviews of the SNP MOC in conjunction with the periodic audits of the 
MA organizations. During 2010 and 2011, we conducted a pilot study to 
assist us in determining the best methods for assessing the MOCs once 
they were implemented by the SNPs. We will expand this effort in 2012, 
by assessing a sample of the SNPs that attained a 3-year approval as a 
result of the NCQA SNP approval process that was mandated under the 
Affordable Care Act. This assessment will help us ensure that SNPs are 
providing care consistent with their approved MOC and to identify MAOs' 
strengths and weaknesses in implementing their MOCs. We also hope to 
use this information to identify best practices to share with plans and 
the public.
    After considering comments we received, we are finalizing these 
provisions without modification.
    Comment: One commenter viewed this provision as a positive addition 
to demonstrating the value and effectiveness of the SNP model. To 
ensure successful implementation and to improve clarity the commenter 
offered the following suggestions:
     Section 422.152(g)(2)--To ensure that CMS, contracting 
plans, and other interested parties are referring to the same standard, 
the commenter suggested that the regulation specify the source of the 
domains referenced (for example, CMS, NCQA, NIH).
     Section 422.152(g)(2)(viii)--The commenter was concerned 
that the delivery of extra services and benefits to meet the 
specialized needs of the most vulnerable beneficiaries may conflict 
with current CMS guidance on MA bids and benefits. The commenter 
requests that CMS clarify how a SNP would provide a different benefit 
set or set of services to those populations as the term ``extra 
services and benefits'' seems to imply.
     Section 422.152(g)(2)(x)--The commenter believes that the 
use of the term ``plans demonstrating use of integrated systems of 
communication''

[[Page 54605]]

is unclear and requests that CMS provide additional clarification as to 
the intent of the measure CMS references.
    Response: We appreciate the commenter's interest in this issue. 
With respect to Sec.  422.152(g)(2), we are using the definitions of 
domains as described by the Care Continuum Alliance, formerly the 
Disease Management Association of America. An integrated system of 
communication is the system the plan employs to communicate with all of 
its stakeholders--providers, beneficiaries, the public and regulatory 
agencies. This definition is included in Chapter 5 of the Medicare 
Managed Care Manual (``Quality Improvement Program''). The chapter, 
which is part of the Publication 100-16, may be accessed online at 
http://www.cms.hhs.gov/Manuals/IOM.
    We expect MA organizations offering SNPs to incorporate some or all 
of the following benefits that exceed the basic required Medicare A and 
B benefits offered by other MA products available in the same service 
area--(1) No or lower beneficiary cost-sharing; (2) longer benefit 
coverage periods for inpatient services; (3) longer benefit coverage 
periods for specialty medical services; (4) parity (equity) between 
medical and mental health benefits and services; (5) additional 
preventive health benefits (for example, dental screening, vision 
screening, hearing screening, age-appropriate cancer screening, risk-
based cardiac screening); (6) social services (for example, connection 
to community resources for economic assistance); (7) transportation 
services; and (8) wellness programs to prevent the progression of 
chronic conditions.
    Finally, in Sec.  422.152(g)(2)(x), we state that, as part of its 
quality program, a SNP must incorporate use of integrated systems of 
communication as evidenced by measures from the care coordination 
domain. An integrated system of communication is the system the plan 
employs to communicate with all of its stakeholders--providers, 
beneficiaries, the public and regulatory agencies. An example of an 
integrated communication system is a call center that might, as a 
reminder, reach out to clients in advance of their scheduled 
appointments.
    Comment: One commenter expressed the view that current CMS policy 
in the area of allowed extra services and benefits to meet the needs of 
vulnerable beneficiaries is unclear, resulting in instability of 
benefit packages (for example, an extra benefit of independent living 
skills was approved one year and disapproved the next year). The 
commenter also contends that CMS' policy is not applied consistently 
across organizations, resulting in an unlevel playing field for some 
MAOs. Another commenter advised that the plan's care management 
approach may be more a matter of ``how'' and ``when'' benefits are 
provided and reimbursed than what extra benefits and services are 
provided.
    Response: We have provided guidance to MA organizations offering 
SNPs that they should incorporate some or all of the following benefits 
that exceed the basic required Medicare A and B benefits offered by 
other MA products available in the same service area--(1) No or lower 
beneficiary cost-sharing; (2) longer benefit coverage periods for 
inpatient services; (3) longer benefit coverage periods for specialty 
medical services; (4) parity (equity) between medical and mental health 
benefits and services; (5) additional preventive health benefits (for 
example, dental screening, vision screening, hearing screening, age-
appropriate cancer screening, risk-based cardiac screening); (6) social 
services (for example, connection to community resources for economic 
assistance); (7) transportation services; and (8) wellness programs to 
prevent the progression of chronic conditions. As the commenter 
asserts, as important as the provision of ``extra'' services is plans' 
appropriate management of all benefits--both those covered by Parts A 
and B and those that extend or enrich Parts A and B services or provide 
supplemental benefits--for their particular populations is equally as 
important to us. With respect to the commenters' assertion that our 
policy is not applied consistently across organizations, we note that 
our bid review process very carefully scrutinizes permissible 
supplemental benefits across all MA plan.
    Comment: A commenter stated that the term ``health status,'' in 
reference to the second-tier language in the September 18, 2008 IFC, 
can be interpreted in a variety of ways. In an effort to promote 
consistent compliance by SNPs, the commenter recommends that CMS 
provide an explanation of the meaning of the term. The commenter also 
stated that depending upon the beneficiary's disease state, the course 
of the beneficiary's medical condition may be expected to result in 
declining health status. The commenter recommends that CMS revise the 
regulation to accommodate this circumstance.
    Response: We have not provided a specific definition of health 
status, as it is more appropriate for SNPs to apply a definition that 
is appropriate for its population. We understand that for beneficiaries 
with certain medical conditions, the natural course of the disease will 
result in a decline in health status and death. However, our intent is 
to improve health status for the overall Medicare population.
    Comment: Several commenters contended that health outcomes cannot 
be achieved without consideration of other quality of life indicators, 
such as adequate housing, engagement in meaningful activities, 
employment/community activities, and self-determination. These 
commenters suggested that meaningful measures of outcomes and quality 
should include personal experience outcomes. One of the commenters 
urged CMS to consider how ``improvement in health status'' will apply 
to persons whose care plan is focused on maintaining current 
functioning, delaying decline, or approaching the end of life.
    Response: We agree that health outcomes are linked to many other 
factors in a patient's life. We intend to continue to explore best 
practices for measuring health outcomes in the Medicare population. We 
will also consider how ``improvement in health status'' will apply to 
persons whose care plan is focused on maintaining current functioning, 
delaying decline, or approaching the end of life.
    Comment: One commenter noted that the regulation identifies data 
collection, analysis, and reporting as well as audit requirements in 
its QI system but that it does not provide in-depth specifications. The 
commenter suggests that such measures and specifications need further 
development and should be integrated with State's quality measures and 
data requirements.
    Response: Since the publication of the September 18, 2008 IFC, we 
have issued guidance to plans regarding in-depth data specifications in 
various guidance vehicles, including HPMS memoranda. Much of this 
guidance is also consolidated in Chapter 5 of the Medicare Managed Care 
Manual, ``Quality Improvement Program.''
    We are currently revising the process that MA organizations will 
use to submit their 2012 Chronic Care Improvement Programs (CCIPs) and 
Quality Improvement Projects (QIPs) and automating collection within a 
new module in the Health Plan Management System (HPMS). We are also 
revising and streamlining the templates that MA organizations will use 
for CCIP and QIP submission through the Paperwork Reduction Act 
process. The new format will allow MA organizations to demonstrate how 
the CCIP and/or QIP is developed, implemented and analyzed on a 
continuous cycle and to show where improvements in care occur. We

[[Page 54606]]

will provide more detailed guidance and timelines, as well as in-depth 
training on the new CCIP and QIP tools in the fall of 2011. We are also 
developing an MA quality Web page, which we intend to use to provide 
important information to external stakeholders, including MA 
organizations.
    With respect to the commenter's specific concern about integration 
of quality data specifications with those of individual States, we note 
that is it not currently possible to integrate Medicare and Medicaid 
quality reporting requirements at this time. However, this is an issue 
we are currently exploring in coordination with the Federal Coordinated 
Health Care Office (FCHO).
    Comment: Several commenters advised that States have many quality 
assurance requirement processes in place for Medicaid as such the new 
requirements must not conflict/override/interfere with current Medicaid 
contract requirements. According to the commenters, SNPs are concerned 
that they will be forced to try and reconcile conflicting Medicare and 
Medicaid requirements with States without clear guidance from CMS. 
Areas of potential overlap include care plans, initial/annual health 
risk assessments, performance measures, and appeals and grievances.
    Response: We understand the potential for conflicting requirements 
and are currently working with the FCHO to consider ways of more 
closely aligning Medicare and Medicaid requirements.
    The FCHO published the Alignment Initiative on May 16, 2011. This 
Initiative is focused on the new Office's efforts to address 
misalignments between Medicare and Medicaid, including extensive 
treatment and discussion of differing Medicare and Medicaid 
requirements for integrated managed care plans, including SNPs. CMS is 
reviewing the extensive comments that it has received and is working on 
addressing issues identified by this Office and commenters. Further 
guidance will be forthcoming.
    Comment: One commenter questioned how continuum of care is defined. 
The commenter urged that CMS be careful not to encroach on the right of 
State Medicaid agencies to define what benefits to include in its 
contracts with SNPs.
    Response: We have no intention of encroaching on State Medicaid 
agencies' rights to define the Medicaid benefits that are available for 
the dual eligible population. Continuum of care refers to patients 
receiving the care that is appropriate for managing their specific 
health conditions. We recommend using the Care Continuum Alliance's 
definition as a resource. Additional information on continuum of care 
can be found at http://www.carecontinuum.org.
    Comment: One commenter believed there was a lack of evidence based 
guidelines for some populations, such as specific disability groups; 
the commenter suggests that CMS should include language allowing 
locally recognized protocols to permit maximum flexibility. Another 
commenter stated that an evidence base does not exist for the co-morbid 
populations most likely to receive care via SNPs.
    Response: We understand that evidence-based practice in medicine is 
a growing field and, as such, acknowledge that there may not be 
evidence-based protocols for all clinical conditions and co-
morbidities. We do, however, expect plans to institute evidence-based 
protocols and practices that are available and appropriate for their 
patient population. Where there is no evidence-based guidance, then we 
expect that the plan will seek guidance from their account manager at 
the regional office and, in conjunction with CMS, determine the best 
approach to implement.
    Comment: One commenter expressed concern that SNPs which have high 
cost, high need dual populations will be compared with other SNPs 
serving other subsets of the population without an appropriate risk 
adjustment and stratification system. The commenter questions whether 
CMS has a plan for making fair comparisons of data across such 
differences in populations among D-SNPs, as well as between C-SNPs, I-
SNPs, and D-SNPs.
    Another commenter questioned how there can be comparisons across 
different types of SNPs when the populations are so different. The 
commenter recommends that CMS exclude integrated, full benefit D-SNPs 
from the requirements.
    Response: We understand that there are differences in SNP 
populations. The MOC is the vehicle for SNPs to identify, implement, 
provide, and coordinate appropriate health care for their specific 
target populations. Effecting the type of data comparisons recommended 
by the commenter would require us to develop data measures specific to 
each SNP type. At this time, we do not anticipate developing such 
measures. We are aware, however, of the measurement issues that SNPs 
with small enrollments face. We are currently focusing our attention on 
these issues in order to refine our measures for SNPs, including those 
with low enrollments. One way we are addressing this concern is through 
a contract to develop outcome measures for MA organizations, as well as 
for SNPs more specifically. Through this contract we are reviewing all 
current SNP measures and developing measures where there are gaps, 
including for SNPs with low enrollment. We expect this work on outcome 
measures to be completed in late 2014.
    We do not agree with the commenter that fully integrated dual 
eligible SNPs should be exempt from data reporting requirements. All 
SNP types must comply with our requirements.
    Comment: One commenter contended that reporting quality data by 
PBP/plan would result in many low enrollment SNPs not having any 
members in the denominator, or so few that the data/rates would not be 
meaningful. The commenter recommends that quality data instead be 
reported by SNP type (for example, D-SNP) to ensure CMS and 
beneficiaries have meaningful data for plan comparison purposes.
    Response: We understand that there are potentially SNPs with very 
low enrollment (small denominators). Because of this, we currently have 
data reported at the contract level. We understand that plans with 
small enrollments, especially SNPs, may not have the data resources 
available to them to track and monitor quality on an ongoing basis. 
However, SNPs are required to collect HEDIS[reg] data using selected 
measures that have been developed just for plans with smaller 
enrollments. These data, as well as the NCQA structure and process 
measures, should be used to track and monitor areas that could benefit 
from ongoing quality improvement. Also, small plans may have encounter 
data or other data specific to the operations of their organization 
that could be useful for quality improvement.
    As part of our continued effort to explore measures that are more 
sensitive for plans with low enrollment, we are developing outcome 
measures for the MA program, including SNPs. We will also conduct a 
pilot study to test the measures (for example, measures that address 
health outcomes related to coordination of care and transitions of 
care), as well as a larger study to validate the measures. One of our 
goals is to incorporate some of these measures into the MA plan rating 
system. This work will also assist us in developing measures to address 
the concerns of plans with low enrollment that cannot report using some 
of the current measures in the CAHPS[reg]; HEDIS[reg],

[[Page 54607]]

and/or HOS instruments. We expect to complete our work in late 2014.
    Comment: One commenter advised that they have heard concerns from 
both States and plans regarding the stringency of the QI requirements 
and their potential impact on plans' stability.
    Response: We appreciate the commenter's interest in this issue. We 
believe that improving quality and having the data to demonstrate these 
improvements will help support the stability and viability of the 
program.
    Comment: One commenter recommended that CMS promptly issue guidance 
with operational instructions implementing the 2008 SNP Chronic 
Condition Panel Final Report. MIPPA restricted enrollment in C-SNPs to 
special needs individuals that ``have one or more co-morbid and 
medically complex chronic conditions that are substantially disabling 
or life-threatening, have a high risk of hospitalization or other 
significant adverse health outcomes, and require specialized delivery 
systems across domains of care.''
    Response: Fifteen SNP-specific chronic conditions were recommended 
by the panel and adopted beginning with the CY 2009 plan year. The 
Special Needs Plan Chronic Condition Panel Final Report was made public 
on November 12, 2008. The final report is available on the CMS Web site 
at: https://www.cms.gov/SpecialNeedsPlans/Downloads/SNP_CC_Panel_Final_Report.zip.
    Comment: In questioning how the new requirements to collect, 
analyze, and report data as well as new requirements for MOC, care 
management, etc., relate to existing CCI, HEDIS, and structure and 
process measures, one commenter urged CMS to work closely with SNPs and 
NCQA to minimize any new data reporting burdens, to prevent duplication 
of data collection and reporting efforts and to maximize use of 
existing structure and process measures to the extent possible in 
meeting new reporting requirements. The commenter also requested that 
CMS take into consideration the development time required to ensure 
accurate and complete data as well as provide technical specifications 
well in advance (for example, plans should have the technical 
specifications 6 months in advance). In addition, the commenter 
requested, that since SNPs have to meet both standard MA reporting as 
well as SNP-specific reporting, CMS take into account the total data 
and reporting burden on SNPs and consider staggering reporting of any 
new SNP requirements, similar to the process for Part C reporting.
    Response: We are sensitive to the potential overlap of QI data 
reporting requirements. As part of our overall QI strategy, are 
carefully and systematically evaluating the impact of data collection 
requirements related to QI in an attempt to decrease burden and prevent 
duplication, while achieving our programmatic goals. Where possible, we 
will attempt to stagger reporting requirements.
    Many of the measures that we have received comments on are included 
in the 5-star plan rating system. We are looking systematically at all 
of our QI reporting tools and measures and making a number of changes. 
For example, we are in the process of improving and implementing new 
reporting tools for the CCIPs and the QIPs for the CY 2012 reporting 
cycle. We expect that these new reporting tools will decrease the data 
collection and reporting burden for all MA organizations. We are also 
developing a module in HPMS that will allow for this reporting process 
to be automated. CMS is committed to continuing to review and to assess 
the measures to address these concerns.
    We acknowledge that the NCQA structure and process measures overlap 
heavily with the MOC and QI reporting requirements. The structure and 
process measures were developed in an effort to identify SNP-specific 
measures that are not affected by a plan's enrollment size. Another 
goal of these measures is to evaluate some of the specific features of 
SNPs that make them unique among MA plans. These measures cannot 
replace the QIPs, since QIPs are a tool for evaluating weaknesses in 
the overall QI program for and MA organization, as well as monitoring 
the impact of any intervention that was implemented to mitigate a 
specific problem.
    Similarly, the MOC serves a unique purpose by ensuring that SNPs 
design a clinical care program to address the health care needs of the 
specific vulnerable populations they serve. The MOC is not a data 
collection system but, rather, a framework for coordinating the key 
evidence based elements critical to providing integrated, high quality 
care to vulnerable patients.
    We are looking systematically at all of our QI reporting tools and 
measures, and are in the process of making changes to eliminate some of 
the burden on plans. For example, we are in the process of streamlining 
and improving the CCIP and QIP reporting tools. By improving the 
reporting tools we expect to use in the 2012 reporting cycle we expect 
to decrease the burden for completing the data collection and 
reporting. We are also developing automating the submission process 
through an HPMS module.
    Comment: One commenter recommended that CMS require the data to be 
reported uniformly. The commenter pointed out that the first tier 
purpose of the QI program to provide data on quality and outcomes to 
enable beneficiaries to compare and select from among health coverage 
options and the second tier purpose for measuring essential components 
of the MOC using a variety of plan-determined methodologies discussed 
in the rule do not appear to require uniform data reporting that would 
promote comparisons among plans.
    Response: We appreciate the commenter's interest in this issue. We 
understand the need for uniformity in reporting and will strive to 
incorporate this principle in the QI program.
d. Special Needs Plans and Other MA Plans With Dual-Eligibles: 
Responsibility for Cost-Sharing (Sec.  422.504(g)(1)) and Written 
Disclosure of Cost-Sharing Requirements (Sec.  422.111(b)(2)(iii))
(1) Comprehensive Written Disclosure Requirement for Dual Eligible SNPs 
(Sec.  422.111(b)(2)(iii))
    Section 164(c)(1) of MIPPA requires that plan sponsors offering D-
SNPs must provide each prospective enrollee, prior to enrollment, with 
a comprehensive written statement that describes the benefits and cost-
sharing protections that the individual would be entitled to under the 
D-SNP and the relevant State Medicaid plan. The comprehensive written 
statement must include the benefits that the individual is entitled to 
under Medicaid (Title XIX), the cost-sharing protections that the 
individual is entitled to under Medicaid (Title XIX), and a description 
of which of these benefits and cost-sharing protections are covered 
under the D-SNP. This provision is effective January 1, 2010. In the 
September 18, 2008 IFC (73 FR 54226), we introduced the regulations at 
Sec.  422.111(b)(2)(iii) to reflect these statutory requirements, and 
are finalizing it without modification in this final rule.
    Comment: One commenter mentioned that it believed that CMS's 
current marketing materials for duals were confusing and inaccurate. 
The commenter expressed support for the comprehensive written statement 
requirement, which it believed would provide dual eligible enrollees 
with crucial information on a plan's cost-sharing benefits.

