[Federal Register Volume 83, Number 73 (Monday, April 16, 2018)]
[Rules and Regulations]
[Pages 16440-16757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07179]



[[Page 16439]]

Vol. 83

Monday,

No. 73

April 16, 2018

Part II





 Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 405, 417, 422, et al.





Medicare Program; Contract Year 2019 Policy and Technical Changes to 
the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, 
the Medicare Prescription Drug Benefit Programs, and the PACE Program; 
Final Rule

  Federal Register / Vol. 83 , No. 73 / Monday, April 16, 2018 / Rules 
and Regulations  

[[Page 16440]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 417, 422, 423, 460, and 498

[CMS-4182-F]
RIN 0938-AT08


Medicare Program; Contract Year 2019 Policy and Technical Changes 
to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-
Service, the Medicare Prescription Drug Benefit Programs, and the PACE 
Program

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

ACTION: Final rule.

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SUMMARY: This final rule will revise the Medicare Advantage (MA) 
program (Part C) regulations and Prescription Drug Benefit program 
(Part D) regulations to implement certain provisions of the 
Comprehensive Addiction and Recovery Act (CARA) to further reduce the 
number of beneficiaries who may potentially misuse or overdose on 
opioids while still having access to important treatment options; 
implement certain provisions of the 21st Century Cures Act; support 
innovative approaches to improve program quality, accessibility, and 
affordability; offer beneficiaries more choices and better care; 
improve the CMS customer experience and maintain high beneficiary 
satisfaction; address program integrity policies related to payments 
based on prescriber, provider and supplier status in MA, Medicare cost 
plan, Medicare Part D and the PACE programs; provide an update to the 
official Medicare Part D electronic prescribing standards; and clarify 
program requirements and certain technical changes regarding treatment 
of Medicare Part A and Part B appeal rights related to premiums 
adjustments.

DATES: 
    Effective Date: This rule is effective June 15, 2018.
    The incorporation by reference of certain publications listed in 
the rule is approved by the Director of the Federal Register as of June 
15, 2018.
    Applicability Dates: The applicability date of the provisions of 
this rule is January 1, 2019 except for the provisions in Sec. Sec.  
422.100(f)(4) and (5) and 422.101(d) (discussed in section II.A.4. of 
this final rule (Maximum Out-of-Pocket Limit for Medicare Parts A and B 
Services)) and Sec.  422.100(f)(6) (discussed in section II.A.5. of 
this final rule (Cost Sharing Limits for Medicare Parts A and B 
Services)). Those provisions are applicable for contract year 2020 
(January 1, 2020). E-Prescribing and the Part D Prescription Drug 
Program; Updating Part D E Prescribing Standards discussed in section 
II.D.8. of this final rule is applicable January 1, 2020 conditioned on 
The Office of the National Coordinator for Health Information 
Technology (ONC) adopting the same standard for use in its Electronic 
Health Record Certification Program by that date.

FOR FURTHER INFORMATION CONTACT: 
    Theresa Wachter, (410) 786-1157, Part C Issues.
    Marie Manteuffel, (410) 786-3447, Part D Issues.
    Kristy Nishimoto, (206) 615-2367, Beneficiary Enrollment and 
Appeals Issues.
    Raghav Aggarwal, (410) 786-0097, Part C and D Payment Issues.
    Vernisha Robinson-Savoy, (443) 826-9925, Compliance Program 
Training Issues.
    Frank Whelan, (410) 786-1302, Preclusion List Issues.
    Shelly Winston, (410) 786-3694, Part D E-Prescribing Program.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary and Background

A. Executive Summary

1. Purpose
    The primary purpose of this final rule is to make revisions to the 
Medicare Advantage (MA) program (Part C) and Prescription Drug Benefit 
Program (Part D) regulations based on our continued experience in the 
administration of the Part C and Part D programs and to implement 
certain provisions of the Comprehensive Addiction and Recovery Act and 
the 21st Century Cures Act. The changes are necessary to--
     Support Innovative Approaches to Improving Quality, 
Accessibility, and Affordability;
     Improve the CMS Customer Experience; and
     Implement Other Changes.
    In addition, this final rule makes technical changes related to 
treatment of Part A and Part B premium adjustments and updates the 
NCPDP SCRIPT standard used for Part D electronic prescribing. While the 
Part C and Part D programs have high satisfaction among enrollees, we 
continually evaluate program policies and regulations to remain 
responsive to current trends and newer technologies, and provide 
increased flexibility to serve patients. Specifically, this regulation 
meets the Administration's priorities to reduce burden and provide the 
regulatory framework to develop MA and Part D products that better meet 
the individual patient's health care needs. These changes being 
finalized will empower MA and Part D plans to meet the needs of 
enrollees at the local level, and should result in more enrollee choice 
and more affordable options. Additionally, this regulation includes a 
number of provisions that will help address the opioid epidemic and 
mitigate the impact of increasing drug prices in the Part D program.
2. Summary of the Major Provisions
a. Implementation of the Comprehensive Addiction and Recovery Act of 
2016 (CARA) Provisions
    In line with the agency's response to the President's call to end 
the scourge of the opioid epidemic, this final rule implements 
statutory provisions of the Comprehensive Addiction and Recovery Act of 
2016 (CARA), which amended the Social Security Act and was enacted into 
law on July 22, 2016. CARA includes new authority for Medicare Part D 
plans to establish drug management programs effective on or after 
January 1, 2019. Through this final rule, CMS has established a 
framework under which Part D plan sponsors may establish a drug 
management program for beneficiaries at risk for prescription drug 
abuse or misuse, or ``at-risk beneficiaries.'' Specifically, under drug 
management programs, Part D plans will engage in case management of 
potential at-risk beneficiaries, through contact with their 
prescribers, when such beneficiary is found to be taking a specific 
dosage of opioids and/or obtaining them from multiple prescribers and 
multiple pharmacies who may not know about each other. Sponsors may 
then limit at-risk beneficiaries' access to coverage of controlled 
substances that CMS determines are ``frequently abused drugs'' to a 
selected prescriber(s) and/or network pharmacy(ies) after case 
management with the prescribers for the safety of the enrollee. CMS 
also limits the use of the special enrollment period (SEP) for dually- 
or other low income subsidy (LIS)-eligible beneficiaries by those LIS-
eligible beneficiaries who are identified as at-risk or potentially at-
risk for prescription drug abuse under such a drug management program. 
Finally, these provisions will codify the current Part D Opioid Drug 
Utilization Review (DUR) Policy and Overutilization Monitoring System 
(OMS) by integrating this current policy with drug management program 
provisions.

[[Page 16441]]

Through the adoption of this policy, from 2011 through 2017, there was 
a 76 percent decrease (almost 22,500 beneficiaries) in the number of 
Part D beneficiaries identified as potential very high risk opioid 
overutilizers. Thus, drug management programs will expand upon an 
existing, innovative, successful approach to reduce opioid 
overutilization in the Part D program by improving quality of care 
through coordination while maintaining access to necessary pain 
medications, and will be an important next step in addressing the 
opioid epidemic and safeguarding the health and safety of our nation's 
seniors.
b. Revisions to Timing and Method of Disclosure Requirements
    Consistent with agency efforts supporting innovative approaches to 
improve quality, accessibility, and affordability and reduce burden, we 
are finalizing changes to align the MA and Part D regulations in 
authorizing CMS to set the manner of delivery for mandatory disclosures 
in both the MA and Part D programs. CMS will use this authority to 
allow MA plans to meet the disclosure and delivery requirements for 
certain documents by relying on notice of electronic posting and 
provision of the documents in hard copy when requested, when previously 
the documents, such as the Evidence of Coverage (EOC), had to be 
provided in hard copy. Additionally, we are changing the timeframe for 
delivery of the MA and Part D EOC to the first day of the Annual 
Election Period (AEP), rather than 15 days prior to that date. Allowing 
Part C and Part D plans to provide the EOC electronically will 
alleviate plan burden related to printing and mailing and reduce the 
number of paper documents that enrollees receive from plans. Changing 
the date by which plans must provide the EOC to enrollees will allow 
plans more time to finalize the formatting and ensure the accuracy of 
the information in the EOC. Changing the date will also separate the 
mailing and receipt of the EOC from the Annual Notice of Change (ANOC), 
which describes the important changes in a patient's plan from one year 
to the next. The ANOC must be delivered 15 days prior to the AEP and 
will be received by enrollees ahead of the EOC, thus allowing enrollees 
to focus on materials that drive decision-making during the AEP. We see 
this final change as an overall reduction of burden that our 
regulations have on plans and enrollees. In aggregate, we estimate a 
savings (to plans for not producing and mailing hardcopy EOCs) of 
approximately $54.7 million each year, 2019 through 2023.
c. Preclusion List Requirements for Prescribers in Part D and 
Individuals and Entities in MA, Cost Plans, and PACE
    This final rule will rescind current regulatory provisions that 
require prescribers of Part D drugs and providers of MA services and 
items to enroll in Medicare in order for the Part D drug or MA service 
or item to be covered. As a replacement, a Part D plan sponsor will be 
required to reject, or require its pharmacy benefit manager to reject, 
a pharmacy claim for a Part D drug if the individual who prescribed the 
drug is included on the ``preclusion list.'' Similarly, an MA service 
or item will not be covered if the provider that furnished the service 
or item is on the preclusion list. The preclusion list will consist of 
certain individuals and entities that are currently revoked from the 
Medicare program under 42 CFR 424.535 and are under an active 
reenrollment bar, or have engaged in behavior for which CMS could have 
revoked the individual or entity to the extent applicable if they had 
been enrolled in Medicare, and CMS determines that the underlying 
conduct that led, or would have led, to the revocation is detrimental 
to the best interests of the Medicare program. We believe that this 
change from an enrollment requirement to a preclusion list requirement 
will reduce the burden on Part D prescribers and MA providers without 
compromising our program integrity efforts.
3. Summary of Costs, Savings and Benefits of the Major Provisions

------------------------------------------------------------------------
          Provision           Savings and benefits          Costs
------------------------------------------------------------------------
Implementation of the         The purpose of this   The creation of lock
 Comprehensive Addiction and   provision is to       in-status is a
 Recovery Act of 2016.         create a lock-in      burden to plans.
                               status for certain    The cost to
                               at-risk               industry is
                               beneficiaries. In     estimated at about
                               addition to the       $2.8 million per
                               benefits of           year. This $2.8
                               preventing opioid     million cost arises
                               and benzodiazepine    from (i) the
                               dependency in         uploading and
                               beneficiaries, we     preparing of
                               estimate, in 2019,    additional notices
                               a reduction of $19    to enrollees
                               million in Trust      ($101,721), (ii)
                               Fund expenditures     the re-negotiation
                               because of reduced    of contracts
                               opioid scripts.       between Part D
                               This $19 million      sponsors and
                               reduction modestly    pharmacies
                               increases to a $20    ($547,415), (iii)
                               million reduction     the programming of
                               in 2023.              edits about lock-
                                                     ins into the
                                                     systems of Part D
                                                     sponsors
                                                     ($2,152,332), and
                                                     (iv) the right of
                                                     enrollees to appeal
                                                     a status of lock-in
                                                     ($35,183).
Revisions to Timing and       We estimate 67% of    ....................
 Method of Disclosure          the current 47.8
 Requirements.                 million
                               beneficiaries will
                               prefer use of the
                               internet versus
                               hard copies. This
                               will result in a
                               savings to the
                               industry of $54.7
                               million each year,
                               2019 through 2023.
                               This is due to a
                               reduction in
                               printing and
                               mailing costs.
Preclusion List Requirements  For 2019, this        For 2019, this
 for Prescribers in Part D     provision saves       provision costs
 and Individuals and           providers $34.4       Part D sponsors or
 Entities in MA, Cost Plans,   million. For 2020     their PBMs $9.3
 and PACE.                     and future years,     million. For 2020
                               there are no          and future years,
                               savings. The $34.4    costs are
                               million in savings    negligible (below
                               to providers arises   $50,000). The $9.3
                               because of removal    million cost arises
                               of the requirement    because of
                               of MA providers and   programming and
                               suppliers and Part    staff resources
                               D prescribers to      needed to produce
                               enroll in Medicare    and send required
                               as a prerequisite     notifications to
                               for furnishing        enrollees and
                               health care items     prescribers.
                               and services. Part
                               C providers and
                               suppliers save
                               $24.1 million in
                               reduced costs while
                               Part D providers
                               save $10.3 million
                               in reduced costs.

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Physician Incentive Plans--   For 2019, this        ....................
 Update Stop-Loss Protection   provision reduces
 Requirements.                 required
                               reinsurance
                               resources by $204.6
                               million. The $204.6
                               million savings
                               increases yearly
                               because of expected
                               enrollment
                               increases and
                               medical inflation;
                               the savings is
                               $281.8 million in
                               2023. The savings
                               arise because we
                               are replacing the
                               current insurance
                               schedule in the
                               regulation with
                               updated stop-loss
                               insurance
                               requirements that
                               will allow
                               insurance with
                               higher deductibles.
                               This updated
                               schedule will
                               result in a
                               significant
                               reduction to the
                               cost of obtaining
                               stop-loss
                               insurance. The
                               higher deductibles
                               are consistent with
                               the increase in
                               medical costs due
                               to inflation.
                               Through transfers,
                               the 2019 $204.6
                               million savings
                               results in $71.6
                               savings to the
                               Medicare Trust Fund
                               and $133 million
                               savings (in the
                               form of rebates) to
                               Medicare Advantage
                               (MA) organizations.
                               It is likely that
                               some of the savings
                               to MA organizations
                               will result in
                               increased health
                               care benefits to MA
                               enrollees.
------------------------------------------------------------------------

B. Background

    In the proposed rule titled ``Medicare Program; Contract Year 2019 
Policy and Technical Changes to the Medicare Advantage, Medicare Cost 
Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit 
Programs, and the PACE Program'' which appeared in the November 28, 
2017 Federal Register (82 FR 56336), we proposed to revise the Medicare 
Advantage program (Part C) regulations and Prescription Drug Benefit 
program (Part D) regulations to implement certain provisions of the 
Comprehensive Addiction and Recovery Act (CARA) and the 21st Century 
Cures Act; improve program quality, accessibility, and affordability; 
improve the CMS customer experience; address program integrity policies 
related to payments based on prescriber, provider and supplier status 
in Medicare Advantage, Medicare cost plan, Medicare Part D and the PACE 
programs; provide a proposed update to the official Medicare Part D 
electronic prescribing standards; clarify program requirements; and 
make certain technical changes regarding treatment of Medicare Part A 
and Part B appeal rights related to premium adjustments.
    We received approximately 1,669 timely pieces of correspondence 
containing multiple comments on the CY 2019 proposed rule. While we are 
finalizing several of the provisions from the proposed rule, there are 
a number of provisions from the proposed rule that we intend to address 
later and a few that we do not intend to finalize. We also note that 
some of the public comments were outside of the scope of the proposed 
rule. These out-of-scope public comments are not addressed in this 
final rule. Summaries of the public comments that are within the scope 
of the proposed rule and our responses to those public comments are set 
forth in the various sections of this final rule under the appropriate 
heading. However, we note that in this final rule we are not addressing 
comments received with respect to the provisions of the proposed rule 
that we are not finalizing at this time. Rather, we will address them 
at a later time, in a subsequent rulemaking document, as appropriate.

II. Provisions of the Proposed Rule and Analysis of and Responses to 
Public Comments

A. Supporting Innovative Approaches to Improving Quality, 
Accessibility, and Affordability

1. Implementation of the Comprehensive Addiction and Recovery Act of 
2016 (CARA) Provisions
a. Medicare Part D Drug Management Programs
    The Comprehensive Addiction and Recovery Act of 2016 (CARA), 
enacted into law on July 22, 2016, amended the Social Security Act and 
includes new authority for the establishment of drug management 
programs in Medicare Part D, effective on or after January 1, 2019. In 
accordance with section 704(g)(3) of CARA and revised section 1860D-
4(c) of the Act, CMS must establish through notice and comment 
rulemaking a framework under which Part D plan sponsors may establish a 
drug management program for beneficiaries at-risk for prescription drug 
abuse, or ``at-risk beneficiaries.'' Under such a Part D drug 
management program, sponsors may limit at-risk beneficiaries' access to 
coverage of controlled substances that CMS determines are ``frequently 
abused drugs'' to a selected prescriber(s) and/or pharmacy(ies). While 
such programs, commonly referred to as ``lock-in programs,'' have been 
a feature of many state Medicaid programs for some time, prior to the 
enactment of CARA, there was no statutory authority to allow Part D 
plan sponsors to require beneficiaries to obtain controlled substances 
from a certain pharmacy or prescriber in the Medicare Part D program. 
Thus, although drug management programs are voluntary, this rule 
codifies a framework that will place requirements upon such programs 
when established by Part D sponsors.
    This final rule implements the CARA Part D drug management program 
provisions by integrating them with the current Part D Opioid Drug 
Utilization Review (DUR) Policy and Overutilization Monitoring System 
(OMS) (``current policy'').\1\ This integration will mean that Part D 
plan sponsors implementing a drug management program could limit an at-
risk beneficiary's access to coverage of frequently abused drugs 
beginning 2019 through a beneficiary-specific point-of-sale (POS) claim 
edit and/or by requiring the beneficiary to obtain frequently abused 
drugs from a selected

[[Page 16443]]

pharmacy(ies) and/or prescriber(s) after case management and notice to 
the beneficiary. To do so, the beneficiary will have to meet clinical 
guidelines that factor in that the beneficiary is taking opioids over a 
sustained time period and that the beneficiary is obtaining them from 
multiple prescribers and/or multiple pharmacies. This final rule also 
implements a limitation on the use of the special enrollment period 
(SEP) for low income subsidy (LIS)-eligible beneficiaries who are 
identified as potential at-risk beneficiaries or at-risk beneficiaries.
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    \1\ In using the term ``current policy'', we refer to the aspect 
of our current Part D opioid overutilization policy that is based on 
retrospective DUR and case management. Please refer to the CMS 
website, ``Improving Drug Utilization Review Controls in Part D'' at 
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.html which contains CMS 
communications regarding the current policy.
---------------------------------------------------------------------------

    We received the following general comments and our responses 
follow:
    Comment: Commenters were overall supportive of our proposal. Some 
commenters found it to be a conservative and uniform approach to 
implementing the CARA drug management program provisions. Other 
commenters included specific suggestions for improvements with their 
overall supportive or neutral comments.
    Response: We thank the commenters for their comments. We summarize 
and respond to specific recommendations later in this preamble.
    Comment: We received a request that we confirm that nothing in the 
final rule impacts PACE organizations' waivers of Part D requirements 
in Sec.  423.153. This commenter also asked that existing waivers of 
Sec.  423.153 be extended to include Sec.  423.153(f) unless such a 
waiver is not needed due to the voluntary nature of drug management 
programs.
    Response: PACE organizations are not excluded from OMS reporting 
under the current policy. Additionally, because of the voluntary nature 
of the provisions under Sec.  423.153(f), a waiver is not necessary for 
PACE organizations. However, to the extent that PACE organizations 
commence drug utilization management activities covered under Sec.  
423.153(f), PACE organizations must comply with the requirements of 
423.153(f).
    Comment: We received comments that expressed concern about the time 
needed for Part D plan sponsors to make the necessary systems changes 
to implement compliant drug management programs.
    Response: Section 704(g)(1) of CARA states that the amendments made 
by this section shall apply to prescription drug plans (and MA-PD 
plans) for plan years beginning on or after January 1, 2019. However, 
given the current national opioid epidemic, we expect that Part D 
sponsors will diligently implement fully-functional drug management 
programs in 2019. Moreover, as the new requirements for drug management 
programs build from and are integrated with existing policy, we expect 
sponsors will be able to implement them expeditiously.
    Comment: We received one suggestion that CMS pilot different 
approaches for implementing the CARA drug management program 
provisions, specifically the ``lock-in'' provisions, as we did before 
implementing our current policy.
    Response: Because the CARA drug management provisions will be 
integrated with our current policy, albeit with some modifications to 
that policy, we are not persuaded that an additional pilot is necessary 
since plan sponsors already have experience with addressing potential 
opioid overutilization.
    Comment: A commenter requested that CMS acknowledge the work it 
will take for Standard Development Organizations (SDOs) to implement 
the finalized CARA provisions. In particular, the commenter noted that 
development of any codes and messaging associated with the new CARA-
related requirements will take time to implement.
    Response: We understand that any modifications to existing 
standards to accurately achieve the desired functionalities to further 
the electronic exchange of information between healthcare stakeholders 
about the final CARA provisions may require time. We rely on SDOs to 
coordinate these efforts, and CMS is committed to working with the SDOs 
during this process, if needed.
    Comment: A commenter requested clarification on how to handle 
concurrent DUR edits, such as formulary-level cumulative opioid MME 
safety edits, and the drug management program. Specifically, the 
comment sought clarification on whether the drug management program 
beneficiary-specific POS claim edits or lock-in limitations would take 
precedence over an approved exception to a cumulative opioid MME safety 
edit.
    Response: A plan sponsor may implement formulary-level coverage 
rules for opioids (that is, prior authorization, quantity limits or 
step therapy) or safety edits, and implement a drug management program. 
The formulary and coverage rules would apply to all enrollees (unless 
they obtain an exception), and the drug management program would apply 
to potential at-risk and at-risk beneficiaries. A Part D sponsor's 
concurrent and retrospective DUR programs should be closely 
coordinated. In certain circumstances, it may be appropriate for a 
sponsor to make an at-risk determination through the drug management 
program for a beneficiary who received an approved exception to a 
cumulative opioid MME safety edit, and as part of the at-risk 
determination, may determine that continuing the approved exception is 
no longer appropriate.
    For example, a plan implemented a hard formulary-level cumulative 
MME opioid edit at 200 MME with 2 or more opioid prescribers. A 
beneficiary received their opioids from 2 prescribers and has a 
cumulative MME that exceeds 200 MME. They trigger the edit and request 
a coverage determination. The prescriber attests to medical necessity 
and the exception request is approved. At a later time, the beneficiary 
seeks opioids from 3 additional prescribers, and meets the CARA/OMS 
criteria. Through case management, the prescriber verifies the 
beneficiary is at-risk and agrees to prescriber lock-in due to care 
coordination issues.
b. Integration of CARA and the Current Part D Opioid DUR Policy and OMS
    Our proposal was to integrate the CARA Part D drug management 
program provisions with our current policy and codify them both. 
Specifically, under this regulatory framework, we proposed that Part D 
plan sponsors may voluntarily adopt drug management programs through 
which they address potential overutilization of frequently abused drugs 
identified retrospectively through the application of clinical 
guidelines/OMS criteria that identify potential at-risk beneficiaries 
and conduct case management which incorporates clinical contact and 
prescriber verification that a beneficiary is an at-risk beneficiary. 
If deemed necessary, a sponsor could limit at-risk beneficiaries' 
access to coverage for such drugs through pharmacy lock-in, prescriber 
lock-in, and/or a beneficiary-specific point-of-sale (POS) claim edit. 
Finally, sponsors would report to CMS the status and results of their 
case management through OMS and any beneficiary coverage limitations 
they have implemented through MARx, CMS' system for payment and 
enrollment transactions. Thus, although drug management programs are 
voluntary, our proposal was to codify a framework that will place 
requirements upon such programs when established by Part D sponsors.
    We stated that we foresee that all plan sponsors will implement 
such drug management programs based on our experience that all plan 
sponsors are complying with the current policy; the fact that our 
proposal largely incorporates the CARA drug management provisions into 
existing

[[Page 16444]]

CMS and sponsor operations; and especially, in light of the national 
opioid epidemic and the declaration that the opioid crisis is a 
nationwide Public Health Emergency.
    Comment: Commenters expressed strong support for integrating the 
drug management program provisions of CARA with the current policy. 
Commenters expressed that our proposal is reasonable, thoughtful, 
thorough, practical, and comprehensive; that it builds on a successful 
existing Medicare Part D program; that it will involve a common set of 
procedures and help ensure a streamlined and efficient process rather 
than creating a separate one that would require additional oversight 
and add administrative burden. We did not receive comments that opposed 
integrating the drug management program provisions of CARA with the 
current policy.
    Response: We thank the commenters for their supportive comments and 
are finalizing this integration approach to our proposal.
(1) Requirements for Part D Drug Management Programs (Sec. Sec.  
423.100 and 423.153)
    We proposed the following definitions in establishing requirements 
for Part D drug management programs.
(i) Definitions (Sec.  423.100)
(A) Definition of ``Potential At-Risk Beneficiary'' and ``At-Risk 
Beneficiary'' (Sec.  423.100)
    Section 1860D-4(c)(5)(C) of the Act contains a definition for ``at-
risk beneficiary'' that we proposed to codify at Sec.  423.100. In 
addition, although the section 1860D-4(c)(5) of the Act does not 
explicitly define a ``potential at-risk beneficiary,'' it refers to a 
beneficiary who is potentially at-risk in several subsections.
    Accordingly, we proposed to define these two terms at Sec.  423.100 
as follows: Potential at-risk beneficiary means a Part D eligible 
individual--(1) Who is identified using clinical guidelines (as defined 
in Sec.  423.100); or (2) With respect to whom a Part D plan sponsor 
receives a notice upon the beneficiary's enrollment in such sponsor's 
plan that the beneficiary was identified as a potential at-risk 
beneficiary (as defined in paragraph (1) of this definition) under the 
prescription drug plan in which the beneficiary was most recently 
enrolled, such identification had not been terminated upon 
disenrollment, and the new plan has adopted the identification.
    At-risk beneficiary means a Part D eligible individual--(1) who 
is--(i) Identified using clinical guidelines (as defined in Sec.  
423.100); (ii) Not an exempted beneficiary; and (iii) Determined to be 
at-risk for misuse or abuse of such frequently abused drugs under a 
Part D plan sponsor's drug management program in accordance with the 
requirements of Sec.  423.153(f); or (2) With respect to whom a Part D 
plan sponsor receives a notice upon the beneficiary's enrollment in 
such sponsor's plan that the beneficiary was identified as an at-risk 
beneficiary (as defined in paragraph (1) of this definition) under the 
prescription drug plan in which the beneficiary was most recently 
enrolled, such identification had not been terminated upon 
disenrollment, and the new plan has adopted the identification. We 
noted that we included the phrase, ``and the new plan has adopted the 
identification'' to both definitions for cases where a beneficiary has 
been identified as a potential at-risk or at-risk beneficiary by the 
immediately prior plan to indicate that the beneficiary's status in the 
subsequent plan is not automatic.
    We received the following comments and our response follows:
    Comment: A commenter did not believe that a definition for a 
``potential at-risk beneficiary'' was needed, nor the additional 
prescriber verification the commenter associated with the definition.
    Response: We disagree. Although as we noted above, section 1860D-
4(c)(5) of the Act does not explicitly define a ``potential at-risk 
beneficiary,'' it refers to a beneficiary who is potentially at-risk in 
section 1860D-4(c)(5)(B)(ii), which addresses initial notices; in 
1860D-4(c)(5)(H)(i) which addresses data disclosures; and in section 
1860D-4(c)(5)(I) which addresses the sharing of information for 
subsequent plan enrollments. Therefore, we proposed to define a 
potential at-risk beneficiary in Sec.  423.100, as the CARA drug 
management program provisions clearly contemplate this status for a 
beneficiary.
    With respect to additional prescriber verification of a potential 
at-risk beneficiary, we believe this comment is based on a 
misunderstanding of our proposal, as we did not propose that a 
beneficiary's status as a potential at-risk beneficiary must be 
verified. Rather, we proposed and are finalizing a requirement, as we 
discuss later in this preamble, that a prescriber must verify that a 
beneficiary is at-risk, which serves as his or her professional opinion 
that a Part D plan sponsor takes into account during case management.
    Comment: We received a question whether an individual who is 
subject to lock-in under his or her Medicaid program and then becomes 
dually-eligible constitutes a potential or at-risk beneficiary under 
our proposed definitions.
    Response: Such a beneficiary would not automatically be considered 
to be a potential at-risk or an at-risk beneficiary under a Part D 
sponsor's drug management program. Rather, whether such a beneficiary 
is a potential at-risk or at-risk beneficiary would depend upon whether 
he or she meets the clinical guidelines and is determined to be an at-
risk beneficiary under the process set forth in this rule. An automatic 
determination based on a beneficiary's inclusion and status in a 
Medicaid drug management program would not be appropriate because each 
Medicaid drug management program has its own criteria and requirements 
for reviewing and addressing recipients who may be at-risk for 
prescription drug abuse or misuse and its own interventions. We also 
note that Medicaid programs are not required to comply with section 
1860D-4(c)(5) as Part D drug management programs are.
    To the extent a Part D sponsor is aware or discovers based on 
reliable information that a beneficiary who meets the clinical 
guidelines was locked-in under a Medicaid drug management program, that 
sponsor may consider that information in deciding whether to determine 
that a beneficiary is an at-risk beneficiary under the requirements of 
this final rule. Also, any beneficiary entering the Part D program will 
be immediately subject to their plan's formulary-level controls to 
address opioid overutilization before they may be identified as 
potentially at-risk, so any opioid overutilization by the beneficiary 
in his or her new Part D plan may be addressed by these controls.
    Comment: We received a comment requesting clarification with regard 
to a person who is locked-in under an employer plan and then becomes 
eligible for a Part D EGWP, if the EGWP can continue the lock-in in the 
Part D plan or at least consider the prior lock-in as part of a new 
determination.
    Response: Beginning with plan year 2019, Part D sponsors, including 
sponsors of EGWPs, may adopt drug management programs that meet the 
requirements we are finalizing in this rule. Under a Part D 
prescription drug management program, sponsors may implement a 
prescriber and/or pharmacy lock-in or beneficiary-specific POS claim 
edit for frequently abused drugs with respect to an at-risk 
beneficiary. Similar to a Medicaid beneficiary who becomes newly 
eligible for Medicare and enrolls in Part D, a person who is locked-in 
under a

[[Page 16445]]

commercial plan does not automatically meet the definition of an at-
risk beneficiary we are finalizing in Sec.  423.100. Rather, such a 
person first must be determined to be an at-risk beneficiary in 
accordance with the requirements we are finalizing at Sec.  423.153(f).
    In other words, in order for a beneficiary to be eligible to be 
immediately locked-in to a prescriber or pharmacy in a Part D plan in 
which they are newly enrolled, the plan from which they most recently 
disenrolled must be a Part D plan in which he or she was determined to 
be an at-risk beneficiary under that plan's drug management program. 
When a new enrollee comes from a non-Part D plan in which the 
beneficiary was subject to lock-in, however, the sponsor can consider 
the prior lock-in if it learns or knows of it based upon reliable 
information which is legally available to the sponsor in conjunction 
with the information it gathers from the case management process, the 
beneficiary, and the sponsor's other relevant internal sources and 
data.
    Comment: A commenter asked if a Part D sponsor may consider opioid 
utilization information from external sources during case management, 
such as a state prescription drug monitoring program (PDMP) in making 
the determination if a beneficiary is at-risk.
    Response: As noted above with respect to beneficiaries who were 
locked-in under an employer or Medicaid plan before enrolling in 
Medicare Part D, we encourage sponsors to use all reliable sources 
legally available to them to obtain an accurate account of a potential 
at-risk or at-risk beneficiary's utilization of frequently abused 
drugs.
    After considering the comments, we are finalizing the definition of 
potential at-risk beneficiary and at-risk beneficiary with minor 
modifications for clarity. First, we are removing the phrase ``and the 
new plan adopted the identification'' from paragraph (2) of both 
definitions. As we noted above, the purpose of this language was to 
indicate that the beneficiary's at-risk status in the subsequent plan 
is not automatic, which we meant for purposes of the limitation on the 
special enrollment period (SEP) for LIS beneficiaries with an at-risk 
status. However, as we discuss later in this preamble, this limitation 
will be triggered or continued by Part D sponsors sending the initial 
and second notices to such beneficiaries, as applicable, so we no 
longer believe this phrase is necessary in these definitions.
    Second, we also are making a minor clarifying change in the 
definition of at-risk beneficiary to explicitly acknowledge that it is 
the Part D sponsor that determines which beneficiaries are at-risk 
beneficiaries under its drug management program.
    The definition of potential at-risk beneficiary will read: A Part D 
eligible individual--(1) Who is identified using clinical guidelines 
(as defined in Sec.  423.100); or (2) With respect to whom a Part D 
plan sponsor receives a notice upon the beneficiary's enrollment in 
such sponsor's plan that the beneficiary was identified as a potential 
at-risk beneficiary (as defined in paragraph (1) of this definition) 
under the prescription drug plan in which the beneficiary was most 
recently enrolled and such identification had not been terminated upon 
disenrollment. The definition of at-risk beneficiary will read: At-risk 
beneficiary means a Part D eligible individual--(1) Who is--(i) 
Identified using clinical guidelines (as defined in Sec.  423.100); 
(ii) Not an exempted beneficiary; and (iii) Determined to be at-risk 
for misuse or abuse of such frequently abused drugs by a Part D plan 
sponsor under its drug management program in accordance with the 
requirements of Sec.  423.153(f); or (2) With respect to whom a Part D 
plan sponsor receives a notice upon the beneficiary's enrollment in 
such sponsor's plan that the beneficiary was identified as an at-risk 
beneficiary (as defined in the paragraph (1) of this definition) under 
the prescription drug plan in which the beneficiary was most recently 
enrolled and such identification had not been terminated upon 
disenrollment.
(B) Definition of ``Frequently Abused Drug'', ``Clinical Guidelines'', 
``Program Size'', and ``Exempted Beneficiary'' (Sec.  423.100)
    Because we use these terms in the proposed definitions of 
``potential at-risk beneficiary'' and ``at-risk beneficiary,'' we 
proposed to define ``frequently abused drug'', ``clinical guidelines'', 
``program size'', and ``exempted beneficiary'' at Sec.  423.100 as 
follows:
 Frequently Abused Drug
    Section 1860D-4(c)(5)(G) of the Act defines ``frequently abused 
drug'' as a drug that is a controlled substance that the Secretary 
determines to be frequently abused or diverted. Consistent with the 
statutory definition, we proposed to define ``Frequently abused drug'' 
at Sec.  423.100 to mean a controlled substance under the Federal 
Controlled Substances Act that the Secretary determines is frequently 
abused or diverted, taking into account the following factors: (1) The 
drug's schedule designation by the Drug Enforcement Administration; (2) 
Government or professional guidelines that address that a drug is 
frequently abused or misused; and (3) An analysis of Medicare or other 
drug utilization or scientific data. This definition is intended to 
provide enough specificity for stakeholders to know how the Secretary 
will determine a frequently abused drug, while preserving flexibility 
to update which drugs CMS considers to be frequently abused drugs based 
on relevant factors, such as actions by the Drug Enforcement 
Administration and/or trends observed in Medicare or scientific data. 
Since we did not receive any specific comments to change this 
definition, we are finalizing it as proposed.
    Comment: A commenter requested that CMS include the criteria, 
resources, and the evidence basis upon which it will rely to determine 
that a drug is a frequently abused drug for purposes of a drug 
management program.
    Response: The definition of frequently abused drug that we are 
finalizing indicates that criteria, resources, and evidence basis will 
be the DEA schedule designation, government, and professional drug 
guidelines, and analyses of drug utilization or scientific data.
    We did not receive any further comment on the definition of 
``frequently abused drug'' and are therefore finalizing it as proposed.
    Consistent with current policy, we proposed that opioids are 
frequently abused drugs, except buprenorphine for medication-assisted 
treatment (MAT) and injectables. As we stated in the preamble to the 
proposed rule, we plan to publish and update a list of frequently 
abused drugs for purposes of Part D drug management programs.
    Comment: All commenters agreed that the Secretary should determine 
that opioids are frequently abused drugs, many referencing the national 
opioid overuse epidemic.
    Response: We appreciate that stakeholders are focused on the opioid 
public health emergency.
    Comment: Some of these commenters agreed with our proposal to 
determine only opioids, except buprenorphine for medication-assisted 
treatment (MAT) and injectables, as frequently abused drugs, at least 
in the initial implementation of Part D drug management programs, in 
order to allow CMS and stakeholders to focus on opioid overuse and gain 
experience with the use of lock-in as a tool to address overutilization 
in the Part D program, before potentially determining other controlled 
substances as

[[Page 16446]]

frequently abused drugs. These commenters urged CMS to wait until drug 
management programs were established, and testing and monitoring 
indicate that the program can be administered in a manner that does not 
limit beneficiary access to needed medications before expanding the 
programs further. Some of these commenters were concerned that an at-
risk beneficiary would have to obtain all frequently abused drugs from 
one pharmacy or one prescriber and that this could disrupt patient care 
if the pharmacy did not carry all frequently abused drugs.
    However, some commenters urged us to determine that all controlled 
substances are frequently abused drugs. These commenters were 
particularly focused on a determination as to benzodiazepines, and to a 
lesser extent, muscle relaxants. Due to this focus, these commenters 
referred to the CDC Guideline that specifically recommends that 
clinicians avoid prescribing opioid pain medication and benzodiazepines 
concurrently whenever possible due to increased risk for overdose. They 
also referred to CMS work in this area: (1) The fact that CMS added a 
concurrent benzodiazepine-opioid flag to OMS in October 2016 in 
response to the CDC Guideline and after our own research on the use of 
benzodiazepines among Medicare beneficiaries \2\ to alert Part D 
sponsors that concurrent use may be an issue that should be addressed 
during case management; \3\ and (2) the fact that we have stated that a 
sponsor may implement a beneficiary-specific claim edit at POS for non-
opioid medications under the current policy.\4\ They further referred 
to a statistic from the National Institute on Drug Abuse that 30 
percent of overdoses involving opioids also involve benzodiazepines.\5\ 
Finally, these commenters pointed out that the FDA has found that the 
growing combined use of opioid medicines with benzodiazepines or other 
drugs that depress the central nervous system has resulted in serious 
side effects, including slowed or difficult breathing and deaths. These 
commenters further noted that in an effort to decrease the use of 
opioids and benzodiazepines, and opioids and other such depressants, 
the FDA added Boxed Warnings--its strongest warnings--to the drug 
labeling of prescription opioid pain and cough medicines, and 
benzodiazepines.\6\ Given these developments, these commenters stressed 
the importance of Part D plan sponsors being able to use the tools that 
will be available to them under drug management programs to address the 
dangers of concurrent opioid and benzodiazepine use.
---------------------------------------------------------------------------

    \2\ https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Concurrent-Use-of-Opioids-and-Benzodiazepines-in-a-Medicare-Part-D-Population-CY-2015.pdf.
    \3\ Please refer to the memo, ``Medicare Part D Overutilization 
Monitoring System (OMS) Update: Addition of the Concurrent Opioid-
Benzodiazepine Use Flag'' dated October 21, 2016.
    \4\ Supplemental Guidance Related to Improving Drug Utilization 
Review Controls in Part D'' September 6, 2012.
    \5\ https://www.drugabuse.gov/drugs-abuse/opioids/benzodiazepines-opioids.
    \6\ https://www.fda.gov/Drugs/DrugSafety/ucm518473.htm.
---------------------------------------------------------------------------

    Response: In light of these comments, we are persuaded that it is 
appropriate that drug management programs are able to address 
concurrent opioid and benzodiazepine use. Such a determination is 
consistent with the definition of frequently abused drugs that we are 
finalizing. First, the Secretary determines benzodiazepines are 
frequently abused or diverted, taking into account that they are 
controlled substances under the Controlled Substances Act (CSA) and 
that prescription benzodiazepines are on Schedule IV, where the DEA 
places substances that have a potential for abuse. In addition, the 
Secretary takes into account that the FDA has issued a warning about 
the risks associated with using opioids and benzodiazepines 
concurrently. Further, the CDC included in its evidence-based opioid 
prescribing guideline a caution to co-prescribe opioids and 
benzodiazepines. Finally, CMS' own statistics reveal that 51 percent of 
Part D beneficiaries that will be identified as potentially at-risk 
under the 2019 clinical guidelines we are finalizing are using opioids 
and benzodiazepines concurrently compared to 24 percent across all Part 
D opioid users. This statistic is indicative that concurrent use is 
even more of a danger among potential at-risk beneficiaries than 
Medicare Part D beneficiaries generally. Therefore, the Secretary 
determines that benzodiazepines are a frequently abused drug for 
purposes of Part D drug management programs beginning in 2019. However, 
the clinical guidelines will still only consider a beneficiary's opioid 
use, as we explain just below.
    Comment: A commenter agreed with our statement in the proposed rule 
that there is difficulty in establishing overuse guidelines for non-
opioid substances. The commenter stated that this underscores the need 
for a robust evidence base to support determining that additional types 
of drugs are frequently abused drugs.
    Response: We agree with the commenter's concern, and for this 
reason we are not modifying the clinical guidelines for 2019 to include 
benzodiazepine use, even though benzodiazepines will be considered a 
frequently abused drug for 2019. This means that a beneficiary who is 
determined to be at-risk based on clinical guidelines that look at the 
beneficiary's opioid use could have a coverage limitation applied under 
a drug management program to both opioids and benzodiazepines to manage 
current and future concurrent use. For example, a sponsor could require 
an at-risk beneficiary to obtain both opioids and benzodiazepines from 
one selected pharmacy.
    We believe that this is appropriate based on the robust evidence 
that concurrent benzodiazepine use with opioids results in an even 
higher risk of an adverse health event than use of opioids alone. We 
will expect to rarely see a sponsor apply a limitation only to an at-
risk beneficiary's access to coverage for benzodiazepines, since to do 
so, the beneficiary would have to have met the clinical guidelines 
which look at opioid use that is potentially risky. However, we 
acknowledge that prescriber agreement during case management could 
rarely lead to such an outcome. For example, no opioid prescriber 
agrees to a beneficiary-specific POS claim edit for opioids, but 
rather, all but one states they will no longer prescriber opioids to 
coordinate the beneficiary's use. However, the benzodiazepine 
prescriber agrees to such an edit for benzodiazepines. We discuss 
prescriber agreement in more detail later in this preamble.
    Given that we are finalizing two categories of drugs as frequently 
abused drugs for 2019, depending upon what a plan sponsor learns during 
case management, we reiterate that the sponsor may have to permit a 
beneficiary to obtain frequently abused drugs from more than one 
pharmacy and/or more than one prescriber in order to provide reasonable 
access, if the sponsor applies lock-in as a coverage limitation, which 
we discuss later in this preamble.
    Comment: A few commenters suggested that Part D sponsors be able to 
expand their drug management programs to include additional frequently 
abused drugs based on their experience with their enrollees. One 
suggested that a sponsor be required to submit such an expansion to CMS 
for approval.
    Response: We disagree with this comment. Section 1860D-4(c)(5)(G) 
of the Act defines ``frequently abused

[[Page 16447]]

drug'' as a drug that is a controlled substance that the Secretary 
determines to be frequently abused or diverted. Consistent with this 
statutory provision, we believe it is appropriate that the 
determination of frequently abused drugs not be plan-specific, but 
rather be consistent across Part D plans, as this will permit better 
oversight and promote consistency across all Part D drug management 
programs.
    We proposed that future determinations of frequently abused drugs 
by the Secretary primarily be included in the annual Medicare Parts C&D 
Call Letter or in similar guidance, if necessary, to address midyear 
entries to the drug market or evolving government or professional 
guidelines or relevant data analysis, which will be subject to public 
comment. We proposed that this approach would be consistent with our 
approach under the current policy and necessary for Part D drug 
management programs to be responsive to changing public health issues 
over time.
    Comment: We received comments supportive of our proposal to apply 
the standards we are establishing in rulemaking to future 
determinations of frequently abused drugs through the annual Medicare 
Parts C&D Call Letter, or in similar guidance. We did not receive any 
comments that opposed this proposed approach.
    Response: We appreciate the comments.
    Comment: A commenter asked us to confirm that we would use the same 
process to determine that a drug is no longer a frequently abused drug.
    Response: We will apply the same regulatory standards and use the 
same process that we use to determine that a drug is a frequently 
abused drug when determining that a drug no longer is a frequently 
abused drug for purposes of Part D drug management programs.
    Comment: A few commenters urged CMS to exclude abuse-deterrent (AD) 
opioids from this definition of ``frequently abused drug'' as there is 
no evidentiary data to support the thesis that AD opioids are 
frequently abused and existing observation data supports their 
exclusion from this broad standard.
    Response: The FDA requires a boxed warning on opioid abuse-
deterrent formulations (ADFs), because even with these formulations 
there is still potential for addiction, abuse, misuse, and diversion. 
The FDA has also noted \7\ that ``abuse-deterrent technologies have not 
yet proven successful at deterring the most common form of abuse--
swallowing a number of intact capsules or tablets to achieve a feeling 
of euphoria. Moreover, the fact that a product has abuse-deterrent 
properties does not mean that there is no risk of abuse. It means, 
rather, that the risk of abuse is lower than it would be without such 
properties.'' Also, ADFs do not prevent patients who may be using 
opioids for therapeutic reasons from taking higher doses than 
prescribed or diverting the opioid. For these reasons, we disagree that 
abuse-deterrent formulations should be excluded from the determination 
of frequently abused drugs.
---------------------------------------------------------------------------

    \7\ ``Abuse-Deterrent Opioids--Evaluation and Labeling Guidance 
for Industry'', U.S. Department of Health and Human Services, Food 
and Drug Administration, Center for Drug Evaluation and Research 
(CDER), Clinical Medical, April 2015.
---------------------------------------------------------------------------

    Comment: A few commenters asked CMS to clarify whether methadone, a 
Part D drug when indicated for pain, would be included in the 
definition of a frequently abused drug under the drug management 
program. Other commenters agreed with excluding buprenorphine for MAT 
from the definition of frequently abused drug as not to limit patient 
access to treatment and noted that removing buprenorphine as a 
frequently abused drug is consistent with the CDC's approach to exclude 
buprenorphine from the determination of a person's daily opioid MME.
    Response: Yes, methadone for pain is included in the definition of 
a frequently abused drug for purposes of Part D drug management 
programs, consistent with current policy/OMS. Although buprenorphine is 
recognized by the DEA as a drug of abuse, we thank the commenters that 
agreed with excluding buprenorphine for MAT from the definition of 
frequently abused drug so that access to MAT, such as buprenorphine, is 
not impacted. However, the commenters' reference to the CDC's exclusion 
of buprenorphine from the determination of a person's daily opioid MME 
made us believe that commenters may be conflating the definition of a 
frequently abused drug with the clinical guidelines and associated 
opioid dosage thresholds. Therefore, we realize that we need to be more 
specific about what opioid use, opioid prescribers, and opioid 
dispensing pharmacies means in the clinical guidelines, which we also 
discuss later.
    Since the publication of the proposed rule, the CDC removed the 
conversion factors for all formulations of buprenorphine, for pain and 
for MAT, from the most recent CDC MME conversion factor file (https://www.cdc.gov/drugoverdose/data-files/CDC_Oral_Morphine_Milligram_Equivalents_Sept_2017.xlsx). Therefore, CMS 
cannot determine the MME. As such, buprenorphine products are not used 
to determine the beneficiary's average daily MME. However, we will 
still use prescription opioids, including all formulations of 
buprenorphine for pain and MAT, to determine opioid prescribers and 
opioid dispensing pharmacies in the clinical guidelines.
 Clinical Guidelines & Program Size
    Section 1860D-4(c)(5)(C)(i)(I) of the Act requires at-risk 
beneficiaries to be identified using clinical guidelines that indicate 
misuse or abuse of frequently abused drugs and that are developed by 
the Secretary in consultation with stakeholders. We proposed to include 
a definition of ``clinical guidelines'' that cross references standards 
that we proposed at Sec.  423.153(f) for how the guidelines will be 
established and updated. Specifically, we proposed to define clinical 
guidelines for purposes of a Part D drug management program in Sec.  
423.100 as criteria to identify potential at-risk beneficiaries who may 
be determined to be at-risk beneficiaries under such programs, and that 
are developed in accordance with the standards in Sec.  423.153(f)(16) 
and beginning with contract year 2020, will be published in guidance 
annually.
    We also proposed to add Sec.  423.153(f)(16) to state that 
potential at-risk beneficiaries and at-risk beneficiaries are 
identified by CMS or a Part D sponsor using clinical guidelines that: 
(1) Are developed with stakeholder consultation; (2) Are based on the 
acquisition of frequently abused drugs from multiple prescribers, 
multiple pharmacies, the level of frequently abused drugs, or any 
combination of these factors; (3) Are derived from expert opinion and 
an analysis of Medicare data; and (4) Include a program size estimate. 
This proposed approach to developing and updating the clinical 
guidelines is intended to provide enough specificity for stakeholders 
to know how CMS will determine the guidelines by identifying the 
standards we will apply in determining them.
    This proposed approach also indicated that the program size will be 
determined as part of the process to develop the clinical guidelines--a 
process into which stakeholders will provide input. Section 1860D-
4(c)(5)(C)(iii) of the Act states that the Secretary shall establish 
policies, including the guidelines and exemptions, to ensure that the 
population of enrollees in drug management programs could be 
effectively managed by plans. We proposed to define ``program size'' in

[[Page 16448]]

Sec.  423.100 to mean the estimated population of potential at-risk 
beneficiaries in drug management programs (described in Sec.  
423.153(f)) operated by Part D plan sponsors that the Secretary 
determines, as part of the process to develop clinical guidelines, can 
be effectively managed by such sponsors.
    Comment: We did not receive any specific comments about the 
definition we proposed for clinical guidelines in Sec.  423.100, nor 
the standards we proposed in Sec.  423.153(f)(16).
    Response: We are therefore finalizing the definition and standards 
as proposed, with one modification adding language so that the 
guidelines will be published in guidance annually beginning with 
contract year 2020 guidance, since we are publishing the 2019 clinical 
guidelines in this final rule.
    Comment: We received comments supportive of our proposal to apply 
the standards we are establishing in rulemaking for clinical guidelines 
in Sec.  423.153(f)(16) to develop future OMS criteria through the 
annual Medicare Parts C&D Call Letter process beginning with plan year 
2020.
    We did not receive comments that specifically opposed this proposed 
approach.
    Response: We appreciate these comments.
    Because Part D drug management programs will be integrated with the 
current policy/OMS beginning in 2019, there will be no separate OMS 
criteria in 2019 and beyond. For plan year 2019, we proposed the 
clinical guidelines to be the OMS criteria established for plan year 
2018. The clinical guidelines for use in drug management programs we 
proposed for 2019 are: Use of opioids with an average daily MME greater 
than or equal to 90 mg for any duration during the most recent 6 months 
and either: 4 or more opioid prescribers and 4 or more opioid 
dispensing pharmacies OR 6 or more opioid prescribers, regardless of 
the number of opioid dispensing pharmacies.
    We estimated that these criteria would identify approximately 
33,053 potential at-risk beneficiaries in the Part D program based on 
2015 data, whom we believe are at the highest risk of death or overdose 
due to their opioid use. Also, under our proposal, we stated that Part 
D plan sponsors will not be able to vary the criteria of the guidelines 
to include more or fewer beneficiaries in their drug management 
programs, as they may under the current policy, except that we proposed 
to continue to permit plan sponsors to apply the criteria more 
frequently than CMS will apply them through OMS in 2018, which can 
result in sponsors identifying beneficiaries earlier. This is because 
CMS evaluates enrollees quarterly using a 6-month look back period, 
whereas sponsors may evaluate enrollees more frequently (for example, 
monthly).
    We also described other clinical guidelines that we considered in 
the Regulatory Impact Analysis section of the proposed rule. 
Stakeholders were invited to comment on those options and any others 
that would identify more or fewer potential at-risk beneficiaries.
    Comment: We received comments that were overall supportive of the 
clinical guidelines/criteria we proposed for 2019 with the estimated 
program size of 33,053. However we did receive a few comments 
suggesting criteria for the clinical guidelines that were not among the 
alternate options we included in the RIA. Some of these supportive 
comments supported the guidelines without reservation, making 
statements such as noting the guidelines align with the CDC Guideline 
or that they understood or supported CMS' desire to gain experience 
with the use of lock-in as a drug management tool before adopting 
clinical guidelines with flexibility and/or that would identify more 
potential at-risk beneficiaries. These commenters want CMS to adopt a 
clear and universal set of guidelines which minimizes customer and 
provider confusion, as well as administrative burden when submitting 
and receiving OMS quarterly reports. These commenters assert that 
voluntary plan guidelines would increase confusion and fragmentation 
across the Medicare landscape. However, some commenters urged that Part 
D plan sponsors should have complete flexibility to identify potential 
at-risk beneficiaries, or at least some flexibility to identify 
additional ones consistent with our current policy. These commenters 
emphasized that sponsors should be able to establish and update 
targeting criteria and program features based on evolving clinical 
evidence and feedback and the specific needs of their members. Some of 
these commenters referred to the experience Part D sponsors and their 
PBMs have gained in identifying opioid overutilization among their plan 
members over the last several years and the need to be able to do more 
to address the opioid overuse crisis. Some commenters referred in 
particular to beneficiaries who do not have an average daily MME of 
greater or equal to 90 mg but who are filling opioids prescriptions 
from many different prescribers or pharmacies that they may currently 
address but would not be able to under our proposal. These commenters 
pointed out that such beneficiaries benefit from better coordination of 
care, which case management and coverage limitations on frequently 
abused drugs can support. Another commenter referred to beneficiaries 
with high dose utilization regardless of the number of prescribers as 
appropriate for review by drug management programs.
    As to program size, a commenter stated that the proposed clinical 
guidelines would identify a reasonable number of potential at-risk 
beneficiaries. Another commenter proposed alternative criteria 
involving a lower MME level that it stated would identify more than 
300,000 Part D beneficiaries as potentially at-risk, whereas the other 
commenters (including those commenters that requested increased 
flexibility) did not provide a program size estimate. On the other 
hand, we did not receive comments that the clinical guidelines we 
proposed would identify a potential at-risk beneficiary population that 
cannot be effectively managed by Part D plan sponsors, and because the 
proposed guidelines are the same as the OMS criteria for 2018 that were 
established through the 2018 Parts C&D Call Letter process, we did not 
expect such comments.
    We received a few comments that the proposed clinical guidelines 
appear to be aimed at primarily limiting the program size arbitrarily 
rather than permitting scientific evidence and clinical research to 
dictate the most appropriate guidelines.
    Response: We appreciate the commenters that provided a specific 
suggestion for criteria; however, these criteria were not among the 
alternate options we included in the RIA. Therefore, we decline to 
adopt these suggestions, as the clinical guidelines are to be developed 
by the Secretary in consultation with stakeholders.
    We were persuaded by the commenters that Part D sponsors should 
have some flexibility in adopting targeting criteria for potential at-
risk beneficiaries in order to be able to identify more such 
beneficiaries, which in turn enables sponsors to be able to do more to 
address the opioid overuse public health emergency. In addition, 
flexibility in adopting targeting criteria for potential at-risk 
beneficiaries is consistent with the current policy, and we wish to be 
more conservative in varying from that policy for the same reasons. 
However, we still believe it prudent to place certain parameters around 
the beneficiaries who may be identified as potentially at-risk by 
sponsors for their drug management programs, particularly as we gain

[[Page 16449]]

experience with the use of lock-in as a drug management tool.
    Given that no other commenter recommended a specific program size, 
there is no discernible consensus that a population of more than 
300,000 would be manageable for Part D sponsors. We therefore decline 
to adopt these criteria as the clinical guidelines for that reason, and 
also because we want sponsors to focus on the Part D population that is 
at the highest risk. Also, as we noted previously, the statute requires 
us to establish policies to ensure that the populations of enrollees in 
a prescription drug management program can be effectively managed by 
plans. Therefore, we disagree that the clinical guidelines arbitrarily 
limit the size of these programs.
    After publication of the proposed rule, we conducted an analysis of 
the clinical guidelines/OMS criteria for 2019 that we proposed using 
2017 PDE data, as the original estimates were based on 2015 data. We 
were pleased to confirm that the current policy, which will be 
integrated into Part D drug management programs, continues to make 
substantial progress in reducing potential opioid overutilization in 
the Part D program. The reduction in the number of beneficiaries 
meeting the OMS criteria between 2015 and 2017 far outpaced previous 
trends. We thank the Part D sponsors that have executed the current 
policy, the providers who have participated, and the various 
stakeholders who have provided helpful input over the years.
    According to this analysis, the 2019 clinical guidelines/OMS 
criteria we proposed would identify an estimated 11,753 potential at-
risk beneficiaries rather than the 33,053 we originally estimated. 
Given the incremental approach we have taken with the current policy 
over the years since its inception, this revised estimate provides an 
opportunity to adjust the clinical guidelines/OMS criteria downward in 
terms of prescriber and pharmacy thresholds which will incorporate more 
potential at-risk beneficiaries in 2019.
    Therefore, after considering the comments and this updated data, we 
are doing two things with respect to our clinical guidelines proposal, 
which we will identify a similar program size as the one we proposed, 
as well as strike a balance between those commenters wanting complete 
flexibility to adopt criteria to identify potential at-risk 
beneficiaries and those urging no flexibility. First, we are finalizing 
alternative criteria that we considered in the RIA as Option 3 as 
minimum criteria. These minimum criteria are: Use of opioids with an 
average daily MME greater than or equal to 90 mg for any duration 
during the most recent 6 months and either: 3 or more opioid 
prescribers and 3 or more opioid dispensing pharmacies OR 5 or more 
opioid prescribers, regardless of the number of opioid dispensing 
pharmacies.
    This means that beneficiaries meeting these criteria will be 
reported to sponsors by OMS and sponsors with drug management programs 
must review each case and report their findings back to OMS as they do 
today consistent with how they have operated under the current policy. 
In addition, sponsors may not vary these minimum criteria. However, as 
we previously stated, sponsors will be permitted to apply the minimum 
criteria more frequently using their own prescription claims data than 
CMS will apply them through OMS quarterly. According to our analysis of 
2017 PDE data, these minimum criteria would identify 44,332 potential 
at-risk beneficiaries and is the option based on 90 MME in the RIA that 
has a revised program size estimate which is closest to our original 
estimate of 33,053 but that would not identify fewer at-risk 
beneficiaries. Given the scope of the opioid crisis, and current data 
showing significant reduction in the number of beneficiaries meeting 
the OMS criteria, finalizing criteria that would have resulted in a 
smaller program size could undermine the increasing momentum in 
addressing opioid overutilization in the Medicare Part D program.
    Second, we are finalizing supplemental criteria to provide sponsors 
with some flexibility in adopting criteria for their drug management 
programs. This means that sponsors may continue to report additional 
beneficiaries to OMS--as they do today under the current policy. 
However, unlike the current policy, such beneficiaries must meet the 
following supplemental criteria: Use of opioids (regardless of average 
daily MME) during the most recent 6 months with 7 or more opioid 
prescribers OR 7 or more opioid dispensing pharmacies.
    These supplemental criteria were included in the additional 
criteria options that we considered and are included in a options chart 
in the Regulatory Impact Analysis (RIA) of the proposed rule; 
specifically, in Row 2 of option 6. Using 2017 data, we estimate that 
these supplemental criteria would identify an additional 22,841 
potential at-risk beneficiaries. We believe these criteria would be 
responsive to the concern of the commenters who, in urging us to allow 
flexibility for sponsors to adopt targeting criteria, expressed 
concerns about not being able to continue to address plan members who 
are receiving opioids from a large number of prescribers or pharmacies 
but who do not meet a particular MME threshold.
    We note that we do not anticipate that OMS will report 
beneficiaries meeting these supplemental criteria to sponsors; however, 
Part D sponsors may review beneficiaries who meet them--and must report 
them to OMS if they do--at a level that is manageable for their drug 
management programs in conjunction with the potential at-risk 
beneficiaries reported by OMS minimum criteria, whom they must address.
    Thus, the final clinical guidelines for 2019 will result in an 
estimated program size of approximately 67,173 beneficiaries--44,332 of 
whom Part D sponsors with drug management programs must review and 
22,841 of whom such sponsors may review. We believe this program size 
can be effectively managed by plans because we have already received 
feedback from Part D sponsors through the final 2018 Medicare Parts C&D 
Call Letter process that 33,000 beneficiaries are manageable. Thus, we 
conclude that 44,332 beneficiaries are associated with the option 
included in the RIA of the proposed rule that is the closest in number 
without identifying fewer potential at-risk beneficiaries and is 
consistent with historical program size under the current policy. 
Moreover, we received no comments that 33,053 beneficiaries is the 
largest program size Part D sponsors can manage. Finally, as we stated 
above, sponsors may review the additional 22,841 beneficiaries at a 
level that is manageable for their drug management programs.
    These final criteria for 2019 meet the definition of clinical 
guidelines that we are finalizing. They are criteria to identify 
potential at-risk beneficiaries who may be determined to be at-risk 
beneficiaries under drug management programs, and they were developed 
in accordance with the standards we are finalizing in Sec.  
423.153(f)(16) and beginning for 2020, will be published in guidance 
annually. These criteria also adhere to the standards we proposed in 
Sec.  423.153(f)(16) because: (1) They were developed with stakeholder 
consultation in that we solicited comment on them in the proposed rule; 
(2) they are based on the acquisition of frequently abused drugs from 
multiple prescribers, multiple pharmacies, and the level of frequently 
abused drugs in that they identify potential at-risk beneficiaries 
taking opioids and obtaining them from 7 or more prescribers or 7 or 
more pharmacies; (3)

[[Page 16450]]

they are derived from our and commenters' expert opinion that obtaining 
opioids from many prescribers or many pharmacies is a potentially 
dangerous utilization pattern of frequently abused drugs due to an 
apparent lack of coordination of care that warrants further review and 
this opinion is supported by the fact that this pattern is highly 
unusual in the Part D program as it represents 0.11 percent of 
beneficiaries; and (4) they include a program size estimate.
    We have consolidated the clinical guidelines/OMS criteria in Table 
1 for easier reference. We note that we were not persuaded by the 
commenter who urged us to adopt criteria that would address high opioid 
use regardless of the number of prescribers or pharmacies, as one 
purpose of drug management programs, and lock-in tools specifically, is 
to promote better care coordination among multiple providers.
    Comment: Some commenters suggested that if we have concerns with 
allowing Part D sponsors flexibility in adopting targeting criteria for 
potential at-risk beneficiaries, that we establish a process through 
which a sponsor could submit their guidelines to CMS.
    Response: We thank these commenters for their idea, but we prefer 
the approach we have taken as providing consistency across the entire 
Part D program and a program size, as required by CARA.
    Comment: A few commenters urged caution in the use of policies 
determining access to medications based upon thresholds such as MME, 
which the commenters viewed as a potentially problematic type of one-
size-fits all approach. These commenters noted that scientific 
literature does not support the establishment of a recommended maximum 
dose for opioids. These commenters also pointed out that the use of 
such thresholds may result in a false impression of a superior safety 
profile, which we interpreted to mean that referring to a specific MME 
level as potentially dangerous may give the impression that a level 
below that amount is universally safe.
    Response: We agree with the commenter that the CDC Guideline--and 
our clinical guidelines for Part D drug management programs that refer 
to it--are not intended as a maximum threshold for prescribing, as we 
noted in the preamble to the proposed rule. In the absence of dosing 
limits in the FDA-approved labeling for opioids, we are using the CDC 
guideline to establish a threshold to identify potentially high-risk 
beneficiaries who may benefit from closer monitoring and to create 
alignment between Government programs.
    Moreover, our implementation of the CARA drug management program 
provisions focuses on beneficiaries who are receiving opioids from 
multiple prescribers and/or multiple pharmacies, not just at a certain 
MME level. In addition, our finalized requirements for drug management 
programs require Part D sponsors to engage in case management with 
prescribers, obtain their verification that the beneficiary is at-risk 
and their agreement before implementing a prescriber lock-in or 
beneficiary-specific claim edit, as long as the prescribers are 
responsive to case management. This means that decisions about the 
amount of frequently abused drugs an at-risk beneficiary should receive 
are made by the beneficiary's prescriber(s) if they are responsive and 
not based on the targeting threshold for review of the beneficiary's 
utilization. Thus, this approach is aimed at addressing overutilization 
of frequently abused drugs while maintaining access to such drugs when 
medically necessary in the Part D program.
    Comment: A commenter proposed modifying ``for any duration'' in the 
clinical guidelines to permit beneficiaries a reasonable overlap time 
to refill medications and suggested that CMS set a reasonable overlap 
period of no more than 3 days for the purposes of identifying potential 
at-risk beneficiaries.
    Response: CMS performed an extensive analysis of the OMS criteria 
using 2015 data (https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Revised-OMS-Criteria-Modification-Analysis.pdf). Adjusting the clinical guideline MME 
calculation for each beneficiary to account for overlapping fills would 
be difficult to operationalize from a data analysis perspective since 
it would be dependent on the number of fills and the opioids dispensed, 
including strength each beneficiary received. For this reason, CMS 
chose to calculate the MME daily dose using the average daily dose 
during the opioid usage. We included ``for any duration'' in the 
clinical guidelines since this means that these beneficiaries reached 
or exceeded the MME level in a short period of time, and received their 
opioids from multiple prescribers and pharmacies. This indicates 
potential coordination of care issues or misuse. We found that the 
number of additional overutilizers with an episode length less than 90 
days for any of the MME dose thresholds analyzed ranged from only 57 to 
320 beneficiaries, or 1 to 2 percent of the 90+ day episode opioid 
overutilizer count. Therefore, we included these beneficiaries as 
potential opioid overutilizers under the current policy, and we will 
continue to utilize this methodology for OMS reporting of potential at-
risk beneficiaries for drug management programs.
    If a sponsor performs case management for a potential at-risk 
beneficiary who was reported through OMS and discovers that the high 
use was a result of appropriate prescription overlap and not misuse, we 
would expect the sponsor to stop conducting case management for that 
beneficiary, and to not send the initial notice to the beneficiary.
    Comment: A commenter requested that CMS clarify that the language 
``for any duration during the most recent 6 months'' means that the 
opioid use occurred during the most recent 6 months and not 6 months of 
consistent use.
    Response: We confirm that this language means that the opioid use 
occurred during the most recent 6 months.
    Comment: A commenter suggested that CMS apply path analysis to 
develop clinical guidelines to identify potential at-risk beneficiaries 
using the Integrated Data Repository (IDR), which is a data warehouse 
that integrates multiple data sources and supports analytics across 
CMS.
    Response: We thank the commenter for suggesting an approach in the 
IDR to improve identification of potential at-risk beneficiaries for 
CMS to consider.
    We proposed that under the clinical guidelines, prescribers 
associated with the same single Tax Identification Number (TIN) be 
counted as a single prescriber, because we have found under the current 
policy that such prescribers are typically in the same group practice 
that is coordinating the care of the patients served by it, and failing 
to do so would result in a high volume of false positives reported 
through OMS. Thus, it is appropriate to count such prescribers as one, 
so as not to identify beneficiaries through OMS who are not potentially 
at-risk.
    In this regard, in applying the clinical guidelines criteria, CMS 
proposed to count prescribers with the same TIN as one prescriber, 
unless any of the prescribers are associated with multiple TINs. We 
also proposed that when a pharmacy has multiple locations that share 
real-time electronic data, all locations of the pharmacy collectively 
be treated as one pharmacy under the clinical guidelines. For example, 
under the criteria we are finalizing, a beneficiary who meets the 90 
MME criterion and received opioid

[[Page 16451]]

prescriptions from 3 prescribers in the same group practice and 2 
independent opioid prescribers (1 group practice + 2 prescribers = 3 
prescribers) and filled the prescriptions at 4 opioid dispensing 
pharmacies that do not share real-time electronic data, will still meet 
the criteria, which is appropriate. However, a beneficiary who meets 
that 90 MME criterion and received opioid prescriptions from 3 
prescribers in the same group practice and 1 independent opioid 
prescriber (1 group practice + 1 prescriber = 2 prescribers) and filled 
the prescriptions at 4 opioid dispensing pharmacies that do not share 
real-time electronic data will not meet the criteria.
    Comment: Several commenters supported the proposal conceptually to 
count prescribers associated with the same single TIN as a single 
prescriber, but many of these commenters noted that some Part D plans 
sponsors and PBMs do not have access to prescriber TIN information. A 
few commenters recommended that CMS count prescribers with the same 
National Provider Identifier (NPI) as a single prescriber, and a 
commenter suggested that CMS require prescribers to share real-time 
electronic data through an electronic health record (EHR).
    Response: We appreciate the support for this proposal as well as 
the information on the operational challenges. After considering these 
comments, we are finalizing this aspect of the clinical guidelines for 
2019. Part D plan sponsors without the ability to group prescribers 
using the TIN through data analysis will have to make these 
determinations during case management. If a sponsor finds that the 
multiple opioid prescribers for the beneficiary are from a single group 
practice, and therefore, the beneficiary does not meet the clinical 
guidelines, the sponsor could stop conducting case management for that 
beneficiary, and would not send the initial notice to the beneficiary. 
We will issue guidance and updated OMS technical user guides to plan 
sponsors at a later time, including data sources and standard responses 
used in OMS reporting, which may include providing such feedback to 
CMS.
    In addition, this information may be discovered after the sponsor 
provided the beneficiary the initial notice. In such an event, the 
sponsor would send the beneficiary an alternate second notice that the 
beneficiary is not at-risk. To the comments about grouping by NPI, we 
clarify that under the current policy/OMS we use the NPI to first 
identify single prescribers, and then we further group single 
prescribers with the same single TIN. We will continue this methodology 
for the clinical guidelines under the drug management program. We 
appreciate the comment regarding real-time prescriber data, but we did 
not propose such a system for Part D prescribers.
    Comment: We received several comments supporting our proposal that 
when a pharmacy has multiple locations that share real-time electronic 
data, all locations of the pharmacy collectively be treated as one 
pharmacy under the clinical guidelines. We also received many comments 
that Part D plan sponsors and their PBMs do not have the systems 
capabilities to account for pharmacies that have multiple locations 
that share real-time electronic data, in order to treat all locations 
of the pharmacy collectively as one pharmacy. We received one comment 
that they are able to, but that there are operational challenges to 
synthesizing the data to be useful for drug management programs.
    Response: As we stated in the proposed rule, section 1860D-
4(c)(5)(D) of the Act specifies that for purposes of limiting access to 
coverage of frequently abused drugs to those obtained from a selected 
pharmacy, if the pharmacy has multiple locations that share real-time 
electronic data, all such locations of the pharmacy collectively are 
treated as one pharmacy. Because of this statutory requirement, it 
makes sense to us to consider such multiple locations as one pharmacy 
for purposes of the clinical guidelines, similar to how we account for 
group practices, to reduce false positives, particularly because the 
purpose of the guidelines is to identify when a beneficiary may be at 
risk for overutilization because they use multiple pharmacies. 
Therefore, we are finalizing this aspect of the clinical guidelines for 
2019.
    We understand that we, and apparently most sponsors and their PBMs, 
do not have the systems capability to automatically determine when a 
pharmacy is part of a chain. Therefore, Part D plan sponsors without 
this capability will have to make these determinations during case 
management. If through such case management, a plan sponsor finds that 
multiple locations of a pharmacy used by the beneficiary share real-
time electronic data, the sponsor will be required to treat those 
locations as one pharmacy. This may result in the sponsor not or no 
longer conducting case management for a beneficiary because the 
beneficiary does not meet the clinical guidelines, or in the sponsor 
sending the beneficiary an alternate second notice that the beneficiary 
is not at-risk if the sponsor discovers this information after it 
provided the beneficiary with the initial notice.
    We note that group practices and chain pharmacies are discussed 
later in this preamble in the context of the selection of a 
prescriber(s) and pharmacy(ies) in cases when a Part D plan limits a 
beneficiary's access to coverage of frequently abused drugs to selected 
pharmacy(ies) and/or prescriber(s).
    As noted above, Table 1 shows that in 2017 approximately 44,332 
beneficiaries would have met the minimum criteria of the 2019 clinical 
guidelines that we are finalizing, which is approximately 0.10 percent 
of the 45 million beneficiaries enrolled in Part D in 2017. 
Approximately, 22,841 additional beneficiaries will have met the 
supplemental criteria that we are finalizing, which is approximately 
0.05 percent. To derive this estimated population of potential at-risk 
beneficiaries, we analyzed prescription drug event data (PDE) from 
2017,\8\ using the CDC opioid drug list and MME conversion factors, and 
applying the criteria we are finalizing as the clinical guidelines. 
This estimate is over-inclusive because we did not exclude 
beneficiaries in long-term care (LTC) facilities who will be exempted 
from drug management programs, as we discuss later in this section.
---------------------------------------------------------------------------

    \8\ Unique count of beneficiaries who met the criteria in any 6 
month measurement period (January 2017-June 2017; April 2017-
September 2017; or July 2017-December 2017).
---------------------------------------------------------------------------

    However, based on similar analyses we have conducted, this 
exclusion will not result in a noteworthy reduction to our estimate. 
Also, we were unable to count all locations of a pharmacy that has 
multiple locations that share real-time electronic data as one, which 
is a topic we discussed earlier and will return to later. Thus, there 
likely are beneficiaries counted in our estimate who will not be 
identified as potential at-risk beneficiaries because they are in an 
LTC facility or only use multiple locations of a retail chain pharmacy 
that share real-time electronic data.

[[Page 16452]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.000

    As clarified above, since the CDC removed all formulations of 
buprenorphine, for pain and for MAT, from the most recent CDC MME 
conversion factor file, buprenorphine products are not used to 
determine the beneficiary's average daily MME. However, we will use 
prescription opioids, including all buprenorphine products for pain and 
MAT, to determine opioid prescribers and opioid dispensing pharmacies 
under the minimum criteria. Similarly, sponsors must include all 
prescription opioids, including all buprenorphine products, to 
determine opioid prescribers and opioid dispensing pharmacies under the 
supplemental criteria.
 Exempted Beneficiary
    We proposed that an exempted beneficiary, with respect to a drug 
management program, would mean an enrollee who: (1) Has elected to 
receive hospice care; (2) Is a resident of a long-term care facility, 
of a facility described in section 1905(d) of the Act, or of another 
facility for which frequently abused drugs are dispensed for residents 
through a contract with a single pharmacy; or (3) Has a cancer 
diagnosis. While the first two exceptions are required under CARA, we 
proposed to exercise the authority in section 1860D-4(c)(5)(C)(ii)(III) 
of the Act to treat a beneficiary who has a cancer diagnosis as an 
exempted individual. We did not propose to exempt additional categories 
of beneficiaries.
    We received the following comments and our response follows:
    Comment: Commenters were overall supportive of our proposal to 
exempt beneficiaries who have a cancer diagnosis. A few of the 
commenters noted that the CDC Guideline recommendations do not apply to 
active cancer treatment. Many of these commenters asked for more 
guidance on how this exemption, which is a feature of the current 
policy, would be operationalized. Others felt the exemption is too 
broad and could be applied to beneficiaries who have not been treated 
for cancer in years or who are being treated for non-terminal cancer 
but possibly do have an opioid overuse issue that needs to be 
addressed. A few commenters disagreed with the exemption as an 
inappropriate

[[Page 16453]]

one-size-fits-all approach. Even the commenters who did not support the 
exemption noted that the cancer population is unique and must be 
handled delicately.
    Response: We thank the commenters for their supportive comments as 
to the exemption for cancer. Our intent is to exempt beneficiaries who 
are currently being treated for active cancer-related pain from Part D 
drug management programs and this is the exemption we are finalizing 
based on the comments. While our current policy generally excludes 
beneficiaries with cancer diagnoses from OMS reporting,\9\ we believe 
it is appropriate to be more specific with respect to regulatory 
parameters for Part D prescription drug management programs. Therefore, 
the comments have persuaded us that we need to be more precise with 
this codified exemption.
---------------------------------------------------------------------------

    \9\ Currently, for OMS, the following beneficiaries are excluded 
from OMS reporting: Those with ICD-10-CM codes associated with 
American Medical Association (AMA) Physician Consortium for 
Performance Improvement (PCPI) ICD-10 cancer diagnoses in the Common 
Working File (CWF) data during the 12 months prior to the end of the 
measurement period or cancer RxHCCs in the latest Risk Adjustment 
Processing System (RAPS). Note, this is currently aligned with the 
Pharmacy Quality Alliance opioid overuse measure specifications.
---------------------------------------------------------------------------

    As we noted in the proposed rule, there are some limitations around 
this exemption under the current policy due to our current data sources 
which will remain when implementing the drug management program 
clinical guidelines. For example, there may be a lag in current year 
diagnosis data in CMS systems and the RxHCC codes from the risk 
adjustment processing system are based on diagnosis data from the past 
year. Therefore, Part D plan sponsors will have to identify such 
exempted beneficiaries through the case management process if they are 
inadvertently reported through OMS or when the sponsor is reviewing 
cases pursuant to applying the minimum clinical guidelines more 
frequently than CMS and the supplemental criteria of the clinical 
guidelines. Plan sponsors may have more recent cancer diagnosis 
information or learn this information through clinical contact with 
prescribers. Plan sponsors may currently refer to the CDC Guideline as 
a reference which distinguishes active cancer treatment from cancer 
survivors with chronic pain who have completed cancer treatment, are in 
clinical remission, or are under cancer surveillance only. We will 
monitor health care guidelines that address this topic and issue 
guidance as warranted to further refine the execution of the exemption 
for beneficiaries being treated for active cancer-related pain that we 
are finalizing.
    While we understand the concerns of the commenters who did not 
support this exemption about potential inappropriate opioid use among 
this population, we note that this exemption is a feature of the 
current policy, which has reportedly been working well and we therefore 
believe it is appropriate to extend it to drug management programs. We 
agree that this population deserves heightened protection but we are 
finalizing an exemption that we believe is narrowly tailored to address 
the concerns of commenters who urged us to proceed with caution with 
respect to this exemption.
    Comment: Many commenters supported the exemption for beneficiaries 
in the LTC setting. A few commenters recommended that we not exempt LTC 
beneficiaries from retrospective drug utilization review (DUR) 
processes. A commenter asked if it could still implement a beneficiary-
specific claim edit at POS for frequently abused drugs if it 
independently determined an LTC resident to be at-risk.
    Response: Section 1860D-4(c)(5)(C)(ii) exempts beneficiaries in the 
LTC setting, and we therefore do not have the authority to permit plans 
to include them in Part D drug management programs. We are finalizing 
this exemption as proposed. Because beneficiary-specific POS claim 
edits for frequently abused drugs are included in drug management 
programs through the integration approach we are finalizing, a sponsor 
may not implement such an edit for an exempt beneficiary.
    However, while exempt beneficiaries are exempt from drug management 
programs, they are not exempt from retrospective DUR processes. Part D 
plan sponsors still must comply with its other utilization management 
obligations in Sec.  423.153, and could implement a beneficiary-
specific edit for drugs other than frequently abused drugs, for 
example, if necessary to comply with those obligations. In addition, 
sponsors may also still review the use of drugs that constitute 
frequently abused drugs by beneficiaries in LTC facilities and work 
with such facilities to identify patterns of inappropriate or medically 
unnecessary care among enrollees. However, as just stated, the sponsors 
cannot implement beneficiary-specific edits for drugs that constitute 
frequently abused drugs, nor prescriber or pharmacy lock-in for such 
drugs.
    Comment: A commenter requested that CMS exempt any Part D claim 
submitted by a Network Long-Term Care Pharmacy (NLTCP), as defined in 
Chapter 5 of the Medicare Prescription Drug Benefit Manual, asserting 
that such pharmacies are required to meet minimum performance and 
service criteria, including performing drug utilization reviews and 
identifying inappropriate drug usage. Another asked for clarification 
on whether beneficiaries serviced by long-term care pharmacies are 
exempt or if the exemption is limited to beneficiaries in long-term 
care facilities.
    Response: Section 1860D-4(c)(5)(C)(ii) of the Act exempts residents 
of a long-term care facility rather than pharmacy claims submitted by 
long-term care pharmacies. Therefore, we find it is appropriate to 
finalize an exemption that takes the same approach as the statute. 
However, we note that beneficiaries serviced by long-term care 
pharmacies may meet another exemption, such as the one for 
beneficiaries residing in facilities for which frequently abused drugs 
are dispensed for residents through a contract with a single pharmacy.
    Comment: A few commenters stated that they will need the Long-Term 
Institution (LTI) report to be released on a monthly basis rather than 
the current quarterly basis.
    Response: We thank the commenters for their comment and will 
explore if more frequent reporting is feasible.
    Comment: Many commenters supported the proposed exemption for 
beneficiaries who are residents of a facility for which frequently 
abused drugs are dispensed for residents through a contract with a 
single pharmacy. Others urged us to propose one.
    Response: We clarify for commenters that the proposed rule included 
an exemption for beneficiaries who are residents of a facility for 
which frequently abused drugs are dispensed for residents through a 
contract with a single pharmacy, as required by Section 1860D-
4(c)(5)(C)(ii). Therefore, we are finalizing this exemption as 
proposed.
    Comment: Many commenters urged us to extend an exemption to 
beneficiaries in assisted living facilities, asserting that such 
beneficiaries are at very low risk of substance abuse and that applying 
lock-in to them could be disruptive and undermine their care. Other 
commenters opposed such an exemption and urged us to proceed with 
caution in carving out multiple exemptions that could undermine the 
purpose of drug management programs. Other commenters referred to the 
difficulty in identifying such beneficiaries to exempt them.