[[Page 54608]]

    Response: We agree that the comprehensive written statement will 
help dual-eligible beneficiaries make more informed enrollment choices.
    Comment: One commenter stated that the comprehensive written 
statement provision, as written in the interim final rule, was narrower 
than the corresponding section of MIPPA, which requires that CMS 
establish a standard content and format for the notice concerning cost 
sharing protections and Medicare and Medicaid benefits. The commenter 
also recommended adding language to the rule to specify that the 
comprehensive written statement must include a statement of the 
benefits that the SNP provides.
    Response: We disagree with the commenter's assertion that we should 
modify the rule to specifically reference CMS's responsibility to 
establish a standard content and format for the comprehensive written 
notice. Section 164(c)(1) of MIPPA (section 1859(f)(3)(c) of the Act) 
directly mandates that CMS determine the form and content of the 
comprehensive written statement. Regulatory language is neither a 
necessary nor appropriate means of effectuating this statutory 
directive to the agency. Therefore, we are not adding this language to 
the final rule.
    In addition, the language in the regulatory text for this provision 
includes the requirement that the comprehensive written statement must 
include a description of the benefits and cost-sharing protections that 
the D-SNP provides. We do not believe this provision requires further 
clarification.
    Comment: Two commenters requested clarification on the format and 
administration of the requirements established in this provision. One 
commenter suggested that CMS develop a simple template that States 
could use to describe their Medicaid benefits, and requested that CMS 
clarify how the written statement could be modified to reflect States' 
mid-year benefit changes. The commenter additionally asked CMS to 
define the role of the CMS Central Office and CMS Regional offices in 
coordinating the flow of information between States and SNPs. Another 
commenter asked CMS to clarify whether a plan that included this 
information on its Evidence of Coverage (EOC) document would be 
compliant with the comprehensive written statement requirement.
    Response: We are not modifying the provision to address the 
operational issues that the commenters raised. We do not believe that 
rulemaking is the appropriate vehicle for addressing comments on the 
operational issues related to the comprehensive written statement 
requirement. We will address operational issues related to the 
comprehensive written statement requirement for D-SNPs through 
operational guidance vehicles (for example, call letters, manual 
chapters, and HPMS memoranda). We anticipate that this future guidance 
will address the commenters' concerns regarding the operational aspects 
of the comprehensive written disclosure requirement.
(2) Limitation on Cost-Sharing for Certain Dual Eligible Special Needs 
Individuals (Sec.  422.504(g)(1))
    Section 165 of MIPPA, which revised section 1852(a) of the Act, 
prohibits D-SNPs from imposing cost-sharing requirements on full 
benefit dual-eligible individuals and Qualified Medicare Beneficiaries 
(QMBs), as described in sections 1935(c)(6) and 1905(p)(1) of the Act, 
that would exceed the cost-sharing amounts permitted under the State 
Medicaid plan if the individual were not enrolled in the D-SNP. The 
effective date of this provision is January 1, 2010.
    Comment: One commenter asked CMS to clarify the difference between 
this provision's requirement that limits cost-sharing for full benefit 
dual-eligible beneficiaries and the prohibition on balance billing 
Qualified Medicare Beneficiaries (QMBs) that is established in 1903(n) 
of the Act. The commenter also requested that CMS explain the 
difference between this provision and provisions that hold 
beneficiaries harmless in instances of non-payment by a health plan or 
a State Medicaid Agency. Another commenter asked CMS to clarify how a 
plan should construct its benefits and its bid for full benefit duals 
when the liability of the State varies by the reimbursement level in 
its State Medicaid plan.
    Response: We will continue to provide all MA plans, including D-
SNPs, with guidance on the bid submission process. We do not believe 
that it is appropriate to address issues relating to plan bids through 
formal rulemaking. Unlike the statutory prohibition on QMB balance 
billing that outlines State cost-sharing responsibilities and provider 
billing requirements, this requirement at Sec.  422.504(g)(1)) limits 
the cost-sharing that MA plans may impose on their full benefit and 
zero-cost-share dual eligible enrollees. We are not describing the 
requirements of balance billing or ``hold harmless'' provisions in 
detail in this preamble, as they are outside the scope of this final 
rule.
    Comment: One commenter requested that CMS address how this 
requirement would apply to D-SNPs that enroll dual eligible individuals 
who are not all eligible for full State Medicaid benefits. The 
commenter also suggested that CMS strengthen its language regarding 
States' cost-sharing responsibility. Finally, the commenter noted its 
belief that the protection of full-benefit dual eligible beneficiaries 
from cost-sharing above Medicaid levels should extend to full benefit 
dual eligible beneficiaries in all MA plans, not just those who are 
enrolled in SNPs.
    Response: In our January 2009 final rule (74 FR 1499) entitled, 
``Medicare Program; Medicare Advantage and Prescription Drug Benefit 
Programs: Negotiated Pricing and Remaining Revisions,'' we extended the 
cost-sharing requirements that MIPPA imposed on D-SNPs to all MA plans. 
We also applied this cost-sharing protection to individuals who belong 
to any Medicaid dual eligibility category for which the State provides 
a zero cost-share. Our January 2009 final rule (74 FR 1499) replaced 
and superseded the language in our September 18, 2008 IFC, and 
finalized changes to Sec.  422.504(g)(1)(iii). Therefore, in this final 
rule, we are not finalizing the regulatory text changes to Sec.  
422.504(g)(1)(iii) that we described in our September 18, 2008 IFC.
(3) Private Fee-For-Service (PFFS) Plans
(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.
    In the September 18, 2008 IFC, we revised Sec.  422.114(a)(2)(ii) 
to reflect this new statutory requirement. We did not receive any 
comments on this requirement; therefore, we are finalizing the 
revisions to Sec.  422.114(a)(2) as described in the September 18, 2008 
IFC.

[[Page 54609]]

(b) Requirement for Certain Non-Employer PFFS Plans to Use Contract 
Providers
    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 with providers. 
Specifically, for plan year 2011 and subsequent plan years, MIPPA 
required that non-employer/union MA PFFS plans (employer/union 
sponsored PFFS plans were 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, section 1852(d)(4)(B) of the Act as 
amended by MIPPA, requires that 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. 
Therefore, we stated in the September 18, 2008 IFC that 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).
    ``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 informed 
PFFS plans of the network areas in the announcement of CY 2010 MA 
capitation rates, which was published on the first Monday of April 
2009. We used 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 (CCPs) 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 specified that the term ``network-based plan'' 
excluded 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).
    We stated in the September 18, 2008 IFC that, 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 
in the United States. 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. We also stated that, in order to operationalize section 
162(a)(1) of MIPPA, we 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 are considered 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 stated in the September 18, 2008 IFC that 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 finalizing the revisions to Sec.  422.114(a)(3) as described 
in the (73 FR 54226) IFC published on September 18, 2008 IFC to reflect 
the requirements found in section 162(a)(1) of MIPPA for non-employer 
PFFS plans.
    Comment: A few commenters urged CMS to modify the definition of a 
``network area'' to mean an area with CCPs offered by two different 
organizations in order to ensure that there is real competition in the 
area.
    Response: MIPPA defines ``network area,'' 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 with enrollment as of the first day of the year in 
which the announcement is

[[Page 54610]]

made.'' ``Network-based plan'' is defined in MIPPA 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. We interpret 
``having at least 2 network-based plans'' to mean that there are at 
least 2 plans, which meet the definition of a network-based plan, that 
are offered by the same MA organization or by different MA 
organizations. We believe this interpretation is consistent with the 
statutory requirements for identifying network areas. We do not believe 
we have the statutory authority to interpret the definition of a 
network area in a different manner.
    Comment: A commenter recommended that network-based plans ``with 
enrollment'' should be defined as plans with a minimum enrollment 
threshold of 5,000 in MSAs with a population of more than 250,000 and 
1,500 in all other areas. The commenter stated that establishing a 
minimum membership standard would ensure that the CCPs that remain in 
the market are stable and minimize the possibility of future plan exit 
and further MA member disruption.
    Response: MIPPA defines ``network area,'' 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 with enrollment as of the first day of the year in 
which the announcement is made.'' We interpret the phrase ``with 
enrollment'' to mean that a network-based plan is required to have at 
least 1 beneficiary enrolled in the plan in order to be counted for 
purposes of identifying the location of the network areas. We believe 
that interpreting ``with enrollment'' any differently would result in 
an artificial threshold and would not be consistent with the statute.
    Comment: A commenter recommended that CMS provide preliminary 
information about CY 2011 network areas, based on January 1, 2009, 
enrollment data, in the CY 2010 announcement and later update this 
information in the CY 2011 announcement to reflect January 1, 2010, 
enrollment data. The commenter further stated that the 2010 data and 
resulting network areas should be the basis for determining PFFS plan 
compliance with the MIPPA requirement for CY 2011. Another commenter 
recommended that once CMS denotes a county as a network area, that 
county should keep the network area designation. The commenter stated 
that counties should not switch from network to non-network status over 
time, even if one of the two CCPs in the county exit.
    Response: The methodology for identifying the location of network 
areas for a given plan year is specified in the statutory definition of 
a ``network area.'' MIPPA defines ``network area,'' 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 with enrollment as of the first day of the 
year in which the announcement is made.'' We accordingly used 
enrollment data as of January 1, 2009, to identify the network areas 
for plan year 2011. The methodology we used to identify the list of 
network areas for plan year 2011 is consistent with statutory 
requirements. The statute also requires us to update the list of 
network areas for each plan year, and not doing so would be 
inconsistent with the intent of the statute. Because of this 
requirement, we cannot allow counties to keep a network designation 
when one or more of the network-based plans in those counties exits the 
market because the county no longer meets the network designation 
criteria.
    Comment: A commenter urged that CMS recognize that MA organizations 
are in the process of creating PPOs and other MA plans in areas that 
are likely to be network areas in 2011, and therefore establish a 
passive enrollment process whereby PFFS enrollees in network areas 
automatically enroll in their current sponsor's replacement product (if 
one is available) on January 1, 2011, unless the beneficiary 
affirmatively chooses to join another plan or return to fee-for-service 
Medicare.
    Response: On April 16, 2010, we released guidance via HPMS on the 
renewal and non-renewal options for MA organizations for CY 2011. We 
allowed non-network PFFS plans to transition their enrollees to their 
full network PFFS plans in CY 2011. We extended this same option to 
PFFS plans for CY 2012 via the CY 2012 Final Call Letter. However, we 
do not believe it would be appropriate to allow transition of enrollees 
from one MA plan type (for example, PFFS plan) to another MA type (for 
example, HMO or PPO plan), as this would be a change from an ``open'' 
model to a closed network.
    Comment: A commenter recommended that CMS permit PFFS plans to 
employ a mixed model for complying with the network access standards 
imposed by MIPPA.
    Response: We believe that requiring MA organizations offering PFFS 
plans to have separate contracts for their non-network, partial, and 
full network plans would allow these organizations to better manage 
their plans and allow CMS to more effectively oversee these plans. We 
also believe that not permitting PFFS plans to offer a mixed model 
would help beneficiaries to better distinguish among the three types of 
PFFS plans.
    Comment: A commenter recommended that CMS establish a special e-
mail box for any PFFS-related MIPPA questions and use the questions 
submitted to the e-mail box to develop timely guidance issued before 
the annual Call Letter.
    Response: All of the PFFS-related provisions in this rule became 
effective prior to the publication of this final rule. Since we already 
released operational guidance to assist with the implementation of 
these provisions, we do not believe it would be useful to establish an 
e-mail box for PFFS-related MIPPA questions at this time. We note that 
plans may submit questions about these provisions to their Regional 
Office Account Manager.
(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 required 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. We revised Sec.  422.114(a) in 
the September 2008 IFC to reflect this statutory change. Specifically, 
the changes to Sec.  422.114(a) set 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. We stated in the 
September 18, 2008 IFC (73 FR 54226) that, in order to meet the access 
requirements beginning plan year 2011, an employer/union sponsored PFFS 
plan must establish written contracts or

[[Page 54611]]

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. We also stated that 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 1852(j)(6) of the Act that currently apply.
    We added paragraph (a)(4) to Sec.  422.114 in order to reflect this 
new statutory requirement for employer/union sponsored PFFS plans.
    Comment: A commenter recommended that CMS provide more 
clarification regarding network access standards for employer-sponsored 
PFFS plans. The commenter stated that CMS should adopt access standards 
that are unique to each group plan and eventually adopt access 
standards that evaluate provider access based on the population 
eligible for enrollment.
    Response: Currently, we do not review Health Service Delivery (HSD) 
tables for employer/union sponsored PFFS plans to determine whether the 
plans meet our network access standards. However, these plans must 
ensure that their enrollees have adequate access to providers 
consistent with Chapter 9 of the Medicare Managed Care Manual.
    We are finalizing Sec.  422.114(a)(4) as described in the September 
18, 2008 IFC to reflect the new requirement found in section 162(a)(2) 
of MIPPA 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 generally cannot vary based 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. However, this section of MIPPA 
allowed 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 was effective at the time of publication of the 
September 18, 2008 IFC.
    In the September 18, 2008 IFC, we revised paragraph (a)(3)(ii) of 
Sec.  422.4 and paragraph (a) of Sec.  422.216 to add the 
clarifications found in section 162(b) of MIPPA. We did not receive any 
comments on our revisions; therefore, we are finalizing the revisions 
to Sec.  422.4(a)(3) and Sec.  422.216(a) as described.
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 repealed, effective January 1, 2010, the 
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. We 
stated in the September 18, 2008 IFC that, 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 also 
revised Sec.  422.152(a) to delete language exempting PFFS and MSA 
plans from having quality improvement programs.
    MAOs that offer one or more MA plans must have for each of their 
plans a QI program under which it meets all of the following 
requirements:
     Has a chronic care improvement program (CCIP), that meets 
the requirements of Sec.  422.152(c), and addresses populations 
identified by CMS based on a review of current quality performance.
     Conducts quality improvement projects (QIP) that can be 
expected to have a favorable effect on health outcomes and enrollee 
satisfaction, meets the requirements of Sec.  422.152(d), and addresses 
areas identified by CMS.
     Encourages providers to participate in CMS and Health and 
Human Service (HHS) QI initiatives.
    1.  Develops and maintains a health information system.
    2.  Contracts with an approved Medicare CAHPS vendor to 
conduct the Medicare CAHPS satisfaction survey of Medicare enrollees.
    3.  Includes a program review process for formal evaluation 
that addresses the impact and effectiveness of its QI programs at least 
annually.
    4.  Corrects problems for each plan.
    Finally, MAOs must ensure that, (1) their reported data are 
accurate and complete, (2) they maintain health information for CMS 
review as requested, (3) they conduct an annual review of their overall 
QI program, and (4) they take action to correct problems revealed 
through complaints and QI program performance evaluation findings.
    We did not receive any comments on this requirement; therefore, we 
are finalizing the revisions to Sec.  422.152(a) as described in the 
September 18, 2008 IFC.
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 cannot 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).
    The statute provided 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 
interpreted 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.
    In the September 18, 2008 IFC, we added paragraph (h) to Sec.  
422.152 to describe the data collection requirements for MA PFFS and 
MSA plans. We stated that 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 data collection requirements using administrative claims data 
only. We also

[[Page 54612]]

stated that for plan year 2011 and subsequent plan years, MA PFFS and 
MSA plans are subject to data collection requirements that may not 
exceed the requirements specified in Sec.  422.152(e) for MA local 
plans that are PPO plans.
    Comment: A commenter suggested that CMS create an exception to the 
data collection requirements for 2010 for PFFS plans that will 
terminate in 2011.
    Response: In the 2010 Call Letter, we stated that MA organizations 
that will terminate their PFFS or MSA contracts effective January 1, 
2011 will not be required to submit a HEDIS report for 2010 for those 
contracts.
    We are finalizing Sec.  422.152(h) as described in the September 
2008 IFC to reflect the new quality data collection requirements for 
PFFS and MSA plans.
c. Data Collection Requirements for MA Regional Plans
    Section 163(b)(2) of MIPPA 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) of MIPPA 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.
    We received no comments on this section and 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. Therefore we are finalizing this section without 
modification.
4. Phase-Out of Indirect Medical Education Component of MA Capitation 
Rate (Sec.  422.306)
    In our September 18, 2008 IFC we noted that section 161 of MIPPA 
added a new paragraph (4) to 1853(k) of the Act, which directed the 
Secretary to phase-out indirect medical education (IME) amounts from MA 
capitation rates with a maximum adjustment percentage per year of 0.60 
percent. We explained that implementation of the IME payment phase-out 
began in plan year 2010. Each year after 2010 the maximum adjustment 
percentage was to increase up to an additional 0.60 percent until the 
entire IME portion of the MA capitation rate in an area is reduced to 
zero. We stated that PACE programs are excluded from the IME payment 
phase-out. Finally, we stated that payment to teaching facilities for 
IME expenses for MA plan enrollees will continue to be made under 
section 1886(d)(11) of the Act by Original Medicare. We stated that we 
were adding a new paragraph (c) to Sec.  422.306 to reflect this 
statutory IME phase-out.
    We received no comments on this provision and are finalizing our 
regulatory changes without modification.

B. Changes to the Part D Prescription Drug Benefit Program

1. Use of Prescription Drug Event Data for Purposes of Section 1848(m) 
of the Act (423.322(b))
    Section 132 of MIPPA revised 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) of the Act 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) of the Act, in the IFC we revised Sec.  423.322(b) to remove 
the restriction placed on officers, employees and contractors of the 
HHS when using these data in accordance with section 1848(m) of the 
Act.
    Comment: A commenter questioned whether MAOs are required to pay e-
prescribing incentive payments and if so, whether the payment will be 
based on MAO or national data.
    Response: This provision relates to the extended authority granted 
under MIPAA for the Secretary to use prescription drug event data for 
purposed of providing incentives payments for e-prescribing. The 
commenter's questions are specific to e-prescribing requirements and, 
therefore, are outside the scope of the final rule. However, as stated 
in the 2010 Call Letter dated March 30, 2009, payments to physicians 
who are contracted with MAOs are generally governed by the terms of the 
contract, and it is up to the MAO whether to take the e-prescribing 
incentive payment into account in establishing the amount the physician 
is paid.
    We are finalizing this provision without change.
2. Elimination of Medicare Part D Late Enrollment Penalties Paid by 
Subsidy Eligible Individuals (Sec.  423.46 and Sec.  423.780)
    In the September 18, 2008 interim final rule (73 FR 54208), we 
stated that each year since the beginning of the Medicare prescription 
drug program we had conducted a Medicare payment demonstration that 
provided that Medicare beneficiaries who qualified for the low-income 
subsidy for Medicare prescription drug coverage were able to enroll in 
a Medicare prescription drug plan with no penalty. We stated the 
demonstration had tested the number and characteristics of the 
beneficiaries that benefited from waiver of the late enrollment penalty 
(LEP), and the cost of the waiver to Medicare. Originally this payment 
demonstration allowed certain Medicare beneficiaries to enroll in a 
Medicare prescription drug plan in 2006 with no LEP. Under the original 
waiver, we did not collect the LEP 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 ``late'' in Medicare Part D in 
2007 and 2008.
    Section 114 of MIPPA revised the statute to waive the late 
enrollment penalty for subsidy eligible individuals. Accordingly, we 
revised our regulation at Sec.  423.780(e) in order to reflect this 
MIPPA change. Under the revised regulation, we will no longer charge 
subsidy eligible individuals (defined in Sec.  423.773) a late 
enrollment penalty. This eliminated the need for the LEP payment 
demonstration. Finally, we stated this provision was effective January 
1, 2009, when the current demonstration ended. We stated that we

[[Page 54613]]

were 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.
    We received no comments on these provisions and are finalizing our 
regulatory changes without modification.
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 
codified these new requirements in Sec.  423.505 and Sec.  423.520 of 
the September 18, 2008 interim final rule.
    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 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 the regulations 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.
    As provided in section 1860D-12(b)(4)(B) of the Act and codified in 
Sec.  423.520(a)(1)(i) and Sec.  423.520(a)(1)(ii), 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, Sec.  423.520(a)(2)(i) and (ii) 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), 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.  423.520(a)(1)(i) and Sec.  423.520(a)(1)(ii).
    Comment: One commenter suggested that we clarify that the word 
``day'' as used throughout these provisions means ``calendar day.''
    Response: Section 1860D-12(b)(4)(B) defines the term ``applicable 
number of calendar days'' as ``14 days'' with respect to electronic 
claims and ``30 days'' with respect to non-electronic claims. Elsewhere 
in the statute, Congress simply used the term ``days.'' Since Congress 
did not define ``days,'' nor use another more restrictive term, such as 
``business days,'' we interpret ``calendar days'' and ``days'' to have 
the same meaning for purposes of the prompt pay requirements and thus 
have simply used the term ``days'' throughout the regulation.
    Comment: Several commenters asserted that claims that are 
electronically adjudicated at point of sale (POS) should be deemed 
``clean claims'' that are payable within 14 days, with no retroactive 
review allowed during the 10-day period for sponsors to provide notice 
of deficiencies. These commenters suggested that issues such as 
eligibility issues which are discovered during the 10-day period should 
be resolved among plans.
    Response: We believe that section 1860D-12(b)(4)(D)(i) clearly 
provides that claims are deemed to be clean if the Part D sponsor 
involved does not provide notice to the claimants of any deficiencies 
within the statutory time period, which is 10 days for claims submitted 
electronically. The fact that a Part D sponsor adjudicates an 
electronic claim at POS does not preclude the sponsor from notifying 
the claimant of a deficiency within the ten day period. While a 
sponsor's failure to pay a claim can cause the claim to be deemed clean 
pursuant to section 1860D-12(b)(4)(D)(iii) of the Act, payment of the 
claim in and of itself does not deem it to be a clean claim under the 
Act. Since the statute did not provide a time period for a pharmacy to 
cure a deficiency, we expect that such a time period would be a matter 
of negotiation between the parties, as well as whether payment for such 
a claim may be retracted in the meantime.
    Under section 1860D-12(b)(4)(D)(ii) of the Act and in Sec.  
423.520(c)(2) of the regulations, 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, and 
within 15 days after a non-electronic claim is received.
    Once the submitting pharmacy resubmits the 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), 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 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) (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).
    Comment: Several commenters stated that CMS should clarify the 
September 18, 2008 IFC to limit the number of requests plans can make 
for additional information about a non-clean claim to one request and 
to only information readily available to pharmacies. The commenters 
provided the example of a plan asking for proof of eligibility on the 
10th day after receiving a non-clean electronic claim, and then waiting 
an additional 10 days after receipt of this additional documentation to 
request information on fulfillment of prior authorization requirements.
    Response: The statute and IFC State that if a Part D sponsor 
determines that a submitted claim is not a clean claim, it must notify 
the submitting pharmacy within the specified time period and ``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.'' Since the statute and regulation 
use the term ``notification'' in the singular and use the phrases ``all 
defects and improprieties'' and ``all additional

[[Page 54614]]

information necessary,'' we believe this provision plainly requires 
plans to identify all of the problems with the claim in a single notice 
and, therefore, plans cannot make multiple requests for additional 
information during the applicable time period (10 days for a non-clean 
electronic claim and 15 days for a non-clean non-electronic claim). 
Therefore, we disagree that a clarification of the regulation text is 
needed on this point. In addition, we believe that the statute and 
September 18, 2008 IFC, which state that a claim is deemed to be a 
clean claim 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 ten days after the date on which 
additional information is received, is intended only to provide a 
timeframe for a sponsor to notify a pharmacy of previously requested 
information that was not received or is still deficient, or of a new 
deficiency raised by the additional information received, and is not 
intended to permit Part D sponsors to request new information for the 
first time to cure a deficiency that could have been identified in the 
original claim submission. Therefore, we agree and have revised Sec.  
423.520(c)(2)(ii) to clarify that a Part D sponsor may only provide 
notice of any remaining defects or improprieties in the claim, or of 
any new deficiencies raised by the additional information.
    Comment: One commenter noted that there appeared to be an error in 
Sec.  423.520(c)(3) in referencing only Sec.  423.520(a)(1)(i) and 
(ii).
    Response: We agree with the commenter that the regulation should be 
drafted more clearly. While the regulation as currently written mirrors 
the statute in only cross-referencing the timeframe for paying a clean 
claim, and not the timeframe for deeming a claim clean where a sponsor 
does not provide timely written notice of any deficiencies, we believe 
it is clear that the intent of the statute is for sponsors to pay 
claims that are deemed clean within the time frame for paying a clean 
claim. Section 1860D-12(b)(4)(D)(i) of the Act is clear that claims 
that are not contested within the applicable timeframes are deemed 
clean. Therefore, we have revised the regulation accordingly to 
reference the timeframes for paying a clean claim in Sec.  
423.505(a)(1)(i) and (ii) and the timeframes for contesting a claim in 
(c)(1)(i) and (ii).
    With respect to the act of payment itself, in accordance with 
section 1860D-12(b)(4)(D)(iv) of the Act, Sec.  423.520(d) specifies 
that payment for a clean claim is considered to have been made on the 
date payment for an electronic claim is transferred. Payment for a 
clean claim is considered to have been made on the date payment for a 
non-electronic claim is submitted to the United States Postal Service 
or common carrier, respectively.
    Comment: One commenter suggested that the payment date for 
electronic claims should be when the transaction is initiated, and 
payment for non-electronic claims should be when payment is given to 
the USPS or common carrier. Other commenters disagreed, suggesting that 
payment for electronic claims should be the date when funds are made 
available to the provider, and that there should be no exceptions in 
batch payments--meaning all payments in a batch should be made 
available to the provider on or before the 14th day after the date on 
which the earliest clean electronic claim of the batch was received.
    Response: Section 1860D-12(b)(4)(D)(iv) of the Act states plainly 
that payment of a clean claim is considered to have been made on the 
date on which the payment is transferred (for electronic claims) and 
the date the payment is submitted to the U.S. Postal Service or common 
carrier for delivery. Section 423.520(d) is consistent with the 
statute. We interpret the term ``transferred'' to mean when payment has 
been made to the payee. Thus, for an electronic claim, this would be 
the date on which funds will be posted to the payee's (or its agent's) 
account. For a non-electronic claim, we interpret ``submitted'' to mean 
the date when the payment is postmarked by the USPS or recorded as 
received by a common carrier. Payment for all claims must meet 
applicable statutory and regulatory timeframes, regardless of whether 
the claims are paid in batches or not.
    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), 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), 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). For purposes of CMS payments to Part D sponsors for 
qualified prescription drug coverage, any interest amounts paid under 
Sec.  423.520(e)(1) 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). In accordance with section 1860D-12(b)(4)(C)(ii) 
of the Act and as codified in Sec.  423.520(e)(2), 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. We will make such determinations 
on a case-by-case basis at the sponsor's request.
    Comment: One commenter suggested that CMS's authority is limited 
when determining exigent circumstances under which plans will not be 
charged interest on late paid claims and that the language was too 
broad.
    Response: We agree that the language in Sec.  423.520(e)(2) could 
be interpreted as giving us slightly broader authority than MIPPA 
bestowed. Therefore, we have revised the section to more closely track 
the statutory language.
    The Act addressed payment of claims by electronic funds transfer 
(EFT). Section 1860D-12(b)(4)(E) of the Act and Sec.  423.520(f) 
require that a Part D sponsor pay all electronically submitted clean 
claims by 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), 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

[[Page 54615]]

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), 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) must 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. We received no comments on Sec.  423.520(f), 
Sec.  423.520(g), or Sec.  423.520(h).
    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 amended 
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) required that, effective contract year 
2010, the contract between CMS and the Part D sponsor must include the 
prompt payment provisions at Sec.  423.520.
    We also amended 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 required that sponsors' pharmacy contracts include the prompt 
payment provisions of Sec.  423.520. We review pharmacy contract 
templates (except for mail-order and LTC pharmacy templates) for new 
applicants to ensure the addition of these prompt payment provisions. 
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. We 
received no comments on these provisions.
    The revisions to the regulations reflecting the previously-
described MIPPA prompt payment provisions were all effective on January 
1, 2010. We are finalizing these provisions with the amendments 
previously described.
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 
1857(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, our 
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 
codified this new statutory contract requirement at Sec.  
423.505(b)(20). Effective January 1, 2010, this provision applies to 
any claim submitted by a long-term care pharmacy, as defined in Sec.  
423.100.
    Effective contract year 2010, new sections 1860D-12(b)(5) and 
1857(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), in the IFC we amended 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.
    Comment: Two commenters stated the 90-day limit for claims 
submission is problematic given the time required to process Medicaid 
applications, the retroactivity of many Medicaid eligibility 
determinations, and the time lags associated with updates to State 
eligibility data bases. These commenters noted that LTC pharmacies are 
holding receivables for copayments for beneficiaries who have Medicaid 
pending or are dual eligible, but whose status has not been updated or 
who had a retroactive Medicaid effective date.
    The commenters recommended that CMS codify in the regulation the 
statement in our September 18, 2008 IFC preamble that the statute does 
not eliminate CMS' policy requiring a new timely filing period for 
claims incurred during a period of retroactive Medicaid eligibility, or 
specify in the PDP contract that this provision does not preclude a LTC 
pharmacy from rebilling when the claim was not paid fully or correctly, 
or clarify the 90 days applies only to ``clean claims.''
    Response: This provision applies to claims for reimbursement of 
prescription drugs--not to claims adjustments resulting from 
retroactive changes affecting the beneficiary's cost-sharing, premiums 
and plan benefit phase (such as changes in low-income subsidy (LIS) 
status). Since the publication in the September 18, 2008 IFC, we 
published proposed and final rules on October 22, 2009 (74 FR 54634) 
and April 15, 2010 (75 FR 19678), respectively. In the April 2010 final 
rule, we codified at Sec.  423.464 and Sec.  423.466 our previous 
policy guidance requiring sponsors to make retroactive claim 
adjustments and take into account other payer contributions as part of 
the coordination of benefits. We also added a new timeliness standard 
at Sec.  423.466 to require adjustment and issuance of refunds or 
recovery notices within 45 days of the sponsor's receipt of the 
information necessitating the adjustment.
    The specific change at Sec.  423.464 added a new paragraph (g)(7) 
to require sponsors to account for payments by State Pharmaceutical 
Assistance Programs (SPAPs) and other providers of prescription drug 
coverage in reconciling retroactive claims adjustments that create 
overpayments and underpayments, as well as to account for payments made 
and for amounts being held for payment, by other individuals for 
entities. We acknowledged in the preamble of the April 2010 final rule 
(75 FR 19724) that pharmacies are not providers of other prescription 
drug coverage, but noted it was our intention to apply the 45-day limit 
to all retroactive changes. As a result, we also amended Sec.  423.800 
to add a new paragraph (e) to make it clear that the 45-day timeframe 
applies to adjustments involving pharmacies and beneficiaries, 
including LTC pharmacies holding cost-sharing amounts due. The new 
paragraph (e) requires sponsors to process retroactive adjustments to 
cost-sharing for low-income subsidy

[[Page 54616]]

individuals and any resulting refunds and recoveries within the 
timeframe specified in Sec.  423.466(a). We note that by definition 
``adjustments'' can only be made to previously adjudicated claims.
    Comment: One commenter recommended the regulatory text explicitly 
address retroactive Part D enrollment for dual eligible beneficiaries 
and continue to operate under the CMS May 25, 2007 policy guidance 
requiring the use of the date of Medicaid notification to establish a 
timely claims filing period under Sec.  423.505(b)(20). The commenter 
noted that this would ensure beneficiaries and other parties, including 
pharmacies, have the opportunity to request reimbursement for claims 
incurred during the retroactive Part D enrollment period.
    Response: We stated in the September 18, 2008 IFC preamble that the 
new LTC pharmacy claim submission requirement would not eliminate the 
requirement 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 as specified in May 25, 2007 
memorandum. However, since the publication in the September 18, 2008 
IFC, we have changed the manner in which these claims are processed. 
Beginning in January 2010, CMS implemented a demonstration project, 
known as the low-income newly eligible transition (NET) program, to 
handle retroactive Part D enrollment. Under the demonstration, a 
single, competitively procured Part D sponsor covers all Part D 
prescription drug claims for all periods of retroactive coverage for 
full benefit dual eligible and SSI-eligible individuals, as well as 
point-of-sale coverage at the pharmacy for certain LIS individuals who 
are not yet enrolled in a Part D plan. Beneficiaries who are 
retroactively auto/facilitated enrolled by CMS and LIS beneficiaries 
confirmed eligible for the demonstration are temporarily enrolled in 
the demonstration contractor's plan. These beneficiaries are then 
prospectively auto/facilitated enrolled in a qualified PDP.
    Because the low-income NET demonstration eliminates the routine 
need for sponsors to reimburse claims incurred by individuals eligible 
for the program during periods of retroactive Part D enrollment, there 
is no longer a need for Part D sponsors to provide the special 
transition period required by the May 25, 2007 memorandum. This policy 
change is described in section 50.10 of the updated Coordination of 
Benefits (COB) chapter of the Medicare Prescription Drug Benefit Manual 
issued on March 19, 2010 which is available on the CMS Web site at 
http://www.cms.gov/PrescriptionDrugCovContra/Downloads/Chapter14.pdf. 
Beneficiaries and pharmacies, including LTC pharmacies, can submit 
claims incurred during the period of retroactive Part D enrollment to 
the low-income NET program contractor without timely filing limits 
during the period of enrollment in the low-income NET program and for 
up to 180 days following the beneficiary's disenrollment from the 
program. Claims filing requirements are specified in the CMS contract 
with the low-income NET program contractor. As a result, we do not 
believe it is necessary to revise the regulatory language to address 
retroactive Part D enrollment.
    Comment: One commenter argued that the timeframe for claims 
submission is too restrictive for ICF/MR and IMD business cycles and 
noted further that PDP contract negotiations with LTC institutions can 
take 6 to12 months, so flexible timeframes are necessary.
    Response: We recognize that the statutory timeframes for LTC 
pharmacy claims submission may not be aligned with previous billing 
practices, but we have no authority to revise the statutory timeframes 
to provide the flexibility sought by the commenter.
    After considering the comments received in response to the 
September 18, 2008 IFC, we are finalizing these provisions without 
change.
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 codified 
in Sec.  423.505(b)(21) 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.  
423.505(b)(21)(i) and Sec.  423.505(b)(21)(ii), these updates, if 
applicable, must occur on January 1 of each contract year and not less 
frequently than every 7 days thereafter.
    We also amended 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). Specifically, Sec.  423.505(i)(3)(viii)(A) requires 
that sponsors' pharmacy contracts include the pricing standard update 
requirements at Sec.  423.505(b)(21), if applicable, and Sec.  
423.505(i)(3)(viii)(B) further specified that a Part D sponsor's 
pharmacy contract must indicate the source used by the Part D sponsor 
for making such pricing updates.
    We 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.
    Comment: One commenter requested a definition of ``prescription 
drug pricing standard.''
    Response: We do not believe that such a definition is necessary at 
this time. The preamble to the September 18, 2008 interim final rule 
provided the following examples of prescription drug pricing standards: 
ones that are based on ``wholesale average cost, average manufacturer 
price, average sales price.'' We believe these examples sufficiently 
illustrate what is meant by a prescription drug pricing standard--that 
is, it is an accepted methodology based on published drug pricing. We 
believe that defining the standard beyond this may be overly 
prescriptive and might not be flexible enough to evolve with industry 
changes. Also, we are prohibited under the section 1860D-11(i)(1) of 
the Act from interfering in negotiations between sponsors and network 
pharmacies, and we presume such negotiations would address if a 
``prescription drug pricing standard'' will be used between the 
parties.
    Comment: There were several related comments submitted by a number 
of commenters about the applicability of prescription drugs pricing 
standards and the 7-day update requirement, which were: (1) Plans must 
promptly use updated standards to actually process claims; (2) plans 
should have to update benchmark prices to reflect price on date of 
service if plans could have access to such data; (3) plans should have 
to use a benchmark provider that updates data at least weekly; and (4) 
plans should not be able to now update their standards every seven days 
if they previously updated more frequently or have access to more 
frequent updates.
    Response: Section 1860D-12(b)(6) requires that if a Part D sponsor 
``uses