[[Page 16454]]

    Response: Based on the comments received, we are not persuaded that 
beneficiaries in assisted living facilities should be exempt from Part 
D drug management programs, because we do not believe that these 
facilities routinely dispense drugs to their residents through a 
contract with a single pharmacy, and therefore these beneficiaries 
could be identified by the clinical guidelines on this or another basis 
and be potentially at-risk. However, if a sponsor learned during case 
management that a beneficiary resides in an assisted living facility 
that does dispense drugs through a contract with a single pharmacy, 
then the sponsor must exempt such resident from its drug management 
program.
    In addition, we are persuaded that many exemptions for certain 
group of beneficiaries or ones that are crafted too broadly would risk 
undermining the purpose of drug management programs. Therefore, we 
decline to establish a separate exemption for assisted living facility 
residents. We note that several required features of Part D drug 
management programs, such as case management, multiple written 
beneficiary notices, the right to appeal and our general oversight, 
will serve as beneficiary safeguards should a Part D sponsor 
inappropriately limit a beneficiary's coverage to frequently abused 
drugs through a drug management program.
    Comment: A commenter questioned how a drug management program 
should handle at-risk beneficiaries who move in and out of an LTC 
facility.
    Response: An at-risk beneficiary who moves into an LTC facility 
becomes an individual exempted from a drug management program and a 
sponsor must remove such beneficiary from such program as soon as it 
reliably learns that the beneficiary has moved into an LTC facility, 
whether that be via the beneficiary, the facility, a pharmacy, a 
prescriber, or an internal or external report. A beneficiary who moves 
out of an LTC facility is no longer exempted unless he or she meets 
another prong of the finalized definition of exempted beneficiary.
    Comment: Several commenters suggested that an exemption for 
beneficiaries who are receiving non-hospice palliative and end-of-life 
care would be appropriate in light of the exemption for beneficiaries 
who have elected hospice care. A few of these commenters asserted that 
without an exemption in the regulation, beneficiaries could be included 
in a drug management program at a plan sponsor's discretion and 
experience restricted access to pain-control medication when they need 
them the most. Some commenters noted that the CDC Guideline exempts 
patients receiving palliative and end-of-life care. Others disagreed, 
asserting that we had put sufficient safeguards in place to protect 
such beneficiaries in drug management programs. Other commenters 
referred to the difficulty in identifying such beneficiaries in order 
to exempt them.
    Response: We are persuaded that beneficiaries who are receiving 
non-hospice palliative and end-of-life care but have not elected 
hospice should be exempted from Part D drug management programs. While 
we wish to exercise caution and thoughtfulness in establishing 
regulatory exemptions versus clinical guidelines/criteria, as we noted 
above, we agree based on the multiple comments that such beneficiaries 
should be treated the same as beneficiaries who have elected hospice 
care for purposes of drug management programs, as they are very similar 
in their health care status, if not their health benefit plan status. 
While we expect that Part D plan sponsors and PBMs would not 
inappropriately place such beneficiaries in their drug management 
programs, an actual regulatory exemption from drug management programs 
would be more definitive. Furthermore, adding these exemptions would 
align the drug management programs with the CDC Guideline, which was 
developed by experts and specifically provides recommendations for 
primary care clinicians who are prescribing opioids for chronic pain 
outside of active cancer treatment, palliative care, and end-of-life 
care. Therefore for consistency with the CDC Guideline, beneficiaries 
who are receiving non-hospice palliative and end-of-life care but who 
have not elected hospice will be exempted from Part D drug management 
programs as well.
    As discussed in the proposed rule, the data challenges to identify 
these Part D beneficiaries will still exist for CMS and we anticipate 
for Part D sponsors also. Therefore, we will explore options for 
refining OMS reporting in this regard, and sponsors will have to 
identify these exempted beneficiaries through the case management 
process.
    We also remind Part D sponsors that drugs and biologicals covered 
under the Medicare Part A per-diem payments to a Medicare hospice 
program are excluded from coverage under Part D. For a prescription 
drug to be covered under Part D for a beneficiary who has elected 
hospice, the drug must be for treatment unrelated to the terminal 
illness or related conditions. This is because drugs and biologicals 
covered under the Medicare Part A per-diem payments to a Medicare 
hospice program are excluded from coverage under Part D. Therefore, in 
2014,\10\ we strongly encouraged sponsors to place beneficiary-level PA 
requirements on only four categories of prescription drugs including 
analgesics. As a result, a small number of beneficiaries who elected 
hospice care have been identified and excluded from the current policy/
OMS.
---------------------------------------------------------------------------

    \10\ Please see the most recent CMS guidance, ``Update on Part D 
Payment Responsibility for Drugs for Beneficiaries Enrolled in 
Medicare Hospice'', issued on November 15, 2016.
---------------------------------------------------------------------------

    Comment: A few commenters requested clarification on the practical 
meaning of an exempted individual. Specifically, they asked if the 
beneficiary is exempted from only coverage limitations or from 
retrospective DUR processes. A commenter opposed our proposal that drug 
management programs would supersede the current policy in that 
beneficiary-specific edits would no longer be permitted on non-opioid 
medications. Another commenter requested clarification on the status of 
existing beneficiary-specific POS claim edits for opioids and 
benzodiazepines beginning January 1, 2019.
    Response: Exempted beneficiaries are exempted from Part D drug 
management programs. Also, because we are integrating the ``lock-in'' 
component of the drug management programs with the current policy, 
going forward, beneficiary-specific POS edits and lock-in for 
frequently abused drugs will be permitted only in compliance with Sec.  
423.153(f). However, as we noted earlier, the prescription drug 
management program requirements that we are finalizing in this rule do 
not affect plan sponsors' obligation to comply with other requirements 
pertaining to coverage or utilization management. Part D plan sponsors 
are still obligated to conduct other drug utilization review and 
management consistent with existing DUR requirements, which includes 
reviewing utilization for any Part D drug and may include implementing 
beneficiary-specific POS claim edits on drugs that are not frequently 
abused drugs, if necessary. However, we do not have specific guidance 
in this area, but we would expect the sponsor to employ the same level 
of diligence and documentation with respect to beneficiary-level POS 
claim edits for non-frequently abused drugs that we

[[Page 16455]]

require for drug management programs, consistent with current 
policy.\11\
---------------------------------------------------------------------------

    \11\ See ``Supplemental Guidance Related to Improving Drug 
Utilization Review Controls in Part D,'' dated September 6, 2012.
---------------------------------------------------------------------------

    In addition, beneficiaries for whom Part D sponsors have 
implemented beneficiary-specific POS claim edits for opioids and/or 
benzodiazepines before January 1, 2019 can continue to be subject to 
those edits under the current policy after December 31, 2018, which 
means that they may remain in place unless removed under the current 
policy. For example, as the result of a coverage determination or 
appeal.\12\ To the extent that such a beneficiary is reported through 
OMS on January 1, 2019 or later to a sponsor with a drug management 
program, that sponsor must comply with the requirements we are 
finalizing in this rule.
---------------------------------------------------------------------------

    \12\ Patient Safety Analysis Overutilization Monitoring System 
User Guide. January 2018.
---------------------------------------------------------------------------

    Comment: A commenter suggested that CMS develop a process by which 
additional categories of exempted individuals could be evaluated and 
added that are evidence-based and involve health care practitioners.
    Response: We will evaluate the implementation of the drug 
management programs. Based on this experience or new or emerging 
relevant health care information, we will consider proposing additional 
exemptions through rulemaking as necessary.
    Comment: A commenter asked how to handle retroactive notifications 
that would qualify a beneficiary for an exemption.
    Response: As we stated in a previous response with regard to 
beneficiaries who move into LTC facilities, a sponsor must remove an 
exempted beneficiary from a drug management program as soon as it 
reliably learns that the beneficiary is exempt, whether that be via the 
beneficiary, the facility, a pharmacy, a prescriber, or an internal or 
external report.
    Based on these comments, we are finalizing with modification the 
following definition for exempted beneficiary: An exempted beneficiary, 
with respect to a drug management program, will mean an enrollee who: 
(1) Has elected to receive hospice care or is receiving palliative or 
end-of-life care; (2) is a resident of a long-term care facility, of a 
facility described in section 1905(d) of the Act, or of another 
facility for which frequently abused drugs are dispensed for residents 
through a contract with a single pharmacy; or (3) is being treated for 
active cancer-related pain. Given this exemption, CMS will report 
potential at-risk beneficiaries who meet the minimum criteria of the 
clinical guidelines to sponsors through the OMS. Currently, we have the 
ability to exempt beneficiaries in LTC facilities, in hospice, and with 
active cancer-related pain. Sponsors may have more current data or 
obtain information through the case management and notification 
processes to further exempt beneficiaries, including those receiving 
palliative or end-of-life care.
(ii) Requirements of Drug Management Programs (Sec. Sec.  423.153, 
423.153(f))
    As noted previously, we proposed to codify a regulatory framework 
under which Part D plan sponsors may adopt drug management programs to 
address overutilization of frequently abused drugs. Therefore, we 
proposed to amend Sec.  423.153(a) by adding this sentence at the end: 
``A Part D plan sponsor may establish a drug management program for at-
risk beneficiaries enrolled in their prescription drug benefit plans to 
address overutilization of frequently abused drugs, as described in 
paragraph (f) of this section,'' in accordance with our authority under 
revised section 1860D-4(c)(5)(A) of the Act.
    We also proposed to revise Sec.  423.153 by adding a new paragraph 
(f) about drug management programs for which the introductory sentence 
will read: ``(f) Drug Management Programs. A drug management program 
must meet all the following requirements.'' Thus, the requirements that 
a Part D plan sponsor must meet to operate a drug management program 
will be codified in various provisions under Sec.  423.153(f).
    We received the following comments and our response follows:
    Comment: While CMS received many comments that were supportive of 
drug management programs as a whole, we did not receive comments 
specific to these provisions.
    Response: We are therefore finalizing as proposed.
(iii) Written Policies & Procedures (Sec.  423.153(f)(1))
    We proposed to require Part D sponsors document their programs in 
written policies and procedures that are approved by the applicable P&T 
committee and reviewed and updated as appropriate, which is consistent 
with the current policy. Also consistent with the current policy, we 
proposed to require that these policies and procedures address the 
appropriate credentials of the personnel conducting case management and 
the necessary and appropriate contents of files for case management. We 
additionally proposed to require sponsors to monitor information about 
incoming enrollees who will meet the definition of a potential at-risk 
and an at-risk beneficiary in proposed Sec.  423.100 and respond to 
requests from other sponsors for information about potential at-risk 
and at-risk beneficiaries who recently disenrolled from the sponsor's 
prescription drug benefit plans.
    To codify these requirements, we proposed the written policies and 
procedures specified at Sec.  423.153(f)(1) (see 82 FR 56510).
    We received the following comments and our response follows:
    Comment: We received a comment strongly supportive of the 
requirements in this provision.
    Response: We thank the commenter for the support.
    Comment: We received a few comments inquiring what credentials are 
needed for clinical staff who conduct case management. The commenters 
were concerned that the clinical staff conducting case management be 
adequately qualified to perform it in terms of education and training. 
These commenters stated that unqualified case managers could 
significantly detract from the benefit of Part D drug management 
programs.
    Response: We agree that the requirement that clinical staff conduct 
case management needs more detail. CMS expects that such clinical staff 
conducting case management as part of a Part D plan sponsor's drug 
management program would be a physician or other appropriate health 
care professional with sufficient expertise to conduct medical 
necessity reviews related to potential opioid overutilization. While we 
are not specifying particular credentials for clinical staff, in 
response to these comments, we are clarifying in the finalized version 
of Sec.  423.153(f)(1)(i) that clinical staff must have a current and 
unrestricted license to practice within the scope of his or her 
profession in a State, Territory, Commonwealth of the United States 
(that is, Puerto Rico), or the District of Columbia.
    Comment: We received several comments that a dentist should be 
required to be included on the case management team when a prescriber 
of frequently abused drugs is a dentist.
    Response: We decline to adopt this recommendation. We do not want 
to be overly prescriptive as to the specific background of licensed 
clinical staff conducting case management. We believe the plan should 
have some flexibility, beyond what is discussed in the preceding 
response and described in Sec.  423.153(f)(1)(i), to determine 
appropriate credentials of the clinical

[[Page 16456]]

staff conducting case management based on the facts and circumstances 
of the case.
    Comment: We received a question asking how prescriber agreement 
should be documented and shared with appropriate parties. We also 
received a few comments that a Part D sponsor must ensure that any 
records of contacts between the sponsors and prescribers under drug 
management programs must be easily accessible to at-risk beneficiaries 
who wish to appeal and that these records are easily able to be auto-
forwarded to the Independent Review Entity (IRE).
    Response: We agree that such information must be documented and 
available to appropriate parties including at-risk beneficiaries and 
the IRE, when applicable. To comply with Sec.  423.153(f)(1)(ii), 
sponsors must document contact with prescribers during case management, 
for example, if a prescriber agreed with the plan sponsor to implement 
a limit on the beneficiary's access to coverage for frequently abused 
drugs pursuant to Sec.  423.153(f)(4). Also, the sponsor must document 
if the beneficiary calls the sponsor to provide his or her pharmacy or 
prescriber preferences for lock-in. To make this clearer, we are adding 
language to Sec.  423.153(f)(1)(ii) such that the necessary and 
appropriate contents of files for case management must include 
documentation of the substance of prescriber and beneficiary contacts.
    Comment: We received a comment that we should require Part D plan 
sponsors' policies and procedures for clinical contact to include 
secure identity verification safeguards to protect prescribers from 
``phishing'' communications that attempt to trick prescribers into 
disclosing patient information.
    Response: We decline to make this a requirement specific to Part D 
drug management programs. We note that health care providers' offices 
and Part D sponsors are both covered entities under Health Insurance 
Portability and Accountability Act of 1996. We also encourage Part D 
sponsors to have written policies and procedures for their staff who 
contact providers to proactively identify themselves in a manner that 
should reasonably satisfy the providers of their identity and for 
providers to likewise have written practice policies and procedures to 
reasonably establish the identity of the staff of health benefit plans 
who contact them and do not proactively establish their identity.
    Given these comments and our responses, we are finalizing Sec.  
423.153(f)(1) with modification to include the changes regarding the 
licensure of the clinical staff conducting case management and the 
required documentation of the substance of prescriber and beneficiary 
contacts.
(iv) Case Management/Clinical Contact/Prescriber Verification (Sec.  
423.153(f)(2))
    To meet the requirements of section 1860D-4(c)(5)(C) and section 
1860D-4(c)(5)(B)(i)(II) of the Act, we proposed in a new Sec.  
423.153(f)(2) to require Part D sponsors' clinical staff to engage in 
case management for each potential at-risk beneficiary for the purpose 
of engaging in clinical contact with the prescribers of frequently 
abused drugs and verifying whether a potential at-risk beneficiary is 
an at-risk beneficiary. Specifically, we proposed that a new Sec.  
423.153(f)(2) would state that the sponsor's clinical staff must 
conduct case management for each potential at-risk beneficiary for the 
purpose of engaging in clinical contact with the prescribers of 
frequently abused drugs and verifying whether a potential at-risk 
beneficiary is an at-risk beneficiary. Proposed Sec.  423.153(f)(2)(i) 
would further state that, except as provided in paragraph (f)(2)(ii) of 
this section, the sponsor must do all of the following:
     Send written information to the beneficiary's prescribers 
that the beneficiary meets the clinical guidelines and is a potential 
at-risk beneficiary;
     Elicit information from the prescribers about any factors 
in the beneficiary's treatment that are relevant to a determination 
that the beneficiary is an at-risk beneficiary, including whether 
prescribed medications are appropriate for the beneficiary's medical 
conditions or the beneficiary is an exempted beneficiary; and
     In cases where the prescribers have not responded to the 
inquiry described in (f)(2)(i)(B), make reasonable attempts to 
communicate telephonically with the prescribers within a reasonable 
period after sending the written information.
    We proposed to add paragraph (ii) to Sec.  423.153(f)(2) that would 
specify that the exception would be for identification by prior plan. 
If a beneficiary was identified as a potential at-risk or an at-risk 
beneficiary by his or her most recent prior plan, and such 
identification has not been terminated in accordance with paragraph 
(f)(14) of this section, the sponsor meets the requirements in 
paragraph (f)(2)(i) of this section, so long as the sponsor obtains 
case management information from the previous sponsor and such 
information is still clinically adequate and up to date. This proposal 
is to avoid unnecessary burden on health care providers when additional 
case management outreach is not necessary because it has already been 
performed by a prior Part D sponsors for the beneficiary. We discuss 
potential at-risk and at-risk beneficiaries who change plans again 
later in this preamble.
    The information that the plan sends to the prescribers and elicits 
from them is intended to assist a Part D sponsor to understand why the 
beneficiary meets the clinical guidelines and if a limitation on access 
to coverage for frequently abuse drugs is warranted for the safety of 
the beneficiary. Also, sponsors will use this information to choose 
standardized responses in OMS and provide information to MARx about any 
plan coverage limitations that the sponsors implement. We will address 
required reporting to OMS and MARx by sponsors again later.
    Our proposed Sec.  423.153(f)(2) used the terms ``reasonable 
attempts'' and ``reasonable period'' rather than specify a required 
number of attempts or a specific timeframe for plan sponsor to call 
prescribers. We explained that this was due to the competing priorities 
of sponsors' diligently addressing opioid overutilization in the Part D 
program through case management, which may necessitate telephone calls 
to the prescribers, while being cognizant of the need to be judicious 
in contacting prescribers telephonically in order to not unnecessarily 
disrupt their practices. We further stated that we wished to leave 
flexibility in the regulation text for sponsors to balance these 
priorities on a case-by-case basis in their drug management programs. 
However, we note that we proposed a 3 attempts/10 business days 
requirement for sponsors to conclude that a prescriber is unresponsive 
to case management in Sec.  423.153(f)(4) discussed later in this 
section.
    We received the following comments and our response follows:
    Comment: We received a comment requesting that a plan sponsor be 
able to communicate to CMS if no prescriber will verify that the 
beneficiary is at-risk.
    Response: We plan to expand and modify OMS and the MARx system to 
accommodate the CARA drug management program provisions we are 
finalizing here. We will issue additional guidance and technical 
instructions as needed.
    Comment: We received a comment asking that we recommend that Part D 
sponsors encourage prescribers during case management to discuss drug 
management programs with their patients. We also received a request 
that we issue guidance to plan sponsors directing them to encourage 
prescribers, as part of the required clinical contact,

[[Page 16457]]

to perform a comprehensive substance abuse disorder screening and/or 
assessment of the patient deemed to be a potential at-risk beneficiary, 
and if indicated, refer him or her for follow-up treatment with a pain 
specialist or addiction treatment provider.
    Response: We encourage Part D plan sponsors to undertake both of 
these suggestions, but decline to require it at this time, as we 
believe prescribers, in their professional discretion by and large will 
undertake appropriate adjusted treatment plans with their patients and/
or MA-PDs will negotiate such issues with their network providers. We 
also remind commenters that not all Part D prescription drug plans have 
network providers.
    Comment: We received some comments that Part D sponsors should not 
be permitted to telephone prescribers in order to avoid disrupting 
their practices.
    Response: We decline to adopt this suggestion. The clinical 
guidelines identify beneficiaries who are potentially at-risk for a 
serious adverse health event, including death, due to their opioid use 
and apparent lack of coordinated care. The requirements we are 
finalizing permit sponsors to escalate the steps they take during case 
management to engage in clinical contact with the beneficiary's 
prescribers of frequently abused drugs. We would expect such 
prescribers to understand such sponsors' attempts to make them aware of 
important information in this regard that they likely do not know.
    Comment: We received a comment that integrated delivery systems use 
communication tools other than telephone calls to escalate matters to 
prescribers and that CMS should allow such systems to use such tools 
instead.
    Response: Our intent is for Part D sponsors to use the most 
effective means designed to elicit a prescriber response to case 
management. Therefore, based on this comment, we are modifying the 
regulatory language in Sec.  423.153(f)(2)(i)(C).
    Comment: We received a question whether a gaining sponsor must 
immediately lock-in a new enrollee if the sponsor receives notice from 
the losing sponsor that the enrollee was locked-in by the losing 
sponsor.
    Response: No. Part D sponsors are responsible for their own drug 
management programs. As such, a gaining sponsor is not required to but 
may do so under certain circumstances as we discuss later in this 
preamble. Also, we note that with respect to at-risk beneficiaries that 
are new to a plan, sponsors that do not take any action should be aware 
that such beneficiaries may later be reported through OMS if they meet 
the clinical guidelines. Also, we note that pursuant to Sec.  
423.153(f)(2)(i), the sponsor must conduct case management for every 
potential at-risk beneficiary, unless an exception applies.
    After considering these comments, we are finalizing the proposed 
language in Sec.  423.153(f)(2) with the modification described.
(v) Limitations on Access to Coverage for Frequently Abused Drugs 
(Sec.  423.153(f)(3))
    We proposed to describe all the tools that will be available to 
sponsors to limit an at-risk beneficiary's access to coverage for 
frequently abused drugs under a drug management program in Sec.  
423.153(f)(3). Our proposal specified that subject to the requirements 
of paragraph (f)(4) of this section, a Part D plan sponsor may do all 
of the following:
     Implement a point-of-sale claim edit for frequently abused 
drugs that is specific to an at-risk beneficiary.
     In accordance with paragraphs (f)(10) and (f)(11) of this 
section, limit an at-risk beneficiary's access to coverage for 
frequently abused drugs to those that are--
    ++ Prescribed for the beneficiary by one or more prescribers;
    ++ Dispensed to the beneficiary by one or more network pharmacies; 
or
    ++ Specified in both paragraphs (f)(3)(ii)(B)(1) and (2) of this 
section.
    Paragraph (iii)(A) will state that if the sponsor implements an 
edit as specified in paragraph (f)(3)(i) of this section, the sponsor 
must not cover frequently abused drugs for the beneficiary in excess of 
the edit, unless the edit is terminated or revised based on a 
subsequent determination, including a successful appeal. Paragraph 
(iii)(B) will state that if the sponsor limits the at-risk 
beneficiary's access to coverage as specified in paragraph (f)(3)(ii) 
of this section, the sponsor must cover frequently abused drugs for the 
beneficiary only when they are obtained from the selected pharmacy(ies) 
and/or prescriber(s), or both, as applicable, (1) in accordance with 
all other coverage requirements of the beneficiary's prescription drug 
benefit plan, unless the limit is terminated or revised based on a 
subsequent determination, including a successful appeal, and (2) except 
as necessary to provide reasonable access in accordance with paragraph 
(f)(12) of this section.
    We received the following comments and our response follows:
    Comment: We received a question whether a Part D sponsor, under a 
drug management program, may implement a combination of a beneficiary-
specific POS claim edit, prescriber and/or pharmacy lock-in for 
frequently abused drugs, and whether these limitations may be 
implemented at different times. Another comment recommended that plan 
sponsors be permitted to establish a prescriber lock-in concurrently 
with a beneficiary-specific POS claim edit and not require the plan to 
contact the prescribers separately for each limitation.
    Response: We acknowledge that there may be cases where a plan may 
impose one or more coverage limitations for frequently abused drugs 
simultaneously on an at-risk beneficiary, and at a later time, add new 
limitations and/or terminate existing ones. Thus, a plan sponsor may 
choose to implement multiple limitations on access to coverage for 
frequently abused drugs for an at-risk beneficiary at one time.
    For instance, after case management, a plan sponsor may decide to 
pursue implementation of a POS claim edit, prescriber lock-in, and 
pharmacy lock-in for an at-risk beneficiary simultaneously because of 
the circumstances of the particular case. In this instance, prescriber 
agreement would be necessary to implement the POS edit and the 
prescriber lock-in.
    A plan sponsor may also implement additional coverage limitations 
over time (for example, start with a beneficiary-level POS edit, 
subsequently add a prescriber lock-in, and subsequently add a pharmacy 
lock-in) because the case has not resolved itself as expected after 
initial case management. We remind plan sponsors that when implementing 
additional coverage limitations, the plan sponsor must repeat the case 
management process including prescriber verification, prescriber 
agreement, if applicable, and notice requirements for each additional 
limitation, and that such actions would also confer a new 60 day appeal 
timeframe. We discuss this scenario further in the appeal section of 
this preamble.
    Furthermore, a plan sponsor might also terminate existing 
limitations on access to coverage over time (for example, an at-risk 
beneficiary may have a POS edit and pharmacy lock-in and the plan 
sponsor terminates the pharmacy lock-in and leaves in place the POS 
edit).
    While we are allowing plan sponsors to make such additions/
terminations to limitations to access to coverage for frequently abused 
drugs for an at-risk beneficiary, we recognize that such

[[Page 16458]]

changes might be disruptive and/or confusing for the beneficiary, and 
thus strongly discourage plans from making frequent changes to such 
limitations for a particular at-risk beneficiary. To minimize such 
disruption and ensure such actions are taken in the manner contemplated 
by the statute, we have added a provision at Sec.  423.153(f)(5)(iv) to 
the regulation text which specifies that, if a plan intends to make 
changes to the limitations imposed on a beneficiary under their drug 
management program after the beneficiary has been identified as at-
risk, the plan sponsor is required to provide the beneficiary notices 
under the rules established at Sec.  423.153(f)(5) through (f)(8) and 
discussed later in this preamble. Additionally, we will closely monitor 
information submitted by sponsors to CMS in OMS and MARx and complaint 
data to make sure plans are not inappropriately disrupting beneficiary 
access to coverage for frequently abused drugs by making frequent 
changes to the limitations on access to coverage. While we are not 
currently imposing limitations on how many times the plan can make such 
changes, we will re-evaluate this policy in the future if it becomes 
problematic.
    In response to this comment, we are finalizing this provision as 
proposed, except we are modifying Sec.  423.153(f)(3) to state a Part D 
plan sponsor may do ``any or all of the following,'' and Sec.  
423.153(f)(3)(ii)(C) to simply state ``both.'' This will make clearer 
that read as a whole, Sec.  423.153(f)(3) means that a Part D sponsor 
may use the tool of a beneficiary-specific point-of-sale edit, or 
prescriber or pharmacy lock-in, or any combination of these three tools 
to limit an at-risk beneficiary's access to coverage of frequently 
abused drugs under its drug management program.
(vi) Requirements for Limiting Access to Coverage for Frequently Abused 
Drugs (Sec.  423.153(f)(4))
    We proposed in Sec.  423.153(f)(4) that before a Part D plan 
sponsor could limit the access of at-risk beneficiary to coverage for 
frequently abused drugs, the sponsor would first be required to take 
certain actions. We proposed in paragraph Sec.  423.153(f)(4)(i)(A) 
that a sponsor would be required to conduct the case management 
discussed earlier, which includes clinical contact to determine whether 
prescribed medications are appropriate for the potential at-risk 
beneficiary's medical conditions that is required by section 1860D-
4(c)(5)(C)(iv) of the Act and prescriber verification that the 
beneficiary is an at-risk beneficiary in accordance with Section 1860D-
4(c)(5)(B)(i)(II).
    We also proposed in paragraph Sec.  423.153(f)(4)(i)(B) that the 
sponsor would be required to obtain the agreement of the prescribers of 
frequently abused drugs with the limitation, unless the prescribers 
were not responsive to the required case management. We invited 
stakeholders to comment on not requiring prescriber agreement to 
implement pharmacy lock-in.
    We further proposed in paragraph Sec.  423.153(f)(4)(i)(C) that the 
sponsor must first provide notices that complied with Sec.  
423.153(f)(5) and (f)(6) to the beneficiary in accordance with section 
1860D-4(c)(5)(B)(i)(I) of the Act. We additionally proposed in 
paragraph Sec.  423.153(f)(4)(ii) that a sponsor has complied with the 
requirement in Sec.  423.153(f)(2)(i)(C) to make reasonable attempts to 
communicate telephonically with prescribers with a reasonable period if 
the prescribers were not responsive after 3 attempts to contact them 
within 10 business days. Finally, we proposed language in Sec.  
423.153(f)(4)(ii) that would provide an exception to the case 
management requirement in Sec.  423.153(f)(2) in cases when a potential 
or an at-risk beneficiary was identified as such by the beneficiary's 
most recent prior prescription drug benefit plan and the sponsor had 
obtained the case management information from the sponsor and updated 
it as appropriate. We discussed such cases elsewhere in this section. 
We also discuss proposed Sec.  423.153(f)(4)(iv) that would have 
imposed a 6-month delay before a sponsor could implement prescriber 
lock-in later in this preamble.
    We received the following comments and our responses follow:
    Comment: A commenter suggested that we allow a coverage limitation 
to be put in place through a drug management program if a prescriber 
requests one to assist in coordinating the care for his or her patient.
    Response: If the beneficiary meets the clinical guidelines/OMS 
criteria we are finalizing, and a prescriber requests during case 
management that a coverage limitation be implemented for the 
beneficiary, the sponsor may implement it in accordance with the 
requirements we are finalizing for drug management programs in this 
rule.
    Comment: Many commenters stated that Part D sponsors should not 
have to seek prescriber agreement to limit at-risk beneficiaries to a 
pharmacy(ies) for access to coverage for frequently abused drugs. These 
commenters argued that requiring prescriber agreement for pharmacy 
lock-in would create additional administrative burden and 
inefficiencies and thus prevent drug management programs from 
responding in a timely fashion to potentially dangerous overutilization 
of frequently abused drugs. These commenters also argued that sponsors 
of stand-alone Part D plans do not have contracts with most of the 
prescribers and, therefore, have limited opportunity to have clinical 
contact with these prescribers. Moreover, many commenters felt it was 
not appropriate to require that the prescriber agree to pharmacy lock-
in when the pharmacy is not required to agree when a sponsor applies 
prescriber lock-in to an at-risk beneficiary.
    Other commenters supported our proposal to require prescriber 
agreement for pharmacy lock-in. These commenters argued that provider 
discretion and clinical judgment is appropriate to prevent pharmacy 
lock-in from being implemented by Part D sponsors inappropriately and 
impeding legitimate patient access.
    Response: CMS was persuaded by commenters' rationale that requiring 
prescriber agreement for pharmacy lock-in could undermine one purpose 
of drug management programs, which is to promptly address potentially 
dangerous overutilization of frequently abused drugs. While we 
recognize that prescriber agreement is an essential component of 
prescriber lock-in, and prescriber agreement is preferred in the case 
of a beneficiary-specific claim edit for frequently abused drugs, we 
are now persuaded that prescriber agreement to pharmacy lock-in is not 
essential, as pharmacy lock-in is primarily about where the drugs are 
dispensed and not who wrote the prescription or its dosage. Therefore, 
we are finalizing this provision with this modification. Plan sponsors 
will not be required to obtain the agreement of the prescribers of 
frequently abused drugs to implement a pharmacy lock-in. However, we do 
note that should a prescriber proactively alert the plan sponsor that 
they do not believe that pharmacy lock-in is appropriate for a 
particular at-risk beneficiary, we expect the plan sponsor to take such 
information into consideration.
    On the point of prescriber agreement, we also wish to note that it 
was unclear in some of the statements if the commenters understood that 
section 1860D-4(c)(5)(C)(iv) and Section 1860D-4(c)(5)(B)(i)(II) of the 
Act require, respectively, that a Part D sponsor engage in clinical 
contact with prescribers regarding whether medications are appropriate 
for a beneficiary's medical condition and to

[[Page 16459]]

verify that a beneficiary is at-risk before limiting access to coverage 
for frequently abused drugs. Thus, eliminating the need to obtain 
prescriber agreement to a pharmacy lock-in does not eliminate the 
requirement to comply with Sec.  423.153(f)(2) and (f)(4)(i)(A) with 
respect to pharmacy lock-in.
    Comment: Several commenters asked CMS to provide additional details 
about what options Part D plan sponsors would have if a prescriber does 
not agree to a pharmacy lock-in.
    Response: As mentioned above, we are not finalizing the proposal 
that sponsors must receive prescriber agreement before placing an at-
risk beneficiary in pharmacy lock-in.
    Comment: In general, commenters supported our proposal that a Part 
D sponsor would have to obtain prescriber agreement before implementing 
prescriber lock-in or a beneficiary-specific claim edit at POS for 
frequently abused drugs to limit an at-risk beneficiary's access to 
coverage for frequently abused drugs, in cases when a prescriber is 
responsive to case management. These commenters maintained that the 
prescribers are in the best position to understand the beneficiary's 
background and know additional relevant considerations.
    However, many commenters voiced their recommendation that the Part 
D sponsor be able to implement prescriber lock-in without obtaining 
agreement from all prescribers. Several commenters expressed that it 
would be difficult to get all prescribers to agree to any limitation, 
and suggested that as long as at least one prescriber of frequently 
abused drugs agreed to the limitation, sponsors should be able to 
proceed with a prescriber lock-in. Commenters suggested that plan 
sponsors will have already coordinated with the prescribers during case 
management, at which time the sponsor will have confirmed the 
appropriateness of the medication and verified with a prescriber that 
the beneficiary is at risk. Thus, these commenters further suggested 
that obtaining formal approval of the lock-in will only serve to delay 
initiating the lock-in.
    Commenters also raised the point that a given prescriber may be 
contributing to the overutilization, in which case his or her approval 
may not be obtained and requested clarification how a sponsor should 
act in a beneficiary's best interest if prescribers disagree with each 
other about the implementation of a claim edit or lock-in. Some 
commenters recommended that CMS require approval only from the primary 
prescriber of frequently abused drugs, as determined by case 
management.
    Response: We agree that in order for drug management programs to 
operate effectively, and prevent the resource-intensive process of 
obtaining agreement from multiple prescribers, a Part D sponsor should 
not have to obtain the agreement to prescriber lock-in of all the at-
risk beneficiary's prescribers of frequently abused drugs. Therefore, 
we are changing the language of Sec.  423.153(f)(4)(i)(B) to refer to 
at least one prescriber, which means that only one prescriber has to 
agree to prescriber lock-in or a beneficiary-specific POS edit.
    In addition, we believe the language of Sec.  423.153(f)(4)(ii)(B) 
needs to be clearer that prescribers must be responsive in the case of 
a prescriber lock-in, meaning that non-responsive prescribers cannot 
constitute agreement as they can in the case of a beneficiary-specific 
POS edit. Therefore, we are finalizing the Sec.  423.153(f)(4) with 
this modification in paragraph (ii)(A) and a new (B).
    Comment: We received a comment suggesting that a better approach to 
prescriber agreement would be for at-risk beneficiaries to identify a 
primary prescriber to help drug management and increase beneficiary 
safety.
    Response: As noted above, we have modified our proposal and are 
finalizing that all prescribers do not have to agree to prescriber 
lock-in in order for a plan to implement prescriber lock-in for an at-
risk beneficiary; rather, at least one prescriber has to agree. 
However, we believe that the prescriber who agrees to prescriber lock-
in for a beneficiary should be identified through the plan sponsor as a 
result of case management, and not the at-risk beneficiary. There may 
be a conflict of interest in having an at-risk beneficiary select whom 
they consider to be their ``primary'' prescriber for purposes of 
prescriber agreement, given they might be motivated to select a 
``primary'' prescriber that they feel would not agree to prescriber 
lock-in, such that they can continue receiving inappropriate amounts of 
frequently abused drugs. We reiterate that the requirement that at 
least one prescriber agree is for agreement to lock-in is different 
from the beneficiary's preferences for the prescriber to which they 
will be locked into, which we discuss later in this preamble.
    Comment: We received comments that a prescriber should be able to 
agree, disagree or neither agree nor disagree with a limitation on a 
beneficiary's access to coverage for frequently abused drugs.
    Response: A prescriber is of course free to have any of these 
reactions to case management. A plan sponsor cannot implement 
prescriber lock-in for the beneficiary, unless at least one prescriber 
agrees to prescriber lock-in, as discussed earlier. Typically, we would 
expect the one prescriber to agree to prescriber lock-in and agree to 
serve as the prescriber. A sponsor cannot lock-in a beneficiary to a 
prescriber who disagrees, unless the prescriber changes their mind, 
which must be documented in the case file.
    We foresee a situation when a prescriber initially disagrees with 
prescriber lock-in and asserts that he or she must be able to continue 
to prescribe frequently abused drugs for the beneficiary. In such a 
case, if another prescriber has agreed to serve as the prescriber to 
which the beneficiary is locked into, a plan sponsor may need to again 
ask the first prescriber if he or she would agree to be a prescriber 
the beneficiary is locked into, and the beneficiary is ultimately 
locked into two prescribers to ensure reasonable access pursuant to 
Sec.  423.153(f)(12), which we discuss further below. This could 
happen, for example, when a beneficiary has been obtaining opioids from 
multiple prescribers and benzodiazepines from one psychiatrist. A 
sponsor may have to permit an at-risk beneficiary to obtain opioids 
from the prescriber who agreed to the lock-in limitation and 
benzodiazepines from the psychiatrist, who initially did not agree to 
prescriber lock-in, but ultimately does agree to serve that beneficiary 
in a lock-in capacity.
    With respect to a beneficiary-specific POS claim edit for 
frequently abused drugs, however, a plan sponsor may not implement one 
at a dosage that is lower than the highest dosage a prescriber asserts 
is medically necessary, which is consistent with our current 
policy.\13\
---------------------------------------------------------------------------

    \13\ Supplemental Guidance Related to Improving Drug Utilization 
Review Controls in Part D, September 6, 2012.
---------------------------------------------------------------------------

    If a prescriber neither agrees nor disagrees with a limitation on 
access to coverage for frequently abused drugs, such a prescriber may 
be considered by the sponsor to be non-responsive, and an at-risk 
beneficiary could not be locked into that prescriber.
    Comment: We received a comment suggesting that 30 days be the time 
period during which a Part D sponsors must attempt to reach an 
unresponsive prescriber.
    Response: We believe 30 days is too long considering that drug 
management programs involve frequently abused drugs and multiple 
prescribers and

[[Page 16460]]

pharmacies; that the clinical guidelines identify beneficiaries who are 
at potentially at high risk for an adverse health event due to the 
amount of such drugs they are taking; and that there is an apparent 
lack of coordinated care.
    Comment: We received a comment that a sponsor should only be 
required to attempt to reach a prescriber twice in 10 business days 
rather than 3 times in order to establish that the prescriber is 
unresponsive.
    Response: We decline to make this change as this is our current 
policy and we received minimal comment on this proposed requirement. 
The purpose of the policy is to ensure that sponsors have diligently 
tried to involve prescribers in the case management process.
    We wish to note that we believe the language we proposed in Sec.  
423.153(f)(4)(iii) which provides an exception to case management is 
duplicative of the language we discussed above that we are finalizing 
in Sec.  423.153(f)(2)(ii). Therefore, we are deleting the language in 
Sec.  423.153(f)(4)(iii).
    Given the foregoing, we are finalizing Sec.  423.153(f)(4) with 
modification, including ones to assist the reader in more easily 
understanding the cross-references.
    We will also state in paragraph (ii)(A) that, except as provided in 
paragraph (ii)(B) which regards a prescriber limitation, if the sponsor 
complied with the requirement of paragraph (f)(2)(i)(C) of this section 
about attempts to reach prescribers, and the prescribers were not 
responsive after 3 attempts by the sponsor to contact them within 10 
business days, then the sponsor has met the requirement of paragraph 
(f)(4)(i)(B) of this section which regards eliciting information from 
the prescribers. Paragraph (i)(B) will state that the sponsor may not 
implement a prescriber limitation pursuant to Sec.  
423.153(f)(3)(ii)(A) if no prescriber was responsive.
(vii) Beneficiary Notices and Limitation of Special Enrollment Period 
(Sec. Sec.  423.153(f)(5), 423.153(f)(6), 423.153(f)(7), 423.153(f)(8), 
423.38)
(A) Initial Notice to Beneficiary and Sponsor Intent To Implement 
Limitation on Access to Coverage for Frequently Abused Drugs (Sec.  
423.153(f)(5))
    The notices referred to in proposed Sec.  423.153(f)(4)(i)(C) are 
the initial and second notice that section 1860D-4(c)(5)(B)(i)(I) of 
the Act requires Part D sponsors to send to potential at-risk and at-
risk beneficiaries regarding their drug management programs.
    We proposed in Sec.  423.153(f)(5) that if a Part D plan sponsor 
intends to limit the access of a potential at-risk beneficiary to 
coverage for frequently abused drugs, the sponsor will be required to 
provide an initial written notice to the potential at-risk beneficiary. 
We also proposed that the language be approved by the Secretary and be 
in a readable and understandable form that contains the language 
required by section 1860D-4(c)(5)(B)(ii) of the Act, as well as 
additional detail specified in the proposed regulation text.
    In proposed paragraph (f)(5)(ii)(C)(2)--which will require a 
description of public health resources that are designed to address 
prescription drug abuse--we proposed to require that the notice contain 
information on how to access such services. We also included a 
reference in proposed paragraph (ii)(C)(4) to the fact that a 
beneficiary will have 30 days to provide information to the sponsor, 
which is a timeframe we discuss later in this preamble. We proposed an 
additional requirement in paragraph (ii)(C)(5) that the sponsor include 
the limitation the sponsor intends to place on the beneficiary's access 
to coverage for frequently abused drugs, the timeframe for the 
sponsor's decision, and, if applicable, any limitation on the 
availability of the SEP. Finally, we proposed a requirement in 
paragraph (ii)(C)(8) that the notice contain other content that CMS 
determines is necessary for the beneficiary to understand the 
information required in the initial notice.
    We noted that our proposed implementation of the statutory 
requirements for the initial notice will permit the notice also to be 
used when the sponsor intends to implement a beneficiary-specific POS 
claim edit for frequently abused drugs.
    Although section 1860D-4(c)(5) is silent as to the sequence of the 
steps of clinical contact, prescriber verification, and the initial 
notice, we proposed to implement these requirements such that they will 
occur in the following order: first, the plan sponsor will conduct the 
case management which encompasses clinical contact and prescriber 
verification required by Sec.  423.153(f)(2) and obtain prescriber 
agreement if required by Sec.  423.153(f)(4), and subsequently, if 
applicable, the plan sponsor will provide the initial notice indicating 
the sponsor's intent to limit the beneficiary's access to frequently 
abused drugs. Further, under our proposal, although the proposed 
regulatory text of (f)(4)(i) states that the sponsor must verify with 
the prescriber(s) that the beneficiary is an at-risk beneficiary in 
accordance with the applicable statutory language, the beneficiary will 
still be a potential at-risk beneficiary from the sponsor's perspective 
when the sponsor provides the beneficiary the initial notice. This is 
because the sponsor has yet to solicit information from the beneficiary 
about his or her use of frequently abused drugs, and such information 
may have a bearing on whether a sponsor identifies a potential at-risk 
beneficiary as an at-risk beneficiary.
    Moreover, we proposed that a sponsor should not send a potential 
at-risk beneficiary an initial notice until after the sponsor has been 
in contact with the beneficiary's prescribers of frequently abused 
drugs as part of case management, so as to avoid unnecessarily alarming 
the beneficiary. This is because the result of case management may be 
that the sponsors takes a ``wait and see'' approach to observe if the 
prescribers adjust their management of, and opioid prescriptions they 
are writing for, the beneficiary. We noted that while this approach is 
acceptable, we still expect sponsors to address the most egregious 
cases of apparent opioid overutilization without unreasonable delay.
    Under our proposed approach, a sponsor will provide an initial 
notice to a potential at-risk beneficiary if the sponsor intends to 
limit the beneficiary's access to coverage for frequently abused drugs, 
and the sponsor will provide a second notice to an at-risk beneficiary 
when it actually imposes a limit on the beneficiary's access to 
coverage for frequently abused drugs. Alternatively, the sponsor will 
provide an alternate second notice if it decides not to limit the 
beneficiary's access to coverage for frequently abused drugs. The 
second notice and alternate second notice are discussed later in this 
final rule.
    Finally, we proposed to require at Sec.  423.153(f)(5)(iii) that 
the Part D plan sponsor make reasonable efforts to provide the 
beneficiary's prescriber(s) of frequently abused drugs with a copy of 
the notice required under paragraph (f)(5)(i).
    We received the following comments related to the initial notice, 
and general comments applicable to all the proposed notices, and our 
responses follow:
    Comment: We received many comments related to our proposal to 
require written beneficiary notice both when a plan identifies the 
beneficiary as potentially at risk for prescription drug abuse, and 
again when the plan determines the beneficiary is at risk and 
implements a beneficiary-level POS edit

[[Page 16461]]

and/or a pharmacy or prescriber lock-in for frequently abused drugs. 
Some commenters disagreed with our proposal to require two notices, 
stating that a second notice would be unnecessary, confusing, or overly 
burdensome.
    Several other commenters strongly supported our proposal to require 
the two notifications, including the proposed change to the existing 
OMS process that would require the initial and second notices before a 
plan imposes a beneficiary-specific edit at POS. Commenters stated that 
requiring multiple notices will increase the likelihood that affected 
beneficiaries will be notified of their status and aware of how they 
could dispute it. A commenter wanted CMS to require more than two 
notices, because CMS did not propose to require acknowledgement of 
receipt from the beneficiary.
    Response: We thank those commenters who agreed with our proposals 
to require two notices and to integrate existing OMS process into a 
uniform process for all drug management program restrictions. While we 
appreciate the concerns expressed by commenters who do not agree with 
our proposal, as we noted in the proposed rule, the statute at Sec.  
1860D-4(c)(5)(B) clearly requires written beneficiary notification both 
upon identification as a potential at-risk beneficiary and again when 
the plan determines the beneficiary is at risk. We do not agree that 
additional notices beyond what we proposed should be required, as it 
would be overly burdensome on plans and provide little value to 
beneficiaries.
    Comment: Several commenters asked if stakeholders will have an 
opportunity to comment on the beneficiary notices and for more 
information on whether they can be modified by plans and when they will 
be released. A commenter requested that CMS conduct focus-group testing 
with beneficiaries to ensure the notice is understandable.
    Response: As discussed in section III.B.14 of this final rule, 
these notices are subject to approval by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 
et seq.). The notices will be posted in the Federal Register to give 
stakeholders an opportunity to review and comment before final versions 
of the notices are posted. CMS will consider testing through 
beneficiary focus groups, time permitting. The notices and accompanying 
instructions will contain detailed information about permissible 
modifications by plans. CMS intends to release the notices with 
sufficient time for plan sponsors to implement them into their drug 
management programs.
    Comment: We received some comments related to requirements to 
translate these beneficiary notices. Some of the commenters stated that 
these notices should be designated to be among materials subject to 
translation requirements in proposed Sec. Sec.  422.2268 and 423.2268. 
A commenter asked for clarification on whether plans are required to 
include section 1557 taglines with these notices.
    Response: While CMS is still developing instructions related to 
translation requirements to provide guidance on the requirements at 
Sec. Sec.  422.2268 and 423.2268, we note that, 423.128(d)(1)(iii) 
requires Part D plan sponsors' call centers to have interpreter 
services available to call center personnel to answer questions from 
limited-English proficient beneficiaries. These obligations are based 
on Medicare regulations and other civil rights laws, such as Title VI 
of the Civil Rights Act of 1964, that apply to Medicare health and drug 
plans. Applicability of Section 1557, and the scope of requirements for 
access for limited English proficient beneficiaries, and what is a 
significant communication are determined by the Office for Civil Rights 
(OCR).
    Comment: A commenter urged CMS to consider implementing additional 
requirements for beneficiary notification, including establishing 
requirements stipulating information that must be written on envelopes 
containing written notices, adding requirements for telephonic or email 
notification in addition to written notices, and requirements for 
prescribers to contact beneficiaries to confirm receipt of the required 
notices.
    Response: We agree with the commenter that detailed beneficiary 
notification is important, both upon identification as a potential at-
risk beneficiary and again either confirming the at-risk identification 
or that the plan has determined the beneficiary is not at-risk. 
However, we disagree with this commenter that additional notice 
requirements are necessary or advisable. We believe it would be overly 
burdensome to require plans to include specific information on the 
outside of mailing envelopes and there is no such precedent for similar 
beneficiary notices in the Part D program, such as notices of coverage 
denials or transition letters. While CMS expects that prescribers of 
frequently abused drugs will communicate regularly with their patients, 
we do not believe it is necessary to require prescribers to confirm 
that beneficiaries received the required plan notices. Finally, we note 
that, while CMS does not require telephonic or email notification in 
addition to the required written notices, plans are not precluded from 
doing so.
    Comment: A commenter asked why CMS proposed to require that the 
initial notice contain contact information for other organizations that 
can provide assistance to beneficiaries regarding the sponsor's drug 
management program.
    Response: Such information is statutorily required under Sec.  
1860D-4(c)(5)(B)(ii)(VII) to be included in the initial notice. As 
specified in the statute, it should be similar to the information 
provided in other standardized Part D beneficiary notices. We expect 
the notice may include, for example, contact information for the 
enrollee's State Health Insurance Program (SHIP), 1-800-MEDICARE, the 
Medicare Rights Center, and/or other organizations as appropriate.
    Comment: We received some comments that supported our proposal to 
require plan sponsors to make reasonable efforts to provide copies of 
notices to the potentially at-risk and at-risk beneficiary's 
prescriber(s).
    Response: We thank these commenters for their support.
    Comment: A few commenters opined that Part D plan sponsors and 
third party administrators do not have access to a list of all State 
and Federal public health resources designed to address prescription 
drug abuse. These commenters stated that requiring plans operating in 
multiple states to compile such a list would be overly burdensome, and 
requested that CMS provide templates containing such information as 
required under proposed Sec.  423.153(f)(5)(ii)(C)(2). Another 
commenter asked if MA-PD plans will be allowed to include information 
about plan-specific mental health benefits in addition to State and 
Federal resources.
    Response: CMS appreciates the input provided by these commenters. 
While the notice templates and instructions are still under 
development, CMS expects to provide information on Federal and State 
public health resources to assist plans in meeting the statutory 
requirement at Sec.  1860D-4(c)(5)(B)(ii)(II) to include such 
information in the initial notice. Under the existing regulations at 
Sec.  423.505(i), Part D plan sponsors are ultimately responsible for 
adhering to all terms and conditions of their contract with CMS, 
including compliance with all Federal laws, regulations and CMS 
instructions related to activities or responsibilities delegated to a 
third party. Pursuant to the regulation at Sec.  
423.153(f)(5)(ii)(C)(2), which we are finalizing as proposed, plans 
will be also required to include

[[Page 16462]]

information about relevant benefits and services covered by the plan, 
such as medical, mental health and MAT benefits.
    Comment: Some commenters stated that CMS should specify in 
regulation text that initial notices must not be sent to potential at-
risk beneficiaries until the plan has communicated with and received 
clinical information from the beneficiary's prescribers. These 
commenters noted that failure to conduct case management prior to 
sending the initial notice would interfere with doctor-patient 
relationships and unnecessarily alarm beneficiaries who may be 
determined not to be at-risk.
    Response: We agree with these commenters that initial notices 
should not be sent to beneficiaries before the plan has engaged in case 
management and attempted to communicate with the beneficiary's 
prescriber(s), and this is specified in the regulation text at Sec.  
423.153(f)(2)(i). However, we know from experience with the OMS process 
that prescribers are not always responsive to the plan's attempts to 
make clinical contact; therefore, we proposed at Sec.  
423.153(f)(2)(i)(C) that plans must make additional attempts to contact 
such prescribers. Additionally, we proposed at Sec.  423.153(f)(4) that 
plans cannot limit access to frequently abused drugs unless the plan 
has conducted case management and obtained agreement from prescribers 
(or made certain attempts to contact prescribers). We believe this 
approach strikes an appropriate balance between ensuring sufficient 
access to frequently abused drugs and protecting at-risk beneficiaries 
from potential harm in the absence of improved care coordination.
    After consideration of the comments received on this section, we 
are finalizing our proposal with modification to clearly codify the 
policy that a sponsor should not provide the initial notice to the 
beneficiary until after the sponsor has engaged in the required case 
management by adding the phrase ``after conducting the case management 
required by Sec.  423.153(f)(2)'' at the beginning of Sec.  
423.153(f)(5)(i).
(B) Limitation on the Special Enrollment Period for LIS Beneficiaries 
With an At-Risk Status (Sec.  423.38)
    Section 704(a)(3) of CARA gave the Secretary the discretion to 
limit the SEP for full benefit dually eligible (FBDE) beneficiaries 
outlined in section 1860D-1(b)(3)(D) of the Act. In addition to 
providing relevant information to a potential at-risk beneficiary, we 
proposed that the initial notice will notify dually- and other low 
income subsidy (LIS)-eligible beneficiaries that they would be unable 
to use the special enrollment period (SEP) for LIS beneficiaries due to 
their potential at-risk status. (Hereafter, this SEP is referred to as 
the ``duals' SEP''). This limitation is related to, but distinct from, 
other changes to the duals' SEP discussed in the proposed rule.
    We proposed that once a dually- or other LIS-eligible individual is 
identified as a potential at-risk beneficiary, and the sponsor intends 
to limit the beneficiary's access to coverage for frequently abused 
drugs, the sponsor will provide an initial notice to the beneficiary 
and the duals' SEP would no longer be available to the otherwise 
eligible individual. This means that he or she would be unable to use 
the duals' SEP to enroll in a different plan or disenroll from the 
current Part D plan. The limitation would be effective as of the date 
the Part D plan sponsor identifies an individual to be potentially at-
risk.
    We proposed that, consistent with the timeframes discussed in 
proposed paragraph Sec.  423.153(f)(7), if the Part D plan sponsor 
takes no additional action to identify the individual as an at-risk 
beneficiary within 90 days from the initial notice, the ``potentially 
at-risk'' designation and the duals' SEP limitation would expire. If 
the sponsor determines that the potential at-risk beneficiary is an at-
risk beneficiary, the duals' SEP would not be available to that 
beneficiary until the date the beneficiary's at-risk status is 
terminated based on a subsequent determination, including a successful 
appeal, or at the end of a 12-month period calculated from the 
effective date of the limitation, as specified in the second notice 
provided under Sec.  423.153(f)(6), whichever is sooner.
    We noted that auto- and facilitated enrollment of LIS eligible 
individuals and plan annual reassignment processes would still apply to 
dual- and other LIS-eligible individuals who were identified as an at-
risk beneficiary in their previous plan. Furthermore, we noted that the 
proposed enrollment limitations for Medicaid or other LIS-eligible 
individuals designated as at-risk beneficiaries would not apply to 
other Part D enrollment periods, including the AEP or other SEPs, 
including when an individual has a gain, loss, or change in Medicaid or 
LIS eligibility. We proposed that the ability to use the duals' SEP 
would not be permissible once the individual is enrolled in a plan that 
has identified him or her as a potential at-risk beneficiary or at-risk 
beneficiary under Sec.  423.100 of this final rule. (See section 
II.A.10 for a more detailed discussion of Part D SEP changes.)
    We received the following comments and our response follows:
    Comment: We received many comments supporting the limitation of the 
duals' SEP for those individuals identified as potential at-risk or at-
risk for overutilizing frequently abused drugs. Commenters noted that 
this limitation would support care coordination for this population, 
ensure that these beneficiaries are effectively managed, and prevent 
those that do abuse drugs from frequent plan switching, and either 
changing to a Part D plan without a drug management program, or 
accessing opioids because of a gap in information sharing across plans. 
Several commenters stated that this move would support their state's 
efforts in curbing the opioid epidemic.
    Response: We appreciate the support for our proposal to limit the 
SEP for individuals identified as potential at-risk or at-risk for 
overutilizing frequently abused drugs.
    Comment: A commenter requested that CMS confirm that any 
limitations on Part D LIS-eligible individuals would not impact the 
ability of such individuals to make an enrollment or disenrollment 
during other enrollment periods for which he or she is eligible. 
Commenters specifically asked about the AEP and the SEPs available for 
individuals to enroll in or disenroll from Program for All-inclusive 
Care (PACE) or enroll in a 5-Star plan.
    Response: We note that the enrollment limitation for a potential 
at-risk or an at-risk individual will not apply to other Part D 
enrollment periods, including the AEP or other SEPs, including new SEPs 
that will be established at Sec.  423.38(c)(9) and (c)(10) and are 
discussed in more detail in section II.A.10. of this final rule. In the 
event that an individual is subject to this limitation, but is eligible 
for another enrollment period, he or she may use that enrollment period 
to make a change. For example, a potential at-risk or at-risk dually- 
or other LIS-eligible individual who is subject to the duals' SEP 
limitation may use the PACE SEP to enroll in or disenroll from PACE, or 
they may use the 5-Star Rating SEP to enroll in an MA plan, PDP, or 
cost plan with a Star Rating of 5 stars during the year in which that 
plan has the 5-star overall rating, provided the enrollee meets the 
other requirements to enroll in that plan.
    Comment: A commenter asked for clarification as to whether the SEP 
limitation for potential at-risk or at-risk individuals would apply 
when a

[[Page 16463]]

beneficiary loses Medicaid eligibility and goes through the deeming 
process permitted in capitated models under Financial Alignment 
Initiative demonstrations. The commenter stated that, in their state, a 
beneficiary is allowed to remain in the demonstration Medicare-Medicaid 
Plan (MMP) for up to 3 months while he or she tries to regain Medicaid 
eligibility. If the beneficiary regains Medicaid eligibility within 
this 3 month window, would the state be required to allow the 
beneficiary to change his or her enrollment? The commenter stated, 
that, now, they automatically re-enroll the beneficiary back into the 
MMP.
    Response: The period of deemed continued eligibility provides an 
opportunity for individuals in Dual Special Needs Plans (D-SNPs) or 
MMPs who lose Medicaid eligibility to stay enrolled in their plan for a 
short time,\14\ while they try to regain Medicaid eligibility. However, 
should an individual be eligible to leave the plan, and takes an action 
to leave the plan, using any valid SEP, the plan must honor the 
disenrollment request. It is our view that a change in Medicaid status, 
especially loss of Medicaid eligibility, is an important event with 
potentially significant financial impacts to the beneficiary. As a 
result, the SEP outlined in Sec.  423.38(c)(9) will remain available to 
a potential at-risk or at-risk individual, even if the person is 
provided a deeming period by an MMP or D-SNP. This will permit 
individuals in a capitated model under the Financial Alignment 
Initiative demonstrations to change plans using the duals' SEP, within 
3 months of a gain, loss, or change to Medicaid or LIS eligibility, or 
notification of such.
---------------------------------------------------------------------------

    \14\ Under the capitated model of the Financial Alignment 
Initiative demonstration, MMPs may provide up to 3 months of deemed 
continued eligibility for individuals who lose MMP eligibility due 
to short-term loss of Medicaid. As outlined in Chapter 2 of the 
Medicare Managed Care Manual, D-SNPs must provide at least 1 month 
and up to 6 months of deemed continued eligibility for individuals 
who lose eligibility due to loss of Medicaid, but are reasonably 
expected to regain Medicaid within that timeframe.
---------------------------------------------------------------------------

    Comment: We received several comments relating to the operational 
aspects of implementing this limitation on the duals' SEP. Commenters 
requested clarification on how a plan sponsor would know if a potential 
at-risk or at-risk beneficiary was not eligible to use the duals' SEP, 
and how the MARx system would be operationalized to effectuate this 
change. A commenter requested clarification on how these individuals 
would be prevented from utilizing the duals' SEP.
    Response: Information related to an individual's at-risk status, 
including the beginning and end dates for any limitation imposed, will 
be stored in MARx and available to plans for enrollment processing via 
the User Interface (UI) and the beneficiary eligibility query (BEQ). 
CMS will reject a submitted enrollment for a beneficiary who is subject 
to the SEP limitation and the plan will be notified with a unique 
transaction reply code (TRC). We will also notify plans via a TRC if a 
member has a change in their at-risk status period. We will provide 
further subregulatory guidance on system and operational changes that 
will occur to effectuate this limitation, as well as the larger drug 
management program.
    Comment: To further assist in these efforts to curb opioid misuse, 
a commenter requested that CMS share data about any members in Part D 
plans who are subject to this SEP limitation to target Medicaid wrap 
services, including supplemental behavioral health and substance use 
treatment services.
    Response: We thank the commenter for their suggestion and we will 
explore data sharing for states to provide additional services to these 
individuals.
    Comment: A commenter recommended that CMS allow potential at-risk 
or at-risk individuals to use the duals' SEP to change to another plan 
if that plan has an established drug management program in place.
    Response: We appreciate the comment; however, we disagree with 
allowing individuals identified as potentially at risk or at risk to 
use the duals' SEP. Even if an at-risk individual joined another plan 
that had a drug management program in place, there would be challenges 
in terms of preventing a gap managing their potential or actual 
overutilization of frequently abused drugs due to the timing of 
information sharing between the plans and possible difference in 
provider networks.
    Comment: A commenter stated that because the ``at-risk'' status is 
transferable from one plan to another, an individual will not avoid the 
implications of the lock-in by utilizing the SEP. As such, the 
commenter believed that the dual SEP should not be limited.
    Response: We disagree. First, for general clarification purposes, 
the at-risk determination will not automatically transfer and be 
applied by a new Part D plan in the event a potentially at-risk or at-
risk beneficiary changes plans. Even though a gaining plan will be able 
to see if a new member had an at-risk determination with their prior 
plan, the new plan will still have to make their own determination 
regarding the individual's status and send the individual the 
appropriate notice, which will trigger the SEP limitation, as we have 
explained elsewhere in this preamble. Although the beneficiary's prior 
at-risk designation is an indicator that the new plan will have to 
initiate case management and may even allow them to bypass the first 
notice and go straight to issuing the second notice, the at-risk 
determination is not directly transferable.
    In addition, while we assume that all Part D sponsors will have 
drug management programs in place, it is not a requirement.
    With respect to the need for the SEP limitation, this policy is 
still needed to prevent potential and at-risk beneficiaries from making 
frequent plan changes after they receive the initial and second 
notices, as applicable, and thus, avoid the care coordination that drug 
management plans are intended to provide.
    We note that the SEP limitation--whether it is a first time 
designation or one that is being applied after enrollment into a new 
plan--will be effective as of the date on the initial notice that the 
Part D plan sponsor provides to an individual identified to be 
potentially at-risk. We are revising that language in Sec.  
423.38(c)(4) to state that beneficiaries that have been notified that 
they are potentially at-risk or at-risk, and such identification has 
not been terminated in accordance with Sec.  423.153(f)), will not be 
able to use the duals' SEP.
    Comment: A commenter encouraged CMS to offer increased resources to 
SHIPs to provide targeted outreach to the dual eligible and LIS 
populations who will be impacted by these changes. The commenter stated 
that CMS should also conduct outreach and education to providers and 
pharmacies, including mental health and substance use providers, as 
well as community based organizations (such as recovery learning 
communities), as these changes have a specific impact on beneficiaries 
with substance use disorders. The commenter stated that these efforts 
will help ensure that beneficiaries most likely to be impacted by these 
changes, and their providers, are made aware well in advance of 
implementation. Also, the commenter encouraged CMS and the 
Administration for Community Living (ACL) to provide continued funding 
for state Ombudsman programs that serve dual eligible populations 
enrolled in demonstration products, and to allow states to use this 
funding to serve dual

[[Page 16464]]

eligible beneficiaries enrolled in any integrated care product, 
including, for example FIDE SNPs.
    Response: CMS appreciates the comment, and we will continue to 
explore avenues for beneficiary and provider outreach and education; 
however, provisions for addressing cost and funding resources is 
outside of the scope of this rule.
    Comment: Several commenters opposed the limitation of the duals' 
SEP for at-risk beneficiaries. Commenters cited issues, such as limited 
access to prescription drugs and the possible risks of medical 
complications and increased costs resulting from such access barriers. 
They also noted the vulnerability and special needs of this population. 
A commenter stated that this limitation is unnecessary, as the current 
OMS program in Part D typically resolves cases of potential misuse 
without resorting to any beneficiary-specific tactic and would result 
in beneficiaries losing access to an important patient protection.
    Response: We appreciate the comments. As we stated in the proposed 
rule, based on the 2015 data in CMS' OMS, more than 76 percent of all 
beneficiaries estimated to be potential at-risk beneficiaries are LIS-
eligible individuals. It is our view that the SEP limitation will be an 
important tool to reduce the opportunities for dual and LIS-eligible 
beneficiaries designated as at-risk to switch plans, and circumvent the 
care coordination that a drug management program is designed to provide 
for this vulnerable population, especially as our nation faces an 
opioid epidemic. As stated previously, the enrollment limitation for a 
potential at-risk or an at-risk individual would not apply to other 
Part D enrollment periods, including the AEP or other SEPs. In the 
event that a potential at-risk or at-risk dually- or other LIS-eligible 
individual is subject to this limitation, but that individual is 
eligible to make an enrollment change using a different and valid 
election period, he or she may do so.
    In the case where an individual is prescribed a specific drug that 
is not on the sponsor's formulary, the individual always has the right 
to request a coverage determination for the drug. Each Part D sponsor 
that provides prescription drug benefits for Part D drugs and manages 
this benefit through the use of a formulary must establish and maintain 
exceptions procedures for receipt of an off formulary drug. A Part D 
sponsor must grant an exception whenever it determines that the drug is 
medically necessary, consistent with the physician's or other 
prescriber's statement, and that the drug would be covered but for the 
fact that it is an off formulary drug. Since these protections apply to 
all beneficiaries, they also protect dually-eligible and other LIS-
eligible beneficiaries.
    Comment: A couple of commenters stated that maintaining maximum 
flexibility regarding enrollment in Medicare Part D and the ability to 
change PDPs best serves the interests of low-income beneficiaries, 
especially American Indian and Alaskan Native (A/I and A/N) 
beneficiaries. The commenters further stated that a decision to change 
plans is often made in order to access a specific prescription drug. 
The commenters further requested that, if the proposed regulation is 
retained, CMS specify an exemption for Indian Health Service (IHS)-
eligible individuals as inserting the Medicare Part D drug plans into 
the relationship between Medicare/IHS beneficiaries and their IHS/
Tribal providers would not be helpful. We discuss IHS beneficiaries 
again further below.
    Response: CMS disagrees with establishing population-based 
exceptions to the duals' SEP limitation. In our view, all potential at-
risk and at-risk beneficiaries should be afforded the opportunity to 
benefit from the care coordination that the drug management program is 
designed to provide. We do not believe it is prudent at this time to 
carve out a subset of at-risk beneficiaries to which special rules 
apply. As previously mentioned, there are opportunities for potential 
at-risk and at-risk individuals to make enrollment choices during other 
election periods. Also, an individual always has the right to request a 
coverage determination, including an exception request for an off-
formulary drug.
    Comment: A couple of commenters expressed concern about this SEP 
limitation not being appealable. A commenter urged CMS to make the loss 
of the duals' SEP for potential at-risk beneficiaries appealable, as an 
at-risk beneficiary's other non-opioid-related conditions may justify 
the using of an SEP. A commenter noted that the proposal stipulated an 
appeals process for beneficiaries wishing to appeal their at-risk 
status, but encouraged CMS in its final rule to clarify whether the 
loss of a duals' SEP would be appealable in any way, and urge CMS to 
make a provision for beneficiaries who may need access to this SEP 
despite their at-risk status.
    Response: Similar to all other enrollment decisions, the limitation 
on the duals' SEP for potential at-risk or at-risk individuals is not 
appealable. However, after an individual is determined to be at-risk, 
he or she may appeal that determination. We intend to provide maximum 
transparency to the beneficiary by ensuring, consistent with the 
statutory requirements, that the beneficiary has information about 
appeal rights during the at-risk determination process.
    Comment: A commenter stated that nothing in the law would make a 
dual-eligible at- risk or potentially at-risk beneficiary ineligible 
for an SEP.
    Response: We disagree with the commenter. Section 704(a)(3) of CARA 
gives the Secretary the discretion to limit the SEP for FBDE 
beneficiaries outlined in section 1860D-1(b)(3)(D) of the Social 
Security Act (the Act). As discussed previously, the duals' SEP was 
extended to all other subsidy-eligible beneficiaries by regulation so 
that all LIS-eligible beneficiaries are treated uniformly.
    Comment: A commenter is concerned that dually- and other LIS-
eligible individuals inappropriately identified as potentially at-risk 
may not understand the process for correcting a determination that was 
made in error or may otherwise be inappropriate. The commenter further 
stated that some beneficiaries will be erroneously identified and not 
confirmed as at-risk and they should not be subject to the SEP 
limitation as a result of poor data, plan error, or some other reason 
unrelated to the beneficiary's action.
    Response: We appreciate the comments. We believe that there will be 
sufficient safeguards in the design and implementation of prescription 
drug management programs to prevent errors and provide beneficiaries 
with an opportunity to make corrections. CMS expects that exempt 
individuals will be identified through OMS. For those that are not 
excluded based on this data, they should be excluded by their plans 
during case management, as clinical contact and prescriber verification 
and agreement should occur before an initial notice of potential at-
risk status is sent to the individual and the SEP limitation is 
imposed. Thereafter, if a beneficiary believes he or she has been 
identified in error, the beneficiary has a chance to submit relevant 
information in response to the initial notice. If a determination is 
made that a beneficiary is an at-risk beneficiary, a Part D sponsor 
must also provide a second written notice to the beneficiary which is 
required to provide clear instruction on how a beneficiary may submit 
further applicable information to the sponsor. A beneficiary is also 
provided a right to redetermination of the at-risk status. CMS expects 
these measures will provide adequate protections for all beneficiaries.

[[Page 16465]]

    Comment: Another commenter requested clarification that the SEP is 
only removed for LIS beneficiaries once the plan sponsor has completed 
case management activities, including prescriber agreement.
    Response: We appreciate the question regarding when the duals' SEP 
limitation goes into effect. The duals' SEP limitation can go into 
effect without prescriber agreement; however, before the initial notice 
is sent, which informs the beneficiary of the limitation, the sponsor 
is required to engage in case management and attempt to communicate 
with the beneficiary's prescriber(s).
    Comment: A commenter urged CMS to make a provision for LIS 
beneficiaries who lose access to their SEP, but need access to non-
opioid drugs. For example, if an LIS beneficiary is determined to be 
at-risk and loses an SEP, and is later diagnosed with a different 
chronic condition that requires medication not on the beneficiary's 
current formulary. The commenter requested that CMS specify in the 
final rule that such a beneficiary would be given special consideration 
when submitting an appeal to their current plan to gain coverage of 
necessary non-opioid drugs.
    Response: We do not believe any ``special consideration'' is 
necessary. An enrollee--regardless of LIS eligibility--always has the 
right to request a coverage determination for a drug. In all cases, the 
standard is that the plan must notify the enrollee of its coverage 
determination decision as expeditiously as the enrollee's health 
condition requires, but no later than the applicable adjudication 
timeframe (24 hours for an expedited coverage determination, 72 hours 
for a standard coverage determination).
    Comment: A commenter noted that, while they agree with the proposal 
to implement the SEP provision, there may be an increase in complaints 
and grievances against the sponsor. The commenter encourages CMS to 
exclude beneficiaries identified as potentially at-risk and at-risk 
from Consumer Assessment of Healthcare Providers and Systems (CAHPS) 
surveys and not count complaints related to the duals' SEP limitation 
in the Complaint Tracking Module (CTM) numbers for star-rating 
purposes.
    Response: Thank you for the comment. Our Star Ratings proposal did 
not address this topic, and we plan to take this comment under 
advisement.
    After consideration of these comments, we are finalizing the 
provision on the CARA duals' SEP limitation at Sec.  423.38(c)(4) with 
a modification to specify that beneficiaries that have been notified 
that they are potentially at-risk or at-risk as defined in Sec.  
423.100, and such identification has not been terminated in accordance 
with Sec.  423.153(f)), will not be able to use the duals' SEP.
    The duals' SEP limitation will align with the revised timeframes 
for the potential-at-risk and at-risk status as addressed in section 
423.153(f) of this final rule. That is, if the Part D plan sponsor 
takes no additional action to identify the individual as an at-risk 
beneficiary within 60 days from the date on the initial notice, the 
``potentially at-risk'' designation and the duals' SEP limitation will 
expire. At-risk determinations will be for an initial 12 month period, 
with the option to extend for a maximum of 24 months in total (that is, 
an additional 12 month period) upon reassessment of the beneficiary's 
at-risk status at the completion of the initial 12 month period.
(C) Second Notice to Beneficiary and Sponsor Implementation of 
Limitation on Access to Coverage for Frequently Abused Drugs (Sec.  
423.153(f)(6))
    Section 1860D-4(c)(5)(B)(i)(I) of the Act requires Part D sponsors 
to provide a second written notice to at-risk beneficiaries when they 
limit their access to coverage for frequently abused drugs. We proposed 
to codify this requirement in Sec.  423.153(f)(6)(i). As with the 
initial notice, our proposed implementation of the statutory 
requirement for the second notice will also permit it to be used when 
the sponsor implements a beneficiary-specific POS claim edit for 
frequently abused drugs. Specifically, we proposed to require the 
sponsor to provide the second notice when it determines that the 
beneficiary is an at-risk beneficiary and to limit the beneficiary's 
access to coverage for frequently abused drugs. We further proposed to 
require the second notice to include the effective and end date of the 
limitation. Thus, this second notice will function as a written 
confirmation of the limitation the sponsor is implementing with respect 
to the beneficiary, and the timeframe of that limitation.
    We also proposed that the second notice, like the initial notice, 
contain language required by section 1860D-4(c)(5)(B)(iii) of the Act 
to which we proposed to add detail in the regulation text. The second 
notice must also be approved by the Secretary and be in a readable and 
understandable form, as well as contain other content that CMS 
determines is necessary for the beneficiary to understand the 
information required in the notice. In paragraph (2), we proposed 
language that will require a sponsor to include the limitation the 
sponsor is placing on the beneficiary's access to coverage for 
frequently abused drugs, the effective and end date of the limitation, 
and if applicable, any limitation on the availability of the SEP. We 
proposed an additional requirement in paragraph (6) that the sponsor 
include instructions how the beneficiary may submit information to the 
sponsor in response to the request described in paragraph (4). In Sec.  
423.153(f)(6)(iii), we proposed that the sponsor be required to make 
reasonable efforts to provide the beneficiary's prescriber(s) of 
frequently abused drugs with a copy of the notice, as we proposed with 
the initial notice. Finally, we proposed a requirement in paragraph (7) 
that the notice contain other content that CMS determines is necessary 
for the beneficiary to understand the information required in the 
initial notice.
    Also, the sponsor will generally be required to send two notices--
the first signaling the sponsor's intent to implement a POS claim edit 
or limitation (both referred to generally as a ``limitation''), and the 
second upon implementation of such limitation. Under our proposal, the 
requirement to send two notices will not apply in certain cases 
involving at-risk beneficiaries who are identified as such and provided 
a second notice by their immediately prior plan's drug management 
program.
    We received the following comments and our responses follow:
    Comment: We received many comments related to our proposal 
requiring plans to provide a second written notice to beneficiaries 
before implementing a restriction under the plan's drug management 
program, most of which supported the proposal. Other commenters opposed 
it, expressing a belief that only one notice would be sufficient. Some 
of these commenters offered ideas for various alternative approaches 
for CMS to consider, such as including information in the plan's 
Evidence of Coverage that would replace the notices described in the 
proposed rule, or using a single notice similar to the current OMS 
requirement. Other commenters stated that the two notices required for 
lock-in should be limited to lock-in and plans should continue to be 
permitted to send a single notice when implementing a beneficiary-level 
POS edit.
    Response: We disagree with the comments recommending requiring a 
single beneficiary notice or replacing one or both notices with general 
information in other documents. Section

[[Page 16466]]

1860D-4(c)(5)(B) requires two written notices before a beneficiary can 
be locked-in to a prescriber or pharmacy, and includes a high level of 
specificity about the content of the notices. Moreover, the required 
initial and second notices contain important information about access 
restrictions that may be or will be placed on potentially at-risk and 
at-risk beneficiaries, resources such beneficiaries may need to treat 
potential drug dependency issues, and notification of important 
beneficiary rights.
    We also disagree with comments stating that the proposed notice 
requirements for the lock-in program should be limited to lock-in, and 
that CMS should retain existing beneficiary notice policies, including 
sending only one notice, when implementing beneficiary-level POS edits. 
Currently, the application of a beneficiary-level POS claim edit is not 
considered a coverage determination and does not trigger appeal rights 
under Subpart M. As we explained in the proposed rule, the 
implementation of a beneficiary-specific POS claim edit or a limitation 
on the at-risk beneficiary's coverage for frequently abused drugs to a 
selected pharmacy(ies) or prescriber(s) will be an aspect of an at-risk 
determination (a type of initial determination that will confer appeal 
rights on the beneficiary, consistent with section 1860D-4(c)(5)(E) of 
the Act) under our proposal establishing the Part D drug management 
program. As discussed in subsection (c) of this preamble, we are 
finalizing the proposal to integrate the current OMS process with lock-
in to create a uniform drug management program for Part D. Under this 
final rule, since the application of a beneficiary-level POS edit for 
frequently abused drugs can only be applied upon the plan's at-risk 
determination and is subject to appeal, it is necessary to treat those 
edits the same as limitations on selected pharmacy(ies) or 
prescriber(s). Furthermore, we believe that establishing an 
inconsistency with respect to notice requirements would be confusing 
for beneficiaries and plans. For these reasons, and because we believe 
the second notice, which identifies the action taken by the plan and 
instructs the beneficiary how to exercise their statutory appeal 
rights, is an important beneficiary protection, the notice is required 
both for lock-in and for POS edits for frequently abused drugs.
    Comment: A commenter suggested that CMS require that the second 
notice, in addition to the initial notice, include a description of all 
State and Federal public health resources addressing prescription drug 
abuse that are available to the beneficiary.
    Response: While we agree that this information is important to 
communicate to affected beneficiaries, we recognize the potential 
burden that multiple notices may place on plan sponsors as well as 
beneficiaries. We note that such information is required in the initial 
notice, and the statute does not require it in the second notice. While 
CMS will not preclude plans from providing this information again, for 
example, if requested by the enrollee, we do not believe it is 
necessary to require that it be included in both notices.
    After consideration of comments received, we are finalizing our 
proposal without modification to require plans to send both the initial 
and second notice before implementing a beneficiary-level POS edit or a 
pharmacy or prescriber lock-in under a drug management program.
(D) Alternate Second Notice When Limit on Access Coverage for 
Frequently Abused Drugs by Sponsor Will Not Occur (Sec.  423.153(f)(7))
    Although not explicitly required by the statute, we proposed at 
Sec.  423.153(f)(7) that if a sponsor determines that a potential at-
risk beneficiary is not an at-risk beneficiary and does not implement 
the limitation on the potential at-risk beneficiary's access to 
coverage of frequently abused drugs it described in the initial notice, 
then the sponsor will be required to provide the beneficiary with an 
alternate second notice. Specifically, we proposed that such alternate 
second notice use language approved by the Secretary in a readable and 
understandable form, and contain the following information: The sponsor 
has determined that the beneficiary is not an at-risk beneficiary; the 
sponsor will not limit the beneficiary's access to coverage for 
frequently abused drugs; if applicable, the SEP limitation no longer 
applies; clear instructions that explain how the beneficiary may 
contact the sponsor; and other content that CMS determines is necessary 
for the beneficiary to understand the information required in this 
notice.
    As with the other notices, we proposed that the Part D sponsor be 
required to make reasonable efforts to provide the beneficiary's 
prescriber(s) of frequently abused drugs with a copy of this notice.
    We received the following comments and our response follows:
    Comment: We received a few comments on this proposal. Some of these 
commenters supported the proposal and agreed that such notice is 
necessary to minimize beneficiary confusion and limit unneeded appeals 
when a plan decides not to implement any restrictions on frequently 
abused drugs. A commenter disagreed with our proposal to require an 
alternate second notice, stating such notice is not necessary.
    Response: As we stated in the proposed rule, we believe that this 
alternate notice is necessary to ensure beneficiaries who received the 
initial notice of an intended limitation on access to frequently abused 
drugs under the plan's drug management program are informed of the 
outcome of the plan's decision not to take such action. We are 
finalizing Sec.  423.153(f)(7) without modification.
(E) Timing of Notices and Exceptions to Timing (Sec.  423.153(f)(8))
    Section 1860D-4(c)(5)(B)(iv) of the Act requires a Part D sponsor 
to provide the second notice to the beneficiary on a date that is not 
less than 30 days after the sponsor provided the initial notice to the 
beneficiary. Although not specifically required by CARA, we believe it 
is also important to establish a maximum timeframe by which the plan 
must send the second notice or the alternate second notice, to ensure 
that plans do not leave a case open indefinitely. We proposed to 
specify at Sec.  423.153(f)(8)(i) that a Part D sponsor must provide 
the second notice described in paragraph (f)(6) or the alternate second 
notice described in paragraph (f)(7), as applicable, on a date that is 
not less than 30 days and not more than the earlier of the date the 
sponsor makes the relevant determination or 90 days after the date of 
the initial notice described in paragraph (f)(5).
    Section 1860D-4(c)(5)(B)(iv)(II) of the Act explicitly provides for 
an exception to the required 30 day minimum timeframe for issuing a 
second notice. Specifically, the statute permits the Secretary to 
identify through rulemaking concerns regarding the health or safety of 
a beneficiary or significant drug diversion activities that will 
necessitate that a Part D sponsor provide the second written notice to 
the beneficiary before the minimum 30 day time period normally required 
has elapsed.
    As we explained in the proposed rule, because this provision also 
allows an at-risk identification to carry forward to the next plan, we 
believe it is appropriate to permit a gaining plan to provide the 
second notice to an at-risk beneficiary so identified by the most

[[Page 16467]]

recent prior plan without having to wait the minimum 30 days, if 
certain conditions are met. This is consistent with our current policy 
under which a gaining sponsor may immediately implement a beneficiary-
specific POS claim edit, if the gaining sponsor is notified that the 
beneficiary was subject to such an edit in the immediately prior plan 
and such edit had not been terminated.\15\
---------------------------------------------------------------------------

    \15\ See ``Beneficiary-Level Point-of-Sale Claim Edits and Other 
Overutilization Issues,'' August 25, 2014.
---------------------------------------------------------------------------

    As such, at Sec.  423.153(f)(8)(ii), we proposed one exception to 
the timing of the notices, applicable to at-risk beneficiaries who 
switch plans. The exception allows a gaining plan sponsor to 
immediately provide the second notice described in paragraph (f)(6) to 
a beneficiary for whom the gaining sponsor received notice that the 
beneficiary was identified as an at-risk beneficiary by the prior plan 
and such identification had not been terminated. The exception is only 
permissible if the gaining sponsor is implementing either a 
beneficiary-specific POS edit as described in paragraph (f)(3)(i) under 
the same terms as the prior plan, or a limitation on access to coverage 
as described in paragraph (f)(3)(ii), if such limitation will require 
the beneficiary to obtain frequently abused drugs from the same 
pharmacy location and/or the same prescriber, as applicable, that was 
selected under the immediately prior plan under (f)(9).
    We received the following comments and our responses follow:
    Comment: Some commenters recommended that the timeframe between the 
first and second notices be shortened to within 15 days, which the 
commenters believe would provide sufficient time for beneficiaries to 
submit preferences. A commenter noted that there is no added value in 
waiting 30 days after the initial notice to provide the second notice 
because it contains similar information.
    Response: We disagree with these commenters. Outside of 
circumstances identified by the Secretary through rulemaking, section 
1860D-4(c)(5)(B)(iv) requires that the second notice be provided ``on a 
date that is not less than 30 days'' after the initial notice. 
Moreover, because the statute gives significant deference to 
beneficiary preferences, CMS does not believe that 15 days is 
sufficient for beneficiaries to receive the initial notice, identify 
their preferences for prescribers and/or pharmacies, potentially confer 
with the preferred prescribers and/or pharmacies, communicate 
preferences to their plan, and give the plan sufficient time to 
implement the limitation in their systems, including situations where 
the plan determines that an exception to preferences under Sec.  
423.153(f)(10) is warranted.
    Comment: We received several comments supporting our proposal to 
establish a maximum timeframe by which sponsors must send the second or 
alternate second notice. However, most of these commenters expressed 
concerns that 90 days is too long because potentially at-risk 
beneficiaries would be subject to a limitation on their SEP without 
appeal rights during that 90 day timeframe. Commenters stated that, if 
those beneficiaries identified as potentially at-risk did not lose 
access to the SEP, 90 days would be acceptable. Other commenters 
expressed a belief that plans would not need 90 days to obtain 
beneficiary preferences and implement relevant access limitations upon 
receipt of those preferences.
    Response: We appreciate the commenters' feedback about the proposed 
90 day maximum timeframe. As we noted in the preamble to the proposed 
rule, while section 1860D-4(c)(5)(B)(iv) of the Act requires plans to 
wait a minimum of 30 days from the initial notice before providing the 
second notice, Congress did not establish a maximum timeframe. Because 
case management, clinical contact and prescriber verification 
requirements would be met before the plan sends the initial notice, we 
agree with the commenters that our proposed 90 day maximum timeframe 
between notices could be shortened. Therefore, we are modifying Sec.  
423.153(f)(8)(i) to require the notice required under (f)(6) or 
alternate notice required under (f)(7) to be provided to the 
beneficiary no more than the earlier of the date the sponsor makes the 
relevant determination or 60 days after the date of the initial notice 
required under (f)(5).
    Given the comments received, many of which stated that the 90 day 
maximum timeframe we proposed is too long, we believe 60 days strikes 
the right balance. We do not believe the maximum timeframe should be 
shorter than 60 days, because sponsors may need this time to process 
information from beneficiaries that is received at the end of the 
minimum 30 day timeframe, or to communicate with prescribers who may 
have been unresponsive prior to receiving a copy of the initial notice 
the plan provided to the beneficiary. This revised timeframe is still 
sufficient to limit any potential compliance issues for sponsors 
related to timeliness and unnecessary appeals where such information is 
still being processed. However, we do not expect sponsors to routinely 
take the maximum amount of time to issue the second notice, and note 
that they must send it sooner if they make the relevant determination 
sooner. We note that the SEP is addressed in an earlier section of this 
preamble.
    Comment: We received several comments related to our proposal at 
Sec.  423.153(f)(8)(ii) to, under certain circumstances, permit a 
gaining plan to immediately send a second notice without waiting 30 
days to a beneficiary who is already subject to a drug management 
program coverage limitation (a beneficiary-specific POS claim edit or 
pharmacy or prescriber lock-in) in their immediately prior plan. Most 
commenters supported our proposal to establish an exception to the 30-
day notice for at-risk beneficiaries, as identified by the losing plan, 
when such beneficiaries switch plans and the gaining plan decides to 
continue the same limitation(s). Some of these commenters agreed that 
exceptions to the 30 day notice should be limited to circumstances 
where the beneficiary was already given notice by the previous plan. 
Some commenters noted that because a beneficiary may be changing plans 
due to dissatisfaction with their current providers, these 
beneficiaries must also have an opportunity to change their preferences 
with respect to pharmacies and prescribers when they change plans. 
Other commenters supported the exception that we proposed but stated 
that the statute allows exceptions under additional circumstances based 
on the health and safety of the beneficiary or significant drug 
diversion activity. A commenter recommended that CMS should specify 
that when a beneficiary who moves to a new plan offered by the same 
parent organization as their prior plan, the plan is not required to 
send any notice to the beneficiary to continue the restriction because 
such notice would only serve to confuse the beneficiary.
    Response: As we explained in the proposed rule, we believe that 
exceptions to the statutory requirement to wait at least 30 days before 
sending the second notice and implementing a coverage limitation under 
a drug management program should be very limited. Since the drug 
management program is focused on improved care coordination for 
beneficiaries who are utilizing high doses of frequently abused drugs 
and/or have multiple providers, and the statute specifies that such 
exceptions be identified through rulemaking regarding the health or

[[Page 16468]]

safety of the beneficiary or regarding significant drug diversion 
activities, we do not believe that it is appropriate to permit such an 
exception based on a sponsor's concerns about the health and safety of 
a particular beneficiary because that is too subjective and could 
adversely impact such beneficiaries, who could be subject to a coverage 
limitation without notice. Rather, we are finalizing the exception we 
proposed related to at-risk beneficiaries who switch plans and the 
gaining plan decides to continue a limitation(s) under the same terms 
as the losing plan, because we believe, in this instance, the coverage 
limitation(s) can safely be immediately implemented--namely, when the 
beneficiary already has been identified as at-risk by his or her prior 
plan, and the coverage limitations would continue in the same manner 
under his or her new plan. We have not at this time identified 
additional circumstances under which an exception to the 30-day minimum 
between the first and second notices is warranted. We note that this 
final rule does not change existing requirements that Part D plan 
sponsors cannot pay fraudulent claims. With respect to a beneficiary 
who changes plans within the same parent organization, we are 
clarifying that the gaining plan must still meet the requirements set 
forth at Sec.  423.153(f)(8)(ii). We do not believe it is advisable to 
apply a different standard to a gaining plan just because it has the 
same parent organization as the losing plan.
    While we are finalizing our proposed exception to the timing of the 
notices, we agree with the commenters who stated that beneficiaries who 
change plans should still have an opportunity to change their 
preferences for prescribers and pharmacies. Therefore, we are 
clarifying that an at-risk beneficiary's right to submit new 
preferences we are finalizing at (f)(9) also applies to beneficiaries 
who switch plans. While a gaining plan could still implement the 
restriction without providing 30 day advance notice, they must comply 
with the statutory and regulatory requirements to accept beneficiary 
preferences. Under the exception to the notice requirements that we are 
finalizing in this rule, a gaining plan choosing to immediately impose 
the restriction(s) of the prior plan is not required to resend the 
initial notice described at (f)(5) that was sent by the prior plan, but 
must issue a new version of the second notice described at (f)(6). This 
notice, which is being developed by CMS, will allow the gaining plan to 
include updated information from the initial notice that changes with 
the change to the new plan (for example, plan contact information or 
relevant medical benefits available to such beneficiary under the new 
plan).
    After consideration of all comments received on Sec.  
423.153(f)(8), we are finalizing our proposal at paragraph (f)(8)(i) to 
retain the minimum 30 day timeframe between the initial and second or 
alternate second beneficiary notices (except as provided in 
subparagraph (ii)), with a modification establishing a maximum 
timeframe of 60 days between the notices.
    Additionally, we are finalizing the proposed exception to the 
minimum 30 day timeframe at Sec.  423.153(f)(8)(ii), which permits a 
gaining plan to immediately issue the second beneficiary notice 
required by (f)(6) and implement a continuation of the same claim edit 
and/or pharmacy or prescriber lock-in for an at-risk beneficiary who 
was already provided the initial and second notice for such 
limitation(s) from the losing plan. As discussed above, we believe the 
circumstances under which a limitation can be safely implemented 
without advance beneficiary notice and are consistent with the 
requirements for such exceptions at section 1860D-4(c)(5)(iv)(II) are 
limited in scope. While, at this time, we have not identified 
additional circumstances under which we believe an exception to the 30 
day beneficiary notice is warranted under section 1860D-
4(c)(5)(B)(iv)(II), we will continue to evaluate this issue, and may 
establish additional exceptions through future rulemaking.
(viii) Provisions Specific to Limitations on Access to Coverage of 
Frequently Abused Drugs to Selected Pharmacies and Prescribers 
(Sec. Sec.  423.153(f)(4) and 423.153(f)(9) Through (13))
    Some of the drug management program provisions in CARA are only 
relevant to ``lock-in.'' We proposed several regulatory provisions to 
implement these provisions, as follows:
(A) Special Requirement To Limit Access to Coverage of Frequently 
Abused Drugs to Selected Prescriber(s) (Sec.  423.153(f)(4))
    In the proposed rule, we noted that, at that time, we viewed 
prescriber lock-in as a tool of last resort to manage at-risk 
beneficiaries' use of frequently abused drugs, meaning when a different 
approach has not been successful, whether that was a ``wait and see'' 
approach after case management or the implementation of a beneficiary 
specific POS claim edit or a pharmacy lock-in. We also were concerned 
about impacting an at-risk beneficiary's relationship with their 
provider, and we sought comment on whether a 6-month delay before a 
sponsor could implement prescriber lock-in would lessen burden on 
prescribers.
    As a result, we proposed in Sec.  423.153(f)(4)(iv) that a sponsor 
may not limit an at-risk beneficiary's access to coverage of frequently 
abused drugs to a selected prescriber(s) until at least 6 months has 
passed from the date the beneficiary is first identified as a potential 
at-risk beneficiary. We specifically sought comment on whether this 6-
month waiting period would reduce provider burden sufficiently to 
outweigh the additional case management, clinical contact and 
prescriber verification that providers may experience if a sponsor 
later believed a beneficiary's access to coverage of frequently abused 
drugs should be limited to a selected prescriber(s).
    We received the following comments and our response follows:
    Comment: Many commenters expressed significant concerns with the 
proposal to require a Part D plan sponsor to wait at least six months 
from the date the beneficiary is first identified as a potential at-
risk beneficiary before limiting that beneficiary to a prescriber for 
frequently abused drugs, noting that it works against the goal of CARA 
and defeats the purpose of the lock-in program. Moreover, many 
commenters also expressed that a 6 month delay to prescriber lock-in 
was not in the spirit of a national public health emergency, and may 
actually place at-risk beneficiaries at even greater risk for adverse 
health outcomes. A commenter expressed support for the 6 month delay, 
noting that it would allow time for alternative interventions to be 
implemented so as to not burden the prescriber unnecessarily. A 
commenter offered a lengthy legal argument against the 6-month delay 
for prescriber lock-in.
    Response: In light of these comments, we have been persuaded not to 
finalize require a 6 month waiting period before a plan may limit an 
at-risk beneficiary to a prescriber for frequently abused drugs. We 
agree with the majority of commenters that CMS should not impose a 
waiting period for plan sponsors to implement a prescriber lock-in for 
at-risk beneficiaries, and that once a beneficiary is deemed at-risk, a 
plan sponsor should have the full range of limitations on access to 
coverage for frequently abused drugs to employ for such beneficiaries. 
We are persuaded

[[Page 16469]]

that our initial concern about the beneficiary's relationship with a 
provider is significantly outweighed by the more immediate concerns for 
the beneficiary's safety.
    In addition, we are unpersuaded that our proposal would reduce 
burden on providers. This is because a sponsor, in conducting the case 
management is required under Sec.  423.153(f)(2), to contact 
prescribers and the sponsor may seek a prescriber's agreement to a 
beneficiary-specific POS claim edit pursuant to Sec.  423.153(f)(4). 
Thus, we now believe that requiring a sponsor to wait 6 months to 
contact the prescriber again to assist with additional case management 
for the prescriber lock-in, and to possibly obtain the prescriber's 
agreement to such lock-in, will actually increase provider burden.
    For these reasons, we are not finalizing the proposal that a 
sponsor may not limit an at-risk beneficiary's access to coverage of 
frequently abused drugs to a selected prescriber(s) until at least 6 
months has passed from the date the beneficiary is first identified as 
a potential at-risk beneficiary. Therefore, we have removed the 
language from Sec.  423.153(f)(4) relevant to this 6-month waiting 
period for prescriber lock-in.
(B) Selection of Pharmacies and Prescribers (Sec. Sec.  423.153(f)(9) 
Through (13))
(1) Beneficiary Preferences (Sec.  423.153(f)(9))
    Section 1860D-4(c)(5)(D)(iii) of the Act provides that, if a 
sponsor intends to impose, or imposes, a limit on a beneficiary's 
access to coverage of frequently abused drugs to selected pharmacy(ies) 
or prescriber(s), and the potential at-risk beneficiary or at-risk 
beneficiary submits preferences for a network pharmacy(ies) or 
prescriber(s), the sponsor must select the pharmacy(ies) and 
prescriber(s) for the beneficiary based on such preferences, unless an 
exception applies, for example, the beneficiary's preferred provider 
would contribute to the beneficiary's abuse of prescription drugs. We 
address exceptions to beneficiary's preferences later in the preamble.
    In light of this language, we proposed a Part D plan sponsor must 
accept an at-risk beneficiary's preferences for in-network prescribers 
and pharmacies from which to obtain frequently abused drugs unless an 
exception applies. In cases that involve stand-alone PDPs, we proposed 
that a sponsor must accept the beneficiary's selection of prescriber, 
unless an exception applies, because such PDPs do not have provider 
networks. We further proposed that a stand-alone PDP or MA-PD does not 
have to accept a beneficiary's selection of a non-network pharmacy, 
except as necessary to provide reasonable access, which we discuss 
later in this section. Our rationale for this proposal was that the 
selection of network prescribers and pharmacies puts the plan sponsor 
in the best possible position to coordinate the beneficiary's care 
going forward in light of the demonstrated concerns with the 
beneficiary's utilization of frequently abused drugs.
    Also, we did not propose to place a limit on how many times 
beneficiaries can submit their preferences, but we did solicit 
additional comments on this topic. Finally, under our proposal, the 
sponsor would be required to confirm the selection of pharmacy and/or 
prescriber in writing to the beneficiary either in the second notice, 
if feasible, or within 14 days of receipt of the beneficiary's 
submission.
    We received the following comments and our response follows:
    Comment: Commenters widely supported CMS's proposal that the 
pharmacy or prescriber in which an at-risk beneficiary is locked-into 
must be in-network for a plan, except to provide reasonable access or 
when the plan does not have a relevant network. Specifically, 
commenters noted that allowing selection of out of network pharmacies 
or prescribers would undermine keeping beneficiary costs low, and 
efforts to combat pharmacy-based fraud and abuse.
    Response: We thank commenters for their support.
    Comment: CMS received a handful of comments that disagreed that a 
prescriber should have to be in-network, given some Medicare Advantage 
beneficiaries may receive out-of-network treatment from providers due 
to their relationships with the prescriber and the high quality of care 
that they provide. These commenters requested that CMS eliminate the 
requirement that a prescriber generally must be in-network if the plan 
sponsor imposes a limit on a beneficiary's access to coverage for 
frequently abused drugs to a selected prescriber or prescribers.
    Response: We were not persuaded that sponsors should have to accept 
a beneficiary's selection of an out-of-network prescriber or pharmacy, 
unless needed to maintain reasonable access or if the plan does not 
have a relevant network. Our rationale for this is that Section 1860D-
4(c)(5)(D)(iii) refers specifically to the beneficiary selecting a 
network prescriber(s) and/or pharmacy(ies) and the plan sponsor 
accepting such selections based on the beneficiary's preference. We 
therefore believe that the statute does not contemplate requiring Part 
D plan sponsors to select a beneficiary's preference of an out-of-
network prescriber or pharmacy in all instances.
    However, because our requirements for drug management programs--as 
proposed and finalized--permit stand-alone PDPs to use prescriber lock-
in, the requirement for a sponsor to accept the beneficiary's selection 
of a network prescriber is inapplicable, and the sponsor must accept 
the beneficiary's selection of a prescriber, unless an exception 
applies, such as if the selection would contribute to the beneficiary's 
abuse of prescription drugs. With regard to this exception, we note 
that when there is a prescriber or pharmacy network, and the plan 
sponsor asserts it would accept a beneficiary's in-network pharmacy or 
prescriber preference(s) but such selection would contribute to 
prescription drug abuse or drug diversion by the beneficiary, we would 
question why such pharmacy or prescriber is in the sponsor's network.
    We realize that in the case of at-risk beneficiaries enrolled in MA 
plans that provide out-of-network coverage of services and are designed 
and specifically authorized for that purpose (that is, PPO, PFFS, and 
cost plans), these beneficiaries have access to supplemental services 
out of network. However, as we stated above, Section 1860D-
4(c)(5)(D)(iii) states that if an at-risk beneficiary submits 
preferences for which in-network prescribers and pharmacies the 
beneficiary would prefer, the PDP sponsor shall select them. The 
requirement, discussed later, that Part D prescription drug management 
programs ensure reasonable access addresses the sponsor's selection 
out-of-network prescribers and pharmacies when necessary and therefore 
accommodate our regulations at Sec.  422.105; Sec.  422.112 that permit 
out-of-network coverage.
    We note that by requiring a plan sponsor to accept an at-risk 
beneficiary's selection of an out-of-network prescriber, we would in 
effect have a blanket requirement that a coordinated health plan to 
manage an at-risk beneficiary out-of-network, which would be difficult 
to achieve. For those at-risk beneficiaries locked into a particular 
prescriber(s) and/or pharmacy(ies), prescriptions for frequently abused 
drugs would need to be obtained from an in-network prescriber (when 
such a network exists), even in the case of at-risk beneficiaries who 
are enrolled in MA plan that provide for out-of-network coverage.