[[Page 54617]]

a standard for reimbursement of pharmacies based on the cost of a 
drug,'' the sponsor must update the standard on January 1 of the year 
and not less frequently than once every 7 days.'' We believe the 
statute's use of the word ``reimbursement,'' here makes it clear that 
Part D sponsors must not only update prescription drugs pricing 
standards but actually use them to reimburse claims. Nevertheless, we 
have clarified the language of Sec.  423.505(b)(21) to apply to 
prescription drug pricing standards used for reimbursement by Part D 
sponsors. Further, the statute plainly indicates that updates must 
occur at least every 7 days, but does not contemplate that we could 
require more frequent updates--though we note that a Part D sponsor can 
arrange with its contracted pharmacies to make more frequent updates. 
Finally, the statute is silent on the issue of whether sponsors must 
use the price on the date of service (DOS) to process a claim. The 
statute does not address this issue, and we believe it is best decided 
by the parties. Thus, pricing used to process Part D claims can be no 
older than 7 days, when a prescription drug pricing standard is used 
for reimbursement. This is consistent with our previous subregulatory 
guidance issued as a memo titled, ``Guidance for regulations in the IFC 
on September 15, 2008, in which we stated, ``* * * sponsors must ensure 
they design their internal processes to ensure that fee schedules tied 
to any drug pricing standard are updated within these prescribed 
timeframes, and that all claims are adjudicated in accordance with 
appropriately updated fee schedules.'' However, pharmacies are not 
precluded from negotiating with Part D sponsors for more frequent 
updating, or for DOS pricing to be used, or for a particular standard 
to be applied, for that matter.
    Comment: Several commenters stated that CMS should require plans to 
maintain current pricing for 60 days while plans and pharmacies 
negotiate new pricing when benchmarks are eliminated or methods for 
deriving benchmarks materially altered.
    Response: Section 173 of MIPPA did not address this issue. In the 
absence of specific direction on this point, we believe Congress 
intended to leave that issue to the discretion of the Part D sponsors 
and its contracted pharmacies. Also, as previously noted, we are 
prohibited under section 1860D-11(i)(1) of the Act from interfering in 
negotiations between sponsors and network pharmacies, and therefore, we 
presume these matters would be addressed in the negotiations between 
the parties. However, we note that the regulation requires that if a 
standard is used, it be identified in the contract between the parties, 
and of course any existing contract between the parties that identifies 
a standard would have to be amended according to the amendment terms of 
the contract if the pricing standard were to change.
    In the September 18, 2008 interim final rule, we stated that we are 
aware that some pharmacies, particularly independent pharmacies, work 
with agents for purposes of negotiating and signing contracts with Part 
D sponsors on their participating pharmacies' behalf, and that 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). Thus, we stated the drug pricing standard update 
requirements at Sec.  423.505(b)(21) 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. We received no 
comments on these provisions.
    The regulations reflecting the previously described MIPAA 
provisions on the regular update of prescription drug pricing standards 
were all effective January 1, 2009. We are finalizing these provisions 
as corrected on November 21, 2008 (73 FR 70598) with the amendments 
previously described.
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 us 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.
    Section 181 of MIPPA amended 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 strengthened our 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 did 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 added a provision with respect to the disclosure of claims 
data to Congressional support agencies. Specifically, section 181 of 
MIPPA added clause (ii) to section 1860D-12(b)(3)(D) of the Act, which 
requires the Secretary to make data collected under section 1860D-
12(b)(3)(D) of the Act 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 data, 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) of the Act, as 
amended, removed 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 regulations now requires that Part D 
plan sponsors must submit all data elements included as part of their 
drug claims ``for purposes deemed necessary

[[Page 54618]]

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. Prior to the issuance of 
the September 18, 2008 IFC, Sec.  423.505(m)(1) of the regulations 
provided that with respect to data collected under Sec.  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 section 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, in the September 18, 2008 
IFC, we revised Sec.  423.505(m)(1) of our regulations, to omit any 
reference to ``Congressional oversight agencies.'' We also added a new 
paragraph (m)(3) to Sec.  423.505 specifying that the Secretary will 
make the information collected under Sec.  423.505(f)(3) available to 
Congressional support agencies for the purposes of conducting 
congressional oversight, monitoring, making recommendations, and 
analysis of the Medicare program.
    We used 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 Sec.  
423.505(m)(1)(iv), we did not include the 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 the final 
rule on Part D claims data (73 FR 30664), 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.
    We received no comments on this section, and therefore are 
finalizing these provisions without modification.
7. Exemptions From Income and Resources for Determination of 
Eligibility for Low-Income Subsidy (Sec.  423.772)
    Section 1860D-14 of the 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) of the Act by exempting from the 
determination of LIS the following:
     Support and maintenance furnished in kind from income.
     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 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, we 
are updating our regulations to reflect the new exclusions from income 
and resources.
    In order to reflect these changes, we revised the definitions of 
``income'' and ``resources'' in Sec.  423.772.
    The amendments made by this provision were effective with respect 
to LIS applications filed on or after January 1, 2010.
    We did not receive any comments and are therefore finalizing these 
provisions without modification.

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 sections of Parts 422 and 423.

                        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............  ...............
Marketing: Standards for MA/Part  Subpart V............         422.2268  Subpart V............         423.2268
 D marketing:.
     Nominal gifts
     Scope of marketing
     Co-branding
     Including plan type
     in plan name
Marketing: reporting              Subpart V............         422.2272  Subpart V............         423.2272
 terminations.
Marketing:......................  Subpart V............         422.2274  Subpart V............         423.2274
     Broker and agent
     compensation
     Training and
     testing
----------------------------------------------------------------------------------------------------------------


[[Page 54619]]

1. Disclosure of Plan Information (Sec.  422.111)
    Section 164 of MIPPA 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, the September 18, 
2008 IFC added a new paragraph (b)(iii) to Sec.  422.111. The addition 
requires dual-eligible SNPs to provide the information specified in 
Sec.  422.111(b) 15 days before the annual coordinated election period 
to each prospective enrollee, both prior to enrollment and at least 
annually thereafter. We developed a model comprehensive statement for 
beneficiaries that could be included with any description of benefits 
offered by the SNP plan.
    We did not receive comments on this provision. Therefore, we are 
finalizing this provision without modification.
2. Medicare Advantage and Prescription Drug Program Marketing 
Requirements (New Subparts V)
a. General
    With this final rule, we are finalizing the provision of our 
September 18, 2008, and November 14, 2008 interim final rules with 
comment periods ((73 FR 54226) and (73 FR 67406), respectively). With 
the exception of the provisions relating to including plan type in the 
name of the plan (effective January 1, 2010), and the reporting by 
plans of agent and broker terminations to States (effective January 1, 
2009), all of the Part C and Part D marketing requirements discussed 
below were effective upon publication of our September 18, 2008 and 
November 10, 2008 IFCs.
b. Standards for MA and PDP Marketing (Sec.  422.2268 and Sec.  
423.2268)
    We received a number of comments on the provisions contained in 
Sec.  422.2268 and Sec.  423.2268 requesting clarification or pointing 
out areas of disagreement with the provisions. These comments were as 
follows:
(1) Nominal Gifts (Sec.  422.2268(b) and Sec.  423.2268(b))
    Plan sponsors are required to limit the offering of gifts and other 
promotional items to potential enrollees at promotional events to those 
gifts of ``nominal value'' that are offered to all potential enrollees.
    Comment: One commenter requested clarification on the meaning of 
``all potential enrollees'' in relation to the provision of nominal 
gifts at promotional events.
    Response: By ``all potential enrollees,'' we mean anyone in 
attendance at the event. Additionally, we specify that when plan 
sponsors provide nominal gifts at promotional events, anyone in 
attendance can get a gift. There should be no further requirements for 
gift receipt beyond attendance at the event. For example, at an event, 
the plan sponsor offers small piggy banks as a nominal gift. The plan 
sponsor cannot require that an attendee provide an address or phone 
number in order to receive the gift.
(2) Limiting the Scope of Health Care Products To Be Discussed (Sec.  
422.2268(g) and (h) and Sec.  423.2268(g) and (h))
    Any appointment with a beneficiary involving the marketing of 
health care related products (for example, where Medicare supplement, 
MA, and/or stand-alone PDP will be discussed) must be limited by the 
plan sponsor to the scope agreed upon by the beneficiary. In advance of 
any marketing appointment, the beneficiary must have the opportunity to 
agree to the range of choices that will be discussed, and that 
agreement must be ``documented'' by the plan sponsor. Discussion of 
additional lines of plan business (for example, MA, MA-PD, PDP or 
Medigap) not identified prior to the individual appointment requires a 
separate appointment that may not be rescheduled until 48 hours after 
the initial appointment, unless requested by the beneficiary.
    Comment: We received several comments on the requirement that the 
scope of the appointment be documented. Some commenters stated that the 
requirement for such documentation is a hassle for seniors to complete 
in advance of the appointment. A commenter believed that seniors get so 
much paper and complicated forms that they appreciate ``simple'' 
communications, and suggested they would be put off by needing to 
complete some form documenting the scope of their appointment in order 
to speak to an agent. While the commenter appreciated the efforts of 
CMS to protect the public and regulate agents, he did not believe that 
a documentation requirement was the best way to accomplish either goal. 
Yet another commenter found requiring that a scope of appointment form 
be filled out in advance of appointments and home visits to be a 
reasonable protection for beneficiaries. However, this commenter also 
believed that requiring a scope of appointment form for a walk-in visit 
at an office or during seminars confuses the beneficiary since they do 
not understand why they have to sign a form when they have voluntarily 
initiated a walk-in visit or attending a seminar. Also, some commenters 
supported the scope of appointment requirements, but believed that 
requiring the provision in the proposed rule that 48 hours pass before 
a return visit to discuss additional health-related lines of business 
puts an unreasonable burden on the beneficiary and an added cost to 
plans and ultimately to enrollees. Also mentioned by these commenters 
as problematic was the difficulty this requirement poses for rural 
agents due to driving distances to meet face-to-face with beneficiaries 
that end up being costly and difficult to reschedule. We received 
additional comments pertaining to a specific draft form for use in 
documenting the scope of an appointment.
    Response: We believe the scope of appointment requirement is 
necessary beneficiary protection to document a beneficiary's agreement 
to an appointment and the content of the discussion during the 
appointment. We disagree with the commenter suggesting that filling out 
a form documenting the scope of the appointment creates a hassle for 
seniors and note that agents/brokers play a significant role in 
providing guidance and advice to beneficiaries when selecting health 
plan options including assistance with filling out applications. 
Because of their unique position, agents/brokers have the opportunity 
to unduly influence beneficiary choices. Therefore, we believe that the 
scope of appointment should be documented regardless of whether the 
beneficiaries walk into an agent's office without an appointment 
seeking information. For example, if during the discussion of the 
agreed upon plan products, the beneficiary requests information 
regarding other products, it does no good to require the beneficiary to 
return (or the agent to come to the beneficiary) 48-hours later to 
continue the discussion. Instead, an expansion of the scope should be 
documented and the discussion may continue. We have also made 
allowances through operational guidance to accommodate the 
circumstances of rural agents like those described herein. In response 
to the comment on the 48-hour waiting period, we have moved this 
requirement to paragraph (g), and in response to the comments we have 
provided that a 48-hour waiting period must only be provided where 
``practicable.''
    Since neither the proposed nor final scope of appointment 
requirement specifies that a particular format must be used to document 
appointments, we

[[Page 54620]]

are not responding to comments related to any specific formats as that 
is outside of the scope of these regulations.
    Comment: A few commenters recommended that CMS exempt the scope of 
appointment form used by agents/brokers from requiring review and 
approval by a plan, since agents/brokers represent multiple plans. The 
commenters do not see any advantage from a beneficiary protection 
perspective requiring agents/brokers to carry separate approved scope 
of appointment forms from each plan they represent.
    Response: MA and PDP sponsors are free to create their own scope of 
appointment form as long as it makes clear that the potential enrollee 
understood the scope of the appointment. There is no requirement from 
CMS that sponsors create their own forms and require agents or brokers 
to use them. Our requirement is that the scope of appointment be 
documented. To the extent that sponsors create their own forms for this 
purpose, CMS does require they have the plan name and logo on them.
    Comment: A commenter questioned whether any meeting outside the 
enrollee's home that involves more than one potential enrollee could be 
considered a sales (or educational) event that does not require scope 
of appointment documentation.
    Response: A scope of appointment is not required at educational 
events. In the case of marketing/sales events, if the event is 
advertised to the general public, a scope of appointment is not 
required. On the other hand, if an agent holds a small group event with 
individuals who were personally invited (or requested the event), a 
scope of appointment would be required.
    Comment: A commenter strongly disagreed with the requirement that 
individual agents send every form documenting the scope of an 
appointment to the related health plan for every sales appointment, 
whether or not the beneficiary purchases a policy from the agent or 
not.
    Response: The purpose of the scope of appointment documentation 
requirement is to document each beneficiary appointment with an agent/
broker to discuss various Medicare plan products whether or not the 
beneficiary purchases a policy. While we do not specify how plan 
sponsors comply, it does hold plan sponsors accountable for complying 
with the scope of appointment requirements.
    Comment: A couple commenters questioned whether documentation of 
the scope of an appointment had to be kept for 10 years on sales calls, 
and asked about its compliance with the Paperwork Reduction Act (PRA).
    Response: The scope of appointment documentation is subject to the 
requirement in the MA regulations that it be maintained for a period of 
10 years (Sec.  422.504(d) and Sec.  423.504(b)(4)). Therefore, if the 
documentation is in the form of a recorded sales call, that recording 
is subject to the 10-year maintenance requirement. However, the Scope 
of Appointment Form, is not subject to PRA requirements because we are 
not collecting information or specifying the use of a particular format 
for doing so. If plans choose to use a form to document the scope of 
appointment, they are required to maintain that documentation.
    Comment: A commenter requested that the existing scope of 
appointment documentation requirement and 48-hour cooling off period be 
applied solely to Medicare Advantage.
    Response: We disagree and believe beneficiaries deserve the same 
marketing protection regardless of the nature of the Medicare product 
being marketed. While the statutory scope of appointment requirements 
apply to the marketing of all Medicare Advantage (including MA-only) 
and Prescription Drug plans, we have previously exercised our authority 
under section 1876(i)(3)(D) of the Act to impose ``necessary and 
appropriate'' requirements on section 1876 cost plans to require that 
they comply with MA marketing requirements.
    Comment: A commenter requested that CMS allow the practice of cold 
calling beneficiaries.
    Response: The prohibition against cold calling beneficiaries is set 
forth in the statute at section 1851(j)(1)(A) of the Act, and thus 
could not be changed by regulation. The request to do so is outside the 
scope of this rulemaking.
    Comment: Several commenters objected to beneficiaries with an 
existing relationship with an agent as having their ``hands tied'' in 
discussing Medicare coverage with their agents.
    Response: We have guidance in the Medicare Marketing Guidelines 
that describes how agents may interact with beneficiaries after they 
establish an ongoing relationship with them. For example, agents are 
not allowed to cold-call beneficiaries or contact beneficiaries 
unsolicited. However, an agent that has an established relationship 
with a beneficiary, would be expected to call the beneficiary to 
provide them with information about benefit options, updates, or plan 
changes. These follow-up calls would not be considered unsolicited 
contacts or cold-calls.
    Comment: A commenter requested that SNPs be allowed to work with 
trusted referral sources to obtain consent from the beneficiary to be 
contacted by the plan. The trusted referral source could include a 
family member, physician, social service providers, home health agency 
staff or other entities that are committed to the best interests of the 
beneficiary. Such a ``trusted referral source'' would, under the 
commenter's suggested approach, help the beneficiary execute a business 
reply form by explaining the scope of the marketing appointment and 
documenting beneficiary consent. In the view of the commenter, it would 
allow plans to deal with language, literacy and other barriers to 
effective direct mail marketing, comply with cold call and appointment 
rules, and protect the best interests of the beneficiary. In addition, 
the commenter requested that plans be able to bring a scope of 
appointment form to marketing meetings in cases where the agent is 
marketing to their beneficiary.
    Response: Beneficiaries may turn to a number of sources for advice 
and assistance with making health care choices. However, because 
providers like physicians, social workers, home health agency staff, 
and others, are trusted sources of information and are in a position to 
unduly influence a beneficiary's decision, they must follow the 
guidance contained in the Medicare Marketing Guidelines with regard to 
the interactions between beneficiaries and providers. We do appreciate 
and recognize the marketing challenges faced by special needs plans. 
However, we believe that these issues are addressed adequately in 
subregulatory guidance and that further regulation is not necessary. 
For example, agents may document a new scope of appointment at a 
marketing meeting when the beneficiary indicates that he or she would 
like information beyond the scope of the original appointment.
    Comment: A commenter recommended that we integrate full benefit 
dual eligibles' need for flexibility in the marketing rules that 
accommodate the challenges of selling to full benefit dual eligibles, 
while maintaining adequate protections for vulnerable populations.
    Response: While we recognize that there may be unique challenges 
when marketing to the dual eligible population, at this time, CMS 
believes that additional regulatory changes would not be necessary, 
beyond the scope of those changes addressed herein. CMS will consider 
whether further subregulatory guidance is needed.