[[Page 16470]]

Therefore, we are finalizing our provision as proposed.
    We wish to make a point of clarification regarding at-risk 
beneficiaries who are entitled to fill prescriptions or receive 
services from IHS, Tribal, and Urban Indian (ITU) organization 
pharmacies and providers. An IHS I/T/U pharmacy or provider may be the 
selected pharmacy or prescriber for such beneficiaries and they may go 
to such a pharmacy or prescriber pursuant to our reasonable access 
requirement, even if they are not in-network which we discuss again 
later.
    Comment: Regarding a limitation on how many times beneficiaries can 
submit their preferences, many commenters suggested that we allow an 
at-risk beneficiary to submit his or her preferences anywhere from 1 to 
3 times per year, noting that it was important to cap the number of 
times preferences can be submitted. A commenter noted that the 
beneficiary's unlimited opportunity to change preferences for 
prescribers and pharmacies will be problematic and burdensome, and 
recommended that CMS place a limit on the number of times a beneficiary 
may change preferences on an annual basis, unless they can provide good 
cause for requesting the change. Suggested examples of good cause would 
include moving beyond easy access to the prescriber or pharmacy; the 
prescriber has discharged the beneficiary from his/her practice; or the 
pharmacy is unable to provide the requested drugs.
    Response: While commenters raised concerns that at-risk 
beneficiaries should have some parameters around changing their 
preferences for a selected pharmacy or prescriber, CMS must balance 
curbing opioid overuse and misuse with ensuring reasonable access to 
selected pharmacies and prescribers. Therefore, we will allow at-risk 
beneficiaries to submit their preferences to plan sponsors without a 
numerical restriction during the plan year. We note that the sponsor 
does not have to make changes to the selection of pharmacy(ies) and 
prescriber(s) based on the at-risk beneficiaries preferences if the 
plan sponsor believes such changes are contributing to abuse or 
diversion of frequently abused drugs, pursuant to Sec.  423.153(f)(10), 
discussed above. Also, CMS will monitor for these issues and act 
accordingly to ensure efficient operation of the program and prevention 
of excessive administrative burden.
    Comment: A commenter stated that an at-risk beneficiary should not 
be locked-into pharmacies in which the plan sponsor or PBM overseeing 
the drug management program has a financial interest.
    Response: Since the selection of the pharmacy in which an at-risk 
beneficiary is locked into is largely a beneficiary choice, and one 
they are provided specifically in the statute with little exception, 
CMS does not find this comment persuasive, and will finalize this 
provision as proposed.
    Comment: A commenter stated that plan sponsors should be able to 
implement the change in a beneficiary's preference within 14 days after 
the beneficiary has submitted the preference.
    Response: We note that our proposal, which we are finalizing, 
requires the sponsor to inform the beneficiary of the selection in the 
second notice or if not feasible due to the timing of the beneficiary's 
submission of preference, in a subsequent written notice issue no later 
than 14 days after receipt of the submission.
    Accordingly, we are finalizing Sec.  423.153(f)(9), as proposed. We 
note that we added the words ``or change'' in paragraph (iii) for 
consistency with the rest of the regulation text in this section.
(2) Exception to Beneficiary Preferences (Sec.  423.153(f)(10))
    Section 1860D-4(c)(5)(D)(iv) of the Act provides for an exception 
to an at-risk beneficiary's preference of prescriber or pharmacy from 
which the beneficiary must obtain frequently abused drugs, if the 
beneficiary's allowable preference of prescriber or pharmacy will 
contribute to prescription drug abuse or drug diversion by the at-risk 
beneficiary. Section 1860-D-4(c)(5)(D)(iv) of the Act requires the 
sponsor to provide the at-risk beneficiary with at least 30 days 
written notice and a rationale for not accepting his or her allowable 
preference for pharmacy or prescriber from which the beneficiary must 
obtain frequently abused drugs under the plan.
    We received the following comments and our response follows:
    Comment: Commenters generally agreed with our proposal that plan 
sponsors may disallow a beneficiary's selection of a prescriber or 
pharmacy that may contribute to prescription drug abuse or drug 
diversion.
    Response: We appreciate the commenters support.
    Comment: A commenter suggested that CMS require plans/PBMs to 
report the percentage of times when beneficiary preference is/is not 
considered and to track which pharmacy the plan/PBM utilizes to 
override patient preference.
    Response: While we are not currently requiring that plans or PBMs 
report to CMS the percentage of times when beneficiary preference is/is 
not considered and to track which pharmacy the plan/PBM utilizes to 
override patient preference, we will re-evaluate this policy in the 
future if it becomes problematic. Therefore, we will closely monitor to 
make sure plans are not inappropriately choosing to not accept 
beneficiary preferences, in order to ensure efficient operation of the 
program and prevention of excessive administrative burden.
    While we received no comments specific to beneficiary appeal rights 
when the plan's selection of pharmacies or prescribers for lock-in are 
not aligned with the beneficiary's submitted preferences, we remind 
plans that the statute at Sec.  1860D-2(c)(5)(E) specifically states 
that the selection of pharmacy or prescriber for lock-in is subject to 
appeal. If a beneficiary complains about being locked into a pharmacy 
or prescriber that is not the one they selected, such complaint must be 
treated as an appeal. We address beneficiary appeals rights later in 
this preamble.
    We are finalizing the following at Sec.  423.153(f)(10) Exception 
to Beneficiary Preferences, as proposed.
(3) Reasonable Access (Sec. Sec.  423.100, 423.153(f)(11) 
423.153(f)(12))
    If a potential at-risk beneficiary or at-risk beneficiary does not 
submit pharmacy or prescriber preferences, section 1860-D-4(c)(5)(D)(i) 
of the Act provides that the Part D sponsor shall make the selection. 
Section 1860-D-4(c)(5)(D)(ii) of the Act further provides that, in 
making the selection, the sponsor shall ensure that the beneficiary 
continues to have reasonable access to frequently abused drugs, taking 
into account geographic location, beneficiary preference, the 
beneficiary's predominant usage of prescriber or pharmacy or both, 
impact on cost-sharing, and reasonable travel time. We proposed Sec.  
423.153(f)(11) to codify these statutory provisions.
    Since the statute explicitly allows the beneficiary to submit 
preferences, we interpreted the additional reference to beneficiary 
preference in the context of reasonable access to mean that a 
beneficiary allowable preference should prevail over a sponsor's 
evaluation of geographic location, the beneficiary's predominant usage 
of a prescriber and/or pharmacy impact on cost-sharing, and reasonable 
travel time. In the absence of a beneficiary preference for pharmacy 
and/or prescriber, however, a Part D plan sponsor must take into

[[Page 16471]]

account geographic location, the beneficiary's predominant usage of a 
prescriber and/or pharmacy, impact on cost-sharing, and reasonable time 
travel in selecting a pharmacy and/or prescriber, as applicable, from 
which the at-risk beneficiary will have to obtain frequently abused 
drugs under the plan. Thus, absent a beneficiary's allowable preference 
or plan recognition that the beneficiary's selection will contribute to 
prescription drug abuse or drug diversion, we proposed that the sponsor 
must ensure reasonable access by choosing the network pharmacy or 
prescriber that the beneficiary uses most frequently unless the plan is 
a stand-alone PDP and the selection involves a prescriber(s). In the 
latter case, the prescriber will not be a network provider, because 
such plans do not have provider networks. In urgent circumstances, we 
proposed that reasonable access means the sponsor must have reasonable 
policies and procedures in place to ensure beneficiary access to 
coverage of frequently abused drugs without a delay that may seriously 
jeopardize the life or health of the beneficiary or the beneficiary's 
ability to regain maximum function. We stated that determining 
reasonable access may be complicated when an enrollee has multiple 
addresses or his or her health care necessitates obtaining frequently 
abused drugs from more than one prescriber and/or more than one 
pharmacy. Sections 1860D-4(c)(5)(D)(ii)(I) and (II) address this issue 
by requiring the Part D plan sponsor to select more than one prescriber 
to prescribe frequently abused drugs and more than one pharmacy to 
dispense them, as applicable, when it reasonably determines it is 
necessary to do so to provide the at-risk beneficiary with reasonable 
access, which we proposed to codify at Sec.  423.153(f)(12). To address 
chain pharmacies and group practices, we proposed that in the case of a 
group practice, all prescribers of the group practice shall be treated 
as one prescriber and all locations of a pharmacy that share real-time 
electronic data should be treated as one pharmacy.
    We proposed to interpret these provisions to mean that a sponsor 
will be required to select more than one prescriber of frequently 
abused drugs, if more than one prescriber has asserted during case 
management that multiple prescribers of frequently abused drugs are 
medically necessary for the at-risk beneficiary.
    We received the following comments and our response follows:
    Comment: A commenter noted that the reasonable access provisions 
did not allow for situations where a patient who is locked-in is 
hospitalized or develops a new medical condition that requires they see 
a new physician, and that CMS should consider providing additional 
flexibility in such unexpected or unplanned situations.
    Response: We note that drugs dispensed during a hospitalization are 
covered under the Medicare Part A benefit. Aside from that, plans are 
required to provide reasonable access to at-risk beneficiaries in their 
drug management programs under proposed Sec.  423.153(f)(11). Proposed 
Sec.  423.153(f)(12) requires a Part D plan sponsor to select more than 
one prescriber to prescribe frequently abused drugs when it reasonably 
determines it is necessary to do so to provide the at-risk beneficiary 
with reasonable access. To the extent that a new health condition 
necessitates an at-risk beneficiary to change providers who prescribe 
frequently abused drugs rather than see more than one, the beneficiary 
can submit a new prescriber preference, as discussed earlier.
    With respect to a hospital emergency room visit, for example, we 
stated that in urgent circumstances, proposed Sec.  423.153(f)(11) 
requires a Part D sponsor to ensure an at-risk beneficiary has 
reasonable access in the case of emergency services, which we stated 
means that the sponsor must have reasonable policies and procedures in 
place to ensure beneficiary access to coverage of frequently abused 
drugs without a delay that may seriously jeopardize the life or health 
of the beneficiary or the beneficiary's ability to regain maximum 
function. Thus, we believe Sec.  423.153(f)(11) and (12) address the 
commenter's concerns.
    Comment: We received a comment requesting that group practices be 
permitted to designate one or more prescribers when a plan sponsor 
intends to limit a beneficiary's access to coverage of frequently 
abused drugs to a selected prescriber or prescribers at a group 
practice, and permit the group practice to modify such designation from 
time to time. The commenter stated that this requirement should apply 
whether or not the prescribers at the group practice are all associated 
with the same single Tax Identification Number (TIN).
    Response: Under the provision we proposed and are finalizing, all 
prescribers of a group practice are treated as one prescriber. A TIN is 
a mechanism that can assist Part D sponsors in identifying group 
practices, but as discussed earlier in the preamble, case management 
can also reveal the existence of a group practice that is prescribing 
frequently abused drugs to a beneficiary.
    Comment: We received several comments that recommended that CMS re-
evaluate its policy for determining chain pharmacies, as identification 
of which pharmacies share real-time data may be difficult in many 
situations, noting that sponsors do not have an effective way to manage 
such arrangements, and PBMs do not have the systems capabilities to 
discern if their systems are integrated and interchangeable. A 
commenter stated support for CMS' proposal as it relates to chain 
pharmacies, but noted that managing this option will be challenging 
absent additional instructions from CMS.
    Response: Section 1860D-4(c)(5)(D)(ii) of the Act states that with 
respect to a pharmacy that has multiple locations that share real-time 
electronic data, all such locations of the pharmacy shall collectively 
be treated as one pharmacy for purposes of an at-risk beneficiary's 
selection of pharmacies. Until such pharmacies can be determined 
through data, sponsors with drug management programs will have to 
ascertain such pharmacies through the case management and beneficiary 
notification processes. We therefore are finalizing this provision as 
proposed.
    Earlier in the preamble in responding to comments about prescriber 
agreement, we stated that in the case of prescriber lock-in, if a 
prescriber who has not agreed to this limitation insists that he or she 
must be able to continue to prescribe frequently abused drugs for the 
beneficiary, a plan sponsor may need to offer to lock-in the at-risk 
beneficiary to more than one prescriber to ensure reasonable access 
pursuant to Sec.  423.153(f)(12), for example, if the beneficiary has 
been obtaining opioids from one prescriber and benzodiazepines from 
another. Thus, we point out that in finalizing the drug management 
program regulations, we are not interpreting the reasonable access 
provisions to require a sponsor to select more than one prescriber, if 
more than one prescriber has asserted during case management that 
multiple prescribers of frequently abused drugs are medically necessary 
for the at-risk beneficiary but only to consider it in the context of 
the requirement to provide reasonable access. This should also be the 
sponsor's approach when a beneficiary submits a preference for more 
than one prescriber and/or more than one pharmacy as his or her 
preference.
    Also earlier in this preamble, we stated that an IHS pharmacy or 
provider may be the selected pharmacy or

[[Page 16472]]

prescriber for at-risk beneficiaries who are entitled to fill 
prescriptions from IHS, tribal, or Urban Indian (I/T/U) organization 
pharmacies and receive services through the IHS health system, and that 
they may go to such a pharmacy or prescriber pursuant to our reasonable 
access requirement, even if they are not in-network. Therefore, we are 
adding language to Sec.  423.153(f)(12) to address situations when the 
sponsor reasonably determines that the selection of an out-of-network 
prescriber or pharmacy is necessary to provide the beneficiary with 
reasonable access. This language also addresses our earlier comment 
that a stand-alone PDP or MA-PD does not have to accept a beneficiary's 
selection of a non-network pharmacy or prescriber, except as necessary 
to provide reasonable access.
    Given the foregoing, we therefore finalize as proposed the 
following at Sec.  423.153(f)(11), with a modification to include 
language that the sponsor must ensure reasonable access by taking into 
account ``all relevant factors, including but not limited to'' and to 
renumber for better clarity: Reasonable access. In making the 
selections under paragraph (f)(12) of this section, a Part D plan 
sponsor must ensure that the beneficiary continues to have reasonable 
access to frequently abused drugs, taking into account all relevant 
factors, including but not limited to: (i) Geographic location; (ii) 
Beneficiary preference; (iii) The beneficiary's predominant usage of a 
prescriber or pharmacy or both; (iv) The impact on cost-sharing; (v) 
Reasonable travel time; (vi) Whether the beneficiary has multiple 
residences; (vii) Natural disasters and similar situations; and (viii) 
The provision of emergency services.
    We are also finalizing with modification for the addition of 
language requiring the selection of an out-of-network prescriber or 
pharmacy if necessary at Sec.  423.153(f)(12). Paragraphs (f)(12)(i) 
and (ii) will specify the following:
     A Part D plan sponsor must select, as applicable--
    ++ One, or, if the sponsor reasonably determines it necessary to 
provide the beneficiary with reasonable access, more than one, network 
prescriber who is authorized to prescribe frequently abused drugs for 
the beneficiary, unless the plan is a stand-alone PDP, or the selection 
of an out-of-network provider is necessary; and
    ++ One, or, if the sponsor reasonably determines it necessary to 
provide the beneficiary with reasonable access, more than one, network 
pharmacy that may dispense such drugs to such beneficiary, unless the 
selection of an out-of-network pharmacy is necessary.
     For purposes of paragraph (f)(12) of Sec.  423.153, in the 
case of a--
    ++ Pharmacy that has multiple locations that share real-time 
electronic data, all such locations of the pharmacy shall collectively 
be treated as one pharmacy; and
    ++ Group practice, all prescribers of the group practice shall be 
treated as one prescriber.
(4) Confirmation of Pharmacy and Prescriber Selection (Sec.  
423.153(f)(13))
    Section 1860D-4(c)(5)(D)(v) of the Act requires that, before 
selecting a prescriber or pharmacy, a Part D plan sponsor must notify 
the prescriber and/or pharmacy that the at-risk beneficiary has been 
identified for inclusion in the drug management program, which will 
limit the beneficiary's access to coverage of frequently abused drugs 
to selected pharmacy(ies) and/or prescriber(s) and that the prescriber 
and/or pharmacy has been selected as a designated prescriber and/or 
pharmacy for the at-risk beneficiary. We proposed Sec.  423.153(f)(13) 
to codify this statutory requirement.
    We also proposed that plan sponsors must obtain the network 
prescriber's or pharmacy's confirmation that the selection is accepted 
before conveying this information to the at-risk beneficiary, unless 
the prescriber or pharmacy agreed in advance in its network agreement 
to accept all such selections and the agreement specifies how the 
prescriber and pharmacy will be notified of its selection. In these 
cases, the network provider would agree to forgo specific notification 
if selected under a drug management program to serve an at-risk 
beneficiary.
    We received the following comments and our responses follow:
    Comment: We received a comment that CMS should prohibit plan 
sponsors from including in their provider agreements any requirement 
that would require a prescriber to confirm in advance and forego 
specific confirmation, if selected under a drug management program to 
serve an at-risk beneficiary.
    Response: In light of this comment, and given the fact that we are 
finalizing a requirement for prescriber agreement for prescriber lock-
in, as discussed earlier in the preamble, we believe the appropriate 
approach is that the required prescriber agreement during case 
management satisfies the requirement that the plan sponsor notify the 
prescriber that the at-risk beneficiary has been identified for 
inclusion in a drug management program and the prescriber has been 
selected as a prescriber that the beneficiary will be locked into for 
purposes of frequently abused drugs. In our view, the process of 
obtaining the prescriber agreement to prescriber lock-in also serves as 
the receipt of confirmation from the prescriber, not to mention our 
requirement that the sponsor make reasonable efforts to provide the 
prescriber with a copy of the beneficiary notices that the sponsor must 
provide, discussed earlier. Such an approach reduces unnecessary 
repetition of communication with prescribers.
    For network pharmacies, this approach means that the notification 
that the at-risk beneficiary has been identified for inclusion in a 
drug management program and the pharmacy has been selected as a 
pharmacy that the beneficiary will be locked into for purposes of 
frequently abused drugs and the pharmacy's confirmation can be 
negotiated between the plan sponsor and the pharmacy, and if not, the 
plan sponsor must do so on a case-by-case basis, which is also the case 
for out-of-network prescribers and pharmacies.
    Comment: A commenter proposed an additional exception to the 
confirmation requirement for plan sponsors that own or operate their 
own pharmacies, arguing that such confirmation would be unnecessary 
given that the pharmacy would already be confirmed, as part of their 
integrated system.
    Response: We are not persuaded that an exception is needed in these 
situations. If the pharmacy is a separate legal entity from the plan 
sponsor, then the contract could contain a blanket agreement stating 
that the pharmacy agrees to accept at-risk beneficiaries that the plan 
sponsors locks into that pharmacy, as we mentioned in the proposed 
rule. If the pharmacy is the same legal entity as the plan sponsor, 
then notification is automatic, and no further notification or contract 
language would be necessary.
    Based on the comments and our responses, we are finalizing this 
provision with modifications to state the following regarding 
confirmation of selections(s):
     Before selecting a prescriber or pharmacy under this 
paragraph, a Part D plan sponsor must notify the prescriber or 
pharmacy, as applicable, that the beneficiary has been identified for 
inclusion in the drug management program for at-risk beneficiaries and 
that the prescriber or pharmacy or both is(are) being selected as the 
beneficiary's designated prescriber or pharmacy or both for frequently 
abused drugs. For prescribers, this notification occurs during case 
management as described in

[[Page 16473]]

paragraph (f)(2) or when the prescriber provides agreement pursuant to 
paragraph (f)(4)(i)(B).
     The sponsor must receive confirmation from the 
prescriber(s) or pharmacy(ies) or both, as applicable, that the 
selection is accepted before conveying this information to the at-risk 
beneficiary, unless the pharmacy has agreed in advance in a network 
agreement with the sponsor to accept all such selections and the 
agreement specifies how the pharmacy will be notified by the sponsor of 
its selection.
     A sponsor complies with paragraphs (i) and (ii) as it 
pertains to a prescriber by obtaining the prescriber's agreement 
pursuant to Sec.  423.153(f)(4)(i)(B).
(ix) Drug Management Program Appeals (Sec. Sec.  423.558, 423.560, 
423.562, 423.564, 423.580, 423.582, 423.584, 423.590, 423.602, 423.636, 
423.638, 423.1970, 423.2018, 423.2020, 423.2022, 423.2032, 423.2036, 
423.2038, 423.2046, 423.2056, 423.2062, 423.2122, and 423.2126)
    Section 1860D-4(c)(5)(E) of the Act specifies that the 
identification of an individual as an at-risk beneficiary for 
prescription drug abuse under a Part D drug management program, a 
coverage determination made under such a program, the selection of a 
prescriber or pharmacy, and information sharing for subsequent plan 
enrollments shall be subject to reconsideration and appeal under 
section 1860D-4(h) of the Act. This provision also permits the option 
of an automatic escalation to external review to the extent provided by 
the Secretary.
    As discussed earlier in this preamble, we proposed to integrate the 
lock-in provisions with existing Part D Opioid DUR Policy/OMS. 
Determinations made in accordance with any of those processes, at Sec.  
423.153(f), and discussed previously, are interrelated issues that we 
collectively refer to as an ``at-risk determination.'' In this final 
rule, we are adding a definition of at-risk determination at Sec.  
423.560 to describe a decision made under a plan sponsor's drug 
management program in accordance with Sec.  423.153(f) that involves 
the identification of an individual as an at-risk beneficiary for 
prescription drug abuse; a limitation, or the continuation of a 
limitation, on an at-risk beneficiary's access to coverage of 
frequently abused drugs (that is, a beneficiary specific point-of-sale 
edit the selection of a prescriber and/or pharmacy and implementation 
of lock-in); and information sharing for subsequent plan enrollments.
    We proposed that at-risk determinations made under the processes at 
Sec.  423.153(f) be adjudicated under the existing Part D benefit 
appeals process and timeframes set forth in Subpart M. Consistent with 
the existing Part D benefit appeals process, we proposed that at-risk 
beneficiaries (or an at-risk beneficiary's prescriber, on behalf of the 
at-risk beneficiary) must affirmatively request IRE review of adverse 
plan level appeal decisions made under a plan sponsor's drug management 
program. We also proposed to amend the existing Subpart M rules at 
Sec.  423.584 and Sec.  423.600 related to obtaining an expedited 
redetermination and IRE reconsideration, respectively, to apply them to 
appeals of an at-risk determination made under a drug management 
program. While we did not propose to adopt auto-escalation, the 
proposed approach ensures that an at-risk beneficiary has the right to 
obtain IRE review and higher levels of appeal (ALJ/attorney 
adjudicator, Council, and judicial review). Accordingly, we also 
proposed to add the reference to an ``at-risk determination'' to the 
following regulatory provisions that govern ALJ and Council processes: 
Sec. Sec.  423.2018, 423.2020, 423.2022, 423.2032, 423.2036, 423.2038, 
423.2046, 423.2056, 423.2062, 423.2122, and 423.2126.
    Finally, we also proposed a change to Sec.  423.1970(b) to address 
the calculation of the amount in controversy (AIC) for an ALJ hearing 
in cases involving at-risk determinations made under a drug management 
program in accordance with Sec.  423.153(f).
    In addition to the changes related to the implementation of drug 
management program appeals, we also proposed to make technical changes 
to Sec.  423.562(a)(1)(ii) to remove the comma after ``includes'' and 
replace the reference to ``Sec. Sec.  423.128(b)(7) and (d)(1)(iii)'' 
with a reference to ``Sec. Sec.  423.128(b)(7) and (d)(1)(iv).''
    We received the following comments and our responses follow:
    Comment: A few commenters strongly objected to beneficiaries not 
having appeal rights during their designation as ``potential'' at-risk 
beneficiaries at the time the initial notice is received from the plan 
sponsor.
    Response: As we noted in the proposed rule, when a beneficiary is 
identified as being potentially at-risk, but has not yet been 
definitively identified as at-risk, the plan is not taking any action 
to limit such beneficiary's access to frequently abused drugs. Because 
the plan sponsor has not taken any action to limit a beneficiary's 
access at this point in the process, the situation is not ripe for 
appeal. We proposed that a beneficiary will have the right to appeal a 
determination made under a plan sponsor's drug management program when 
the beneficiary receives the second notice explaining that access to 
coverage for frequently abused drugs will be limited. We believe the 
intent of the statute is to confer appeal rights to beneficiaries at 
the point in the process at which a beneficiary is notified that access 
will be limited and provide an explanation of the restrictions that 
will be applied under the drug management program.
    As discussed earlier in this preamble, the proposed 90 day maximum 
timeframe for the plan sponsor to send the second or alternate second 
notice is being reduced to 60 days under this final rule. Specifically, 
the second or alternate second notice is to be provided to the 
beneficiary no more than the earlier of the date the sponsor makes the 
relevant determination or 60 days after the date of the initial notice. 
This 60 day period may be used by a plan sponsor to process information 
received from beneficiaries or communicate with prescribers who may 
have been unresponsive prior to receiving a copy of the initial notice 
the plan provided to the beneficiary. As we also previously noted in 
this preamble, we do not expect plans to routinely take the maximum 
amount of time to issue the second notice, and note that the plan must 
send it sooner if they make the relevant determination sooner. Reducing 
this period between the initial notice and the second or alternate 
second notice to a maximum of 60 days balances plan sponsors' need for 
time to process information from beneficiaries and prescribers, if 
applicable, with providing timely notice to beneficiaries.
    Comment: Several commenters encouraged CMS to make the appeals 
process regarding lock-in as simple as possible for beneficiaries to 
ensure that those who need particular drugs are able to access them. 
These commenters suggested that CMS implement all of the protections of 
CARA, including automatic escalation to independent review. Several 
commenters do not agree with CMS' interpretation of the CARA language 
on appealing lock-in and believe automatic escalation to the IRE would 
ensure beneficiary due process and access to needed prescription drugs. 
These commenters strongly oppose the use of the existing Part D appeals 
process for appeals of at-risk status or other consequences of drug 
management, and view the process as a significant barrier that will 
increase the timeframe for the lock-in appeals process. Commenters 
expressed concerns regarding case management and physician agreement as 
additional hurdles for beneficiaries who are not at-

[[Page 16474]]

risk, in addition to plan compliance with the current requirements for 
timely appeals. A few commenters stated that CARA contemplates a more 
streamlined process that is easier for beneficiaries to navigate and 
that automatic escalation would allow for improved tracking and 
monitoring of the scope and impact of the lock-in program, in addition 
to providing more uniform decision making across various plan programs. 
A commenter suggested that CMS conduct analysis to determine which 
option would prevent or reduce bias against beneficiaries, as well as 
minimize the timeframe by which the review process occurs, and upon 
implementation closely monitor the decisions of at-risk status to 
ensure decisions are made in the best interest of the beneficiary. A 
commenter recommended a separate appeals process that is similar to the 
grievance process.
    Response: We agree with commenters that the appeals process for 
enrollees identified as at-risk should be as easy to navigate as 
possible. As we noted in the proposed rule, Part D enrollees, plan 
sponsors, and other stakeholders are already familiar with the Part D 
benefit appeals process. Resolving disputes that arise under a plan 
sponsor's drug management program within the existing Part D benefit 
appeals process is not only required by statute, but will allow at-risk 
beneficiaries to be more familiar with, and more easily access, the 
appeals process as opposed to creating a new process specific to 
appeals related to a drug management program. Since the statute 
specifically refers to section 1860D-4(h) of the Act and the process we 
proposed is consistent with the existing appeals process, we disagree 
with the comment that further analysis of options is necessary to 
``prevent or reduce bias against beneficiaries.'' As we noted in the 
proposed rule, affording a plan sponsor the opportunity to review its 
initial determination may result in resolution of the disputed issues 
at a lower level of review and obviate the need for further appeal of 
the issues to the Part D IRE which, in turn, will minimize the time for 
reviewing and resolving disputes. With respect to the monitoring of 
plan sponsors' at-risk decisions, appeal decisions involving at-risk 
status will be subject to review under existing plan sponsor audit 
processes. We do not believe that a process similar to the existing 
grievance process, as recommended by a commenter, would comport with 
the statute, which requires the use of the existing appeals process. 
However, potential at-risk and at-risk beneficiaries retain their 
existing right to file a grievance with the plan if they have 
complaints about the prescription drug management program.
    With respect to the comment on case management and physician 
involvement, these are key components to drug management programs and 
we disagree that these components create additional hurdles for 
beneficiaries within the appeals process. In fact, we believe that the 
extensive case management we expect to be performed under plan 
sponsors' drug management programs, including ongoing communications 
among the plan sponsor, enrollee, prescriber(s) and pharmacy, will 
result in a relatively low volume of appeals under these programs. In 
addition, the appeals that are processed will be informed by the case 
management conducted by the plan sponsor and the involvement of the 
physician.
    Comment: Many commenters agreed with the proposal to utilize the 
existing Part D appeals process for at-risk beneficiaries, including 
not requiring automatic escalation for external review. These 
commenters believed that use of the existing process is the simplest 
and most administratively efficient approach, as it is familiar to 
beneficiaries, plan sponsors, and other stakeholders. These commenters 
also believed that plan sponsors should have the opportunity to review 
additional information and potentially adjust their initial decision 
before the case is reviewed by the IRE.
    Response: We thank the commenters for expressing support for use of 
the existing Part D benefit appeals process for beneficiaries 
identified as at-risk under a plan sponsor's drug management program. 
In addition to comporting with the statutory requirement, we agree with 
the commenters that use of the existing appeals process is the most 
administratively efficient approach and will result in better outcomes 
for at-risk beneficiaries. Not only is the existing appeals process 
familiar to enrollees, plans, and the IRE, but it allows a plan sponsor 
the opportunity to review information it used to make an at-risk 
determination under its drug management program (and any additional 
relevant information submitted as part of the appeal), promotes the 
resolution of issues at a lower level of administrative review and 
potentially reduces the need for the beneficiary to further appeal the 
issues in dispute. However, if the matter is not resolved by the plan 
sponsor at the redetermination level, an at-risk beneficiary will have 
the right to seek review by the Part D IRE.
    Comment: With respect to the calculation of the amount in 
controversy (AIC) for an ALJ hearing or judicial review, a commenter 
expressed support for using a formula based on the value of any refills 
for frequently abused drugs to calculate the AIC, noting that it will 
provide a greater probability for higher review, benefiting both the 
plan and the beneficiary.
    Response: We thank the commenter for expressing support for the 
proposal related to calculation of the AIC at Sec.  423.1970(b)(2) for 
disputes related to identification as an at-risk beneficiary under a 
plan sponsor's drug management program.
    Comment: A few commenters requested clarification as to whether the 
beneficiary Notice of Appeal Rights (reject code 569), which triggers a 
pharmacy to provide the beneficiary with the standardized pharmacy 
notice, Prescription Drug Coverage and Your Rights (CMS-10147), should 
accompany any POS claim rejections regarding prescriber or pharmacy 
lock-in or beneficiary-specific POS edits. Commenters recommended that 
the CMS-10147 not be provided to beneficiaries when a claim rejects at 
POS due to issues under a plan sponsor's drug management program.
    Response: We agree with the commenters that a POS claim rejection 
as a result of a restriction imposed under a plan sponsor's drug 
management program should not trigger delivery of the standardized 
pharmacy notice (CMS-10147). The pharmacy notice informs a beneficiary 
to contact his or her Part D plan to request a coverage determination. 
As discussed above in this final rule, a determination under a plan 
sponsor's drug management program is not a coverage determination as 
defined at Sec.  423.566. Instead, a determination made under a drug 
management program is governed by the provisions proposed at Sec.  
423.153(f) related to at-risk determinations. If a beneficiary 
disagrees with a decision made under Sec.  423.153(f), the beneficiary 
has the right to appeal such decision. The at-risk beneficiary will be 
notified of this appeal right pursuant to the notice described at Sec.  
423.153(f)(6).
    Comment: Several commenters requested clarification that when a 
beneficiary appeals their coverage limitation under the drug management 
program, that the request should be processed as a redetermination and 
not as a coverage determination. A few commenters requested 
clarification as to whether or not the POS edit or a lock-

[[Page 16475]]

in would be a coverage determination. Commenters asked if Chapter 18 of 
the Prescription Drug Benefit Manual would apply, and if so, noted that 
CMS should release proposed changes to the guidance for comment. 
Commenters inquired about how the CARA provisions would impact the 
coverage determination and redetermination processes, including 
approval and denial language used by plan sponsors. A commenter stated 
that they do not believe that these are coverage determinations because 
they involve access issues and being treated as such would pose system, 
policy, and process challenges. This commenter also asked for 
clarification on how this process would impact the appeals auto-forward 
star measure if treated as a coverage determination.
    Response: We did not propose to change the current definition of a 
coverage determination at Sec.  423.566. As we stated in the proposed 
rule, the types of decisions made under a drug management program align 
more closely with the regulatory provisions in Subpart D than with the 
provisions in Subpart M. We believe it is clearer to set forth the 
rules for at-risk determinations as part of Sec.  423.153 and cross 
reference Sec.  423.153(f) in relevant appeals provisions in Subpart M 
and Subpart U. The types of initial determinations made under a drug 
management program (for example, a restriction on the at-risk 
beneficiary's access to coverage of frequently abused drugs to those 
that are prescribed for the beneficiary by one or more prescribers) 
will be subject to the processes proposed at Sec.  423.153(f).
    What we did propose is that at-risk determinations made under the 
processes at Sec.  423.153(f) be adjudicated under the existing Part D 
benefit appeals process and timeframes set forth in Subpart M. Thus, we 
agree with these commenters that a determination made under a drug 
sponsor's drug management program should not be considered a coverage 
determination as defined at Sec.  423.566. If a beneficiary has a 
dispute related to a determination under the processes set forth at 
Sec.  423.153(f), the beneficiary has the right to request a 
redetermination and potentially higher levels of appeal. Therefore, 
drug management program disputes are subject to the appeals provisions 
in Subpart M and Subpart U of the regulations and the guidance in 
Chapter 18 of the Prescription Drug Benefit Manual also applies. 
Disputes under a plan sponsor's drug management program will be 
adjudicated under the existing appeals process and the regulatory 
timeframes will apply. The manual guidance will be updated, as 
necessary, to reflect any changes relevant to drug management program 
disputes. With respect to the redetermination notice, plan sponsors may 
use CMS' model redetermination notice (with modifications) or develop 
their own notice for informing an enrollee of the outcome of the 
appeal.
    Comment: A few commenters suggested that these appeals be limited 
to the beneficiary-level edit, the selected pharmacy or the prescriber, 
and not the underlying criteria for identification and guidance. 
Commenters noted that the appeal should be limited to the issue of 
whether the beneficiary is an appropriate candidate for lock-in, and 
not have any other scope. A commenter stated that the appeal should not 
relate to whether the plan may impose prior authorization or other 
utilization management restrictions on certain prescriptions. Rather, 
according to the commenter, beneficiary appeals should be limited to 
compliance with internal program criteria and CMS guidance, rather than 
allowing beneficiaries to challenge the underlying criteria. A 
commenter asked that CMS clarify how to effectuate a redetermination 
that requires the reversal of one limit, but other limits remain (for 
example, a formulary restriction and lock-in), and which limit takes 
priority. This commenter stated that beneficiaries would have to 
receive decision notices explaining that because of the remaining 
limits, their drug access will continue to be limited. Another 
commenter requested guidance on whether to handle a dispute involving 
beneficiary-specific POS claim edit and a dispute about a pharmacy or 
prescriber selection under the same appeal, or the POS edit as a 
coverage determination and the lock-in as an appeal.
    Response: As explained above, the statute explicitly states that 
one of the issues that can be appealed is the identification as an at-
risk beneficiary for prescription drug abuse under a Part D drug 
management program. With respect to the comment that an enrollee not be 
permitted to challenge the ``underlying criteria,'' we interpret this 
to mean a plan sponsor's clinical guidelines used to identify potential 
at-risk beneficiaries. We believe that a beneficiary disputing his or 
her at-risk determination will inherently be arguing that the plan's 
criteria for identifying at-risk beneficiaries do not apply to his or 
her particular circumstances. In addition to the at-risk determination, 
an enrollee has the right under the statute to appeal the selection of 
a prescriber or pharmacy as well as a coverage determination made under 
a plan sponsor's drug management program. As previously noted, 
determinations made under the processes at Sec.  423.153(f) will be 
adjudicated under the existing Part D benefit appeals process. Such 
determinations include limitation on access to coverage for frequently 
abused drugs, including a POS claim edit for frequently abused drugs 
that is specific to an at-risk beneficiary and a limit on an at-risk 
beneficiary's access to coverage for frequently abused drugs to those 
that are prescribed by one or more prescribers or dispensed to the 
beneficiary by one or more network pharmacies. As also previously 
noted, we did not propose to revise the existing definition of a 
coverage determination. In addition to a determination made under the 
processes at Sec.  423.153(f), a coverage determination, including an 
exception, is also subject to appeal. For example, if an enrollee does 
not dispute a POS edit for a quantity limit on a drug within 60 days of 
the date of the second notice pursuant to Sec.  423.153(f)(6) but later 
requests an exception to the quantity limit and that request is denied 
by the plan sponsor, the enrollee has the right to appeal the denial of 
the exception request. While the enrollee always has the right to 
request a coverage determination, changes to previously imposed 
limitations can also be implemented through ongoing case management and 
a new determination under the processes at Sec.  423.153(f).
    As noted earlier, a commenter asked whether a dispute regarding 
pharmacy or prescriber selection for purposes of lock-in and a dispute 
related to a beneficiary specific POS claim edit should be processed as 
the same appeal. If a beneficiary's request for an appeal raises 
multiple issues related to the limitations imposed on the beneficiary 
under a drug management program, the plan sponsor must address each 
issue as part of the appeal. For example, if the beneficiary's appeal 
request includes a dispute related to pharmacy selection and a POS 
edit, the adjudication and disposition of the appeal would involve both 
issues. All disputes raised in the enrollee's appeal request that arise 
under a plan's drug management program will be adjudicated as a single 
case. Assuming the request is filed timely, an enrollee could later 
appeal another limitation imposed under the drug management program, 
such as the selection of a prescriber, and the adjudication and 
disposition of that appeal would relate to prescriber selection for 
purposes of lock-in and be considered separate and distinct from any 
previous or pending appeal

[[Page 16476]]

requests. An appeal request must be filed within 60 calendar days from 
the date of the notice that explains the limitations imposed under the 
drug management program (unless there is good cause for late filing of 
the appeal). In addition to appealing determinations made under the 
processes at Sec.  423.153(f) that limit a beneficiary's access, a 
beneficiary who is subject to a Part D plan sponsor's drug management 
program always retains the right to request a coverage determination 
under existing Sec.  423.566 for any Part D drug that the beneficiary 
believes may be covered by their plan.
    With respect to effectuation of a redetermination of an at-risk 
determination, we agree with the commenter that the redetermination 
notice should clearly explain which aspect of the program is changing 
(for example, change in pharmacy lock-in) and which restrictions remain 
unchanged and will continue to apply to the beneficiary. We would like 
to clarify that all changes must be effectuated pursuant to the 
effectuation rules at Sec.  423.636 and Sec.  423.638; in other words, 
one change does not take ``priority'' over another applicable change 
with respect to effectuation. For example, if the outcome of a standard 
redetermination related to pharmacy and prescriber lock-in is a change 
to the pharmacy and the prescriber(s) an at-risk enrollee must use, the 
plan sponsor must implement both of those changes concurrently and as 
expeditiously as the enrollee's health condition requires, but no later 
than 7 calendar days from the date the plan sponsor receives the 
redetermination request.
    Comment: A few commenters suggested that CMS confirm that a 
beneficiary should not continue to receive inappropriate fills of 
opioids during the appeals process.
    Response: We thank the commenters for their request for 
confirmation that a beneficiary who has been identified as at-risk, has 
received the second notice, and has requested an appeal should not 
continue to receive ``inappropriate fills'' of opioids during the 
appeals process. We are interpreting ``inappropriate fills'' to mean a 
fill that does not comport with the specific restrictions placed on the 
at-risk beneficiary (for example, pharmacy lock-in). Once the 
beneficiary has been notified via the second notice of applicable 
restrictions, there should be no additional fills of any of the drug(s) 
subject to the drug management program that do not satisfy the 
parameters of the program established for the at-risk beneficiary, 
unless those restrictions are later modified through the appeals 
process.
    Comment: A commenter asked that CMS clarify whether these appeals 
are required to be handled based on the timeframes for a request for 
benefit or a request for payment, and whether or not these are subject 
to the expedited timeframes.
    Response: As noted in the proposed rule, at-risk determinations 
made under the processes at Sec.  423.153(f) would be adjudicated under 
the existing Part D benefit appeals process and timeframes set forth in 
Subpart M and Subpart U. As such, at-risk determinations will be 
subject to the benefit request timeframes set forth at Sec.  
423.590(a). We also proposed to amend the existing Subpart M rules at 
Sec.  423.584 and Sec.  423.600 related to obtaining an expedited 
redetermination and IRE reconsideration, respectively, to apply them to 
appeals of a determination made under a drug management program. 
Consistent with existing rules, the beneficiary must meet the 
requirements set forth in regulation in order to obtain an expedited 
review of their at-risk determination.
    Comment: In the case of a beneficiary appealing the Part D plan 
sponsor's initial selection of a prescriber or pharmacy, a commenter 
requested clarification whether the plan sponsor must obtain 
confirmation of acceptance from the new prescriber and/or pharmacy the 
beneficiary has selected as part of the appeal and whether this 
confirmation needs to be made within the appeals timeframes. This 
commenter expressed concern with obtaining such confirmation within the 
short window for adjudicating the case.
    Response: While we appreciate the commenter's concern regarding the 
timeframe for making a decision, we believe that the current timeframes 
afford the plan sponsor sufficient time to obtain confirmation from a 
prescriber and/or pharmacy that they have accepted the beneficiary's 
selection for lock-in. Under the current Part D benefit appeals 
process, plan sponsors are required to obtain similar information from 
prescribers and we believe that appeals of at-risk determinations 
should not be materially different from the outreach plans conduct as 
part of the coverage determination, exceptions, and benefits appeals 
process. Please refer to the discussion regarding confirmation of 
pharmacy and prescriber selection earlier in this preamble.
    Comment: A few commenters requested clarification as to whether or 
not plans would be permitted to terminate exceptions or implement 
temporary exceptions, in consultation with the prescriber, prior to the 
end of a plan year due to opioid case management and, if so, what prior 
notice requirements will apply.
    Response: Consistent with existing rules for the exceptions process 
at Sec.  423.578(c), if a drug is found to no longer be safe for the 
enrollee, then a previously approved exception request could be 
terminated prior to the end of the plan year. This would include if the 
plan determines that the previously approved exception is no longer 
safe as part of an at-risk determination or ongoing case management 
under its drug management program. A determination made by a plan 
sponsor under the processes at Sec.  423.153(f) is subject to appeal. 
For example, if a determination is made under a plan sponsor's drug 
management program to implement a beneficiary-specific POS claim edit 
for a drug, the beneficiary will be notified of that decision per the 
provisions at Sec.  423.153(f)(6) and the decision may be appealed. If 
the beneficiary does not appeal the decision within 60 calendar days 
from the date of the notice that explains the limitations the plan 
sponsor is placing on the beneficiary's access to coverage for 
frequently abused drugs, the beneficiary retains the right to request a 
coverage determination related to a beneficiary-specific POS edit at 
any time. And, as stated above, changes to previously imposed 
limitations can also be implemented through ongoing case management and 
a new determination under the processes at Sec.  423.153(f).
    Comment: A few commenters expressed concern regarding the lack of 
any proposed review criteria that would be used by plans to evaluate 
these appeals based on the at-risk determination. Commenters stated 
that appeal requests for opioid restrictions do not fit in any existing 
utilization management criteria (for example formulary and tiering 
exceptions criteria) and request additional guidance from CMS. These 
commenters are concerned that if the beneficiary appeals the limitation 
beyond the plan, the IRE or ALJ/attorney adjudicator will likely review 
these restrictions similar to a formulary or tiering exception and not 
based on the at-risk determination. A commenter indicated that this 
type of review may have an adverse impact on plans' D03 STARS Ratings, 
and if approved, an exception must be effectuated through the end of 
the plan year, which could remove the enrollee from case management for 
the rest of the year even if they meet the criteria for such.
    Response: We appreciate the commenters' concerns. If the case goes 
to the IRE, or higher levels of appeal, the administrative case file 
assembled by

[[Page 16477]]

the plan sponsor will contain the relevant information needed by the 
adjudicator to make an informed decision, such as information used by 
the plan sponsor to determine at-risk status, a description of the case 
management the plan has performed and the beneficiary's preference with 
respect to prescriber or pharmacy lock-in. We believe the regulations, 
applicable manual guidance, the plan sponsor's review criteria and case 
management notes on the access limitations that apply to the enrollee 
(which would be included in the administrative case file) will be 
sufficient for an adjudicator to review an appeal. With respect to the 
comment on an approved exception, please refer to the introductory 
section on drug management programs earlier in this preamble for a 
discussion of determinations where continuing an approved exception is 
no longer appropriate.
    Comment: With respect to the handling and reporting of appeals, a 
few commenters expressed concerns regarding the negative impact 
choosing to implement the lock-in procedures could potentially have on 
a plan. A commenter noted that opioid restriction reviews are not 
represented in their reporting and there are no allowable values in the 
audit universes that would designate a case as an opioid restriction. 
As a result, the commenter believes that if an approved exception is 
terminated prior to the end of the plan year, this could be detected on 
audit and the plan sponsor may be found to be non-compliant with 
exception processing requirements.
    Response: If a plan sponsor makes a determination under its drug 
management program per the processes at Sec.  423.153(f) that results 
in a finding that a drug previously approved through the exception 
process is found to no longer be safe for treating the beneficiary's 
disease or medical condition, the previously approved exception can be 
terminated prior to the end of the plan year. With respect to the 
commenter's concern about such a case being reviewed on audit, the plan 
sponsor would not be subject to a finding of non-compliance for having 
terminated a previously authorized exception if such termination is 
consistent with a clinically appropriate determination made under the 
plan sponsor's drug management program.
    Comment: A few commenters encourage CMS to communicate appeal-
related information and requirements in a clear, concise, and 
consistent manner to beneficiaries, the IRE, and plan sponsors to 
support a uniform understanding of the agency's rules and related 
expectations. A commenter stated that beneficiaries are not always 
aware of their exceptions and appeal rights and many do not understand 
how the process works. This commenter expressed concern that there may 
be a lack of transparency in the appeals process or excessive 
administrative burden for the beneficiary and provider, which may 
extend to those who may be inappropriately identified as at-risk and 
subject to unnecessary access restrictions to needed medications.
    Response: We agree with the commenters that appeals-related 
information and requirements should be communicated in a clear, 
concise, and consistent manner to beneficiaries, Part D plan sponsors, 
and the IRE. We will continue to update existing materials and develop 
new CARA related communications, such as the first and second notices 
described elsewhere in this final rule, with these goals in mind.
    After consideration of these comments, we are finalizing with 
modifications the provisions on CARA appeals with two clarifying 
changes. First, in this final rule, we are including a definition of 
at-risk determination to Sec.  423.560 to clarify the types of actions 
made under the processes at Sec.  423.153(f) that are subject to 
appeal. In addition to coverage determinations made under a drug 
management program, an enrollee has the right to appeal the 
identification as an at-risk beneficiary for prescription drug abuse; a 
beneficiary specific point-of-sale (POS) edit; the selection of a 
prescriber or pharmacy for purposes of lock-in; and information sharing 
for subsequent plan enrollments. Second, proposed new paragraph 
(a)(1)(v) at Sec.  423.562 has been revised to clarify that 
determinations made in accordance with the processes at Sec.  
423.153(f) are collectively referred to as an at-risk determination as 
defined at Sec.  423.560.
    Finally, we did not receive comments on the technical changes to 
Sec.  423.562(a)(1)(ii) and we are finalizing those changes as 
proposed.
(x) Termination of a Beneficiary's Potential At-Risk or At-Risk Status 
(Sec.  423.153(f)(14))
    Section 1860-D-4(c)(5)(F) of the Act provides that the Secretary 
shall develop standards for the termination of the identification of an 
individual as an at-risk beneficiary, which shall be the earlier of the 
date the individual demonstrates that he or she is no longer likely to 
be an at-risk beneficiary in the absence of limitations, or the end of 
such maximum period as the Secretary may specify.
    We proposed a maximum 12-month period for both a lock-in period, 
and also for the duration of a beneficiary-specific POS claim edit for 
frequently abused drugs. However, we also noted that if the sponsor 
implements an additional, overlapping limitation on the at-risk 
beneficiary's access to coverage for frequently abused drugs, the 
beneficiary may experience a coverage limitation beyond 12-months. The 
same is true for at-risk beneficiaries who were identified as such in 
the most recent prescription drug plan in which they were enrolled and 
the sponsor of their subsequent plan immediately implements a 
limitation on coverage of frequently abused drugs.
    Section 1860-D-4(c)(5)(F)(ii) of the Act states that nothing in 
CARA shall be construed as preventing a plan from identifying an 
individual as an at-risk beneficiary after such termination on the 
basis of additional information on drug use occurring after the date of 
notice of such termination. Accordingly, termination of an at-risk 
determination will not prevent an at-risk beneficiary from being 
subsequently identified as a potential at-risk beneficiary and an at-
risk beneficiary on the basis of new information on drug use occurring 
after the date of such termination that causes the beneficiary to once 
again meet the clinical guidelines.
    We received the following comments and our response follows:
    Comment: We received widespread comments that suggested that a 
maximum 12-month lock-in period was arbitrary, and that automatic 
termination of a beneficiary's at-risk status after 12 months threatens 
beneficiary safety. Commenters suggested that termination of such 
programs should be based on the needs of the beneficiary following a 
clinical assessment, and that an arbitrary time limit assumes without 
any clinical justification that he or she is no longer at-risk for drug 
abuse after 12 months. Following this period, many commenters also 
recommended plan sponsors should be permitted to conduct a review of 
the beneficiary's at-risk status at the expiration of the first 12 
months whether a beneficiary is determined at-risk, and if so, 
implement a termination after an additional 12 months, for 24 months 
total. While very few commenters supported the 12-month limitation 
timeframe, they did not provide rationale for their support.
    Response: We disagree with commenters that the 12-month period 
lock-in period we proposed is arbitrary. As we noted in the proposed 
rule, during the Stakeholder Listening Session on CARA held in November

[[Page 16478]]

2016, most commenters recommended a maximum 12-month period for lock-
in. We also noted that a 12-month lock-in period is common in Medicaid 
lock-in programs.\16\ Additionally, Section 1860D-4(c)(5)(F) grants the 
Secretary the authority to establish a maximum limitation period, and 
we choose to exercise said authority.
---------------------------------------------------------------------------

    \16\ Medicaid Drug Utilization Review State Comparison/Summary 
Report FFY 2015 Annual Report: Prescription Drug Fee-For Service 
Program (December 2016).
---------------------------------------------------------------------------

    CMS was, however, persuaded that a 12-month limitation maximum 
might be too short to ensure for beneficiary safety in some instances, 
and a longer limitation on access to coverage for frequently abuse 
drugs might be needed in such cases. We also re-reviewed limitation 
periods in Medicaid lock-in programs, and found that another very 
common lock-in period is 24 months. An additional prevalent trend for 
Medicaid lock-in periods is the ability to extend the lock-in period 
based on a review of appropriateness of continuance of lock-in.\17\ 
This trend aligned very closely with the many commenters who suggested 
a 24-month limitation period, and/or the ability of the plan sponsor to 
extend the limitation as a result of a clinical assessment. As a 
compromise between these two options, CMS is finalizing an initial 12-
month limitation period as proposed, but with ability modification 
allowing for the sponsor to extend the limitation for up to an 
additional 12 months. This extension will be dependent upon a clinical 
assessment whether the beneficiary demonstrates that they are no longer 
likely, in the absence of the limitation(s) the plan sponsor has placed 
on their access to coverage for frequently abused drugs, to be an at-
risk beneficiary for prescription drug abuse at the conclusion of the 
initial 12 months of the limitation. Thus, the maximum limitation 
period will be 24 months.
---------------------------------------------------------------------------

    \17\ Medicaid Drug Utilization Review State Comparison/Summary 
Report FFY 2016 Annual Report: Prescription Drug Fee-For Service 
Program (October 2017).
---------------------------------------------------------------------------

    Based on the provisions discussed earlier regarding when prescriber 
agreement is required, we believe the plan sponsor must, as part of the 
required clinical assessment, obtain prescriber agreement to extend a 
prescriber lock-in beyond the initial 12 months. Prescriber agreement 
will also be required with respect to extending beneficiary-specific 
POS edits. However, as with the initial POS edit, one can be extended 
without prescriber agreement if no prescriber is responsive. Also, the 
plan sponsor will be required to send the at-risk beneficiary another 
second notice, indicating that the limitation is being extended, and 
that they continue to be considered as an at-risk beneficiary. Aside 
from the required prescriber agreement just described, a plan sponsor 
will have discretion as to how they clinically assess whether an at-
risk beneficiary's demonstrates whether they are no longer likely to be 
an at-risk beneficiary for prescription drug abuse in the absence of 
limitation at the conclusion of the initial 12 months of the 
limitation. This assessment might include a review of medical records 
or prescription drug monitoring program data, if available to the 
sponsor. Given that the plan sponsor will not be required to obtain 
prescriber agreement to extend pharmacy lock-in past the initial 12 
month period, we expect the plan sponsor to have a clinical basis to 
extend the limitation, such as, the plan sponsor has recently rejected 
claims for frequently abused drugs from non-selected pharmacies to an 
extent that indicates the beneficiary may abuse frequently abused drugs 
without the limitation.
    Comment: A handful of commenters suggested that a limitation to 
coverage for frequently abused drugs only be terminated as a result of 
a clinical assessment by the at-risk beneficiary's prescriber with no 
maximum limitation period.
    Response: CMS believes it advisable to place a time limit on the 
duration of a limitation on access to coverage for frequently abused 
drugs that a plan sponsor can place on an at-risk beneficiary in order 
to balance the beneficiary's right to utilize their Part D benefit 
without encumbrance against with the sponsor's responsibility to manage 
the Part D benefit and promote the safety of its enrollees.
    Comment: A commenter suggested that CMS could consider requiring 
Part D sponsors to send annual notifications to beneficiaries who are 
subjected to a lock-in and their approving prescribers to let them know 
the lock-in will be extended another 12 months. This would afford 
beneficiaries and prescribers an annual opportunity to request that the 
lock-in be reconsidered or raise any concerns.
    Response: We decline to adopt this suggestion, as it does not 
suggest a basis upon which the limitation would be extended. Under the 
provision we are finalizing, a clinical assessment is required and, if 
the limitation on access to coverage is extended beyond the initial 12 
month period, the plan sponsor would be required to send the at-risk 
beneficiary an additional second notice pursuant to Sec.  423.153(f)(6) 
explaining that the limitation is being extended and for how long.
    Also, a beneficiary, their representative, or their prescriber on 
behalf of the beneficiary, is not precluded from requesting that the 
plan revisit its determination that the beneficiary is an at-risk 
beneficiary as defined at Sec.  423.100, or the terms of any limitation 
imposed on the beneficiary under the plan's drug management program.
    Based on these comments and our responses, we are therefore 
finalizing additional language at Sec.  423.153(f)(14). The revised 
language will specify that the identification of an at-risk beneficiary 
as such must terminate as of the earlier of the following:
     The date the beneficiary demonstrates through a subsequent 
determination, including but not limited to, a successful appeal, that 
the beneficiary is no longer likely, in the absence of the limitation 
under this paragraph, to be an at-risk beneficiary; or
     The end of a--
    ++ One year period calculated from the effective date of the 
limitation, as specified in the notice provided under paragraph (f)(6) 
of this section, unless the limitation was extended pursuant to 
paragraph (f)(14)(ii)(B) of this section.
    ++ Two year period calculated from the effective date of the 
limitation, as specified in a notice provided under paragraph (f)(6) of 
this section, subject to the following requirements:

--The plan sponsor determines at the end of the one year period that 
there is a clinical basis to extend the limitation.
--Except in the case of a pharmacy limitation imposed pursuant to 
paragraph (f)(3)(ii)(B) of this section, the plan sponsor has obtained 
the agreement of a prescriber of frequently abused drugs for the 
beneficiary that the limitation should be extended.
--The plan sponsor has provided another notice to the beneficiary in 
compliance with paragraph (f)(6) of this section.
--If the prescribers were not responsive after 3 attempts by the 
sponsor to contact them within 10 business days, then the sponsor has 
met the requirement of paragraph (f)(14)((ii)(B)(2) of this section.
--The sponsor may not extend a prescriber limitation implemented 
pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber 
was responsive.

[[Page 16479]]

(xi) Data Disclosure and Sharing of Information for Subsequent Sponsor 
Enrollments (Sec.  423.153(f)(15))
    In order for Part D sponsors to conduct the case management/
clinical contact/prescriber verification pursuant to Sec.  
423.153(f)(2), certain data disclosure and sharing of information must 
happen. First, CMS must identify potential at-risk beneficiaries to 
sponsors who are in the sponsors' Part D prescription drug benefit 
plans. In addition, a new sponsor must have information about potential 
at-risk beneficiaries and at-risk beneficiaries who were so identified 
by their immediately prior plan and enroll in the new sponsor's plan 
and such identification had not terminated before the beneficiary 
disenrolled from the immediately prior plan. Finally, as discussed 
earlier, sponsors may identify potential at-risk beneficiaries by their 
own application of the clinical guidelines (that is, applying the 
minimum clinical guidelines more frequently or in applying the 
supplemental clinical guidelines). It is important that CMS be aware of 
which Part D beneficiaries sponsors identify on their own, as well as 
which ones have been subjected to limitations on their access to 
coverage for frequently abused drugs under sponsors' drug management 
programs for Part D program administration and other purposes.
    Regarding data disclosures, section 1860D-4(c)(5)(H) of the Act 
provides that, in the case of potential at-risk beneficiaries and at-
risk beneficiaries, the Secretary shall establish rules and procedures 
to require the Part D plan sponsor to disclose data, including any 
necessary individually identifiable health information, in a form and 
manner specified by the Secretary, about the decision to impose such 
limitations and the limitations imposed by the sponsor under this part. 
We plan to expand and modify the scope of OMS and the MARx system as 
appropriate to accommodate the data disclosures necessary to oversee 
and facilitate Part D drug management programs.
    Section 1860-D-4(c)(5)(I) of the Act requires that the Secretary 
establish procedures under which Part D sponsors must share information 
when at-risk beneficiaries or potential at-risk beneficiaries enrolled 
in one prescription drug plan subsequently disenroll and enroll in 
another prescription drug plan offered by the next sponsor (gaining 
sponsor). We plan to expand the scope of the reporting to MARx under 
the current policy to include the ability for sponsors to report 
similar information to MARx about all pending, implemented, and 
terminated limitations on access to coverage of frequently abused drugs 
associated with their plans' drug management programs.
    We proposed to codify the data disclosure and information sharing 
process under the current policy, with the expansion just described, by 
adding data disclosure requirements in Sec.  423.153.
    We received the following comments and our response follows:
    Comment: We received comments supportive of our proposal regarding 
data disclosures and sharing of information. We did not receive 
comments opposed to our proposal.
    Response: We thank the commenters for their support.
    Comment: A commenter recommended that we clarify sponsors must 
conduct case management with respect to potential at-risk beneficiaries 
who are current utilizers under the Part D sponsor and not such 
beneficiaries who are identified by the prior sponsor. This commenter 
stated further that if sponsors are required to conduct case management 
on potential at-risk beneficiaries identified by the prior sponsor, 
then the response due date should be extended for such cases (that is, 
to next OMS quarter), as sponsors may need to contact the prior sponsor 
for case details to conduct case management for the prior claims data. 
In extending the outlier response due date, this commenter urged us to 
consider that the volume of such cases may differ based on the size of 
the prior sponsor.
    Response: Pursuant to Sec.  423.153(f)(2)(i), sponsors are required 
to conduct case management with respect to all potential at-risk 
beneficiaries who are identified by CMS or the sponsor applying the 
clinical guidelines, regardless of whether the beneficiary meets the 
clinical guidelines based on PDE data from the beneficiary's current 
Part D contract alone or across multiple contracts (including contracts 
the beneficiary was previously enrolled in during the measurement 
period).
    Sec.  423.153(f)(2)(ii) does provide an exception to the case 
management requirements with respect to potential at-risk beneficiaries 
identified as such by their most recent prior plan, if the 
identification has not been terminated and the sponsor obtains case 
management information from the previous sponsor, which is clinically 
adequate and up to date. Under the current policy, a sponsor may report 
in OMS that a beneficiary's case is under review. We plan to keep this 
response. However, because of this comment, we realize that there may 
be some instances in which a sponsor receives notice about a potential 
at-risk beneficiary who has just enrolled in its plan, but the deadline 
to provide information to CMS within 30 days from the date of the most 
recent prior CMS report identifying potential at-risk beneficiaries 
pursuant to proposed Sec.  423.153(f)(15) might be very short. 
Therefore, we are modifying Sec.  423.153(f)(15) such that the sponsor 
would have to provide the information within 30 days from the date of 
the most recent CMS report received after receiving such a notice.
    Comment: We received a comment requesting clarity on the issue of 
patient consent in the sharing of the patient personal health 
information related to implementation of these finalized provisions.
    Response: While the commenter's concerns about sharing personal 
health information are not entirely clear, we note that Part D plan 
sponsors are required under Sec.  423.136 to establish procedures for 
maintenance and sharing of medical records and other health information 
about enrollees in accordance with all applicable Federal and State 
confidentiality laws.
    Comment: We received a question asking what data sources we will 
use to identify LIS beneficiaries who are potentially at-risk.
    Response: We plan to use OMS to identify all potential at-risk 
beneficiaries who meet the minimum criteria of the clinical guidelines, 
discussed earlier, to report to Part D plan sponsors. We will modify 
the OMS as appropriate to implement the Part drug management program 
requirements. We will issue guidance and updated OMS technical user 
guides to plan sponsors at a later time, including data sources used in 
OMS reporting.
    Comment: We received a question whether the original plan that 
identified the beneficiary's at-risk status has a duty to inform the 
new plan of individual's status.
    Response: Plan sponsors will be required to communicate 
beneficiaries' potential and at-risk statuses to each other through the 
data disclosures and information sharing we are finalizing in this 
section.
    Comment: We received a question whether we will be providing new 
response codes for pharmacy and prescriber lock-in in OMS, specifically 
whether we will eliminate the response code ``BSC'' which stands for 
``Beneficiary did not meet sponsor's internal criteria.'' We also 
received some specific suggestions to: (1) Include responses to OMS 
that differentiate between lock-in and a claim edit at POS;

[[Page 16480]]

(2) add a sponsor summary page to OMS; (3) make enhancements to MARx to 
recognize internal and external contract changes; and (4) allow for 
more complete case management information to be shared to obviate the 
needs for sponsors to contact each other.
    Response: We appreciate these suggestions. We plan to expand and 
modify the scope of OMS and MARx as appropriate and technically 
possible in light of the final requirements in this rule to accommodate 
the data disclosures necessary to oversee and facilitate Part D drug 
management programs. We plan to issue guidance about this expansion and 
details on the modifications. Based on these comments, we are 
finalizing Sec.  423.153(f)(15) with modifications to specify the 
following regarding data disclosure:
     CMS identifies potential at-risk beneficiaries to the 
sponsor of the prescription drug plan in which the beneficiary is 
enrolled.
     A Part D sponsor that operates a drug management program 
must disclose any data and information to CMS and other Part D sponsors 
that CMS deems necessary to oversee Part D drug management programs at 
a time, and in a form and manner, specified by CMS. The data and 
information disclosures must do all of the following:
    ++ Provide information to CMS within 30 days of receiving a report 
about a potential at-risk beneficiary from CMS.
    ++ Provide information to CMS about any potential at-risk 
beneficiary that meets paragraph (1) of the definition in Sec.  423.100 
that a sponsor identifies within 30 days from the date of the most 
recent CMS report identifying potential at-risk beneficiaries.
    ++ Provide information to CMS about any potential at-risk 
beneficiary that meets paragraph (2) of the definition in Sec.  423.100 
within 30 days of the date after which the sponsor referred to in 
paragraph (2).
    ++ Provide information to CMS as soon as possible but no later than 
7 days of the date of the initial notice or second notice that the 
sponsor provided to a beneficiary, or as soon as possible but no later 
than 7 days of a termination date, as applicable, about a beneficiary-
specific opioid claim edit or a limitation on access to coverage for 
frequently abused drugs.
    ++ Transfer case management information upon request of a gaining 
sponsor as soon as possible but no later than 2 weeks from the gaining 
sponsor's request when--

--An at-risk beneficiary or potential at-risk beneficiary disenrolls 
from the sponsor's plan and enrolls in another prescription drug plan 
offered by the gaining sponsor; and
--The edit or limitation that the sponsor had implemented for the 
beneficiary had not terminated before disenrollment.

    We note that this final provision contains a technical correction 
to refer to 7 days instead of 7 business days the first instance this 
timeframe is used for consistency and added ``as soon as possible'' in 
Sec.  423.153(f)(15(D). It also substitutes ``provide information'' for 
``respond'' in one place for consistent terminology in this section.
(xii) Out of Scope Comments and Summary
    We received comments on the following topics which were out of 
scope of our proposal and to which we are therefore not responding: (1) 
CMS oversight of Part D drug management programs; (2) Education of Part 
D enrollees and providers regarding prescription drug management 
programs; (3) A seven day limit on opioids for acute pain; (4) 
Additional ideas about how to address the national opioid overuse 
crisis; (5) Opioid use standards in Medicare Set Aside arrangement 
(MSAs).
2. Flexibility in the Medicare Advantage Uniformity Requirements
    We have determined that providing access to services (or specific 
cost sharing for services or items) that are tied to health status or 
disease state in a manner that ensures that similarly situated 
individuals are treated uniformly is consistent with the uniformity 
requirement in the Medicare Advantage (MA) regulations at Sec.  
422.100(d). We solicited comments on this reinterpretation in the 
proposed rule. In response to those comments and our further 
consideration of this issue, we are providing guidance here to MA 
organizations. As discussed in more detail below, the Bipartisan Budget 
Act of 2018 (Pub. L. 115-123) amends section 1853 of the Act to 
authorize waiver of the uniformity requirement beginning in 2020 for MA 
plans that provide additional supplemental benefits (which are not 
required to be health care benefits) to chronically ill enrollees. It 
also amends section 1859 of the Act to require a nationwide revision of 
the Medicare Advantage Value-Based Insurance Design test model 
currently administered by the Center for Medicare and Medicaid 
Innovation, which provides similar flexibility to participating MA 
plans to offer targeted supplemental benefits. Our reinterpretation of 
the uniformity requirements is not identical to these statutory 
changes, but does provide a comparable flexibility for MA plans that is 
consistent with the requirement that MA plans offer uniform benefits, 
with uniform premium and uniform cost-sharing to all enrollees.
    This regulatory requirement that MA plans provide uniform benefits 
implements both section 1852(d) of the Act, which requires that 
benefits under the MA plan are available and accessible to each 
enrollee in the plan, and section 1854(c) of the Act, which requires 
uniform premiums for each enrollee in the plan. Previously, we required 
MA plans to offer all enrollees access to the same benefits at the same 
level of cost sharing. We have determined that these statutory 
provisions and the regulation at Sec.  422.100(d) mean that we have the 
authority to permit MA organizations the ability to reduce cost sharing 
for certain covered benefits, offer specific tailored supplemental 
benefits, and offer lower deductibles for enrollees that meet specific 
medical criteria, provided that similarly situated enrollees (that is, 
all enrollees who meet the medical criteria identified by the MA plan 
for the benefits) are treated the same. In addition, there must be some 
nexus between the health status or disease state and the specific 
benefit package designed for enrollees meeting that health status or 
disease state. As examples, uniformity flexibility will allow an MA 
plan to offer an enrollee with diabetes any or all of the following:
     Reduced cost sharing for endocrinologist visits;
     More frequent foot exams as a tailored, supplemental 
benefit;
     A lower deductible.
    In these examples, non-diabetic enrollees will not have access to 
these tailored cost sharing or supplemental benefits; however, any 
enrollee that develops diabetes will then have access to these 
benefits.
    We believe that our reinterpretation of the uniformity requirement 
is consistent with the underlying Part C statutory requirements because 
targeted supplemental benefits and cost sharing reductions must be 
offered uniformly to all enrollees with a specified health status or 
disease state. By tying specific supplemental benefits to specific 
medical conditions, MA plans would be building upon the concept of 
medical necessity and developing targeted benefits designed to treat 
the illnesses of enrollees who meet specific medical criteria. Further, 
treating similarly situated enrollees equally preserves the uniformity 
of the benefits package. This

[[Page 16481]]

flexibility is similar to our policy over the past several years of 
permitting MA plans to adopt tiered cost-sharing, that is, allowing 
plans to have different cost sharing for contracted providers of the 
same type (for example, hospitals) provided that enrollees are equally 
able to access the lower cost-sharing providers.
    Such flexibility under our new interpretation of the uniformity 
requirement is not without limits, however, as section 1852(b)(1)(A) of 
the Act prohibits an MA plan from denying, limiting, or conditioning 
the coverage or provision of a service or benefit based on health-
status related factors. MA regulations (for example, Sec. Sec.  
422.100(f)(2) and 422.110(a)) reiterate and implement this non-
discrimination requirement. In interpreting these obligations to 
protect against discrimination, we have historically indicated that the 
purpose of the requirements is to protect high-acuity enrollees from 
adverse treatment on the basis of their higher cost health conditions 
(79 FR 29843; 76 FR 21432; and 74 FR 54634). As MA plans consider this 
new flexibility in meeting the uniformity requirement, they must be 
mindful of ensuring compliance with non-discrimination responsibilities 
and obligations.\18\ MA plans that exercise this flexibility must 
ensure that the cost sharing reductions and targeted supplemental 
benefits are for health care services that are medically related to 
each disease condition. CMS will be concerned about potential 
discrimination if an MA plan is targeting cost sharing reductions and 
additional supplemental benefits for a large number of disease 
conditions, while excluding other, potentially higher-cost conditions. 
We will review benefit designs to make sure that the overall impact is 
non-discriminatory and that higher acuity, higher cost enrollees are 
not being excluded in favor of healthier populations.
---------------------------------------------------------------------------

    \18\ Among these responsibilities and obligations are compliance 
with Title VI of the Civil Rights Act, section 504 of the 
Rehabilitation Act, the Age Discrimination Act, section 1557 of the 
Affordable Care Act, and conscience and religious freedom laws.
---------------------------------------------------------------------------

    In identifying eligible enrollees, the MA plan must use medical 
criteria that are objective and measurable, and the enrollee must be 
diagnosed by a plan provider or have their existing diagnosis certified 
or affirmed by a plan provider to assure equal application of the 
criteria. Objective criteria that are contained in written policies and 
that are clearly and adequately communicated to enrollees (such as in 
the EOC and other plan documents) are necessary to ensure that these 
tailored benefits are not provided in a discriminatory fashion and that 
the overall package of benefits is uniform among similarly situated 
individuals. We view this flexibility as an extension of the concept 
that as an enrollee in good health without cardiac problems would not 
receive cardiac rehabilitation services, an enrollee who does not meet 
the medical criteria would not receive the targeted benefits offered by 
an MA plan.
    CMS is currently testing value based insurance design (VBID) 
through the use of our demonstration authority under section 1115A of 
the Act (42 U.S.C. 1315a, added by section 3021 of the Affordable Care 
Act), and we note that Bipartisan Budget Act of 2018 expands the 
testing of the model under section 1115A(b) to all 50 states by 2020. 
This demonstration includes some of the elements that are a part of our 
reinterpretation of the uniformity requirements. However, there are 
also features of the VBID demonstration that are unique to the 
demonstration test, such as the ability for participating plans to 
target Part D benefits, the restriction to certain medical conditions, 
and the requirement that plans apply to participate. We expect the VBID 
demonstration to provide CMS with insights into future VBID innovations 
for the MA program.
    After the publication of the proposed rule, Congress passed the 
Bipartisan Budget Act of 2018 (Pub. L. 115-123). Section 50322 of the 
law expanded supplemental benefits in Section 1852(a)(3) of the Act and 
also authorized waiver of the uniformity requirements to permit MA 
plans to offer targeted supplemental benefits for the chronically ill 
through new provisions, effective in plan year 2020.
    Specifically, the Bipartisan Budget Act of 2018 expands 
supplemental benefits available to chronically ill enrollees by adding 
a new subparagraph (D) to Section 1852(a)(3). This subparagraph expands 
supplemental benefits for the chronically ill to include benefits that 
``have a reasonable expectation of improving or maintaining the health 
or overall function of the chronically ill enrollee and may not be 
limited to being primarily health related benefits.'' These additional 
supplemental benefits will be qualitatively different than the 
supplemental health care benefits that MA plans may currently offer and 
may continue to offer to enrollees who are not chronically ill. In 
addition, it provides authority for the waiver of uniformity 
requirements ``only with respect to supplemental benefits provided to a 
chronically ill enrollee.''
    We have evaluated how this new authority for the Secretary to waive 
uniformity requirements relates to our concurrent reinterpretation of 
uniformity requirements. We believe that a waiver of uniformity 
requirements was authorized in this new provision to allow for the 
delivery of different, non-uniform benefits to a subset of enrollees 
that meet a specific definition: Chronically ill enrollee.\19\ We do 
not believe that our reinterpretation, which also allows for targeted 
benefits based on the disease state or health status, can only be 
accomplished through a waiver of uniformity requirements.
---------------------------------------------------------------------------

    \19\ The Bipartisan Budget Act specifically identifies the 
chronically ill as individuals with (1) one or more morbidities that 
is life threatening and limits overall function (2) has a high risk 
of hospitalization and adverse outcomes, and (3) requires intensive 
care coordination.
---------------------------------------------------------------------------

    We believe that the waiver authorized under the Bipartisan Budget 
Act is necessary in order to allow MA plans the flexibility to offer 
chronically ill enrollees supplemental benefits that are not uniform 
across the entire population of the chronically ill. The Bipartisan 
Budget Act states that supplemental benefits must ``have a reasonable 
expectation of improving or maintaining the health or overall function 
of the chronically ill enrollee.'' This means that MA plans do not have 
to offer uniform supplemental benefits to all chronically ill 
enrollees, and instead, may vary supplemental benefits offered to the 
chronically ill as it relates to the individual enrollee's specific 
medical condition and needs. In other words, a supplemental benefit 
adopted under the new statutory provision may not be provided to a 
chronically ill enrollee if that benefit does not have a reasonable 
likelihood of improving that enrollee's health condition. Therefore, we 
have determined that the waiver of uniformity requirements and the 
enactment of section 1852(a)(3)(D) of the Act does not limit our 
authority to interpret sections 1851(d) and 1854(c) of the Act as 
permitting uniform benefits to include specific services targeted for 
groups of similarly situated specific enrollees based on medical 
criteria.
    Our reinterpretation of uniformity requirements maintains the 
spirit of the MA regulations at Sec.  422.100(d), which aims for equal 
treatment across all similarly situated enrollees. A specific health 
status or disease state--or meeting a specific group of medical 
criteria--is merely a means of ``grouping'' similarly situated 
enrollees for equal access to and treatment in connection with coverage 
of benefits.

[[Page 16482]]

All enrollees in that group must have access to the same targeted 
benefits. The new expansion of supplemental benefits for the 
chronically ill breaks that construct because the needs of one 
chronically enrollee may be very different from those of another within 
the same health status or disease state. As such, a waiver was 
authorized to provide for differences in supplemental benefits across 
chronically ill enrollees in order for MA organization to craft 
specific supplemental benefit offerings for each vulnerable plan member 
so that individual needs are met.
    Further, our reinterpretation of uniformity requirements is 
compatible with the new legislation in Bipartisan Budget Act. Beginning 
in 2020, MA plans may offer three forms of supplemental benefits: 
``standard'' supplemental benefits offered to all enrollees; 
``targeted'' supplemental benefits offered to qualifying enrollees by 
health status or disease state; and ``chronic'' supplemental benefits 
offered to the chronically ill. The first two (standard and targeted) 
will be allowable in 2019. Only ``chronic'' supplemental benefits will 
be evaluated under the new expansive definition in the Bipartisan 
Budget Act and be eligible for a waiver of the uniformity requirements. 
Standard and targeted supplemental benefits will be evaluated under our 
existing interpretation of whether the benefit is ``primarily health 
related.'' It is possible that an enrollee qualifies for a ``targeted'' 
supplemental benefits as well as ``chronic'' supplemental benefits. In 
that circumstance, the MA plan must provide the targeted supplemental 
benefits as long as the enrollee establishes the required health status 
or disease state and the benefits are medically appropriate. However, 
the MA plan must only provide ``chronic'' supplemental benefits if the 
benefit has a reasonable expectation of improving or maintaining the 
health or overall function of the chronically ill enrollee.
    Based on these differences, it will be important for MA plans to 
identify in their bids and in their Evidence of Coverage documents 
which supplemental benefits are offered as ``standard'', ``targeted'', 
or ``chronic'' benefits. CMS will evaluate the acceptability of the 
supplemental benefit offering based on this designation and the 
standards identified in section 1852(a)(3) of the Act. We believe that 
both the new uniformity interpretation and the new statutory provision 
will succeed in increasing MA plans' flexibility and plan options and 
ultimately allow for better health outcomes.
    We received the following comments, and our response follows:
    Comment: A number of commenters supported CMS' implementation of 
this reinterpretation. These commenters stated that their ability to 
lower cost sharing will help beneficiaries seek high value and 
effective care.
    Response: We thank commentators for their support of this 
reinterpretation.
    Comment: Commenters suggested that CMS include regulatory text in 
the final rule that confirms that the flexibility that will be allowed 
in the MA uniformity requirements.
    Response: In this final rule, we are reinterpreting existing 
statutory and regulatory authority to allow MA organizations the 
ability to reduce cost sharing for certain covered benefits, offer 
specific tailored supplemental benefits, and offer different lower 
deductibles for enrollees that meet specific medical criteria. Thus, it 
is unnecessary to provide additional regulation language.
    Comment: A number of commenters requested that CMS provide 
additional sub-regulatory guidance surrounding this policy.
    Response: We will provide additional guidance and update all 
corresponding guidance documents (that is, bid guidance and operational 
guidance) to reflect the new interpretation. This guidance will be 
available before contract year 2019 bids are due.
    Comment: We received a number of comments asking that CMS issue 
sub-regulatory guidance with examples for permissible and impermissible 
actions, as well as examples of what would be considered 
discriminatory. In addition, others suggested that CMS specify the 
medical criteria that MA plans should use to determine enrollee 
eligibility as well as clear guidelines for eligible tailored 
supplemental benefits and/or reduced cost sharing.
    Response: CMS will provide additional operational guidance before 
CY 2019 bids are due.
    Comment: A commenter recommended that CMS open its implementing 
guidance to public comment prior to issuance.
    Response: We appreciate this comment. We will not be able to 
solicit industry comment in time for CY 2019 bids. However, we will 
take this suggestion under consideration as we develop future guidance 
and will reach out for input as needed.
    Comment: A number of commenters requested that CMS to provide 
certain technical clarifications. For instance, commenters questioned 
whether the plan-level deductible could be eliminated, or just reduced, 
and if lower cost sharing means a zero-dollar copay.
    Response: Yes, under this reinterpretation, a plan may reduce or 
eliminate a deductible, co-pay, or cost sharing for Part C services. We 
remind all organizations that this is reinterpretation is about MA 
benefits only and does not permit changes in Part D cost sharing or 
Part D benefits, which must be consistent with Part D applicable law 
and CMS policy. In addition, additional operational guidance will be 
provided before CY 2019 bids are due.
    Comment: We also received comments asking CMS to clarify whether a 
plan may reduce or eliminate certain cost sharing based on 
participation in a disease management program.
    Response: Yes, under this reinterpretation, a plan may restrict 
cost sharing reductions based on participation in a disease management 
program so long as there is equal access to the disease management 
program based on objective criteria related to a health status or 
disease state.
    Comment: We received comments asking CMS to clarify whether a plan 
may offer different co-pays to a subset of the population for some 
visits, but not all.
    Response: We appreciate the comment and are still considering how 
our new interpretation of the uniformity requirement would apply to 
such situations. We intend to provide clarifying guidance on this issue 
through HPMS memoranda and updates to the Medicare Managed Care Manual.
    Comment: A commenter requested that CMS clarify whether reduced 
cost sharing can be extended to premiums.
    Response: No, this flexibility does not extend to premiums; 
beneficiaries in the same plan must have the same premium. Allowing 
different premiums would violate section 1854(c) of the Act, which 
explicitly requires uniform premiums. Our reinterpretation of section 
1854(c), section 1852(d) regarding access to benefits for all 
enrollees, and the regulations implementing those statutes permits only 
reductions in Part C cost sharing and deductibles, and in targeting 
Part C supplemental benefits. As noted elsewhere, these specific 
benefits must be tied to health status or disease state and must be 
applied to health care services that are medically related to each 
disease condition. Additionally, targeted benefits and reduced cost 
sharing must be offered in a manner that ensures that similarly 
situated individuals are treated uniformly is consistent with the 
uniformity

[[Page 16483]]

requirement in the Medicare Advantage (MA) regulations at Sec.  
422.100(d).
    Comment: We received a comment asking CMS to confirm if MA plans 
may choose to apply these flexibilities to out-of-network benefits.
    Response: CMS will provide additional guidance and update all 
corresponding guidance documents to reflect the new interpretation. 
This guidance will be available before CY 2019 bids are due.
    Comment: We received comments requesting that CMS encourage plans 
to offer such flexibilities to beneficiaries with specific conditions 
(for example, dementia), stating that such flexibilities could help the 
ongoing treatment.
    Response: In the proposed rule, we stated that an MA plan may offer 
reduced cost sharing, deductibles, and or targeted supplemental 
benefits to enrollees diagnosed with specific diseases. In identifying 
eligible enrollees, the MA plan must use medical criteria that are 
objective and measurable, and the enrollee must be diagnosed by a plan 
provider or have their existing diagnosis certified or affirmed by a 
plan provider to assure equal application of the objective criteria 
necessary to provide equal treatment of similarly situated individuals. 
We do not have the authority to restrict or mandate which diagnoses or 
health conditions a plan chooses for this flexibility. Plans may 
determine which diagnoses or health conditions they choose to offer 
these flexibilities. CMS encourages plans to consider the population of 
their plan when making these decisions.
    Comment: We received a number of comments requesting that CMS allow 
reduced cost sharing and targeting supplemental benefits based on 
conditions unrelated to medical conditions, such as living situation 
and income. A commenter suggested CMS allow plans to reduced premiums 
for beneficiaries who sign up for automated premium payments.
    Response: The revised uniformity interpretation does not allow 
plans to reduce cost sharing and offer targeted supplemental benefits 
based on criteria unrelated to a diagnosis or health condition. We have 
determined that a plan may only provide access to targeted supplemental 
benefits (or specific cost sharing for certain services or items) based 
on health status or disease state. In identifying eligible enrollees, 
the MA plan must use medical criteria that are objective and 
measurable. In addition, MA plans that exercise this flexibility must 
ensure that the cost sharing reductions and targeted supplemental 
benefits are for health care services that are medically related to 
each diagnosis or health condition. Note that, effective CY 2020, the 
Bipartisan Budget Act of 2018 calls for a new category of supplemental 
benefits to be made available to chronically ill enrollees that are not 
limited to being primarily health related. Because the new benefits 
will not be limited to the primarily health related standard, it is 
possible for certain offerings to address issues beyond a specific 
medical condition, such as social supports. However, the basis for 
offering the new benefits will be based solely on an enrollees' 
qualification as ``chronically ill'' and may not be based on conditions 
unrelated to medical conditions, such as living situation and income.
    Comment: We received a comment urging CMS to include an affirmation 
that C-SNPs would automatically be permitted to adjust benefits and 
cost sharing based on the eligibility groupings that CMS has approved 
for each C-SNP.
    Response: CMS will update sub-regulatory guidance to clarify the 
impact of both this reinterpretation and the Bipartisan Budget Act on 
SNP policy.
    Comment: A commenter suggested that CMS should also provide 
clarification on how the additional benefit flexibility for highly 
integrated dual eligible special needs plans (D-SNPs), as outlined in 
Chapter 16b of the Medicare Managed Care Manual, is retained and/or 
modified under these provisions.
    Response: Chapter 16b and any corresponding guidance will be 
updated to clarify any impact this reinterpretation has on D-SNP 
policy.
    Comment: A commenter asked CMS to allow plans to provide certain 
supplemental benefits only to fully integrated D-SNP (FIDE SNP) 
enrollees who do not meet nursing home level of care requirements that 
would otherwise make them eligible for home and community-based 
services under an Elderly Waiver.
    Response: CMS will update sub-regulatory guidance to clarify the 
impact of both this reinterpretation and the Bipartisan Budget Act on 
D-SNP policy.
    Comment: We received some comments suggesting that CMS allow plans 
to reduce cost sharing and offer targeting supplemental benefits based 
on functional status, in addition to a medical condition.
    Response: There must be an underlying disease condition that is 
diagnosed, such as Alzheimer's disease or Parkinson's disease, in order 
for the plan to reduce cost sharing and offer targeted supplemental 
benefits. As stated in the proposed rule, in identifying eligible 
enrollees, the MA plan must use medical criteria that are objective and 
measurable, and the enrollee must be diagnosed by a plan provider or 
have their existing diagnosis certified or affirmed by a plan provider 
to assure equal application of the objective criteria necessary to 
provide equal treatment of similarly situated individuals. 
Specifically, MA plans offering targeted benefits will be responsible 
for developing the criteria to identify enrollees who fall within each 
of the clinical categories selected by an organization. Furthermore, 
cost sharing reductions and targeted supplemental benefits must be for 
health care services that are medically related to each disease 
condition.
    Note that, effective CY 2020, the Bipartisan Budget Act of 2018 
calls for a new category of supplemental benefits to be made available 
to chronically ill enrollees that are not limited to being primarily 
health related. Because the new benefits will not be limited to the 
primarily health related standard, it is possible for certain offerings 
to address issues beyond a specific medical condition, such as social 
supports. However, the basis for offering the new benefits will be 
based solely on an enrollees' qualification as ``chronically ill'' and 
may not be based on conditions unrelated to medical conditions, such as 
living situation and income.
    Comment: We received a comment asking CMS to expand our definition 
of health status or disease state to include ``medically complex 
patients.''
    Response: We have determined that a plan may only provide access to 
targeted supplemental benefits (or specific cost sharing for certain 
services or items) based on health status or disease state. In 
identifying eligible enrollees, the MA plan must use medical criteria 
that are objective and measurable. MA plans offering targeted benefits 
are responsible for developing the criteria to identify enrollees who 
fall within each of the clinical categories selected by an 
organization.
    Comment: We received comments requesting that CMS clarify whether a 
plan may reduce cost sharing only for a subset of high-quality network 
providers as long as all members with the same health status or disease 
state receive the same lower cost sharing for using these providers.
    Response: Yes, under this flexibility, a plan may reduce cost 
sharing for certain high-quality providers to members with a specified 
health status or disease state. MA plans may identify high-value 
providers across all Medicare provider types. This can include 
physicians and practices, hospitals,

[[Page 16484]]

skilled-nursing facilities, home health agencies, ambulatory surgical 
centers, etc.
    Comment: Some commenters suggested CMS delay implementation, 
stating that plans need time to enhance their existing internal tools 
and systems to accommodate varying benefit structures for different 
sub-populations within a single plan. Some commented that this may be 
administratively burdensome to implement, and therefore, may not be 
equal adoption across all MA organizations.
    Response: CMS will permit this flexibility beginning in CY 2019. MA 
organizations that need additional time to consider whether and how to 
take advantage of this new flexibility are not required to offer 
targeted supplemental benefits or reductions in cost sharing or 
deductibles. We believe it is important to allow plans the flexibility 
to target and better provide for the needs of their enrollees. Our 
reinterpretation of the uniformity requirements offers flexibility to 
MA organizations in designing their coverage and is not a mandate.
    Comment: Some commenters recommended that only high-performing 
plans be permitted to provide flexibility in the MA Uniformity 
Requirements.
    Response: CMS appreciates these comments and believes this 
flexibility will help enrollees seek higher value care. Therefore, CMS 
will permit all plans to use this flexibility beginning in CY 2019. CMS 
appreciates these comments and believes this flexibility will help 
enrollees seek higher value care. This flexibility is not a change to 
the regulation; it is a reinterpretation of an existing regulation. 
Therefore, all MAOs must comply with uniformity requirements regardless 
of individual plan performance. CMS will permit all plans to use this 
flexibility beginning in CY 2019.
    Comment: We received a number of comments suggesting that this 
reinterpretation is premature. Some commenters suggested that CMS wait 
until the VBID demonstration has concluded.
    Response: The existing VBID demonstration will continue. 
Information regarding this demonstration can be found at https://innovation.cms.gov/initiatives/vbid/. While we have adopted features of 
the VBID demonstration, the VBID demonstration and the new uniformity 
flexibilities are distinct. CMS will permit this flexibility beginning 
in CY 2019, as we believe it is important to allow plans the 
flexibility to target and better provide for the needs of their 
enrollees. We hope that the VBID demonstration will provide CMS with 
insights into future innovations for the MA program.
    Comment: Some commenters suggested that CMS take a measured 
approach by setting initial limits on the number of targeted conditions 
and tailored benefit packages that an MA plan can offer.
    Response: The existing uniformity flexibility regulatory authority 
does not allow CMS to limit the number of targeted conditions without 
additional rulemaking.
    Comment: Some suggested that CMS adopt the oversight requirements 
in the VBID demonstration in allowing plans to use this flexibility 
under the new reinterpretation.
    Response: Currently, the VBID demonstration has a number of 
oversight requirements, including some marketing restrictions, 
monitoring to ensure compliance with demonstration rules, data 
reporting to help CMS evaluate outcomes, and restricting low performing 
plans from participation. CMS has no plans to adopt these additional 
demonstration requirements. First, CMS has a robust compliance and 
auditing program to oversee MA plans and all benefit packages are 
reviewed by CMS. Therefore, we do not believe any additional monitoring 
or compliance is needed. Second, MA rules require that this benefit be 
available in marketing materials and transparent to enrollees. 
Therefore, we cannot restrict marketing this benefit. Third, we believe 
we do not need to introduce any additional uniformity reporting as the 
VBID reporting is designed to aide demonstration evaluation. However, 
CMS will monitor the implementation of this flexibility and make 
appropriate adjustments as needed.
    Comment: Commenters asked that CMS clarify how this flexibility 
impacts the VBID demonstration.
    Response: The existing VBID demonstration will continue. We note 
that Bipartisan Budget Act of 2018 expands the testing authority under 
section 1115A(b) to all 50 states. This flexibility will not impact the 
VBID demonstration, which is separate from this rulemaking. The new 
flexibilities discussed here will have no impact on current VBID 
operations. Information regarding this demonstration can be found at 
https://innovation.cms.gov/initiatives/vbid/. The VBID demonstration 
will provide CMS with insights into future innovations for the MA 
program.
    Comment: A commenter asked if CMS planned to implement reporting 
requirements related to this flexibility, noting that such requirements 
are in the VBID demonstration.
    Response: CMS has no plans to add any reporting requirements 
related to uniformity flexibility at this time. We do note that MA 
plans must explain the targeted supplemental benefits and reductions in 
cost sharing and deductibles in their bids (OMB 0938-0763), including 
information necessary for CMS to evaluate if there is any 
discrimination involved. In addition, MA plans must include 
descriptions of these benefits in benefit disclosures required under 
Sec.  422.111.
    Comment: We received a number of comments expressing concern that 
this policy could increase beneficiary confusion, particularly as it 
relates to marketing materials provided during the annual election 
process.
    Response: To mitigate beneficiary confusion, CMS will require MA 
plans that take advantage of this flexibility to include benefit 
flexibility information in their CY 2019 EOC. Also, indication of 
additional benefits and/or reduced cost sharing for enrollees with 
certain health conditions will be displayed in Medicare Plan Finder.
    Comment: We received several comments asking CMS to clarify whether 
plans will be permitted to market this flexibility to potential 
enrollees. Some suggested CMS permit marketing. Others suggested CMS 
prohibit marketing.
    Response: Plans will be allowed to market the additional benefits 
and/or reduced cost sharing to potential enrollees to give 
beneficiaries the information necessary to choose the best plan for 
their health care needs. Plans will be required to follow the same CMS 
marketing rules for this benefit, as they are required to follow when 
marketing any other benefit. This includes ensuring that materials are 
not materially inaccurate or misleading or otherwise make material 
misrepresentations. Specifically, CMS will require that plans include 
comprehensive benefit flexibility information in their CY 2019 EOC and 
indicate the additional benefits and/or reduced cost sharing in 
Medicare Plan Finder.
    Comment: A number of commenters expressed concern that this policy 
may lead to discrimination. For example, some commenters expressed 
concern that a plan may balance the reduction of cost sharing for one 
group by increasing cost sharing for others. Further, some commenters 
expressed concern that this could lead to lead to ``cherry-picking'' by 
plans for beneficiaries with low-cost conditions while discriminating 
against

[[Page 16485]]

those with higher-cost chronic conditions.
    Response: As noted in the preamble language, the implementation of 
this flexibility must not violate existing anti-discrimination rules 
(for example, service category cost sharing and per member per month 
actuarial equivalence standards communicated by CMS annually in the 
Call Letter). Organizations that exercise this flexibility must ensure 
that the cost sharing reductions and targeted supplemental benefits 
only apply to healthcare services that are medically related to each 
health status or disease state. CMS will not permit cost sharing 
reductions across all benefits for an enrollee; cost sharing reductions 
must be for specific benefits related to a specific health status or 
disease state. Specifically, plans must not target cost sharing 
reductions and additional supplemental benefits for a large number of 
disease conditions, while excluding other higher-cost conditions. CMS 
will review benefit designs to make sure that targeted disease state(s) 
and/or clinical condition(s) included in the benefit design are non-
discriminatory and that higher acuity, higher cost enrollees are not 
being excluded in favor of healthier populations.
    Comment: A commenter recommended that plan members should have full 
appeal rights with respect to denial of access to supplemental 
benefits.
    Response: All negative coverage decisions are subject to appeal 
rights. CMS is reinterpreting existing statutory language at section 
1854(c) and 1852(d) of the Act, and the implementing regulation at 
Sec.  422.100(d), to allow MA organizations the ability to reduce cost 
sharing for certain covered benefits, offer specific tailored 
supplemental benefits, and offer lower deductibles for enrollees that 
meet specific medical criteria. We have reviewed and considered all 
comments on this clarification and will begin implementing this 
additional flexibility in CY 2019. In addition, we will provide 
additional operational guidance before CY 2019 bids are due.
3. Segment Benefits Flexibility
    In reviewing section 1854(h) of the Act and Medicare Advantage (MA) 
regulations governing plan segments, we have determined that the 
statute and existing regulations may be interpreted to allow MA plans 
to vary supplemental benefits, in addition to premium and cost sharing, 
by segment so long as the supplemental benefits, premium, and cost 
sharing are uniform within each segment of an MA plan's service area. 
Plans segments are county-level portions of a plan's overall service 
area which, under current CMS policy, are permitted to have different 
premiums and cost sharing amounts as long as these premiums and cost 
sharing amounts are uniform throughout the segment. As county-level 
areas, these are separate rating setting areas within the plan's 
service area; no further subdivision is permitted. We are proposed to 
revise our interpretation of the existing statute and regulations to 
allow MA plan segments to vary by supplemental benefits in addition to 
premium and cost sharing, consistent with the MA regulatory 
requirements defining segments at Sec.  422.262(c)(2).
    We received the following comments, and our response follows:
    Comment: We received a number of comments supporting the 
implementation of this reinterpretation.
    Response: We thank commentators for their support of this 
reinterpretation.
    Comment: Many commenters requested that CMS clarify if this 
segmentation can be offered to a sub-set of the network providers.
    Response: The MA regulations at Sec.  422.2 define a provider 
network as occurring at the MA plan level: ``. . . the providers with 
which an MA organization contracts or makes arrangements to furnish to 
furnish covered health care services to Medicare enrollees under a MA 
coordinated care plan or network PFFS plan''. In implementing its 
network adequacy standard CMS allows for networks at the MA plan level 
(a provider specific plan) or at the contract level. In addition to 
being inconsistent with the regulations we believe that allowing 
networks to be established at the MA plan segment level would introduce 
an unnecessary level of complexity to the MA program.
    Comment: A commenter asked if there are any restrictions to the 
benefits that may vary and if all supplemental benefits and services 
are eligible, or is this specific to a set of supplemental benefits?
    Response: Plans may vary supplemental benefits by plan segment 
consistent with the bid submitted for the segment. All basic benefits 
(that is, Part A and B benefits) must be offered by all MA plans in all 
segments.
    Comment: A commenter asked if the maximum out-of-pocket (MOOP) 
amount was one of the elements that may vary.
    Response: Yes, because the MOOP is an element of the cost-sharing 
structure of the plan, each segment may have its own MOOP. This 
flexibility already exists in MA.
    Comment: Commenters asked CMS to clarify if in sub-regulatory 
guidance that plans are allowed to display multiple segments in the 
Evidence of Coverage (EOC), Summary of Benefits, and other coverage 
documents.
    Response: Plans will be required to follow the same CMS 
communication, disclosure and marketing guidelines for each segment In 
addition, as noted in section II.B, CMS will require plans to include 
comprehensive benefit flexibility information in their CY 2019 (EOC).
    Comment: A commenter noted that CMS uses both ``supplemental 
benefits'' and ``benefits'' in the preamble language and asked CMS 
explicitly clarify if this new segment benefit flexibility applies only 
to supplemental benefits and not to the core MA benefit package to 
which beneficiaries are entitled.
    Response: Thank you for the comment. All MA plans must provide 
basic benefits--meaning Part A and Part B benefits consistent with the 
cost-sharing limits identified in section 1854(e)(4)(A) \20\ and Sec.  
422.100(j) and (k)--in all segments. We have determined that the 
statute and existing regulations may be interpreted to allow MA plans 
to vary supplemental benefits, in addition to premium and cost sharing, 
by segment, as long as the benefits, premium, and cost sharing are 
uniform within each segment of an MA plan's service area. Supplemental 
benefits include cost-sharing reductions from the actuarial equivalent 
on average of original Medicare for basic benefits and coverage of 
additional services and items not covered by original Medicare.
---------------------------------------------------------------------------

    \20\ Beginning in 2006, an MA plan may reduce cost sharing below 
the actuarial value specified in section 1854(e)(4)(A) of the Act 
only as a mandatory supplemental benefit. The actuarial value of the 
deductibles, coinsurance, and copayments applicable to the basic 
benefits on average to enrollees in an MA plan must be equal to the 
actuarial value of the deductibles, coinsurance, and copayments that 
would be applicable with respect to such benefits on average to 
individuals enrolled in original Medicare.
---------------------------------------------------------------------------

    Comment: Some commenters expressed concern that CMS is moving too 
quickly in implementing this reinterpretation and that such flexibility 
should be tested on a small scale first.
    Response: We believe this flexibility will allow plans to better 
target and provide for the needs of their populations. CMS will monitor 
the implementation of this flexibility and make appropriate adjustments 
as needed. In addition, we note that MA organizations are not required 
to use this flexibility to vary benefits, cost-sharing and premium at 
the segment level.

[[Page 16486]]

    Comment: We received many comments related to concern about benefit 
transparency and that this flexibility to offer segments with varied 
benefits, cost-sharing, or premiums, may lead to beneficiary confusion. 
Commenters expressed concern that this flexibility will result in 
beneficiary confusion regarding the differences between plans, which 
may create a confusing environment for Medicare beneficiaries trying to 
make informed decisions when choosing plans.
    Response: Plans will be required to follow existing rules governing 
mandatory disclosures (for example, Sec.  422.111), communications and 
marketing. In addition, CMS will require plans to include comprehensive 
benefit flexibility information in their CY 2019 EOC.
    In this final rule, CMS is adopting a reinterpretation of section 
1854(h) of the Act and Sec. Sec.  422.100(d)(2) and 422.262 to allow MA 
organizations the ability to vary supplemental benefits, in addition to 
premium and cost sharing, by segment, as long as the benefits, premium, 
and cost sharing are uniform within each segment of an MA plan's 
service area. We have reviewed comments on our proposal and have 
considered these comments as we finalize the policy. Plans will be 
permitted to begin implementing this flexibility in CY 2019.
4. Maximum Out-of-Pocket Limit for Medicare Parts A and B Services 
(Sec. Sec.  422.100(f)(4) and (5) and 422.101(d))
    As provided at Sec. Sec.  422.100(f)(4) and (5) and 422.101(d)(2) 
and (3), all Medicare Advantage (MA) plans (including employer group 
waiver plans (EGWPs) and special needs plans (SNPs)), must establish 
limits on enrollee out-of-pocket cost sharing for basic benefits 
(meaning Parts A and B services) that do not exceed the annual limits 
established by CMS. CMS added Sec.  422.100(f)(4) and (5), effective 
for coverage in 2011, under the authority of sections 1852(b)(1)(A), 
1856(b)(1), and 1857(e)(1) of the Act in order not to discourage 
enrollment by individuals who utilize higher than average levels of 
health care services (that is, in order for a plan not to be 
discriminatory) (75 FR 19709-11). Section 1858(b)(2) of the Act 
requires a limit on in-network out-of-pocket expenses for enrollees in 
regional MA plans. In addition, local preferred provider organization 
(LPPO) plans, under Sec.  422.100(f)(5), and regional PPO (RPPO) plans, 
under section 1858(b)(2) of the Act and Sec.  422.101(d)(3), are 
required to have a ``catastrophic'' limit inclusive of both in- and 
out-of-network cost sharing for all Parts A and B services, the annual 
limit which is also established by CMS; all cost sharing (that is, 
deductibles, coinsurance, and copayments) for Parts A and B services, 
excluding plan premium, must be included in each plan's maximum out-of-
pocket (MOOP) amount subject to these limits. As stated in the CY 2018 
final Call Letter \21\ and in the 2010 final rule (75 FR 19710), CMS 
currently sets MOOP limits based on a beneficiary-level distribution of 
Parts A and B cost sharing for individuals enrolled in Medicare Fee-
for-Service (FFS) for local and regional MA plans.
---------------------------------------------------------------------------

    \21\ The CY 2018 final Call Letter may be accessed at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
---------------------------------------------------------------------------

    CMS proposed to amend Sec. Sec.  422.100(f)(4) and (5) and 
422.101(d)(2) and (3) to clarify that CMS may use Medicare FFS data to 
establish the annual MOOP limits, which have historically been linked 
to values that approximate the 85th and 95th percentile of out-of-
pocket expenditures for beneficiaries in original Medicare. The 
proposal included that CMS have authority to increase the voluntary 
MOOP limit to another percentile level of Medicare FFS, increase the 
number of service categories that have higher cost sharing in return 
for offering a lower MOOP amount, and implement more than two levels of 
MOOP and cost sharing limits to encourage plan offerings with lower 
MOOP limits. CMS also proposed that it have authority to increase the 
number of service categories that have higher cost sharing in return 
for offering a lower (voluntary) MOOP amount. To codify these various 
authorities, CMS proposed regulation text permitting CMS to set the 
annual MOOP limits to strike a balance between limiting maximum 
beneficiary out-of-pocket costs and potential changes in premium, 
benefits, and cost sharing, with the goal of ensuring beneficiary 
access to affordable and sustainable benefit packages. CMS intends to 
use the annual Call Letter process to communicate its application of 
the regulation and to transition changes to MOOP limits over time, 
beginning no earlier than in CY 2020, to avoid disruption to benefit 
designs and minimize potential beneficiary confusion.
    As noted in the proposed rule, CMS discussed in the 2010 rulemaking 
(75 FR 19709) that it provides greater flexibility in establishing cost 
sharing for basic benefits to MA plans that adopt a lower, voluntary 
MOOP limit than is available to plans that adopt the higher, mandatory 
MOOP limit. The number of beneficiaries with access to a voluntary MOOP 
limit plan and the proportion of total enrollees in a voluntary MOOP 
limit plan has decreased significantly from CY 2011 to CY 2017.
    Currently, CMS sets the mandatory MOOP amount at approximately the 
95th percentile of projected beneficiary out-of-pocket spending. Stated 
differently, 5 percent of Medicare FFS beneficiaries are expected to 
incur approximately $6,700 or more in Parts A and B deductibles, 
copayments, and coinsurance. CMS sets the voluntary MOOP amount of 
$3,400 to represent approximately the 85th percentile of projected 
Medicare FFS out-of-pocket costs. The Office of the Actuary conducts an 
annual analysis to help CMS determine these MOOP limits. Since the MOOP 
requirements for local and regional MA plans were finalized in 
regulation, a strict application of the 95th and 85th percentiles would 
have resulted in MOOP limits for local and regional MA plans 
fluctuating from year-to-year. To avoid enrollee confusion, allow plans 
to provide stable benefit packages year over year, and minimize 
disincentives to the adoption of the lower voluntary MOOP amount 
because of fluctuations in the amount, CMS has exercised discretion in 
order to maintain stable MOOP limits from year-to-year that approximate 
but are not exactly at the 85th and 95th percentile of, beneficiary 
cost sharing in Medicare FFS.
    In the proposed rule, CMS explained that it would want to change 
the MOOP limits if a consistent pattern of increasing or decreasing 
costs emerges over time. CMS also summarized how stakeholders have 
suggested changes to how CMS establishes MOOP limits, including 
suggestions to use the most appropriate data to inform its decision-
making, increase the MOOP limits and the number of service categories 
that have higher cost sharing in return for a plan offering a lower 
MOOP limit, and implement different levels of MOOP and service category 
cost sharing standards to encourage plan offerings with lower MOOP 
limits.
    CMS explained in the proposed rule its goal to establish future 
MOOP limits based on the most relevant and available data, or 
combination of data, that reflects beneficiary health care costs in the 
MA program and maintains MA benefit stability over time. Medicare FFS 
data currently represents the most relevant and available data at this 
time so the proposal included codifying use of Medicare FFS data in 
Sec. Sec.  422.100(f)(4) and (5) and 422.101(d)(2) and (3).
    CMS also explained in the proposed rule that it wished to have 
flexibility to

[[Page 16487]]

change its existing methodology (of using the 85th and 95th percentiles 
of projected beneficiary out-of-pocket Medicare FFS spending) in the 
future. The proposed rule was explicitly based on a policy objective of 
striking the appropriate balance between limiting MOOP costs and 
potential changes in premium, benefits, and cost sharing with the goal 
of making sure beneficiaries can access affordable and sustainable 
benefit packages. While CMS intends to continue using the 85th and 95th 
percentiles of projected beneficiary out-of-pocket spending for the 
immediate future to set MA MOOP limits, the proposed amendments to 
Sec. Sec.  422.100(f)(4) and (5) and 422.101(d)(2) and (3) were to 
incorporate authority to balance these factors to set the MOOPs. The 
flexibility contemplated by the proposed rule would permit CMS to 
annually adjust mandatory and voluntary MOOP limits based on changes in 
market conditions and to ensure the sustainability of the MA program 
and benefit options.
    The proposed rule also explained how CMS would, in advance of each 
plan year, use the annual Call Letter and other guidance documents to 
explain its application of the regulations and the data used to 
identify MOOP limits. In addition, CMS committed to transitioning any 
significant changes adopted using the new proposed authority over time 
to avoid disruption to benefit designs and minimize potential 
beneficiary confusion.
    In conclusion, CMS proposed to amend Sec. Sec.  422.100(f)(4) and 
(5) and 422.101(d)(2) and (3) to clarify that CMS may use Medicare FFS 
data to establish annual MOOP limits and to adopt a flexible standard 
for setting the MOOPs. This flexible standard would authorize CMS to 
increase the voluntary MOOP limit to another percentile level of 
Medicare FFS beneficiary spending; increase the number of service 
categories that have higher cost sharing in return for offering a lower 
MOOP amount; and implement more than two levels of MOOP and cost 
sharing limits (as a means to encourage plan offerings with lower MOOP 
limits).
    We received the following comments on this proposal, and our 
response follows,
    Nearly all commenters who provided feedback on this provision 
(Maximum Out-of-Pocket Limit for Medicare Parts A and B Services 
(Sec. Sec.  422.100(f)(4) and (5) and 422.101(d))) also provided 
feedback on the proposal at section II.B.5 (Cost Sharing Limits for 
Medicare Parts A and B Services (Sec.  422.100(f)(6))). In this 
section, we address comments that focus on either this section or both 
sections, while we address comments that focus on cost sharing limits 
in section II.B.5.
    Comment: The majority of commenters supported this proposal, 
stating that CMS should primarily use Medicare FFS and MA encounter 
data to inform its decision-making, and that CMS should consider 
authorizing more than two levels of MOOP and associated cost sharing 
standards to encourage plan offerings with lower MOOP limits. Some 
commenters also made suggestions for levels of MOOP limits and cost 
sharing service category adjustments that could be especially 
beneficial.
    Response: We thank commenters for their support. CMS's goal is to 
establish future MOOP limits based on the most relevant and available 
data, or combination of data, that reflects beneficiary health care 
costs in the MA program and maintains benefit stability over time. This 
final rule limits that data to the FFS Medicare data, but as other data 
sources become accessible, relevant, and of the quality necessary to 
make these determinations, we will engage in rulemaking to change the 
rule.
    Comment: Many commenters expressed concern with MA encounter data 
being used at this time to establish MOOP levels based on data quality 
issues. Commenters also encouraged CMS to continue working with MA 
organizations to improve the validity and reliability of MA encounter 
data. A commenter suggested CMS consider other data such as of 
Marketplace Qualified Health Plan review data.
    Response: Medicare FFS data is the most relevant and available data 
at this time. CMS will consider future rulemaking to use MA encounter 
cost data as well as Medicare FFS data to establish MOOP limits. In 
determining completeness and accuracy of MA encounter data CMS does 
consider the various managed care payment arrangements and payment 
policies that may exist between organizations, as compared to Medicare 
FFS data (which are based on relatively consistent payment schedules 
and payment policies). At this time we cannot commit to a timeline for 
use of MA encounter data or other data sources to establish MOOP 
limits. As we learn more and are able to establish standards for the 
completeness and sufficiency of alternate data sources, we will revisit 
this issue.
    Comment: Some commenters noted concern with the specific 
methodology that CMS would use other than the 85th or 95th percentile 
of Medicare FFS beneficiary costs to establish MOOP limits and how 
abrupt changes may impact cost sharing and the levels of MOOP limits. A 
commenter also stated concern about what level of change to MOOP limits 
would be considered ``significant'' and necessitate a multi-year 
transition. Some commenters suggested CMS maintain the current 
voluntary and mandatory MOOP limits (that is, $3,400 and $6,700) and 
establish additional MOOP limits between these levels with prorated 
cost sharing standards to minimize any impact to benefit design and 
beneficiaries. Some commenters suggested CMS further change the 
regulatory cost sharing standards for inpatient, skilled nursing 
facility, emergency care, and other professional services as an 
incentive for plans to adopt lower MOOP limits, while other commenters 
cautioned CMS to limit changes to these categories to prevent 
discrimination.
    Response: We appreciate the feedback and will take these 
suggestions and concerns under consideration. CMS plans to transition 
changes under the finalized regulations over time, beginning no earlier 
than CY 2020, to avoid disruption to benefit designs and minimize 
potential beneficiary confusion. The regulation standard adopted in 
this final rule for Sec. Sec.  422.100(f)(4) and (5) and 422.101(d)(2) 
and (3) (that the MOOP be set to strike a balance between limiting 
maximum beneficiary out of pocket costs and potential changes in 
premium, benefits, and cost sharing, with the goal of ensuring 
beneficiary access to affordable and sustainable benefit packages) will 
apply to determinations regarding a transition period from one 
particular MOOP to another MOOP. We anticipate that sudden and 
significant shifts in the MOOP would cause sudden changes in premiums, 
benefits and cost sharing, which are identified under the new 
regulation text as something to be minimized. Consistent with past 
practice, CMS will continue to publish the expected changes for the 
next year and a description of how the regulation standard is applied 
(that is, the methodology used) in the annual Call Letter prior to bid 
submission so that MA plans can submit bids consistent with MA 
standards. CMS has historically provided prior notice and an 
opportunity to comment on the Call Letter guidance document and does 
not expect that to change. This will provide MA organizations adequate 
time to comment and prepare for changes. We anticipate potential 
changes in MOOP limits or cost sharing based on MA benefit design 
strategies will be

[[Page 16488]]

conveyed through existing enrollee communication materials.
    Comment: Several commenters were concerned about CMS's strategy to 
promote plan adoption of lower MOOP limits by increasing the cost 
sharing flexibility for those plans. They suggested that allowing this 
flexibility may result in discriminatory benefit designs as plans may 
raise cost sharing limits for certain service categories more likely to 
be utilized by vulnerable beneficiaries, and that such beneficiaries 
would be especially disadvantaged if they do not reach the lower, 
voluntary MOOP limit. Some commenters identified concern for specific 
service categories if their cost sharing limits were raised (for 
example, inpatient and professional services) and requested CMS be 
especially thoughtful when considering changes to these categories. A 
few commenters proposed that CMS consider lowering cost sharing limits 
for mandatory MOOP plans as another method to encourage adoption of a 
lower MOOP limit.
    Response: CMS agrees that while increasing flexibility for MA plans 
that voluntarily offer lower MOOP limits can allow for improved plan 
design, it will be important to make sure that vulnerable patient 
populations are not discriminated against and that plan designs are not 
confusing to beneficiaries. Other existing regulations governing cost 
sharing designs of MA plans--such as the prohibition on discrimination 
(Sec.  422.100(f)(2)), requirement that certain services have cost 
sharing that is no higher than FFS Medicare limits (Sec.  422.100(j)), 
and requirement that overall plan cost-sharing for coverage of basic 
benefits must be actuarially equivalent to the level of cost sharing 
(deductible, copayments, or coinsurance) charged to beneficiaries under 
the original Medicare program option (Sec.  422.254(b)(4))--remain in 
place and are unchanged by this final rule. CMS will manage the 
flexibility plans have in setting cost sharing limits to make sure that 
plan designs are not discriminatory. For example, CMS does not intend 
to significantly increase cost sharing limits as a percentage of 
Medicare FFS above current levels for inpatient, primary, and specialty 
care based on cost sharing standards that CMS publishes in its annual 
Call Letter. CMS intends to continue the practice of furnishing 
information to MA organizations about the methodology used to establish 
cost sharing limits and the thresholds CMS identifies as non-
discriminatory through the annual Call Letter process or Health Plan 
Management System (HPMS) memoranda and solicit comments, as 
appropriate.
    Comment: Some commenters reported concern with the proposal to 
amend Sec.  422.100(f)(6) and implement it as described in the proposed 
rule strategy because of unintended consequences, such as beneficiaries 
having to choose between plans offering different levels of MOOP limits 
and variability in cost sharing across services. A commenter suggested 
that CMS update plan selection resources such as Medicare Plan Finder 
(MPF) to simplify the plan selection process and assist beneficiaries 
choose the plan that best fits their unique health care needs.
    Response: We agree that cost sharing must not be discriminatory and 
that it is important to make sure that beneficiaries have adequate 
information to support their plan enrollment decision-making. 
Beneficiaries typically make decisions based on plan characteristics 
that are important to their needs (for example, benefits, cost sharing, 
MOOP limit, plan premium, and providers) and are not familiar with the 
complexities associated with bidding guidance and cost sharing 
standards that plans use to prepare bids. To minimize beneficiary 
confusion, CMS will continue evaluations and enforcement of the current 
authority prohibiting plans from misleading beneficiaries in their 
communication materials. In addition, we will disapprove a plan bid if 
its proposed benefit design substantially discourages enrollment in 
that plan by certain Medicare-eligible individuals. In addition, CMS 
will continue efforts to improve plan offerings and plan comparison 
tools and resources (for example, MPF and 1-800-MEDICARE).
    Comment: We received a comment that noted the importance of MOOP 
limits as part of a benefit offering for beneficiary protection and 
that there are MA plans being marketed that do not have a MOOP for out-
of-network services.
    Response: CMS notes that all Medicare LPPOs and RPPOs are required 
to have a combined in- and out-of-network MOOP limit. HMO-POS plans may 
offer out-of-network benefits as supplemental benefits, but are not 
required to have these services contribute to the in-network MOOP limit 
or a combined in- and out-of-network MOOP limit.
    We received over 40 comments pertaining to the proposal, with the 
majority reflecting support to amend Sec. Sec.  422.100(f)(4) and (5) 
and 422.101(d)(2) and (3) to clarify that CMS may use Medicare FFS data 
to establish annual MOOP limits. The majority of comments also 
supported the regulation amendment to add a standard governing CMS 
establishment of MOOP limits (to strike a balance between limiting 
maximum beneficiary out of pocket costs and potential changes in 
premium, benefits, and cost sharing, with the goal of ensuring 
beneficiary access to affordable and sustainable benefit packages). As 
noted in the proposed rule, CMS will interpret and implement these 
amendment to give CMS the authority to change MOOP limits; increase the 
number of service categories that have higher cost sharing in return 
for offering lower MOOP limits; and implement more than two levels of 
MOOP limits. Consistent with past practice, CMS will continue to 
publish the expected changes for the next year and a description of how 
the regulation standard is applied in the annual Call Letter prior to 
bid submission so that MA plans can submit bids consistent with MA 
standards. CMS plans to transition changes under the finalized 
regulations over time, beginning no earlier than CY 2020, to avoid 
disruption to benefit designs and minimize potential beneficiary 
confusion. After careful consideration of all of the comments we 
received, we are finalizing the proposal to amend Sec. Sec.  
422.100(f)(4) and (5) and Sec.  422.101(d)(2) and (3) as described with 
an applicability date of January 1, 2020; this applicability date is 
consistent with our intent that these new standards apply to cost 
sharing limits set for plans years after 2019. We are also finalizing 
minor revisions as follows:
    (1) In Sec.  422.100(f)(5), we are finalizing the regulation text 
without the phrase ``annually determined by CMS using Medicare Fee for 
Service and to establish appropriate'' in the introductory text; we 
believe that the regulation text finalized in the paragraph (f)(5)(ii) 
is sufficiently clear on this point.
    (2) In Sec.  422.100(f)(5)(ii), we will finalize the text with 
``CMS sets'' in place of ``CMS will set'' for clarity.
5. Cost Sharing Limits for Medicare Parts A and B Services (Sec.  
422.100(f)(6))
    In addition to MOOP Limits, MA plan cost sharing for Parts A and B 
services is subject to additional regulatory requirements and limits in 
Sec. Sec.  417.454(e), 422.100(f)(6), and 422.100(j). Section 
422.100(f)(6) provides that cost sharing must not be discriminatory and 
CMS determines annually the level at which certain cost sharing becomes 
discriminatory. Sections 417.454(e) and 422.100(j) are based on how 
section 1852(a)(1)(B)(iii) and (iv) of the Act directs that cost

[[Page 16489]]

sharing for certain services may not exceed the cost sharing levels in 
Medicare Fee-for-Service (FFS); under the statute and the regulations, 
CMS may add to that list of services. CMS identifies Parts A and B 
services that are more likely to be used by enrollees in establishing 
its cost sharing parameters for review and evaluation. The review 
parameters are currently based on Medicare FFS data and reflect a 
combination of patient utilization scenarios and length of stays or 
services used by average to sicker patients. CMS uses multiple 
utilization scenarios for some services (for example, inpatient care) 
to guard against MA organizations distributing or designing cost 
sharing amounts in a manner that is discriminatory. Review parameters 
are also established for frequently used professional services, such as 
primary and specialty care services.
    CMS proposed to amend Sec.  422.100(f)(6) to clarify that it may 
use Medicare FFS data to establish appropriate cost sharing limits for 
certain services that are not discriminatory. In addition, CMS proposed 
to amend the regulation to reflect that CMS would use FFS data and MA 
encounter data to inform patient utilization scenarios to help identify 
MA plan cost sharing standards and thresholds that are not 
discriminatory. We specifically solicited comment on whether to codify 
that use of MA encounter data for this purpose in Sec.  422.100(f)(6). 
In this final rule, we reiterate our intent to use the annual Call 
Letter process to communicate its application of the regulation and 
announce our intent to transition changes to cost sharing standards 
over time, beginning no earlier than in CY 2020, to avoid disruption to 
benefit designs and minimize potential beneficiary confusion. This 
proposal is not related to a statutory change.
    In the proposed rule, CMS explained that it sought to codify 
authorization to allow CMS to use the most relevant and appropriate 
information in determining whether specific cost sharing is 
discriminatory and to set standards and thresholds above which CMS 
believes cost sharing is discriminatory. In addition, CMS stated its 
intent to continue the practice of furnishing information to MA 
organizations about the methodology used to establish cost sharing 
limits and the thresholds CMS identifies as non-discriminatory through 
the annual Call Letter process. We referenced soliciting comments 
before finalizing guidance as necessary and appropriate. We expect this 
process will allow MA organizations to prepare plan bids consistent 
with parameters that CMS have determined to be non-discriminatory. In 
addition, and as appropriate, CMS noted that we may also issue guidance 
using Health Plan Management System (HPMS) memoranda.
    CMS noted in the proposed rule that while it has not established a 
specific service category cost sharing limit for all possible services, 
CMS has issued guidance that MA plans must pay at least 50 percent of 
the contracted (or Medicare allowable) rate and that cost sharing for 
services cannot exceed 50 percent of the total MA plan financial 
liability for the benefit in order for the cost sharing for such 
services to be considered non-discriminatory (Medicare Managed Care 
Manual, Chapter 4, Section 50.1 at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/internet-Only-Manuals-IOMs-Items/CMS019326.html). We stated our belief that cost sharing (service 
category deductibles, copayments, or co-insurance) that fails to cover 
at least half the cost of a particular service or item acts to 
discriminate against those for whom those services and items are 
medically necessary and discourages enrollment by beneficiaries who 
need those services and items. If an MA plan uses a copayment method of 
cost sharing, then the copayment for an in-network Medicare FFS service 
category cannot exceed 50 percent of the average contracted rate of 
that service without CMS seriously questioning and reviewing the cost-
sharing as discriminatory. CMS does not believe that cost sharing at 
such high levels can legitimately serve any purpose other than 
discriminating against the enrollees who need and frequently use those 
services. Some service categories may identify specific benefits for 
which a unique copayment will apply, while others are grouped, such as 
durable medical equipment or outpatient diagnostic and radiological 
services, which contain a variety of services with different levels of 
cost which may reasonably have a range of copayments.
    As discussed in section II.A/B.4 in the proposed rule and this 
final rule, CMS uses (and will continue to use under revisions 
finalized for Sec. Sec.  422.100 and 422.101) Medicare FFS data in 
setting limits and thresholds for MA cost sharing for the basic 
benefits (that is, the Part A and Part B services that MA plans must 
cover). Medicare FFS data currently represents the most relevant and 
available data at this time. CMS uses it as well to evaluate the cost 
sharing for specific services, apply the anti-discrimination standard 
currently at Sec.  422.100(f)(6), and consider whether to exercise 
CMS's authority to add (by regulation) categories of services for which 
cost sharing may not exceed levels in Medicare FFS.
    As noted with regard to setting MOOP limits under Sec. Sec.  
422.100 and 422.101, CMS may consider future rulemaking regarding the 
use of MA encounter data to understand program health care costs and 
compare to Medicare FFS data in establishing cost sharing limits. 
Therefore, in addition to proposing to codify use of the FFS data, CMS 
proposed to include in Sec.  422.100(f)(6) that CMS would use MA 
encounter data to inform utilization scenarios used to identify 
discriminatory cost sharing.
    CMS explained that its proposal to amend Sec.  422.100(f) would 
allow use of the most relevant and appropriate information in 
determining cost sharing standards and thresholds. For example, 
analyses of MA utilization encounter data can be used with Medicare FFS 
data to establish the appropriate utilization scenarios to determine MA 
plan cost sharing standards and thresholds. CMS solicited comments and 
suggestions on this proposal, particularly whether additional 
regulation text is needed to achieve CMS's goal of setting and 
announcing each year presumptively discriminatory levels of cost 
sharing.
    We received the following comments on this proposal, and our 
response follows,
    Nearly all commenters who provided feedback on this provision (Cost 
Sharing Limits for Medicare Parts A and B Services (Sec.  
422.100(f)(6))) also provided feedback on section II.B. 4 (Maximum Out-
of-Pocket Limit for Medicare Parts A and B Services (Sec. Sec.  
422.100(f)(4) and (5) and 422.101(d))). In this section, we address 
commenters that primarily focus on cost sharing limits, while section 
II.B.4 addresses commenters that focus on MOOP limits or both of these 
provisions.
    Comment: The majority of commenters supported the proposal, stating 
that CMS should use Medicare FFS data to establish non-discriminatory 
cost sharing limits as it is currently the most relevant and 
appropriate information in determining cost sharing standards and 
thresholds. Commenters also supported providing guidance through the 
annual Call Letter to achieve CMS's goal of setting and announcing each 
year presumptively discriminatory levels of cost sharing that will not 
be considered discriminatory or in violation of other applicable 
standards.
    Response: We thank the commenters for their support. CMS intends to 
continue the practice of furnishing

[[Page 16490]]

information to MA organizations about the methodology used to establish 
cost sharing limits and the thresholds CMS identifies as non-
discriminatory through the annual Call Letter process. We will also 
continue to solicit comments before finalizing guidance as necessary 
and appropriate. Addressing changes in these vehicles that solicit 
comments provides for more timely and effective changes to protect 
beneficiaries. We expect this process will allow MA organizations to 
prepare plan bids consistent with parameters that CMS have determined 
to be non-discriminatory. In addition, and as appropriate, CMS will 
announce and issue guidance using HPMS memoranda.
    Comment: Many commenters were concerned about the quality of MA 
encounter data and questioned whether such data should be used to 
establish cost sharing limits. A few commenters were concerned about 
using MA encounter data to inform utilization scenarios, as proposed, 
based on data quality issues. A commenter proposed that CMS consider 
using a phased in approach over multiple years by blending Medicare FFS 
and MA encounter data for utilization analyses to address data quality 
concerns.
    Response: We understand the concerns expressed by commenters about 
using MA encounter data to estimate costs associated with specific 
health care services. However, we believe MA encounter data can be used 
to understand utilization trends in establishing the utilization 
scenarios selected for cost sharing standards (for example, 6-day and 
10-day inpatient cost sharing standards). Medicare FFS data currently 
represents the most relevant and available data at this time but we 
believe adding MA encounter data to FFS data will improve our 
utilization scenarios for the MA population. CMS may consider future 
rulemaking to incorporate MA encounter data with Medicare FFS data to 
establish cost sharing limits as well. Under this final rule, CMS will 
use Medicare FFS data along with MA encounter data to help inform 
utilization scenarios (for example, inpatient lengths of stay) in 
establishing cost sharing standards as we continue to rely on Medicare 
FFS data to determine cost sharing dollar limits. We believe the use of 
MA encounter data to inform utilization scenarios is reasonable as we 
are using it in conjunction with Medicare FFS data, which mitigates 
concerns about the completeness and quality of the MA encounter data.
    Comment: Several commenters were concerned about CMS's strategy to 
promote plan adoption of lower MOOP limits by increasing the cost 
sharing flexibility for those plans. Commenters expressed concern that 
allowing this flexibility may result in discriminatory benefit designs 
as plans may raise cost sharing limits for certain service categories 
more likely to be utilized by vulnerable beneficiaries. Some commenters 
referenced specific service categories of concern if cost sharing 
limits were raised (for example, inpatient and professional services) 
and requested CMS be especially thoughtful when considering changes to 
these categories.
    Response: CMS agrees that while increasing flexibility in cost 
sharing standards for plans that voluntarily offer lower MOOP limits 
can allow for improved plan design, it will be important to make sure 
that vulnerable patient populations are not discriminated against and 
that plan designs are not confusing to beneficiaries. CMS will manage 
the flexibility plans have in setting cost sharing limits to make sure 
that plan designs are not discriminatory.
    Comment: Some commenters noted concern with the specific 
methodology that CMS would use to establish cost sharing limits and how 
abrupt any changes may be from one contract year to the next. A few 
commenters requested CMS provide additional guidance on its 
implementation of the proposed changes to Sec.  422.100(f)(6).
    Response: CMS intends to use the annual Call Letter process to 
communicate its application of the regulation and to transition changes 
to cost sharing standards over time, beginning no earlier than CY 2020, 
to avoid disruption to benefit designs and minimize potential 
beneficiary confusion. Consistent with past practice, CMS will continue 
to publish annual limits, expected changes for the next year, and a 
description of how the regulation standard is applied (that is, the 
methodology used) in the annual Call Letter prior to bid submission so 
that MA plans can submit bids consistent with CMS standards. This will 
provide MA organizations adequate time to comment and prepare for 
changes.
    We received over 40 comments pertaining to the proposal, with the 
majority reflecting support to amend Sec.  422.100(f)(6) to permit use 
of Medicare FFS data to establish cost sharing limits that will not be 
considered discriminatory for Part A and B services in MA plans. 
Commenters also generally supported continued use of the annual Call 
Letter process for explaining our application and implementation of the 
revised Sec.  422.100(f)(6). After careful consideration of all the 
comments, we are finalizing our proposal to use Medicare FFS data along 
with MA encounter data to inform utilization scenarios (for example, 
inpatient lengths of stay) and rely on Medicare FFS data to determine 
cost sharing standards and thresholds. We are finalizing these 
amendments with an applicability date of January 1, 2020; this 
applicability date is consistent with our intent that these new 
standards apply to cost sharing limits set for plans years after 2019. 
As MA encounter cost data quality improves, CMS will consider future 
rulemaking to incorporate with Medicare FFS data to establish cost 
sharing limits. CMS intends to use the annual Call Letter process to 
communicate its application of the regulation and plans to transition 
changes under the finalized regulations over time, beginning no earlier 
than CY 2020, to avoid disruption to benefit designs and minimize 
potential beneficiary confusion. We are also finalizing a minor 
revision to paragraph (f)(6) to improve the flow of the text. 
Specifically, we are separating the last sentence into two sentences 
divided by a semicolon with minor grammatical edits.
6. Meaningful Differences in Medicare Advantage Bid Submissions and Bid 
Review (Sec. Sec.  422.254 and 422.256)
    As provided at Sec. Sec.  422.254(a)(4) and 422.256(b)(4), CMS will 
only approve a bid submitted by a Medicare Advantage (MA) organization 
if its plan benefit package (PBP) is substantially different from those 
of other plans offered by the organization in the same area with 
respect to key plan characteristics such as premiums, cost sharing, or 
benefits offered. MA organizations may submit bids for multiple plans 
in the same area under the same contract only if those plans are 
substantially different from one another based on CMS's annual 
meaningful difference evaluation. CMS proposed to eliminate the 
meaningful difference requirement beginning with MA bid submissions for 
contract year (CY) 2019. Separate meaningful difference rules were 
concurrently adopted for MA and stand-alone prescription drug plans 
(PDPs), but this specific proposal was limited to the meaningful 
difference provision related to the MA program. A proposal related to 
the Part D meaningful difference regulation is addressed at section 
III. II.A.16. of this final rule.
    In the proposed rule, CMS explained the goal of eliminating the 
meaningful difference requirement: To improve competition, innovation, 
available

[[Page 16491]]

benefit offerings, and provide beneficiaries with affordable plans that 
are tailored for their unique health care needs and financial 
situation. Other regulations prohibit plans from misleading 
beneficiaries in their communication materials, provide CMS the 
authority to disapprove a bid if a plan's proposed benefit design 
substantially discourages enrollment in that plan by certain Medicare-
eligible individuals, and allow CMS to non-renew a plan that fails to 
attract a sufficient number of enrollees over a sustained period of 
time (Sec. Sec.  422.100(f)(2), 422.510(a)(4)(xiv), 422.2264, and 
422.2260(e)). Therefore, CMS explained in the proposed rule, MA 
organizations could be expected to continue designing PBPs that, within 
a service area, are different from one another with respect to key 
benefit design characteristics. CMS stated its belief that any 
potential beneficiary confusion would be minimized when comparing 
multiple plans offered by the MA organization. For example, 
beneficiaries may consider the following factors when they make their 
health care decisions: Plan type, Part D coverage, differences in 
provider network, Part B and plan premiums, and unique populations 
served (for example, special needs plans). In addition, CMS stated its 
intent to continue the practice of furnishing information to MA 
organizations about the bid evaluation methodology through the annual 
Call Letter process and/or Health Plan Management System (HPMS) 
memoranda and solicit comments, as appropriate. This process allows CMS 
to articulate bid requirements and MA organizations to prepare bids 
that satisfy CMS requirements and standards prior to bid submission in 
June each year.
    As stated in the proposed rule, although challenged by choices, 
beneficiaries do not want their plan choices to be limited and 
understand key decision factors such as premiums, out-of-pocket cost 
sharing, Part D coverage, familiar providers, and company offering the 
plan.\22\ CMS noted that more sophisticated approaches to consumer 
engagement and decision-making should help beneficiaries, caregivers, 
and family members make informed plan choices. CMS cited supporting 1-
800-MEDICARE and enhancements to MPF that have improved the customer 
experience, such as including MA and Part D benefits and a new consumer 
friendly tool for the CY 2018 Medicare open enrollment period. This new 
tool assists beneficiaries in choosing a plan that meets their unique 
health and financial needs based on a set of 10 quick questions.
---------------------------------------------------------------------------

    \22\ Jacobson, G. Swoope, C., Perry, M. Slosar, M. How are 
seniors choosing and changing health insurance plans? Kaiser Family 
Foundation. 2014
---------------------------------------------------------------------------

    As stated in the October 22, 2009, proposed rule (74 FR 54670 
through 73) and April 15, 2010, final rule (75 FR 19736 through 40), 
CMS's goal for the meaningful difference evaluation was to ensure a 
proper balance between affording beneficiaries a wide range of plan 
choices and avoiding undue beneficiary confusion in making coverage 
selections. The meaningful difference evaluation was initiated when 
cost sharing and benefits were relatively consistent within each plan, 
and similar plans within the same contract could be readily compared by 
measuring estimated out-of-pocket costs (OOPC) and other factors 
currently integrated in the evaluation's methodology. Detailed 
information about the meaningful difference evaluation is available in 
the CY 2018 Final Call Letter issued April 3, 2017, (pages 115-118) and 
information about the CMS OOPC model is available at: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/OOPCResources.html. As discussed in the CY 
2018 Final Call Letter, the differences between similar plans must have 
at least a $20 per member per month estimated beneficiary out-of-pocket 
cost difference. Differences in plan type (for example, HMO, LPPO), SNP 
sub-type, and inclusion of Part D coverage are considered meaningful 
differences, which align with beneficiary decision-making. As noted in 
the proposed rule, premiums, risk scores, actual plan utilization, and 
enrollment are not included in the evaluation because these factors 
will introduce risk selection, costs, and margin into the evaluation, 
resulting in a negation of the evaluation's objectivity. CMS clarified 
that the OOPC model uses the lowest cost sharing value for each service 
category to estimate out-of-pocket costs, which may or may not be a 
relevant comparison between different plans for purposes of evaluating 
meaningful difference when variable cost sharing of this type is 
involved.
    Based on CMS's efforts to revisit MA standards and the 
implementation of the governing law to find flexibility for MA 
beneficiaries and plans, MA organizations are able to: (1) Tier the 
cost sharing for contracted providers as an incentive to encourage 
enrollees to seek care from providers the plan identifies based on 
efficiency and quality data which was communicated in CY 2011 guidance; 
(2) establish Provider-Specific Plans (PSPs) designed to offer 
enrollees benefits through a subset of the overall contracted network 
in a given service area, which are sometimes referred to as narrower 
networks, and which was collected in the PBP beginning in CY 2011; and 
(3) beginning in CY 2019, provide different cost sharing and/or 
additional supplemental benefits for enrollees based on defined health 
status or disease state within the same plan (Flexibility in the 
Medicare Advantage Uniformity Requirements). These flexibilities allow 
MA organizations to provide beneficiaries with access to health care 
benefits that are tailored to individual needs, but make it difficult 
for CMS to objectively measure meaningful differences between plans. 
Items 1 and 3 provide greater cost sharing flexibility to address 
individual beneficiary needs but result in a much broader range of cost 
sharing values being entered into the PBP.
    CMS restated its commitment to ensuring transparency in plan 
offerings so that beneficiaries can make informed decisions about their 
health care plan choices while also noting the importance of 
encouraging competition, innovation, and providing access to affordable 
health care approaches that address individual needs. CMS recognized 
that the current meaningful difference methodology evaluates the entire 
plan and does not capture differences in benefits that are tied to 
specific health conditions. As a result, CMS noted the meaningful 
difference evaluation will not fully represent benefit and cost sharing 
differences experienced by enrollees and could lead to MA organizations 
to focus on CMS standards, rather than beneficiary needs, when 
designing benefit packages. CMS noted the challenges with trying to 
capture differences in provider network, more tailored benefit and cost 
sharing designs, or other innovations. In addition, we are concerned 
that plans may be forced to potentially develop more complicated and 
confusing benefit designs to achieve differences between plans.
    CMS recognized to satisfy current CMS meaningful difference 
standards, MA organizations may have to change benefit coverage or cost 
sharing in certain plans to establish the necessary benefit value 
difference, even if substantial difference exists based on factors CMS 
is currently unable to incorporate into the evaluation (such as tiered 
cost sharing, and unique benefit packages based on enrollee health 
conditions). Although these changes in benefits coverage may be 
positive or negative, CMS stated concern that the meaningful difference 
requirement

[[Page 16492]]

results in organizations potentially reducing the value of benefit 
offerings. These are unintended consequences of the existing meaningful 
difference evaluation and may restrict innovative benefit designs that 
address individual beneficiary needs and affordability.
    As discussed in the proposed rule, CMS continually evaluates 
consumer engagement tools and outreach materials (including marketing, 
educational, and member materials) to ensure information is formatted 
consistently so beneficiaries can easily compare multiple plans. Annual 
guidance and model materials are provided to MA organizations to assist 
them in providing resources, such as the plan's Annual Notice of Change 
(ANOC) and Evidence of Coverage (EOC), which contain valuable 
information for the enrollee to evaluate and select the best plan for 
their needs. CMS invests substantial resources in engagement strategies 
such as 1-800-MEDICARE, MPF, standard and electronic mail, and social 
media to continuously communicate with beneficiaries, caregivers, 
family members, providers, community resources, and other stakeholders.
    CMS noted that MA organizations may be able to offer a portfolio of 
plan options with clear differences between benefits, providers, and 
premiums which will allow beneficiaries to make more effective 
decisions if the MA organizations are not required to change benefit 
and cost sharing designs in order to satisfy Sec. Sec.  422.254 and 
422.256. Currently, MA organizations must satisfy CMS meaningful 
difference standards (and other requirements), rather than solely 
focusing on beneficiary purchasing needs when establishing a range of 
plan options. CMS also noted additional beneficiary protections 
including: Plans are required to not mislead beneficiaries in 
communication materials; CMS may disapprove a bid if CMS finds that a 
plan's proposed benefit design substantially discourages enrollment in 
that plan by certain Medicare-eligible individuals; and CMS may 
terminate plans that fail to attract a sufficient number of enrollees 
over a sustained period of time (Sec. Sec.  422.100(f)(2), 
422.510(a)(4)(xiv), 422.2264, and 422.2260(e)). For these reasons, CMS 
proposed to remove Sec. Sec.  422.254(a)(4) and 422.256(b)(4) to 
eliminate the meaningful difference requirement for MA bid submissions. 
CMS also solicited comments and suggestions on making sure 
beneficiaries have access to innovative plans that meet their unique 
needs.
    We received the following comments on this proposal, and our 
response follows:
    Comment: Some commenters fully supported the proposal, stating that 
eliminating the meaningful difference requirement will support plan 
innovation and provide Medicare beneficiaries access to plans that meet 
their unique needs. Several commenters noted that eliminating the 
current meaningful difference requirement that established arbitrary 
differences between plans will allow MA organizations to put the 
beneficiary at the center of benefit design. This will result in MA 
organizations being able to offer a portfolio of plan options with 
clear differences between benefits, providers, and premiums that are 
easily understood by beneficiaries. Commenters also noted that CMS's 
efforts to support beneficiaries make informed choices by maintaining 
existing requirements for marketing materials and nondiscriminatory 
benefit designs will sufficiently safeguard beneficiaries if the 
meaningful difference requirement is eliminated.
    Response: We thank the commenters for supporting the proposal. We 
believe this proposed change could result in more innovative products 
that are more competitive and market-driven within a less restrictive 
regulatory framework.
    Comment: A commenter supported the proposal and questioned how the 
agency will ensure potential savings from eliminating the meaningful 
difference requirement will be passed on to beneficiaries in the form 
of lower premiums, while also maintaining coverage of essential and 
appropriate benefits.
    Response: CMS expects that the elimination of the meaningful 
difference evaluation, in conjunction with the expansion of benefit 
flexibilities, will allow organizations to provide benefit offerings 
that satisfy the unique needs of beneficiaries, increase enrollee 
satisfaction, reduce overall plan expenditures, and result in more 
affordable plans. All MA plans must provide enrollees in that plan with 
all Parts A and B services so beneficiaries are assured a minimum 
package of covered services; many plans also provide supplemental 
benefits, at the MA organization's option. While CMS reviews and 
approves MA PBPs and premiums for actuarial soundness and satisfying 
CMS standards, we do not have the legal authority to dictate MA 
organizations' business decisions to establish premiums at a specific 
level. MA organizations can adjust their plan offerings to reflect 
annual changes in medical costs and payment rates and may do so in a 
variety of ways, such as adjustments to cost sharing amounts, adding or 
subtracting supplemental benefits, or making changes to the monthly 
premium(s). Plans face competition in their defined market areas and 
must also comply with Part C standards related to changes in benefits, 
cost sharing, and premium. In addition, all beneficiaries are made 
aware of plan changes including premium for the upcoming year and can 
choose to switch plans during the annual election period.
    Comment: Several commenters disagreed with the proposal to 
eliminate the meaningful difference requirement because they believe it 
is a beneficiary protection. Reasons for maintaining the meaningful 
difference requirement included: Concerns about the ability of Medicare 
beneficiaries to make the nuanced comparisons among various plan types 
and benefit packages, limited resources to assist beneficiaries with 
complicated decisions, expectation that older people and people with 
disabilities do not use technology to the same extent as non-Medicare 
beneficiary populations (thereby limiting the usefulness of MPF, a 
primary means of CMS assistance to beneficiaries in comparing plans), 
and unknown resource availability to support call centers to assist 
beneficiaries who do not have access to or use the internet. Several 
comments were concerned that narrower networks could be potentially 
discriminatory or a means of limiting benefit access for enrollees. 
Another commenter had concerns that eliminating the meaningful 
difference requirement may encourage plan risk segmentation based on 
benefit design but did not include any rationale for their concern. 
Some commenters referenced plan selection research, such as National 
Institutes of Health, and Brookings studies,\23\ noting Consumers Union 
findings that indicate beneficiaries face challenges in navigating the 
Medicare market due to not using available tools (such as MPF),

[[Page 16493]]

confusion when using MPF, and high rates of individuals not making an 
active health plan selection because of choice anxiety. Several 
commenters also noted their general concern that the net effect of 
eliminating the meaningful difference requirement and other proposals 
pursued in the proposed rule may have unintended consequences regarding 
beneficiary confusion that will negate the value of market innovation, 
especially for people with lower income and educational levels.
---------------------------------------------------------------------------

    \23\ Bertko J, Ginsburg PB, Lieberman S, Trish E, Antos J. 
Medicare Advantage: Better information tools, better beneficiary 
choices, better competition. U.S.C.-Brookings Schaeffer Initiative 
for Health Policy. Nov. 2017. Retrieved from https://www.brookings.edu/wp-content/uploads/2017/11/ma-consumer-reforms.pdf.
    Cognitive Functioning and Choice between Traditional Medicare 
and Medicare Advantage; J. Michael McWilliams, Christopher C. 
Afendulis, Thomas G. McGuire, and Bruce E. Landon; Health Affairs, 
September 2011 (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3513347/
).
    The Evidence is Clear: Too Many Health Insurance Choices Can 
Impair, Not Help Consumer Decision Making; Lynn Quincy and Julie 
Silas; Consumers Union, November 2012 (http://consumersunion.org/pdf/Too_Much_Choice_Nov_2012.pdf).
---------------------------------------------------------------------------

    Response: We acknowledge the commenters' concerns about beneficiary 
confusion. We believe that the tools CMS provides for beneficiaries to 
make decisions and our enforcement of communication and marketing 
requirements (such as the prohibition on misleading beneficiaries) 
mitigate and address these concerns. Under our existing authority at 
Sec.  422.110, CMS will monitor to ensure organizations are not 
engaging in activities that are discriminatory or potentially 
misleading or confusing to Medicare beneficiaries. We note that CMS has 
authority, clarified in this final rule, to review marketing (review in 
advance of use) and communication (review after use) materials to 
ensure compliance with MA program requirements. CMS will conduct 
outreach with organizations that appear to offer a large number of 
similar plans in the same county following bid submissions and 
communicate any general concerns through the annual Call Letter process 
and/or HPMS memoranda. CMS network adequacy requirements apply to all 
Part C provider networks to ensure adequate network provider access for 
enrollees. With regard to concerns about risk segmentation, CMS 
believes risk segmentation is not beneficial to MA organizations or 
enrollees who want to maintain stable benefits and premiums, but if an 
organization wanted to purposely create risk segmentation within its 
plan offerings, it could do so with or without the meaningful 
difference evaluation. The agency will continue to monitor and address 
potential concerns as part of our existing authority to review and 
approve bids. We expect eliminating the meaningful difference 
requirement will improve plan choices for beneficiaries by driving 
provider network and benefit package innovation and affordable health 
care coverage. MA organizations also consider beneficiary choice 
anxiety when developing their own portfolio of plan offerings, so that 
sales and broker personnel and marketing materials can highlight key 
differences between plan offerings and support informed choice. 
Beneficiaries also rely on established health plan characteristics to 
guide their decision making, such as preferences for plan type (for 
example, HMO or PPO), providers (for example, established primary care 
physician being in network), presence of Part D benefits, cost sharing, 
plan premium, and brand.\24\ In addition, dually eligible beneficiaries 
may choose D-SNPs that provide more standardized plan options with 
little or no cost sharing responsibilities instead of a non-D-SNP plan 
without these benefits. This allows beneficiaries to reduce the number 
of health plan options of interest (for example, focus on MA 
organizations offering SNP options) and simplify the process to choose 
their health plan. After taking into account specific preferences, such 
as plan type, beneficiaries may choose from a limited subset of 
available plan options with the assistance of plan communication 
materials and existing CMS resources such as MPF and 1-800-MEDICARE. In 
addition, CMS will continue to prohibit plans from misleading 
beneficiaries in their communication materials, disapprove a plan's bid 
if its proposed benefit design substantially discourages enrollment in 
that plan by certain Medicare-eligible individuals, and allow CMS to 
terminate a plan that fails to attract a sufficient number of enrollees 
over a sustained period of time so that any potential beneficiary 
confusion is minimized when comparing multiple plans offered by the 
organization (Sec. Sec.  422.100(f)(2), 422.510(a)(4)(xiv), 422.2264, 
and 422.2260(e)).
---------------------------------------------------------------------------

    \24\ Jacobson, G., Swoope, C., Perry, M., Slosar, M. How are 
seniors choosing and changing health insurance plans? Kaiser Family 
Foundation. 2014.
    Atherly, A., Dowd, B., Feldman, R. The Effect of Benefits, 
Premiums, and Health Risk on Health Plan Choice in the Medicare 
Program. Health Services Research. 2004. Retrieved from https://onlinelibrary.wiley.com/doi/full/10.1111/j.1475-6773.2004.00261.x.
    McCormack LA, Garfinkel SA, Hibbard JH, Norton EC, Bayen UJ. 
Health plan decision making with new medicare information materials. 
Health Services Research. 2001;36(3):531-554.
    Abaluck, Jason, and Jonathan Gruber. 2011. ``Choice 
Inconsistencies among the Elderly: Evidence from Plan Choice in the 
Medicare Part D Program.'' American Economic Review, 101(4): 1180-
1210.
    Uhrig, J., Harris-Kojetin, L., Bann, C., Kuo, T. Do Content and 
Format Affect Older Consumers' Use of Comparative Information in a 
Medicare Health Plan Choice? Results from a Controlled Experiment. 
2006. Retrieved from http://journals.sagepub.com/doi/pdf/10.1177/1077558706293636.
---------------------------------------------------------------------------

    Comment: Several commenters had concern that eliminating the 
meaningful difference requirement would promote ``gaming'' among plan 
sponsors (for example, offering a large number of plan options in a 
service area) which may challenge or complicate beneficiary decision-
making because of the potential increase in plan options; these 
commenters questioned if elimination of the requirement provides enough 
benefits to outweigh the risks. A few commenters questioned whether 
there is evidence that innovation is or will be inhibited by the 
meaningful difference evaluation. A commenter recommended CMS formally 
survey MA organizations about the impact of meaningful difference 
standards as well as survey beneficiaries regarding their satisfaction 
with MA plan offerings. Some commenters suggested CMS first pursue 
adjusting the meaningful difference requirement before eliminating it 
by either waiving the requirement if MA organizations can provide 
alternative evidence to CMS that their plan offerings are substantively 
different, significantly reducing the current $20 meaningful difference 
threshold between similar plans to provide more flexibility, accounting 
for differences in premiums, and providing broader consideration of 
provider network differences in the evaluation. A commenter requested 
that instead of eliminating the meaningful difference requirement, CMS 
revise the evaluation and require plan actuaries to attest to actuarial 
value differences among plans using a utilization profile that is 
representative of the plan population. A few comments stated that if 
CMS was to place a limit on the number of plans an organization could 
offer that CMS take into consideration the appropriate level within an 
organizational structure to establish the limit (for example, parent, 
legal entity, or contract organization), mergers and acquisitions, and 
that CMS treat full-provider networks separately from more limited 
provider networks.
    Response: As discussed in the proposed rule, CMS is concerned the 
meaningful difference requirement may force MA organizations to design 
benefit packages to meet CMS standards rather than address beneficiary 
needs. CMS has been made aware of these concerns through comments 
submitted in response to recent Call Letters and the Request for 
Information (April 2017), that highlighted how MA organizations may be 
forced to meet arbitrary limits between their plans to comply with CMS 
meaningful difference standards. Based on this information CMS does not 
believe formal surveys are necessary to determine the unintended 
consequences of the meaningful difference evaluation. Our proposal to 
eliminate the meaningful difference requirement aimed to improve 
competition, innovation, available benefit offerings, and provide 
beneficiaries with

[[Page 16494]]

affordable plans that are tailored for their unique health care needs 
and financial situation. The number of MA plan bids may increase 
because of a variety of factors, that are not related to the 
elimination of the meaningful difference requirement, such as payments, 
bidding and service area strategies, serving unique populations, and in 
response to other program constraints or flexibilities. CMS expects 
that eliminating the meaningful difference requirement will improve 
plan choice for beneficiaries by driving provider network and benefit 
package innovation and affordable health care coverage. CMS believes 
that eliminating the current meaningful difference requirement will 
allow MA organizations to put the beneficiary at the center of benefit 
design as MA organizations will not be pressured to make benefit 
changes to comply with an arbitrary requirement that may ultimately 
result in higher premiums and/or cost sharing for beneficiaries. This 
will result in MA organizations being able to offer a portfolio of plan 
options with clear differences between benefits, providers, and 
premiums that are more easily understood by beneficiaries. In order to 
capture differences in provider networks, more tailored benefit and 
cost sharing designs, or other innovations, the evaluation process 
would have to use more varied and complex assumptions to identify plans 
that are not meaningfully different from one another. CMS believes that 
such an evaluation could result in more complicated and potentially 
confusing benefit designs and would require investment of greater 
administrative resources for MA organizations and CMS, while not 
producing results that are useful to beneficiaries. CMS expects that 
eliminating the meaningful difference requirement will improve the plan 
options available for beneficiaries. As it is unknown how many 
organizations will choose to add plan options as a result of this 
provision, we are unable to estimate the impact to beneficiaries should 
this lead to more competition. CMS expects increased competition will 
lead to potentially lower premiums and/or cost-sharing for Medicare 
beneficiaries. CMS does not anticipate beneficiaries will need 
additional time to compare differences between plans related to the 
elimination of the meaningful difference requirement. This particular 
change is expected to help MA organizations differentiate plan 
offerings more effectively so that beneficiaries can make decisions 
more efficiently. We believe that the tools and information CMS 
provides for beneficiaries to make decisions (for example, Medicare 
Plan Finder, Medicare and You Handbook, 1-800-MEDICARE), in addition to 
our enforcement of communication and marketing requirements, aim to 
mitigate any potential choice overload. We are not pursuing adjustments 
to the meaningful difference requirement (for example, waivers) because 
the use of a waiver or justification process introduces subjectivity 
into the benefit review and we believe the goal of increasing 
flexibility is better served by eliminating the requirement. With this 
final rule, organizations will have more flexibility to design MA plans 
in a manner that is more focused on beneficiary needs. Finally, we do 
not intend to establish a specific number of plans that any one 
organization could offer. The MA program has a different market 
structure than standalone PDPs, that is, PDPs serve entire regions 
while MA organizations may serve different service areas based on 
county. The same MA organization may have multiple plans but those 
plans may only overlap in a limited number of counties. Depending on 
the market structure (for example, makeup of providers and consumers) 
it may be helpful for MA organizations to provide offerings from 
multiple plan types so that beneficiaries have valuable options. In 
addition, it may be helpful for MA organizations to offer SNP plans to 
meet the needs of different beneficiary populations. CMS will monitor 
and address potential concerns as part of our existing authority to 
review and approve bids.
    Comment: A few commenters requested that CMS conduct an evaluation 
to estimate whether eliminating the meaningful difference requirement 
would create choice anxiety among beneficiaries and its potential 
effect on future enrollment. A few commenters also questioned if CMS 
had presented sufficient reasons to justify eliminating the meaningful 
difference requirement.
    Response: In the proposed rule (82 FR 56363 through 56365) and in 
the responses in this section, we have discussed our supporting 
rationale to eliminate the meaningful difference requirement. After 
carefully considering the commenters' concerns, we believe our proposal 
will result in improved options--both in terms of innovative plans and 
affordability--for beneficiaries and that existing safeguards, along 
with beneficiary decision making education and tools, will be 
successful in managing beneficiary choice anxiety concerns.
    Comment: A commenter requested clarification on how this proposal, 
in conjunction with others, affects expectations for state Medicaid 
agencies and SNPs.
    Response: CMS does not anticipate that eliminating the meaningful 
difference requirement, in conjunction with other proposals, would 
affect state Medicaid agencies. To the extent that clarification of 
state Medicaid or SNP issues is required as a result of the regulation 
changes in this final rule, CMS would communicate this guidance through 
the annual Call Letter process, HPMS memoranda, and Medicare Managed 
Care Manual updates. In addition, the CMS Medicare-Medicaid 
Coordination Office (MMCO) may provide assistance for states and D-
SNPs. The Center for Medicare is working collaboratively with MMCO in 
the regulations drafting process and implementation steps related to 
this rule. Separately, MMCO is re-examining the potential need for 
resources related to implementing the provisions of section 50311 of 
the Bipartisan Budget Act of 2018.
    Comment: Several commenters requested that CMS issue guidance 
regarding the distinctions in plan options that would be permissible 
and operational guidance on the implementation of this proposal in the 
annual Call Letter to support CY 2019 bid development and submission.
    Response: MA organizations can use the information contained in 
this final rule about the elimination of the meaningful difference 
requirements and CMS expectations to prepare CY 2019 bid submissions. 
CMS intends to continue using the annual Call Letter process in future 
years for releasing draft versions of bid-related guidance for comment 
and to provide additional guidance regarding general concerns we may 
have with organizations' portfolio of plan offerings. In addition, we 
will provide information about potential concerns regarding activities 
that are potentially discriminatory or potentially misleading or 
confusing to Medicare beneficiaries.
    Comment: Several commenters noted concern about resources to 
support beneficiaries choose a health plan and navigate their benefits 
(for example, 1-800-MEDICARE, MPF, SHIP counselors, and the Medicare 
Ombudsman program) and supported improvements to MPF that allow 
beneficiaries to more easily narrow down their choices based on 
personalized information (for example, more filters and pre-selection 
criteria to identify important plan characteristics that limit plan 
options to evaluate). Several commenters offered to provide

[[Page 16495]]

input to MPF changes, while others encouraged CMS to establish a group 
of representatives (for example, MA organizations, advocacy 
organizations, provider groups, and other stakeholders) to help develop 
MPF improvements, health plan decision-making education materials, and 
other information to improve the health plan selection process and 
overall experience for beneficiaries. Some comments indicated that 
changes to the MPF should occur prior to eliminating the meaningful 
difference evaluation. Commenters also had an interest in CMS 
establishing communications and marketing guidance so that MA 
organizations can describe how an organization's plan offerings are 
different in situations where multiple plan options are compared (for 
example, providing additional information in the Summary of Benefits). 
In addition, other comments noted the need for CMS to solicit input 
from multiple stakeholders to improve communication materials (for 
example, ANOC and EOC).
    Response: These recommendations are not strictly within the scope 
of this final rule provision. We do however appreciate the many 
comments and suggestions related to improving the health plan decision 
making process and overall experience for beneficiaries. We agree with 
the need for clear and complete information and intend to continue 
improving the MPF to make it as user friendly as possible. We are 
sharing these comments and suggestions with the CMS Office of 
Communications. Additionally, we would encourage third party 
organizations that support beneficiaries in their decision-making to 
take advantage of existing resources 1-800-MEDICARE, MPF, SHIP 
counselors, and the Medicare Ombudsman program. CMS will take commenter 
suggestions under careful consideration and will continue to include 
stakeholders and beneficiaries in the planning, preparation, testing, 
and execution process for MPF; CMS subjects some model enrollee 
communication materials to periodic consumer testing and also considers 
comments submitted from MA organizations and stakeholders on an ongoing 
basis. In addition, CMS will look for ways to incorporate the 
suggestions from commenters about how the health plan selection process 
can be simplified for beneficiaries through existing and possibly new 
Medicare materials. MA organizations have and are encouraged to use 
existing flexibilities to highlight differences between their own plan 
offerings for beneficiaries in marketing and communications materials 
(for example, summary of benefits).
    We received over 65 comments pertaining to the proposal; the great 
majority reflected mixed support for eliminating the meaningful 
difference requirement. After careful consideration of all of the 
comments we received, we are finalizing the elimination of the 
meaningful difference requirement from Sec. Sec.  422.254 and 422.256 
as proposed. Under our existing authority at Sec.  422.2268, CMS will 
monitor to ensure organizations are not engaging in activities that are 
discriminatory or potentially misleading or confusing to Medicare 
beneficiaries. CMS will communicate and work with organizations that 
appear to offer a large number of similar plans in the same county, 
raising and discussing with such MA organizations any concerns. CMS 
plan checks would include plans offered under each contract, unique 
plan type, and county. Plan types currently include: (1) HMO and HMO-
POS not offering all Parts A and B services out-of-network, (2) HMO POS 
offering all Parts A and B services out-of-network, (3) LPPO, (4) RPPO, 
(5) PFFS, and (6) unique SNP types (that is, different chronic 
diseases, institutional categories, and dual-eligible sub-types). From 
a beneficiary's perspective, CMS would expect plans within the same 
contract, plan type, and county to be distinguishable by beneficiaries 
using such factors as the inclusion or exclusion of Part D coverage, 
provider network, plan premium, Part B premium buy-down, estimated out-
of-pocket costs, and benefit design so that MA organizations can market 
their plans clearly. CMS intends to issue guidance through the annual 
Call Letter process and HPMS memoranda to help organizations design 
plan options that avoid potential beneficiary confusion prior to bid 
submission.
7. Coordination of Enrollment and Disenrollment Through MA 
Organizations and Effective Dates of Coverage and Change of Coverage 
(Sec. Sec.  422.66 and 422.68)
    In addition to general authority for the Secretary to establish the 
process through which MA plan election is made by Medicare 
beneficiaries, section 1851(c)(3)(A)(ii) of the Act authorizes the 
Secretary to implement default enrollment rules for the Medicare 
Advantage (MA) program. This default enrollment is in addition to the 
statutory direction that beneficiaries who do not elect an MA plan are 
defaulted to original (fee-for-service) Medicare. Section 
1851(c)(3)(A)(ii) states that the Secretary may establish procedures 
whereby an individual currently enrolled in a non-MA health plan 
offered by an MA organization at the time of his or her Initial 
Coverage Election Period is deemed to have elected an MA plan offered 
by the organization if he or she does not elect to receive Medicare 
coverage in another way. We proposed new regulation text to establish 
limits and requirements for these types of default enrollments to 
address our administrative experience with and concerns raised about 
these types of default enrollments under our existing practice. Based 
on our experience with the seamless conversion process thus far, we 
proposed to codify at Sec.  422.66(c)(2) requirements for seamless 
default enrollments upon initial eligibility for Medicare. As proposed, 
such default enrollments would be into dual eligible special needs 
plans (D-SNPs) and would be subject to five substantive conditions: (1) 
The state has approved use of this default enrollment process and 
provided Medicare eligibility information to the MA organization; (2) 
CMS has approved the MA organization to use the default enrollment 
process before any enrollments are processed; (3) the individual is 
enrolled in an affiliated Medicaid managed care plan and is dually 
eligible for Medicare and Medicaid; (4) the MA organization provides a 
notice that meets CMS requirements to the individual; and (5) the 
individual does not opt out of the default enrollment. We proposed that 
coverage under these types of default enrollments begin on the first of 
the month that the individual's Part A and Part B eligibility is 
effective. We also proposed changes to Sec. Sec.  422.66(d)(1) and 
(d)(5) and 422.68 that coordinate with the proposal for Sec.  422.66.
    As noted in the proposed rule, we initially addressed default 
enrollment upon conversion to Medicare in a 2005 rulemaking (70 FR 4606 
through 4607) and released subregulatory guidance \25\ to provide an 
optional enrollment mechanism in 2006. This mechanism permitted MA 
organizations to develop processes and, with CMS approval, provide 
seamless continuation of coverage by way of enrollment in an MA plan 
for newly MA eligible individuals who are currently enrolled in other 
health plans offered by the MA organization (such as commercial or 
Medicaid plans) at the time of the individuals' initial eligibility for 
Medicare. The guidance emphasized

[[Page 16496]]

that approved MA organizations not limit seamless continuation of 
coverage to situations in which an enrollee becomes eligible for 
Medicare by virtue of age, and directed MA organizations to implement 
seamless conversions to include all newly eligible Medicare 
beneficiaries, including those whose Medicare eligibility is based on 
disability. From its inception, the guidance required that individuals 
receive advance notice of the proposed MA enrollment and have the 
ability to ``opt out'' of such an enrollment prior to the effective 
date of coverage. This guidance has been in practice for the past 
decade, but we encountered complaints and heard concerns about the 
practice.
---------------------------------------------------------------------------

    \25\ https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/Downloads/CY_2018_MA_Enrollment_and_Disenrollment_Guidance_6-15-17.pdf.
---------------------------------------------------------------------------

    The Advance Notice of Methodological Changes for Calendar Year (CY) 
2016 for Medicare Advantage (MA) Capitation Rates, Part C and Part D 
Payment Policies and 2016 Call Letter discussed the opportunity to 
integrate Medicare and Medicaid benefits via seamless continuation of 
coverage into D-SNPs, and we received positive comments from state 
Medicaid agencies supporting this enrollment mechanism and requesting 
clarification of the approval process. We also received comments from 
beneficiary advocates asking for additional consumer protections (for 
example, requiring written beneficiary confirmation and a special 
enrollment period for those enrolled using this optional mechanism).
    On October 21, 2016,\26\ in response to inquiries regarding this 
enrollment mechanism, its use by MA organizations, and the beneficiary 
protections currently in place, we announced a temporary suspension of 
acceptance of new proposals for seamless continuation of coverage. We 
discovered, based on our subsequent discussions with beneficiary 
advocates and MA organizations approved for this enrollment mechanism, 
that MA organizations find it difficult to comply with our current 
guidance and approval parameters, especially the requirement to 
identify commercial members who are approaching Medicare eligibility 
based on disability when the other plan offered by the MA organization 
is a commercial insurance plan. MA organizations also outlined 
challenges in confirming entitlement to Medicare Parts A and B within 
necessary timeframes and obtaining the individual's Medicare number--
which in 2018 will become a random and unique number instead of the 
Social Security Number-based identifier used today. As discussed in 
more detail below, we anticipate that the switch from the SSN-based 
identifier will exacerbate this difficulty.
---------------------------------------------------------------------------

    \26\ https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/Downloads/HPMS_Memo_Seamless_Moratorium.pdf.
---------------------------------------------------------------------------

    We noted in the proposed rule how organizations operating Medicaid 
managed care plans are better able to meet these requirements when 
states provide data, including the individual's Medicare number, to 
identify individuals about to become Medicare eligible; MA 
organizations with state contracts to offer D-SNPs will be able to 
obtain (under their agreements with state Medicaid agencies) the data 
necessary to process and submit default enrollments to CMS without 
needing to collect information from the Medicare beneficiaries. 
Therefore, we proposed to revise Sec.  422.66 to permit default 
enrollment only for Medicaid managed care enrollees who are newly 
eligible for Medicare and who are enrolled into a D-SNP administered by 
an MA organization with the same parent organization as the 
organization that operates the Medicaid managed care plan in which the 
individual remains enrolled. At Sec.  422.66(c)(2)(i)(B), we also 
proposed to limit these default enrollments to situations where the 
state has actively facilitated and approved the MA organization's use 
of this enrollment process and articulates this in the agreement with 
the MA organization offering the D-SNP and by providing necessary 
identifying information to the MA organization.
    The proposal was designed to support state efforts to increase 
enrollment of dually eligible individuals into fully integrated systems 
of care There is evidence \27\ that such systems improve health 
outcomes so supporting efforts to increase use those systems is 
consistent with overall CMS policy. Further, we believe then, and now, 
that the proposal provided states with additional flexibility and 
control.
---------------------------------------------------------------------------

    \27\ There is a growing evidence that integrated care and 
financing models can improve beneficiary experience and quality of 
care, including:
     Health Management Associates, Value Assessment of the 
Senior Care Options (SCO) Program, July 21, 2015, available at: 
http://www.mahp.com/unify-files/HMAFinalSCOWhitePaper_2015_07_21.pdf;
     MedPAC chapter ``Care coordination programs for dual-
eligible beneficiaries,'' June 2012, available at: http://www.medpac.gov/docs/default-source/reports/chapter-3-appendixes-care-coordination-programs-for-dual-eligible-beneficiaries-june-2012-report-.pdf?sfvrsn=0.
     Anderson, Wayne L., Zhanlian Fen, and Sharon K. Long, 
RTI International and Urban Institute, Minnesota Managed Care 
Longitudinal Data Analysis, prepared for the U.S. Department of 
Health and Human Services Assistant Secretary for Planning and 
Evaluation (ASPE), March 2016, available at: https://aspe.hhs.gov/report/minnesota-managed-care-longitudinal-data-analysis.
---------------------------------------------------------------------------

    To ensure individuals are aware of the default MA enrollment and of 
the changes to their Medicare and Medicaid coverage, we also proposed, 
at Sec.  422.66(c)(2)(i)(C) and (c)(2)(iv), a requirement for MA 
organizations to issue a notice no fewer than 60 days before the 
default enrollment effective date to the enrollee. The notice \28\ must 
include clear information on the D-SNP, as well as instructions to the 
individual on how to opt out (or decline) the default enrollment and 
how to enroll in Original Medicare or a different MA plan.
---------------------------------------------------------------------------

    \28\ Enrollment requirements and burden are currently approved 
by OMB under control number 0938-0753 (CMS-R-267). Since this rule 
will not impose any new or revised requirements/burden, we are not 
making any changes to that control number.
---------------------------------------------------------------------------

    We also proposed, in paragraph (c)(2)(i)(E) and (2)(ii), that MA 
organizations must obtain approval from CMS before implementing default 
enrollment. We explained that under our proposal in paragraph 
(c)(2)(i)(B), CMS approval would be granted only if the applicable 
state approves the default enrollment through its agreement with the MA 
organization. We also noted that MA organizations would be required to 
implement default enrollment in a non-discriminatory manner, consistent 
with their obligations under Sec.  422.110; that is, MA organizations 
could not select for default enrollment only certain members of the 
affiliated Medicaid plan who were identified as eligible for default 
enrollment. Lastly, we proposed authority for CMS to suspend or rescind 
approval at any time it determined that the MA organization is not in 
compliance with the requirements. We requested comment on whether this 
authority to rescind approval should be broader. We also explained that 
we continued to consider whether a time limit on the approval (such as 
2 to 5 years) would be appropriate so that CMS would have to revisit 
the processes and procedures used by an MA organization in order to 
assure that the regulation requirements are still being followed. We 
were particularly interested in comment on this point in conjunction 
with our alternative proposal (discussed later in this section) to 
codify the existing parameters for this type of seamless conversion 
default enrollment such that all MA organizations would be able to use 
this default enrollment process for newly eligible and newly enrolled 
Medicare beneficiaries in the MA organization's non-Medicare coverage.