[[Page 54621]]

(3) Use of Names and Logos, Co-Branding (Sec.  422.2268(n) and Sec.  
423.2268(n))
    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.
    Comment: We received mixed comments regarding this provision. One 
commenter had no major concerns about the co-branding provisions, but 
another commenter recommended that we clarify that the inclusion of the 
name and/or logo of the plan's PBM and/or parent company on the 
member's identification card is not considered ``co-branding'' and so 
not subject to Sec.  423.2268(n). Another commenter supported the 
prohibition on displaying names or logos on plan cards. However, the 
commenter requested clarification regarding ``other marketing 
materials'' that are subject to a disclaimer, stating that in many 
cases, the use of a network provider's name will be necessary to convey 
information to beneficiaries. Such instances could include network 
directory or brochures (under Sec.  422.2260 and Sec.  423.2260) that 
list the names of providers in the plan's network. Thus, the commenter 
believes that a broad use of the term without more clarity on what CMS 
intends to be captured by its proposal could create confusion to plans 
and network providers about the range of acceptable practices.
    Response: We agree that PBMs are not typically co-branding 
partners; however, PBMs assume different roles in the MA and Part D 
programs, including: plan sponsor, plan subcontractor, or health care 
provider (mail order pharmacy). Since beneficiaries may not always 
understand the relationship of the PBM to the plan sponsor, we believe 
that including the PBM's name on the identification card may create 
confusion or lead the beneficiary to interpret this as a co-branding 
arrangement. Therefore, we believe that the co-branding requirements do 
apply and the name of the PBM cannot be included on the member 
identification card. We believe that unless a beneficiary must obtain 
services from a specific provider organization, the provider 
organization name should not be included on the ID card. We do not 
believe that additional clarification in the regulations is necessary 
regarding the specific materials that are intended as ``other marketing 
materials.'' We provide further interpretive guidance in the Medicare 
Marketing Guidelines.
(4) Inclusion of Plan Type in Plan Name (Sec.  422.2268 and Sec.  
423.2268)
    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 consistency across plans, the plan type is required to be 
included at the end of the plan name.
    Comment: One commenter was concerned about the clarity of the 
regulations containing various references to ``lines of business'' and 
``plan type'' in sections Sec.  422.2268(h) and Sec.  422.2268(q) and 
elsewhere. This commenter believed that the terms are employed somewhat 
interchangeably, but are not defined explicitly in the regulation. The 
commenter noted that there is a definition of plan type in Sec.  
422.2274(a)(3)(i) but it was unclear as to whether CMS intended that 
this definition apply throughout the regulation.
    Response: We clarified the definition of ``plan type'' in the 
Medicare Marketing Guidelines and include examples of all of the plan 
type indicators. We do not believe that further regulatory definitions 
are necessary.
c. Reporting Agent and Broker Terminations (Sec.  422.2272(d) and Sec.  
423.2272(d))
    Section 103 of the MIPPA, requires us to expand our proposed 
requirements on plans that use licensed agents and brokers. In 
accordance with MIPPA, Sec.  422.2272(d) and Sec.  423.2272(d) 
implement the requirement 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.
    We did not receive any comments on this provision; and are 
therefore, finalizing this provision without modification.
d. Broker and Agent Compensation (Sec.  422.2274, Sec.  423.2274)
    Section 103(b)(1)(B) of MIPPA revised 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 revised the 
Act to apply these same guidelines to PDP sponsors.
    In our November 18, 2008 IFC, we invited comment on the approach 
taken in that rule to implementing the foregoing requirements. We are 
particularly interested in comments on whether this goal would be 
served by: (1) Providing for higher levels of compensation for an 
initial enrollment in Part C or Part D (given the added costs of 
explaining how the programs work) than for a change in enrollment from 
one Part C plan or Part D plan to another, (2) establishing a flat fee 
schedule; or (3) providing for lower payments in early years and higher 
payments in the renewal years, or in later renewal years, to 
incentivize agents or brokers to keep enrollees in the same plan rather 
than giving them an incentive to move enrollees.
    We are also concerned about amounts paid to Field Marketing 
Organizations (FMOs) or similar typoes of entities for their services 
that do not necessarily flow down to the agent or broker who deals with 
the beneficiary. Specifically, we are concerned that these FMOs or 
other similar entities could engage in a ``highest bidders'' for their 
services.
    We received a number of comments from plan sponsors, individuals, 
and trade associations, concerning compensation. These covered aspects 
of compensation including: compensation rules, structures and rates, 
and data. A summary of the comments we received and our responses 
follow:
(1) Compensation Rules
    Comment: Commenters recommended varied approaches, including: 
providing generous initial compensation payments and no renewal 
payments, eliminating renewal payments, paying renewals on a declining 
scale, paying compensation based on enrollment type (SEP, ICEP/ICP), 
creating special compensation structures for PDPs, and relying on 
market forces. Reasons given for these recommendations included: 
renewal payments increase costs, diverted money could be better spent 
on benefits, and the compensation payments reduce efficiency.
    Response: We believe that our current compensation processes have 
reduced the incidence of aggressive marketing and encourage agents and 
brokers to assist beneficiaries with making health care decision based 
on the beneficiaries' interests. We have done this by implementing a 
process that encourages agents and brokers to develop long-term 
relationships with beneficiaries. Thus, the 6-year compensation cycle 
is intended to recognize that beneficiaries need assistance from year-
to-year in

[[Page 54622]]

understanding plan benefit changes so they can ensure that they are in 
the appropriate plan to meet their needs.
    While we agree that the amount of work required to adequately 
explain the various Medicare product lines to beneficiaries will vary 
based on the beneficiaries' prior knowledge of the program, we believe 
that we have developed a process that recognizes the difference in 
experience of the beneficiary as well as the uniqueness of each product 
type. We have done this by allowing agents to be paid initial 
compensation for unlike plan changes, changes among MA/MA-PD, PDP, and 
1876 cost plans. For like plan changes (MA/MA-PD to MA/MA-PD, PDP to 
PDP, or cost to cost), agents, and brokers are paid renewal 
compensation.
(2) Compensation Structures and Rates
    Comment: Commenters expressed the concern that the variation 
allowed plans in developing compensation structures could potentially 
create financial incentives for agents to push low-value (less 
expensive) plans or MA products (over PDPs); leading to increased 
``cherry picking'' or steering by independent agents and brokers.
    Response: We believe that some variation in compensation is 
unavoidable. For example, the amount of work required to explain to a 
beneficiary the benefits, policies, and procedures of a particular MA 
plan compared with the amount of work required to explain to a 
beneficiary the benefits, policies, and procedures of a PDP are quite 
different. One would not expect for the compensation to be the same. 
Furthermore, we think that making the amounts for both plans the same 
would only incentivize agents to maximize profits by aggressively 
selling the plan that takes the least amount of time to explain.
    At the time that our November 10, 2008 IFC was promulgated, we 
collected historical agent and broker compensation data from Medicare 
plan sponsors. Analysis of that data resulted in the establishment by 
us of fair-market value cut-off amounts (FMV). We then allowed plan 
sponsors to adjust their 2009 compensation amounts to an amount at or 
below the FMV. This allowed plan sponsors to be competitive in the 
marketplace while simultaneously limiting the high-end amount. We 
believe these amounts limit the variation in compensation paid to 
agents and brokers selling Medicare plans within specific geographic 
areas.
    In addition to the fair-market value cut-off amounts, we 
implemented a strong surveillance and compliance program as well as a 
number of operational policy changes designed to strengthen beneficiary 
protections against aggressive and deceptive marketing practices by 
agents or brokers. We implemented enrollment verification processes 
that require plans to verify with beneficiaries that they are enrolling 
in the plan of their choice and understand the benefits of that plan. 
We also require plans to report terminated agents or brokers to State 
Departments of Insurance. We believe that with these policy refinements 
and the existing rules requiring plans to recover all payments for an 
enrollment from agents or brokers when a rapid disenrollment occurs 
provide necessary protections for beneficiaries as they make their 
health care choices.
    Comment: We also received comments requesting that we create single 
commissions by product type (MA, MA-PD, PDP), create a flat rate for 
all product types that is the same for new plans as well as renewals, 
equalize commissions across all product types, or set benchmarks. In 
addition, commenters recommended that we limit the ability of agents 
and brokers to contract with multiple organizations and allow market 
forces to strengthen all Medicare plan products through competition.
    Response: Since the issuance of our November 10, 2008 IFC, we 
released the FMV cut-off amounts, which are essentially benchmarks. 
These amounts set ceilings for agent or broker compensation payments 
for enrollments based on geographic areas. Because the 2009 FMV amounts 
were established through a blind bidding process that may have put low-
bidding sponsors at a competitive disadvantage. During the summer of 
2009, sponsors were allowed the opportunity to adjust their 
compensation amounts to any amount at or below the FMV. This was an 
important policy decision because, by regulation, all future 
compensation amounts are based on the 2009 amount filing.
    We believe that setting the FMV cut-off amounts was the best 
approach because it allows for market forces to act while limiting the 
amount of spending. We also believe that this approach, along with the 
compensation regulatory provisions achieves the goals of the policy, 
and is the most efficient option because it does not require a 
significant investment of time, money, and staff resources. For 
example, in order to create a flat rate, we would have to consider a 
number of variables like individual local market dynamics, the impacts 
on small versus large plan sponsors, and plan benefit changes from 
year-to-year. In order to update the rate, we would have to engage in a 
similar process each subsequent year. Such an endeavor would require 
additional systems development and staff resources.
(3) Compensation Data
    Comment: Commenters questioned CMS's ability to gather accurate and 
reliable market data, found the blind-bidding process unfair, and 
contended that the 2006 rates were not sustainable market rates. We 
also received a request to share aggregate data, with plan sponsors, 
and allow plans to adjust their compensation amounts. A commenter also 
requested that national plans' rates be included when making local plan 
comparisons.
    Response: We recognize the inherent problems with the initial data 
collection process and that it was a blind-bidding process that 
potentially disadvantaged plans that submitted more conservative 
compensation estimates. In the spring of 2009, we published our FMV 
cut-off amounts based on the historical data submitted by plan sponsors 
in November 2008. The data included information in local markets for 
local and national plans. In July 2009, we allowed plan sponsors to 
adjust their original compensation amount submissions to an amount at 
or below the FMV. The purpose of this adjustment was to level the 
playing field allowing plans that initially submitted low compensation 
amounts (whether due to limited ability to collect historical data or 
underestimating the current market rates), the opportunity to become 
more competitive. In 2009, we began requiring plan sponsors to submit 
the range of amounts (high and low values) they pay their agents and 
brokers. These amounts are automatically updated from year-to-year and 
plan sponsors are only required attest to the amount and their 
continued use of independent agents and brokers. We currently posts 
plan compensation information on its Web site by State and county.
    At this time, we cannot change the way plan sponsors update their 
annual compensation amounts. However, we will consider this proposal 
for future rulemaking.
(4) Spending Limits
    Comment: We received comments requesting that we establish limits 
on marketing expenditures. One suggestion was for a limit based on the 
percentage of the sponsor payments rates that can be expended on 
marketing. Another would apply limits on spending for marketing based 
on sponsor history of marketing misrepresentation. A third

[[Page 54623]]

would place hard caps on spending for marketing to limit the share of 
per capita payments to sponsors that is diverted away from extra 
benefits or lower cost sharing.
    Response: We believe that at this time it is unnecessary to place 
the types of limits on spending that were recommended by these 
commenters because, in addition to the establishment of the FMV cut-off 
amounts, we have in place a sophisticated surveillance and compliance 
program to monitor the activities of sponsors, agents, and brokers in 
the marketplace. The program includes the monitoring of marketing 
events, targeted audits of sponsors, coordination with the State 
Departments of Insurance, and penalties for sponsors who are not 
adequately ensuring that their agents or brokers are complying with our 
rules.
(5) Marketing Entities
    Comment: We received several comments recommending that we charge 
plan sponsors a fee or increase existing users' fees that would be used 
to pay SHIPs and other community volunteer organizations to ``provide 
beneficiaries with advice and counseling on plan selection.''
    Response: In our October 2009, proposed rule (74 FR 54634), we 
solicited public comment on a number of ideas including whether or not 
State Health Insurance Assistance Programs had the capacity to serve 
significantly more Medicare beneficiaries. We received a number of 
comments and suggestions, and as in our April 2010 final rule (75 FR 
19678), there were a number of concerns about the adequacy of the 
funding necessary for SHIPs to serve more Medicare beneficiaries, the 
ability of SHIPs to create networks to service entire States, and the 
limits of SHIPs under their current structure to handle increased 
capacity. In addition to these concerns about the ability to transfer 
the responsibilities of independent agents and brokers to organizations 
like SHIPs, we believe that we do not have the statutory authority to 
increase or create new fees as a means of providing additional 
resources to SHIPs so that they can increase their capacity.
    Comment: We also received several comments regarding payments to 
FMOs which focused on the language the commenter found to be unclear 
describing the responsibility of plan sponsors to ensure that the 
payments made by FMOs, are consistent with the compensation 
regulations. The commenters recommended direct regulation of FMOs or 
more explicit regulation language pertaining to the payment 
arrangements between the FMOs and the agents who work for them. One 
comment compared FMO/agent relationships to real estate broker/agent 
relationships, and argued for flexibility in the way that FMOs paid 
agents based on factors like experience and tenure.
    Response: We agree that while it was always our intent that the 
compensation rules would apply at all levels including the FMO/writing 
agent level, our regulations language did not clearly express this 
intent. Therefore, we are explicitly clarifying our intent in Sec.  
422.2274(a)(1)(iv)(A) (B) and Sec.  423.2274(a)(1)(iv)(A) and (B) of 
this final rule that the compensation rules apply to payments made by 
plan sponsors to the FMOs, as well as the FMOs'' agents. We also note 
that our September 18, 2008 IFC provided plan sponsors with the 
flexibility to use factors like tenure and experience when developing 
compensation structures.
(6) Employed Agents
    Comment: Commenters sought clarification of the fact that there 
were fundamental differences between compensation streams and 
responsibilities for employed agents and independent agents. These 
differences included the structure of the payment arrangements (salary 
and benefits for employees, straight commission for independent 
agents), responsibilities (employees typically do not maintain a 
relationship with beneficiaries beyond the point of enrollment), and 
level of oversight (in-house oversight of employees). A few commenters 
requested language that exempts employees of plan sponsors and their 
subcontractors (like call center staff) from the compensation 
requirements that they believe were intended for independent agents and 
brokers.
    Response: We clarified in the preamble of the September 18, 2008, 
interim final marketing regulations, that customer service 
representatives were not required to be licensed as long as they were 
engaged in duties specific to their job as customer service 
representatives (CSRs) (for example, providing factual responses to 
beneficiary questions or assisting with the enrollment process of 
beneficiaries who have decided on their own to enroll in the plan). We 
also clarified in the same regulations the differences between 
treatment of employed and independent agents and brokers (contracted). 
In addition, we have published the Medicare Marketing Guidelines which 
clarifies these issues and believes that further regulatory 
clarification is unnecessary.
(8) Recommendations
    Comment: Several commenters requested that CMS consider the 
following recommendations:
     Guaranteeing a 7-day reconciliation cycle for payments of 
compensation.
     Eliminating charge backs for disenrollments.
     Eliminating product specific training.
     Clarifications of policy, definitions, and approach to 
controlling plan changes.
    Response: Since the time that public comments were solicited on 
these regulations, we have put in place a number of operational 
policies that address the concerns expressed by the commenters. For 
example, in 2009, we did not have the systems capability to provide 
plans with information so that they could reconcile payments. Instead, 
we used an ad hoc report that provided basic information to assist plan 
sponsors with paying agents appropriately. As of January 2010, we have 
been providing plan sponsors with an agent and broker compensation 
report that is generated from the Medicare Advantage and Prescription 
Drug System (MARX) and delivered with the monthly MARX enrollment 
reports. Since its implementation, plan sponsors are able to use the 
system to pay agents timely and accurately. We have also published 
guidance on a number of policy issues in the Medicare Marketing 
Guidelines including chargebacks for different types of disenrollments, 
the relationship of referral fees to total compensation, examples of 
types of remuneration under the definition of compensation, 
clarification that the compensation cycle operates on a calendar year, 
and the exclusion of employer group plans from some of the agent and 
broker requirements. Therefore, we believe that additional regulatory 
provisions are unnecessary.
    In addition to the aspects of compensation that we have learned 
through the comments we received on the interim final regulations, we 
have also identified several areas in our guidance which are not 
sufficiently clear. For example, we received a number of questions from 
plan sponsors, agents, and FMOs requesting clarification on the actual 
months for which agents or brokers could be compensated. The provision 
in the interim final regulations (Sec.  422.2274(a)(4) and Sec.  
423.2274(a)(4)) stated that ``compensation shall be paid for months 4 
through 12.'' The intent of this provision was to ensure that, in the

[[Page 54624]]

case of a rapid disenrollment (a disenrollment within the first 3 
months of enrollment), agents did not receive compensation. However in 
subregulatory guidance, we have since clarified the compensation policy 
around rapid disenrollments by clarifying the circumstances when a 
disenrollment would not be considered a rapid disenrollment (for 
example, when a beneficiary moves out of the plan service area within 
in the first three months of enrollment).
    We also learned that plan sponsors were interpreting ``year'' in 
different ways (Sec.  422.2274(a)(4) and Sec.  423.2274(a)(4)). Some 
sponsors were interpreting ``year'' to mean a year from the date of 
enrollment. Some sponsors have interpreted it to mean a calendar year, 
while others have interpreted it to mean a fiscal year. We have since 
clarified in subregulatory guidance that ``year'' means a plan year, 
from January through December.
    We also have learned that plan sponsors and FMOs are unclear about 
the delineation between the activities that are part of the total 
compensation amount and those that are outside of our definition of 
compensation (Sec.  422.2274(a)(1)(iv) and Sec.  423.2274(a)(1)(iv)). 
We have clarified in subregulatory guidance that compensation ``for 
activities other than selling Medicare products'' must be at fair 
market value. However, we do not intend to define fair market value for 
these activities.
    Lastly, we have learned that plan sponsors are not clear what is 
meant by ``new compensation'' in Sec.  422.2274(a)(1) (ii) and Sec.  
423.2274(a)(1)(ii). By ``new compensation'' we meant that when an 
unlike plan type change is made, a new 6-year compensation cycle 
begins. Thus, the agent would receive an initial compensation amount.
    After considering the comments received and experience we have 
gained over the past 3years, we are finalizing these requirements with 
modification.
e. Agent and Broker Training (Sec.  422.2274(b) and Sec.  423.2274(b))
    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 Sec.  422.2274(b) and Sec.  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 Sec.  422.2274(c) and Sec.  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.
    Comment: A commenter requested clarification of the term 
``selling'' as it applies to various roles within a plan. The commenter 
asserted that confusion exists as to whom ``selling'' pertains. It was 
asked if all licensed agents being paid any commission or 
administrative payment by a plan are considered to be ``selling'' MA 
and Part D plans, or if only the writing agent is considered to be 
``selling.'' The commenter further recommended that CMS clarify, in the 
final rule, that all agents receiving any level of commission must be 
trained and tested annually to ensure that all levels of the sales 
force have up-to-date information.
    Response: We describe who would qualify as ``one who sells'' in the 
Medicare Marketing Guidelines. In the definitions section of the 
Medicare Marketing Guidelines we define a Sales Person, or one who 
sells, as follows: The term ``sales person'' is used in these Medicare 
Marketing Guidelines to define an individual who markets and/or sells 
products for a single plan sponsor or numerous plan sponsors. It 
includes employees, brokers, agents, and all other individuals, 
entities, and downstream contractors that may be utilized to market 
and/or sell on behalf of a plan sponsor. While we realize that, in many 
instances, there may be many individuals involved in selling, it is the 
intent of the guidance for plans to encompass all possible points of 
contact which could reasonably be expected to sell and that those 
contacts are included in their respective training and testing 
programs.
    Comment: We received another comment which asserted that 
regulations requiring more standardized industry training and testing 
may have some negative impacts on beneficiary choices. While the 
commenter agreed that in years past not all agents were properly 
trained and that previous responses encouraged an industry 
certification process, they suggested that there is too much 
duplication of training. Specifically, it is mentioned that requiring 
agents and brokers to receive separate training and certification from 
each company that they represent for each product, discourages 
qualified agents and brokers from representing a wide variety of 
products. The commenter further asserted that agents and brokers would 
most likely select one or two products to promote due to the 
duplicative and time-consuming requirements imposed upon them, and that 
this would be detrimental to Medicare beneficiaries in an environment 
where choice is critical.
    Response: While we agree with the commenter that requiring 
different certifications from separate plan sponsors does create 
duplication in areas of training and testing in addition to 
considerable time (depending on the number of certifications desired), 
it is a requirement that will better protect beneficiaries. Many 
Medicare beneficiaries have suffered tremendous damages both monetarily 
and at a cost to their health due to poorly informed sales 
representatives. The training and testing certification process has 
been identified by both the industry and Medicare beneficiaries as a 
good protection. By implementing regulations that provide consistent 
and routine training and testing of agents, brokers, and all manner of 
personnel that may conduct sales-related activity, beneficiaries will 
be less likely to make important health decisions based on incomplete 
or inaccurate information. We will continue to evaluate the 
requirements and methods utilized to implement the training and testing 
in the future.
    Since our April 2011 final rule (76 FR 21432) entitled, Medicare 
Program: Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs for Contract Year 2012 and Other 
Changes, finalized changes to Sec.  422.2274 and Sec.  423.2274, 
paragraphs (b) and (c), we are not finalizing these provisions in this 
final rule.
    In Sec.  422.2274(d) and Sec.  423.2274(d), MA organizations and 
PDP sponsors are required to provide us the information designated by 
CMS as necessary to conduct oversight of marketing activities.
    We received no comments on these provisions and are finalizing them 
without modification.
    In Sec.  422.2274(e) and Sec.  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. We will establish and 
maintain a memorandum of understanding (MOU) to share compliance and 
oversight information with States that agree to the MOU.

[[Page 54625]]

    We received no comments on these provisions and are finalizing them 
without modification.

D. Changes to Section 1876 Cost Plans

1. Clarifying the Conditions Under Which 1876 Cost Plans or Portions of 
Their Service Areas May Be Prohibited
    In the September 2008 IFC, we implemented statutory requirements 
affecting section 1876 cost contract plans and policies related to the 
ability to offer cost contract plans when in the same service area or 
portion of a service area as MA coordinated care plans. Section 
1876(h)(5)(C) of 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 5,000 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 5,000) 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 section 
1876(h)(5)(C)(iii) of the Act that the two plans triggering the 
prohibition may not be offered by the same MA organization.
    In addition, by revising section 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 5,000 enrollees, the determination to prohibit 
a plan will be made with respect to each MSA and counties contiguous to 
each MSA that are not in another MSA with a population of more than 
250,000.
    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 revised paragraphs of Sec.  
417.402(c)(1) through (3). We received two comments on this provision 
and, with one exception discussed below, are finalizing the provision 
as specified in the IFC.
    Comment: A commenter suggested that we update our regulations at 
Sec.  417.402(c) to reflect the MIPPA-revised date of January 1, 2010 
on or after which CMS will non[pi]renew affected service areas of cost 
contract plans.
    Response: Subsequent to this comment, new statutory language 
revised the non[pi]renewal date from January 1, 2010 to January 1, 
2013. We specified the new timeline in our final rule that appeared in 
the April 15, 2010 Federal Register (76 FR 21732) and that implemented 
this and other provisions of the Affordable Care Act.
    Comment: A commenter requested that we clarify in our revision of 
Sec.  417.402(c)(3) that in determining minimum enrollment in MSAs and 
contiguous counties we specify that only those contiguous counties are 
taken into account if not in another MSA with a population of more than 
250,000.
    Response: This clarification is consistent with the statute and we 
have revised Sec.  417.402(c)(3) accordingly.

III. Collection of Information Requirements

    This final rule contains information collection provisions that are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). 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 OMB for review 
and approval. In order to fairly evaluate whether an information 
collection should be approved by OMB, section 3506(c)(2)(A) of the 
Paperwork Reduction Act of 1995 requires that we solicit comment on the 
following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The title, description, and respondent description of the 
information collection provisions and an estimate of the annual 
reporting burden were provided in a series of interim final rules, (73 
FR 54208) and (73 FR 54226) issued September 18, 2008. Included in the 
estimate was the time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing each collection of information. We solicited public 
comment on each of the issues in the interim final rule that contained 
information collection requirements (ICRs). This final rule requires no 
new information collection. In the document below, we describe the 
information collection burden associated with provisions of the interim 
final rule that we are finalizing.

A. ICRs Regarding the Model of Care (MOC) Requirements for Special 
Needs Plans (Sec.  422.101)

    Section 422.101(f)(1) states that MA organizations offering special 
needs plans (SNPs) must implement a model of care (MOC) with care 
management as a centerpiece designed to meet the specialize needs of 
the plan's targeted enrollees. The burden associated with this 
requirement is the time and effort put forth by the SNP to establish a 
MOC that meets the requirements under Sec.  422.101(f). In our 
September 18, 2008 IFC, we estimated that it would take each SNP 80 
hours to meet this requirement in the initial year of development. We 
estimated that it would take 10 hours per year in subsequent years to 
revise the MOC based on performance data analysis through the plan's 
quality improvement program. Existing SNPs already have MOCs and 
revise, rather than develop, their MOCs in response to this 
requirement. In our September 18, 2008 IFC, we estimated that the 335 
existing SNPs would have a cumulative annual burden of 3,350 hours to 
revise their MOC. We also estimated that we would approve approximately 
150 new SNPs in January 2010, and that these 150 new SNPs would have a 
cumulative initial year burden of 12,000 hours to develop their MOC, 
and a cumulative annual burden of 1,500 hours to revise their MOC in 
subsequent years. We projected the total annual burden to be 3,350 
hours in calendar year 2009. We projected that the total annual burden 
to be 13,500 hours in calendar year 2010 (12,000 hours for SNPs 
approved to begin operating January 1, 2010 and 1,500 hours for SNPs 
approved prior to January 1, 2010). In this final rule, we are 
modifying the annual burden estimate reported in the interim final rule 
to reflect a significant increase in the number of existing SNPs in 
2010 as compared to 335 existing SNPs that we estimated in the interim 
final rule. We are also modifying the estimate to reflect a significant 
decrease in the number of new SNPs approved for 2010 as compared to the 
150 new SNPs that we estimated in the interim final rule. We estimate 
that the 544 SNPs existing in 2010 will expend 10 hours per year in

[[Page 54626]]

subsequent years to revise the MOC based on performance data analysis 
through the plan's quality improvement program. Therefore, we estimate 
a cumulative annual burden of 5,440 hours for these existing SNPs to 
revise their MOCs. We estimate that the 15 new SNPs approved in 2010 
will have a cumulative initial year burden of 1,200 hours (15 new SNPs 
multiplied by 80 hours in the initial year of development) to develop 
their MOC, and a cumulative annual burden of 150 hours (15 new SNPs 
multiplied by 10 hours per year) to revise their MOC in subsequent 
years.
    In our September 18, 2008 IFC, we assumed hourly wages of $37.15 
(based on United States Department of Labor (DOL) statistics for a 
management analyst) plus the added OMB figures of 12 percent for 
overhead and 36 percent for benefits for a total hourly labor cost of 
$54.98, respectively, to represent average costs to plans, sponsors, 
and downstream entities for the provisions discussed in our September 
18, 2008 IFC. While we recognized that SNPs may need to utilize medical 
personnel or senior staff to comply with this requirement, we were 
unsure of these costs when we developed the cost estimate for this 
provision in the interim final rule. Therefore, in our September 18, 
2008 IFC, we requested comment on the additional cost impact of the MOC 
requirement on SNPs. We did not receive any comments in response to our 
request for comment on the cost estimate for this provision. Based on 
new information regarding the labor wages of staff that review the MOCs 
we are revising our hourly labor estimate from the estimate we reported 
in the interim final rule. In this final rule, our estimate of the 
information collection burden associated with this provision reflects 
an hourly salary of $55.46 for a GS 13, Step 10 analyst for 2010, with 
an additional 48 percent increase to account for fringe benefits and 
overhead. Therefore, we estimate a total hourly labor cost of $82.08, 
and a total cost (including start-up and annual costs) of $598,068 to 
implement the requirements of this provision.

B. ICRs Regarding the State Contracting Requirements for Dual Eligible 
Special Needs Plans (Sec.  422.107)

    Section 422.107(a) requires that an MA organization seeking to 
offer a SNP 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 SNP to contract with the State Medicaid 
agency. In our September 18, 2008 IFC, we estimated it would take 460 
SNPs 18 hours each for 6 months to comply with this requirement (36 
hours per year). Therefore, we estimated that the total annual burden 
associated with this requirement was 16,560 hours. In this final rule, 
we are revising the estimates we reported in the interim final rule to 
reflect a significant decrease in the number of SNPs that were required 
to comply with this requirement in 2010. In 2010, 43 SNPs were required 
to have State contracts. Therefore, we estimate that it will take 43 
SNPs 36 hours to comply with this requirement each year, resulting in a 
total annual burden of 1,548 hours. In our September 18, 2008 IFC, we 
assumed hourly wages of $37.15 (based on DOL statistics for a 
management analyst) 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 the interim final rule. In this final rule, we 
are updating the labor estimates we reported in our September 18, 2008 
IFC to reflect the most recent 2009 data available from the DOL's 
Bureau of Labor Statistics (BLS) for the hourly wages of management 
analysts. Therefore, our final labor cost estimate reflects a median 
hourly rate of $36.18 for a management analyst, and a, 48 percent 
addition to this hourly rate for overhead and fringe benefits, for a 
total hourly labor cost estimate of $53.55 per response. We estimate a 
total annual cost of $82,895 in order to implement this provision's 
requirements.

C. ICRs Regarding the Comprehensive Written Statement Requirement for 
D-SNPs (Sec.  422.111)

    Section 422.111(b)(2)(iii) states that each SNP 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 
SNPs 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. In 
our September 18, 2008 IFC, we estimated that 460 SNPs would be 
affected annually by this requirement and that it would take each SNP 
10 hours to comply with this requirement. Therefore, we estimated that 
the total annual burden associated with this requirement would be 4,600 
hours. In this final rule, we are revising the annual burden estimate 
we reported in the interim final rule to reflect the most recent 
information we have regarding the number of D-SNP plan benefit packages 
(PBPs). In this final rule, we are revising the estimate we reported in 
the final rule to reflect an increase in the number of D-SNPs affected 
by this requirement. In 2010, 487 D-PBPs were affected by this 
requirement. Accordingly, we estimate the total annual burden 
associated with this requirement is 4,870 hours (10 hours multiplied by 
487 D-SNP PBPs). We are also revising our labor cost estimates in this 
final rule to reflect the most recent hourly wage data available from 
the BLS. In our interim final rule, we estimated an hourly labor rate 
of $14.68 for the hourly wages of word processors and typists based on 
2006 BLS data. Our labor cost estimate in this final rule assumes a 
median hourly rate of $15.67, based on the most recent 2009 BLS data 
available for the hourly wages of word processors and typists. To 
account for fringe benefits and overhead, we add 48 percent to this 
hourly rate to obtain a total hourly labor cost estimate of $23.19 per 
response. We estimate total annual costs of $112,935 in order to 
implement this provision's requirements.

D. ICRs Regarding the Access to Services Under an MA Private Fee-for-
Service (PFFS) Plan (Sec.  422.114)

1. Clarification Regarding Utilization
    The revised Sec.  422.114(a)(2)(ii)(A) requires that for plan year 
2010 and subsequent plan years, a private fee-for-service (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 1852(d)(1) of the Act. This

[[Page 54627]]

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.
    We use the network adequacy standards established for coordinated 
care plans in order to determine whether PFFS plans who want to meet 
access requirements under Sec.  422.114(a)(2)(ii) satisfactorily meet 
those requirements. Therefore, in our September 18, 2008 IFC, we 
assumed that there would be no additional burden on PFFS plans in order 
to comply with Sec.  422.114(a)(2)(ii)(A). We did not receive any 
comments on our assumption on no additional burden on PFFS plans, and 
we are not changing this assumption in this final rule.
2. 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 Sec.  422.114(a)(3)(i) 
meets the access requirements in Sec.  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 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 is required to 
create separate plans within its existing service area based on whether 
the counties located in that service area are considered network areas. 
In our September 18, 2008 IFC, we estimated the burden of this 
administrative requirement on the 77 MA organizations that offered 838 
non-employer MA PFFS plans at the time that the interim final rule was 
published. We also estimated that an additional 300 plans would be 
created as a result of organizations creating separate PBPs for their 
network area and non-network area plans. We estimated that it would 
take 2 hours to create a new plan benefit package for a total of 600 
hours to create 300 plan benefit packages. We are not modifying this 
total burden hour estimate in this final rule. However, as stated 
earlier, we are modifying our estimate of the hourly labor costs 
incurred through this requirement to reflect the most recent hourly 
wage data available from the BLS. Therefore, we estimate a total hourly 
labor cost of $53.55 for this provision, assuming an hourly labor cost 
of $36.18 for a management analyst in 2009, and a 48 percent increase 
to account for fringe benefits and overhead. We estimate a total annual 
cost of $32,130 associated with implementing this provision's 
requirements.
3. 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 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 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 Sec.  
422.501. In our September 18, 2008 IFC, we estimated that approximately 
10 organizations would submit applications for a year, and that it 
would take each of these organizations approximately 100 hours to 
complete an application, for a total burden of 1,000 hours for all 
applicants on an annual basis. We are not modifying this total burden 
hour estimate in this final rule. However, we are modifying our 
estimate of the hourly labor costs incurred through this requirement to 
reflect the most recent hourly wage data available from the BLS. We 
calculate a total hourly labor cost of $53.55 for this provision 
assuming the hourly salary of $36.18 for a management analyst in 2009, 
with a 48 percent increase to account for fringe benefits and overhead. 
This burden associated with the requirement under Sec.  422.501 imposes 
$53,550 in annual costs and is captured in OMB 0938-0935. We 
have updated this PRA package approved under OMB 0938-0935 for 
this ICR to reflect our revised burden estimates.