[[Page 16497]]

    Under our proposal, default enrollment of individuals at the time 
of their conversion to Medicare would be more limited than the default 
enrollments Congress authorized the Secretary to permit in section 
1851(c)(3)(A)(ii) of the Act. However, we also proposed some 
flexibility for MA organizations that wish to offer seamless 
continuation of coverage to their non-Medicare members (commercial, 
Medicaid or otherwise) who are gaining Medicare eligibility. We further 
proposed to amend Sec.  422.66(d)(5) and to establish, through 
subregulatory guidance, a new and simplified positive (that is, ``opt 
in'') election process that would be available to all MA organizations 
for their commercial, Medicaid or other non-Medicare plan members. To 
reflect this proposal for a simplified election process, we proposed to 
add text in Sec.  422.66(d)(5) authorizing a simplified election for 
purposes of converting existing non-Medicare coverage to MA coverage 
offered by the same organization. This new simplified enrollment 
process aimed to lessen burden for MA organizations, make enrollment 
easier for the newly-eligible beneficiary to complete, and provide 
opportunity for beneficiary choice, so that beneficiaries could remain 
with the organization that offers their non-Medicare coverage or select 
another MA plan that meets their individual needs with respect to 
provider network, prescription drug formularies, and cost and benefit 
structures. We explained that our new election process would provide a 
longer period of time for MA organizations to accept enrollment 
requests than the time period in which MA organizations would be 
required to effectuate default enrollments, as organizations would be 
able to accept simplified enrollments throughout the individual's 
Initial Coverage Election Period (ICEP), provided he or she enrolled in 
both Medicare Parts A and B when first eligible. We proposed to use 
existing authority to create this new enrollment mechanism, which would 
be available to MA organizations in the 2019 contract year. We 
solicited comments on the proposed changes to Sec.  422.66(d)(5) and 
the form and manner of the simplified enrollments.
    In addition to these proposals and solicitations for comment 
related to default and seamless enrollments for newly eligible Medicare 
beneficiaries, we proposed amendments to Sec. Sec.  422.66(d)(1) and 
422.68 that are also related to MA enrollment. Currently, as described 
in the 2005 final rule (70 FR 4606 through 4607), Sec.  422.66(d)(1) 
requires MA organizations to accept enrollment requests from an 
individual who is enrolled in a non-Medicare health plan offered by the 
MA organization during the month immediately preceding the month in 
which he or she is entitled to both Part A and Part B and who meets MA 
eligibility requirements. We are concerned that in some instances, this 
regulation has been interpreted as meaning that the enrollment request 
must be filed during the month before Medicare entitlement occurs. To 
clarify the requirement and be more consistent with section 
1851(c)(3)(A)(ii), we proposed to amend Sec.  422.66(d)(1) to add text 
clarifying that seamless continuation of coverage is available to an 
individual who requests enrollment during his or her Initial Coverage 
Election Period. We also proposed a revision to Sec.  422.68(a) to 
ensure that ICEP elections made during or after the month of 
entitlement to both Part A and Part B are effective the first day of 
the calendar month following the month in which the election is made. 
This proposed revision would codify subregulatory guidance that MA 
organizations have been following since 2006. This proposal is also 
consistent with the proposal at Sec.  422.66(c)(2)(iii) regarding the 
effective date of coverage for default enrollments into D-SNPs. We also 
solicited comment on these related proposals.
    In conclusion, we proposed to add regulation text at Sec.  
422.66(c)(2)(i) through (iv) to set limits and requirements for a 
default enrollment of the type authorized under section 
1851(c)(3)(A)(ii). We proposed a clarifying amendment to Sec.  
422.66(d)(1) regarding when seamless continuation coverage can be 
elected and revisions to Sec.  422.66(d)(5) to reflect our proposal for 
a new and simplified positive election process that will be available 
to all MA organizations and their members who enroll in an MA plan 
offered by the same entity that offers the individual's pre-Medicare 
coverage. Lastly, we proposed revisions to Sec.  422.68(a) to ensure 
that ICEP elections made during or after the month of entitlement to 
both Part A and Part B are effective the first day of the calendar 
month following the month in which the election is made. We solicited 
comments on all these proposals.
    In addition, we presented an alternative for consideration and 
comment. Because we recognized that our proposal narrowed the scope of 
default enrollments compared to what CMS approved under section 
1851(c)(3)(A) of the Act in the past, we discussed in the proposed rule 
that we continued to consider retaining processes similar to the pre-
moratorium seamless conversion process. That seamless conversion 
mechanism is outlined currently in section 40.1.4 of Chapter 2 of the 
Medicare Managed Care Manual and had been in practice through October 
2016. As an alternative we considered proposing regulations to codify 
that guidance as follows--
     Articulating the requirements for an MA organization's 
proposal to use the seamless conversion mechanism, including 
identifying eligible individuals in advance of Medicare eligibility;
     Establishing timeframes for processing and the effective 
date of the enrollment; and
     Requiring notification to individuals at least 60 days 
prior to the conversion of their right to opt-out or decline the 
enrollment.
    In considering this alternative, we contemplated additional 
beneficiary protections, including the issuance of an additional notice 
to ensure that individuals understood the implication of taking no 
action when notified of the default enrollment. While this alternative 
would lead to increased use of the seamless conversion enrollment 
mechanism than what had been used in the past, we expressed concern 
that the operational challenges, particularly in relation to the new 
Medicare Beneficiary Identification number, could be significant for MA 
organizations to overcome at this time.
    We also explained how we considered proposing regulations to limit 
the use of default enrollment to only beneficiaries who are eligible 
for Medicare based on age. While this alternative would simplify an MA 
organization's ability to identify eligible individuals, we noted 
concerns about disparate treatment among newly eligible beneficiaries 
based on their reason for obtaining Medicare entitlement.
    We invited comments on our proposal and the alternate approaches we 
identified, including the following:
     Codify the existing parameters for this type of seamless 
conversion default enrollment such that all MA organizations would be 
able to use this default enrollment process for newly eligible and 
newly enrolled Medicare beneficiaries already covered by the MA 
organization's non-Medicare coverage.
     Codify the existing parameters for this type of seamless 
conversion default enrollment, as described previously, but allow that 
use of default enrollment to be limited to only the aged population.
    We also asked for solutions to address the concerns we identified 
in the proposed rule, particularly related to

[[Page 16498]]

how MA organizations could identify commercial members who are 
approaching Medicare eligibility based on disability, as well as how 
plans could confirm MA eligibility and process enrollments without 
access to the individual's Medicare number.
    We received the following comments and our responses follow:
    Comment: We received significant support for our proposal to permit 
default MA enrollments, especially for dually-eligible beneficiaries 
who are newly eligible for Medicare. Most commenters supported the 
proposal to permit only D-SNPs to receive defaulted enrollments for 
dually-eligible beneficiaries. Some commenters who supported our 
proposal also supported the alternative we noted for consideration that 
would permit default enrollment of newly Medicare-eligible individuals 
enrolled in a non-Medicare health plan offered by the same 
organization.
    Response: We appreciate the widespread support we received for the 
proposal. In our view, this proposal and our final rule support state 
efforts to increase enrollment of dually eligible individuals in fully 
integrated systems of care.
    We appreciate the responses to our solicitation of feedback on 
expanding default enrollment to include individuals enrolled in 
commercial health plans offered by an MA organization. As noted in the 
proposed rule (82 FR 56366) and above, our experience with the current 
seamless conversion enrollment mechanism makes it clear that 
organizations attempting to seamlessly convert individuals from 
commercial coverage (that is, private coverage and Marketplace 
coverage) are, for the most part, unable to comply with our current 
guidance and approval parameters, especially the expectation that 
organizations have the means to identify their commercial members who 
are approaching Medicare eligibility based on disability. Given these 
challenges, we did not specifically propose to codify default 
enrollment from commercial coverage. We also solicited feedback on how 
MA organizations might overcome the challenges in confirming 
entitlement to Medicare Parts A and B within necessary timeframes and 
obtaining the individual's Medicare number, given that in 2018 this 
will become a random and unique number instead of a Social Security 
Number-based identifier. We received only a few responses to our 
solicitation of ideas on how to resolve these issues; commenters 
generally deferred to CMS to find a way to identify non-MA members when 
those members approach Medicare eligibility and for CMS to convey this 
information to plans well in advance of the Medicare eligibility date. 
In light of these comments, CMS may consider expanding default 
enrollment to occur from commercial or other coverage arrangements in 
future rulemaking. We are not finalizing the alternate proposal on 
which we solicited comment.
    Comment: A commenter asked that we expand default enrollment to 
those enrolled in other ``state innovated models'' and delivery systems 
other than Medicaid managed care, such as ACOs. The same commenter 
asked that we allow the default enrollment provisions to be applied to 
individuals enrolled in coverage other than comprehensive Medicaid 
managed care, including prepaid inpatient health plans, prepaid 
ambulatory health plans, and primary care case management. Another 
commenter asked that we consider expanding our proposal for default 
enrollment and/or changing the current parameters for passive 
enrollment to allow a State to enroll any dually-eligible individual 
(whether in a Medicaid managed care plan or in a Medicaid Fee-for-
Service program) into a D-SNP at any time.
    Response: We appreciate the comments. As proposed, default 
enrollment would be subject to several substantive conditions, one of 
which required that anyone being considered for default enrollment be 
enrolled in a Medicaid managed care plan affiliated with the MA 
organization. Our proposal was specific to allowing default enrollment 
of individuals enrolled in comprehensive Medicaid managed care plans--
rather than limited-benefit plans or case management arrangements--into 
D-SNPs when these Medicaid managed care plan enrollees first become 
eligible for Medicare. We believe that our overall goals of encouraging 
integrated care are best met by limiting the default enrollment to the 
context of comprehensive Medicaid managed care plans at this point and 
may revisit an expansion of this regulation in future rulemaking. We 
plan to further clarify allowable scenarios in subsequent guidance. 
However, given the parameters of section 1851(c)(3)(A)(ii) of the Act, 
we are unable to finalize a regulation that so substantially expands 
the population of beneficiaries subject to this default enrollment to 
include Medicaid beneficiaries who are not enrolled in a health plan 
offered by an MA organization.
    Comment: Several commenters who support our proposal for default 
enrollment recommend that, if finalized, we ensure that beneficiaries 
who do not speak English as a primary language receive outreach in 
their language, preferably by both mail and telephone.
    Response: We appreciate these comments and agree that clear 
communication with individuals identified for default enrollment is an 
important protection, especially with regard to the potential impact of 
MA plan enrollment on an individual's access to care. We note that 
existing law, such as Title VI of the Civil Rights Act of 1964 
(applicable to MA organizations in connection with Medicare coverage) 
and 42 CFR 438.10 (applicable to Medicaid managed care plans) address 
requirements for providing access to enrollees who have limited English 
proficiency (LEP). Guidance on the Civil Rights Act of 1964 and 
authorities that are not limited to Medicare or Medicare is issued by 
the HHS Office for Civil Rights (OCR). We refer the commenter to 
section II.B.5 of this final rule on marketing and communications 
requirements. We believe, therefore, that revisions to our proposed 
rule are not necessary.
    Comment: Several commenters stated that the network for the MA plan 
should be substantially identical and should not be substantially 
narrower than the network of the Medicaid plan from which default 
enrollment would occur.
    Response: Although we did not include specific provider network 
criteria in our proposal for default MA enrollment, we note that CMS 
currently has in place network adequacy requirements that would apply 
to any MA plan into which default enrollment occurs. States also have 
the opportunity to use their State Medicaid agency contracts with D-
SNPs to create additional provider network continuity requirements. 
Therefore, we do not believe that additional criteria are warranted.
    Comment: Several of the commenters who opposed our proposal for 
default enrollment asked that in the event that our proposal for 
default enrollment is finalized, we consider additional beneficiary 
protections, such as a minimum star rating for the MA plan into which 
default enrollment would occur and the exclusion of MA plans that have 
been assessed a civil monetary penalty or have been sanctioned within 
the previous 18 months. Another commenter expressed concern about the 
potential for individuals to be default enrolled into an MA plan with a 
low star rating when there are MA plans with higher star ratings 
offered by other organizations in the same area. These commenters note 
that organizations with high star ratings that do not offer

[[Page 16499]]

a Medicaid plan would not be permitted to conduct default enrollment.
    Response: We appreciate the comments we received regarding the 
significance of the compliance history of an MA organization that 
wishes to conduct default MA enrollment and the suggestion of a minimum 
star rating. We agree with these commenters that standards governing 
the quality of the MA D-SNP are appropriate to adopt as well. We 
believe that default enrollment should not be permitted into an MA plan 
offered by an MA organization with a low star rating and/or recent 
issues of significant noncompliance with our regulatory requirements 
such that CMS has imposed a suspension on new enrollments. Since 
default MA enrollment is based on an opt-out, rather than opt-in, 
approach, we believe it is important to ensure that individuals are not 
enrolled by default into MA plans offered by poor performing 
organizations. Therefore, we are finalizing the regulation with 
additional paragraphs ((c)(2)(i)(F) and (G)) that limit default 
enrollment authority to MA plans that have an overall rating of 3 Stars 
(or are low enrollment or new contracts) and that are not under a 
prohibition on new enrollments.
    Comment: Most commenters expressed support for limiting CMS 
approval of an organization's request to conduct default enrollment to 
a specific time frame. Those who mentioned a specific time frame 
suggested a period of 2 to 5 years. A commenter suggested that CMS 
conduct a review after initial approval only if there is an indication 
of disruption in care.
    Response: CMS oversight of plans' implementation of the default 
enrollment process is an important beneficiary protection. We agree 
with the suggestions of a 5 year timeframe, as it provides a reasonable 
amount of time for MA organizations to implement and then assess the 
approved process, limits administrative burden for MA organizations to 
request continued approval, and provides them the opportunity to update 
their processes as operational enhancement or new technologies emerge. 
However, in our view, should beneficiary complaints or allegations of 
noncompliance come to our attention, we need to be able to conduct a 
review of an organization's default enrollment process prior to the 
expiration of the five year period. Therefore, we will include in the 
final rule an approval time period of 5 years with a provision that 
permits CMS to suspend or rescind approval if CMS determines that the 
MA organization is not in compliance with the requirements or Sec.  
422.66(c)(2) or other MA program standards.
    Comment: A commenter suggested that we share with states the 
criteria we will use to review plan proposals to offer default 
enrollment, adding that this may promote uniformity with implementation 
across the various states.
    Response: The requirements for default enrollment are outlined in 
this regulation. In addition, we will consider additional guidance, 
which is available to states, industry, advocates, and the general 
public, as necessary.
    Comment: Most commenters expressed support for our proposal to 
permit simplified elections for seamless continuation of commercial 
coverage into a MA plan offered by the same organization. A commenter 
expressed opposition to the offering of a simplified (opt-in) 
enrollment mechanism to anyone enrolled in a Medicaid managed care 
plan. Another commenter asked that we consider making the simplified 
(opt-in) enrollment mechanism available to all beneficiaries, including 
those who are not in their ICEP and those who are not enrolled in a 
non-Medicare plan offered by the same organization.
    Response: We appreciate the support for our proposal to promote 
beneficiary choice and simplify the enrollment process for all MA 
organizations that offer non-Medicare coverage. However, we disagree 
with the suggestion to prohibit use of the simplified enrollment 
mechanism by those enrolled in Medicaid managed care plans. In our 
view, an eligible individual always has the option to make an active 
choice into an MA plan that meets their needs when in an election 
period. Further, as not all individuals in Medicaid managed care plans 
will be automatically enrolled into a D-SNP (such as those individuals 
enrolled in Medicaid managed care plans whose parent organizations have 
opted not to use the default enrollment mechanism or those individuals 
whose Medicaid managed care enrollment is in a Medicaid prepaid health 
plan that covers a limited scope of benefits), the simplified 
enrollment mechanism will lessen burdens on the enrollee and MA 
organizations that offer such plans. We believe that a simplified 
election process for beneficiaries who wish to convert from their non-
Medicare coverage to MA coverage offered by the same entity will 
facilitate a more efficient enrollment process overall.
    As described in the proposed rule, this mechanism will be available 
to any MA organization that chooses to offer it. It will be potentially 
available to any beneficiary who wishes to join an MA plan offered by 
the same MA organization that offers his or her non-Medicare coverage 
at the time of his or her initial Medicare eligibility. The simplified 
enrollment mechanism aims to lessen the amount of information that an 
MA organization needs to collect from the beneficiary and to use 
information the MA organization already has. MA organizations that do 
not already have an existing relationship with an individual must 
collect all the necessary information in which to determine eligibility 
and process the enrollment request under Sec.  422.60.
    We appreciate the feedback to finalize use of a simplified 
enrollment mechanism authorized under Sec.  422.66(d)(5) as amended in 
this final rule. We will permit individuals who are in their ICEP and 
enrolled in any type of non-Medicare plan to use the simplified (opt-
in) enrollment mechanism to request enrollment in any type of MA plan 
offered by the same MA organization that offers the non-Medicare 
coverage.
    Comment: A few commenters responded to our solicitation of feedback 
on limiting default enrollment to only the aged. Most of these 
commenters opposed this limitation; a commenter supported it. Those who 
oppose limiting default enrollment to only the aged believe that 
allowing default enrollment to be offered only to those whose Medicare 
eligibility is based on age, instead of to all beneficiaries, would be 
discriminatory on its face because the exclusion is based on having a 
disability or ESRD. Another commenter believes that states and plans 
should be allowed to determine whether including all individuals 
approaching Medicare eligibility is feasible and, if not feasible, 
include only those whose Medicare eligibility is based on age.
    Response: We thank the commenters and agree that it would be 
inappropriate to exclude individuals whose Medicare eligibility is 
based on disability from default enrollment. We believe that an 
individual's eligibility to be included in default enrollment should be 
based on his or her projected Medicare eligibility in general and not 
on the specific reason for Medicare eligibility. We are, therefore, 
finalizing this aspect of our proposal as described in the notice of 
proposed rulemaking and are not including any authority to limit 
default enrollment (under paragraph (c)) or seamless conversions (under 
paragraph (d)) to beneficiaries whose eligibility is based on age.

[[Page 16500]]

    Comment: In the event that our proposal for default enrollment is 
finalized, several commenters who opposed our proposal for default 
enrollment ask that default-enrolled beneficiaries be provided 
transition coverage, allowing use of an off-formulary drug, and 
allowing a beneficiary to maintain an out-of-network provider for 12 
months, similar to the Medicare-Medicaid financial alignment 
demonstration.
    Response: We appreciate these comments and note that several of the 
concerns expressed are addressed in other areas of current regulation 
and guidance. With regard to formulary concerns, we note that all plans 
offering Part D coverage must meet CMS' formulary adequacy requirements 
and, in addition, must offer a transition period upon a member's 
enrollment in a new plan. Specifically, under Sec.  423.120(b)(3), new 
enrollees must be provided a temporary supply of non-formulary Part D 
drugs, as well as Part D drugs with utilization management 
restrictions, and can work with their new plan and provider to switch 
to a different formulary drug or request an exception during their 
first 90 days of enrollment in the new MA plan. States may also use 
their State Medicaid Agency contracts with D-SNPs to create additional 
continuity requirements. With regard to the commenters' suggestion that 
we require MA organizations to allow new members to receive care from 
out-of-network providers for 12 months, similar to the Medicare-
Medicaid financial alignment demonstration, we note that a 6 month 
continuity of care period is more common for demonstration plans. In 
addition, we note that this period can be offered by demonstration 
plans due to the demonstration authority itself; we do not have similar 
authority to impose a similar requirement on MA organizations that 
choose to implement the default enrollment process.
    Comment: The few commenters who opposed default enrollment cite as 
the basis for their position the lack of beneficiary choice and the 
potential for disruption in care resulting from default enrollment into 
a plan with different benefits, cost-sharing, provider network and 
formulary.
    Response: In response to these comments, we note that an important 
feature of this enrollment process is clear and timely advance notice 
to the individual regarding default MA enrollment and the opportunity 
to decline the enrollment up to and including the day prior to the 
enrollment effective date. We, therefore, disagree with these 
commenters that the default MA enrollment process, as proposed and as 
finalized in this rule, does not involve beneficiary choice. The notice 
requirements in the final rule will provide the beneficiary a least a 2 
month period in which to review his or her Medicare options and make an 
informed choice. Further, the new MA Open Enrollment Period, discussed 
at section II.B.1 of this final rule, would be available to any 
beneficiary who was default enrolled in an MA plan pursuant to Sec.  
422.66(c)(2). Upon an individual's new enrollment in an MA plan during 
the individual's ICEP, he or she would have 3 months, under the MA Open 
Enrollment Period discussed in Sec.  422.62(a)(5), to make a change to 
another MA plan or select Original Medicare for health coverage. 
Additionally, as individuals eligible for default enrollment would only 
be those dually-eligible, they would also be eligible to use their 
quarterly opportunity under the duals SEP, as outlined in II.A.10 of 
this final rule, to make a Part D election, as well as any other 
election periods for which they may qualify, to make a change. In this 
context, a Part D election would include enrollment into an MA plan 
that includes a Part D benefit. We believe that there are adequate 
protections in place, as finalized with these amendments to Sec.  
422.66(c)(2) and elsewhere in this final rule, for beneficiary choice 
in connection with the initial election period when someone is first 
entitled to or eligible for Medicare.
    The regulation we proposed requires the MA organization conducting 
default enrollment to provide notice that describes the costs and 
benefits of the MA plan into which the default enrollment would occur, 
as well as the process for accessing care under the plan. We agree with 
the commenters that information on the differences between an 
individual's current non-Medicare coverage and the new MA plan, 
including a statement as to whether the individual's current primary 
care provider will continue to be available to the individual upon 
enrollment in the MA plan, should be included in the advance 
notification of default enrollment. We also agree that information on 
other types of Medicare plans should be included in the notice to 
ensure an individual who is notified of default enrollment has 
sufficient information and can make an informed choice with regard to 
the coverage option that best meets his or her needs. Therefore, we are 
finalizing additional paragraphs, at (c)(2)(iv), that specific 
information be included in the notice describing the default enrollment 
and the ability to opt-out:
    (A) Information on the differences in premium, benefits and cost 
sharing between the individual's current Medicaid managed care plan and 
the dual eligible MA special needs plan and the process for accessing 
care under the MA plan;
    (B) The individual's ability to decline the enrollment, up to and 
including the day prior to the enrollment effective date, and either 
enroll in Original Medicare or choose another MA plan; and
    (C) A general description of alternative Medicare health and drug 
coverage options available to an individual in his or her Initial 
Coverage Election Period.
    In addition, we are including in the regulation that this 
information and the notice about the default enrollment is in addition 
to any mandatory disclosures required under Sec.  422.111.
    Comment: Several commenters who opposed our proposal for default 
enrollment expressed support for our proposal to develop a simplified 
(opt-in) enrollment mechanism, as long as differences between an 
individual's current and new plan are clearly communicated and that he 
or she is made aware of all options available to newly Medicare-
eligible individuals. These commenters note that an individual's 
initial eligibility for Medicare is a critical decision point and that 
information on the full range of Medicare coverage options is important 
to help ensure that those approaching Medicare eligibility are aware of 
the resources available to them and of any time-limited enrollment 
opportunities, such as the option to obtain Medigap on a guaranteed 
issue basis.
    Response: With respect to the new simplified (opt-in) election 
mechanism that would be available to all MA organizations for MA 
enrollments of their commercial, Medicaid or other non-Medicare 
members, we note that MA organizations that choose to implement this 
optional election mechanism will be required to follow existing rules 
governing mandatory disclosures (for example, Sec.  422.111), 
communications and marketing that are applicable to other beneficiary-
initiated enrollment requests. Required disclosures include a 
description of the MA plan benefits, including applicable conditions 
and limitations, premiums and cost-sharing (such as copayments, 
deductibles, and coinsurance), any other conditions associated with 
accessing benefits and for purposes of comparison, a description of the 
benefits offered under original

[[Page 16501]]

Medicare. Also included under Sec.  422.111 is the requirement to 
disclose the number, mix, and distribution (addresses) of providers 
from whom enrollees may reasonably be expected to obtain services. We 
will provide additional information on this optional enrollment 
mechanism in subregulatory guidance.
    Given these substantial existing disclosure requirements that will 
be applicable to the new simplified (opt-in) election mechanism, as 
well as our ongoing public outreach and education activities for 
individuals new to Medicare, we do not believe that additional notice 
or disclosure requirements are warranted.
    Comment: A few commenters asked that we reduce the requirement to 
identify newly-eligible Medicare beneficiaries from 90 to 60 days.
    Response: We believe the commenters' reference to a 90 day 
requirement for advance notification of newly-eligible Medicare 
beneficiaries is based on the current subregulatory guidance applicable 
to the seamless conversion enrollment mechanism. This guidance will be 
revised as a result of this final rule to account for default 
enrollment and the new simplified (opt-in) enrollment mechanism. The 
rule we are finalizing requires notice to the affected beneficiary at 
least 60 days in advance of the enrollment effective date (the month in 
which the individual is first entitled to both Part A and Part B). This 
reflects a change from the current seamless conversion process, which 
requires identification of beneficiaries that will be seamlessly 
enrolled 90 days in advance. While we believe that timely 
identification of individuals approaching Medicare eligibility is an 
important beneficiary protection that helps to ensure that plans are 
able to provide timely advance notification and submission of 
enrollment transactions to CMS, we also believe that for default 
enrollment this shorter timeframe does not have an adverse beneficiary 
impact. MA plans that are authorized to use this default enrollment 
process must identify all eligible enrollees in time to provide the 
required advance notification to individuals eligible for default 
enrollment no fewer than 60 days before the default enrollment 
effective date.
    Comment: Several commenters suggested that CMS consider allowing 
default enrollment from Medicaid managed care plans into fully 
integrated dual eligible special needs plans (FIDE SNPs), which are a 
type of special needs plan designed to promote the full integration and 
coordination of Medicaid and Medicare benefits for dual eligible 
beneficiaries by a single managed care organization.
    Response: We thank the commenters for their feedback and agree that 
allowing default enrollment from Medicaid managed care plans into FIDE 
SNPs is consistent with the proposed rule. FIDE SNPs are a specific 
type of approved MA-PD dual eligible special needs plan. We will 
finalize revised text to clarify that FIDE SNPs are permitted to use 
the default enrollment mechanism, subject to the other requirements in 
the rule.
    Comment: A commenter stated that Congress should revisit default 
enrollment in traditional Medicare. This commenter believes that to the 
extent that MA quality is superior, enrollment should default to the 
highest quality option, rather than to traditional Medicare.
    Response: As acknowledged by the commenter, this comment is outside 
of the scope of this regulation and our authority under section 1851. 
CMS's authority is circumscribed by the Medicare statute, particularly 
section 1851(c)(3)(A)(ii) of the Act with regard to default 
enrollments.
    Comment: A commenter suggests that plans conducting default 
enrollment be allowed to send the notification of default enrollment up 
to 90 days after an individual's initial Medicare eligibility, adding 
that this would increase enrollment into integrated plans.
    Response: We appreciate the suggestion; however we disagree with 
permitting notification of default enrollment after enrollment or, as 
implied by the commenter, effectuating the default enrollment up to 90 
days after the initial date of Medicare eligibility. As described in 
our proposal, states have the information to identify newly eligible 
Medicare beneficiaries before the actual first date of Medicare 
eligibility; therefore, they have the information necessary to provide 
to their contracted MA organizations so that the integrated coverage 
can begin at the earliest possible date--the date the individual first 
has both Medicare Parts A and B. As such, the effective date for 
default enrollment will always coincide with the date of an 
individual's entitlement to and eligibility for Medicare Parts A and B, 
which would not allow the commenter's suggested change. We note as well 
that the commenter's suggestion would result in notification of the 
default enrollment well after the enrollment effective date, resulting 
in a period of time during which the individual is not aware of his or 
her enrollment in an MA plan, does not have the information necessary 
to access benefits and would be financially liable for healthcare 
services received from providers not contracted with the MA plan. To 
ensure that individuals receive timely advance notification of the 
default enrollment, we are declining the commenter's suggestion. We 
note that individuals who are enrolled into a MA plan through default 
enrollment continue to have a three-month opportunity to change their 
enrollment using the MA Open Enrollment Period, as outlined in Sec.  
422.62(a)(5). Further, an individual who chooses to opt out of default 
enrollment into an MA plan is still able to make an election during his 
or her Initial Coverage Election Period, which begins 3 months before 
and lasts 3 months after the month of initial Medicare eligibility.
    Comment: A commenter suggested that default enrollment not be 
allowed where Medicare-Medicaid financial alignment demonstration plans 
are available.
    Response: We are committed to partnership with state Medicaid 
agencies to pursue integrated care approaches that work for each state. 
We believe that the proposed regulatory language requiring state 
approval for default enrollment into D-SNPs provides an appropriate 
safeguard that ensures any default enrollments are consistent with the 
state's Medicare-Medicaid integration goals.
    Comment: A commenter who opposes default enrollment into D-SNPs 
stated that it will lead to reduced competition and fewer D-SNP 
offerings for beneficiaries, resulting in higher costs and fewer 
benefits over time.
    Response: We appreciate the comment but disagree with the 
commenter's assessment and conclusion regarding the impact of default 
MA enrollment on competition in the market and the number of D-SNP 
offerings. As default enrollment accounts only for those newly eligible 
for Medicare, it is our view that D-SNPs provide a valuable service to 
all beneficiaries--those currently and newly in the Medicare program.
    After review of the comments, and as discussed earlier, we are 
finalizing the proposed changes to Sec. Sec.  422.66(c) and 
422.68(d)(1) and (5) with the following modifications:
     Paragraph 422.66(c)(2)(i) will be revised to clarify that 
we will allow default enrollment into a FIDE-SNP administered by an MA 
organization under the same parent organization as the organization 
that operates the Medicaid managed care plan in which the individual 
remains enrolled.
     Paragraph 422.66(c)(2)(i) will be revised to require a 
minimum star rating

[[Page 16502]]

on the contract receiving default enrollments for an MA organization to 
be approved for default enrollment. We are revising the paragraph to 
require that, for an organization to be approved for default 
enrollment, it must have an overall quality rating, from the most 
recently issued ratings, under the rating system described in 
Sec. Sec.  422.160 through 422.166, of at least 3 stars or is a low 
enrollment contract or new MA plan as defined in Sec.  422.252. In 
addition, the MA organization must not be under an enrollment 
suspension.
     Paragraph 422.66(c)(2)(ii) will be revised to include an 
approval period not to exceed 5 years, subject to CMS authority to 
rescind or suspend approval if the plan is non-compliant.
     Paragraph 422.66(c)(2)(iv) will be revised to require that 
the notice issued by the MA organization include information on the 
differences in premium, benefits and cost sharing between the 
individual's current Medicaid managed care plan and the dual eligible 
MA special needs plan and the process for accessing care under the MA 
plan; an explanation of the individual's ability to decline the 
enrollment, up to and including the day prior to the enrollment 
effective date, and either enroll in Original Medicare or choose 
another MA plan; and a general description of alternative Medicare 
health and drug coverage options available to an individual in his or 
her Initial Coverage Election Period.
     Paragraph 422.66(c)(2)(iv) will be revised to clarify that 
the mandatory notice is in addition to the information and documents 
required to be provided to new enrollees under Sec.  422.111.
8. Passive Enrollment Flexibilities To Protect Continuity of Integrated 
Care for Dually Eligible Beneficiaries (Sec.  422.60(g))
    Beneficiaries who are dually eligible for both Medicare and 
Medicaid typically face significant challenges in navigating the two 
programs, which include separate or overlapping benefits and 
administrative processes. Fragmentation between the two programs can 
result in a lack of coordination for care delivery, potentially 
resulting in unnecessary, duplicative, or missed services. One method 
for overcoming this challenge is through integrated care, which 
provides dually eligible beneficiaries with the full array of Medicaid 
and Medicare benefits for which they are eligible through a single 
delivery system, thereby improving quality of care, beneficiary 
satisfaction, and care coordination, and reducing administrative 
burden.
    In the proposed rule, we proposed a limited expansion of CMS' 
regulatory authority to initiate passive enrollment for certain dually 
eligible beneficiaries who are currently enrolled in an integrated D-
SNP into another integrated D-SNP in instances where integrated care 
coverage would otherwise be disrupted, such as during a state re-
procurement of Medicaid managed care contracts that results in current 
Medicaid managed care plans not being renewed, or when beneficiaries 
are enrolled in an integrated D-SNP that non-renews its MA contract at 
the end of the contract year. The intent of CMS' proposal was to 
improve care coordination and minimize disruption in care by promoting 
enrollment in integrated care arrangements for dually eligible 
beneficiaries currently enrolled in an integrated D-SNP.
    Specifically, we proposed authorizing CMS to passively enroll 
certain dually eligible individuals currently enrolled in an integrated 
D-SNP into another integrated D-SNP, after consulting with the state 
Medicaid agency that contracts with the D-SNP or other integrated 
managed care plan, when CMS determines that the passive enrollment will 
promote continuity of care and integrated care under Sec.  
422.60(g)(1)(iii). We also proposed, under Sec.  422.60(g)(2), a number 
of requirements an MA plan would have to meet in order to qualify to 
receive passive enrollments under paragraph (g)(1)(iii). These proposed 
requirements are detailed below.
     MA plans receiving the passive enrollments must be highly 
integrated D-SNPs, thereby restricting passive enrollment to those MA 
plans that operate as a FIDE SNP or meet the integration standard for a 
highly-integrated D-SNP, as defined in Sec.  422.2 and described in 
Sec.  422.102(e), respectively.
     In an effort to promote continuity of care, receiving MA 
plans must have substantially similar provider and facility networks 
and Medicare- and Medicaid-covered benefits as the integrated MA plan 
(or plans) from which beneficiaries are passively enrolled.
     D-SNP contracts must have a minimum overall MA Star Rating 
of at least 3 stars for the year prior to receipt of passive enrollment 
or be a low enrollment or new MA contract (which do not have a Star 
Rating because of the insufficient data available).
     Receiving MA plans must not have any prohibition on new 
enrollment imposed by CMS.
     Receiving MA plans must have appropriate limits on premium 
and cost-sharing for beneficiaries.
    We solicited comments on our proposal to identify plans for 
receiving passive enrollments, particularly on the minimum quality 
standards relevant to dually eligible beneficiaries. We also solicited 
comments on whether to limit passive enrollment authority to 
circumstances that would not raise total cost to the Medicare and 
Medicaid programs. Additionally, we requested feedback on how to 
calculate the projected impact on Medicare and Medicaid costs from 
exercise of this authority.
    In the proposed rule, we noted that we had also considered 
proposing new (or additional) beneficiary notification requirements for 
passive enrollments that occur under proposed paragraph (g)(1)(iii), 
including the provision of two notifications to enrollees prior to the 
effective date. Citing the existing beneficiary notifications that are 
currently required under Medicare regulations and concerns regarding 
the quantity of notifications sent to beneficiaries, we did not propose 
to modify the existing notification requirements under paragraph (g)(4) 
of the proposed rule. However, we solicited comment on alternatives 
regarding beneficiary notices, including comments about the content and 
timing of such notices.
    We received the following comments and our responses follow.
    Comment: Many commenters expressed support for CMS' proposal for a 
limited expansion of the current passive enrollment authority in order 
to promote continued enrollment of dually eligible beneficiaries in 
integrated D-SNPs, preserve and promote care integration, and limit 
disruptions in care under certain circumstances. Several commenters 
supported CMS' goal of care continuity while expressing their belief 
that the best way to empower beneficiaries is through mechanisms where 
beneficiaries opt in to integrated care. A commenter requested that CMS 
consider how passive enrollment of beneficiaries from an existing 
integrated D-SNP into another integrated D-SNP could create disruptions 
in care. A few commenters opposed our passive enrollment proposal due 
to concerns that passive enrollment limits beneficiary choice and 
erodes the role of competition in the marketplace. A commenter 
suggested that a better alternative for beneficiaries in integrated D-
SNPs that are non-renewing is for them to revert to FFS Medicare. 
Another commenter noted that passive enrollment in other

[[Page 16503]]

circumstances has proven to be too confusing for dually eligible 
beneficiaries.
    Response: We appreciate the support by most commenters of our goals 
of promoting continuity and quality of care for dually eligible 
beneficiaries currently enrolled in integrated D-SNPs in situations 
where they would otherwise experience an involuntary disruption in 
either Medicare or Medicaid coverage. As we stated in the proposed rule 
(82 FR 56369-56370), we anticipate using this new authority exclusively 
in limited situations related to market disruptions related to D-SNP 
non-renewal or changes in state Medicaid managed care organization 
procurements; therefore, we anticipate that this authority, as 
finalized, will have no significant impact on competition in the 
Medicare Advantage marketplace. We also proposed that D-SNPs meet 
certain requirements related to integration, quality, performance, and 
provider network and benefits comparability relative to the enrollees' 
previous coverage. We believe these safeguards will ensure continuity 
of care and limit any disruption associated with a plan change for 
affected enrollees. In addition, we believe the beneficiary notice 
requirements for passively enrolled individuals described in Sec.  
422.60(g)(4) ensure that beneficiaries will receive appropriate advance 
notice regarding the costs and benefits of their new coverage, the 
process for accessing care under the new plan, and an explanation of 
the beneficiary's ability to decline the enrollment or choose another 
plan. As described elsewhere in this final rule, we are strengthening 
the notice requirements associated with passive enrollment under this 
new limited expansion of CMS' passive enrollment authority. Finally, we 
note that all individuals enrolled into an integrated D-SNP under CMS' 
passive enrollment authority will have a special election period (SEP) 
under Sec.  422.60(g)(5), which as finalized in this rule refers to the 
new SEP established in this final rule at Sec.  423.38(c)(10). This SEP 
will allow individuals to opt out of the passive enrollment within 3 
months of notification of a CMS or state-initiated enrollment action or 
that enrollment action's effective date (whichever is later). This SEP 
is in addition to any other election periods for which they qualify. 
During the SEP, a beneficiary would be able choose FFS Medicare or 
other coverage based on their personal preferences. Therefore, we are 
finalizing the proposed limited expansion of CMS' passive enrollment 
authority at Sec.  422.60(g)(1)(iii). However, we note that we are 
making a technical revision to paragraph (g)(1)(iii) to clarify that a 
plan must meet all the requirements under paragraph (g)(2) to be 
eligible to receive passive enrollment.
    Comment: A commenter stated that any beneficiary who has chosen FFS 
Medicare should not be passively enrolled. Several commenters suggested 
that passive enrollment be extended to existing and new dually eligible 
beneficiaries in FFS Medicare and stand-alone Part D plans. A few 
commenters recommended passively enrolling dually eligible 
beneficiaries into a D-SNP when states enroll beneficiaries into a 
mandatory Medicaid long-term services and supports (LTSS) program.
    Response: While we appreciate commenters' support for coordinated 
care options for individuals who are not currently enrolled in an MA 
plan, we note that our intent in proposing an expansion of CMS' passive 
enrollment authority was to promote continuity of integrated care for 
those beneficiaries enrolled in an integrated D-SNP but who would 
experience an involuntary disruption in their Medicare or Medicaid 
coverage in the absence of passive enrollment into a comparable 
integrated D-SNP. This authority could not be used to transition 
enrollees currently in FFS Medicare to an MA plan.
    Comment: Some commenters agreed that passive enrollment eligibility 
should be limited to highly integrated D-SNPs. A commenter recommended 
limiting eligibility for passive enrollment to integrated D-SNPs with 
the experience and size to meet the unique needs of the dual eligible 
population. A few commenters expressed concern that the scope of our 
proposal was too limited because only Fully Integrated Dual Eligible 
(FIDE) SNPs and other MA plans that meet the integration standard for a 
highly-integrated D-SNP, as defined in Sec.  422.2 and described in 
Sec.  422.102(e), respectively, would be qualified to receive the 
passive enrollments. These commenters noted the limited number of 
highly integrated D-SNPs and FIDE SNPs currently in the market. A few 
commenters recommended extending eligibility to include all D-SNPs that 
meet minimum quality standards and can demonstrate appropriate levels 
of integrated benefits. Another commenter recommended that CMS allow 
states the flexibility to determine which D-SNPs are eligible to 
participate in passive enrollment.
    Response: We appreciate the commenters' perspectives on this issue. 
We may re-examine this issue as we gain experience, but we have 
concluded that it is more prudent to focus this form of passive 
enrollment on a narrow set of circumstances that offer the highest 
levels of integration between Medicare and Medicaid. This will allow us 
to better monitor implementation and will promote integration, which 
has been associated with better outcomes.\29\ We also note that our 
proposed criteria are minimum standards only; states can establish 
additional criteria to determine which D-SNPs may be eligible for 
passive enrollment. As such, we are finalizing the scope of the 
proposed passive enrollment authority for dually eligible beneficiaries 
enrolled in an integrated D-SNP, without modification.
---------------------------------------------------------------------------

    \29\ There is a growing evidence that integrated care and 
financing models can improve beneficiary experience and quality of 
care, including:
     Health Management Associates, Value Assessment of the 
Senior Care Options (SCO) Program, July 21, 2015, available at: 
http://www.mahp.com/unify-files/HMAFinalSCOWhitePaper_2015_07_21.pdf.
     MedPAC chapter ``Care coordination programs for dual-
eligible beneficiaries,'' June 2012, available at: http://www.medpac.gov/docs/default-source/reports/chapter-3-appendixes-care-coordination-programs-for-dual-eligible-beneficiaries-june-2012-report-.pdf?sfvrsn=0.
     Anderson, Wayne L., Zhanlian Fen, and Sharon K. Long, 
RTI International and Urban Institute, Minnesota Managed Care 
Longitudinal Data Analysis, prepared for the U.S. Department of 
Health and Human Services Assistant Secretary for Planning and 
Evaluation (ASPE), March 2016, available at: https://aspe.hhs.gov/report/minnesota-managed-care-longitudinal-data-analysis.
---------------------------------------------------------------------------

    Comment: Several commenters encouraged CMS to consider further 
expanding our proposed passive enrollment authority to transition 
enrollees of non-renewing Medicare-Medicaid Plans (MMPs) into an 
integrated D-SNP.
    Response: We clarify that under the Financial Alignment Initiative 
capitated model demonstrations, MA regulations--including those 
governing passive enrollments--apply to MMPs unless waived. As has been 
the case to date under the demonstrations, we will continue to use our 
demonstration authority to waive applicable MA regulatory requirements 
in three-way contracts as necessary, and in partnership with each 
state, to achieve each individual demonstration's objectives.
    Comment: Several commenters supported the requirement for 
consultation with the state Medicaid agency that contracts with an 
eligible D-SNP, as proposed in Sec.  422.60(g)(1)(iii). Some commenters 
noted that this consultation would ensure both the proper utilization 
of CMS' passive enrollment authority and consistency

[[Page 16504]]

with states' integration goals and priorities. A commenter noted that 
this consultation would result in a more seamless process for states, 
integrated D-SNPs, and dually eligible beneficiaries. A few commenters 
noted that passive enrollment should occur at state discretion and 
pursuant to the State Medicaid Agency Contract with the D-SNP required 
under Sec.  422.107.
    Response: We appreciate the support for the proposed requirement 
that CMS consult with state Medicaid agencies to make a determination 
that D-SNPs meet the passive enrollment eligibility criteria and that 
the use of passive enrollment will promote integrated care and 
continuity of care for full-benefit dual eligible beneficiaries 
currently enrolled in an integrated D-SNP. We are committed to working 
with states to ensure that any passive enrollments under this authority 
meet CMS requirements as well as state priorities.
    Comment: A commenter requested that CMS clearly communicate the 
criteria for an integrated D-SNP to be eligible to accept passive 
enrollees in subregulatory guidance.
    Response: We anticipate issuing subregulatory guidance about the 
criteria for the passive enrollment authority finalized in this rule. 
We believe that the amendments to Sec.  422.60(g) as finalized here are 
sufficiently clear, particularly in light of the detailed discussion in 
the proposed rule and these various responses to comment, that 
implementation in CY2019 will not be confusing for D-SNPs that are 
qualified to receive enrollments.
    Comment: A commenter expressed concern that passive enrollment 
authority would be delegated to states. Another commenter recommended 
that CMS provide more clarification on whether CMS or state Medicaid 
agencies would be managing passive enrollment into integrated D-SNPs 
under our proposal, as well as on the implementation process for such 
passive enrollments.
    Response: When circumstances arise in which passive enrollment into 
an integrated D-SNP could potentially be applied, CMS will consult with 
the applicable state Medicaid agency, consistent with Sec.  
422.60(g)(1)(iii) as finalized. We anticipate that such consultation 
would include collaboration between CMS and the state Medicaid agency 
on issues such as identifying plans that meet the requirements in Sec.  
422.60(g)(2), decisions about enrollee assignment, and communications 
with impacted plans. We clarify that, as is the case today with respect 
to other passive enrollments into MA plans, affected D-SNPs will submit 
enrollment transactions to CMS' MARx system.
    Comment: Several commenters supported our proposed requirement in 
Sec.  422.60(g)(2)(ii) that a receiving integrated D-SNP have 
substantially similar provider and facility networks to the other MA 
integrated D-SNP plan (or plans) from which the passively enrolled 
beneficiaries are enrolled. A few commenters suggested that CMS limit 
the application of provider network and benefit similarity in order not 
to further narrow the scope of permissible passive enrollments into D-
SNPs.
    Response: We appreciate the support of our proposed requirement for 
provider network comparability as a minimum requirement for an 
integrated D-SNP's eligibility for passive enrollment. We disagree with 
the commenters' suggestion that we limit our eligibility analysis on 
provider network comparability given our emphasis on continuity of care 
in the application of this limited expansion of CMS' passive enrollment 
authority. We believe that this comparability analysis will minimize 
the number of enrollees whose provider relationships are disrupted as a 
result of passive enrollment and will encourage retention following 
enrollees' transition to a new integrated D-SNP. We are therefore 
finalizing the requirements for assessing network comparability as a 
condition for eligibility for passive enrollment under Sec.  
422.60(g)(1)(iii) as proposed.
    Comment: Several commenters requested clarification on how CMS will 
determine that the receiving integrated D-SNP has substantially similar 
provider and facility networks and Medicare- and Medicaid-covered 
benefits as the D-SNP from which the beneficiaries were passively 
enrolled.
    Response: We appreciate the commenters' request for clarification 
and anticipate issuing clarifications through subregulatory guidance. 
The subregulatory guidance will articulate the process and timing for 
the losing and receiving D-SNPs to submit networks through the CMS 
Health Plan Management System. CMS will also review plan benefit 
packages submitted by the impacted D-SNPs as well as engage the State 
Medicaid agency to ensure covered services are similar to services 
currently being received by impacted dual eligible beneficiaries.
    Comment: In addition to our proposed network comparability 
requirement, several commenters recommended the use of an ``intelligent 
assignment'' process for passively enrolling beneficiaries into a D-SNP 
based on the providers and prescription drugs associated with each 
individual beneficiary. Several commenters also recommended that, in 
our analysis of benefits comparability, CMS consider the comparability 
of the receiving D-SNP's formulary.
    Response: We agree that intelligent assignment processes would be 
helpful for ensuring care continuity and minimizing enrollee 
disruption. We will consider the availability of intelligent assignment 
processes when effectuating passive enrollments under this authority 
and will also consider intelligent assignment options in the future. 
However, we note that all plans offering Part D coverage must meet CMS' 
formulary adequacy requirements and, in addition, must offer a 
transition period upon a member's enrollment in a new plan. 
Specifically, under Sec.  423.120(b)(3), new enrollees must be provided 
a temporary supply of non-formulary Part D drugs, as well as Part D 
drugs with utilization management restrictions, and can work with their 
new plan and provider to switch to a different formulary drug or 
request an exception during their first 90 days of enrollment in their 
new plan.
    Comment: A commenter expressed concern that passive enrollment 
could further limit enrollee choice in states in which biologic 
medications are reimbursed at low rates under Medicaid.
    Response: We appreciate the commenter's concern about access to 
medically necessary drugs. We note that Medicare covers nearly all 
prescription drugs for dually eligible individuals under Parts A, B, 
and D. Medicaid coverage of drugs for dually eligible individuals is 
generally limited to over-the-counter drugs and products and 
prescription drugs that are otherwise excluded from the definition of a 
Part D drug. For dually eligible beneficiaries, the drugs referenced by 
this commenter would be covered under Medicare Part B rather than 
Medicaid.
    Comment: Several commenters recommended a transition period during 
which passively enrolled beneficiaries can see current providers that 
are not in their new plan's network. A few commenters also suggested 
that care plans and authorized services be continued for a period of 
time following passive enrollment.
    Response: We appreciate the commenters' suggestion that we 
incorporate continuity of care requirements into our proposed passive 
enrollment processes. We believe our finalization of the requirement 
for substantially similar provider and facility networks under Sec.  
422.60(g)(2)(ii) will facilitate continuity of care in most

[[Page 16505]]

cases. In addition, as previously discussed, the Part D transition 
requirements provide continuity of prescription drug benefits during a 
beneficiary's first 90 days of coverage in a new plan, including in 
cases where passive enrollment has been effectuated. We encourage 
states to consider using their State Medicaid Agency Contracts with D-
SNPs as a vehicle for requiring that any passive enrollments into 
integrated D-SNPs apply transition rules that align with those 
applicable to Medicaid managed care organizations under Sec.  
438.62(b). As previously noted, we are finalizing our provider and 
benefits comparability requirements at Sec.  422.60(g)(2)(ii) without 
further modification.
    Comment: Several commenters responded to our request for comment on 
CMS' proposal that an integrated D-SNP meet certain quality criteria to 
qualify for passive enrollment, particularly with respect to the 
proposed requirement that a D-SNP have an overall quality rating of at 
least 3 stars based on the MA Star Ratings system. Several commenters 
expressed support for our proposed application of a minimum overall MA 
Star Rating of at least 3 stars. A commenter noted that CMS' 
consultation with the state Medicaid agency would ensure that an 
integrated D-SNP's Medicaid performance is considered in addition to 
the Medicare performance captured by the MA Star Ratings. Several 
commenters recommended raising the minimum required MA Star Rating 
level. A commenter noted concerns with the MA Star Ratings as a basis 
for our proposed quality requirement because star ratings may be 
affected more by the percentage of dually eligible members enrolled in 
an MA plan than other factors and suggested requiring state approval 
instead of a minimum MA Star Rating. Some commenters expressed concern 
that use of MA Star Ratings does not capture plans' performance related 
to services covered under Medicaid or other factors affecting plan 
capacity to ensure access to care for passively enrolled individuals.
    Response: We appreciate commenters' support for establishing 
minimum quality criteria as part of our assessment of an integrated D-
SNP's eligibility for passive enrollment under this provision. We call 
attention to our revision to Sec.  422.60(g)(2)(iii), clarifying that 
the minimum star rating of at least 3 stars for a D-SNP to be eligible 
to receive passive enrollment from the most recently issued MA Star 
Rating for the D-SNP under the rating system described in Sec. Sec.  
422.160 through 422.166. While we acknowledge the limitations 
commenters identified with the MA Star Ratings, especially with respect 
to assessing the quality of Medicaid services provided under an 
integrated D-SNP, we believe the MA Star Ratings system is CMS' most 
effective and methodologically sound tool for measuring plan 
performance and quality and ensuring that passive enrollments are 
limited to MA plans that have demonstrated a commitment to quality. 
With regard to the methodological concerns related to the impact of 
enrollees' socioeconomic status on MA contract performance, we direct 
the commenter's attention to the discussion in this final rule about 
the MA and Part D Quality Rating System about adjustments to the 
ratings to address those and similar concerns in section II.A.11.t. We 
note that the additional required consultation with states in Sec.  
422.60(g)(1)(iii) as part of the process of determining that an 
integrated D-SNP meets the criteria for receipt of passive enrollment 
will provide valuable information regarding the performance and quality 
of the organization's Medicaid product. We are therefore finalizing the 
quality requirements under Sec.  422.60(g)(2)(iii) with a clarification 
that the most recently issued overall MA Star Rating is the applicable 
rating for determining eligibility to receive passive enrollment. We 
note as well that new and low enrollment plans are generally not 
assigned an overall Star Rating because of the lack of data from a 
prior performance period (new plans) or insufficient number of 
enrollees for reliable sampling (low enrollment); therefore, the 
regulation text as proposed and as finalized, permits new and low 
enrollment plans that meet the other requirements to also receive these 
passive enrollments. However, we will consider revisiting the minimum 
MA Star Rating level in future rulemaking once we gain additional 
experience with implementing passive enrollments into integrated D-
SNPs.
    Comment: Several commenters made additional recommendations for 
specific minimum quality measures and other criteria relevant to dually 
eligible beneficiaries that CMS should consider as part of our 
determination of integrated D-SNPs' eligibility for passive enrollment 
under proposed Sec.  422.60(g)(1)(iii). A few commenters recommended 
that CMS require integrated D-SNPs to have additional accreditation, 
such as the National Committee for Quality Assurance (NCQA) Medicaid 
plan accreditation and long-term services and supports (LTSS) 
accreditation. A commenter recommended using measures developed by the 
multi-stakeholder Core Quality Measures Collaborative. Another 
commenter suggested evaluating an integrated D-SNP's behavioral health 
services by number of days on waiting list and availability of a 
behavioral health expert. This commenter also suggested several methods 
for assessing LTSS.
    Response: We appreciate the additional information these commenters 
provided regarding accreditation and measures relevant to dually 
eligible beneficiaries. Since the number of plans eligible to receive 
passive enrollment under our proposed limited expansion of passive 
enrollment authority is projected to be small, we believe it is 
important to consider minimizing burden to eligible plans and ensuring 
that there are an adequate number of plans to receive enrollments. MA 
Star Ratings are based on currently reported plan data and do not 
impose additional reporting or specific accreditation requirements on 
integrated D-SNPs. As stated previously, we are finalizing the quality 
requirements for receipt of passive enrollment under Sec.  
422.60(g)(1)(iii) as proposed.
    Comment: We received no comments supporting a limitation of our 
proposed expansion of CMS' passive enrollment authority to 
circumstances that would not raise total cost to the Medicare and 
Medicaid programs. A few commenters stated they would not support a 
cost-effectiveness test as a standalone requirement for determining a 
D-SNP's eligibility to receive passive enrollments under our proposed 
rule. In addition, several commenters expressed concerns about 
establishing such a limitation for a variety of reasons. A commenter 
stated that a cost-effectiveness test would limit CMS' ability to align 
enrollment and preserve continuity of care. Another commenter believed 
that this approach did not consider long-term savings resulting from 
better integration. A few commenters also noted that the added cost and 
administrative burden involved in identifying these circumstances and 
measuring the cost-effectiveness of passive enrollment would 
potentially offset any cost-savings. Another commenter believed that 
choosing integrated D-SNPs for passive enrollment based on an 
artificial cost estimate would be inconsistent with the MA bid process 
and good faith contracting efforts.
    Response: We thank commenters for their comments on this issue. We 
are not adding a cost-effectiveness test for passive enrollments under 
paragraph (g)(1)(iii) in this final rule.

[[Page 16506]]

    Comment: In response to our request for comments on beneficiary 
notices for passive enrollments that would occur under proposed 
paragraph (g)(1)(iii), a few commenters supported maintaining the 
current requirement that receiving plans send one enrollee notice 
requirement when passive enrollment is applied, arguing that states or 
receiving plans could voluntarily choose to add more notifications as 
necessary, and that additional notices added to plan burden. A 
commenter noted that, because the Medicaid Managed Care Rule under 
Sec.  438.54(c)(3) requires the State to notice beneficiaries regarding 
passive enrollment into a Medicaid managed care plan but does not 
specify the number of notices required, a requirement of one notice 
under our proposed passive authority resulted in better alignment 
between Medicare and Medicaid requirements. However, many commenters 
recommended a more robust noticing process, including increasing the 
number of required notices to two for these passive enrollments. Some 
commenters also recommended that impacted plans provide the notices in 
beneficiaries' primary language and identify for each enrollee any 
providers or prescription drugs not included under their new plan. A 
few commenters recommended additional telephonic outreach for 
beneficiaries whose notices are returned by the postal service as 
undeliverable and for those whose primary language is not English.
    Response: We agree with most commenters on this issue that, on 
balance, two notices may be more beneficial than one notice when 
enrollees are being passively enrolled from one integrated D-SNP into 
another under paragraph (g)(1)(iii). A second notice provides an 
additional opportunity for the receiving D-SNP to connect with new 
members and to ensure they receive information about their benefits, 
rights, and options. We believe the benefits from an additional notice 
outweigh the additional burden. In contrast, passive enrollments 
effectuated under paragraphs (g)(1)(i) and (ii)--in other words, when 
an immediate termination as provided in Sec.  422.510(b)(2)(i)(B) 
occurs or when CMS determines a plan poses a potential risk of harm to 
enrollees--are typically performed under time constraints which may 
make the provision of two notices impracticable.
    We are therefore finalizing the notice requirements associated with 
passive enrollments under paragraph (g)(1)(iii) to require two notices 
and to establish parameters around the timing of such notices. 
Accordingly, we are adding new paragraph (g)(4)(ii) to require that 
plans receiving passive enrollments under paragraph (g)(1)(iii) send 
two notices to enrollees that describe the costs and benefits of the 
plan and the process for accessing care under the plan and clearly 
explain the beneficiary's ability to decline the enrollment or choose 
another plan. In addition, we are adding new paragraph (ii)(A) to 
specify that the first notice provided under paragraph (ii) must be 
provided, in a form and manner determined by CMS, no fewer than 60 days 
prior to the enrollment effective date. We are also adding a new 
paragraph (ii)(B) to specify that the second notice must be provided--
again, in a form and manner determined by CMS--no fewer than 30 days 
prior to the enrollment effective date.
    We clarify that for passive enrollments under paragraphs (g)(1)(i) 
and (ii), only one notice will be required. This requirement is now 
reflected in new paragraph (4)(i), which also specifies that the notice 
must describe the costs and benefits of the plan and the process for 
accessing care under the plan, as well as the beneficiary's ability to 
decline enrollment or choose another plan, and be provided prior to the 
enrollment effective date (or as soon as possible after the effective 
date if prior notice is not practical).
    We appreciate commenters' suggestions about the importance of 
telephonic outreach and will encourage affected plans to conduct this 
additional telephonic outreach. We will also encourage the D-SNPs 
losing members to passive enrollment into another plan to share 
information about their enrollees' language preferences to facilitate 
the provision of information in non-English languages and alternate 
formats as applicable. As we gain additional experience using this 
passive enrollment authority, we will consider the development of 
additional guidance or further rulemaking about beneficiary notice 
requirements as necessary.
    Comment: We received a number of comments about the content of 
beneficiary notices sent to passively enrolled individuals. Some 
commenters recommended that notices used as part of this process be 
consumer tested. Several commenters recommended that notices include 
alternative options for Medicare coverage, such as available PACE 
organizations. A few commenters suggested that the notices include 
information on the Special Election Period (SEP) and opt-out process. A 
few commenters also recommended that beneficiaries have access to 
individual counseling regarding their benefit options. A commenter 
recommended that notices be designed to ensure informed consent by 
affected enrollees.
    Response: We appreciate the suggestions commenters provided about 
the content of beneficiary notices for passive enrollment under 
paragraph (g)(1)(iii). We note that CMS currently requires notices sent 
to passively enrolled individuals to clearly explain the beneficiary's 
ability to decline the enrollment or choose another plan. We are 
therefore finalizing the requirements related to notice content without 
modification at Sec.  422.60(g)(4)(i) and (ii), as described elsewhere 
in this preamble. We agree with commenters who emphasized the 
importance of providing additional information and counseling to inform 
beneficiary choice. As we move forward with implementation of this 
limited expansion of CMS' passive enrollment authority, we will 
consider developing a notice template that includes information about 
the availability of resources for additional information and choice 
counseling in the impacted service area, including SHIP programs, as 
well as 1-800-Medicare and Medicare Plan Finder. We will consider 
opportunities for consumer testing notice language, though we note that 
each instance of passive enrollment under this authority will be unique 
and require tailoring to the specific circumstances. As noted 
previously, we believe that the addition of a second notice will help 
increase beneficiaries' awareness of the change to their coverage and 
ensure individuals have the information to make decisions about whether 
to remain in the new integrated D-SNP or select other coverage that 
better serves their needs.
    Comment: A few commenters recommended any beneficiary who is unable 
to be contacted should not be passively enrolled and should instead be 
defaulted into FFS Medicare.
    Response: We do not agree with these commenters. The individuals 
impacted by our proposal are those already enrolled in an integrated D-
SNP and who, absent our application of CMS' passive enrollment 
authority, would lose access to their current integrated care. Dually 
eligible individuals will have various SEPs available, including the 
Part D SEP for dual and other LIS-eligible beneficiaries discussed in 
section II.A.10 of this final rule and the new SEP at Sec.  
423.38(c)(10) discussed in section II.A.10 of this final rule that 
allows individuals who have been auto-enrolled, facilitated enrolled, 
passively enrolled, or reassigned into a plan by CMS an opportunity to 
change plans. These SEPs will allow any individual who does not wish to 
retain coverage

[[Page 16507]]

under his or her new integrated D-SNP to make a different election, 
including opting for coverage in FFS Medicare. We also note that the 
addition of the SEP at Sec.  423.38(c)(10) to this final rule renders 
the SEP described in current Sec.  422.60(g)(5) duplicative because it 
applies to all individuals who have been enrolled in a plan as a result 
of a CMS- or state-initiated enrollment action, including passive 
enrollment under Sec.  422.60(g). To avoid operational complexity, we 
are therefore finalizing this provision by replacing the language 
describing the SEP for passively enrolled individuals at Sec.  
422.60(g)(5) with a cross-reference to the new SEP described at Sec.  
423.38(c)(10).
    Comment: A commenter suggested that CMS provide additional 
opportunities for states to fully integrate Medicaid and Medicare 
noticing and beneficiary communications materials for integrated 
products.
    Response: We appreciate the support for further integration of 
Medicare and Medicaid benefits information for integrated D-SNPs and 
note that CMS has made progress toward this goal in collaboration with 
some state partners. However, this comment is outside the scope of this 
regulation.
    Comment: Several commenters requested clarification on how the SEP 
related to our proposed passive enrollment provision would be impacted 
by, or would interact with, the proposal to limit the Part D SEP for 
dual and other LIS-eligible beneficiaries.
    Response: As previously discussed, dually eligible beneficiaries 
will have access to other SEPs, including the Part D SEP for dual and 
other LIS-eligible beneficiaries and the new SEP finalized in this rule 
at Sec.  423.38(c)(10) that allows individuals who have been auto-
enrolled, facilitated enrolled, passively enrolled, or reassigned into 
a plan by CMS or a state an opportunity to change plans.
    Comment: A couple of commenters noted a lack of alignment between 
the length of the SEP for passive enrollees under Sec.  422.62(b)(4)--
that is, 60 days--and the 90-day disenrollment period afforded to 
enrollees passively enrolled into a Medicaid managed care organization 
under Sec.  438.56.
    Response: The commenters are correct that the length of the SEP for 
passive enrollees, as described in the proposal, and that of the 
Medicaid managed care disenrollment period are not the same. In certain 
integrated care programs, the combination of changes to the SEP for 
dual eligible beneficiaries (discussed in section II.A.10.of this final 
rule) and the 2-month period for the SEP in proposed Sec.  422.60(g)(5) 
could lead to beneficiary confusion and unintended misalignments 
between Medicare and Medicaid. As noted previously in this preamble, we 
are finalizing Sec.  422.60(g)(5) with modifications to replace the 
language describing the SEP for passively enrolled individuals with a 
cross-reference to the new SEP described at Sec.  423.38(c)(10). This 
SEP will allow individuals to opt out of the passive enrollment within 
3 months of notification of a CMS or state-initiated enrollment action 
or that enrollment action's effective date (whichever is later). We 
believe this change will better align the length of the SEP for 
individuals who are passively enrolled under Sec.  422.60(g) with the 
Medicaid managed care disenrollment period under Sec.  438.56.
    Comment: A commenter encouraged CMS to monitor any negative and 
unintended consequences of our use of passive enrollment after 
implementation of our proposed expanded authority.
    Response: We appreciate the commenters' concerns and clarify that 
we intend to use all currently available mechanisms to monitor any 
passive enrollments into integrated D-SNPs, including grievances and 
complaints reported to impacted plans and to 1-800-Medicare. We are 
committed to making all necessary adjustments as we gain experience 
with the application of passive enrollment in the circumstances 
provided for in this final rule, including future rulemaking as 
necessary.
    After consideration of the comments we received, we are finalizing 
our proposal regarding the expansion of CMS' regulatory authority to 
initiate passive enrollment for certain dually eligible beneficiaries 
who are currently enrolled in an integrated D-SNP into another 
integrated D-SNP at Sec.  422.60(g) with some modifications. 
Specifically, we are making the following modifications:
     We are making a technical revision to paragraph 
(g)(1)(iii) to clarify that a plan must meet all the requirements 
established in paragraph (g)(2) to be eligible to receive passive 
enrollment.
     We are revising paragraph (g)(2)(iii) to require a minimum 
Star Rating that applies for a plan to be eligible to receive passive 
enrollment. For a plan to be eligible to receive passive enrollment, it 
must have an overall quality rating, from the most recently issued 
ratings, under the rating system described in Sec. Sec.  422.160 
through 422.166, of at least 3 stars or is a low enrollment contract or 
new MA plan as defined in Sec.  422.252.
     We are adding new paragraph (g)(4)(ii) to require that 
plans receiving passive enrollments under paragraph (g)(1)(iii) send 
two notices to enrollees that describe the costs and benefits of the 
plan and the process for accessing care under the plan and clearly 
explain the beneficiary's ability to decline the enrollment or choose 
another plan. In addition, we are adding new paragraph (ii)(A) to 
specify that the first notice provided under paragraph (ii) must be 
provided, in a form and manner determined by CMS, no fewer than 60 days 
prior to the enrollment effective date. We are also adding a new 
paragraph (ii)(B) to specify that the second notice must be provided, 
in a form and manner determined by CMS, no fewer than 30 days prior to 
the enrollment effective date. New paragraph (g)(4)(i) will retain the 
original requirement that one notice be provided to passively enrolled 
individuals under paragraphs (g)(1)(i) and (ii).
     We are modifying Sec.  422.60(g)(5) by replacing the 
current language describing the SEP for passively enrolled individuals 
at Sec.  422.60(g)(5) with a cross-reference to the new SEP described 
at Sec.  423.38(c)(10), which provides a 3-month SEP when an enrollee 
has been auto-enrolled, facilitated enrolled, passively enrolled, or 
reassigned into a Part D plan as a result of a CMS or state-initiated 
enrollment action. We note that all D-SNPs are also Part D plans as 
they are required to provide the Part D prescription drug benefit 
pursuant to Sec.  422.2 (definition of specialized MA plans for special 
needs individuals).
9. Part D Tiering Exceptions (Sec. Sec.  423.560, 423.578(a) and (c))
a. Background
    Section 1860D-4(g)(2) of the Act specifies that a beneficiary 
enrolled in a Part D plan offering prescription drug benefits for Part 
D drugs through the use of a tiered formulary may request an exception 
to the plan sponsor's tiered cost-sharing structure. The statute 
requires such plan sponsors to have a process in place for making 
determinations on such requests, consistent with guidelines established 
by the Secretary. The requirements for tiering exceptions, set forth at 
Sec.  423.578(a), require plan sponsors to establish and maintain 
reasonable and complete exceptions procedures that permit enrollees, 
under certain circumstances, to obtain a drug in a higher cost-sharing 
tier at the more favorable cost-sharing applicable to alternative drugs 
on a lower cost-sharing tier of the plan sponsor's formulary. Such an 
exception is granted when the plan sponsor determines that the non-

[[Page 16508]]

preferred drug is medically necessary based on the prescriber's 
supporting statement.
    As we stated in the proposed rule, we believe that changes in the 
prescription drug marketplace necessitate revisions to existing 
regulations to ensure that tiering exceptions are adjudicated by plan 
sponsors in the manner the statute contemplates, and are understood by 
beneficiaries. Therefore, we proposed various changes to Sec. Sec.  
423.560, 423.578(a) and 423.578(c) to revise and clarify requirements 
for how tiering exceptions are to be adjudicated and effectuated (82 FR 
56371).
    We received the following general comments on this proposal and our 
responses follow:
    Comment: We received many comments on the proposal. While most 
comments received were generally supportive of our efforts to update 
and improve tiering exceptions policy, there was mixed support for and 
opposition to specific aspects of what we proposed. Many commenters who 
supported our overall proposal noted that beneficiaries have difficulty 
understanding the existing policy, and stated that there is a need for 
a more simplified process. A commenter who opposed revising our 
existing policy for tiering exceptions stated that plans and enrollees 
already understand the current policy and there will be little positive 
outcome. Another commenter agreed that tiering exceptions are an 
important beneficiary protection, but stated a belief that they 
undermine plan sponsors' ability to manage their formularies, which are 
already reviewed by CMS for clinical accuracy. This commenter also 
stated that tiering exceptions provide no incentive for an enrollee to 
try a less expensive drug found on a lower tier if they are able to get 
a more expensive drug at a lower cost.
    Response: We thank the commenters who supported our proposal for 
their support. We agree that this policy area has been confusing for 
beneficiaries and one of our goals in making changes is to make it more 
understandable. We believe that the proposed revisions will streamline 
and clarify the requirements for tiering exceptions, as well as help 
ensure that enrollees have appropriate access to medically necessary 
drugs.
    We disagree with the comment that tiering exceptions provide no 
incentive for enrollees to try lower-cost drugs. On the contrary, Sec.  
1860D-4(g)(2) stipulates that, in order for a tiering exception to be 
approved, the enrollee's prescriber must determine that the preferred 
drug for treatment of the same condition has been or would be less 
effective or have adverse effects for that individual. If the enrollee 
cannot demonstrate that the requested drug is medically necessary, a 
tiering exception cannot be obtained.
    We address comments about specific aspects of the tiering 
exceptions proposal in relevant sections below.
    Comment: Several commenters requested that CMS ensure beneficiaries 
are educated about the availability of tiering exceptions. Some 
commenters expressed a belief that there is little information 
available to beneficiaries about tiering exceptions, and that it is 
difficult to apply to individual situations. Comments offered several 
suggestions, including improving existing educational publications and 
information provided through 1-800-MEDICARE, providing information in 
plain language, and developing notices that provide information at the 
pharmacy counter. Some commenters stated that CMS should require plan 
sponsors to improve information provided in their member materials, and 
noted that plans and pharmacies have a responsibility for educating 
beneficiaries about the availability of tiering exceptions.
    Response: We agree that information about the availability of 
tiering exceptions must be provided to beneficiaries by CMS and their 
Part D plan sponsor. We note that such information is already contained 
in several CMS publications, including Medicare & You (CMS pub. 10050), 
Medicare Appeals (CMS pub. 11525), Your Guide to Medicare Prescription 
Drug Coverage (CMS pub. 11109) and Medicare Rights and Protections (CMS 
pub. 11534), as well as documents that plans are required to provide to 
enrollees, including the Evidence of Coverage, Part D formulary, and 
Annual Notice of Change. Information about the availability of tiering 
exceptions is also included in the standardized pharmacy notice (CMS-
10147) provided to affected enrollees at the point of sale when a claim 
is rejected by their Part D plan sponsor, and in the standardized Part 
D denial notice (CMS-10146), which is provided to enrollees when their 
plan makes an adverse coverage determination. Such information is also 
found on Medicare.gov. CMS will continue to review plan documents and 
beneficiary publications to identify potential areas for improvement, 
and update the documents mentioned above as needed based on this final 
rule, including consideration of how to clarify when a tiering 
exception may be available.
    Comment: Several commenters recommended that CMS ensure consistent 
understanding of tiering exceptions policy by providing specific 
guidance to plan sponsors related to the review of tiering exception 
requests, including examples using various formulary structures that 
illustrate the steps of the process, and guidance to determine the 
lowest applicable tier and appropriate alternative drugs. A commenter 
expressed concern that the proposed rule conflicts with current 
guidance in Chapter 18 of the Medicare Prescription Drug Benefit 
Manual.
    Response: We appreciate the commenters' suggestions for additional 
guidance to ensure that plan sponsors understand the revised policy and 
properly process tiering exception requests. CMS manual guidance will 
be updated to reflect the changes made through this final rule. With 
respect to the comment about the existing version of Chapter 18, we 
note that existing guidance reflects existing regulations and policy.
    Comment: A commenter asserted that utilization management tools, 
such as the use of tiered cost-sharing to encourage use of lower-cost 
drugs, put unnecessary burden on prescribers and cause access delays 
for beneficiaries. The commenter stated that exception requests usually 
require prescribers to submit a written statement supporting the 
exception request, and noted that prescribers are not compensated for 
time spent preparing these statements or obtaining utilization 
management information for the specific plans used by their patients. 
This commenter also suggested that if there was greater transparency on 
which medications are subject to utilization management tools, it would 
reduce the administrative burden placed on physicians.
    Response: We thank the commenter for sharing their concerns. 
Because section 1860D-4(g)(2) of the Act specifies that a tiering 
exception could be granted ``if the prescribing physician determines 
that the preferred drug for treatment of the same condition either 
would not be as effective for the individual or would have adverse 
effects for the individual or both,'' we do not believe CMS has 
authority to require plans to provide tiering exceptions in the absence 
of such a statement from the prescriber. Under existing Sec.  
423.568(a), plans are required to accept oral requests for benefits at 
the coverage determination level, including exception requests, and CMS 
encourages plans to accept oral prescriber supporting statements for 
exception requests when appropriate.
    Comment: A commenter recommended that SNPs, MMPs, and defined 
standard benefit plans be exempt from the tiering exceptions process. 
This commenter also asked that

[[Page 16509]]

CMS explain how tiering exceptions are applied to Low Income Subsidy 
(LIS) beneficiaries.
    Response: We appreciate the commenter's recommendation. In 
accordance with Sec.  423.578(a), the exceptions process applies to 
Part D plans that provide prescription drug benefits through the use of 
a tiered formulary. Given the fixed copays for LIS beneficiaries, that 
are based on whether the drug is a brand or generic product pursuant to 
Sec.  423.782(a)(2)(iii)(A), tiering exceptions do not apply. 
Regardless of whether the beneficiary meets the medical necessity 
criteria for the drug in the higher tier, it would not change the brand 
vs. generic nature of the requested drug, so the cost-sharing would 
remain fixed.
b. Limitations on Tiering Exceptions
    We proposed to revise Sec.  423.578(a)(2) to read as follows: 
``Part D plan sponsors must establish criteria that provide for a 
tiering exception consistent with paragraphs Sec.  423.578(a)(3) 
through (a)(6) of this section.'' This adds a cross-reference to 
revised paragraph (a)(6), which revises allowable limitations plan 
sponsors are permitted to establish in their tiering exceptions 
procedures.
    At Sec.  423.578(a)(6), we proposed to revise the regulations to 
specify how a Part D plan sponsor may limit tiering exceptions. The 
proposed revision strikes the existing regulation text which permits 
plans to disallow tiering exceptions for any non-preferred drug to 
cost-sharing associated with a dedicated generic tier. We proposed to 
replace it with new regulation text at Sec.  423.578(a)(6) specifying 
that a Part D plan sponsor will not be required to offer a tiering 
exception for a brand name drug or biological product to a preferred 
cost-sharing level that applies only to generic alternatives. Under our 
proposal, plans would be required to approve tiering exceptions for 
non-preferred generic drugs when the plan determines that the enrollee 
cannot take the preferred generic alternative(s), including when the 
preferred generic alternative(s) are on dedicated generic tier(s) and 
when the lower tier(s) contain a mix of brand and generic alternatives. 
In other words, plans would no longer be permitted to exclude a tier 
containing alternative drug(s) with more favorable cost-sharing from 
their tiering exceptions procedures altogether just because that lower-
cost tier includes only generic drugs.
    We proposed to revise existing tiering exceptions policy for brand 
name and generic drugs, and proposed a new policy for requests 
involving biological products. First, we proposed to revise Sec.  
423.578(a)(6) by adding new paragraphs (i) and (ii), which would permit 
plans to limit the availability of tiering exceptions for the following 
drug types to a preferred tier that contains the same type of 
alternative drug(s) for treating the enrollee's condition:
     Brand name drugs for which an application is approved 
under section 505(c) of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 355(c)), including an application referred to in section 
505(b)(2) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
355(b)(2)); and
     Biological products, including biosimilar and 
interchangeable biological products, licensed under section 351 the 
Public Health Service Act.
    With the proposed revisions, approved tiering exceptions for brand 
name drugs would generally be assigned to the lowest applicable cost-
sharing associated with brand name alternatives, and approved tiering 
exceptions for biological products would generally be assigned to the 
lowest applicable cost-sharing associated with biological alternatives. 
As discussed above, cost sharing for approved tiering exceptions for 
non-preferred generic drugs would be assigned to the lowest applicable 
cost-sharing associated with alternative drug(s) that could be either 
brand name or generic drugs.
    We proposed at Sec.  423.578(a)(6)(i) to codify that plans are not 
required to offer tiering exceptions for brand name drugs or biological 
products at a cost-sharing level of alternative drug(s) for treating 
the enrollee's condition where the alternatives include only the 
following drug types:
     Generic drugs for which an application is approved under 
section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
355(j)), or
     Authorized generic drugs as defined in section 505(t)(3) 
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(t)(3)).
    We proposed to codify existing CMS policy treating authorized 
generics as generics for purposes of tiering exceptions because the 
process used by CMS to collect Part D plan formulary data does not 
allow us to clearly identify whether a plan sponsor includes coverage 
of authorized generic National Drug Codes (NDCs). Under this regulatory 
proposal, a plan sponsor could not completely exclude a lower tier 
containing only generic and authorized generic drugs from its tiering 
exception procedures; rather, the plan sponsor would be permitted to 
limit tiering exceptions for a particular brand drug or biological 
product to the lowest cost sharing tier containing alternatives of the 
same drug type. Plans will be required to grant a tiering exception for 
a higher cost generic or authorized generic drug to the cost sharing 
associated with the lowest tier containing generic and/or authorized 
generic alternatives when the medical necessity criteria are met.
    Finally, we proposed to revise and redesignate existing Sec.  
423.578(a)(7) as new Sec.  423.578(a)(6)(iii), to specify that, ``If a 
Part D plan sponsor maintains a specialty tier, as defined in Sec.  
423.560, the sponsor may design its exception process so that Part D 
drugs and biological products on the specialty tier are not eligible 
for a tiering exception.'' We also proposed to add the following 
definition to Subpart M at Sec.  423.560:
    Specialty tier means a formulary cost-sharing tier dedicated to 
very high cost Part D drugs and biological products that exceed a cost 
threshold established by the Secretary.
    The proposed changes retain the existing regulatory policy that 
permits Part D plan sponsors to disallow tiering exceptions for any 
drug that is on the plan's specialty tier. While we did not propose to 
specify it in regulation text, we stated in the preamble to the 
proposed rule (82 FR 56372) that, if the specialty tier has cost 
sharing more preferable than another tier, then a drug placed on such 
other non-preferred tier is eligible for a tiering exception to the 
cost sharing applicable to the specialty tier if an applicable 
alternative drug is on the specialty tier and the other requirements of 
Sec.  423.578(a) are met. In other words, while plans are not required 
to allow tiering exceptions for drugs on the specialty tier to a more 
preferable cost-sharing tier, the specialty tier is not exempt from 
being considered a preferred tier for purposes of tiering exceptions.
    We received the following comments and our responses follow:
    Comment: We received many comments on this aspect of our proposal. 
Most commenters were supportive of the proposal to remove the generic 
tier exclusion and replace it with limitations that apply to brand name 
drugs and biological products. Some commenters opposed our proposal to 
remove the generic tier exclusion, stating that this would discourage 
plans from offering $0 copayment tiers and increase costs for 
enrollees. Others opposed the proposal to allow plans to limit tiering 
exceptions for brand name drugs only when brand alternatives are on a 
lower tier, noting that allowing plans to limit tiering exceptions for 
brand drugs to the lowest

[[Page 16510]]

cost-sharing associated with brand alternatives does not provide 
sufficient relief for enrollees with a medical need for a brand drug 
because they cannot take a lower cost generic. Commenters expressed 
concern that this would eliminate beneficiaries' ability to seek 
tiering exceptions in many cases, and also stated that nothing in the 
statute permits these limitations.
    Response: We thank commenters who supported the proposed changes 
for their support. As we stated in the proposed rule, we believe a 
policy that allows beneficiaries with a medical need for a non-
preferred product to seek and obtain more favorable cost-sharing 
through the tiering exceptions process must be balanced by reasonable 
limitations to ensure that all enrollees have access to medically 
necessary drugs at the most favorable cost-sharing terms possible.
    We disagree with the commenters opposed to our proposal to require 
plans to include dedicated generic tiers in their tiering exceptions 
procedures. As we discussed in the preamble to the proposed rule (82 FR 
56371), most Part D formularies now include multiple generic tiers, as 
well as multiple higher-cost tiers that contain a mix of brand and 
generic drugs. To encourage the use of generic drugs, we proposed to 
revise the existing regulatory policy to permit tiering exceptions into 
dedicated generic tiers, but allow plans to limit those exceptions to 
requests involving non-preferred generic drugs. Because approval of a 
tiering exception continues to require that the enrollee demonstrate a 
medical need for the non-preferred drug, and because plans will not be 
required to permit exceptions for brand name drugs or biological 
products to the cost-sharing associated with dedicated generic tiers, 
we do not believe this change will result in changes to plan benefit 
design.
    We disagree with the comments asserting that the statute does not 
permit tiering exceptions for non-preferred brand name drugs to be 
limited to the cost sharing associated with preferred brand name drugs. 
Section 1860D-4(g)(2) of the Act specifies that Part D plan sponsors 
offering a tiered drug benefit must have a process for tiering 
exceptions, consistent with guidelines established by the Secretary for 
making such determinations, where ``a nonpreferred drug could be 
covered under the terms applicable for preferred drugs'' (emphasis 
added). While we agree that the statutory language does not 
specifically refer to brand name and generic drugs, it clearly gives 
CMS authority to establish guidelines for plan procedures, and does not 
require that such exceptions be available in all circumstances.
    Comment: Several commenters supported our proposal to treat 
authorized generic drugs in the same manner as generic drugs for 
tiering exceptions.
    Response: We thank the commenters for their support.
    Comment: We received some comments requesting that CMS specify that 
multi-source drugs and other drugs that do not meet the definition of a 
generic or authorized generic drug, but that a plan may place on a 
generic-labeled tier, also be treated as generic drugs for purposes of 
tiering exceptions.
    Response: We disagree with these comments. As discussed above, we 
are revising the tiering exceptions regulations to specify that 
authorized generic drugs be treated as generic drugs. We recognize that 
other drugs may be treated in a similar manner to generic drugs, 
including being placed on generic-labeled drug tiers; however, we 
believe further expansion of what drugs are treated as generics would 
introduce additional complexity to a process that beneficiaries and 
plans already have difficulty understanding. For example, whether a 
brand drug is a ``multi-source'' drug is dependent on multiple factors 
and may change over time. An authorized generic is determined at the 
time of FDA approval and does not change as long as the drug is 
marketed under that approval, regardless of how many other 
interchangeable drugs may be introduced to or leave the market. Because 
tier placement of the same drug can vary widely across Part D plans, we 
believe that applying rules based on FDA approval type is the best way 
to limit confusion and create a consistent policy. Additionally, we 
believe that an enrollee who cannot take a brand drug on a lower-cost 
tier, regardless of the tier label, should be able to obtain the brand 
drug on a higher-cost tier at the more favorable cost-sharing of the 
brand drug on the lower-cost tier.
    Comment: We received many comments related to our proposal to 
retain the current regulatory policy allowing plans to exclude 
specialty tier drugs from their tiering exceptions process. Commenters 
were divided on whether they supported or opposed this proposal. Some 
commenters asked CMS to confirm that drugs on the specialty tier will 
continue to be exempt from tiering exceptions.
    Commenters who supported our proposal stated that tiering 
exceptions should not be allowed for specialty tier drugs because 
alternative drugs on lower tiers are not typically appropriate or 
therapeutically equivalent, even though they may treat the same 
condition.
    Commenters who opposed this limitation on tiering exceptions noted 
that vulnerable beneficiaries who need to access specialty tier drugs 
often do not have alternative options on more preferred tiers and can 
accrue very high out of pocket costs. A few noted that cost-prohibitive 
out of pocket expenses can lead to decreased adherence to drug 
therapies and put patients at risk. Some commenters questioned CMS' 
authority to allow plans to exclude specialty tier drugs from the 
tiering exceptions process because the statute gives beneficiaries the 
right to request a tiering exception for any non-preferred drug when 
the formulary contains a preferred drug for the same condition that has 
lower cost sharing. A commenter stated that prohibiting tiering 
exceptions for specialty tier drugs discriminates against beneficiaries 
who need them.
    Response: We appreciate the comments expressing concern about 
beneficiary access to very high cost drugs. While CMS is aware that 
access to needed drug therapies can be impacted by the out of pocket 
expenses associated with these drugs, we do not believe that requiring 
plans to offer tiering exceptions for specialty tier drugs will result 
in the desired effect. In order for a drug to be placed on the 
specialty tier, the plan's negotiated price for the drug must exceed a 
monthly threshold established by the Secretary ($670 for 2018). Along 
with the protection against tiering exceptions for specialty tier drugs 
that is afforded to plans, CMS also requires plans to limit enrollee 
cost sharing for the specialty tier to 25 percent coinsurance (up to 33 
percent if the plan waives all or part of the Part D deductible), which 
aligns with the statutorily defined maximum cost sharing for the 
defined standard benefit at section 1860D-2(b)(2)(A). When high cost 
drugs are placed on the specialty tier instead of a Non-Preferred Brand 
or Non-Preferred Drug tier, which can have up to 50 percent 
coinsurance, the cost to enrollees who would not qualify for a tiering 
exception is often considerably lower than if the same drug were placed 
on one of these other non-preferred tiers. Additionally, many specialty 
tier drugs, particularly biological products, often do not have viable 
alternatives on lower-cost tiers. The statutory basis for approval of a 
tiering exception request is the presence of an alternative drug(s) on 
a lower cost-sharing tier of the plan's formulary; therefore, even if a 
plan sponsor permitted tiering exceptions for

[[Page 16511]]

specialty tier drugs, such requests would not be approvable if the 
plan's formulary did not include any alternative drugs on a lower tier.
    We disagree with the comments positing that allowing plans to 
exclude the specialty tier from their tiering exceptions procedures is 
inconsistent with the statute. As discussed above in this section, 
section 1860D-4(g)(2) of the Act gives CMS authority to establish 
guidelines for Part D plan sponsors' tiering exceptions procedures, and 
does not require such exceptions to be available in all circumstances. 
For the reasons stated earlier, we believe that our current policy of 
allowing plans to exclude specialty tier drugs from their tiering 
exceptions procedures, coupled with the maximum allowable coinsurance 
of 25 percent to 33 percent for the specialty tier, affords the most 
beneficiaries the most protection from high out-of-pocket expenses 
associated with very high cost drugs.
    Comment: A few commenters suggested that CMS permit plan sponsors 
to designate two specialty tiers on their formularies--a non-preferred 
specialty tier, as well as a preferred specialty tier that would have 
lower cost sharing. These commenters expressed a belief that permitting 
plans to have two specialty tiers would encourage increased competition 
among specialty drugs, giving plans greater leverage in price 
negotiations, resulting in more affordable access for Part D enrollees 
and lower costs for the program. The commenters also noted that 
permitting two specialty tiers could encourage enrollees to try 
preferred specialty products and could reduce the need for enrollees to 
seek coverage through the non-formulary exceptions process.
    Response: While we appreciate these comments, we disagree with the 
suggestion to permit Part D plans to have a preferred and a non-
preferred specialty tier. As discussed above, CMS limits specialty tier 
cost sharing to the statutorily mandated amount for the defined 
standard Part D benefit. While we did not propose to allow plans to 
establish multiple specialty tiers, we are making significant changes 
to existing tiering exceptions policy through this final rule, 
including removal of the generic tier exclusion and addition of the 
brand-to-brand limitation discussed above in subsection b. 
Additionally, while the plan's cost for a drug must exceed a CMS-
specified monthly cost threshold in order to be placed on the specialty 
tier, CMS does not require all drugs exceeding that threshold be placed 
on the specialty tier. In other words, if plans wish to encourage the 
use of certain specialty drugs over others, they can do so within 
existing formulary benefit designs. As such, we are not making 
additional changes in this policy area before having an opportunity to 
consider the effects of the changes in this rule. CMS will continue to 
disallow plan benefit packages with more than one specialty tier.
    Comment: We received some comments requesting that CMS clarify 
whether select care/select diabetic or other $0 copayment tiers can be 
excluded from a plan's tiering exceptions procedures. These commenters 
supported a policy that would permit such an exclusion, stating that 
requiring tiering exceptions to $0 or very low cost tiers would 
discourage plans from offering them and increase overall beneficiary 
out of pocket costs.
    Response: We appreciate the commenter's requests for clarification. 
As discussed above, we proposed to revise the existing regulatory text 
that permits plans to exclude generic tiers from their tiering 
exceptions procedures. We did not propose to permit plans to exclude 
any formulary tiers other than the specialty tier, and do not agree 
that such an exclusion is advisable. As we stated in the proposed rule, 
we believe that tiering exceptions are an important enrollee protection 
and must not be restricted to such a degree. Under the proposed rule, 
which we are finalizing without modification, plans can establish 
tiering exceptions procedures where they do not have to offer such 
exceptions for brand name drugs or biological products to more 
preferred cost-sharing tiers that do not contain an alternative brand 
name or biological product, respectively. We believe that permitting 
additional restrictions that make certain low-cost tiers wholly 
inaccessible to beneficiaries with a medical need for a non-preferred 
drug would be inappropriate.
    Comment: A commenter urged CMS to monitor Part D plan formularies 
to ensure that plans do not change their formularies in an effort to 
decrease opportunities for tiering exceptions. Another commenter 
suggested that CMS consider requiring plan sponsors to establish 
evidence-based formularies that tie enrollee cost-sharing to the 
appropriateness of medications based on safety and efficacy.
    Response: All Part D plan formularies must be approved by CMS as 
part of the bid review process described at Sec.  423.272. Under Sec.  
423.120(b)(1), formularies must be developed and reviewed by a pharmacy 
and therapeutic committee that makes clinical decisions based on 
scientific evidence and standards of practice and considers safety and 
efficacy when determining inclusion of a drug on a formulary, including 
tier placement.
    Comment: We received a comment requesting that CMS clarify non-
formulary drugs approved for a formulary exception continue to be 
ineligible for tiering exceptions. Another commenter suggested that CMS 
consider ways to make it easier for individuals applying for a 
formulary exception to also apply for a tiering exception, if 
applicable.
    Response: We appreciate the commenter's request for clarification. 
We did not propose to revise the existing requirement set forth at 
Sec.  423.578(c)(4)(iii) which establishes that an enrollee may not 
request a tiering exception for a non-formulary drug approved under the 
formulary exceptions rules at Sec.  423.578(b). Under the proposed 
changes to tiering exceptions rules, which we are finalizing as 
proposed, an enrollee may not obtain a tiering exception for an 
approved non-formulary drug. We note that, if an enrollee obtains an 
exception to a utilization management requirement such as step therapy 
or a quantity limit, such enrollee may also request a tiering 
exception, pursuant to Sec.  423.578(a) and (c). The model Part D 
coverage determination request form, developed by CMS with stakeholder 
feedback, permits an enrollee or their prescriber, on the enrollee's 
behalf, to request a tiering exception along with, for example, prior 
authorization. The form includes check boxes for various types of 
requests, including an exception to cost-sharing.
    Comment: We received some comments opposed to requiring plans to 
consider tiering exceptions for non-preferred drugs to specialty tier 
cost-sharing when the specialty tier cost-sharing is more favorable for 
the enrollee. Some of these commenters stated that such a policy would 
be confusing for enrollees because the specialty tier is often a 
higher-numbered tier (for example, tier 5 on a 5-tier formulary). 
Commenters also stated that it would be overly burdensome for plans to 
administer such a policy, particularly if the exception request is for 
a drug on a copayment tier to a coinsurance tier (for example, tier 4--
Non Preferred Drug has a $100 copayment and tier 5--Specialty has a 25 
percent coinsurance). These commenters opined that allowing a drug with 
a copayment to be approved to a coinsurance tier would bypass formulary 
design and require extensive price review and calculation to determine 
which tier is more favorable. A commenter asked CMS to clarify whether 
plans would be permitted to

[[Page 16512]]

retain specialty tier supply limits such as a 30 day supply, even if 
the enrollee wishes to obtain a 90 day supply and a tiering exception 
is approved.
    Response: We appreciate the comments received on this aspect of the 
proposal. We are persuaded by the comments received that requiring 
plans to consider tiering exceptions into the specialty tier would be 
confusing and difficult for plans to implement, and are not finalizing 
this aspect of the proposal. While we believe many of the concerns 
expressed by commenters would be addressed by clarifying that such a 
policy would only apply if the requested drug meets the specialty tier 
cost threshold, we recognize it would still be difficult to explain to 
enrollees, who probably would have no knowledge as to whether any given 
drug would meet the specialty tier cost threshold and would be very 
unlikely to request such an exception. As noted above, we did not 
propose regulation text for such a requirement, and therefore, while we 
are not finalizing it, we are also not making any changes to the 
proposed regulation text.
    Comment: A few commenters stated that CMS should conduct an 
analysis of Part D plan formularies to ensure plans are not 
discriminating against beneficiaries by always placing certain classes 
of drugs on specialty tiers. A commenter asserted that, without 
standardized tiering in Part D, nothing prevents plans from putting 
high cost brand name drugs on specialty tiers to avoid having to offer 
tiering exceptions. The commenter stated that CMS should establish 
additional requirements for tiered formularies, such as requiring that 
all generic drugs be placed on tier 1 or tier 2. Another commenter 
recommended that CMS continue to explore improvements to benefit design 
and meaningful exceptions to high cost-sharing.
    Response: Pursuant to existing Part D policy and the proposed 
definition of specialty tier, it is a tier dedicated to very high cost 
drugs, which are often brand name drugs or biological products. As 
noted in a previous response, pursuant to Sec.  423.120(b)(1), 
formularies must be developed and reviewed by a pharmacy and 
therapeutic committee that makes clinical decisions based on scientific 
evidence and standards of practice, and considers safety and efficacy 
when determining inclusion of a drug on a formulary, including that 
drug's tier placement. While CMS does not prohibit plan sponsors from 
having a mix of both brand and generic drugs on each tier, it is our 
expectation that a tier label be representative of the drugs that make 
up that tier. Additionally, consistent with Sec.  30.2.7 of Chapter 6 
of the Medicare Prescription Drug Benefit Manual, CMS reviews 
formularies for the placement of drugs in non-preferred tiers in the 
absence of therapeutically similar drugs in preferred tiers.
    Comment: A few commenters stated that CMS should increase the $670 
specialty tier cost threshold to reduce the number of drugs that 
qualify and, therefore, reduce out of pocket spending for 
beneficiaries.
    Response: As we did not propose to change the specialty tier 
threshold in this rule, we decline to adopt this recommendation.
    After consideration of the comments received, we believe our 
proposed revisions to Sec.  423.578(a)(6) regarding the limitations 
plans are permitted to establish for tiering exceptions strike an 
appropriate balance between allowing plans to manage their formularies 
and ensuring enrollee access to this statutory protection. These 
revisions prohibit plans from excluding generic drug tiers from their 
tiering exceptions procedures, and permit plans to limit tiering 
exceptions for brand name drugs to the lowest applicable cost sharing 
associated with preferred brand name alternatives, and tiering 
exceptions for biological products to the lowest applicable cost 
sharing associated with preferred biological product alternatives. We 
are finalizing the proposed revisions to Sec.  423.578(a)(6) and the 
proposed definition of specialty tier at Sec.  423.560 without 
modification, noting the clarification discussed above that plans are 
not required to treat the specialty tier as a preferred cost-sharing 
tier for purposes of tiering exceptions. CMS continues to explore ways 
to ensure Part D enrollees are able to access very high cost, medically 
necessary prescription drugs.
d. Alternative Drugs for Treatment of the Enrollee's Condition
    We noted in the proposed rule that we have received comments from 
plan sponsors and PBMs requesting that CMS provide additional guidance 
on how to determine what constitutes an alternative drug for purposes 
of tiering exceptions, including establishment of additional 
limitations on when such exceptions are approvable. The statutory 
language for tiering and formulary exceptions at sections 1860D-4(g)(2) 
and 1860D-4(h)(2) of the Act, respectively, specifically refers to a 
preferred or formulary drug ``for treatment of the same condition.'' 
While our proposal did not include regulation text specific to the 
meaning of an alternative drug, we clarified in the preamble that we 
interpret this language to refer to the condition as it affects the 
enrollee--that is, taking into consideration the individual's overall 
clinical condition, including the presence of comorbidities and known 
relevant characteristics of the enrollee and/or the drug regimen, which 
can factor into which drugs are appropriate alternative therapies for 
that enrollee.
    We received the following comments on this section and our 
responses follow:
    Comment: We received several comments related to how to determine 
which drugs should be considered alternatives for treating the 
enrollee's health condition. Some of these commenters were supportive 
of the additional information we provided in the preamble to the 
proposed rule about how to determine alternative drugs. Most of the 
commenters stated that a more specific regulatory definition of 
alternative drug is needed. Some commenters recommended that the 
definition specify that alternative drugs must be one or more of the 
following: supported in drug compendia or treatment guidelines for use 
in the same place in therapy, FDA-approved for the same indication as 
the requested drug, in the same therapeutic class and/or category as 
the requested drug, use the same route of administration as the 
requested drug, and/or have the same mechanism of action as the 
requested drug.
    Several commenters provided various hypothetical scenarios using 
specific diagnoses and drugs and asked that CMS clarify whether a 
tiering exception would be allowed under our interpretation. A 
commenter asked CMS to provide examples that include how to determine 
what an appropriate alternative drug is. Another commenter stated that 
plan sponsors will continue to inaccurately apply rules for tiering 
exceptions because CMS does not define what a preferred alternative 
drug is. A few commenters stated that CMS' proposed interpretation of 
``same condition'' will limit exception requests and negatively impact 
beneficiaries. A few commenters stated that this interpretation has no 
statutory basis, and one of the commenters asserted that our 
clarification basing what constitutes an alternative drug on the 
individual characteristics and condition of the enrollee would make it 
easy for plans to claim there are no alternatives for treating that 
enrollee and therefore no tiering exception would be allowed.
    Response: The statutory language noted above related to approval of 
a tiering exception request broadly refers to preferred drugs ``for 
treatment of the

[[Page 16513]]

same condition.'' We believe that most of the criteria suggested by 
commenters would be more restrictive than the statute allows if plans 
were required to apply such criteria to all tiering exception 
situations, and we therefore disagree that such criteria should be 
specified in regulation. For example, if the mechanism of action or 
route of administration of a plan's preferred alternative drug would 
cause adverse effects for a particular enrollee versus the non-
preferred drug for treating the same condition, this could be the basis 
for that enrollee to seek a tiering exception for the non-preferred 
drug. Also, CMS does not specify the classification system that must be 
used on Part D plan formularies; therefore, establishing a requirement 
that alternative drugs must be in the same therapeutic class would 
introduce inconsistency because what one plan considers the same drug 
class may be different than another plan for the same drugs. The 
changes to the tiering exception regulations that we are finalizing in 
this rule do not require plans to consider a drug for which the 
enrollee's condition is not a medically accepted indication to be an 
alternative drug for purposes of a tiering exception request. Because 
payment under Part D cannot be made for any drug that does not meet the 
definition of a Part D drug for the prescribed indication, such drug 
could not reasonably be considered an alternative drug for treatment of 
the enrollee's condition.
    In response to comments suggesting that our interpretation of ``for 
treatment of the same condition'' is inconsistent with the statute, we 
disagree. As we noted in the proposed rule, we interpret this language 
to refer to the condition as it affects the enrollee. Given the 
language in section 1860D-4(g)(2) of the Act states that an exception 
could be covered if the prescribing physician determines that the 
preferred drug would not be as effective ``for the individual'' or 
would have adverse effects ``for the individual,'' we believe it is 
appropriate to interpret the standard for the ``same condition'' to be 
referring to the individual.
    While we are not making any changes to the regulations with respect 
to defining alternative drugs, we wish to note that plan medical 
directors are required to be involved in the development and oversight 
of policies and procedures for processing exception requests, including 
criteria for determining alternative drugs, as part of their 
responsibility under Sec.  423.562(a)(5) to ensure the clinical 
accuracy of all coverage determinations and redeterminations involving 
medical necessity. Additionally, Sec.  423.566(d) requires that, before 
issuing an adverse coverage determination based on lack of medical 
necessity, including exception requests, it must be reviewed by a 
physician or appropriate health care professional. These policies 
requiring clinician involvement in the establishment and application of 
plan coverage rules contemplate that those individuals apply reasonable 
clinical judgment, based on sound medical and scientific evidence and 
acceptable standards of practice, in adjudicating exception requests, 
including consideration of alternative drugs on the plan's formulary.
    While we agree that in certain situations and with certain medical 
conditions, what is reasonably considered an alternative drug may be 
limited in ways suggested by commenters, we disagree that such 
designations should be codified in regulation to apply to all tiering 
exceptions for the reasons previously stated, and because we do not see 
a good reason to codify these types of clinical considerations only for 
tiering exceptions, when we have not proposed to do so for other types 
of coverage determinations. We also believe these clarifications 
provide sufficient guidance for plans to determine what drugs should be 
considered alternatives for treating the enrollee's condition, and will 
ensure that plans do not apply unreasonable clinical or policy 
standards to their interpretation of the meaning of alternative drug so 
as to inappropriately refuse to allow tiering exceptions. Therefore, we 
are not adding a definition of alternative drug in this final rule.
    As discussed earlier in this preamble, CMS will update any existing 
agency guidance related to tiering exceptions as needed to ensure that 
it comports with the requirements of this final rule.
    Comment: A commenter asked CMS to clarify whether a tiering 
exception should be approved when the requested drug is not being 
prescribed for a medically accepted indication, or does not otherwise 
meet the definition of a Part D drug.
    Response: Pursuant to the existing regulation at Sec.  423.578(e), 
which we did not propose to revise, enrollees are not permitted to use 
the exceptions process to obtain coverage for a drug that is not being 
prescribed to treat a medically accepted indication as defined in 
section 1860D-2(e)(4) of the Act, or does not otherwise meet the 
definition of a Part D drug at Sec.  423.100. Thus, a plan cannot 
approve a tiering exception request if the requested drug is not being 
used to treat a medically accepted indication or does not meet the 
definition of a Part D drug.
    After consideration of the comments received on this section, we 
are finalizing our proposal without modification, and have chosen not 
to further specify how to determine what an alternative drug for 
treating the enrollee's condition is.
e. Approval of Tiering Exception Requests
    We proposed to revise Sec.  423.578(c)(3) by renumbering the 
provision and adding a new paragraph (ii) to codify our current policy 
that cost sharing for an approved tiering exception request is assigned 
at the lowest applicable tier when preferred alternatives sit on 
multiple lower tiers. Under our proposal, assignment of cost sharing 
for an approved tiering exception must be at the most favorable cost-
sharing tier containing alternative drugs, unless such alternative 
drugs are not applicable pursuant to limitations set forth under 
proposed Sec.  423.578(a)(6).
    We received the following comments and our responses follow:
    Comment: We received several comments related to this aspect of our 
proposal. Commenters were divided, with some supporting our proposal 
and others opposed. Commenters in support of the proposal to require 
approval at the lowest applicable tier stated that this policy allows 
beneficiaries who cannot take less expensive drugs to obtain needed 
drugs at an affordable price. Some commenters noted that they supported 
this aspect of the proposal because we also proposed to allow plans to 
limit tiering exceptions for brand name drugs to the lowest tier 
containing alternative brand name drugs. A few commenters expressed a 
belief that this policy would be easy for beneficiaries to understand.
    Commenters who opposed our proposal stated that requiring approval 
to the lowest applicable tier interferes with plans' ability to manage 
their formularies. A few commenters expressed a belief that our 
proposal is not consistent with the statute, which states that the 
requested drug could be covered at terms applicable to preferred drugs 
but does not specify that it be the terms applicable to the most 
preferred alternatives. A commenter stated that Sec.  1860D-4(g)(2) 
does not specifically refer to a right to obtain a drug at the lowest 
cost-sharing tier. Another commenter stated that requiring plans to 
provide high cost drugs at the lowest tier instead of the next lower 
tier increases premiums for all beneficiaries and provides only 
slightly lower cost-sharing for a few individuals.

[[Page 16514]]

    Response: We thank commenters who were supportive of our proposal 
for their support. We agree that our policy of approval to the lowest 
applicable tier containing alternatives provides the most relief for 
beneficiaries with a medical need for a non-preferred drug.
    We disagree that our proposal is inconsistent with the statute. 
Section 1860D-4(g)(2) provides that if a plan sponsor uses formulary 
tiers and offers lower cost sharing for ``preferred drugs'' (plural) 
included in the formulary, an enrollee may request an exception to the 
tiered cost-sharing structure, and under such an exception, a non-
preferred drug could be covered ``under the terms applicable for 
preferred drugs'' (plural) if the prescriber determines that ``the 
preferred drug'' (singular) for the same condition would not be as 
effective or would have adverse effects, or both. The statute clearly 
contemplates that while there can be multiple drugs that are preferred 
drugs relative to the requested drug, and the prescribing physician can 
determine that ``the'' preferred drug would not be as effective or 
would have adverse effects. We believe it is reasonable to interpret 
this provision to permit an enrollee to seek a tiering exception under 
which he or she would pay the cost sharing applicable to the most 
preferred drug among one or more preferred drugs.
    After consideration of the comments received, we are finalizing 
without modification our proposal at Sec.  423.578(c)(3), which 
specifies that cost-sharing for approved tiering exceptions is assigned 
at the lowest applicable tier when preferred alternatives sit on 
multiple lower tiers.
f. Additional Technical Changes and Corrections
    Finally, we proposed various technical changes and corrections to 
improve the clarity of the tiering exceptions regulations and 
consistency with the regulations for formulary exceptions. 
Specifically, we proposed the following:
     Revise the introductory text of Sec.  423.578(a) to 
clarify that a ``requested'' non-preferred drug for treatment of an 
enrollee's health condition may be eligible for an exception.
     Revise Sec.  423.578(a)(1) to include ``tiering'' when 
referring to the exceptions procedures described in this subparagraph.
     Revise Sec.  423.578(a)(4) by making ``conditions'' 
singular and by adding ``(s)'' to ``drug'' to account for situations 
when there are multiple alternative drugs.
     Revise Sec.  423.578(a)(5) by removing the text specifying 
that the prescriber's supporting statement ``demonstrate the medical 
necessity of the drug'' to align with the existing language for 
formulary exceptions at Sec.  423.578(b)(6). The requirement that the 
supporting statement address the enrollee's medical need for the 
requested drug is already explained in the introductory text of Sec.  
423.578(a).
     Redesignate paragraphs Sec.  423.578(c)(3)(i) through 
(iii) as paragraphs Sec.  423.578(c)(3)(i)(A) through (C), 
respectively. This proposed change will improve consistency between the 
regulation text for tiering and formulary exceptions.
    We received no comments on the proposed technical changes and 
corrections and are finalizing them without modification.
    After consideration of all comments received on the tiering 
exceptions proposal, we are finalizing the proposed regulation text 
without modification. As discussed above, CMS will review agency 
guidance and beneficiary communications and revise as needed to be 
consistent with this final rule.
10. Establishing Limitations for the Part D Special Election Period 
(SEP) for Dually Eligible Beneficiaries (Sec.  423.38)
    As discussed in section II.A.1 of this final rule, the MMA added 
section 1860D-1(b)(3)(D) to the Act to establish a special election 
period (SEP) for full-benefit dual eligible (FBDE) beneficiaries under 
Part D. This SEP, codified at Sec.  423.38(c)(4), was later extended to 
all other subsidy-eligible beneficiaries by regulation (75 FR 19720). 
The SEP allows eligible beneficiaries to make Part D enrollment changes 
(that is, enroll in, disenroll from, or change Part D plans, including 
Medicare Advantage Prescription Drug (MA-PD) plans) once a month 
throughout the year, unlike other Part D enrollees who generally may 
switch plans only during the annual enrollment period (AEP) each fall.
    With over 10 years of programmatic experience, we have observed 
certain enrollment trends in terms of FBDE and other LIS beneficiaries:
     Most LIS beneficiaries do not make an active choice to 
join a PDP.
     Once in a plan, whether it was a CMS-initiated enrollment 
or a choice they made on their own, most LIS beneficiaries do not make 
changes during the year.
     A small subset (0.8 percent) of LIS beneficiaries use the 
SEP to actively enroll in a plan of their choice and then disenroll 
within 2 months.
    In addition, the application of the continuous SEP carries 
different service delivery implications for enrollees of MA-PD plans 
and related products than for standalone enrollees of PDPs. At the 
outset of the Part D program, when drug coverage for dually eligible 
beneficiaries was transitioned from Medicaid to Medicare, there were 
concerns about how CMS would effectively identify, educate, and enroll 
dually eligible beneficiaries. While processes (for example, auto-
enrollment, reassignment) were established to facilitate coverage, the 
continuous SEP served as a fail-safe to ensure that the beneficiary was 
always in a position to make a choice that best served their healthcare 
needs. Unintended consequences have resulted from this flexibility, 
including, as noted by the Medicare Payment Advisory Commission (MedPAC 
\30\), opportunities for marketing abuses.
---------------------------------------------------------------------------

    \30\ Medicare Payment Advisory Commission, ``Report to Congress: 
Medicare Payment Policy,'' March 2008.
---------------------------------------------------------------------------

    Among the key obstacles the continuous SEP (and resulting plan 
movement) can present are--
     Interfering with the coordination of care among the 
providers, health plans, and states;
     Hindering the ability for beneficiaries to benefit from 
case management and disease management;
     Inefficient use of the effort and resources needed to 
conduct enrollee needs assessments and developing plans of care for 
services covered by Medicare and Medicaid;
     Limiting a plan's opportunity for continuous coordinated 
treatment of chronic conditions; and
     Diminishing incentives for plans to innovate and invest in 
serving potentially high-cost members.
    To support plan sponsors' efforts to administer benefits to 
beneficiaries, including coordination of Medicare and Medicaid 
benefits, and maximize care management and positive health outcomes, we 
proposed to amend Sec.  423.38(c)(4) to make the SEP for FBDE and other 
subsidy-eligible individuals available only in certain circumstances. 
Specifically, we proposed to revise to Sec.  423.38(c) to specify that 
the SEP is available only as follows:
     In new paragraph (c)(4)(i), eligible beneficiaries (that 
is, those who are dual or other LIS-eligible and do not meet the 
definition of at-risk beneficiary or potential at-risk beneficiary 
under proposed Sec.  423.100) would be able to use the SEP once per 
calendar year.
     In new paragraph (c)(4)(iii), eligible beneficiaries who 
have been assigned to a plan by CMS or a State would be able to use the 
SEP before that election becomes effective (that is, opt out and

[[Page 16515]]

enroll in a different plan) or within 2 months of their enrollment in 
that plan.
     In new paragraph (c)(9), dual and other LIS-eligible 
beneficiaries who have a change in their Medicaid or LIS-eligible 
status would have an SEP to make an election within 2 months of the 
change, or of being notified of such change, whichever is later. This 
SEP would be available to beneficiaries who experience a change in 
Medicaid or LIS status regardless of whether they have been identified 
as potential at-risk beneficiaries or at-risk beneficiaries under 
proposed Sec.  423.100.
     In addition, we also proposed to remove the phrase ``at 
any time'' in the introductory language of Sec.  423.38(c) for the sake 
of clarity.
    We considered multiple alternatives related to the SEP proposal. In 
the proposed rule, we described and asked for comments on two 
alternatives:
    Limit of two or three uses of the SEP per year. We considered 
applying a simple numerical limit to the number of times the LIS SEP 
could be used by any beneficiary within each calendar year. We 
specifically considered limits of either two or three uses of the SEP 
per year.
    Limits on midyear MA-PD plan switching. We also considered an 
option that would prohibit SEP use into non-integrated MA-PD plans, but 
allow continuous use of the dual SEP to allow eligible beneficiaries to 
enroll into FIDE SNPs or comparably integrated products for dually 
eligible beneficiaries or standalone PDPs.
    We received the following comments and our responses follow:
    Comment: Some commenters supported the proposal and agreed that 
continuity of enrollment could maximize coordination of care and 
positive health outcomes. However, the majority of commenters opposed 
the proposal based on a variety of factors. Most of these commenters 
expressed concerns about the impact on the dual-eligible population 
which, they noted, not only has limited financial resources, but also 
higher rates of disability, higher rates of cognitive impairment, and 
lower health literacy. These circumstances, commenters noted, often 
contribute to more complex and changing health needs and difficulties 
with medication adherence. Citing these circumstances, many commenters 
believed these beneficiaries needed the flexibility to change their 
healthcare coverage at any time during the year.
    Commenters also believed that the proposal was too complex and 
would be difficult for beneficiaries to understand and for plans to 
administer. They noted that limited and, in some cases, multi-layered 
SEPs were unnecessary when the existing ongoing SEP has worked well and 
has proved to be simpler to communicate and understand.
    Many commenters also said that the proposal would have an even 
greater impact given the proposed changes related to midyear formulary 
changes. Commenters noted that since plans have the ability to change 
formularies or provider networks during the year, the ongoing dual SEP 
is a vital beneficiary protection.
    Lastly, commenters said that the proposed dual SEP limitation 
could, in actuality, hamper CMS' stated goal of bringing Medicare and 
Medicaid into better alignment because it could inadvertently 
discourage dual eligible beneficiaries from enrolling in integrated 
products. Commenters noted that because beneficiaries are often 
hesitant to change plans, they may opt to stay in their current plan 
instead of trying an integrated option. In other cases, commenters 
expressed concern that beneficiaries who are assigned into a plan by 
CMS or a State may panic and disenroll immediately if they believe 
pressured to make an immediate decision. Commenters said that the 
ongoing SEP gives beneficiaries the comfort and time to make a 
deliberate and educated choice.
    Response: We thank the commenters for their thoughtful feedback. We 
are mindful of the unique health care challenges that dual and other 
LIS-eligible beneficiaries may face. The goals of the proposal were to 
improve administration of benefits and coordination of care and we 
believed that this could best be accomplished through continuity of 
enrollment. While we acknowledge that many commenters prefer the 
ongoing nature of the existing dual SEP, we still believe that adopting 
some limitations is an appropriate step toward encouraging care 
coordination, achieving positive health outcomes, and discouraging 
extraneous beneficiary movement during the plan year.
    In response to comments, we are modifying our approach. In lieu of 
the proposed dual SEP limitation that would only allow a onetime use 
per year with certain exceptions, we are instead revising the dual SEP 
so that it is similar to the ``two or three uses per year'' alternative 
discussed in the proposed rule. Specifically, the dual SEP is being 
amended so that it can be used once per calendar quarter during the 
first nine months of the year (that is, one election during each of the 
following time periods: January-March, April-June, July-September). 
During the last quarter of the year, a beneficiary can use the AEP to 
make an election that would be effective on January 1. In addition to 
this change, the exception outlined at Sec.  423.38(c)(4)(ii) related 
to CMS and State-initiated elections will not be finalized as proposed. 
(Instead, as discussed below, CMS will be using its authority under 
Sec.  423.38(c)(8)(ii) to establish a coordinating SEP for those who 
are enrolled into a plan by CMS or a State at new Sec.  423.38(c)(10).
    We believe that limiting use of the dual SEP, but in a less 
restrictive manner, strikes the appropriate balance of our stated goals 
and the concerns raised by commenters, for the reasons that follow. We 
consider this approach to be less confusing for both plan sponsors and 
beneficiaries than our proposal because it provides a date-based 
parameter that is easier to comprehend without the additional layers of 
exceptions. By still allowing multiple changes throughout the year, 
dual and other LIS-eligible beneficiaries will maintain additional 
flexibilities not afforded to other Part D-eligible beneficiaries, but 
there may be times when these individuals cannot change plans and have 
that choice effective the next month either because they already made 
an election during that calendar quarter (during the first nine months 
of the year) or because they are making an election during the AEP. We 
believe that having certain periods when individuals must maintain 
enrollment in a particular plan will increase opportunities for 
coordination of care and case management. Even though these periods of 
required continuity of enrollment will be shorter than what was 
proposed, we believe it still matches our stated goals and addresses 
the concerns expressed by commenters.
    While we believe this limitation is an appropriate control to put 
in place, we also believe that it will not impact the vast majority of 
individuals eligible for the dual SEP. As discussed in the proposed 
rule, 2016 data demonstrated that most beneficiaries do not use the 
dual SEP and, of those who do use it, the majority (74.5 percent) only 
used it once. Analysis of 2017 data continues to show that 
beneficiaries who use the SEP use it only one time (85.5 percent). Of 
those who use it two times, the average time between elections is 3.4 
months, which is roughly the duration of a calendar quarter.
    Given this flexibility, we believe that dual and other LIS-eligible 
beneficiaries will have the freedom to choose a plan that works for 
their evolving health care needs during the year. For those that have 
an opportunity to enroll in an integrated product, they will be able to 
do so and know that if it does not suit their needs, they can choose 
another

[[Page 16516]]

plan in the near future. The same logic can be applied to those who 
want to explore other plan options during the year due to formulary, 
provider network, or health status changes. We note, though, that as 
discussed earlier, individuals who have been identified as an at-risk 
beneficiary or potential at-risk beneficiary under Sec.  423.100 will 
not be able to use the dual SEP. As discussed in section II.A.1, we are 
specifying at Sec.  423.38(c)(4) that this particular limitation 
applies once the beneficiary has been notified that he or she has been 
identified as a potential at-risk beneficiary or at-risk beneficiary, 
and the limitation will continue until such identification has been 
terminated consistent with Sec.  423.153(f).
    Comment: Many commenters recommended a wide range of modifications 
or alternatives to the dual SEP limitation outlined in the proposed 
rule. Suggestions included the following:
     Allow beneficiaries to disenroll to FFS at any time.
     Instead of limiting the use of the dual SEP, require a 
minimum enrollment duration in a plan.
     Limit to onetime use per year, without exceptions, to 
mitigate administrative burden.
     Delay any sort of SEP limitation and, instead, contemplate 
for future rulemaking.
    Some commenters--both those who supported and opposed the concept 
of a limitation to the dual SEP--expressed a preference for one of the 
two alternatives discussed in the proposed rule. There were some who 
supported the concept of expanding the onetime annual election to 2-3 
uses per year because it provided more flexibility. Some commenters 
expressed support for the more complex approach that would have allowed 
limited use of the dual SEP for enrollment in integrated products, 
standalone PDPs, and FFS, but not any non-integrated MA plans.
    Along these lines, there was varied feedback for dual SEP use for 
enrollment into integrated products. Some said that it should be 
allowed as a onetime exception, some said that it should be an ongoing 
opportunity, while others said that it should be the only allowable use 
of the dual SEP. A commenter encouraged CMS to work with States to 
define which plans would be considered ``integrated'' and another 
commenter suggested that CMS maintain and publicize a list of 
integrated plans.
    Response: We believe that the wide array of feedback that 
commenters provided on the proposal represents the complexity and 
varying interests of those who would be impacted by a change to the 
dual SEP. Given that the majority of commenters preferred more 
flexibility than what we proposed, we are opting to finalize a 
limitation that is along the lines of the ``two or three uses per 
year'' alternative described in the proposed rule.
    We contemplated allowing multiple uses per year at any time, but 
thought that an approach that allowed for quarterly elections (that is, 
the dual SEP in coordination with the AEP) was preferable because it 
would be easier to keep track of and for beneficiaries to understand. 
With a multiple-use-per-year-at-any-time policy, if a beneficiary makes 
several elections in the beginning of the year, as they approach the 
end of the year it may be hard to remember how many elections they have 
made or whether any more are available. With an approach that allows 
for quarterly elections, however, they only need to remember if they 
made an election in the last few months. If they have not, it is likely 
that they are eligible for a quarterly dual SEP use or the AEP. A 
quarterly approach also mitigates scenarios where a beneficiary makes 
multiple elections in the first half of the year and is then locked 
into a plan for the latter half of the year.
    Comment: In addition to the modifications/alternatives discussed 
above, a number of commenters believed that if limitations were 
established for the dual SEP, CMS should consider additional exceptions 
for certain beneficiary groups or conditions. Specifically, commenters 
believed exceptions would serve as important beneficiary protections 
for the following individuals/circumstances:
     Those who have a new or existing disability.
     Those with a new or altered disease state or diagnosis.
     American Indians and Alaska Natives who also receive 
services through the Indian Health Service.
     Enrollees whose prescription drugs are not covered under 
their plan's formulary or whose providers change during the year.
     Individuals whose caregiver arrangements change during the 
year.
     Individuals who must comply with Medicaid open enrollment 
periods or those who meet the ``for cause'' standards established for 
enrollees in Medicaid managed care plans.
     Those whose providers request an SEP on their behalf.
    Response: We believe that by allowing the dual SEP to be used 
quarterly during the first nine months of the year in conjunction with 
the AEP at the end of the year, we are mitigating the need for the 
exceptions suggested by the commenters. Dual or other LIS-eligible 
beneficiaries who fall into any of these categories would still be able 
to use the dual SEP. The only way that they may be limited is if they 
had already made a recent election into a plan. If that were the case, 
they may have to wait several months to make another change. (A more 
detailed discussion of different election periods and when they are 
considered ``used'' and effective can be found below.) Again, we do not 
see the frequency of movement that would lead us to believe that this 
will be an issue for the vast majority of LIS-eligible beneficiaries.
    We would note that in addition to the dual SEP, there are already a 
number of protections in place for all beneficiaries who have Part D 
coverage and are unable to change plans. For example, beneficiaries can 
request transition fills--prescription drugs that are not on a plan's 
formulary or that are on a plan's formulary but require prior 
authorization or step therapy under a plan's utilization management 
rules--during the first 90 days of enrollment in a new plan as provided 
under Sec.  423.120(b)(3). In addition, beneficiaries can request a 
formulary or tiering exception to obtain a drug that is not on their 
plan's formulary or to obtain a drug at a lower cost-sharing tier.
    While we understand that commenters believe that the ability to 
change plans at any time is an important beneficiary protection, we 
believe it is worth re-stating that the changes finalized at Sec.  
423.38(c)(4) will still provide for multiple uses of the dual SEP 
throughout the year and this is a flexibility that is not afforded to 
all Part D enrollees. During other parts of the year, dual and other 
LIS-eligible individuals will still have access to the AEP in the fall 
or, if applicable, the initial enrollment period (IEP) or the new MA 
open enrollment period (OEP) discussed in section II.B.1. Beneficiaries 
may also continue to be eligible for other SEPs outlined in Sec.  
422.62(b) and Sec.  423.38(c), which includes circumstances like a 
change or residence or other exceptional circumstances as determined by 
CMS.
    In addition, we will be finalizing the SEP opportunity that was 
contemplated in the proposed rule for beneficiaries assigned to a plan 
by CMS or a State. While this was proposed at new Sec.  
423.38(c)(4)(iii) as an additional use of the dual SEP, and would have 
been available before that election became effective or within 2 months 
of enrollment in the plan, we will be finalizing this as a new and 
separate

[[Page 16517]]

SEP at Sec.  423.38(c)(10). We believe that establishing this as a 
separate SEP is more straightforward because it makes clear that this 
opportunity is separate and in addition to the elections allowable 
under the revised dual SEP.
    This new SEP will allow individuals who have been auto-enrolled, 
facilitated enrolled, or reassigned into a plan by CMS, as well as 
those who have been subject to passive enrollment processes discussed 
in section II.A.8, an opportunity to change plans. Unlike the proposed 
SEP, this new SEP will be available even if a beneficiary meets the 
definition of an at-risk beneficiary or potential at-risk beneficiary. 
Beneficiaries would be able to use this new CMS/State assignment SEP 
before that enrollment becomes effective (that is, opt out and enroll 
in a different plan) or within 3 months of the assignment effective 
date, whichever is later. (Note that this SEP will not apply to 
individuals who have been subject to default enrollment processes 
discussed in section II.A.7, as they will be able to use the new Open 
Enrollment Period (OEP) to make an election.)
    Comment: A commenter requested a mechanism for plan sponsors to 
determine if the enrollment prior to the enrollee's SEP request was 
assigned by the CMS or the State. Another commenter requested 
clarification that States may make passive enrollment decisions where 
otherwise permitted, such as in Medicare-Medicaid Plans (MMPs), 
regardless of whether an individual has exhausted his or her SEP 
options for the year.
    Response: CMS is exploring possible mechanisms that would allow 
plan sponsors to determine if the enrollee's most recent enrollment 
transaction was one that was initiated by CMS or the State. In the 
interim, plan sponsors should ask the enrollee if they received a 
notice that indicates that they have been assigned to a plan and have 
certain SEP opportunities.
    If a beneficiary is assigned to a plan by CMS or a State, the 
enrollment change does not count against any of their SEP 
opportunities. That is, if a State passively enrolls a dual-eligible 
beneficiary in April, the beneficiary would still have their second 
quarter dual SEP, as well as the SEP associated specifically with the 
passive enrollment.
    Comment: Several commenters sought clarification on how the dual 
SEP limitation would affect and interact with other election periods. 
Commenters stated that it was unclear how the SEP changes in Sec.  
423.38 would relate to the AEP and OEP. A few commenters sought 
verification that the SEPs for Program of All-inclusive Care for the 
Elderly (PACE) eligible beneficiaries, institutionalized individuals, 
and enrollments into 5-star plans would be unaffected. A commenter 
requested clarification whether the once-per-year SEP falls outside of 
the AEP, or whether the SEP also applies during this same AEP 
timeframe.
    Response: As noted in the proposed rule and above, other election 
periods, including the AEP and the new OEP, are still available to 
eligible individuals. The established SEPs that allow beneficiaries to 
enroll in 5-star plans and PACE, as well as the SEP that allows 
elections for those who move into, reside in, or move out of an 
institution, are unaffected. If used, they would not count as use of 
the dual SEP. If the beneficiary is eligible for multiple election 
periods, plan sponsors (or other enrollment facilitators) may need to 
determine which election period the beneficiary would like to use, 
especially if the election periods would result in different enrollment 
effective dates. This is consistent with subregulatory guidance in 
Chapter 2 of the Medicare Managed Care Manual (section 30.6), Chapter 3 
of the Medicare Prescription Drug Manual (section 30.4), and current 
enrollment processing procedures for any enrollment request received 
when the individual is eligible for more than one election period.
    The dual SEP will be considered ``used'' based on the application 
date. If, for example, an election is made in March and effective in 
April, we would consider the beneficiary as having used their first 
quarter (Q1) dual SEP, even though coverage would not be effective 
until the second quarter of the calendar year. If a dual or other LIS-
eligible beneficiary makes an election during the AEP (October 15th 
through December 7th), coverage would be effective January 1.
    If, for example, a beneficiary is reassigned into a new plan in the 
fall for coverage effective January 1, they would be able to make an 
election under the AEP or the new CMS/State assignment SEP. If they opt 
out of the reassignment before it becomes effective and choose to stay 
in their current plan, this would be considered a cancellation and no 
election period is required.
    We recognize that when looking at all of the election periods and 
associated timeframes in whole, there are multiple opportunities both 
within this SEP and other election periods for an individual to make a 
choice that best meets their needs. We believe that enrollment is an 
individual-based exercise, and 1-800-MEDICARE, SHIPs, advocacy 
helplines, plans, and enrollment brokers, already have processes in 
place to work with individual beneficiaries and determine the election 
periods for which they may be eligible. Ultimately, as already outlined 
in Chapter 3 of the Prescription Drug Benefit Manual (section 30), it 
is the plan sponsor's responsibility to determine the enrollment period 
for each enrollment/disenrollment request. In some cases, plan sponsors 
may need to contact the beneficiary directly to confirm the election 
period.
    Table 2 summarizes the election periods discussed above and the 
suggested hierarchy of election periods (highest to lowest). Readers 
should note that it is not a comprehensive list of all election periods 
and does not negate a plan sponsor's responsibility to contact a 
beneficiary if they believe that multiple election periods may be 
available. More detailed information will be provided in subregulatory 
guidance.

                        Table 2--Election Periods
------------------------------------------------------------------------
                                                          Considered
         Election period               Available           ``Used''
------------------------------------------------------------------------
Part D IEP......................  Based on when       Upon effective
                                   first eligible      date.
                                   for Part D.
MA OEP (must meet OEP             Annually..........  Upon application
 requirements).                                        date.
SEP--5-Star plans...............  Ongoing...........  Available as long
                                                       as election is in
                                                       5-Star plan.
SEP--PACE.......................  Ongoing for         Available as long
                                   enrollment into     as election is in
                                   PACE; two month     PACE plan; upon
                                   window after        application date
                                   disenrollment       for election
                                   from PACE.          subsequent to
                                                       PACE
                                                       disenrollment.
SEP--Institutionalized..........  Ongoing if moving   Available while in
                                   into/residing in    facility; upon
                                   facility; two       application date
                                   month window        for election
                                   after moving out    subsequent to
                                   of facility.        moving out of
                                                       facility.

[[Page 16518]]

 
SEP--CMS/State Assignment.......  Within 3 months *   Upon application
                                   of assignment or    date.
                                   notification of
                                   assignment,
                                   whichever is
                                   later.
SEP--Change in Dual/LIS Status..  Within 3 months *   Upon application
                                   of status change    date.
                                   or notification
                                   of change,
                                   whichever is
                                   later.
Dual SEP........................  Ongoing--One use    Upon application
                                   per calendar        date.
                                   quarter during
                                   the first nine
                                   months of the
                                   year.
AEP.............................  Annually..........  Multiple elections
                                                       can be submitted
                                                       during AEP, last
                                                       rec'd will be
                                                       considered the
                                                       choice.
------------------------------------------------------------------------
* As discussed below, the finalized SEPs will allow for a 3-month
  opportunity to change plans, not the 2-month window noted in the
  proposed rule.

    Comment: A few commenters requested clarification on how plan 
sponsors would be able to determine if a beneficiary has used their 
allowable dual SEP election. Commenters asked whether this information 
would be available in MARx or as a batch enrollment query (BEQ). 
Commenters also asked who is responsible for validating the SEP and 
noted that beneficiaries may be frustrated if they are unaware that 
they have exhausted their allowable use of the dual SEP and their 
enrollment is denied. A commenter asked that plans not be penalized for 
rejections related to the dual SEP.
    Response: Plan sponsors continue to be responsible for determining 
the eligibility and enrollment period for enrollment/disenrollment 
requests. As noted earlier, plan sponsors and other enrollment 
facilitators may need to ask questions of the beneficiary to determine 
if they are eligible for the dual SEP or another election period. As a 
part of this process, we assume that beneficiaries are informed about 
the enrollment process and told that a submitted enrollment form does 
not always guarantee enrollment in a plan. Further, the enrollment 
module in MARx will be updated to no longer allow use of the dual SEP 
more than once per calendar quarter during the first nine months of the 
year. Enrollment transactions submitted for an individual who has 
already used their quarterly opportunity will be rejected, and sponsors 
would notify the individual of the denial, as they do today. While the 
commenter did not specify which penalties they wanted waived, as stated 
earlier, the vast majority of beneficiaries do not use the dual SEP 
multiple times, let alone within a 3-month period, so any rejected 
transactions should be minimal.
    Comment: A commenter asked that we confirm that the dual SEP 
applies to individuals considered full-benefit dual eligible 
beneficiaries under Sec.  423.773(c)(1).
    Response: The dual SEP, with the parameters established in this 
rule, is available for full benefit dual eligible individuals and other 
subsidy-eligible beneficiaries as defined at Sec.  423.772.
    Comment: A few commenters recommended that we modify the proposed 
SEP at Sec.  423.38(c)(9) to allow for a three-month or unlimited 
window post LIS-change, not a 2-month window. These commenters said 
that the outreach and education time can be lengthy and two months does 
not provide the beneficiary with enough time to make a fully-informed 
choice. In addition, a commenter requested that we clarify whether a 
change in co-pay level only is considered a change in LIS-eligible 
status and would prompt eligibility for the dual SEP. Another commenter 
asked how the change in status SEP would affect those going through the 
deeming process.
    Response: We appreciate this insight from commenters and believe 
that a three-month window should give the beneficiary adequate time to 
understand their coverage changes and determine if it is in their best 
interest to change plans. Accordingly, we are revising Sec.  
423.38(c)(9) to allow individuals to make an election within 3 months 
of a gain, loss, or change to Medicaid or LIS eligibility, or 
notification of such a change, whichever is later. A change in co-pay 
level, or any change, resulting from the deeming process, would be 
considered a change in LIS eligibility.
    As discussed previously, the SEP for dual/LIS status change is 
separate from the dual SEP. If, for example, a Medicare beneficiary 
becomes eligible for Medicaid during the year, they would be able to 
use the dual/LIS status change SEP to change plans. In addition, 
because they are now a dually-eligible beneficiary, they would also be 
able to make their allowable quarterly dual SEP election during the 
first nine months of the year.
    Comment: A commenter noted that the Medicaid managed care rule at 
42 CFR 438.56(c)(2)(i) includes a 90-day period for plan changes 
following enrollment, and that dual/LIS SEPs should align so as to 
avoid conflicts between Medicare and Medicaid rules.
    Response: We appreciate the identification of the potential 
conflict. We believe that because of the various election periods that 
are available, including the new SEPs that are being finalized in this 
rule, there should not be a coordination issue with Medicaid managed 
care rules. Specifically, a beneficiary can still use the dual SEP 
quarterly during the first nine months of the year, the new three-month 
SEP for change in Medicaid status, the new three-month CMS/State 
assignment SEP, and the AEP.
    Comments: A commenter recommended that if the proposal was 
finalized, CMS should allow beneficiaries the right to file an appeal 
to switch plans in instances where their Part D plan has made a 
material change (such as to its formulary or to its pharmacy network) 
during the plan year.
    Response: Enrollment decisions are not appealable and we do not 
believe it would be prudent to set up an enrollment appeals process at 
this time. Given that dual and other LIS-eligible beneficiaries will 
still be able to use the dual SEP on a quarterly basis during the first 
nine months of the year, we believe that there is a readily accessible 
remedy for this enrollment issue. The beneficiary will still be able to 
change plans, but in the event that they have already used up their 
dual SEP election, they may have to wait to make another change, unless 
they are eligible for one of the many other SEPs. Again, we expect this 
circumstance to be extremely rare.
    Comment: A few commenters recommended that in addition to MA and 
Part D plans, CMS apply the SEP limitations to Medicare-Medicaid Plans

[[Page 16519]]

(MMPs) as part of the Financial Alignment Initiative demonstration.
    Response: We clarify that under the Financial Alignment Initiative 
capitated model demonstrations, MA regulations--including those 
governing SEPs--apply to MMPs unless waived. As has been the case to 
date under the demonstrations, we will continue to use our 
demonstration authority to waive applicable MA regulatory requirements 
in three-way contracts as necessary, and in partnership with each 
state, to achieve each individual demonstration's objectives.
    Comment: A commenter requested clarification regarding the federal 
vs. state authority over the dual SEP.
    Response: Other than state laws relating to state licensure and 
plan solvency the standards established under Part D supersede any 
state law or regulation with respect to Part D plans.
    Comment: Many commenters provided valuable feedback related to our 
request for suggestions on how to educate the affected population and 
other stakeholders of changes to the dual SEP. Suggestions included the 
following:
     Development of more outreach materials, including non-
English materials.
     Direct notification to affected individuals.
     Increased resources for SHIPs.
     Coordination with the Administration for Community Living 
and State ombudsmen.
     Television advertisements.
     Educational opportunities sales agents, providers and 
community partners.
     Broader education about the dual SEP in general.
    Response: We appreciate the feedback provided by commenters and 
will keep these suggestions in mind as we proceed with implementation 
of the dual SEP limitation beginning in plan year 2019.
    Comment: A commenter recommended changes to Medicaid managed care 
disenrollment rules outlined at 42 CFR 438.56.
    Response: Medicaid disenrollment rules are outside the scope of 
proposals set forth in the proposed rule and, as such, will not be 
considered for this rulemaking.
    After review of the comments, and as discussed above, we are 
finalizing the proposed changes to Sec.  423.38 with the following 
modifications:
     Paragraph (c)(4) is revised to allow eligible 
beneficiaries (that is, those who are dual or other LIS-eligible) use 
of the dual SEP once per calendar quarter during the first nine months 
of the year. We are further specifying that the limitation applicable 
to at-risk beneficiaries and potential at-risk beneficiaries (as 
defined under Sec.  423.100 and discussed in section II.A.1) is 
effective upon notification of that status and ends upon termination of 
that status consistent with Sec.  423.153(f).
     New paragraph (c)(9), which provides dual and other LIS-
eligible beneficiaries who have a change in their Medicaid or LIS-
eligible status an SEP, is modified to allow a 3-month window to make a 
change.
     Proposed paragraph (c)(4)(iii) allowing eligible 
beneficiaries who have been assigned to a plan by CMS or a State use of 
the dual SEP before that election becomes effective or within 2 months 
of their enrollment in that plan will not be finalized. Instead, a new 
CMS/State assignment SEP is established at Sec.  423.38(c)(10) to allow 
individuals in a similar circumstance (that is, auto- or facilitated 
enrolled, reassigned, default or passively enrolled by CMS or a state) 
an opportunity to change plans upon notification or within 3 months of 
the assignment effective date, whichever is later.
    Further detail on the SEP changes will be provided in subregulatory 
guidance. As suggested by a commenter, we will monitor the impact of 
this change and consider future modifications if there is evidence that 
beneficiaries are being harmed.
11. Medicare Advantage and Part D Prescription Drug Plan Quality Rating 
System
a. Introduction
    We are committed to transforming the health care delivery system--
and the Medicare program--by putting a strong focus on person-centered 
care, in accordance with the CMS Quality Strategy, so each provider can 
direct their time and resources to each beneficiary and improve their 
outcomes. As part of this commitment, one of our most important 
strategic goals is to improve the quality of care for Medicare 
beneficiaries. The Part C and D Star Ratings support the efforts of CMS 
to improve the level of accountability for the care provided by health 
and drug plans, physicians, hospitals, and other Medicare providers. We 
currently publicly report the quality and performance of health and 
drug plans on the Medicare Plan Finder tool on www.medicare.gov in the 
form of summary and overall ratings for the contracts under which each 
MA plan (including MA-PD plans) and Part D plan is offered, with drill 
downs to ratings for domains, ratings for individual measures, and 
underlying performance data. We also post additional measures on the 
display page \31\ at www.cms.gov for informational purposes. The goals 
of the Star Ratings are to display quality information on Medicare Plan 
Finder to help beneficiaries, families, and caregivers make informed 
choices by being able to consider a plan's quality, cost, and coverage; 
to provide information for public accountability; to incentivize 
quality improvement; to provide information to oversee and monitor 
quality; and to accurately measure and calculate scores and stars to 
reflect true performance. In addition, CMS has made strides in 
recognizing the challenges of serving high risk, high needs populations 
while continuing the focus on improving health care for these important 
groups.
---------------------------------------------------------------------------

    \31\ http://go.cms.gov/partcanddstarratings (under the 
downloads).
---------------------------------------------------------------------------

    In this final rule, as part of the Administration's efforts to 
improve transparency, we are codifying the existing Star Ratings system 
for the MA and Part D programs with some changes. As noted later in 
this section in more detail, the changes we proposed and are finalizing 
include more clearly delineating the rules for adding, updating, and 
removing measures and modifying how we calculate Star Ratings for 
contracts that consolidate. As we explained in the proposed rule, 
codifying the Star Ratings methodology will provide plans with more 
stability to plan multi-year initiatives, because the rulemaking 
process will create a longer lead time for changes and MA organizations 
and Part D sponsors will know the measures several years in advance. We 
have received comments for the past several years from MA organizations 
and other stakeholders asking that CMS use Federal Register rulemaking 
for the Star Ratings system; we discuss in section II.A.11.c. of this 
final rule (regarding plans for the transition period before the 
codified rules are used) how section 1853(b) authorizes CMS to 
establish and annually modify the Star Ratings system using the Advance 
Notice and Rate Announcement process because the system is an integral 
part of the policies governing Part C payment. We believe this is an 
appropriate time to codify the methodology, because the rating system 
has been used for several years now and is relatively mature so there 
is less need for extensive changes every year; the smaller degree of 
flexibility in having codified regulations rather than using the 
process for adopting payment methodology changes may be appropriate. 
Further, by adopting and

[[Page 16520]]

codifying the rules that govern the Star Ratings system, we are 
demonstrating a commitment to transparency and predictability for the 
rules in the system so as to foster investment.
b. Background
    We originally acted upon our authority to disseminate information 
to beneficiaries as the basis for developing and publicly posting the 
5-star ratings system (sections 1851(d) and 1852(e) of the Act). The MA 
statute explicitly requires that information about plan quality and 
performance indicators be provided to beneficiaries to help them make 
informed plan choices. These data are to include disenrollment rates, 
enrollee satisfaction, health outcomes, and plan compliance with 
requirements.
    The Part D statute (at section 1860D-1(c)) imposes a parallel 
information dissemination requirement with respect to Part D plans, and 
refers specifically to comparative information on consumer satisfaction 
survey results as well as quality and plan performance indicators. Part 
D plans are also required by regulation (Sec.  423.156) to make 
Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey 
data available to CMS and are required to submit pricing and 
prescription drug event data under statutes and regulations specific to 
those data. Regulations require plans to report on quality improvement 
and quality assurance and to provide data which CMS can use to help 
beneficiaries compare plans (Sec. Sec.  422.152 (b)(3) and 
423.153(c)(5)). In addition we may require plans to report statistics 
and other information in specific categories (Sec. Sec.  422.516 and 
423.514).
    Currently, for similar reasons of providing information to 
beneficiaries to assist them in plan enrollment decisions, we also 
review and rate section 1876 cost plans on many of the same measures 
and publish the results. We also proposed to continue to include 1876 
cost contracts in the MA and Part D Star Rating system to provide 
comparative information to Medicare beneficiaries making plan choices. 
We proposed specific text, to be codified at Sec.  417.472(k), 
requiring that 1876 cost contracts to agree to be rated under the 
quality rating system specified at subpart D of part 422. Cost 
contracts are also required by regulation (Sec.  417.472(j)) to make 
CAHPS survey data available to CMS. As is the case today, no Quality 
Bonus Payments (QBP) will be associated with the ratings for 1876 cost 
contracts.
    In line with Sec. Sec.  422.152 and 423.153, CMS uses the 
Healthcare Effectiveness Data and Information Set (HEDIS), Health 
Outcomes Survey (HOS), CAHPS data, Part C and D Reporting requirements 
and administrative data, and data from CMS contractors and oversight 
activities to measure quality and performance of contracts. We have 
been displaying plan quality information based on that and other data 
since 1998.
    Since 2007, we have published annual performance ratings for stand-
alone Medicare PDPs. In 2008, we introduced and displayed the Star 
Ratings for Medicare Advantage Organizations (MAOs) for both Part C 
only contracts (MA-only contracts) and Part C and D contracts (MA-PDs). 
Each year since 2008, we have released the MA Star Ratings. An overall 
rating combining health and drug plan measures was added in 2011, and 
differential weighting of measures (for example, outcomes being 
weighted 3 times the value of process measures) began in 2012. The 
measurement of year to year improvement began in 2013, and an 
adjustment (Categorical Adjustment Index) was introduced in 2017 to 
address the within-contract disparity in performance revealed in our 
research among beneficiaries that are dual eligible, receive a low 
income subsidy, and/or are disabled.
    The MA and Part D Star Ratings measure the quality of care and 
experiences of beneficiaries enrolled in MA and Part D contracts, with 
5 stars as the highest rating and 1 star as the lowest rating. The Star 
Ratings provide ratings at various levels of a hierarchical structure 
based on contract type, and all ratings are determined using the 
measure-level Star Ratings. Contingent on the contract type, ratings 
may be provided and include overall, summary (Part C and D), and domain 
Star Ratings. Information about the measures, the hierarchical 
structure of the ratings, and the methodology to generate the Star 
Ratings is detailed in the annually updated Medicare Part C and D Star 
Ratings Technical Notes, referred to as Technical Notes, available at 
http://go.cms.gov/partcanddstarratings.
    The MA and Part D Star Ratings system is designed to provide 
information to the beneficiary that is a true reflection of the plan's 
quality and encompasses multiple dimensions of high quality care. The 
information included in the ratings is selected based on its relevance 
and importance such that the ratings can meet the needs of 
beneficiaries using them to inform plan choice. While encouraging 
improved health outcomes of beneficiaries in an efficient, person 
centered, equitable, and high quality manner is one of the primary 
goals of the ratings, they also provide feedback on specific aspects of 
care and performance that directly impact outcomes, such as process 
measures and the beneficiary's perspective. The ratings focus on 
aspects of care and performance that are within the control of the 
health plan and can spur quality improvement. The data used in the 
ratings must be complete, accurate, reliable, and valid. A delicate 
balance exists between measuring numerous aspects of quality and the 
need for a small data set that minimizes reporting burden for the 
industry. Also, the beneficiary (or his or her representative) must 
have enough information to make an informed decision without feeling 
overwhelmed by the volume of data.
    The Patient Protection and Affordable Care Act (Pub. L. 111-148), 
as amended by the Healthcare and Education Reconciliation Act (Pub. L. 
111-152), provides for quality ratings, based on a 5-star rating system 
and the information collected under section 1852(e) of the Act, to be 
used in calculating payment to MA organizations beginning in 2012. 
Specifically, sections 1853(o) and 1854(b)(1)(C) of the Act were added 
and amended to provide, respectively, for an increase in the benchmark 
against which MA organizations bid and in the portion of the savings 
between the bid and benchmark available to the MA organization to use 
as a rebate. Under the Act, Part D plan sponsors are not eligible for 
quality based payments or rebates. We finalized a rule on April 15, 
2011 to implement these provisions and to use the existing Star Ratings 
system that had been in place since 2007 and 2008. (76 FR 21485-
21490).\32\ In addition, the Star Ratings measures are tied in many 
ways to responsibilities and obligations of MA organizations and Part D 
sponsors under their contracts with CMS. We believe that continued poor 
performance on the measures and overall and summary ratings indicates 
systemic and wide-spread problems in an MA plan or Part D plan. In 
April 2012, we finalized regulations to use consistently low summary 
Star Ratings--meaning 3 years of summary Star Ratings below 3 stars--as 
the basis for a contract termination for Part C and Part D plans. 
(Sec. Sec.  422.510(a)(14) and 423.509(a)(13)). Those regulations 
further reflect the role the Star Ratings have had in CMS' oversight, 
evaluation, and monitoring of MA and Part D plans to ensure compliance 
with the

[[Page 16521]]

respective program requirements and the provision of quality care and 
health coverage to Medicare beneficiaries.
---------------------------------------------------------------------------

    \32\ The ratings were first used as part of the QBP 
Demonstration for 2012 through 2014 and then used for payment 
purposes as specified in sections 1853(o) and 1854(b)(1)(C) of the 
Act and the regulation at 42 CFR 422.258(d)(7).
---------------------------------------------------------------------------

    The true potential of the use of the MA and Part D Star Ratings 
system to reach our goals and to serve as a catalyst for change can 
only be realized by working in tandem with our many stakeholders, 
including beneficiaries, plans, and advocates. The following guiding 
principles have been used historically in making enhancements and 
updates to the MA and Part D Star Ratings:
     Ratings align with the current CMS Quality Strategy.
     Measures developed by consensus-based organizations are 
used as much as possible.
     Ratings are a true reflection of plan quality and enrollee 
experience; the methodology minimizes risk of misclassification.
     Ratings are stable over time.
     Ratings treat contracts fairly and equally.
     Measures are selected to reflect the prevalence of 
conditions and the importance of health outcomes in the Medicare 
population.
     Data are complete, accurate, and reliable.
     Improvement on measures is under the control of the health 
or drug plan.
     Utility of ratings is considered for a wide range of 
purposes and goals.
    ++ Accountability to the public.
    ++ Enrollment choice for beneficiaries.
    ++ Driving quality improvement for plans and providers.
     Ratings minimize unintended consequences.
     Process of developing methodology is transparent and 
allows for multi-stakeholder input.
    We used these goals to guide our proposal and intend to use them to 
guide how we interpret and apply the final regulations. For each 
provision we proposed, we solicited comment on whether our specific 
proposed regulation text best serves these guiding principles. We also 
solicited comment on whether additional or other principles are better 
suited for these roles in measuring and communicating quality in the MA 
and Part D programs in a comparative manner.
    As we continue to consider making changes to the MA and Part D 
programs in order to increase plan participation and improve benefit 
offerings to enrollees, we also solicited feedback from stakeholders on 
how well the existing stars measures create meaningful quality 
improvement incentives and differentiate plans based on quality. We 
solicited comments on those topics, and have considered them in 
adopting this final rule, as noted in the responses below, and will 
consider them for future rulemaking. We specifically asked for feedback 
on the following topics:
     Additional opportunities to improve measures so that they 
further reflect the quality of health outcomes under the rated plans.
     Whether CMS' current process for establishing the cut 
points for Star Rating can be simplified, and if the relative 
performance as reflected by the existing methodology to establish cut 
points accurately reflects plan quality.
     How CMS should measure overall improvement across the Star 
Ratings measures. In the proposed rule, we specifically requested input 
on additional improvement adjustments that could be implemented, and 
the effect that these adjustment could have on new entrants (here 
meaning new MA organizations and/or new plans offered by existing MA 
organizations).
     Additional adjustments to the Star Ratings measures or 
methodology that could further account for unique geographic and 
provider market characteristics that affect performance (for example, 
rural geographies or monopolistic provider geographies), and the 
operational difficulties that plans could experience if such 
adjustments were adopted.
     In order to further encourage plan participation and new 
market entrants, whether CMS should consider implementing a 
demonstration to test alternative approaches for putting new entrants 
(that is, new MA organizations) on a level playing field with renewing 
plans from a Star Ratings perspective for a pre-determined period of 
time.
     Adding measures that evaluate quality from the perspective 
of adopting new technology (for example, the percent of beneficiaries 
enrolled through online brokers or increasing implementation of the use 
of telemedicine) or improving the ease, simplicity, and satisfaction of 
the beneficiary experience in a plan.
     Including survey measures of physicians' experiences. 
(Currently, we measure beneficiaries' experiences with their health and 
drug plans through the CAHPS survey.) Physicians also interact with 
health and drug plans on a daily basis on behalf of their patients. We 
noted in the proposed rule that we are considering developing a survey 
tool for collecting standardized information on physicians' experiences 
with health and drug plans and their services.
    CMS appreciates the feedback we received on our proposals and on 
the solicitations for comment on the various topics. In the sections 
that follow, which are arranged by topic area, we summarize the 
comments we received on the background section and policies, proposals 
and solicitations summarized there and provide our responses to the 
comments. (In each section in II.B.11.c through w, we summarize the 
proposals from the corresponding section of the proposed rule, the 
applicable comments, and our responses.)
    Comment: Most commenters supported both the principles and the 
decision to codify the methodology for the Part C and D Star Ratings. 
Of the commenters who supported those aspects of our overall proposal, 
a few suggested adding principles, such as the measure data should be 
timely and that distinctions between measure-level Star Ratings (cut 
points) should be meaningful.
    Response: CMS appreciates the support to codify the methodology for 
the Part C and D Star Ratings. We will codify the methodology in this 
final rule as outlined in this preamble, and will consider the 
additional principles raised by the commenters for adoption in the 
future as we continue to refine the principles in consultation with 
experts and stakeholders through the regulatory process.
    Comment: Several commenters requested CMS to continue updating the 
methodology though the Call Letter instead though regulation. 
Commenters were concerned that the regulatory process would lead to CMS 
not being able to act quickly when there are public health or patient 
safety concerns or when treatment guidelines are changed. Commenters 
also cited other concerns, including introducing a burdensome 
regulatory process that delays the implementation of essential measures 
which can improve the quality of care for patients with chronic 
illness, as reasons to not to finalize this proposal but to continue 
using the Call Letter process to modify the Star Ratings methodology. 
They also noted that there are already multiple opportunities for 
comment on new measures; thus, the regulatory process does not create 
additional transparency. A few commenters supported the general effort 
to put the Star Ratings principles and process into regulation, but 
encouraged CMS to adopt a few exceptions (such as allowing new measures 
(but not measures with substantive changes) to enter Star Ratings 
through the Call Letter process).
    Response: CMS understands the commenters' concerns about how the 
regulatory process may, in some cases, prevent CMS from quickly 
changing or adopting measures. However, given the

[[Page 16522]]

level of support for the proposal and the need to provide the industry 
with longer lead times for new measures, we will finalize the proposal 
to implement substantive changes through regulation and use the Call 
Letter to make non-substantive changes, suggest and solicit feedback on 
new measures that will be proposed in regulation, and address emergent 
public health or patient safety concerns by retiring existing measures 
as needed or introducing new measures for the display page that will be 
proposed for Star Ratings as appropriate. We also address comments on 
our proposals related to the type of updates and changes that we 
proposed to adopt without rulemaking, pursuant to specific rules 
proposed for Sec. Sec.  422.164 and 423.184, in section II.A.11.h.
    Comment: A commenter requested that measure changes take 3 years to 
implement in the Star Ratings and that five years should elapse before 
those changes could impact payment.
    Response: We thank the commenter for the suggestion, but are 
finalizing the timeframes proposed in the proposed rule because the 
majority of commenters supported the proposed timeframes. Some of the 
commenters did raise concerns about extending the timeframes for 
implementing and updating measures. Changing the timeframes for 
measures updates to at least 3 years will significantly slow the 
implementation of substantive and non-substantive changes, in 
particular, when the changes are non-substantive.
    Comment: A commenter encouraged CMS to adopt financial incentives 
for stand-alone prescription drug plans based on Part D Star Ratings.
    Response: CMS thanks the commenter for the suggestion, but CMS 
cannot adopt such financial incentives without statutory authority. The 
Quality Bonus Payment (QBP) program for MA plans is statutory and the 
statute does not allow CMS to pay QBPs to stand-alone prescription drug 
plans.
    Comment: We solicited comments on potentially adding measures in 
the future that evaluate quality from the perspective of adopting new 
technology. Many commenters supported adding a measure related to the 
use of technology, but multiple commenters cautioned that CMS rely on 
and use evidence that technology impacts health outcomes or improves 
the experiences of beneficiaries in order to adopt specific measures of 
that type. A number of commenters cautioned CMS to move carefully and 
slowly on promoting technology due to the potential for unintended 
consequences. A few commenters did not support measuring the adoption 
of technology, because such adoption may not always be in the best 
interest of the patient or enrollee. A few commenters did not support 
such measurement because adoption of technology is hard to measure well 
and may not lead to greater member satisfaction or correlate with other 
measures of plan performance. Those commenters discouraged such a 
focus, believing that beneficiaries will vary in their interest in 
whether plans and providers adopt new technologies, so measures of such 
adoption many not inform plan choice. A few commenters also feared that 
measures of adoption of technology may end up reflecting geographic 
differences and the socioeconomic status of members enrolled in the 
plan rather than the quality or performance of the plan itself. With 
respect to CMS' proposal to possibly add new measures that address the 
issue of new technology in the future, such as telemedicine, a 
commenter pointed out that ``Use of new technologies'' is not clearly 
defined and can span a number of technologies implemented across plans 
but not in a uniform manner or across all service areas. A commenter 
recommended that CMS continue to look at the incorporation of new 
technologies into Star Ratings measures but withhold any proposals for 
CY 2019 and CY 2020 until more formal proposals can be put forth for 
notice and comment prior to adoption. A commenter specifically urged 
measures of e-prescribing and e-prior authorization in Star Ratings. 
Another commenter urged CMS to explicitly capture in CAHPS composites 
(that is, the combination of two or more survey items into a measure) 
the use of telemedicine, as current survey wording may not do so.
    Response: CMS appreciates comments received on adding measures that 
evaluate quality from the perspective of adopting new technology and 
will continue to monitor developments in this area for future 
consideration. Although we are not finalizing the adoption of such a 
measure in this rule, we will continue to investigate how best to 
address incorporating new technologies into the Star Ratings measures. 
We note that for HEDIS 2019, NCQA is examining the addition of 
telehealth services in existing HEDIS measures where appropriate. 
NCQA's proposed method would use specific codes and code modifiers to 
clearly define which telehealth services would be allowed for each 
specific measure. Proposed changes to incorporate telehealth services 
will be posted for the HEDIS 2019 public comment period in February. We 
appreciate receiving the comment about telemedicine and CAHPS; we 
recognize telemedicine is an evolving area and may propose changes to 
CAHPS survey questions in the future after discussions with the Agency 
for Healthcare Research and Quality.
    Comment: A commenter specifically requested CMS provide certified 
software for measures not developed by external stewards, such as the 
Medication Therapy Management (MTM) and SNP Care Management measures.
    Response: These measures are based on data reported to CMS through 
the Part C and D Reporting Requirements. CMS is not clear how providing 
certified software for these measures will facilitate the submission of 
these measures. CMS also notes that the MTM measure is developed by an 
external steward (PQA).
    Comments: Many commenters indicated the need for greater alignment 
with providers (physicians, hospitals, medical groups, accountable care 
organizations, and plans) to make the quality measures more consistent, 
both to reduce burden and duplication and to more effectively 
incentivize behavior. For example, a few commenters urged use of 
measures aligned with the Merit-based Incentive Payment System (MIPS) 
program.
    Response: CMS thanks the multiple commenters for these suggestions 
and appreciate the concern about burden and duplication, as well as the 
potential value of consistently reinforcing the same message. CMS is 
continuing to work with measure developers to increase consistency in 
measurement across settings.
    Comment: Several commenters encouraged CMS to develop measures 
related to how well the care that is received by beneficiaries reflects 
the beneficiaries' concerns, values, and goals.
    Response: CMS is tracking work by measure developers in this area 
and thanks the commenters for the suggestion.
    Comment: Many commenters supported CMS continuing to develop and 
implement new measure concepts beyond those in current or currently 
anticipated measure sets. Among the most common suggestions were 
outcome measures, especially new patient-reported outcome measures, 
quality of life, and functional status measures (including Healthy Days 
at Home). Several commenters also encouraged measuring care for cancer, 
prevention of diabetes and other chronic conditions, long-term 
management of chronic obstructive pulmonary disease (COPD), as well as 
advanced care