E. ICRs Regarding the Quality Improvement Program (Sec.  422.152)

    Section 422.152(g) states that MA organizations offering SNPs must 
conduct a QI 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 MOC; 
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 MOC performance.
    The burden associated with this requirement is the time and effort 
put forth by the SNP to develop, collect, and analyze the quality and 
health outcomes measures that meet the requirements under Sec.  
422.152(g). This requirement is for new and existing SNPs. The 
cumulative burden on SNPs is reflected in two parts: the burden on 
plans operating before implementation of this provision in our 
September 18, 2008 IFC; and the burden on new SNPs that were approved 
to operate beginning on January 1, 2010.
    In our September 18, 2008 IFC, we estimated that it would take each 
SNP 120 hours to meet this requirement in the initial year of 
development. We estimated that it would take 40 hours per year in 
subsequent years to revise the quality and health outcomes measures 
based on performance data analysis through the plan's quality 
improvement program. In our September 18, 2008 IFC, we estimated that 
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, we estimated 
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. We anticipated that we would approve 150 new SNPs 
by January 1, 2010, and that the 150 new SNPs would have a cumulative 
initial year (calendar year 2010) burden of 18,000 hours (120 hours 
multiplied by 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 
multiplied by 150 plans) to revise their model of care in subsequent 
years.
    As stated elsewhere in this section, in this final rule we are 
modifying our September 18, 2008 IFC estimates to reflect a significant 
increase in the number of existing SNPs in 2010 as compared to 335 
existing SNPs that we estimated in the interim final rule. We are also 
modifying the estimate to reflect a significant decrease in the number 
of new SNPs approved for 2010 as compared to the 150 new SNPs that we 
estimated in the interim final rule.
    First, we estimate that the 544 existing SNPs existing in 2010 
incurred a cumulative annual burden of 65,280

[[Page 54628]]

hours (120 hours x 544 plans) to develop the quality and health 
outcomes measures needed to evaluate their MOC and overall plan 
performance. For subsequent years, we estimate that these existing SNPs 
will have a cumulative annual burden of 21,760 hours (40 hours x 544 
plans) to revise the quality and health outcomes measures based on 
performance data analysis through the plan's quality improvement 
program. Second, we estimate the 15 new SNPs that CMS approved by 
January 1, 2010 incurred a cumulative initial year (FY 2010) burden of 
1,800 hours (120 hours multiplied by 15 plans) to develop the quality 
and health outcomes measures needed to evaluate their MOC and overall 
plan performance. We estimate that these SNPs will have a cumulative 
annual burden of 600 hours (40 hours multiplied by 15 plans) to revise 
their MOC in subsequent years. In summary, we are revising our 
September 18, 2008 IFC estimates in this final rule to reflect a 
cumulative annual burden of 65,280 hours in calendar year 2009, and a 
total annual burden of 23,560 hours (21,760 hours for existing SNPs 
revising their measures, and 1,800 hours for new SNPs developing their 
measures) for calendar year 2010.
    As stated earlier in this section, while we recognized that SNPs 
may need to utilize medical personnel or senior staff to comply with 
this requirement, we were unsure of these costs when we developed the 
cost estimate for this provision in the interim final rule. Therefore, 
in our September 18, 2008, we requested comment on the additional cost 
impact of the MOC requirement on SNPs. We did not receive any comments 
in response to our request for comment on the cost estimate for this 
provision. However, based on new information regarding the labor wages 
of staff that review the MOCs we are revising our hourly labor estimate 
from the $54.98 hourly wage estimate that we reported in the interim 
final rule. In this final rule, our estimate of the information 
collection burden associated with this provision reflects an hourly 
salary of $55.46 for a GS 13, Step 10 analyst for 2010, with an 
additional 48 percent increase to account for fringe benefits and 
overhead. Therefore, we estimate a total hourly labor cost of $83.08 to 
implement the requirements of this provision, resulting in a onetime 
$5,573,006 start-up cost and $1,857,668 in total annual costs.

F. ICRs Regarding the Standards for MA Organization Marketing (Sec.  
422.2268)

    Section 422.2268(g) states that 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 
acknowledgement confirming the specific types of choices that the 
marketing representative is authorized to discuss. In our November 10, 
2008 IFC, we stated that the burden associated with these requirements 
was exempt from the requirements of the 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. We received no comment on our 
burden determination in the interim final rule, and are therefore 
finalizing the burden estimate associated with this ICR without 
modification.

G. ICRs Regarding the Licensing of Marketing Representatives and 
Confirmation of Marketing Resources (Sec.  422.2272)

    Section 422.2272(d) states that MA organizations must report to the 
State in which the MA organization 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. In our November 10, 2008 IFC, we stated that the burden 
associated with these requirements is exempt from the requirements of 
the 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. We 
received no comment on our burden determination in our November 10, 
2008 IFC, and are therefore finalizing the burden estimate associated 
with this ICR without modification.

H. ICRs Regarding the Broker and Agent Compensation and Training of 
Sales Agents Under MA Organizations (Sec.  422.2274(b) and Sec.  
422.2274(d)) and PDP Sponsors (Sec.  423.2274(b) and Sec.  423.2274(d))

    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. In our 
November 10, 2008 IFC, we stated that the burden associated with these 
requirements is exempt from the requirements of 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. We received no comment on our 
burden determination for Sec.  422.2274(b) in our November 10, 2008 
IFC, and are therefore finalizing the burden estimate associated with 
the Sec.  422.2274(b) ICR without modification.
    In our November 10, 2008 IFC, we required all MA plans to post 
revised compensation structures to brokers or agents that conform 
precisely to our regulations and guidance under Sec.  422.2274(d). We 
additionally required every complete submission of a compensation 
structure to include a signed certification from an authorized senior 
official within the organization. The burden associated with this 
requirement was the time and effort put forth by the organization to 
post the compensation structures and to provide the structures and 
certification to CMS. In our November 10, 2008 IFC, we estimated it 
would take each 670 MA organizations 56 hours each to fulfill this 
requirement for a total of 37,520 hours annually. Although this 
requirement applied to plans in 2009, we did not require plans to post 
their compensation structures in 2010 or 2011. Instead, we now require 
MA organizations to update and attest to their information in the 
Health Plan Management System (HPMS). This Web-based system in HPMS 
allows new plans to submit information and automatically updates 
organization compensation information for existing plans. Once the 
information has been submitted or reviewed, the system allows the 
organization to attest to the accuracy of the information. In this 
final rule, we revise the November 10, 2008 IFC's estimate to reflect 
this burden. We

[[Page 54629]]

believe that the time necessary to complete this process is 2 hours. 
Based on our revised estimate in this final rule for the number of MA 
organizations, the total annual burden associated with this requirement 
is 1,326 hours (663 MA organizations multiplied by 2 hours per 
response). In this final rule, we are additionally revising our interim 
final rule hourly labor cost estimate of $14.68 to reflect the most 
recent 2009 BLS data available. We estimate a median hourly rate of 
$15.67 for the wages of word processors and typists. To account for 
fringe benefits and overhead, we add 48 percent to this hourly rate to 
obtain a total hourly labor cost estimate of $23.19 per response, and a 
total annual burden cost of $30,750. We are revising the PRA package 
approved under OCN 0938-0753 to reflect these information requirements.
    Section 423.2274(b) requires the Part D sponsor to ensure that 
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. In our 
November 10, 2008 IFC, we determined that the burden associated with 
these requirements was exempt from the requirements of the 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. We received no 
comments on our burden determination for Sec.  423.2274(b) in our 
November 10, 2008 IFC, and are therefore finalizing our burden estimate 
for Sec.  423.2274(b) without modification.
    In our November 10, 2008 IFC, we also required all Medicare PDPs to 
post revised compensation structures to brokers or agents that conform 
precisely to our regulations and guidance under Sec.  423.2274(d). 
Additionally, we required every complete submission of a compensation 
structure to include a signed certification from an authorized senior 
official within the organization. The burden associated with this 
requirement was the PDP's time and effort to post its compensation 
structures and to provide the structures and certification to CMS. In 
our November 10, 2008 IFC, we anticipated it would take each Part D 
sponsor 49 hours to fulfill this requirement and that 87 Part D 
sponsors would be affected annually for a total of 4,263 hours 
annually. Although this requirement applied to Part D sponsors in 2009, 
we did not require Part D sponsors to post their compensation 
structures in 2010 or 2011. Instead, we now require Part D sponsors to 
update and attest to their information in the Health Plan Management 
System (HPMS). This Web-based system in HPMS allows new sponsors to 
submit information and automatically updates organization compensation 
information for existing sponsors. Once the information has been 
submitted or reviewed, the system allows the organization to attest to 
the accuracy of the information. In this final rule, we revise the 
November 10, 2008 IFC's estimate to reflect this burden. We believe 
that the time necessary to complete this process is 2 hours. We are 
also revising the burden estimate to reflect updated figures for the 
number of Part D sponsors that were operating in CY 2009. Seventy-nine 
Part D sponsors are affected annually by this requirement, resulting in 
a total annual burden of 158 hours (79 Part D sponsors multiplied by 2 
hours per response). Our labor cost estimate assumes a median hourly 
rate of $15.67, based on the most recent 2009 BLS data available) for 
the hourly wages of word processors and typists. To account for fringe 
benefits, we add 48 percent to this hourly rate to obtain a total 
hourly labor cost estimate of $23.19 per response and a total cost 
estimate of $3,664 annually. We are revising the PRA package approved 
under OCN 0938-0964 to reflect these information collection 
requirements.

I. ICRs Regarding the Prompt Payment for Part D Sponsors (Sec.  
423.520)

    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, in our September 18, 2008 IFC, we stated that the burden 
associated with these requirements is exempt from the requirements of 
the PRA, 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. We 
received no comment on our burden determination in the interim final 
rule, and are therefore finalizing the burden estimate without 
modification.

J. ICRs Regarding the Standards for Part D Marketing (Sec.  423.2268)

    Section 423.2268(g) states that 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, in our November 10, 2008 IFC, 
we stated that the burden associated with these requirements is exempt 
from the requirements of the 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. We received no comment on our burden determination 
in the interim final rule, and are therefore finalizing the burden 
estimate associated with this ICR without modification.

K. ICRs Regarding the Licensing of Marketing Representatives and 
Confirmation of Marketing Resources (Sec.  423.2272)

    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, in 
our November 10, 2008 IFC, we stated that the burden associated with 
these requirements is exempt from the requirements of the 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. We received no 
comment on our burden determination in the interim final rule, and are 
therefore finalizing the burden estimate associated with this ICR 
without modification.

[[Page 54630]]



                                             Table 2--Estimated Fiscal Year Reporting Recordkeeping Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Hourly labor                    Total
                                                                       Burden per   Total annual     cost of     Total labor    capital/     Total cost
       Regulation sections          OMB Control  No.     Respondents    response       burden       reporting     cost ($)     maintenance       ($)
                                                                         (hours)       (hours)         ($)                     costs  ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
422.101(f)(1)...................  0938-New............           544            10         5,440         83.08       551,651             0       551,651
(Start-up)......................  ....................            15            80         1,200
422.101(f)(1)...................  0938-New............           544            10     5,440,150         83.08       464,417             0        46,417
(Annual)........................  ....................            15            10
422.107(a)......................  0938-New............            43            36         1,548         53.55        82,895             0        82,895
422.111(b)(2)...................  0938-New............           487            10         4,870         23.19       112,935             0       112,935
422.114(a)(3)...................  0938-New............           300             2           600         53.55        32,130             0        32,130
422.114(a)(4)...................  0938-0935...........            10           100         1,000         53.55        53,550             0        53,550
422.152(g)......................  0938-New............           544           120        65,280         83.08     5,573,006             0     5,573,006
(Start-up)......................  ....................            15           120         1,800
422.152(g)......................  0938-New............           544            40        21,760         83.08     1,857,668             0     1,857,668
(Annual)........................  ....................            15            40           600
422.2274(d).....................  0938-0753...........           663            26         1,326         23.19        30,750             0        30,750
423.2274(d).....................  0938-0964...........            79            29           158         23.19         3,664             0         3,664
                                 -----------------------------------------------------------------------------------------------------------------------
    Total.......................  ....................         2.141  ............       111,172  ............     8,762,666             0     8,762,666
--------------------------------------------------------------------------------------------------------------------------------------------------------

IV. Regulatory Impact Analysis

A. Introduction

    We have examined the impacts of this rule as required by Executive 
Orders 12866 on Regulatory Planning and Review (September 30, 1993) and 
13563 on Improving Regulation and Regulatory Review (January 18, 2011). 
Executive Orders 12866 and 13563 direct 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). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any one 
year). This final rule has been designated an ``economically 
significant'' rule under section 3(f)(1) of Executive Order 12866. In 
addition, this is a major rule under the Congressional Review Act (5 
U.S.C. 804(2)). Accordingly, the rule has been reviewed by the Office 
of Management and Budget.

B. Statement of Need

    The purpose of this final rule is to finalize provisions of several 
interim final rules that provide revisions to the Medicare Advantage 
(MA) program (Part C) and Prescription Drug Benefit Program (Part D), 
to implement provisions specified in the Medicare Improvements for 
Patients and Providers Act of 2008 (MIPPA), and to make other changes 
to the regulations based on our continued experience in the 
administration of the Part C and Part D programs. These latter 
revisions are necessary to: (1) Clarify various program participation 
requirements; (2) make changes to strengthen beneficiary protections; 
(3) strengthen our ability to identify strong applicants for Part C and 
Part D program participation and remove consistently poor performers; 
and (4) make other clarifications and technical changes. Refer to 
section I. of this final rule for background on the interim final rules 
that we are finalizing. The scope of the analysis of economic impacts 
for this final rule is limited to the costs and savings associated with 
the provisions in the interim final rule that we are finalizing.

C. Overall Impacts

    The CMS Office of the Actuary has estimated savings and costs to 
the Federal government as a result of various provisions of this final 
rule. Tables 4 and 6 detail the breakdown of costs by cost-bearing 
entity. Specifically, Table 4 describes costs and savings to the 
Federal government and Table 6 describes costs to MA organizations and/
or PDP sponsors and third party entities. As detailed in Table 4, we 
expect an aggregate net savings to the Federal government of 
approximately $520 million for fiscal years (FYs) 2010 through 2015 as 
a result of the provisions in this final rule. This estimate represents 
$1.02 billion in savings to the Federal government, as a result of the 
requirement that certain non-employer and all employer private-fee-for-
service plans must establish contracts with providers and costs of 
approximately $500 million as a result of the implementation of prompt 
payment by prescription drug plans and MA-PD plans from FYs 2010 
through 2015. Administrative costs associated with the provisions of 
the interim final rule as finalized by this final rule add negligibly 
to the total administrative costs of the MA or Part D programs. Table 6 
describes the administrative costs that MA organizations and PDP 
sponsors will incur ($19.55 million) from FYs 2010 through 2015 as a 
result of the requirements in this final rule. Refer to section III. of 
this final rule (Collection of Information Requirements) for additional 
information on the calculations and assumptions that form the basis of 
our cost estimates for these provisions.
    As described in Table 3 reflecting the costs and savings in this 
RIA, we conclude that the provisions in this final rule result in a net 
savings of approximately $500.5 million over FYs 2010 to 2015.