[[Page 16523]]

planning, advanced directives and palliative care. A few other 
commenters highlighted concerns about measure gaps, such as for pain 
management, autoimmune disorders, mental illness, dementia/cognitive 
impairment, anticoagulation drug safety, and measures specific to 
patients with multiple co-morbidities, especially co-morbid diabetes 
and cardiovascular disease. A few commenters referred to NQF-endorsed 
measures used in other programs, such as change in functional status 
after spine or hip replacement surgery. A commenter encouraged CMS to 
utilize a comprehensive measure of adult vaccination, while another 
encouraged adoption of a vaccine cost-sharing measure. A commenter 
urged CMS to develop more medication adherence and appropriate use 
measures and to assign a high weight in the Star Ratings program. 
Another commenter suggested that any future transition of care measures 
include detailed information on all drug therapies prescribed and 
broader sharing of discharge information.
    In addition, a few commenters urged CMS to provide quality and 
performance information about physicians within plans or to measure 
plans on the engagement of their network of physicians in value-based 
purchasing designs (that is, payment designs that reward or increase 
payments based on quality or capitated payments to physicians/
practitioners, medical groups and ACOs).
    Several comments highlighted promoting and measuring network 
adequacy and potential delays in care or medication related to this, 
and a few encouraged CMS to reward plans that maintain adequate 
networks with increased Star Ratings. A number of commenters urged CMS 
to measure access to medical specialists and subspecialists, such as 
Mohs surgeons, cataract surgeons, and ophthalmologists, while a couple 
of commenters supported the assessment of pharmacy networks broken down 
by specialty drug access. The two comments about networks of physician 
and surgeon specialists urged CMS to leverage extant measurement with 
the MIPS and Quality Payment Program (QPP) to also help measure plan 
network adequacy. A commenter urged CMS to look beyond simple numbers 
of physicians and specialists, since contracting and affiliation in 
medical groups and ACOs may effectively limit the access patients have 
to the full network.
    Response: CMS appreciates the breadth of suggestions for new 
measures and will take these under consideration, including internal 
discussion and sharing them with the measure developers. We will also 
study the value and feasibility of deriving additional metrics (such as 
additional patient-reported outcome measures) from existing data 
collection efforts, like HOS.
    Comment: Several commenters urged the development of geographic 
and/or provider market characteristic adjusters in order to normalize 
variations outside plans' control. Some stated such adjustments would 
specifically prevent measure bias against state-contracted SNPs.
    Response: CMS appreciates this comment and will take it into 
consideration. As we consider adjustments to the Star Ratings measures, 
we need to ensure that the adjustments do not mask true differences in 
the quality of care across the country.
    Comment: A few commenters requested information about a Star 
Ratings policy for natural disasters.
    Response: CMS provided a detailed proposal concerning treatment of 
Star Ratings measures for contracts affected by disasters in the 2019 
draft Call Letter that would apply to the 2019 and 2020 Star Ratings. 
We plan to propose codifying this policy through future rulemaking for 
performance periods after 2019 and ratings after the 2021 Star Ratings.
    Comment: Several commenters questioned whether the Star Ratings 
regulations apply to PACE organizations.
    Response: The MA Star Ratings regulations do not apply to PACE 
organizations but to the extent that a PACE organization offers a plan 
including qualified prescription drug coverage, it is a Part D sponsor 
and therefore subject to the Part D regulations. This would include the 
Part D Star Ratings regulations adopted in this final rule as 42 CFR 
423.182-423.186. We have not produced Star Ratings for PACE 
organizations to date and are exploring the PACE waiver authority to 
continue to exclude PACE organizations from this requirement.
    Comment: Several commenters made suggestions for possible Medicare 
Plan Finder enhancements, including adding the capability to compare 
plans by population type as well as mobile enhancements. A commenter 
suggested including the overall Star Ratings in the Medicare & You 
handbook.
    Response: We appreciate these comments, but believe they are 
outside the scope of the proposed rule. However, we note that CMS is 
currently exploring options for improving the Plan Finder experience 
for Medicare beneficiaries, and that, although the timelines for 
publishing the Medicare & You handbook do not allow for including the 
overall Star Rating in the initial release that occurs in the fall, the 
overall Star Ratings are included in updated versions of the handbook 
that are released after the initial release and publication.
    Comment: We received one comment that PBMs and Part D plan sponsors 
have delegated their responsibilities for the Star Ratings program to 
network pharmacies without providing the pharmacies with additional 
compensation.
    Response: CMS appreciates these comments, but due to the non-
interference clause, CMS is prevented from interfering in contract 
arrangements between sponsors, pharmacies and other providers. CMS has 
indicated to measure stewards and other stakeholders that if such 
pharmacy performance metrics are used as a condition of pharmacy 
network status, measure specifications should be appropriately scaled, 
for example, ensure adequate sample size, and that incentives to 
achieve performance should be appropriately allocated.
    Comment: We received several comments recommending beneficiaries 
designated for lock-in be excluded from certain Star Ratings measures.
    Response: Thank you for the comment. Our Star Ratings proposal did 
not address this topic, and we plan to take these comments under 
advisement. For more information about CARA, please see section B.
    Comment: CMS had solicited feedback on the potential development of 
a physician survey to gather information for Star Ratings measures. The 
majority of commenters opposed the development of a physician survey 
due to the increased financial and administrative burden it would 
entail for both plans and health care providers/physicians who would be 
surveyed. Other commenters raised concerns about the ability of 
physicians to differentiate across plans when physicians interact with 
multiple plans. Multiple commenters were concerned that a physician 
could not accurately complete a survey on this topic since physicians 
often do not personally know the plan in which a beneficiary is 
enrolled. Some commenters noted that it may be difficult to determine 
who within a provider's practice should complete the survey. Other 
concerns raised include small sample sizes, subjectivity of responses, 
and potential for incomplete data.
    Response: CMS appreciates the input provided by commenters 
regarding the

[[Page 16524]]

burden and multiple challenges in developing a survey to evaluate 
physician experience interacting with both Medicare health and drug 
plans. We are not finalizing any aspect of the physician survey in this 
rule, but will take these comments into consideration as we continue to 
explore the feasibility and the value to the Star Ratings program in 
collecting feedback through a physician survey.
    Comment: A handful of commenters were concerned about the 
administration of a physician survey in integrated plans where the 
physician is employed by the plan which may bias the survey results.
    Response: We acknowledge that responses may not be unbiased in 
situations when the physician is employed by the plan. CMS will take 
this into account as we consider whether to develop a physician/
clinician survey in the future.
    Comment: Among the commenters supporting the development of a 
physician survey, commenters noted that the physician is in close 
contact with plans on behalf of their patients so this would complement 
the existing CAHPS survey for enrollees. A couple of commenters noted 
that a physician survey would be a way to measure network adequacy, 
appeals, benefit limit exceptions, and grievances. A few commenters 
recommended that CMS consider a broader survey of clinician 
experiences, including nurses, therapists, care coordinators, and 
pharmacists from a variety of settings. A commenter requested that a 
physician survey be voluntary.
    Response: CMS appreciates the support for the development of a 
physician survey and will solicit feedback from the industry on 
additional topics to be included on the survey if we move forward with 
the development in the future. We believe obtaining feedback from 
physicians is important; however, we will consider all of the comments 
provided before we make a determination about proceeding with 
developmental work.
    Comment: A commenter suggested the development of a general 
physician survey regarding experiences with managed care compared to 
fee-for-service to understand the larger healthcare landscape, while 
another commenter suggested obtaining feedback through other avenues 
outside of the Star Ratings program.
    Response: CMS appreciates these suggestions but they are out of 
scope for the potential development of surveys for the purpose of Star 
Ratings.
    We specifically address adoption of the Star Ratings System 
regulations for the MA and Part D programs in sections II.B.11.c 
through w.
c. Basis, Purpose and Applicability of the Medicare Advantage and 
Prescription Drug Plan Quality Rating System
    We proposed to codify regulation text, at Sec. Sec.  422.160 and 
423.180, that identifies the statutory authority, purpose, and 
applicability of the Star Ratings system regulations that we proposed 
to add under part 422 subpart D and part 423 subpart D. Under our 
proposal, we are continuing to apply the existing purposes of the 
quality rating system, which are to provide comparative information to 
Medicare beneficiaries pursuant to sections 1851(d) and 1860D-1(c) of 
the Act, identify and apply the payment consequences for MA plans under 
sections 1853(o) and 1854(b)(1)(C) of the Act, and evaluate and oversee 
overall and specific performance by MA and Part D plans. To reflect how 
the Part D ratings are used for MA-PD plan QBP status and rebate 
retention allowances, we also proposed specific text, to be codified at 
Sec.  423.180(b)(2), noting that the Part D Star Rating will be used 
for those purposes.
    We proposed, broadly stated, to codify the current quality Star 
Ratings system uses, methodology, measures, and data collection 
beginning with the measurement periods in calendar year 2019. We 
proposed some changes, such as how we handle consolidations from the 
current Star Ratings program, but overall the proposal was to continue 
the Star Ratings system as it has been developed and has stabilized. 
Under the proposal, data would be collected and performance measured 
using these proposed rules and regulations for the 2019 measurement 
period; the associated quality Star Ratings will be used to assign QBP 
ratings for the 2022 payment year and released prior to the annual 
election period held in late 2020 for the 2021 contract year. Because 
of the timing of the release and use in conjunction with the annual 
coordinated election period, these would be the ``2021 Star Ratings.''
    We proposed that the current quality Star Ratings system and 
procedures for revising it remain in place for the 2019 and 2020 Star 
Ratings. Section 1853(b) of the Act authorizes an advance notice and 
rate announcement to announce and solicit comment for proposed changes 
to the MA payment methodology, which CMS has interpreted to include the 
Part C and D Star Ratings program because of the payment consequences 
of Star Ratings under section 1853(o) of the Act. The statute 
identifies specific notice and comment timeframes, but that process 
does not require publication in the Federal Register. We have used the 
draft and final Call Letter, which are attachments to the Advance 
Notice and final Rate Announcement respectively,\33\ to propose for 
comment and finalize changes to the quality Star Ratings system since 
the ratings became a component of the payment methodology for MA and 
MA-PD plans. (76 FR 21487 through 89). Because the Star Ratings system 
has been integrated into the payment methodology since the 2012 
contract year (as a mechanism used to determine how much a plan is 
paid, and not the mechanism by which [or a rule about when] a plan is 
paid), the Star Ratings are part of the process for setting benchmarks 
and capitation rates under section 1853 of the Act, and the process for 
announcing changes to the Star Ratings system falls within the scope of 
section 1853(b) of the Act. Although not expressly required by section 
1853(b) of the Act, CMS has historically solicited comment on 
significant changes to the ratings system using a Request for Comment 
process before the Advance Notice and draft Call Letter are released; 
this Request for Comment \34\ provides MAOs, Part D sponsors, and other 
stakeholders an opportunity to request changes to and raise concerns 
about the Star Ratings methodology and measures before CMS finalizes 
its proposal for the Advance Notice. We intend to continue the current 
process at least until the 2019 measurement period that we proposed as 
the first measurement period under these new regulations, but we may 
discontinue that process at a later date as the Advance Notice/Call 
Letter process and rulemaking process may provide sufficient 
opportunity for public input. In addition, CMS issues annually the 
Technical Notes \35\ that describe in detail how the methodology is 
applied from the changes in policy adopted through the Advance Notice 
and Rate Announcement process. We intend to continue the practice of 
publishing the Technical Notes during the preview periods. Our proposed 
rule included continued use of the draft and final Call Letters as a 
means to provide subregulatory application),

[[Page 16525]]

interpretation, and guidance of the final version of these proposed 
regulations where necessary. Our proposed regulation text does not 
detail these plans for the RFC and Technical Notes because we believe 
such regulation text will be unnecessary. We proposed to codify the 
first performance period (2019) and first payment year (2022) to which 
our proposed regulations will apply at Sec.  422.160(c) and Sec.  
423.180(c).
---------------------------------------------------------------------------

    \33\ Advance Notices and Rate Announcements are posted each year 
on the CMS website at: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
    \34\ Requests for Comment are posted at http://go.cms.gov/partcanddstarratings under the downloads.
    \35\ http://go.cms.gov/partcanddstarratings (under the 
downloads) for the Technical Notes.
---------------------------------------------------------------------------

    We received no comments on our proposed basis, purpose, and 
applicability regulations. For the reasons outlined in the proposed 
rule and summarized here, we are finalizing the regulation text 
proposed at Sec. Sec.  422.160 and 423.180 with one significant 
modification regarding the applicability of the regulations governing 
the Star Ratings of a surviving contract in a contract consolidation. 
In light of the passage of section 53112 of the Bipartisan Budget Act 
of 2018 (Pub. L. 115-123), the consolidation policy described at 
Sec. Sec.  422.162(b)(3) and 423.182(b)(3) will be implemented for the 
2020 QBP ratings and 2020 Star Ratings. We will finalize additional 
text at Sec. Sec.  422.160(c), 422.162(b)(3)(v), 423.180(c) and 
423.182(b)(3)(iii) to apply the regulations that govern the calculation 
of Star Ratings for surviving contracts when the contract consolidation 
is approved on or after January 1, 2019, consistent with the ACCESS Act 
provision.
d. Definitions
    We proposed the following definitions for the respective subparts 
in part 422 and part 423 in paragraph (a) of Sec. Sec.  422.162 and 
423.182 respectively.
     CAHPS refers to a comprehensive and evolving family of 
surveys that ask consumers and patients to evaluate the interpersonal 
aspects of health care. CAHPS surveys probe those aspects of care for 
which consumers and patients are the best or only source of 
information, as well as those that consumers and patients have 
identified as being important. CAHPS initially stood for the Consumer 
Assessment of Health Plans Study, but as the products have evolved 
beyond health plans the acronym now stands for Consumer Assessment of 
Healthcare Providers and Systems.
     Case-mix adjustment means an adjustment to the measure 
score made prior to the score being converted into a Star Rating to 
take into account certain enrollee characteristics that are not under 
the control of the plan. For example age, education, chronic medical 
conditions, and functional health status that may be related to the 
enrollee's survey responses.
     Categorical Adjustment Index (CAI) means the factor that 
is added to or subtracted from an overall or summary Star Rating (or 
both) to adjust for the average within-contract (or within-plan as 
applicable) disparity in performance associated with the percentages of 
beneficiaries who are dually eligible for Medicare and enrolled in 
Medicaid, beneficiaries who receive a Low Income Subsidy or have 
disability status in that contract (or plan as applicable).
     Clustering refers to a variety of techniques used to 
partition data into distinct groups such that the observations within a 
group are as similar as possible to each other, and as dissimilar as 
possible to observations in any other group. Clustering of the measure-
specific scores means that gaps that exist within the distribution of 
the scores are identified to create groups (clusters) that are then 
used to identify the four cut points resulting in the creation of five 
levels (one for each Star Rating), such that the scores in the same 
Star Rating level are as similar as possible and the scores in 
different Star Rating levels are as different as possible. Technically, 
the variance in measure scores is separated into within-cluster and 
between-cluster sum of squares components. The clusters reflect the 
groupings of numeric value scores that minimize the variance of scores 
within the clusters. The Star Ratings levels are assigned to the 
clusters that minimize the within-cluster sum of squares. The cut 
points for star assignments are derived from the range of measure 
scores per cluster, and the star levels associated with each cluster 
are determined by ordering the means of the clusters.
     Consolidation means when an MA organization/Part D sponsor 
that has at least two contracts for health and/or drug services of the 
same plan type under the same parent organization in a year combines 
multiple contracts into a single contract for the start of the 
subsequent contract year.
     Consumed contract means a contract that will no longer 
exist after a contract year's end as a result of a consolidation.
     Display page means the CMS website on which certain 
measures and scores are publicly available for informational purposes; 
the measures that are presented on the display page are not used in 
assigning Part C and D Star Ratings.
     Domain rating means the rating that groups measures 
together by dimensions of care.
     Dual Eligible (DE) means a beneficiary who is enrolled in 
both Medicare and Medicaid.
     HEDIS is the Healthcare Effectiveness Data and Information 
Set which is a widely used set of performance measures in the managed 
care industry, developed and maintained by the National Committee for 
Quality Assurance (NCQA). HEDIS data include clinical measures 
assessing the effectiveness of care, access/availability measures, and 
service use measures.
     Highest rating means the overall rating for MA-PDs, the 
Part C summary rating for MA-only contracts, and the Part D summary 
rating for PDPs.
     Highly-rated contract means a contract that has 4 or more 
stars for their highest rating when calculated without the improvement 
measures and with all applicable adjustments (CAI and the reward 
factor).
     HOS means the Medicare Health Outcomes Survey which is the 
first patient reported outcomes measure that was used in Medicare 
managed care. The goal of the Medicare HOS program is to gather valid, 
reliable, and clinically meaningful health status data in the Medicare 
Advantage (MA) program for use in quality improvement activities, pay 
for performance, program oversight, public reporting, and improving 
health. All managed care organizations with MA contracts must 
participate.
     Low Income Subsidy (LIS) means the subsidy that a 
beneficiary receives to help pay for prescription drug coverage (see 
Sec.  423.34 for definition of a low-income subsidy eligible 
individual).
     Measurement period means the period for which data are 
collected for a measure or the performance period that a measures 
covers.
     Measure score means the numeric value of the measure or an 
assigned `missing data' message.
     Measure star means the measure's numeric value is 
converted to a Star Rating. It is displayed to the nearest whole star, 
using a 1-5 star scale.
     Overall Rating means a global rating that summarizes the 
quality and performance for the types of services offered across all 
unique Part C and Part D measures.
     Part C Summary Rating means a global rating that 
summarizes the health plan quality and performance on Part C measures.
     Part D Summary Rating means a global rating of the 
prescription drug plan quality and performance on Part D measures.
     Plan Benefit Package (PBP) means a set of benefits for a 
defined MA or PDP service area. The PBP is submitted by PDP sponsors 
and MA organizations to CMS for benefit analysis, bidding,

[[Page 16526]]

marketing, and beneficiary communication purposes.
     Reliability means a measure of the fraction of the 
variation among the observed measure values that is due to real 
differences in quality (``signal'') rather than random variation 
(``noise''); it is reflected on a scale from 0 (all differences in plan 
performance measure scores are due to measurement error) to 1 (the 
difference in plan performance scores is attributable to real 
differences in performance).
     Reward factor means a rating-specific factor added to the 
contract's summary or overall (or both) rating if a contract has both 
high and stable relative performance.
     Statistical significance assesses how likely differences 
observed in performance are due to random chance alone under the 
assumption that plans are actually performing the same. Although not 
part of the proposed regulatory definition, we clarify that CMS uses 
statistical tests (for example, t-test) to determine if a contract's 
measure value is statistically different (greater than or less than 
depending on the test) from the national mean for that measure, or 
whether conversely, the observed differences from the national mean 
could have arisen by chance.
     Surviving contract means the contact that will still exist 
under a consolidation, and all of the beneficiaries enrolled in the 
consumed contract(s) are moved to the surviving contracts.
     Traditional rounding rules mean that the last digit in a 
value will be rounded. If rounding to a whole number, look at the digit 
in the first decimal place. If the digit in the first decimal place is 
0, 1, 2, 3 or 4, then the value should be rounded down by deleting the 
digit in the first decimal place. If the digit in the first decimal 
place is 5 or greater, then the value should be rounded up by 1 and the 
digit in the first decimal place deleted.
    We received no comments on the proposed definitions in paragraph 
(a) of Sec. Sec.  422.162 and 423.182 and are therefore finalizing 
without modification.
e. Contract Ratings
    Star Ratings and data reporting are at the contract level for most 
measures. Currently, data for measures are collected at the contract 
level including data from all plan benefit packages (PBPs) under the 
contract, except for the following Special Needs Plan (SNP)-specific 
measures which are collected at the PBP level: Care for Older Adults--
Medication Review, Care for Older Adults--Functional Status Assessment, 
and Care for Older Adults--Pain Assessment. The SNP-specific measures 
are rolled up to the contract level by using an enrollment-weighted 
mean of the SNP PBP scores. Although we discussed and solicited comment 
on the feasibility and burden of collecting data at the PBP (plan) 
level and the reliability of ratings at the plan level, we proposed to 
continue the practice of calculating the Star Ratings at the contract 
level and that all PBPs under the contract would have the same overall 
and/or summary ratings at paragraph (b)(1) of Sec. Sec.  422.162 and 
423.182.
    However, beneficiaries select a plan, rather than a contract, so we 
discussed in the proposed rule how we considered whether data should be 
collected and measures scored at the plan level. We have explored the 
feasibility of separately reporting quality data for individual D-SNP 
PBPs, instead of the current reporting level. For example, in order for 
CAHPS measures to be reliably scored, the number of respondents must be 
at least 11 people and reliability must be at least 0.60. In the 
proposed rule, we summarized our findings. Our current analyses show 
that, at the PBP level, CAHPS measures could be reliably reported for 
only about one-third of D-SNP PBPs due to sample size issues, and HEDIS 
measures could be reliably reported for only about one-quarter of D-SNP 
PBPs. If reporting were done at the plan level, a significant number of 
D-SNP plans will not be rated and in lieu of a Star Rating, Medicare 
Plan Finder will display that the plan is ``too small to be rated.'' 
However, when enough data are available, plan level quality reporting 
will reflect the quality of care provided to enrollees in that plan. 
Plan-level quality reporting will also give states that contract with 
D-SNPs plan-specific information on their performance and provide the 
public with data specific to the quality of care for dual eligible (DE) 
beneficiaries enrolled in these plans. For all plans as well as D-SNPs, 
reporting at the plan level will significantly increase plan burden for 
data reporting and will have to be balanced against the availability of 
additional clinical information available at the plan level. Plan-level 
ratings will also potentially increase the ratings of higher-performing 
plans when they are in contracts that have a mix of high and low 
performing plans. Similarly, plan-level ratings will also potentially 
decrease the ratings of lower-performing plans that are currently in 
contracts with a mix of high and low performing plans. Measurement 
reliability issues due to small sample sizes will also decrease our 
ability to measure true performance at the plan level and add 
complexities to the rating system. We solicited comments on balancing 
the improved precision associated with plan level reporting (relative 
to contract level reporting) with the negative consequences associated 
with an increase in the number of plans without adequate sample sizes 
for at least some measures; we asked for comments about this for D-SNPs 
and for all plans as we continue to consider whether rating at the plan 
level is feasible or appropriate. In particular, we solicited feedback 
on the best balance and whether changing the level at which ratings are 
calculated and reported better serves beneficiaries and our goals for 
the Star Ratings system.
    We also indicated that we were exploring whether some measure data 
could be reported at a higher level (parent organization versus 
contract) to ease and simplify reporting while continuing to remain 
useful (for example, call center measures as we anticipate that parent 
organizations use a consolidated call center to serve all contracts and 
plans) for the Star Ratings. Further, we said we are exploring if 
contract market area reporting is feasible when a contract covers a 
large geographic area. For example, when HEDIS reporting began in 1997, 
there were contract-specific market areas that evolved into reporting 
by market area for five states with large Medicare populations.\36\ We 
are planning to continue work in this area to determine the best 
reporting level for each measure that most accurately reflects 
performance and minimizes to the extent possible plan reporting burden. 
As we consider alternative reporting units, we solicited comments and 
suggestions about requiring reporting at different levels (for example, 
parent organization, contract, plan, or geographic area) by measure. In 
addition, section 50311(d) of the Bipartisan Budget Act of 2018 after 
publication of the proposed rule, amended section 1853 to require the 
Secretary to determine the feasibility of quality measurement at the 
plan level for all MA plans. CMS will use the feedback received from 
the proposed rule as we consider reporting options in the future and 
continue to evaluate this issue consistent with the Bipartisan Budget 
Act provision.
---------------------------------------------------------------------------

    \36\ The following states were divided into multiple market 
areas: CA, FL, NY, OH, and TX.
---------------------------------------------------------------------------

    We proposed to continue calculating the same overall and/or summary 
Star Ratings for all PBPs offered under an MA-only, MA-PD, or PDP 
contract and

[[Page 16527]]

to codify this policy in regulation text at Sec. Sec.  422.162(b) and 
423.182(b). We also proposed a cost plan regulation at Sec.  417.472(k) 
to require cost contracts to be subject to the part 422 and part 423 
Medicare Advantage and Part D Prescription Drug Program Quality Rating 
System. Specifically, we proposed, at paragraph (b)(1) that CMS will 
calculate overall and summary ratings at the contract level and 
proposed regulation text that cross-references other proposed 
regulations regarding the calculation of measure scoring and rating, 
and domain, summary and overall ratings. Further, we proposed to 
codify, at (b)(2) of each section, that data from all PBPs offered 
under a contract will continue to be used to calculate the ratings for 
the contract. For SNP specific measures collected at the PBP level, we 
proposed that the contract level score will be an enrollment-weighted 
mean of the PBP scores using enrollment in each PBP as reported as part 
of the measure specification, which is consistent with current 
practice. The proposed text is explicit that domain and measure 
ratings, other than the SNP-specific measures, are based on data from 
all PBPs under the contract.
    We received the following comments related to our proposals, and 
our responses follow:
    Comment: Most commenters opposed moving to plan-level reporting and 
expressed overwhelming support for retaining the current contact-level 
measurement. Commenters raised concerns about the additional 
complexity, administrative burden and reporting requirements of plan-
level reporting. Additionally, commenters reiterated our concerns 
regarding the reliability of the scores at the plan level, as well as 
the inability to report some measure due to inadequate sample sizes. A 
commenter urged CMS to continue reporting Star Ratings at the contract 
level for PDPs.
    Response: CMS appreciates commenters' support for contract-level 
reporting and acknowledge the complexities of moving to plan-level 
reporting given the challenges of accurately measuring quality with 
smaller groups and sample sizes and the additional administrative 
burden that would be placed on contracts.
    Comment: A handful of commenters supported plan-level reporting 
also recognized it may not be practical for all quality measures. Some 
of the commenters noted the utility for beneficiaries who choose among 
plans. A commenter suggested CMS require Part D plans to report certain 
medication-related measures at the Formulary ID level.
    Response: We agree that ideally for consumer choice, plan-level 
reporting or Formulary ID level reporting for Part D plans would be 
preferable, because it provides more detailed and targeted data. 
However, we need to consider the operational and methodological 
challenges of reporting at the plan level, including the ability to 
accurately measure performance at that level.
    Comment: A commenter stated that plan-level reporting would be open 
to potential gaming by contracts constructing the plan-level geographic 
areas to maximize Star Ratings for the greatest number of enrollees. 
The commenter suggested that contracts would consider how well each 
plan was performing in the Star Ratings program to determine the 
geographic area of each plan.
    Response: We appreciate this comment and will take it into account 
as we consider this issue in the future.
    Comment: A commenter noted that plan-level reporting would stifle 
innovation and discourage plans from serving difficult areas. This 
would limit the ability of contracts to implement innovative models in 
one plan prior to expanding.
    Response: We appreciate this comment since we clearly do not want 
our Star Ratings policies to stifle innovation. We will take this 
comment into consideration as we continue to consider options for 
different levels of reporting.
    Comment: A handful of commenters expressed interest in measurement 
at the local health services area, including by state. Many of these 
commenters noted that it will be challenging to move to reporting at 
the local geographic area. Issues to be considered include how to 
handle contracts that serve major metropolitan areas that cross state 
lines. A couple of commenters suggested that CMS consider creating 
additional contract numbers or market-level designations for a 
contract. A commenter recommended that CMS discontinue the moratorium 
that does not allow for existing H numbers to be split to allow more 
meaningful measurement.
    Response: CMS is committed to examining the feasibility of 
alternative levels of reporting, including by geographic area. The 
suggestions provided by commenters through the proposed rule will be 
taken into consideration as alternatives are explored. Additionally, 
section 50311(d) of the Bipartisan Budget Act of 2018 (P.L. 115-123) 
enacted after publication of the proposed rule, amended section 1853 to 
require the Secretary to determine the feasibility of quality 
measurement at the plan level for all MA plans. CMS plans to obtain 
additional feedback from stakeholders on this issue given the 
challenges of developing options that would be feasible for both the 
industry and CMS. CMS' contractor for the Star Ratings program is 
planning to convene a Technical Expert Panel following the publication 
of the final rule and this is one of the issues the panel will address. 
This panel will periodically meet to provide feedback on different 
critical Star Ratings issues. Information from the Technical Expert 
Panel will be publicly shared.
    Comment: A commenter expressed concern about pursuing market area 
reporting as such reporting could result in limiting the health care 
options for higher-need populations.
    Response: CMS appreciates this comment and does not want to limit 
options for higher-need populations. We will take the comment into 
consideration as we continue to consider options for different levels 
of reporting.
    Comment: A handful of commenters recommended adjusting the Star 
Ratings to account for variables that contribute to underperformance in 
certain geographic areas, network characteristics and patient 
characteristics by applying, for example, the case-mix adjustment 
process currently used for the CAHPS measures.
    Response: CMS appreciates this comment and will take it into 
account as we continue to consider options for different levels of 
reporting. As we contemplate case-mix adjustment, we need to ensure 
that we are not adjusting away true differences in the quality of care 
across contracts in different geographic areas or with different 
network structures.
    Comment: A commenter raised concerns of the possibility for gaming 
in connection with separate ratings for new contracts. If CMS is to 
proceed, the commenter would like to see simulations of the ratings.
    Response: CMS appreciates this comment and clearly does not want to 
implement changes that would encourage gaming of the Star Ratings 
system. We will take this comment into consideration as we continue to 
analyze different ways to rate contracts.
    Comment: A commenter raised a question about a potential error on 
page 82 FR 56380 in the sentence that reads ``For SNP specific measures 
collected at the PBP level, we propose that the contract level score 
would be an enrollment-weighted mean of the PBP

[[Page 16528]]

scores using enrollment in each PBP as reported as part of the measure 
specification, which is consistent with current practice.'' The 
commenter noted that the current practice weights the PBP scores by 
eligible population.
    Response: The text from the proposed rule is correct. The eligible 
population and the enrollment reported as part of the measure 
specification are the same.
    Comment: A handful of commenters from sponsoring organizations 
suggested separate reporting by Dual SNPs and non-Dual SNPs, and 
rolling up all Dual SNP PBPs and non-Dual SNP PBPs separately within a 
contract. A couple of commenters noted that moving to plan level 
reporting for all SNPs is complex with many pros and cons so they 
recommended that CMS continue contract-level reporting until all of the 
consequences can be fully evaluated.
    Response: CMS appreciates these comments, including the issues 
raised by commenters regarding the complexities of moving to plan/PBP-
level reporting by SNPs and non-SNPs. Given that some contracts just 
have SNP PBPs and other contracts offer both SNP and non-SNP plans, CMS 
needs to evaluate how this would impact reporting of measures and 
calculations. We agree that all of the benefits and disadvantages need 
to be weighed before a final decision is made about how to proceed and 
CMS is committed to continuing to obtain feedback from the industry on 
changes to the level of reporting. CMS continues to evaluate this 
issue. Additionally, in light of the passage of the Bipartisan Budget 
Act of 2018, CMS is required to examine the feasibility of plan-level 
reporting for both SNP and non-SNP plans. Any related changes would be 
proposed through future rulemaking.
    Comment: A couple of commenters supported the idea of reporting the 
call center and appeals measures at the parent organization level since 
in most cases these functions are organized at the parent organization 
level, while a couple of commenters did not like having different 
levels of reporting for different measures, arguing that it would 
create more complexity in the Star Rating program.
    Response: CMS appreciates the suggestions received from commenters 
and will continue to look at the advantages of moving to a different 
level of reporting for these and other measures. Any related changes 
would be proposed through future rulemaking.
    Comment: A commenter supports CMS' current process for rolling up 
SNP plan-benefit package level information to the contract level.
    Response: CMS thanks this commenter for their support for our 
current policy of calculating SNP measures.
    Comment: A handful of commenters recommended that CMS not make any 
changes in the unit for reporting until additional analyses are 
completed that ensures that any changes are fair and equitable to all 
sponsors. A commenter suggests an industry-wide workgroup to discuss 
potential changes to reporting levels and operational challenges.
    Response: We acknowledge these comments and agree that we need to 
do more analysis and obtain additional feedback from sponsors before we 
make any changes in the level of reporting. We support the desire to 
make sure that any changes are fair and equitable to all sponsoring 
organizations. As noted in a previous response, CMS' contractor for the 
Star Ratings program is planning to convene a Technical Expert Panel 
following the publication of the final rule and this is one of the 
issues the panel will address.
    For the reasons indicated in the proposed rule and our responses to 
the related comments, we are finalizing the provisions as proposed in 
paragraphs (b)(1) and (2) of Sec. Sec.  422.162 and 423.182 and Sec.  
417.472(k) without substantive modification. However, we realized that 
paragraphs (b)(1) as proposed did not specify that summary ratings also 
include the reward factor and the Categorical Adjustment Index as 
described in Sec. Sec.  422.166(f) and 423.186(f); we are finalizing 
additional text to clarify that in paragraphs (b)(1). In addition, we 
are slightly revising the last two sentences of paragraphs (b)(2) of 
the same regulation sections to clarify that the rule for including 
plan-level only measures is applicable to the SNP-specific measures 
that are reported only at the plan level.
f. Contract Consolidations
    We proposed a change in how contract-level Star Ratings are 
assigned in the case of contract consolidations. We noted in the 
proposed rule how we have historically permitted MAOs and Part D 
sponsors to consolidate contracts when a contract novation occurs to 
better align business practices. As noted in MedPAC's March 2016 Report 
to Congress (http://www.medpac.gov/docs/default-source/reports/march-2016-report-to-the-congress-medicare-payment-policy.pdf), there has 
been a continued increase in the number of enrollees being moved from 
lower Star Rating contracts that do not receive a QBP to higher Star 
Rating contracts that do receive a QBP as part of contract 
consolidations, which increases the size of the QBPs that are made to 
MAOs due to the large enrollment increase in the higher rated, 
surviving contract. We are worried that this practice results in 
masking low quality plans under higher rated surviving contracts. This 
does not provide beneficiaries with accurate and reliable information 
for enrollment decisions, and it does not truly reward higher quality 
contracts. We proposed to modify the calculation of Star Ratings for 
surviving contracts that have consolidated to address these concerns. 
Instead of assigning the surviving contract the Star Rating that the 
contract would have earned without regard to whether a consolidation 
took place, we proposed to assign and display on MPF Star Ratings based 
on the enrollment-weighted mean of the measure scores of the surviving 
and consumed contract(s) so that the ratings reflect the performance of 
all contracts (surviving and consumed) involved in the consolidation. 
Under our proposal, the calculation of the measure, domain, summary, 
and overall ratings will be based on these enrollment-weighted mean 
scores. We estimated that the number of contracts impacted by the 
proposal would be small relative to all contracts that qualify for 
QBPs. During the period from 1/1/2015 through 1/1/2017 annual 
consolidations for MA contracts ranged from a low of 7 in 2015 to a 
high of 19 in 2016 out of approximately 500 MA contracts. As proposed 
in Sec. Sec.  422.162(b)(3)(i)-(iii) and 423.182(b)(3)(i)-(iii), CMS 
will use enrollment-weighted means of the measure scores of the 
consumed and surviving contracts to calculate ratings for the first and 
second plan years following the contract consolidations. We believe 
that use of enrollment-weighted means will provide a more accurate 
snapshot of the performance of the underlying plans in the new 
consolidated contract, such that both information to beneficiaries and 
QBPs are not somehow inaccurate or misleading. We also proposed, 
however, that the process of weighting the enrollment of each contract 
and applying this general rule will vary depending on the specific 
types of measures involved in order to take into account the 
measurement period and data collection processes of certain measures. 
Our proposal was to treat ratings for determining Quality Bonus Payment 
(QBP) status for MA contracts differently than displayed Star Ratings 
for the first year following the consolidation for consolidations that 
involve the same parent organization and plans of the same plan type.

[[Page 16529]]

    We proposed to codify our new policy at Sec. Sec.  422.162(b)(3) 
and 423.182(b)(3). First, we proposed generally, at paragraph (b)(3)(i) 
of each regulation, that CMS will assign Star Ratings for consolidated 
contracts using the provisions of paragraph (b)(3). We proposed in 
Sec.  422.162(b)(3) both a specific rule to address the QBP rating for 
the first year after the consolidation and a rule for subsequent years. 
As Part D plan sponsors are not eligible for QBPs, Sec.  423.182(b)(3) 
was proposed without the QBP aspect. We proposed in Sec.  
422.162(b)(3)(iv) and Sec.  423.182(b)(3)(ii) the process for assigning 
Star Ratings for posting on the Medicare Plan Finder for the first 2 
years following the consolidation.
    For the first contract year following a consolidation, we proposed 
to use the enrollment-weighted means as calculated below to set Star 
Ratings for MPF publication:
     The Star Ratings measure scores for the consolidated 
entity's first plan year will be based on enrollment-weighted measure 
scores using the July enrollment of the measurement period of the 
consumed and surviving contracts for all measures, except the survey-
based and call center measures.
     The survey-based measures (that is, CAHPS, HOS, and HEDIS 
measures collected through CAHPS or HOS surveys) will use enrollment of 
the surviving and consumed contracts at the time the sample is pulled 
for the rating year. For example, for a contract consolidation that is 
effective January 1, 2021 the CAHPS sample for the 2021 Star Ratings 
will be pulled in January 2020 so enrollment in January 2020 will be 
used. The call center measures will use mean enrollment during the 
study period. We stated that we believed that these proposals for 
survey-based measures are more nuanced and account for how the data 
underlying those measures are gathered and that the enrollment-weighted 
means better reflect the true underlying performance of both the 
surviving and consumed contracts.
    For the second year following the consolidation, for all MA and 
Part D Sponsors, we proposed to calculate the Star Ratings will be 
calculated as follows:
     The enrollment-weighted measure scores using the July 
enrollment of the measurement period of the consumed and surviving 
contracts will be used for all measures except HEDIS, CAHPS, and HOS.
     We proposed that HEDIS and HOS measure data will be used 
as reported in the second year after consolidation. The current 
reporting requirements for HEDIS and HOS already combine data from the 
surviving and consumed contract(s) following the consolidation, so we 
did not propose any modification or averaging of these measure scores. 
For example, for HEDIS if an organization consolidates one or more 
contracts during the change over from measurement to reporting year, 
then only the surviving contract is required to report audited summary 
contract-level data but it must include data on all members from all 
contracts involved.
     We proposed to require that the CAHPS survey sample (that 
would be selected following the consolidation) would include enrollees 
in the sample universe from which the sample is drawn from both the 
surviving and consumed contracts. If there are two contracts (that is, 
Contract A is the surviving contract and Contract B is the consumed 
contract) that consolidate, and Contract A has 5,000 enrollees eligible 
for the survey and Contract B has 1,000 eligible for the survey, the 
universe from which the sample will be selected will be 6,000.
    CMS proposed that these rules would be used to calculate the 
measure scores in the first and second year after consolidation; 
following those two years, CMS proposed to use the other rules proposed 
in Sec. Sec.  422.166 and 423.186 to calculate the measure, domain, 
summary, and overall Star Ratings for the consolidated contract. In the 
third year after consolidation and subsequent years, the performance 
period for all the measures will be after the consolidation, so our 
proposal limited the special rules for calculating post-consolidation 
the Star Ratings to the Ratings issued the first 2 years after 
consolidation.
    When consolidations involve two or more contracts for health and/or 
drug services of the same plan type under the same parent organization 
combining into a single contract at the start of a contract year, we 
proposed to calculate the QBP rating for that first year following the 
consolidation using the enrollment-weighted mean, using traditional 
rounding rules, of what would have been the QBP ratings of the 
surviving and consumed contracts using the contract enrollment in 
November of the year the Star Ratings were released. In November of 
each year following the release of the ratings on Medicare Plan Finder, 
the preliminary QBP ratings are displayed in the Health Plan Management 
System (HPMS) for the year following the Star Ratings year. For 
example, if the first year the consolidated entity is in operation is 
plan year 2020, the 2020 QBP rating displayed in HPMS in November 2018 
will be based on the 2019 Star Ratings (which are released in October 
2018) and calculated using the weighted mean of the November 2018 
enrollment of the surviving and consumed contracts. Because the same 
parent organization is involved in these situations, we believe that 
many administrative processes and procedures are identical in the 
Medicare health plans offered by the sponsoring organization, and using 
a weighted mean of what will have been their QBP ratings accurately 
reflects their performance for payment purposes. In subsequent years 
after the first year following the consolidation, QBPs status will be 
determined based on the consolidated entity's Star Rating posted on 
MPF. Under our proposal, the measure, domain, summary, and (in the case 
of MA-PD plans) the overall Star Ratings posted on Medicare Plan Finder 
for the second year following consolidation would be based on the 
enrollment-weighted measure scores so would include data from all 
contracts involved. Consequently, we stated that we believed the 
ratings used for QBP status determinations would reflect the care 
provided by both the surviving and consumed contracts.
    In conclusion, we proposed a new set of rules regarding the 
calculation of Star Ratings for consolidated contracts to be codified 
at paragraphs (b)(3) of Sec. Sec.  422.162 and 423.182. We solicited 
comment on this proposal and whether our separate treatment of 
different measure types during the first and second year adequately 
addresses the differences in how data are collected (and submitted) for 
those measures during the different periods. We also solicited feedback 
on whether sponsoring organizations believe that the special rule for 
consolidations involving the same parent organization and same plan 
types adequately addresses how those situations are different from 
cases where an MA organization buys or sells a plan or contract from or 
to a different entity and whether these rules should be extended to 
situations where there are different parent organizations involved. For 
commenters that support the latter, we also requested comment on how 
CMS should determine that the same administrative processes are used 
and whether attestations from sponsoring organizations or evidence from 
prior audits should be required to support such determinations.
    Following publication of our proposed rule, Congress enacted the 
Bipartisan Budget Act of 2018. Section 53112 of the Act amended section 
1853(o) to require an adjustment to the Star Ratings, quality bonus 
under

[[Page 16530]]

section 1853(o) and rebate allocation under section 1854 based on the 
quality rating to ``prevent the artificial inflation'' of Star Ratings 
after consolidation. That required adjustment applies for 
consolidations approved on or after January 1, 2019. The statutory 
change requires the adjustment be applied when a single MA organization 
consolidates contracts and reflect an enrollment-weighted average of 
scores or ratings for the underlying contracts. We believe that our 
proposal is generally consistent with the new statutory requirement, 
with minor exceptions. The proposal would not have applied until a 
later period, but, as noted in section II.A.11.c of this final rule, we 
will finalize these provisions to be applicable beginning with the 2020 
QBPs and 2020 Star Ratings produced in fall 2019 to be consistent with 
the statute. Our proposal was for consolidations involving a single 
parent organization while the statute focused on consolidations 
involving a single MA organization; applying the proposed policy to 
consolidations at the level of the parent organization instead of the 
specific MA organization captures more consolidations. We read the 
Bipartisan Budget Act as setting a floor rather than a ceiling on our 
authority to establish and set the rules governing the Stars Rating 
system. In addition, our proposal also was more specific as to how 
enrollment-weighted ratings at the measure and contract level would be 
used following the consolidation. We believe the additional detail in 
our proposal is explicitly authorized as the statutory change leaves it 
to the Secretary to identify the specific appropriate adjustments.
    We received the following comments on our proposals and 
solicitations for feedback, and our responses follow:
    Comment: Commenters expressed overwhelming support for our rules 
outlined at Sec. Sec.  422.162(b)(3) and 423.182(b)(3) to calculate 
contract-level Star Ratings in the case of contract consolidations. 
Commenters stated that this would be a more accurate picture of the 
performance of the underlying contracts. Commenters noted that this 
would help eliminate the gaming that can occur when consolidations of 
multiple contracts in distinct geographic areas result in artificial 
increases the Star Ratings and Quality Bonus Payment (QBP) ratings. A 
number of commenters suggested that this approach was fair and 
equitable to all stakeholders. Some commenters supported this change as 
a short-term solution, but they wanted CMS to consider how in the 
future the ratings could more accurately reflect the care provided at 
the local market area. Commenters recognized that quality reporting at 
the local market area is a sizeable change and would not be feasible 
for a number of years.
    Response: CMS appreciates the commenters' support for revising how 
Star Ratings and QBP ratings are calculated when two or more contracts 
consolidate. We believe that the Bipartisan Budget Act indicates that 
Congress is similarly concerned about these issues and our proposal to 
address them. We also agree with commenters that local market area 
reporting would be preferable in cases when the contracts are 
geographically dispersed. Although moving to local market area 
reporting has many challenges, CMS is committed to work with 
stakeholders to examine the feasibility of local market area reporting. 
Any potential changes that would change the consolidation policy in the 
direction of local market area reporting would be proposed in future 
rulemaking.
    Comment: A commenter recommended that CMS issue contract numbers at 
the state level and then base Star Ratings at the state level to avoid 
consolidations across disperse geographic areas.
    Response: State-based contract numbers would be administratively 
burdensome for both contracts and CMS, would significantly increase 
reporting burden of contracts, and would create measurement challenges 
since many contracts at the state level will not have a sufficient 
number of enrollees by state to calculate reliably the quality measures 
that are part of the Part C and D Star Ratings program. Contracts that 
serve disperse geographic areas often have the majority of their 
enrollees in one or two states with smaller enrollment in other states.
    Comment: A commenter suggested using the unrounded final summary 
mean rather than the rounded final Star Rating.
    Response: CMS is assuming this commenter is referring to the QBP 
rating for the first year of the consolidation. For all other years, 
the QBP rating of the contract would be based on the Star Ratings 
posted on Medicare Plan Finder; therefore for the second year following 
a consolidation, the same rules for calculating the Star Ratings for 
QBP and for MPF posting would apply (that is, Sec. Sec.  
422.162(b)(3)(iii)). The preliminary QBP rating is produced and posted 
in HPMS in November of each year for the bids that will be submitted 
the following year. The QBP appeals process is based on these ratings 
posted in November. In April prior to the bids being due, CMS would 
update the QBP rating using an enrollment-weighted QBP ratings of all 
contracts involved in the consolidation which are already rounded.
    Comment: A commenter asked CMS to consider a grace period that 
would neither reward nor disadvantage the surviving contract as a 
result of acquiring a poor performing contract.
    Response: Under our current policy, a sponsor can gain financially 
by consolidating enrollees from a poor-performing contract into a 
contract that receives a QBP and thereby receive bonus payments that it 
would not have been entitled to receive had the consolidation not 
occurred. The revised methodology for calculating Star Ratings and QBPs 
for the surviving contract takes into consideration the performance of 
all contracts involved; thus, it is a more accurate measure of 
performance. We do not believe that a more accurate reflection of 
performance can be fairly termed a ``reward'' or a ``disadvantage'' of 
contract consolidation.
    Comment: A handful of commenters expressed concern regarding the 
consolidation policy stating that they thought the calculations were 
too complex. A commenter stated it would limit the beneficiary options 
to enroll in plans with richer benefits since there would not be the 
same incentives to consolidate lower performing contracts into higher 
performing ones receiving QBPs.
    Response: Most of the calculations for the revised consolidation 
policy will be handled by CMS, though contracts will have an 
opportunity to review the calculations as part of the normal Star 
Rating review process. The consolidation policy should not make it more 
difficult for contracts to produce the data that are needed for the 
Star Ratings program. The premise behind all of the calculations is to 
combine the already gathered (or currently gathered) data from all 
contracts involved in the consolidation using an enrollment-weighted 
average. This policy should not create a situation which limits options 
for beneficiaries to enroll in plans with richer benefits. As always, 
beneficiaries may is able to choose in their service area any plan that 
best meets their needs. If a beneficiary decides to remain in a 
contract that consolidates, the ratings for that contract will now more 
accurately reflect performance of that contract.
    Comment: A commenter suggested that CMS post by year end in HPMS a 
worksheet with the exact enrollment and overall Star Rating values 
which CMS intends to use for determining QBP ratings for consolidated 
contracts.

[[Page 16531]]

    Response: In November of each year, CMS posts in HPMS the 
preliminary QBP ratings for the bids that will be submitted the 
following year. This starts the QBP appeals process. In April of each 
year prior to bids being submitted, CMS posts in HPMS the final QBP 
rating following the appeals process. In November of each year or at 
year end, CMS would not be aware of future consolidations that would be 
announced near the time of the bid so would be unable to post a 
combined rating for the consolidated contracts at this time. As long as 
CMS is aware of the consolidation by April at the time of the HPMS 
posting, the combined rating for the consolidated contracts would be 
posted at that time. A parent organization would have sufficient 
information to calculate the enrollment weighted QBP rating of a 
consolidated contract using the preliminary QBP ratings posted in HPMS 
in November of each year.
    Comment: A handful of commenters requested that CMS clarify the 
timing of this provision. These commenters expressed a preference for 
it not to begin until the 2021 Star Ratings and 2022 QBPs.
    Response: The proposed rule stated that all of the changes related 
to Star Ratings would go into effect for performance periods in 2019 
(thus, for the 2021 Star Ratings and 2022 QBPs). However, in light of 
the passage of the Bipartisan Budget Act provision which requires 
enrollment-weighted adjustments to the Star Ratings for contract 
consolidations approved on or after 1/1/19, we are finalizing the 
regulation text on this policy to be applicable to consolidations that 
occur on or after the same date. The final regulations at Sec. Sec.  
422.162(b)(3) and 423.182(b)(3) will apply to the star ratings of 
surviving contracts from contract consolidations that are approved on 
or after January 1, 2019. Thus, the policy will be implemented for the 
2020 Star Ratings and the 2020 QBPs. We note that while the statute is 
specific to MA ratings, we are finalizing the same policy for Part D 
Ratings on the same timeframe to have consistent methodology across 
Part C and D for beneficiaries choosing a contract.
    Comment: A few commenters were interested in a similar policy for 
consolidations between different parent organizations.
    Response: We treat the purchase of a contract, multiple contracts 
or all of the contracts offered by a parent organization by different 
parent organization is known as a novation, not a consolidation, even 
though the consolidation will generally also require similar contract 
documents and approvals from CMS. Where one entity is buying all or 
part of the business of another entity, we did not propose and do not 
intend to apply the consolidation policy finalized in this rule. In 
novations, the structure of each of the individual contracts being 
purchased does not change and the contracts still provide the same 
services within the same service area before and after the novation is 
completed, only the company that owns the business and is the MA 
organization under the contract has changed. The Star Rating for each 
individual contract transfers with the contract and remains intact 
until the next rating cycle. Novations can occur at any point during 
the calendar year.
    A consolidation by contrast is when two or more contracts owned by 
the same parent organization are combined into a single contract. The 
overall service area of the two contracts are combined, the contract 
number of the consumed contract(s) is retired and the contract number 
of the surviving contract now provides all of the services in the 
combined service area. To consolidate contracts, all of the contracts 
must be owned by the same parent organization. Consolidations can only 
occur at the change from one year to another year and must be submitted 
and approved by CMS by a specific deadline in the annual contracting 
process. If one parent organization buys another contract owned by a 
different parent organization, the sponsor could consolidate multiple 
contracts using the rules outlined in this rule the year after the 
novation takes place. With a consolidation, the rule finalized here for 
the calculation of the Star Rating of the surviving contract would 
apply.
    Comment: A commenter wanted CMS to propose other alternatives and 
offer additional opportunities to comment, but no additional detail was 
provided on suggested alternatives.
    Response: CMS appreciates the request for other alternatives. 
Commenters to the proposed rule did not suggest other ways to handle 
contracts that consolidate and expressed overwhelming support for this 
policy. CMS will continue to consider if there is a better way to 
account for differences in performance across geographic areas and will 
provide opportunities to engage stakeholders and obtain additional 
input.
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized earlier, we are finalizing the 
provisions as proposed at Sec. Sec.  422.162(b)(3) and 423.182(b)(3), 
except for modifying the timeframe applying these new rules. The 
revised consolidation policy would be applicable for the Rating for any 
surviving contract after a consolidation that is approved on or after 
January 1, 2019. Although the statute related to consolidations is 
specific to MA ratings, we are finalizing the same policy for Part D 
ratings on the same timeframe to have consistent methodology across 
Part C and D for beneficiaries choosing a contract.
g. Data Sources
    Under 1852(e) of the Act, MA organizations are required to collect, 
analyze, and report data that permit measurement of health outcomes and 
other indices of quality. The Star Ratings system is based on 
information collected consistent with section 1852(e) of the Act. 
Section 1852(e)(3)(B) of the Act prohibits the collection of data on 
quality, outcomes, and beneficiary satisfaction other than the types of 
data that were collected by the Secretary as of November 1, 2003; there 
is a limited exception for SNPs to collect, analyze, and report data 
that permit the measurement of health outcomes and other indicia of 
quality. The statute does not require that only the same data be 
collected, but that we do not change or expand the type of data 
collected until after submission of a Report to Congress (prepared in 
consultation with MA organizations and accrediting bodies) that 
explains the reason for the change(s). We clarify here that the types 
of data included under the Star Ratings system are consistent with the 
types of data collected as of November 1, 2003. Since 1997, Medicare 
managed care organizations have been required to annually report 
quality of care performance measures through HEDIS. We have also been 
conducting the CAHPS survey since 1997 to measure beneficiaries' 
experiences with their health plans. HOS began in 1998 to capture 
changes in the physical and mental health of MA enrollees. To some 
extent, these surveys have been revised and updated over time, but the 
same types of data--clinical measures, beneficiary experiences, and 
changes in physical and mental health, respectively--have remained the 
focus of these surveys. In addition, there are several measures in the 
Stars Ratings System that are based on performance that address 
telephone customer service, members' complaints, disenrollment rates, 
and appeals; however these additional measures are not collected 
directly from the sponsoring organizations for the primary purpose of 
quality measurement so they are not information collections governed by

[[Page 16532]]

section 1852(e). These additional measures are calculated from 
information that CMS has gathered as part of the administration of the 
Medicare program, such as information on appeals forwarded to the 
Independent Review Entity under subparts M, enrollment, and compliance 
and enforcement actions.
    The Part D program was implemented in 2006, and while there is no 
parallel provision regarding applicable Part D sources of data, we have 
used similar datasets, for example CAHPS survey data, for 
beneficiaries' experiences with prescription drug plans. Section 1860D-
4(d) of the Act specifically directs the administration and collection 
of data from consumer surveys in a manner similar to those conducted in 
the MA program. All of these measures reflect structure, process, and 
outcome indices of quality that form the measurement set under Star 
Ratings. Since 2007, we have publicly reported a number of measures 
related to the drug benefit as part of the Star Ratings. For MA 
organizations that offer prescription drug coverage, we use the same 
Part D measures focusing on administration of the drug benefit as is 
used for stand-alone PDPs. Similar to MA measures of quality relative 
to health services, the Part D measures focus on customer service and 
beneficiary experiences, effectiveness, and access to care relative to 
the drug benefit. We believe that the Part D Star Ratings are 
consistent with the limitation expressed in section 1852(e) of the Act 
even though the limitation does not apply to our collection of Part D 
quality data from Part D sponsors.
    We intend to continue to base the types of information collected in 
the Part C Star Ratings on section 1852(e) of the Act, and we proposed 
at Sec.  422.162(c)(1) that the type of data used for Star Ratings will 
be data consistent with the section 1852(e) limits and data gathered 
from CMS administration of the MA program. In addition, we proposed in 
Sec.  422.162(c)(1) and in Sec.  423.182(c)(1) to include measures that 
reflect structure, process, and outcome indices of quality, including 
Part C measures that reflect the clinical care provided, beneficiary 
experience, changes in physical and mental health, and benefit 
administration, and Part D measures that reflect beneficiary 
experiences and benefit administration. The measures encompass data 
submitted directly by MA organizations (MAOs) and Part D sponsors to 
CMS, surveys of MA and Part D enrollees, data collected by CMS 
contractors, and CMS administrative data. We also proposed, primarily 
so that the regulation text is complete on this point, a regulatory 
provision at Sec. Sec.  422.162(c)(2) and 423.182(c)(2) that requires 
MA organizations and Part D plan sponsors to submit unbiased, accurate, 
and complete quality data as described in paragraph (c)(1) of each 
section. Our authority to collect quality data is clear under the 
statute and existing regulations, such as section 1852(e)(3)(A) and 
1860D-4(d) and Sec. Sec.  422.12(b)(2) and 423.156. We proposed the 
paragraph (c)(2) regulation text to ensure that the quality ratings 
system regulations include a regulation on this point for readers and 
to avoid confusion in the future about the authority to collect this 
data. In addition, it is important that the data underlying the ratings 
are unbiased, accurate, and complete so that the ratings themselves are 
reliable. This regulation text will clearly establish the sponsoring 
organization's responsibility to submit data that can be reliably used 
to calculate ratings and measure plan performance.
    We received the following comments on this proposal, and our 
responses follow:
    Comment: A few commenters supported codifying language to clearly 
establish the sponsoring organization's responsibility to submit data 
that can be reliably used to calculate ratings and measure plan 
performance.
    Response: CMS appreciates stakeholders' support of our effort to 
codify language to ensure that that the data submitted are accurate and 
reliable. We are finalizing the language as proposed.
    Comment: Responses were mixed on whether audit data should be used 
in the Star Ratings. A couple of commenters opposed including measures 
in the Star Ratings program that rely on audit findings as a data 
source. Other commenters stated given the Beneficiary Access and 
Performance Problems measure that previously included enforcement 
actions was moved out of the 2019 Star Ratings and to the display page, 
they strongly urged CMS to re-incorporate audit information, including 
information about enforcement actions, in Star Ratings. Those in favor 
of using audit information noted that the key purposes of Quality 
Rating System are to provide comparative information to Medicare 
beneficiaries, to base payment on quality, and to oversee the overall 
performance of plans. These commenters opposed CMS removal of audit 
findings and enforcement actions from the Star Ratings since 
deficiencies, in particular repeat deficiencies, may impact beneficiary 
access to drugs and services and the Star Ratings will not reflect 
these issues.
    Response: We appreciate the commenters' feedback and concerns 
received on the use of audits, compliance actions, and enforcement 
actions in the Star Ratings. In the proposed rule, the Beneficiary 
Access and Performance Problems measure was not proposed for the 2021 
Star Ratings even though some stakeholders strongly support including 
some recognition in the Star Ratings program when serious or repeat 
deficiencies are uncovered in audits or other means. These stakeholders 
argue that such deficiencies directly impact beneficiary access to 
needed services and drugs and therefore should be part of the Star 
Ratings program. We will continue to consider the comments as we 
continue our dialogue with stakeholders on this issue and any future 
changes will be proposed in future rulemaking.
    For the reasons set forth in the proposed rule and our responses to 
the related comments, we are finalizing the provisions regarding the 
data sources for measures and ratings as proposed in Sec. Sec.  
422.162(c) and 423.182(c) with two modifications. In Sec.  
422.162(c)(1), we are finalizing additional text to clarify that CMS 
administrative data will be used in the scoring for measures; the new 
text aligns the Part C regulation with the parallel Part D regulation. 
As noted in the proposed rule (82 FR 56382), some measures are based on 
data that CMS (or a contractor) has related to performance by 
sponsoring organizations and we are including a reference to CMS 
administrative data consistent with that longstanding policy. In 
addition, in Sec.  423.182(c)(2), we are finalizing additional text to 
clarify that the reported data permit measurement of health outcomes 
and other indices of quality, consistent with the scope of the measures 
in the Star Ratings program.
h. Adding, Updating, and Removing Measures
    We are committed to continuing to improve the Part C and D Star 
Ratings system by focusing on improving clinical and other outcomes. We 
anticipate that new measures will be developed and that existing 
measures will be updated over time. NCQA and the Pharmacy Quality 
Alliance (PQA) continually work to update measures as clinical 
guidelines change and develop new measures focused on health and drug 
plans. To address these anticipated changes, we proposed in Sec. Sec.  
422.164 and 423.184 specific rules to govern the addition, update, and 
removal of measures. We also proposed to apply these rules to the 
measure set proposed

[[Page 16533]]

in this rulemaking, to the extent that there are changes to the measure 
set between the effective date of this final rule and the Star Ratings 
based on this final rule (that is the ratings based on the performance 
periods beginning on or after January 1, 2019).
    As discussed in more detail in the following paragraphs, we 
proposed the following general rules to govern adding, updating, and 
removing measures:
     For data quality issues identified during the calculation 
of the Star Ratings for a given year, we proposed to continue our 
current practice of removing the measure from the Star Ratings.
     That new measures and substantive updates to existing 
measures would be added to the Star Ratings system based on future 
rulemaking but that prior to such a rulemaking, CMS would announce new 
measures and substantive updates to existing measures and solicit 
feedback using the process described for changes in and adoption of 
payment and risk adjustment policies in section 1853(b) of the Act 
(that is the Call Letter attachment to the Advance Notice and Rate 
Announcement).
     That existing measures (currently existing or existing 
after a future rulemaking) used for Star Ratings would be updated 
(without rulemaking) with regular updates from the measure stewards 
through the process described for changes in and adoption of payment 
and risk adjustment policies in section 1853(b) of the Act when the 
changes are not substantive.
     That existing measures (currently existing or existing 
after a future rulemaking) used for Star Ratings would be removed from 
use in the Star Ratings when there has been a change in clinical 
guidelines associated with the measure or reliability issues identified 
in advance of the measurement period; CMS would announce the removal 
using the process described for changes in and adoption of payment and 
risk adjustment policies in section 1853(b) of the Act. Removal might 
be permanent or temporary, depending on the basis for the removal.
    We proposed specific rules for updating and removal that would be 
implemented through subregulatory action, so that rulemaking would not 
be necessary for certain updates or removals. CMS proposed to announce 
application of the regulation standards in the Call Letter attachment 
to the Advance Notice and Rate Announcement process issued under 
section 1853(b) of the Act.
    First, we proposed to codify, at Sec. Sec.  422.164(a) and 
423.184(a), regulation text stating the general rule that CMS would 
add, update, and remove measures used to calculate Star Ratings as 
provided in Sec. Sec.  422.164 and 423.184. In each paragraph regarding 
addition, updating, and removal of measures and the use of improvement 
measures, we also proposed to make certain of these changes without 
future rulemaking by applying the standards and authority in the 
regulation text. CMS proposed to solicit feedback of its application of 
such rules using the draft and final Call Letter each year. In 
addition, CMS proposed in paragraph (a) of each section to issue a 
complete list of the measure set for each year in the Technical Notes 
or similar guidance document.
    Second, we proposed, in paragraph (b) of these sections, that CMS 
would review the quality of the data on which performance, scoring, and 
rating of measures is done each year. We proposed to continue our 
current practice of reviewing data quality across all measures, 
variation among organizations and sponsors, and measures' accuracy, 
reliability, and validity before making a final determination about 
inclusion of measures in the Star Ratings. We explained that this rule 
was designed to ensure that Star Ratings measures accurately measure 
true plan performance. If a systemic data quality issue is identified 
during the calculation of the Star Ratings, paragraph (b) would 
authorize CMS to remove the measure from that year's rating.
    Third, we proposed to address the addition of new measures in 
paragraph (c).
    In the proposed rule, we explained that our proposal regarding the 
addition of measures was guided by the principles we reiterated in this 
final rule in section II.A.11.b. Measures should be aligned with best 
practices among payers and the needs of the end users, including 
beneficiaries. Our strategy is to continue to adopt measures when they 
are available, that are nationally endorsed, and in alignment with the 
private sector, as we do today through the use of measures developed by 
NCQA and the PQA, and the use of measures that are endorsed by the 
National Quality Forum (NQF). We proposed to codify that CMS would 
continue to review measures of this type for adoption at Sec. Sec.  
422.164(c)(1) and 423.184(c)(1). We do not intend this standard to 
require that a measure be adopted by an independent measure steward or 
endorsed by NQF in order for us to propose its use for the Star 
Ratings, but that these are considerations that will guide us as we 
develop such proposals. We also proposed that CMS would develop its own 
measures as well when appropriate to measure and reflect performance in 
the Medicare program. For the 2021 Star Ratings, we proposed to have 
measures that encompass outcome, intermediate outcome, patient/consumer 
experience, access, process, and improvement measures. It is important 
to have a mix of different types of measures in the Star Ratings 
program to understand how all of the different facets of the provision 
of health and drug services interact. For example, process measures are 
evidence-based best practices that lead to clinical outcomes of 
interest. Process measures are generally easier to collect, while 
outcome measures are sometimes more challenging requiring in some cases 
medical record review and more sophisticated risk-adjustment 
methodologies.
    Over time new measures would be added and measures would be removed 
from the Star Ratings program to meet our policy goals. As new measures 
are added, we noted in the proposed rule that our general guidelines 
for deciding whether to propose new measures through future rulemaking 
would use the following criteria:
     Importance: The extent to which the measure is important 
to making significant gains in health care processes and experiences, 
access to services and prescription medications, and improving health 
outcomes for MA and Part D enrollees.
     Performance Gap: The extent to which the measure 
demonstrates opportunities for performance improvement based on 
variation in current health and drug plan performance.
     Reliability and Validity: The extent to which the measure 
produces consistent (reliable) and credible (valid) results.
     Feasibility: The extent to which the data related to the 
measure are readily available or could be captured without undue burden 
and could be implemented by the majority of MA and Part D contracts.
     Alignment: The extent to which the measure or measure 
concept is included in one or more existing federal, State, and/or 
private sector quality reporting programs.
    As explained in the proposed rule, CMS would balance these criteria 
as part of our decision-making process so that each new measure 
proposed for addition to the Star Ratings meets each criteria in some 
fashion or to some extent. We intend to apply these criteria

[[Page 16534]]

to identify and adopt new measures for the Star Ratings, which would be 
done through future rulemaking and include explanations for how and why 
we propose to add new measures. We also proposed to follow the process 
in our proposed paragraphs (c)(2) through (4) of Sec. Sec.  422.164 and 
423.184 when a new measure has been identified for inclusion in the 
Star Ratings. We proposed to initially solicit feedback on any 
potential new measures through the Call Letter and to codify that as a 
requirement at paragraph (c)(2) of each section.
    As new performance measures are developed and adopted, we proposed, 
at Sec. Sec.  422.164(c)(3) and (4) and 423.184(c)(3) and (4), that 
they would initially be incorporated into the display page for at least 
2 years but that we would keep a new measure on the display page for a 
longer period if CMS finds there are reliability or validity issues 
with the measure. As noted in the Introduction, the rulemaking process 
creates a longer lead time for changes, in particular to add a new 
measure to the Star Ratings or to make substantive changes to measures 
as discussed later in this section. Here is an example timeline for 
adding a new measure to the Star Ratings. In this scenario, the new 
measure has already been developed by the NCQA and the PQA, and 
endorsed by the NQF. Otherwise, that process may add an extra 3 to 5 
years to the timeline.
     January 2019: Solicit feedback in the draft 2020 Call 
Letter on whether to add the new measure.
     April 2019: Summarize feedback in the 2020 Call Letter on 
adding the new measure.
     2020/2021: Propose adding the new measure to the 2024 Star 
Ratings (2022 measurement period) in a proposed rule; finalize through 
rulemaking (for 1/1/2022 effective date).
     2020: Performance period and collection of data for the 
new measure and collection of data for posting on the 2022 display 
page.
     2021: Performance period and collection of data for the 
new measure and collection of data for posting on the 2023 display 
page.
     Fall 2021: Publish new measure on the 2022 display page 
(2020 measurement period).
     January 1, 2022: Applicability date of new measure for 
Star Ratings.
     2022: Performance period and collection of data for the 
new measure and collection of data for inclusion in the 2024 Star 
Ratings.
     Fall 2022: Publish new measure on the 2023 display page 
(2021 measurement period).
     Fall 2023: Publish new measure in the 2024 Star Ratings 
(2022 measurement period).
     2025: QBP status and rebate retention allowances are 
determined for the 2025 payment year.
    Fourth, at Sec. Sec.  422.164(d) and 423.184(d) we proposed to 
address updates to measures based on whether an update is substantive 
or non-substantive. Since quality measures are routinely updated (for 
example, when clinical codes are updated), we proposed to adopt rules 
for the incorporation of non-substantive updates to measures that are 
part of the Star Ratings system without going through new rulemaking. 
As proposed in paragraphs (d)(1) of Sec. Sec.  422.164 and 423.184, we 
would only incorporate updates without rulemaking for measure 
specification changes that do not substantively change the nature of 
the measure.
    Substantive changes (for example, major changes to methodology or 
specifications) to existing measures would be proposed and finalized 
through rulemaking. In paragraphs (d)(2) of Sec. Sec.  422.164 and 
423.184, we proposed to initially solicit feedback on whether to make 
the substantive measure update through the Call Letter prior to the 
measurement period for which the update would be initially applicable. 
For example, if the change announced significantly expands the 
denominator or population covered by the measure (for example, the age 
group included in the measures is expanded), the measure would be moved 
to the display page for at least 2 years and proposed through 
rulemaking for inclusion in Star Ratings. We noted in our proposal that 
this process for substantive updates would be similar to the process 
proposed for adopting new measures under proposed paragraph (c). As 
appropriate, the legacy measure may remain in the Star Ratings while 
the updated measure is on the display page if, for example, the updated 
measure expands the population covered in the measure and the legacy 
measure remains relevant and measures a critical topic for the Star 
Ratings. Adding the substantively updated measure to the Star Ratings 
would be proposed through rulemaking.
    We proposed to adopt rules to incorporate specification updates 
that are non-substantive in paragraph (d)(1). Non-substantive updates 
that occur (or are announced by the measure steward) during or in 
advance of the measurement period would be incorporated into the 
measure and announced using the Call Letter. We proposed to use such 
updated measures to calculate and assign Star Ratings without the 
updated measure being placed on the display page. Our proposal was 
explained as consistent with current practice.
    In paragraphs (d)(1)(i)-(v) of Sec. Sec.  422.164 and (d)(1)(i)-(v) 
of 423.184, we proposed to codify a non-exhaustive list of non-
substantive updates announced during or prior to the measurement period 
and how we will treat them under our proposal. The list includes 
updates in the following circumstances:
     If the change narrows the denominator or population 
covered by the measure with no other changes, the updated measure would 
be used in the Star Ratings program without interruption. For example, 
if an additional exclusion--such as excluding nursing home residents 
from the denominator--is added, the change will be considered non-
substantive and will be incorporated automatically. In our view, 
changes to narrow the denominator generally benefit Star Ratings of 
sponsoring organizations and should be treated as non-substantive for 
that reason.
     If the change does not meaningfully impact the numerator 
or denominator of the measure, the measure would continue to be 
included in the Star Ratings. For example, if additional codes are 
added that increase the number of numerator hits for a measure during 
or before the measurement period, such a change is not considered 
substantive because the sponsoring organization generally benefits from 
that change. This type of administrative change has no impact on the 
current clinical practices of the plan or its providers, and thus will 
not necessitate exclusion from the Star Ratings system of any measures 
updated in this way.
     The clinical codes for quality measures (such as HEDIS 
measures) are routinely revised as the code sets are updated. For 
updates to address revisions to the clinical codes without change in 
the intent of the measure and the target population, the measure would 
remain in the Star Ratings program and would not move to the display 
page. Examples of clinical codes that might be updated or revised 
without substantively changing the measure include:
    ++ ICD-10-CM (``ICD-10'') code sets. Annually, there are new ICD 10 
coding updates, which are effective from October 1 through September 
30th of any given year.
    ++ Current Procedural Terminology (CPT) codes. These codes are 
published and maintained by the American Medical Association (AMA) to 
describe

[[Page 16535]]

tests, surgeries, evaluations, and any other medical procedure 
performed by a healthcare provider on a patient.
    ++ Healthcare Common Procedure Coding System (HCPCS) codes. These 
codes cover items, supplies, and non-physician services not covered by 
CPT codes.
    ++ National Drug Code (NDC). The PQA updates NDC lists biannually, 
usually in January and July.
     If the measure specification change is providing 
additional clarifications such as the following, the measure would also 
not move to the display page since it does not change the intent of the 
measure but provides more information about how to meet the measure 
specifications:
    ++ Adding additional tests that will meet the numerator 
requirements.
    ++ Clarifying documentation requirements (for example, medical 
record documentation).
    ++ Adding additional instructions to identify services or 
procedures that meet (or do not meet) the specifications of the 
measure.
     If the measure specification change is adding additional 
data sources, the measure would also not move to the display page 
because we believe such changes are merely to add alternative ways to 
collect the data to meet the measure specifications without changing 
the intent of the measure.
    We solicited comment on our proposal to add non-substantive updates 
to measures and using the updated measure (replacing the legacy 
measure) to calculate Star Ratings. In particular, we noted our 
interest in stakeholders' views whether only non-substantive updates 
that have been adopted by a measure steward after a consensus-based or 
notice and comment process should be added to the Star Ratings under 
this proposed authority. Further, we solicited comment on whether there 
are other examples or situations involving non-substantive updates that 
should be explicitly addressed in the regulation text or if our 
proposal is sufficiently extensive.
    In addition to updates and additions of measures, we proposed rules 
to address the removal of measures from the Star Ratings to be codified 
in Sec. Sec.  422.164(e) and 423.184(e). In paragraph (e)(1) of each 
section, we proposed the two circumstances under which a measure will 
be removed entirely from the calculation of the Star Ratings. The first 
circumstance we identified was a change or changes in clinical 
guidelines that mean that the measure specifications are no longer 
believed to align with or promote positive health outcomes. We 
explained that as clinical guidelines change, we would need the 
flexibility to remove measures from the Star Ratings that are not 
consistent with current guidelines. We proposed to announce such 
subregulatory removals through the Call Letter so that removals for 
this reason are accomplished quickly and as soon as the disconnect with 
positive clinical outcomes is definitively identified. We noted that 
this proposal is consistent with our current practice. For example, 
previously we retired the Glaucoma Screening measure for HEDIS 2015 
after the U.S. Preventive Services Task Force concluded that the 
clinical evidence is insufficient to assess the balance of benefits and 
harms of screening for glaucoma in adults.
    In the proposed rule, we also explained how we currently review 
measures continually to ensure that the measure remains sufficiently 
reliable such that it is appropriate to continue use of the measure in 
the Star Ratings. We proposed, at paragraph (e)(1)(ii), authority to 
subregulatorily remove measures that show low statistical reliability 
so as to move swiftly to ensure the validity and reliability of the 
Star Ratings, even at the measure level. We explained that we would 
continue to analyze measures to determine if measure scores are 
``topped out'' (that is, showing high performance across all contracts 
decreasing the variability across contracts and making the measure 
unreliable) so as to inform our decision that the measure has low 
reliability. Although some measures may show uniform high performance 
across contracts and little variation between them, we noted we seek 
evidence of the stability of such high performance, and we noted we 
want to balance how critical the measures are to improving care, the 
importance of not creating incentives for a decline in performance 
after the measures transition out of the Star Ratings, and the 
availability of alternative related measures. If, for example, 
performance in a given measure has just improved across all contracts, 
or if no other measures capture a key focus in Star Ratings, a ``topped 
out'' measure with lower reliability may be retained in Star Ratings. 
Under our proposal to be codified at paragraph (e)(2), we would 
announce application of this rule through the Call Letter in advance of 
the measurement period. Below, we summarize the comments we received on 
adding, updating, and removing measures, and provide our responses and 
final decisions.
    Comment: Commenters agreed with the criteria CMS proposed to select 
new measures for the Star Ratings program. Commenters also agreed with 
the proposed measure categories (the measure categories used to assign 
weights to measures as noted in Sec. Sec.  422.166(e) and 423.186(e)), 
though a few commenters asked CMS to include more outcome measures. A 
few commenters also requested that measures be claims-based and not 
based on medical chart review.
    Response: CMS appreciates the support for our criteria for 
selecting new measures. CMS agrees with the desire to add more outcome 
measures to the Star Ratings program and welcomes all suggestions 
(submitted through the annual Call Letter process) for outcome measures 
to include in the Star Ratings program. We realize that medical chart 
review is burdensome and we are continuing to look at ways to minimize 
chart review measures. For example, CMS is exploring whether using 
encounter data for quality measurement would minimize burden for plans 
while resulting in equally accurate and appropriate reflections of 
performance and quality.
    Comment: The majority of commenters agreed with CMS' proposal for 
selecting new measures, announcing and soliciting feedback on new 
measures, finalizing new measures through rulemaking, reporting new 
measures on the display page for a minimum of 2 years prior to becoming 
a Star Rating measure, and keeping new measures on the display page if 
CMS finds reliability or validity issues with the measure 
specifications. Supporters of these proposals noted that the 
introduction of new measures through rulemaking allows greater lead 
time for plans to incorporate new measures, supports stability in the 
Star Rating program, maximizes stakeholder input, and provides 
additional transparency in the Star Ratings selection process. 
Commenters mentioned that increased lead time for the introduction of 
new measures is important especially in any payment program. Commenters 
noted the need for plans to have sufficient time to allocate resources, 
make changes to operations, adjust supporting information systems, and 
plan any specialized educational materials and events. A commenter 
suggested that new measures remain on the display page for 3 years 
which would allow plans to develop internal processes for quality 
measurement and improvement, which the commenter suggests would lead to 
improved health outcomes for beneficiaries; another commenter expressed 
the opinion that reporting a new measure on the display page for 2 
years is too long. Commenters who expressed concern that the time on

[[Page 16536]]

display was too long or suggested exceptions to allow for shorter times 
on display both referred to the need to reflect changes in clinical 
standards and to respond to public health urgencies.
    Response: CMS appreciates receiving feedback on the proposed policy 
to introduce new measures into the Star Ratings program through 
rulemaking. We acknowledge that there is some desire and policy 
rationale to keep measures on the display page for longer than 2 years, 
but CMS is trying to balance the need to introduce new measures in a 
timely manner with giving sponsors sufficient lead time for the 
introduction of new measures. We believe that a 2 year period provides 
the appropriate balance.
    Comment: Some commenters opposed the requirement to propose new 
measures through rulemaking rather than continuing to announce new 
measures through the Call Letter process. The commenters cited the long 
lag between the time measures are developed/approved and the time they 
are included in the Star Ratings, and requested a more expedited 
approach for the inclusion of new measures. Commenters noted that 
adding more lead time would stifle the adoption of new quality measures 
aligned with the latest innovative advances in medicine and technology 
and, thus, prevent Star Rating measures from reflecting the latest 
treatment guidelines and current standards of care. Further, commenters 
mentioned introducing new measures through rulemaking could 
unnecessarily delay implementation of measures needed to address 
clinical area gaps, preventable safety issues, emerging public health 
concerns, and the adoption of evidence-based measures. As a result, 
commenters believed CMS' ability to incentivize improvements in the 
quality of care for Medicare beneficiaries would decrease. A few 
commenters suggested that, if CMS does implement the rulemaking process 
for the introduction of new measures, CMS should consider granting 
exceptions in circumstances in which there are urgent public health and 
patient safety issues to be addressed through quality measures.
    Response: CMS recognizes that introducing new measures through 
rulemaking will make the process longer than CMS' former process of 
introducing new measures through the Call Letter, but we believe doing 
so balances the need for expediency with the need for greater 
transparency and stability for the ratings program. CMS also believes 
the rulemaking process adds an additional opportunity to fine tune 
measures and thus ensure greater measurement accuracy and enhanced 
stability in the Star Ratings program. We note that using rulemaking to 
adopt measures will bring the MA and Part D quality ratings system in 
line with other quality ratings systems and quality data collection 
programs that are used for Medicare payment. We understand the desire 
to have measures that address public health concerns adopted quickly in 
the Star Ratings program. CMS is committed to implementing these types 
of measures as quickly as possible so they can at least be publicly 
reported on the display page prior to being a Star Ratings measure.
    Comment: A few commenters requested that new measures be fully 
defined, tested, and validated by measure stewards prior to being 
considered for Star Ratings, even for CMS developed measures. A 
commenter requested that CMS adopt only measures which have been NQF 
endorsed, publicly reported by NCQA (or the measure steward) for at 
least one measurement period, and reported on the CMS display page for 
at least one measurement period. The commenter also recommended that 
CMS not report new (first year) measures on the display page.
    Response: CMS agrees that measures need to be fully defined, tested 
and validated by measure stewards before used as the basis for Medicare 
payment. Placing new measures on the display page provides transparency 
about CMS' intention to use the measure in the future as part of Star 
Ratings and an opportunity for sponsors to see their scores and 
performance before the measure is used in the Star Ratings. The display 
measures are not assigned Star Ratings or used in the development of 
measure, domain, summary, or overall Star Ratings, so there are no 
payment consequences. Retaining new measures on the display for two 
years gives CMS additional opportunities to identify any data issues 
prior to the measures being included in the Star Ratings program. CMS 
will use endorsed measures as they are available. For some areas which 
CMS judges to be important for the Star Ratings program, endorsed 
measures may not be available. CMS emphasizes that if reliability 
issues with a display measure are identified, the regulations proposed 
and finalized in this rule at Sec. Sec.  422.164(c)(4) and 
423.184(c)(4) prevent the measure from moving to a Star Ratings 
measure. Although a number of commenters to the proposed rule were 
concerned about the rulemaking process preventing CMS from quickly 
responding to public health and patient safety issues, CMS believes 
that reporting new measures as soon as possible on the display page 
will addresses these concerns.
    Comment: The majority of commenters agreed with the process for 
updating existing measures.
    Response: We appreciate the support for the process for updating 
existing measures.
    Comment: Some commenters objected to the proposal for updating 
measures through rulemaking because of the delay between the time 
measures are updated/approved and the time they are re-introduced into 
the Star Ratings program. These commenters requested a more expedited 
approach for updating measures. Most commenters supported CMS in its 
proposal to codify a non-exhaustive list for identifying non-
substantive measure updates. Some commenters requested additional 
information on how the determination is made as to whether a change is 
substantive versus non-substantive. A few commenters wanted a more 
exhaustive list of what are considered non-substantive changes.
    Some commenters expressed the opinion that all measure updates, 
even non-substantive changes, should be announced in advance of the 
measurement period. In addition, a few commenters expressed the opinion 
that all measure updates, whether substantive or non-substantive, 
should be subject to rulemaking. These commenters noted some of the 
same concerns expressed for supporting the addition of new measures 
through rulemaking rather than through the Call Letter process. These 
concerns included allowing plans greater lead time to incorporate 
updates, have sufficient time to allocate resources to incorporate 
updates, make changes to operations, adjust supporting information 
systems, and plan any specialized educational materials and events. A 
commenter, however, expressed the opinion that no measure updates, 
substantive or non-substantive, should be required to go through 
rulemaking, because this would lead to unnecessary gaps in measurement 
for critically important issues.
    Response: CMS appreciates the comments we received on our proposal 
for updating measures. Although there is some disagreement among 
commenters on whether and which updates should go through rulemaking, 
we believe our proposal balances the commenters' concerns by only 
requiring substantive measure updates to go through the rulemaking 
process. Non-substantive updates, such as coding updates, which are not 
significant changes to the measure specifications would continue to be 
announced

[[Page 16537]]

through the Call Letter process. CMS does not have authority to 
determine or direct when measure stewards update measure 
specifications. If non-substantive measure specifications are made 
during the measurement period, CMS believes it is of value to 
incorporate those measure specification updates in that year's Star 
Ratings measures. Non-substantive updates are most often minor code 
updates and are not significant changes to the measure specifications. 
CMS proposed and is finalizing in this rule a comprehensive list of 
measure changes it considers non-substantive in Sec. Sec.  
422.164(d)(1) and 423.184(d)(1); we explained (above and in the 
proposed rule) the basis for our determination that these changes and 
others like them should be implemented without delay or additional 
rulemaking. The list is not exhaustive because additional situations or 
types of changes may also result in little or no change to the results 
of measurement (or generally benefit sponsoring organizations) in a 
similar way. We believe that the standard adopted here--that of non-
substantive changes--is adequately clear to provide notice to 
stakeholders and balance the competing policies identified by 
commenters. CMS encourages plans and other stakeholders to provide 
suggestions for additional non-substantive measure updates to add to 
the current list through future rulemaking.
    Comment: A few commenters expressed disagreement with the proposal 
to continue collecting a legacy measure until an updated measure has 
been on display for 2 years.
    Response: CMS appreciates comments on its proposal to keep legacy 
measures in the Star Ratings during the period when the related updated 
measure goes through rulemaking and is placed on the display page for 2 
years. We intend that a legacy measure may remain in the Star Ratings 
until the updated measure is ready to move into Star Ratings only when 
the area covered by the measure is critical to reflecting whether plans 
are providing appropriate care or for a similar reason that the 
information provided by the legacy measure is important to the Star 
Ratings.
    Comment: There was general agreement among commenters with CMS' 
proposed process for removing measures from the Star Ratings program 
and for announcing the removal in advance of the measurement period. 
However, some commenters did question the criteria for how CMS judges 
measures to be `topped out' or have low statistical reliability.
    Response: CMS appreciates the overall support for its proposal for 
removing measures from the Star Ratings program. Measure scores are 
determined to be `topped out' when they show high performance and 
little variability across contracts, making the measure statistically 
unreliable. However, although some measures may show uniform high 
performance across contracts and little variation between them, CMS 
needs to balance these concerns with how critical the measures are to 
improving care, the importance of not creating incentives for a decline 
in performance after the measures transition out of the Star Ratings, 
and the availability of alternative related measures which address the 
specific clinical concerns.
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized earlier, we are finalizing the 
provisions related to the adoption, update, and removal of measures as 
proposed at paragraphs (c), (d), and (e) of Sec. Sec.  422.164 and 
423.184 with a minor modification to add the phrase ``nationally 
endorsed'' to Sec.  422.164(c)(1) so that the regulation text is 
identical to the parallel Part D provision at Sec.  423.184(c)(1).
i. Measure Set for Performance Periods Beginning on or After January 1, 
2019
    We proposed the measures included in Table 2 to be collected for 
performance periods beginning on or after January 1, 2019 for the 2021 
Part C and D Star Ratings. The CAHPS measure specification, including 
case-mix adjustment, is described in the Technical Notes and at ma-pdpcahps.org. The HOS measure specification, including case-mix 
adjustment, is described at (http://hosonline.org/globalassets/hos-online/survey-results/hos_casemix_coefficient_tables_c17.pdf). These 
specifications are part of our proposal.
    As indicated in the proposed rule, CMS will not codify a list of 
measures and specifications in regulation text in light of the regular 
updates and revisions contemplated by the rules we have finalized at 
paragraphs (c), (d) and (e) of Sec. Sec.  422.164 and 423.184. We 
would, as finalized in Sec. Sec.  422.164(a) and 423.184(a), issue 
annually the full list of measures in the Technical Notes for each 
year's Star Ratings.
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BILLING CODE 4120-01-C
    We summarize the comments received on the proposed measures and 
respond to them by measure in Table 3C for the Part C measures, for 
performance

[[Page 16547]]

periods beginning on or after January 1, 2019.