D. Detailed Impacts

1. Provider Contracts for Employer and Non-Employer PFFS Plans (Sec.  
422.114(a)(3) and Sec.  422.114(a)(4))
    In our September 18, 2008 IFC, we estimated an incurred savings 
(before the Part B premium offset) of $780 million for FY 2011 to $1.59 
billion in FY 2018 as a result of the requirement that certain non-
employer and all employer PFFS plans establish contracts with 
providers. We arrived at this figure by first determining how many 
coordinated care plans (excluding regional PPOs) were currently 
operating in counties that had PFFS plans. We then used this estimate 
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, 
we estimated how many members would end up in PFFS plans that did not 
need to form networks, how

[[Page 54631]]

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, a cost 
to Medicare. We assumed a savings for those beneficiaries that we 
believed would enroll in a MA coordinated care plan, and projected an 
even larger savings for beneficiaries that would enroll in original 
fee-for-service (FFS) Medicare. We assumed that 20 percent of the 2009 
cohort PFFS enrollees would migrate to Medicare FFS in 2011. Based on 
this projected enrollment, we assumed that the per-capita savings for 
those migrating would range from 12 to 15 percent, depending on plan 
type (employer vs. non-employer).
    In this final rule, we are revising the cost estimate projected in 
our September 18, 2008 interim final rule to reflect the actual 
proportion of 2009 PFFS enrollees who migrated to Medicare FFS as 
compared to those who remained in an MA plan. Based on an analysis of 
enrollment in counties with the largest PFFS share in 2009, we 
estimated that only 6 percent of the 2009 PFFS enrollees migrated to 
Medicare FFS as a result of the PFFS network requirements; with 
approximately half of these enrollees having migrated in 2010 and the 
other half having migrated in 2011. Our revised 6 percent migration 
assumption is based on actual MA enrollment changes from 2009 to 2011 
in countries where PFFS enrollment comprised at least 50 percent of 
total MA enrollment. We additionally assume a 13 percent per-capita 
savings for those migrating from PFFS to FFS--a figure that is 
consistent with the 12 to 15 per-capita savings we estimated in our 
interim final rule--based upon 2010 data from the Medicare Payment 
Advisory Commission (MedPAC).
    Also, in this final rule, we are modifying the window over which we 
estimate costs and savings to conform to methodology specified by the 
Office of Management and Budget (OMB). We begin our measurement of 
costs and savings in FY 2010, which is the first year that the 
requirements finalized in this final rule resulted in a monetized 
impact. We then project the impacts forward over the minimum 5-year 
outlook window, resulting in costs and savings estimates for the period 
from FYs 2010 through 2015. In Table 4 we estimate a savings to the 
Federal government of $1.02 billion over FYs 2010 through 2015 as the 
result of the requirement that certain non-employer and all employer 
private-fee-for-service plans must establish contracts with providers. 
We provide a detailed breakdown of these impacts in Table 5. We 
indicate the total costs and savings incurred by this provision over 
FYs 2010 through 2015 in Table 3.
2. Prompt Payment Provisions (Sec.  423.505 and Sec.  423.520)
    In our September 18, 2008 IFC, we estimated that the prompt payment 
provisions contained this final rule would impose significant costs to 
PDPs, MA-PD plans, and their subcontractors. We estimated the loss of 
investment income resulting from the prompt payment provisions would 
increase the costs of the Part D program by $670 million from FY 2010 
through FY 2018. In this final rule, we are revising the cost estimates 
reported in the interim final rule based on new data projections from 
the CMS Office of the Actuary (OACT). In our September 18, 2008 IFC, we 
originally assumed that 80 percent of scripts would be electronic and 
that the clean claim percentage would be 80 percent. However, we now 
believe that both of these percentages are too low. We have revised the 
original estimate under the assumption that 99 percent of claims are 
electronic and that 95 percent of them are clean claims. This 
modification results in a higher cost estimates that are reflected in 
Tables 3 and 4. As stated earlier, in this final rule, we are also 
modifying the window over which we estimate costs and savings to 
conform to OMB convention for estimating costs and savings in major 
rulemaking. Based on the revised estimates and impact analysis window, 
we estimate a total cost of $500 million to PDPs, MA-PD plans, and 
their subcontractors from FY 2010 through FY 2015.

                                  Table 3--Estimated Costs and Savings by Provision for Fiscal Years 2010 Through 2015
                                                                     [$ In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Fiscal year                            Total  (FYs 2010-
                     Provision                         Regulation    ------------------------------------------------------------------   2015)  ($ in
                                                       section(s)        2010       2011       2012       2013       2014       2015        millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Developing SNP Models of Care (MOC)...............     422.101(f)(1)       0.55       0.46       0.46       0.46       0.46       0.46              2.85
D-SNP Contracting Requirement with States.........        422.107(a)       0.08       0.08       0.08       0.08       0.08       0.08              0.48
Comprehensive Written Statement Requirement for D-     422.111(b)(2)       0.11       0.11       0.11       0.11       0.11       0.11              0.66
 SNPs.............................................
Non-employer and Employer PFFS Network                    422.114(a)     -69.92    -159.92    -179.92    -189.92    -199.92    -219.92         -1,019.52
 Requirements.....................................        422.114(b)
SNP Quality Requirements..........................        422.152(g)       5.57       1.86       1.86       1.86       1.86       1.86             14.87
Training and Testing of Agents and Brokers........       422.2274(d)       0.03       0.03       0.03       0.03       0.03       0.03              0.21
                                                         423.2274(d)
Prompt payment by prescription drug plans and MA-            423.505       50.0       70.0       80.0       90.0     100.00     110.00            500.00
 PD plans under Part D............................           423.520
                                                                     -----------------------------------------------------------------------------------
    Total.........................................                       -13.58     -87.38     -97.38     -97.38     -97.38    -107.38           -500.45
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 54632]]


                            Table 4--Estimated Costs and Savings to the Federal Government for Fiscal Years 2010 Through 2015
                                                                     [$ In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Fiscal year                            Total  (FYs 2010-
                     Provision                         Regulation    ------------------------------------------------------------------    2015) ($ in
                                                       section(s)        2010       2011       2012       2013       2014       2015        millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Employer and Employer PFFS Network                    422.114(a)     -70.00    -160.00    -180.00    -190.00    -200.00    -220.00         -1,020.00
 Requirements.....................................        422.114(b)
Prompt payment by prescription drug plans and MA-            423.505      50.00      70.00      80.00      90.00     100.00     110.00            500.00
 PD plans under Part D............................           423.520
                                                                     -----------------------------------------------------------------------------------
    Total.........................................  ................     -20.00     -90.00    -100.00    -100.00    -100.00    -110.00           -520.00
--------------------------------------------------------------------------------------------------------------------------------------------------------


              Table 5--Estimated Federal Savings for Non-Employer and Employer PFFS Network Requirements for Fiscal Years 2010 Through 2015
                                                                     [$ In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Fiscal year                             Total  (FYs 2010-
                                                                    -------------------------------------------------------------------    2015) ($ in
                                                                        2010       2011        2012       2013       2014       2015        millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total HI...........................................................      40.00       90.0      100.00     110.00     120.00     130.00            590.00
(Part C & FFS).....................................................
Total SMI (Part C & FFS)...........................................      40.00       90.0      100.00     110.00     110.00     120.00            570.00
Total Medicare (without Part B premium offset).....................      80.00      180.00     200.00     220.00     230.00     250.00          1,160.00
                                                                    ------------------------------------------------------------------------------------
    Total Medicare (with Part B premium offset)....................      70.00      160.00     180.00     190.00     200.00     220.00          1,020.00
--------------------------------------------------------------------------------------------------------------------------------------------------------


                            Table 6--Estimated Costs to MA Organizations and PDP Sponsors for Fiscal Years 2010 Through 2015
                                                                     [$ In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Fiscal year                            Total (FYs 2010-
                                                       Regulation    ------------------------------------------------------------------   2015)  ($ in
                                                       section(s)        2010       2011       2012       2013       2014       2015        millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Developing SNP Models of Care (MOC)...............     422.101(f)(1)       0.55       0.46       0.46       0.46       0.46       0.46              2.85
D-SNP Contracting Requirement with States.........        422.107(a)       0.08       0.08       0.08       0.08       0.08       0.08              0.48
Comprehensive Written Statement Requirement for        422.111(b)(2)       0.11       0.11       0.11       0.11       0.11       0.11              0.66
 D[dash]SNPs......................................
Non-employer and Employer PFFS Network                 422.114(a)(3)       0.03       0.03       0.03       0.03       0.03       0.03              0.48
 Requirements.....................................     422.114(a)(4)       0.05       0.05       0.05       0.05       0.05       0.05
SNP Quality Requirements..........................        422.152(g)       5.57       1.86       1.86       1.86       1.86       1.86             14.87
Training and Testing of Agents and Brokers........       422.2274(d)       0.03       0.03       0.03       0.03       0.03       0.03              0.18
                                                         423.2274(d)      *0.00      *0.00      *0.00      *0.00      *0.00      *0.00              0.02
                                                                     -----------------------------------------------------------------------------------
    Total.........................................  ................       6.42       2.62       2.62       2.62       2.62       2.62             19.55
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Costs appear as zero due to rounding. CMS estimates actual costs of 0.003 million.

E. Alternatives Considered

    The implementation of all of the economically significant 
provisions of the interim final rule as finalized by this final rule 
was directly mandated by MIPPA. Therefore, we did not consider 
alternative proposals for these self-implementing provisions.

F. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/index.html), in Table 7, 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.

[[Page 54633]]



                     Table 7--Accounting Statement: Classification of Estimated Expenditures
----------------------------------------------------------------------------------------------------------------
                     Category                                         Transfers ($ in millions)
----------------------------------------------------------------------------------------------------------------
            Incurred Savings for the Non-Employer and Employer PFFS Network Provision, FYs 2010-2015
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers Using 7% Discount    -164.9.
 Rate.
Annualized Monetized Transfers Using 3% Discount    -167.7.
 Rate.
From Whom To Whom?................................  Federal Government to PFFS Plans.
----------------------------------------------------------------------------------------------------------------
              Prompt payment by prescription drug plans and MA-PD plans under Part D, FYs 2010-2015
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers Using 7% Discount    81.1.
 Rate.
Annualized Monetized Transfers Using 3% Discount    82.4.
 Rate.
From Whom To Whom?................................  Federal Government To Part D Sponsors.
----------------------------------------------------------------------------------------------------------------
                          Costs for all other (non-marketing) provisions, FYs 2010-2015
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Costs Using 7% Discount Rate.  3.0.
Annualized Monetized Costs Using 3% Discount Rate.  2.9.
Who is Affected?..................................  MAOs/PDP Sponsors.
----------------------------------------------------------------------------------------------------------------

V. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 
96-354), as modified by the Small Business Regulatory Enforcement 
Fairness Act of 1996 (SBREFA) (Pub. L. 104-121), requires agencies to 
determine whether proposed or final rules would have a significant 
economic impact on a substantial number of small entities and, if so, 
to prepare a Regulatory Flexibility Analysis and to identify in the 
notice of proposed rulemaking or final rulemaking any regulatory 
options that could mitigate the impact of the proposed regulation on 
small businesses. For purposes of the RFA, small entities include 
businesses that are small as determined by size standards issued by the 
Small Business Administration, nonprofit organizations, and small 
governmental jurisdictions). Individuals and States are not included in 
the definition of a small business entity.
    The RFA also requires agencies to analyze options for regulatory 
relief of small entities, if a rule has a significant impact on a 
substantial number of small entities. The Secretary determined that the 
September 18, 2008 IFC (73 FR 54226-54254) that we are finalizing would 
have a significant impact on a substantial number of small entities, 
such as small retail pharmacies and pharmacy benefit managers (PBMs). 
The cost impacts for these entities result from the prompt payment 
provision discussed earlier in this document. We provide a detailed 
analysis of this provision's impact on small entities in the regulatory 
impact analysis in our September 18, 2008 IFC (73 FR 54226-54254).
    In addition, section 1102(b) of the Act requires us to prepare an 
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. We are not preparing an 
analysis for section 1102(b) of the Act because the Secretary has 
determined this final rule would not have a significant impact on the 
operations of a substantial number of small rural hospitals.

VI. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995, Pub. L. 104-4) requires that agencies assess anticipated costs 
and benefits before issuing any rule whose mandates require spending in 
any one year of $100 million in 1995 dollars, updated annually for 
inflation. In 2011, that threshold is approximately $136 million. This 
final rule does not mandate any spending by State, local, or Tribal 
governments, in the aggregate, or by the private sector of $136 
million.

VII. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
proposed rule (and subsequent final rule) that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. Since this regulation 
does not impose any costs on State or local governments, the 
requirements of E.O. 13132 are not applicable.

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.

    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 A--General Provisions

0
2. Amend Sec.  417.402 by revising the second sentence of paragraph 
(c)(3) to read as follows:


Sec.  417.402  Effective date of initial regulations.

* * * * *
    (c) * * *

[[Page 54634]]

    (3) * * *. 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 that are not in another MSA with a population of 
more than 250,000.

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 C--Benefits and Beneficiary Protections


Sec.  422.101  [Amended]

0
4. In 422.101, paragraph (f)(1)(ii) is amended by removing the phrase 
``indentifying goals'' and adding the phrase ``identifying goals'' in 
its place.

Subpart V--Medicare Advantage Marketing Requirements

0
5. Section 422.2268 is amended by revising paragraphs (g) and (h) to 
read as follows:


Sec.  422.2268  Standards for MA organization marketing.

* * * * *
    (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 (48 hours in advance, 
when practicable).
    (h) Market additional health related lines of plan business not 
identified prior to an individual appointment without a separate scope 
of appointment identifying the additional lines of business to be 
discussed.
* * * * *

0
6. Section 422.2274 is amended by revising paragraphs (a)(1)(ii) 
introductory text, (a)(1)(ii)(B), (a)(1)(iv), and (a)(4) to read as 
follows:


Sec.  422.2274  Broker and agent requirements.

    (a) * * *
    (1) * * *
    (ii) The compensation amount paid to an agent or broker for 
enrollment of a Medicare beneficiary into an M A plan is as follows:
* * * * *
    (B) For renewals, an amount equal to 50 percent of the initial 
compensation in paragraph (a)(1)(ii)(A) of this section.
* * * * *
    (iv) If the MA organization contracts with a third party entity 
such as a Field Marketing Organization or similar type entity to sell 
its insurance products, or perform services (for example, training, 
customer service, or agent recruitment)--
    (A) The total amount paid by the MA organization to the third party 
and its agents for enrollment of a beneficiary into a plan, if any, 
must be made in accordance with paragraph (a)(1) of this section; and
    (B) The amount paid to the third party for services other than 
selling insurance products, if any, must be fair-market value and must 
not exceed an amount that is commensurate with the amounts paid by the 
MA organization to a third party for similar services during each of 
the previous 2 years.
* * * * *
    (4) Compensation may only be paid for the beneficiary's months of 
enrollment during a plan year (that is, January through December).
    (i) Subject to paragraph (a)(4)(ii) of this section, compensation 
payments may be made up front for the entire current plan year or in 
installments throughout the year.
    (ii) When a beneficiary disenrolls from a plan during the--
    (A) First 3 months of enrollment, the plan must recover all 
compensation paid to agents and brokers.
    (B) Fourth through 12th month of their enrollment (within a single 
plan year), the plan must recover compensation paid to agents and 
brokers for those months of the plan year for which the beneficiary is 
not enrolled.
* * * * *

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

0
7. The authority citation for part 423 continues to read as follows:

    Authority: Sec. 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 K--Application Procedures and Contracts With Part D Plan 
Sponsors

0
8. Amend Sec.  423.505 by revising paragraph (b)(21) introductory text 
to read as follows:


Sec.  423.505  Contract provisions.

* * * * *
    (b) * * *
    (21) Effective contract year 2009 and subsequent contract years, 
update any prescription drug pricing standard based on the cost of the 
drug used for reimbursement of network pharmacies by the Part D sponsor 
on--
* * * * *

0
9. Amend Sec.  423.520 by revising paragraphs (c)(2)(ii), (c)(3), and 
(e)(2) to read as follows:


Sec.  423.520  Prompt payment by Part D sponsors.

* * * * *
    (c) * * *
    (2) * * *
    (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 remaining defect or 
impropriety, or of any new defect or impropriety raised by the 
additional information, in the claim within 10 days of the date on 
which additional information is received under paragraph (c)(2)(i) of 
this section. A Part D sponsor may not provide notice of a new 
deficiency or impropriety in the claim that could have been identified 
by the sponsor in the original claim submission under this paragraph.
    (3) Obligation to pay. A claim submitted to a Part D sponsor that 
is not paid by the Part D sponsor within the timeframes specified in 
paragraphs (a)(1)(i) and (ii) or contested by the Part D sponsor within 
the timeframe specified in paragraph (c)(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.

* * * * *
    (e) * * *
    (2) Authority not to charge interest. As CMS determines, a Part D 
sponsor is not charged interest under paragraph (e)(1) in exigent 
circumstances that prevent the timely processing of claims, including 
natural disasters and other unique and unexpected events.
* * * * *

Subpart V--Part D Marketing Requirements

0
10. Section 423.2268 is amended by revising paragraphs (g) and (h) to 
read as follows:


Sec.  423.2268  Standards for Part D marketing.

* * * * *
    (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 (48 hours in advance, 
when practicable).

[[Page 54635]]

    (h) Market additional health related lines of plan business not 
identified prior to an individual appointment without a separate scope 
of appointment identifying the additional lines of business to be 
discussed.
* * * * *

0
11. Section 423.2774 is amended by revising paragraphs (a)(1)(ii) 
introductory text, (a)(1)(ii)(B), (a)(1)(iv), and (a)(4) to read as 
follows:


Sec.  423.2274  Broker and agent requirements.

* * * * *
    (a) * * *
    (1) * * *
    (ii) The compensation amount paid to an agent or broker for 
enrollment of a Medicare beneficiary into a PDP is as follows:
* * * * *
    (B) For renewals, an amount equal to 50 percent of the initial 
compensation in paragraph (a)(1)(ii)(A) of this section.
* * * * *
    (iv) If the Part D sponsor contracts with a third party entity such 
as a Field Marketing Organization or similar type entity to sell its 
insurance products or perform services (for example, training, customer 
service, or agent recruitment)--
    (A) The total amount paid by the Part D sponsor to the third party 
and its agents for enrollment of a beneficiary into a plan, if any, 
must be made in accordance with paragraph (a)(1) of this section; and
    (B) The amount paid to the third party for services other than 
selling insurance products, if any, must be fair-market value and must 
not exceed an amount that is commensurate with the amounts paid by the 
Part D sponsor to a third party for similar services during each of the 
previous 2 years.
* * * * *
    (4) Compensation may only be paid for the beneficiary's months of 
enrollment during a plan year (that is, January through December).
    (i) Subject to paragraph (a)(4)(ii) of this section, compensation 
payments may be made up front for the entire current plan year or in 
installments throughout the year.
    (ii) When a beneficiary disenrolls from a plan during the--
    (A) First 3 months of enrollment, the plan must recover all 
compensation paid to agents and brokers.
    (B) Fourth through 12th month of their enrollment (within a single 
plan year), the plan must recover compensation paid to agents and 
brokers for those months of the plan year for which the beneficiary is 
not enrolled.
* * * * *

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

    Dated: May 5, 2011.
Marilyn Tavenner,
Principal Deputy Administrator and Chief Operating Officer, Centers for 
Medicare & Medicaid Services.
    Approved: August 12, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-22126 Filed 8-26-11; 11:15 am]
BILLING CODE 4120-01-P