                        Table 3C--Part C Measures
------------------------------------------------------------------------
              Measure
------------------------------------------------------------------------
Breast Cancer Screening (BCS).....  Comment: A commenter expressed
                                     concerns that due to physical and
                                     mental limitations, all permanently
                                     institutionalized beneficiaries,
                                     including those under age 65,
                                     should be excluded from the Breast
                                     Cancer Screening measure. This
                                     commenter suggested that rather
                                     than undergo a mammogram, an
                                     alternative screening option would
                                     be an Automated Breast Ultrasound
                                     (ABUS).
                                    Response: CMS appreciates this
                                     feedback. CMS has shared comments
                                     received on this measure with NCQA,
                                     the measure steward, for
                                     consideration when their advisory
                                     panels re-evaluate this measures,
                                     as part of the standard HEDIS
                                     process.
Colorectal Cancer Screening (COL).  Comment: CMS received no comments on
                                     this measure.
Annual Flu Vaccine................  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
                                    Comment: CMS received one comment
                                     that the annual flu vaccine measure
                                     should use claims data as they are
                                     more reliable. Another commenter
                                     stated that beneficiaries in Puerto
                                     Rico are reluctant to vaccinate
                                     against the flu which unfairly
                                     impacts plans in Puerto Rico, and
                                     that asking beneficiaries to
                                     remember when they received a flu
                                     shot is a burden on them.
                                    Response: The flu item is a HEDIS
                                     measure collected through the CAHPS
                                     survey. Flu shot information is
                                     collected through a survey since
                                     there are a variety of places where
                                     people can get flu shots and the
                                     plan may not have a record of a flu
                                     shot in their administrative data
                                     depending on where the flu shot was
                                     received. We note that CMS applies
                                     standards of reliability to CAHPS
                                     results, directly and through
                                     significance testing. The item asks
                                     whether respondents received a flu
                                     shot since July in order to reflect
                                     the timeframe when beneficiaries
                                     typically receive flu shots. This
                                     is a process measure, and CMS does
                                     not adjust process measures for
                                     beneficiary refusals to avoid
                                     biasing the data.
HOS Measures:
    Improving or Maintaining        Comment: CMS received a number of
     Physical Health.                general comments on HOS measures.
                                    Response: CMS appreciates the
                                     feedback on the HOS measures. Since
                                     the comments on HOS measures were
                                     mostly not measure specific, please
                                     see the HOS summary of comments
                                     received as well as CMS responses
                                     following the Parts C and D Measure
                                     Tables.
Improving or Maintaining Mental     Comment: Several commenters
 Health.                             suggested the HOS measures
                                     Improving or Maintaining Physical
                                     Health and Improving or Maintaining
                                     Mental Health fail to consider the
                                     natural aging process or
                                     accommodate vulnerable
                                     beneficiaries and those with
                                     degenerative or progressive
                                     diseases. They pointed out that as
                                     time passes, patients are more
                                     prone to experience certain health
                                     deterioration and argued that
                                     changes in status--positive or
                                     negative--should not be attributed
                                     to the actions of the health plan.
                                     They again suggested that CMS drop
                                     the two year look-back design of
                                     the survey.
                                    Response: HOS yields two patient-
                                     reported outcome measures of change
                                     in global functioning, by using 2-
                                     year change in scores on the
                                     Physical Component Score (PCS) and
                                     the Mental Component Score (MCS),
                                     both of which come from the
                                     Veterans RAND 12-Item Health Survey
                                     (VR-12) portion of the larger
                                     survey. HOS assesses health
                                     outcomes for randomly selected
                                     beneficiaries from each health plan
                                     over a two-year period by using
                                     baseline measurement and a two-year
                                     follow up. In general, functional
                                     health status is expected to
                                     decline over time in older age
                                     groups, mental health status is
                                     not, and the presence of chronic
                                     conditions is associated with
                                     declines in both *.\37\
                                     Longitudinal HOS outcomes
                                     (including death) are adjusted for
                                     baseline age and other well studied
                                     risk factors, including chronic
                                     conditions, baseline health status,
                                     and socio-demographic
                                     characteristics that include
                                     gender, race, ethnicity, income,
                                     education, marital status, Medicaid
                                     status, SSI eligibility, and
                                     homeowner status. Because each
                                     beneficiary's follow up score is
                                     compared to their baseline score
                                     and adjusted for these risk
                                     factors, each beneficiary serves as
                                     his/her own control. CMS recognizes
                                     that Physical Component Summary
                                     (PCS) and Mental Component Summary
                                     (MCS) may decline over time and
                                     that health maintenance, rather
                                     than improvement, is a more
                                     realistic clinical goal for many
                                     older adults. Therefore, MA
                                     Organizations are asked to improve
                                     or maintain the physical and mental
                                     health of their members. Change
                                     scores are constructed and the
                                     results compare actual to expected
                                     changes in physical and mental
                                     health.
Monitoring Physical Activity (PAO)  Comment: CMS received no comments on
                                     this measure.
Adult BMI Assessment (ABA)........  Comment: CMS received one comment
                                     suggesting the BMI measure be
                                     removed from the Star Ratings
                                     program due to the commenter
                                     believing the measure to be `topped
                                     out.' A measure is considered
                                     `topped out' when it shows high
                                     performance across all contracts
                                     decreasing the variability across
                                     contracts and making the measure
                                     unreliable.
                                    Response: CMS appreciates the
                                     feedback; however, from a review of
                                     the Star Ratings data for this
                                     measure, there are many contracts
                                     rated below 4 stars. There have
                                     been significant increases in
                                     ratings for this measure in recent
                                     years so CMS is carefully
                                     monitoring this measure to see if
                                     it should be proposed for
                                     retirement from the Star Ratings in
                                     the future.
Special Needs Plan (SNP) Care       Comment: A commenter recommended
 Management.                         that the SNP Care Management
                                     measure be retired until clear
                                     technical guidance on the measure
                                     specifications can be issued by the
                                     agency and if the measure is
                                     reintroduced, the cut points should
                                     be stratified based on SNP type
                                     (for example, C-SNP, D-SNP), since
                                     the commenter believes various SNP
                                     types have different outcomes on
                                     this measure.

[[Page 16548]]

 
                                    Response: There are no upcoming
                                     clarifications or changes to this
                                     measure specifications for the 2021
                                     Star Ratings. Note that the SNP
                                     care management measure is
                                     collected at the PBP level and the
                                     requirement to complete a timely
                                     HRA for every plan member (which is
                                     the performance metric measured)
                                     applies to all SNP types. Sponsors
                                     are reminded that as part of the
                                     data validation process of plan-
                                     reported data, a reviewer must
                                     submit and review draft findings to
                                     the sponsor prior to submission via
                                     HPMS. Once data validation findings
                                     are submitted to HPMS, sponsors may
                                     formally submit their disagreement
                                     to CMS if necessary.
                                    Comment: A commenter suggested that
                                     some Star Rating measures are
                                     driven primarily by member
                                     outreach. As such, some plans with
                                     large dual-eligible populations are
                                     disproportionately negatively
                                     impacted by members who are more
                                     transient and with frequent address
                                     and phone number changes that
                                     directly result in fewer successful
                                     contacts and lower engagement. For
                                     outreach-driven measures, the
                                     commenter urges CMS to exclude
                                     members who were unreachable after
                                     a justifiable number of documented
                                     good faith attempts.
                                    Response: The requirement to
                                     complete a timely HRA for every
                                     plan member (which is the
                                     performance metric measured)
                                     applies to all SNP types and is
                                     regulatory. There are no upcoming
                                     specification changes that will
                                     affect this measure for the 2021
                                     Star Ratings. Note that plans may
                                     report when members are unreachable
                                     after documented attempts and when
                                     members refuse to complete the HRA,
                                     but those data are not used in
                                     calculating this measure.
SNP measures:
    Care for Older Adults (COA)--   Comment: A commenter expressed
     Medication Review, Care for     concerns about the varying
     Older Adults (COA)--            performance on SNP measures based
     Functional Status Assessment,   on the SNP type stating that the
     Care for Older Adults (COA)--   performance on these measures is
     Pain Assessment.                heavily biased related to type of
                                     SNP plan, rather than indicative of
                                     plan quality.
                                    Response: These measures are
                                     indicators of high quality care for
                                     all plans that focus on special
                                     needs populations. However, for
                                     HEDIS 2019, NCQA is considering
                                     modifications to these measures, to
                                     broaden the denominators to all
                                     patients with multiple chronic
                                     conditions. CMS will keep
                                     considerations in mind that
                                     measures not be primarily driven by
                                     plan type, rather than differences
                                     in quality of care.
Osteoporosis Management in Women    Comment: CMS received comments that
 who had a Fracture (OMW).           there should be different
                                     exclusions for some health
                                     conditions including osteoporosis
                                     because, for some patients, the
                                     treatments identified in the
                                     measure specification (that is for
                                     compliance) are not medically
                                     appropriate. Commenters noted that
                                     many challenges exist in treating
                                     and screening certain health
                                     conditions for patients with
                                     advanced illness. A commenter
                                     suggested that the Star Ratings
                                     clinical metrics may not be sound
                                     for frail patients with advanced
                                     illness.
                                    Response: CMS appreciates receiving
                                     feedback on this measure. For HEDIS
                                     2019, NCQA is examining potential
                                     cross-cutting exclusions for those
                                     with advanced illness from selected
                                     HEDIS[supreg] measures, including
                                     the Osteoporosis Management in
                                     Women Who Had a Fracture measure.
                                     Proposed changes to implement
                                     advanced illness exclusions will be
                                     posted for the HEDIS 2019 public
                                     comment period in February 2018.
                                     Please see additional comments
                                     related to Patients with Advanced
                                     Illness below.
Diabetes Care (CDC)--Eye Exam.....  Comment: CMS received no comments on
                                     this measure.
Diabetes Care (CDC)-- Kidney        Comment: CMS received a few comments
 Disease Monitoring.                 suggesting the Diabetes Care--
                                     Kidney Disease Monitoring measure
                                     be removed from the Star Ratings
                                     program due to the commenters
                                     belief the measure is `topped out.'
                                     A measure is considered `topped
                                     out' when it shows high performance
                                     across all contracts decreasing the
                                     variability across contracts and
                                     making the measure unreliable.
                                    Response: CMS appreciates the
                                     feedback, however, from a review of
                                     the Star Ratings for this measure,
                                     there are many plans rated below 4
                                     stars. A. As noted above in this
                                     preamble, among other
                                     considerations, CMS wants to
                                     balance how critical measures are
                                     to improving care and the
                                     availability of alternative related
                                     measures. If, for example, no other
                                     measures captures a key focus in
                                     Star Ratings, a `topped out'
                                     measure with lower reliability may
                                     be retained in Star Ratings.
                                     Currently, there are no alternative
                                     kidney disease monitoring measures
                                     appropriate for MA Star Ratings.
Diabetes Care (CDC)--Blood Sugar    Comment: CMS received no comments on
 Controlled.                         this measure.
Controlling Blood Pressure (CBP)..  Comment: CMS received a
                                     recommendation that in alignment
                                     with current clinical practice
                                     guidelines, ambulatory and home
                                     blood pressure readings that are
                                     documented in the treating
                                     provider's medical record be
                                     considered acceptable for the
                                     purposes of assessing the efficacy
                                     and appropriateness of a
                                     clinician's treatment plan.
                                    Response: CMS appreciates feedback
                                     on this measure. NCQA is currently
                                     reevaluating the Controlling High
                                     Blood Pressure measure and
                                     proposing to allow for readings
                                     taken from remote monitoring
                                     devices that transmit results
                                     directly to the provider. Details
                                     on this potential change will be
                                     posted for the HEDIS 2019 public
                                     comment period in February 2018.
Rheumatoid Arthritis Management     Comment: CMS received comments that
 (ART).                              evidence of treatment for
                                     rheumatoid arthritis not limited to
                                     disease-modifying anti-rheumatic
                                     drugs (DMARD) should be considered
                                     for compliance (that is, added to
                                     the numerator for the measure).
                                     Commenters noted that some patients
                                     have limited tolerance for DMARDs
                                     along with a much higher rate of
                                     serious adverse medication effects,
                                     particularly serious infections.

[[Page 16549]]

 
                                    Response: CMS appreciates receiving
                                     feedback on this measure. For HEDIS
                                     2019, NCQA is examining potential
                                     cross-cutting exclusions for those
                                     with advanced illness from selected
                                     HEDIS[supreg] measures, including
                                     the Disease-Modifying Anti-
                                     Rheumatic Drug Therapy for
                                     Rheumatoid Arthritis measures.
                                     Proposed changes to implement
                                     advanced illness exclusions will be
                                     posted for the HEDIS 2019 public
                                     comment period in February 2018.
                                     Please see additional comments
                                     related to Patients with Advanced
                                     Illness below. We understand from
                                     public statements that NCQA plans
                                     to reevaluate the Rheumatoid
                                     Arthritis Management measure and
                                     review the evidence for rheumatoid
                                     arthritis treatment with their
                                     advisory panels.
Reducing the Risk of Falling (FRM)  Comment: CMS received no comments on
                                     this measure.
Improving Bladder Control (MUI)...  Comment: CMS received no comments on
                                     this measure.
Medication Reconciliation Post-     Comment: CMS received no comments on
 Discharge (MRP).                    this measure.
Plan All-Cause Readmissions (PCR).  Comment: A commenter suggested that
                                     in order to provide MA
                                     organizations with greater
                                     visibility into plan performance,
                                     CMS should work with the NCQA to
                                     eliminate the calculation whereby a
                                     national average observed rate is
                                     multiplied by the observed to
                                     expected ratio of readmissions for
                                     Plan All-Cause Readmissions. A
                                     commenter noted that NCQA has
                                     announced in early 2018 substantive
                                     changes in the Plan All-Cause
                                     Readmissions measure.
                                    Response: CMS appreciated feedback
                                     on this measure. The calculation
                                     mentioned that uses the observed
                                     readmission rate divided by the
                                     expected readmission rate for a
                                     contract multiplied by the national
                                     average is the process to calculate
                                     the case-mix adjusted contract
                                     rate. A case-mix adjusted rate is
                                     used to ensure that the comparisons
                                     between contracts is fair and
                                     meaningful. It takes into account
                                     how sick patients were when they
                                     went into the hospital the first
                                     time. CMS will discuss with NCQA
                                     the need to better explain the
                                     calculations involved in the
                                     reporting of the measure.
                                    CMS decision: In that NCQA is
                                     planning to make significant
                                     changes to the Plan All-Cause
                                     Readmissions measure (changes to be
                                     published in 2018 and applied in
                                     measurement year 2019) CMS is not
                                     finalizing this as part of the
                                     measure set for the 2019
                                     performance period and the 2021
                                     Ratings. CMS is finalizing this as
                                     a display measure and consistent
                                     with Sec.   422.164(d)(2) will
                                     include this measure on the display
                                     page for 2 years.
Getting Needed Care...............  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
Getting Appointments and Care       Comment: CMS received many general
 Quickly.                            and specific comments on CAHPS
                                     measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were not always measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
                                    Comment: CMS received one comment
                                     that this composite is unfair to
                                     plans in Puerto Rico because
                                     beneficiaries in Puerto Rico are
                                     not necessarily used to having a
                                     specific appointment time.
                                    Response: We thank the commenter for
                                     this comment. We have conducted
                                     some exploratory work related to
                                     this topic and may propose changes
                                     in the future after consulting with
                                     AHRQ.
Customer Service..................  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
Rating of Health Care Quality.....  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
Rating of Health Plan.............  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
Care Coordination.................  Comment: CMS received many general
                                     and specific comments on CAHPS
                                     measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were not always measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
Complaints about the Health Plan..  Comment: A commenter recommended
                                     creating an excluded category/sub-
                                     category for complaints related to
                                     CMS/SSA system/enrollment issues or
                                     limitations which would effectively
                                     remove complaints of that type from
                                     this measure.
                                    Response: Data exchanges between CMS
                                     and SSA occur regularly and mostly
                                     without incident. When issues
                                     occur, CMS often looks to plan
                                     sponsors to communicate accordingly
                                     to their members and utilize CMS
                                     resources, such as the MA-PD help
                                     desk, to help address their matter
                                     without referral to CMS and
                                     generation of complaints. CMS is
                                     not instituting such a category/sub-
                                     category at this time. Plan
                                     Sponsors should continue to work
                                     alongside their CMS caseworker as
                                     appropriate to provide assistance.
                                    Comment: A few commenters requested
                                     updates to the CMS CTM standard
                                     operating procedures (SOP). There
                                     was a request to provide
                                     instructions for plans to return
                                     issues (either as a CMS issue or as
                                     a closed complaint) determined by 1-
                                     800-Medicare to be errors. Another
                                     request was that complaints found
                                     to not be the fault of the plan be
                                     considered CMS issues, or
                                     reassigned to another entity.

[[Page 16550]]

 
                                    Response: CMS regularly utilizes
                                     feedback from plans and other
                                     stakeholders to identify
                                     opportunities for continuous
                                     improvement of CMS resources such
                                     as 1-800-Medicare. Due to the
                                     volume of CTM complaints received
                                     annually, CMS cannot investigate
                                     for individual errors. CMS expects
                                     such matters to be rare, and any
                                     impact on plans to be evenly
                                     distributed. Plan Sponsors should
                                     not seek recategorization of
                                     marketing complaints because, as a
                                     result of plan investigation, they
                                     have determined the allegation is
                                     unfounded. However, if a marketing
                                     complaint has been misclassified,
                                     and the narrative reflects that the
                                     alleged misrepresentation occurred
                                     by a Call Center representative,
                                     SHIP, etc., then a Plan Request to
                                     make the complaint a ``CMS Issue''
                                     is appropriate. CMS appreciates the
                                     feedback and will include
                                     additional language in the next
                                     version of the CTM Plan SOP.
                                    Comment: A commenter suggested that
                                     CMS create an excluded category
                                     intended for cases that are
                                     educational and/or are referrals to
                                     the contract.
                                    Response: It is not CMS' intention
                                     for the CTM to communicate plan
                                     information or simply provide
                                     education.
                                    Comment: A commenter stated concerns
                                     that duplicate complaints count
                                     against plan sponsors.
                                    Response: CMS' CTM SOP includes
                                     procedures for the removal of
                                     duplicate complaints with the same
                                     complaint identification numbers,
                                     so there is no impact on plan
                                     sponsors. CMS has taken numerous
                                     steps over the years to reduce the
                                     instances of this occurring and
                                     expect that plan sponsors have
                                     noticed significant improvement in
                                     this area. If a beneficiary's issue
                                     persists or is not be resolved by a
                                     plan, multiple complaints may be
                                     entered into the CTM. These
                                     complaints are not duplicative, but
                                     reflect unresolved or similar
                                     issues. CMS does not support
                                     removing such complaints. Inclusion
                                     of these complaints effectively
                                     rewards plan sponsors who are
                                     prompt with acknowledging and
                                     resolving complaints, and provide
                                     excellent customer service to
                                     beneficiaries.
                                    Comment: A commenter requested clear
                                     processes for when the assignment/
                                     reassignment date should be reset
                                     by CMS caseworkers, so that plan
                                     sponsors can better strategize
                                     their actions.
                                    Response: Assignment/reassignment
                                     date by CMS caseworkers is a topic
                                     outside the scope of this rule.
Members Choosing to Leave the Plan  Comment: A couple of commenters
                                     suggested that the disenrollment
                                     rate does not reflect the plan's
                                     quality and the beneficiary
                                     experience. They note that the
                                     disenrollment rate is impacted by
                                     the pricing and coverage strategies
                                     of the contract. Among those
                                     commenters dissatisfied with what
                                     the disenrollment rate reflects and
                                     does not reflect, a commenter
                                     suggested that this measure be
                                     moved to the display page.
                                    Response: CMS is statutorily
                                     required to report voluntary
                                     disenrollment rates as part of the
                                     Balanced Budget Act of 1997.
                                     Disenrollment rates are a strong
                                     measure of a beneficiary's
                                     satisfaction with a contract.
                                     Beneficiaries who are interested in
                                     seeing why enrollees voluntarily
                                     leave a contract can obtain this
                                     information as a drill down to the
                                     disenrollment rates on Medicare
                                     Plan Finder. CMS respectfully
                                     disagrees that pricing strategies
                                     and the coverage provided by the
                                     contract should not be considered
                                     in assessing the quality and
                                     performance of contracts since they
                                     have a direct impact on access to
                                     services.
                                    Comment: A commenter suggests that
                                     CMS conduct additional analyses to
                                     see if the disenrollment rates
                                     should be adjusted by the
                                     proportion of SNP members.
                                    Response: CMS appreciates this
                                     comment and will analyze the data
                                     to see if any future changes are
                                     needed. Any potential changes would
                                     be subject to future rulemaking.
                                     The current Star Ratings
                                     adjustments for dual status are
                                     incorporated as part of the CAI.
Health Plan Quality Improvement...  For the summary of comments received
                                     and CMS' responses for this
                                     measure, please see section `j.
                                     Improvement Measures' of the
                                     Preamble.
Plan Makes Timely Decisions about   Comment: CMS received a comment
 Appeals.                            opposing the inclusion of
                                     dismissals in the Plan Makes Timely
                                     Decisions about Appeals measure.
                                     The commenter expressed concern
                                     that if the inclusion of dismissals
                                     is a positive factor in the
                                     measure, it would create incentives
                                     for the MA organization to increase
                                     the opportunities to enter
                                     dismissals.
                                    Response: CMS appreciates the
                                     comment about dismissals. To
                                     clarify, the measure for the 2021
                                     Star Ratings includes cases
                                     dismissed by the IRE because the
                                     plan has subsequently approved
                                     coverage/payment. In prior years,
                                     we excluded all cases dismissed/
                                     withdrawn by the IRE from this
                                     measure. The inclusion of
                                     dismissals would only apply to
                                     cases dismissed by the IRE because
                                     the plan issued an untimely but
                                     favorable decision. In other words,
                                     plans may send late Part C appeals
                                     to the IRE while simultaneously (or
                                     shortly thereafter) approving the
                                     late cases which results in the
                                     case being dismissed by the IRE,
                                     thus masking that the plans'
                                     decisions were untimely. Inclusion
                                     of cases where the plan has
                                     subsequently approved for coverage/
                                     payment that are dismissed or
                                     withdrawn at the IRE level could
                                     provide a more accurate assessment
                                     of plans' timeliness in their Part
                                     C appeals processing. Without
                                     excluding this group of dismissals,
                                     a plans' performance may be
                                     artificially improved as a result,
                                     especially if dismissals were
                                     directly related to the plans'
                                     (untimely) approvals.
                                    If an MA plan fails to provide the
                                     appellant with a reconsidered
                                     determination within the required
                                     timeframes, this failure
                                     constitutes an affirmation of its
                                     adverse organization determination,
                                     and the plan must submit the case
                                     file to the IRE for review. This
                                     new measure would more accurately
                                     reflect that MA plans are not
                                     making timely decisions. CMS does
                                     not believe this would create the
                                     incentive described by the
                                     commenter.
                                    CMS acknowledges these comments and
                                     is actively evaluating these
                                     measures and the use of the IRE
                                     data as their data source for
                                     future enhancements.
                                    Comment: CMS received a comment
                                     recommending that this measure be
                                     weighted by membership by
                                     calculating the measure similarly
                                     to the Part D Auto-Forward measure
                                     to ensure plans of all sizes are
                                     measured equally.
                                    Response: The Part C and Part D
                                     appeals systems are different, they
                                     have different rules for how
                                     appeals are handled. There are no
                                     auto-forwards in Part C and the
                                     number of late appeals examines how
                                     well the contract is processing the
                                     appeals in a timely manner.
                                     Additionally each measure has
                                     different specifications.

[[Page 16551]]

 
Reviewing Appeals Decisions.......  Please see response for Part D
                                     Appeals Upheld measure.
Call Center--Foreign Language       Comment: A few commenters
 Interpreter and TTY Availability.   recommended that CMS revise the
                                     measure's sampling methodology for
                                     volume and for volume by language
                                     (including consideration of plans
                                     with larger enrollment sizes), or
                                     revise the foreign languages and
                                     testing frequency. An additional
                                     commenter recommended that CMS
                                     adjust the foreign languages tested
                                     to the languages actually spoken in
                                     that plan's area, and mentioned
                                     that 99 percent of local residents
                                     speak Spanish in Puerto Rico. The
                                     commenter also suggested using a
                                     single, combined measure (or rate)
                                     for both Part C and D.
                                    Response: The Accuracy and
                                     Accessibility Study is performed to
                                     (1) ascertain the accuracy of
                                     responses to plan benefit questions
                                     provided by customer service
                                     representatives when calling the
                                     call center in addition to (2)
                                     testing the availability of
                                     interpreters for Limited English
                                     Proficient callers and (3) testing
                                     TTY functionality. A simple random
                                     sample method is used. To reduce
                                     the burden on a call center with
                                     multiple phone lines, we select
                                     samples across the call centers
                                     instead of the phone lines. The
                                     precision requirement of the sample
                                     size is calculated at the call
                                     center level and is based on the
                                     question response accuracy rates
                                     obtained from the accuracy survey,
                                     and the rate of completed calls
                                     made through Limited English
                                     Proficiency (LEP) accommodations
                                     and TTY services. This methodology
                                     was chosen by CMS, in part, because
                                     the accuracy of the information
                                     provided to a caller in response to
                                     specific benefits questions should
                                     not be impacted by enrollment size
                                     or physical call center location.
                                     If contract enrollment size is
                                     positively correlated with higher
                                     variability and wider margins of
                                     error in these key metrics of this
                                     study, CMS would expect to see
                                     contracts with higher enrollments
                                     having the key metrics closer to 50
                                     percent than the contracts with
                                     lower enrollments. We have not
                                     observed that in the data and will
                                     therefore continue to use the
                                     methodology as designed. Call
                                     centers using more or fewer
                                     representatives are held to the
                                     same expectation that the
                                     information provided to callers is
                                     accurate.
                                    Foreign language testing was never
                                     intended to be proportionate to the
                                     demographics of any contract. Plan
                                     sponsors are required to provide an
                                     interpreter for any caller speaking
                                     a foreign language, and CMS seeks
                                     to ensure that more vulnerable
                                     populations have equal access to
                                     interpreters. Rather than test all
                                     foreign languages which would be
                                     overly burdensome and costly, CMS
                                     selects 6 foreign languages from
                                     among the top 10 most frequently
                                     spoken languages in the U.S.,
                                     according to the Office for Civil
                                     Rights (which makes its selections
                                     from U.S. Census Data). The number
                                     of calls by foreign language is
                                     equally divided and randomly
                                     assigned to each call center across
                                     the biweekly calling schedule. The
                                     number received by the call center
                                     is dependent upon each call
                                     successfully reaching the call
                                     center (for example, disconnects in
                                     an IVR or other factors will impact
                                     the ability of the call to reach a
                                     representative). Internal analysis
                                     across all plans shows that the
                                     methodology is sound and CMS has
                                     confidence in the data.
                                    When testing in Puerto Rico, Spanish
                                     is the native language and English
                                     is treated as a foreign language.
                                     Because some of the accuracy calls
                                     are placed in the native language
                                     in addition to foreign language
                                     testing, Spanish calls are placed
                                     at a higher volume for plans in
                                     Puerto Rico.
                                    By design, the Accuracy and
                                     Accessibility Study schedules and
                                     places calls to phone numbers that
                                     may or may not be the same for Part
                                     C and Part D. Also, the study is
                                     conducted at the call center level
                                     (not the phone number level), and
                                     not all plans use the same call
                                     center for Part C as for Part D.
                                     Finally, the accuracy questions
                                     used in this study either relate to
                                     Part C benefit questions or to Part
                                     D benefit questions. Because the
                                     questions are different for each,
                                     CMS believes performance should be
                                     measured separately for the Part C
                                     and Part D programs.
Statin Therapy for Patients with    Comment: CMS received two comments
 Cardiovascular Disease (SPC).       seeking clarification regarding the
                                     categorization and weighting
                                     discrepancies between the Part C
                                     and Part D statin measures. Two
                                     organizations recommended
                                     classifying both SPC and SUPD as
                                     process measures with a weight of
                                     one.
                                    Response: CMS appreciates the
                                     feedback. The Part C Statin Therapy
                                     for Patients with Cardiovascular
                                     Disease (SPC) measure is the
                                     percent of plan members (males 21-
                                     75 years of age and females 40-75
                                     years of age) who were identified
                                     as having clinical atherosclerotic
                                     cardiovascular disease (ASCVD) and
                                     were dispensed at least one high or
                                     moderate-intensity statin
                                     medication. This Part C measure
                                     focuses on patients who were
                                     dispensed one prescription and
                                     whether the patient filled the
                                     medication at least once.
                                     Therefore, it is a process measure.
                                     The Part D measure is the percent
                                     of the number of plan members 40-75
                                     years old who were dispensed at
                                     least two diabetes medication fills
                                     and received a statin medication
                                     fill. Receiving multiple fills
                                     indicates the patient continues to
                                     take the medication and therefore
                                     suggests adherence. Continuing to
                                     take the prescribed medication is
                                     necessary to reach clinical/
                                     therapeutic goals. Thus, the Part D
                                     measure is an intermediate outcome
                                     measure. We believe that for these
                                     measures as proposed (and finalized
                                     in this rule) are properly
                                     categorized.
------------------------------------------------------------------------

    We summarize the comments received on the proposed measures and 
respond to them by measure in Table 3D for the Part C measures, for 
performance periods beginning on or after January 1, 2019.
---------------------------------------------------------------------------

    \37\ Ware JE, Kosinski M. SF-36 Physical and Mental Health 
Summary Scales: A Manual for Users of Version 1, Second Edition. 
Lincoln, RI: QualityMetric, Incorporated, 2001.

                        Table 3D--Part D Measures
------------------------------------------------------------------------
              Measure
------------------------------------------------------------------------
Call Center--Foreign Language       Please see comments received and
 Interpreter and TTY Availability.   CMS' responses for this measure in
                                     the above Part C Measures table for
                                     the measure Call Center--Foreign
                                     Language Interpreter and TTY
                                     Availability.

[[Page 16552]]

 
Appeals Auto-Forward..............  Comment: CMS received one comment
                                     suggesting that CMS align the Part
                                     D Appeals Auto-Forward measure with
                                     the Part C Plan Makes Timely
                                     Decisions about Appeals measure.
                                     The commenter also complained that
                                     cases that can be approved, but
                                     because the approvals are untimely,
                                     the cases are forwarded to the IRE;
                                     the commenter said this can cause
                                     delays in patient care as the
                                     member, provider, and plan await
                                     the IRE's decision.
                                    Response: CMS appreciates receiving
                                     comments on this measure. However,
                                     the Part C and Part D appeals
                                     systems are not interchangeable.
                                     Each appeal system has its own set
                                     of rules and procedures which mean
                                     that combining or aligning these
                                     measures is not appropriate. We
                                     direct the commenter to the appeal
                                     regulations at Sec.  Sec.   422.590
                                     and 422.592 as compared to Sec.
                                     Sec.   423.568(h). Further, we note
                                     that the MA and Part D plans have
                                     full control of the appeal prior to
                                     it having been sent to the IRE. In
                                     the example cited, if the plan had
                                     approved the original request from
                                     the member, the appeal would not
                                     have needed to be raised to the IRE
                                     level or incurred the additional
                                     waiting time.
Appeals Upheld....................  Comment: CMS received a comment
                                     requesting that CMS adjust the
                                     Reviewing Appeals Decisions measure
                                     to remove from the measure denials
                                     due to lack of response from
                                     providers from the denominator and
                                     the numerator. The commenter also
                                     requested to align timeframes for
                                     the plan with the IRE stating that
                                     the IRE is generally held to the
                                     same adjudication timeframes as the
                                     plan but if additional information
                                     is needed from a prescriber, the
                                     IRE is allowed to extend the
                                     adjudication timeframe to obtain
                                     this information. The commenter
                                     further said that a plan is not
                                     afforded this time and must deny
                                     based on the information provided
                                     in order to prevent cases from
                                     being auto-forwarded to the IRE.
                                     Therefore, the commenter requested
                                     to measure fairness based on the
                                     information the plan had at the
                                     time of the plan's decision. Plans
                                     should also not be penalized for
                                     appeals that were overturned when
                                     providers provided ``new''
                                     information to the IRE, which was
                                     not originally submitted by the
                                     provider at the time of the plan's
                                     original coverage determination or
                                     redetermination. A commenter from a
                                     plan noted that this measure did
                                     not reflect the commenter's true
                                     plan performance.
                                    Additionally, this commenter noted
                                     several instances where cases were
                                     overturned by the IRE due to
                                     allowing non-Part D supported
                                     indications to be considered and
                                     disregarding the commenter's CMS
                                     approved clinical policies. Due to
                                     these issues, the commenter
                                     proposed an alternative formula to
                                     capture Appeals Upheld data and
                                     measure plan performance in this
                                     area.
                                    Response: CMS appreciates the
                                     comment. Plans and sponsors must
                                     have procedures in place for
                                     requesting and obtaining
                                     information necessary for making
                                     timely and appropriate decisions.
                                     The IRE's decision is based on the
                                     information gathered during its
                                     review process. Adjusting appeal
                                     timeframes is not within the scope
                                     of this proposal, however, we note
                                     that the IRE must issue a decision
                                     within the same appeals timeframe
                                     as the plan. Please refer to 42 CFR
                                     423.600(d). The timeframes for the
                                     plan and the IRE are aligned. At
                                     this time, CMS will continue to
                                     include this measure in the Star
                                     Ratings CMS acknowledges these
                                     comments, and is actively
                                     evaluating these measures, and the
                                     use of the IRE data as their data
                                     source. For future enhancements.
Complaints about the Drug Plan....  Please see comments received and
                                     CMS' responses for this measure in
                                     the above Part C Measures table for
                                     the measure Complaints about the
                                     Health Plan.
Members Choosing to Leave the Plan  Please see comments received and
                                     CMS' responses for this measure in
                                     the above Part C Measures table for
                                     the measure Members Choosing to
                                     Leave the Plan.
Drug Plan Quality Improvement.....  For the summary of comments received
                                     and CMS' responses for this
                                     measure, please see section `j.
                                     Improvement Measures' of the
                                     Preamble.
Rating of Drug Plan...............  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
                                    Comment: A commenter suggested we
                                     consider this measure `topped out.'
                                    Response: We do not agree this
                                     measure is `topped out'' since many
                                     contracts receive less than 4
                                     stars. Previous analyses of CAHPS
                                     scores have suggested that
                                     seemingly small differences of 1
                                     point on a 0-100 scale are
                                     meaningful; differences of 3 points
                                     can be considered medium, and
                                     differences of 5 points can be
                                     considered large.\38\ For instance,
                                     a 3-point increase in some CAHPS
                                     measures has been associated with a
                                     30 percent reduction in
                                     disenrollment from health plans,
                                     which suggests that even ``medium''
                                     differences in CAHPS scores may
                                     indicate substantially different
                                     care experiences.\39\
Getting Needed Prescription Drugs.  Comment: CMS received a number of
                                     general comments on CAHPS measures.
                                    Response: CMS appreciates the
                                     feedback on the CAHPS measures.
                                     Since the comments on CAHPS
                                     measures were mostly not measure
                                     specific, please see the CAHPS
                                     summary of comments received as
                                     well as CMS responses following the
                                     Parts C and D Measure Tables.
                                    Comment: CMS received one comment
                                     that this composite penalizes Part
                                     D plans where patients do not
                                     prefer to fill prescriptions by
                                     mail.
                                    Response: CMS disagrees that this
                                     composite penalizes plans based on
                                     how beneficiaries choose to fill
                                     prescriptions; rather, the item
                                     focuses on ease of getting
                                     prescriptions filled when using the
                                     plan. The composite covers two
                                     topics: How often it was easy to
                                     use your plan to get the medicines
                                     your doctor prescribed (assessed by
                                     one item) and ease of filling
                                     prescriptions (assessed by
                                     combining two items about how often
                                     it was easy to use your plan to
                                     fill a prescription at your local
                                     pharmacy, and how often it was easy
                                     to use your plan to fill a
                                     prescription by mail). The combined
                                     pharmacy/mail score is averaged
                                     with the first item's score to
                                     produce the composite score. This
                                     averaging weights mail and pharmacy
                                     according to how many respondents
                                     say they use each method, so mail
                                     would not count at all if no one in
                                     the plan uses mail.
                                    Comment: A commenter suggested we
                                     consider this measure `topped out.'

[[Page 16553]]

 
                                    Response: We do not agree this
                                     measure is `topped out' since many
                                     contracts receive less than 4
                                     stars. Previous analyses of CAHPS
                                     scores have suggested that
                                     seemingly small differences of 1
                                     point on a 0-100 scale are
                                     meaningful; differences of 3 points
                                     can be considered medium, and
                                     differences of 5 points can be
                                     considered large.\40\ For instance,
                                     a 3-point increase in some CAHPS
                                     measures has been associated with a
                                     30 percent reduction in
                                     disenrollment from health plans,
                                     which suggests that even ``medium''
                                     differences in CAHPS scores may
                                     indicate substantially different
                                     care experiences.\41\
MPF Price Accuracy................  Comment: A commenter asked CMS to
                                     identify which of the two possible
                                     calculations will be included in
                                     the MPF Accuracy measure. The
                                     commenter noted that CMS had
                                     previously proposed to update the
                                     measure to include frequency and
                                     magnitude of prescription drug
                                     event (PDE) prices that exceed MPF
                                     information beginning with the 2016
                                     data but reverted to the old
                                     measurement (only magnitude) with
                                     the 2018 Star Rating release.
                                    Response: The MPF Accuracy measure
                                     will only measure the magnitude of
                                     difference, as has been done in the
                                     past. CMS will continue to
                                     calculate each contract's accuracy
                                     index which measures the amount
                                     that the PDE price is higher than
                                     the MPF price. CMS will consider
                                     for future rule-making, with
                                     stakeholder input, to include both
                                     frequency and magnitude of PDE
                                     prices that exceed MPF information
                                     in the Accuracy measure.
                                    Comment: A commenter suggested that
                                     this measure is `topped out'. A
                                     measure is considered `topped out'
                                     when it shows high performance
                                     across all contracts decreasing the
                                     variability across contracts and
                                     making the measure unreliable.
                                    Response: As announced through the
                                     2019 Call Letter, CMS is proposing
                                     enhancements to this measure for
                                     the CY2022 Ratings. The enhanced
                                     measure will first be put on
                                     display before being added into the
                                     Star Ratings program pursuant to
                                     the rules in Sec.   423.184.
Adherence Measures:
    Medication Adherence for        Comment: A few commenters requested
     Diabetes Medications,           that CMS consider excluding
     Medication Adherence for        beneficiary prescriptions from
     Hypertension, Medication        these measures or create a
     Adherence for Cholesterol       reporting mechanism that allows
     (Statins).                      plans to identify prescriptions for
                                     removal that are documented as
                                     ``discontinued'' or prescriptions
                                     with therapy changes; the commenter
                                     stated that these changes would
                                     avoid the appearance that
                                     beneficiaries with discontinued
                                     medications are non-adherent. A
                                     commenter expressed concerns about
                                     the thresholds for the medication
                                     adherence for diabetes and
                                     cholesterol measures citing that
                                     they are reaching unsafe levels and
                                     do not reflect individual needs
                                     such as in the aging elderly
                                     population. They described several
                                     circumstances that can adversely
                                     affect adherence measures and
                                     suggest noncompliance, such as
                                     prescription data entry errors and
                                     changes in therapy due to clinical
                                     indicators.
                                    A commenter commended CMS on
                                     including adherence measures in the
                                     Star Ratings. Another commenter
                                     recommended that CMS weight MA-PD
                                     and PDP measures differently based
                                     on the plan's ability to influence
                                     outcomes on a measure. It was
                                     recommended that CMS require
                                     beneficiaries to provide a contact
                                     phone number at the time of
                                     enrollment in order to assist plans
                                     in reaching members to impact
                                     adherence. Another commenter was
                                     concerned about the significant
                                     negative impact by LIS members on
                                     adherence measures.
                                    Response: We appreciate the
                                     feedback. CMS' mission is to
                                     promote quality care for our
                                     beneficiaries. In our May 11, 2012
                                     HPMS memo entitled `Prohibition on
                                     Submitting PDEs for non-Part D
                                     prescriptions', we outlined our
                                     concerns related to beneficiary
                                     privacy protections and data
                                     validation for the submissions of
                                     non-Part D data. If Part D sponsors
                                     were to attempt to collect the data
                                     it is unclear how sponsors could
                                     implement sufficient internal
                                     controls to meet audit standards
                                     necessary to ensure the quality of
                                     the data. In addition, requiring
                                     physicians to attest to therapy
                                     changes or discontinuation of a
                                     prior prescription would be an
                                     added burden and counterproductive
                                     to CMS' Patients over Paperwork
                                     initiative. In the case of changes
                                     in therapy (such as holding or
                                     discontinuing medication), we
                                     believe that the 80 percent
                                     compliance threshold incorporates
                                     these circumstances as the ideal
                                     compliance expectation is 100
                                     percent. We will pass along these
                                     comments to the measure steward
                                     (PQA) but we are unable to use
                                     supplemental data to calculate the
                                     measures.
                                    Data entry error is also a concern
                                     of CMS. We believe that Part D
                                     sponsors have the ability to
                                     identify and correct many data
                                     errors at the point-of-sale and
                                     afterward. Similar to the CMS Part
                                     D Potential Exclusion Warning
                                     Report that identifies PDEs for
                                     adjustment or deletion, plan
                                     sponsors could use their POS edits
                                     systems to screen for data entry
                                     errors. For example, screening
                                     criteria based on a maximum or
                                     minimum daily dose or units per day
                                     could identify outliers. In the
                                     example above, if the term ``3
                                     days'' was accidently entered
                                     instead of ``30 days,'' this could
                                     result in a daily dose that is
                                     significantly higher than the
                                     expected maximum daily dose and
                                     would be an outlier. The claim
                                     could be denied at the POS with a
                                     message of `potential data entry
                                     error' notifying the pharmacist or
                                     technician the need to review and
                                     make a correction. In addition, CMS
                                     provides monthly lists to each plan
                                     sponsor of their members who are
                                     identified as non-compliant
                                     starting in April of each year,
                                     this procedure provides Part D
                                     plans ample time to review their
                                     data and submit corrections.
                                    Also, we disagree that stand-alone
                                     PDPs have very little influence on
                                     beneficiaries' medication
                                     adherence. There are many
                                     strategies that can be used to
                                     improve a beneficiary's medication
                                     adherence in addition to prescriber
                                     interventions, such as refill
                                     reminders, formulary and benefits
                                     design, and medication therapy
                                     management programs. Plan sponsors
                                     can also leverage network pharmacy
                                     relationships to address medication
                                     adherence issues, facilitate
                                     medication synchronization, or
                                     provide education and counseling.
                                     In the absence of a contact phone
                                     number for the beneficiary, it may
                                     be beneficial to use these
                                     interventions to reach the
                                     beneficiary at the place of
                                     dispensing. Furthermore, MA-PDs and
                                     PDPs are rated separately to
                                     account for delivery system
                                     differences. Lastly, as finalized
                                     in the 2019 Call Letter, adherence
                                     measures will now be included in
                                     the CAI to account for LIS
                                     beneficiaries.

[[Page 16554]]

 
MTM Program Completion Rate for     Comment: A commented requested CMS
 CMR.                                move away from MTM process measures
                                     and include outcomes-based MTM
                                     measures in the Star Ratings
                                     program in the future. In the
                                     interim, it was recommended that
                                     CMS evaluate changes to the MTM
                                     Comprehensive Medication Review
                                     Completion Rate (CMR) measure
                                     methodology and that CMS partner
                                     with PQA to develop and understand
                                     the feasibility of implementing
                                     outcome and/or patient-experience
                                     based MTM measures.
                                    Response: The CMR completion rate
                                     measure is an initial measure of
                                     the delivery of MTM services, and
                                     we continue to look forward to the
                                     development and endorsement of
                                     outcomes-based MTM measures as
                                     potential companion measures to the
                                     current MTM Completion Rate CMR
                                     measure. We will consider new MTM
                                     measures when available. Past
                                     analyses did not find a correlation
                                     between a sponsor's rate of MTM
                                     program eligibility and the CMR
                                     completion rate, but we will
                                     continue to monitor and work with
                                     the PQA to consider if any
                                     adjustments are needed to this
                                     measure's specifications.
                                    Comment: A commenter opposed
                                     inclusion of the MTM CMR completion
                                     rate measure in the Star Ratings
                                     due to compliance issues. The
                                     commenter suggested allowing
                                     completion of CMRs with the
                                     beneficiary's prescriber when
                                     unable to contact the beneficiary.
                                    Response: As outlined in 42 CFR
                                     423.153(d)(vii)(B)(2), if a
                                     beneficiary is offered the annual
                                     comprehensive medication review and
                                     is unable to accept the offer to
                                     participate, the pharmacist or
                                     other qualified provider may
                                     perform the comprehensive
                                     medication review with the
                                     beneficiary's prescriber,
                                     caregiver, or other authorized
                                     individual. Current guidance
                                     clarifies that while providers are
                                     required to offer a CMR to all
                                     beneficiaries enrolled in the MTM
                                     program, regardless of setting, in
                                     the event the beneficiary is
                                     cognitively impaired or otherwise
                                     unable to participate, we recommend
                                     that the pharmacist or qualified
                                     provider reach out to the
                                     beneficiary's prescriber,
                                     caregiver, or other authorized
                                     individual, such as the resident's
                                     health care proxy or legal
                                     guardian, to take part in the
                                     beneficiary's CMR. This applies to
                                     beneficiaries in any setting and is
                                     not limited to beneficiaries in
                                     long term care (LTC). This does not
                                     apply to situations where the
                                     sponsor is simply unable to reach
                                     the beneficiary or there is no
                                     evidence of cognitive impairment.
                                     Therefore, we are unable to
                                     consider changes to the measure
                                     absent a change in regulation or
                                     guidance.
Statin Use in Persons With          Comment: A few commenters supported
 Diabetes (SUPD).                    CMS in including this SUPD measure
                                     in the Star Ratings. A commenter
                                     noted support of the addition of a
                                     quality metric monitoring the use
                                     of statins in patients with
                                     diabetes, however, feels that CMS
                                     did not provide a thoughtful
                                     explanation for not selecting the
                                     Part C HEDIS measure of Statin
                                     Therapy in Patients with Diabetes
                                     (NCQA measure), which had also been
                                     under consideration. This measure
                                     includes more robust clinical
                                     considerations for patient
                                     eligibility and thus
                                     appropriateness of statin use.
                                    Response: CMS thanks commenters for
                                     feedback on this measure. Both the
                                     NCQA and PQA measures of statin
                                     therapy were proposed for inclusion
                                     in the Star Ratings, one for Part C
                                     and the other for Part D. As the
                                     Pharmacy Quality Alliance (PQA) is
                                     the developer of the Statin Use in
                                     Persons with Diabetes (SUPD)
                                     measure, CMS will share these
                                     comments with the PQA for their
                                     consideration.
                                    Comment: CMS received two comments
                                     seeking clarification regarding the
                                     categorization and weighting
                                     discrepancies between the Part C
                                     and Part D statin measures. Two
                                     organizations recommended
                                     classifying both SPC and SUPD as
                                     process measures with a weight of
                                     one.
                                    Response: Please refer to the Part C
                                     measure response for Statin Use for
                                     Patients with Cardiovascular
                                     Disease (SPC).
------------------------------------------------------------------------

CAHPS: Summary of Additional Comments Received and CMS's Responses
---------------------------------------------------------------------------

    \38\ Paddison CAM, Elliott MN, Haviland AM, Farley DO, 
Lyratzopoulos G, Hambarsoomian K, Dembosky JW, Roland MO. (2013). 
``Experiences of Care among Medicare Beneficiaries with ESRD: 
Medicare Consumer Assessment of Healthcare Providers and Systems 
(CAHPS) Survey Results.'' American Journal of Kidney Diseases 61(3): 
440-449.
    \39\ Lied, T.R., S.H. Sheingold, B.E. Landon, J.A. Shaul, and 
P.D. Cleary. (2003). ``Beneficiary Reported Experience and Voluntary 
Disenrollment in Medicare Managed Care.'' Health Care Financing 
Review 25(1): 55-66.
    \40\ Paddison CAM, Elliott MN, Haviland AM, Farley DO, 
Lyratzopoulos G, Hambarsoomian K, Dembosky JW, Roland MO. (2013). 
``Experiences of Care among Medicare Beneficiaries with ESRD: 
Medicare Consumer Assessment of Healthcare Providers and Systems 
(CAHPS) Survey Results.'' American Journal of Kidney Diseases 61(3): 
440-449.
    \41\ Lied, T.R., S.H. Sheingold, B.E. Landon, J.A. Shaul, and 
P.D. Cleary. (2003). ``Beneficiary Reported Experience and Voluntary 
Disenrollment in Medicare Managed Care.'' Health Care Financing 
Review 25(1): 55-66.
---------------------------------------------------------------------------

    Comment: CMS received a few comments that CAHPS measures are 
subjective and not reliable. A few commenters stated the CAHPS survey 
responses are not actionable.
    Response: CMS strongly disagrees that patient experience of care 
survey measures are not reliable. CAHPS and other patient experience 
measures have been endorsed as critical aspects of healthcare by the 
Institute of Medicine and the World Health Organization.\42\ \43\ CAHPS 
surveys focus on aspects of healthcare quality that patients themselves 
say are important to them and for which patients are the best and/or 
only source of information. Patient experience surveys such as CAHPS 
focus on how patients experienced key aspects of their care, not merely 
how satisfied they were with their care. Patient experience encompasses 
the range of interactions that patients have with the healthcare 
system, including their care from health plans, and from doctors, 
nurses, and staff in hospitals, physician practices, and other 
healthcare facilities.\44\ While patient experience is an inherently 
important dimension of healthcare quality, it is also the case that the 
preponderance of evidence shows that better patient experience is 
associated with better patient adherence to recommended treatment, 
better clinical processes, better hospital patient safety culture, 
better clinical outcomes, reduced unnecessary healthcare use, and fewer

[[Page 16555]]

inpatient complications.\45\ \46\ Therefore, while we acknowledge that 
the CAHPS survey captures individuals' perspectives on their 
experiences of care, it is anchored in measureable aspects of care and 
so can be measured reliably.
---------------------------------------------------------------------------

    \42\ Institute of Medicine. Crossing The Quality Chasm: A New 
Health System for the 21st Century. Washington DC: National Academy 
Press; 2001.
    \43\ Smith, P.C. (Ed.). (2009). Performance measurement for 
health system improvement: experiences, challenges and prospects. 
Cambridge University Press.
    \44\ Agency for Healthcare Research and Quality. What Is Patient 
Experience?. Content last reviewed March 2017. Agency for Healthcare 
Research and Quality, Rockville, MD. http://www.ahrq.gov/cahps/about-cahps/patient-experience/index.html.
    \45\ Price, R.A., Elliott, M.N., Zaslavsky, A.M., Hays, R.D., 
Lehrman, W.G., Rybowski, L., & Cleary, P.D. (2014). Examining the 
role of patient experience surveys in measuring health care quality. 
Medical Care Research and Review, 71(5), 522-554.
    \46\ Price, R.A., Elliott, M.N., Cleary, P.D., Zaslavsky, A.M., 
& Hays, R.D. (2015). Should health care providers be accountable for 
patients' care experiences?. Journal of general internal medicine, 
30(2), 253-256.
---------------------------------------------------------------------------

    Additionally, CAHPS surveys follow scientific principles in survey 
design and development and have been rigorously developed and tested to 
assess the experiences of Medicare beneficiaries. The surveys are 
designed to reliably assess the experiences of a large sample of 
patients and use standardized questions and data collection protocols 
to ensure that information can be compared across health care settings. 
The contract-level reliability of 2017 MA and PDP CAHPS measures meet 
high standards, with the median reliability of publicly-reported MA 
CAHPS measures exceeding 0.72 for all measures and exceeding 0.90 for a 
majority of measures, with 0.70 being a conventional standard for 
reliability. Finally, there are criteria for sample size eligibility 
that must be met for contracts to be included in data collection, and 
CMS also offers contracts the option of augmenting their CAHPS sample 
sizes if they wish to obtain more precise overall results and/or 
perform subgroup analyses with larger samples.
    Comment: Several commenters stated that CAHPS scores may be 
influenced by factors outside the plan's control, such as cost and 
coverage, provider behavior, cultural differences including language, 
and timing of the survey. A few suggested that beneficiaries who are 
frail, have cognitive impairments, or who have low socio-economic 
status may not be able to respond to survey items accurately. A 
commenter requested allowing proxy methods.
    Response: For MA and PDP CAHPS, CMS uses mixed-mode data collection 
to increase the likelihood of survey participation and 
representativeness.\47\ \48\ Survey responses are also case-mix 
adjusted to account for certain respondent characteristics not under 
the control of the health or drug plan such as age, education, dual 
eligible status and other variables. We note that plans do have some 
control over plan-design features such as cost and coverage as well as 
provider behavior, so it would not be appropriate to adjust for these.
---------------------------------------------------------------------------

    \47\ Fowler Jr, F.J., Gallagher, P.M., Stringfellow, V.L., 
Zaslavsky, A.M., Thompson, J.W., & Cleary, P.D. (2002). Using 
telephone interviews to reduce nonresponse bias to mail surveys of 
health plan members. Medical care, 190-200.
    \48\ Elliott, M.N., Zaslavsky, A.M., Goldstein, E., Lehrman, W., 
Hambarsoomians, K., Beckett, M.K., & Giordano, L. (2009). Effects of 
survey mode, patient mix, and nonresponse on CAHPS[supreg] hospital 
survey scores. Health services research, 44(2p1), 501-518.
---------------------------------------------------------------------------

    CMS currently provides translations of the MA and PDP CAHPS Survey 
in Spanish, Chinese, and Vietnamese, and we are developing a Korean 
translation. All translations are the product of translation and review 
by native speakers of the target languages and have had multiple rounds 
of qualitative testing with Medicare beneficiaries with characteristics 
similar to the MA and PDP CAHPS population. By providing survey 
translations, CMS promotes standardization by assuring that questions 
are presented similarly to beneficiaries across and within languages, 
which also promotes comparability of the results across vendors and 
contracts. The survey administration protocol for MA and PDP CAHPS does 
not permit ``live,'' ``individual,'' or ``real-time'' translation of 
the survey by an interpreter, as such an approach does not promote 
comparability of data and there is no mechanism for assuring the 
accuracy and consistency of the translation. If plans need additional 
translations they should contact us at [email protected]. The MA and 
PDP CAHPS protocol does allow for the use of proxy respondents in cases 
where a respondent is unable to complete the survey.
    Comment: A commenter stated that the CAHPS survey is long, and a 
couple commenters expressed concern about low response rates.
    Response: CMS shortened the MA CAHPS survey in 2017 by removing 
questions and measures not used in Star Ratings, and we also improved 
phone contact information. As a result of CMS's continuing efforts to 
improve response rates, overall MA and PDP CAHPS response rates 
increased from 2016 to 2017, despite national trends of declining 
response rates for most other surveys. Further, meta-analyses of 
surveys that follow the rigorous probability sampling and survey 
approaches used by MA and PDP CAHPS find little relationship between 
response rates and nonresponse bias.\49\ Moreover, research specific to 
patient experience, CAHPS, and MA and PDP CAHPS surveys finds no 
evidence nonresponse bias affects comparison of case-mix adjusted 
scores between contracts or other similar reporting units.\50\ \51\ 
\52\ \53\ \54\
---------------------------------------------------------------------------

    \49\ Groves, R.M., & Peytcheva, E. (2008). The impact of 
nonresponse rates on nonresponse bias: a meta-analysis. Public 
opinion quarterly, 72(2), 167-189.
    \50\ Klein, D.J., Elliott, M.N., Haviland, A.M., Saliba, D., 
Burkhart, Q., Edwards, C., & Zaslavsky, A.M. (2011). Understanding 
nonresponse to the 2007 Medicare CAHPS survey. The Gerontologist, 
51(6), 843-855.
    \51\ Saunders C.L., Elliott M.N., Lyratzopoulos G., Abel G.A. 
(2016) ``Do differential response rates to patient surveys between 
organisations lead to unfair performance comparisons? Evidence from 
the English Cancer Patient Experience Survey'' Medical Care 54(1): 
45-54.
    \52\ Bone A., McGrath-Lone L., Day S., et al. Inequalities in 
the care experiences of patients with cancer: Analysis of data from 
the National Cancer Patient Experience Survey 2011-2012. BMJ Open. 
2014;4:e004567.
    \53\ El Turabi A., Abel G.A., Roland M., et al. Variation in 
reported experience of involvement in cancer treatment decision 
making: Evidence from the National Cancer Patient Experience Survey. 
Br J Cancer. 2013;109:780-787.
    \54\ Lyratzopoulos G., Neal R.D., Barbiere J.M., et al. 
Variation in number of general practitioner consultations before 
hospital referral for cancer: findings from the 2010 National Cancer 
Patient Experience Survey in England. Lancet Oncol. 2012;13:353-365.
---------------------------------------------------------------------------

    Comment: A commenter requested more insight into statistical 
components such as case-mix adjustment, statistical significance, and 
reliability, and another requested that CMS provide all case-mix 
adjustment flags to the survey vendors to facilitate an additional 
validation.
    Response: CMS provides a detailed explanation of the CAHPS 
methodology including case-mix adjustment in the annual Star Ratings 
Technical Notes, in CAHPS plan reports provided to each contract each 
year, and on the MA and PDP CAHPS web page (https://www.ma-pdpcahps.org). CMS also provides survey vendors all of the necessary 
data to perform case-mix adjustment validation. Plans are welcome to 
contact [email protected] with specific questions about MA and PDP 
CAHPS.
    Comment: A commenter requested that plans be able to add their own 
questions to the surveys to validate and clarify responses.
    Response: CMS allows plans to add a limited number of items to the 
MA and PDP CAHPS survey that do not affect responses to the survey or 
pose undue burden to the beneficiary. These rules are to ensure the 
highest possible response rate as well as comparability of the data 
across contracts.
HOS: Summary of Additional Comments Received and CMS's Responses
    Comment: CMS received several comments on the HOS measures. Some 
commenters supported patient reported

[[Page 16556]]

outcome measures. Several commenters, however, suggested that the HOS 
has drawbacks in design, methodology, administration, and reporting 
that disproportionately affect SNP populations and fail to accommodate 
diverse populations and the most vulnerable beneficiaries. Some 
commenters stated that the longitudinal two year look-back design of 
the HOS is especially challenging in populations with high rates of 
degenerative or progressive conditions coupled with pervasive low 
socioeconomic status and high social risk factors. Commenters suggested 
that CMS should change sampling methodology to require larger sample 
sizes or allow plans to request oversampling of typically under-
represented groups. In addition, some commenters would like to 
discontinue the use of proxies for self-report as, the commenters 
argue, there is strong evidence indicating proxies' responses are not 
equivalent to beneficiaries' responses.
    Response: CMS is supportive of increasing sample sizes and is not 
opposed to oversampling to ensure a representative sample but to date 
has received no HOS oversampling requests from any plans. We are 
currently reexamining the HOS with a focus on diverse, dual-eligible 
populations and will explore the feasibility of increasing the required 
sample size. CMS already adjusts the HOS data to control for many 
beneficiary characteristics not under the control of the plan, 
including age, gender, race, ethnicity, income, education, marital 
status, Medicaid status, SSI eligibility, homeowner status, chronic 
conditions, and baseline health status. CMS does not plan to 
discontinue the HOS proxy response option. Because the HOS has both 
mail and telephone components, it is likely that some mail 
questionnaires would be completed by proxies whether permitted or not. 
CMS considers it preferable to collect information about whether the 
beneficiary or a proxy answered the survey than to assume the 
beneficiary answered the questions. Every attempt is made to obtain a 
response from the beneficiary before a proxy response is allowed. Also, 
when a proxy was used at baseline and the beneficiary remains unable to 
complete the follow up survey, attempts are made to re-contact the same 
proxy in order to reduce variability in responses. Finally, frailer 
members, including the most vulnerable beneficiaries, who are unable to 
complete the survey independently are excluded from the HOS if a proxy 
response option is not available.
    Comment: Several commenters mentioned the two year look-back period 
is challenging to beneficiaries. A commenter suggested that keeping the 
identity of sample respondents confidential limits opportunities for 
improvement activities, and another suggested the resulting data may be 
too old to be actionable. A few commenters recommended the elimination 
of HOS measures because the measures are too generic for Star Ratings 
and the information from the surveys is not actionable.
    Response: The Health Outcome Survey (HOS) yields two patient-
reported outcome measures of change in global functioning, by using 2-
year change in scores on the Physical Component Score (PCS) and the 
Mental Component Score (MCS), both of which come from the Veterans RAND 
12-Item Health Survey (VR-12) portion of the larger survey. These 
measures are of unique and high value, as demonstrated by their higher 
weight in calculating the Overall Star Ratings. Critics of the HOS 
often point out the 3 years between HOS baseline data collection and 
health plans receiving member-level results, which include the 
identities of respondents. Contributing to the perceived ``lag'' is the 
longitudinal component of the HOS; beneficiaries who complete the 
baseline HOS must be resurveyed two years later to generate data for 
the HOS ``outcome'' measures. HOS data are hardly ``old.'' In fact, HOS 
baseline results are distributed nine months after data collection 
ends, and performance measurement reports and beneficiary-level data 
are distributed about one year after follow-up data collection ends. 
Further, CMS contends that a majority of plans improve or maintain the 
physical and/or mental health of their membership over time. That is, 
the measure requires time to capture change and in fact does capture 
positive change or maintenance of global functioning for the majority 
of plans' members. The Physical Component Score (PCS) and the Mental 
Component Score (MCS), as derived from the VR-12, have been validated 
in multiple studies of VA and elderly populations. The appendix of each 
contract's annual performance measurement report explains how the 
measures are calculated and adjusted to minimize bias in results. CMS 
encourages all plans to familiarize themselves with the methods 
described in the reports and to utilize the background materials 
available on the HOS website that validate the Improving or Maintaining 
Physical Health and Improving or Maintaining Mental Health measures.
    Comment: Commenters also suggested that CMS provide HOS translation 
and instrument adaptation for languages in addition to English, 
Spanish, or Chinese.
    Response: CMS responds to requests for translations of the survey 
into other languages from vendors, who in turn reflect the requests of 
plans. CMS currently provides translations of the HOS in Spanish and 
Chinese, and a Russian translation will be available in 2019. All 
translated versions are the product of translation and review by native 
speakers of these languages and are subject to multiple rounds of 
qualitative testing with Medicare beneficiaries with characteristics 
similar to the HOS population. As a result, the adoption of a 
translated survey tool takes a significant amount of time. By providing 
survey translations, CMS promotes standardization and assures that 
questions are presented similarly to beneficiaries across and within 
languages, which also promotes comparability of the results across 
vendors and contracts. The survey administration protocol for HOS does 
not permit ``live,'' ``individual,'' or ``real-time'' translation of 
the survey by interpreters because such an approach does not promote 
comparability of data and there is no mechanism for assuring the 
accuracy and consistency of the translation. However, the HOS protocol 
does allow for the use of proxy respondents in cases where a 
beneficiary is unable to complete the survey.
    Comment: A commenter reported that they have observed that plans 
with lower membership generally have higher scores on HOS measures than 
plans with higher enrollment.
    Response: We appreciate the comment. CMS is not aware of any formal 
studies that have been done to address the hypothesized link between 
contract size and performance on longitudinal measures.
Patients With Advanced Illness: Comments Received and CMS's Responses
    Comment: CMS received several comments concerning the exclusion 
from measures of patients with advanced illness and in palliative care; 
those who have refused treatment, assessment, or recommended 
screenings; and those who are unable to achieve the desired clinical 
threshold despite having reached the maximum medical therapy and self-
care practices available for the condition. Commenters recommended that 
exclusions or adjustments to measures be made for these patients, or 
that alternate metrics be developed for these patients, since for many 
of them comfort or improving

[[Page 16557]]

quality of life is a greater part of care than curative treatments. In 
particular, some commenters identified specific HEDIS and HOS measures 
which should be excluded or modified for patients with advanced 
illness: Rheumatoid Arthritis, Statin Use, Improving or Maintaining 
Physical Health, and Improving or Maintaining Mental Health. Commenters 
note that there are many challenges treating and screening certain 
health conditions for patients with advanced illness. A commenter 
suggested that the seriously ill population be excluded from preventive 
and HOS measures, as feasible. While commenters agreed that MA plans 
should advance preventive care and maintain or improve physical health 
for the majority of their enrollees, they argued that there will always 
be a subset of enrollees facing serious illness and continued decline. 
Commenters encouraged CMS to work with measure stewards such as NCQA 
and explore other options that can exclude the seriously ill population 
from such measures. Commenters suggested that the exclusion of the 
seriously ill population from these measures will protect against 
discriminatory enrollment, and will not unfairly evaluate plans that 
support this population in making diagnostic and treatment decisions 
based on the patient's preferences. Finally, some commenters suggested 
that patients with advanced illness who have refused services and 
treatments should also be excluded from measure calculations. They 
stated a patient's goal for comfort rather than further treatment 
should be primary. A commenter suggested that the under 65 population 
residing in nursing homes should be excluded from measures for many of 
the same reasons they wanted those with advanced illness excluded--
advanced sickness, nearing the end of life, refusing treatment, and 
sometimes a patient's choice on comfort not care.
    Response: CMS appreciates feedback on the noted measure adjustments 
and exclusions. For HEDIS 2019, NCQA is examining potential cross-
cutting exclusions for those with advanced illness from selected HEDIS 
measures that may not be clinically appropriate for these individuals. 
NCQA is considering various advanced illness conditions and service use 
(for example, indications of frailty, receipt of palliative care or 
nursing care services) for potential exclusion. We anticipate that NCQA 
will consider these comments as their advisory panels re-evaluate 
measures as part of the standard HEDIS process. Proposed changes to 
implement advanced illness exclusions will be posted for the HEDIS 2019 
public comment period in February 2018. CMS currently has no plans to 
exclude members with serious illness from the HOS.
Additional Comments and Responses
    Comment: CMS received one suggestion that CMS create a new, fixed 
identification code for each measure that would be consistent year-
over-year.
    Response: The measure codes are not published publicly for 
beneficiaries. CMS publishes a Star Ratings measure history in the 
Technical Notes each year that cross references the measure codes. 
Plans are welcome to use their own internal coding systems.
    Comment: A commenter suggested that CMS make PDEs available for 
members in drug assistance programs.
    Response: CMS thanks the commenter for this suggestion. However, 
this suggestion is outside the scope of the proposed rule. This comment 
will be shared with others in CMS who will be interested in the 
suggestion.
    Comment: A commenter suggested that CMS exclude beneficiaries' Part 
D trial medication use from the measures.
    Response: CMS believes this request is specific to the adherence 
measures. The adherence measures require at least two fills on 
different dates for any drug within the drug class for inclusion in the 
measure. The two claim requirement essentially excludes many trial 
prescription periods where the beneficiary failed the initial drug and 
is switched to a different drug class. Since the adherence measures are 
for chronic conditions, CMS expects that the beneficiary would continue 
on one drug within the drug class in the measure. Identifying trial 
periods using PDEs outside this definition would be difficult to 
determine and accepting other source data would be prohibited as 
previously stated.
Summary of Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized earlier, CMS is finalizing the Part C 
and Part D performance measures for the performance periods beginning 
on or after January 1, 2019 with one modification. In that NCQA is 
planning to make substantive changes to the Plan All-Cause Readmissions 
measure that would affect measurement year 2019, CMS is not finalizing 
this as a measure in the 2021 and 2022 Star Ratings but will move this 
measure to the display page for two years. CMS's finalization of the 
proposed measures does include the specifications (metric and 
performance period), domain assignment, measure category, data source 
for the measures, and statistical method for assigning Star Ratings 
(based on Sec. Sec.  422.166(a) and 423.186(a)) as listed in the 
proposed table. However, we note that our finalization of the proposed 
measures does not include the weight of each category as presented in 
the proposed table. For discussion of CMS's final decision to change 
the weight of measures in the Patients' Experience and Complaints 
category and in the Measures Capturing Access category from a weight of 
1.5 to a weight of 2, see section `q. Measure Weights' of this 
preamble. See also Sec. Sec.  422.166(e) and 423.186(e) of this 
regulation for final measure weight assignments. Finally, we note that 
the summary of comments received and CMS's responses for the Health 
Plan Quality Improvement and the Drug Plan Quality Improvement measures 
are presented in the next section (`j. Improvement Measures') of this 
preamble.
j. Improvement Measures
    In the 2013 Part C and D Star Ratings, we implemented the Part C 
and D improvement measures (CY2013 Rate Announcement, https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2013.pdf). The improvement measures address the overall 
improvement or decline in individual measure scores from the prior to 
the current year. We proposed to continue the current methodology 
detailed in the Technical Notes for calculating the improvement 
measures and to codify it at Sec. Sec.  422.164(f) and 423.184(f). For 
a measure to be included in the improvement calculation, the measure 
must have numeric value scores in both the current and prior year and 
not have had a substantive specification change during those years. In 
addition, the improvement measure would not include any data on 
measures that are already focused on improvement (for example, HOS 
measures focused on improving or maintaining physical or mental 
health). The Part C improvement measure includes only Part C measure 
scores, and the Part D improvement measure includes only Part D measure 
scores. We proposed to codify these criteria at paragraph (f)(1)(i) 
through (iii) of Sec. Sec.  422.164 and 423.184. We proposed to 
annually identify the subset of measures to be included in the 
improvement measures through the Call Letter, similar to our proposal 
for regular updates and removal of measures. Under our proposal, once 
the measures to be used for the improvement

[[Page 16558]]

measures are identified, CMS would determine which contracts have 
sufficient data for purposes of applying and scoring the improvement 
measure(s). We again proposed to follow current practices: The 
improvement measure score would be calculated only for contracts that 
have numeric measure scores for both years for at least half of the 
measures identified for use in the improvement measure. We proposed 
this standard for determining contracts eligible for an improvement 
measure at paragraph (f)(2).
    We proposed at Sec. Sec.  422.164(f)(3) and (4) and 423.184(f)(3) 
and (4) the process for calculating the improvement measure score(s) 
and a special rule for any identified improvement measure for a 
contract that received a measure-level Star Rating of 5 in each of the 
2 years examined, but whose associated measure score indicates a 
statistically significant decline in performance over the time period.
    As proposed, the improvement measure would be calculated in a 
series of distinct steps:
     The improvement change score (the difference in the 
measure scores in the 2-year period) will be determined for each 
measure that has been identified as part of an improvement measure and 
for which a contract has a numeric score for each of the 2 years 
examined.
     Each contract's improvement change score will be 
categorized as a significant change or not by employing a two-tailed t-
test with a level of significance of 0.05.
     The net improvement per measure category (outcome, access, 
patient experience, process) will be calculated by finding the 
difference between the weighted number of significantly improved 
measures and significantly declined measures, using the measure weights 
associated with each measure category.
     The improvement measure score will then be determined by 
calculating the weighted sum of the net improvement per measure 
category divided by the weighted sum of the number of eligible 
measures.
     The improvement measure scores will be converted to 
measure-level Star Ratings by determining the cut points using 
hierarchical clustering algorithms.
    We proposed at Sec. Sec.  422.166(a)(2)(iii) and 422.186(a)(2)(iii) 
that the improvement measure score cut points would be determined using 
two separate clustering algorithms. We explained in the preamble that 
improvement measure scores of zero and above will use the clustering 
algorithm to determine the cut points for the Star Rating levels of 3 
and above. Improvement measure scores below zero will be clustered to 
determine the cut points for 1 and 2 stars. Although the preamble of 
the proposed rule indicated this level of detail, our proposed 
regulation text, at proposed paragraphs (f)(4)(v) and (vi) of 
Sec. Sec.  422.164 and 423.184, did not. In paragraph (4)(v), we 
referred only to ``hierarchical clustering algorithms'' without 
specifying the detailed treatment for scores of greater than, equal to, 
or less than zero; in paragraph (4)(vi), we cross-referenced the text 
proposed at Sec. Sec.  422.166(a)(2) and 423.186(a)(2), which did 
include the specific text specifying the detailed treatment for scores 
of greater than, equal to, or less than zero in connection with the 
ratings for the improvement measures. While our proposed regulation 
text was ultimately consistent, it included cross-references not 
explained in the preamble.
    We also proposed that the Part D improvement measure cut points for 
MA-PDs and PDPs would be determined using separate clustering 
algorithms. The Part D improvement measure cut points for MA-PDs and 
PDPs would be reported separately. Finally, we proposed a special rule 
in paragraph (f)(3) to hold harmless sponsoring organizations that have 
5-star ratings for both years on a measure used for the improvement 
measure calculation. This hold harmless provision was added in 2014 to 
avoid the unintended consequence for contracts that score 5 stars on a 
subset of measures in each of the 2 years. For any identified 
improvement measure for which a contract received a rating of 5 stars 
in each of the years examined, but for which the measure score 
demonstrates a statistically significant decline based on the results 
of the significance testing (at a level of significance of 0.05) on the 
change score, the measure would be categorized as having no significant 
change. The measure would be included in the count of measures used to 
determine eligibility for the improvement measure and in the 
denominator of the improvement measure score. We explained in the 
proposed rule that the intent of the hold harmless provision for a 
contract that receives a measure rating of 5 stars for each year is to 
prevent the measure from lowering a contract's improvement measure when 
the contract still demonstrates high performance. We proposed in 
section II.A.12.r another hold harmless provision to be codified at 
Sec. Sec.  422.166(g)(1) and 423.186(g)(1).
    We requested comment on the methodology for the improvement 
measures, including rules for determining which measures are included, 
the conversion to a Star Rating, and the hold harmless provision for 
individual measures that are used for the determination of the 
improvement measure score.
    We received the following comments on our proposals, and our 
responses follow:
    Comment: The overwhelming majority of commenters supported the 
concept of the improvement measures.
    Response: CMS appreciates the overwhelming support for the 
underlying rationale of the improvement measures.
    Comment: A commenter opposed the codification of the improvement 
measures and urged CMS to discontinue its use in the Star Ratings 
program. The commenter believes that the improvement measures are 
unnecessary, distort the signal provided by the Star Ratings, blur the 
distinction between high performing contracts and other contracts, and 
can lead to misclassification.
    Response: CMS believes that continuous improvement is an important 
component of the Star Ratings program and necessary to achieve the 
ultimate goal of providing the best care to beneficiaries and realizing 
the most positive outcomes. The improvement measures provide a distinct 
aspect of performance and as implemented, provide a true reflection of 
this aspect of performance. CMS is cognizant of the challenges of 
improvement for contracts that have high performance; thus, CMS 
implemented the hold harmless provisions. One hold harmless provision 
addresses high performance at the measure level, and the other 
addresses high performance at the highest rating level. The hold 
harmless provisions coupled with the two-step clustering for converting 
the improvement measure scores to measure-level Star Ratings safeguard 
against possible misclassification. CMS appreciates the comments and 
will continue to look at ways to further enhance the Star Ratings.
    Comment: Some commenters suggested excluding CAHPS and HOS measures 
from the improvement measure because they believe the measures are 
subjective in nature. A commenter further justified the removal of the 
survey measures citing the challenges in sample selection that have 
occurred in recent years that have led some plans to appeal their 
results as not statistically significant.
    Response: CMS reviews and selects the improvement measures annually 
and publishes the list in the draft Call Letter, we proposed to follow 
the same

[[Page 16559]]

process going forward. For a measure to be included in the improvement 
calculation, the measure must have numeric value scores in both the 
current and prior year and not have had a substantive specification 
change during those years. In addition, the improvement measure will 
not include any data on measures that are already focused on 
improvement (for example, HOS measures focused on improving or 
maintaining physical or mental health). CAHPS and HOS measures are 
patient experience not patient satisfaction surveys. The voice of the 
beneficiary is a critical component of the information needed for the 
Star Ratings program to realize its goals. If an issue arises with any 
aspect of the standard protocol regarding sampling in the Star Ratings 
program, CMS carefully reviews any impact of the deviation and assesses 
the risk of unintended consequences on the integrity of the ratings. 
Further, CMS develops and tests analytical adjustments to mitigate and 
address all such concerns. Although there did exist minor deviations in 
the protocol for sampling in the Star Ratings in the past, CMS is 
confident that the ratings were not affected and the measures possessed 
all attributes necessary to preserve and maintain the high standards of 
the Star Ratings program.
    Comment: Many commenters supported an expansion of the measure-
level hold harmless provision for a contract that receives 4 or more 
stars in each of the two-years for a measure. Some commenters noted the 
lack of alignment between the highly-rated contracts' hold harmless 
provision for the application of the improvement measure(s) for the 
identification of a contract's highest rating at Sec.  422.166(g)(1) 
and Sec.  423.186(g)(1) and the measure-level hold harmless provision 
at (Sec.  422.164(f)(3) and Sec.  423.184(f)(3).
    Response: CMS appreciates the thoughtful consideration of the hold 
harmless provisions for the improvement measure methodology. As noted, 
the hold harmless provision at the measure level applies a different 
threshold than the hold harmless provision for a highly-rated 
contract's highest rating. A measure, in general, assesses a single, 
distinct aspect of care while an overall or summary rating provides a 
global indicator of quality of care and performance.
    At the basic building block of the rating system, the measure, a 
measure-level rating of 4 stars allows opportunity for improvement with 
a focus on a singular concept. A measure-level Star Rating of 5 does 
not allow the same degree of possible improvement. The measure-level 
hold harmless provision was designed to protect a contract from being 
adversely impacted by the improvement measure(s) without discouraging 
continuous improvement. CMS believes that changing the hold harmless to 
measures that receive at least 4 stars each year would serve to hamper 
advances and innovation in the care of all populations; in addition, it 
could serve to discourage continuous improvement by suggesting that 4 
stars--rather than 5--is the highest achievement on the measure.
    CMS is cognizant of the additional challenges of improvement for 
highly-rated contracts; improvement is more difficult for a contract 
with high performance as compared to a lower-rated contract that has 
more opportunity for improvement. The hold harmless provision for a 
contract's highest rating provides the safeguard for contracts that 
receive an overall or summary rating of 4 stars or more without the use 
of the improvement measures and with all applicable adjustments (CAI 
and the reward factor). A highly-rated contract will have their final 
highest rating as the higher of either the rating calculated including 
or excluding the improvement measures.
    CMS believes there should be a differentiation in the hold harmless 
provisions to appropriately address the amount of information each 
provides, to incentivize contracts to continuously improve, and to 
provide adequate safeguards for high achieving contracts.
    Comment: A few commenters expressed explicit support for the 
current methodology for determining the improvement rating including 
the use of separate clustering algorithms to convert the improvement 
measure scores to a measure-level Star Rating and the separate 
clustering algorithms for the Part D summary rating for PDPs and MA-
PDs.
    Response: CMS appreciates these comments.
    Comment: A commenter suggested that CMS develop a measure to assess 
a decline in performance.
    Response: The current improvement measures capture both improvement 
and decline. The calculation for the improvement measure score and the 
associated methodology to convert the improvement measures scores to 
measure-level Star Ratings are designed such that a contract that has 
below average improvement, indicated by an improvement measure score 
less than zero, will receive an improvement measure-level Star Rating 
less than 3 stars.
    Comment: A commenter expressed concern with the improvement 
methodology and believes it creates a double-jeopardy situation because 
it includes both significance testing and national performance.
    Response: The Star Ratings are designed to incentivize contracts to 
provide the best quality and care to beneficiaries. The methodology 
employed to determine the improvement measure-level Star Ratings is 
designed to align with the underlying principles of the Star Ratings 
methodology. The use of statistical significance allows the changes of 
each individual measure used for the determination of the improvement 
measure score to be assessed for meaningful differences. The use of the 
clustering algorithm to determine the cut points and ultimately, the 
assignment of the measure-level Star Ratings, allows a contract's 
performance to be assessed relative to all contracts that are required 
to report. The determination of the measure-level Star Ratings is done 
in a manner to minimize misclassification. The clustering for the 
improvement measures is done twice to ensure that a contract with 
average or above average performance, demonstrated by an improvement 
measure score of zero or above, will receive a measure-level Star 
Ratings of at least 3 stars. A contract whose performance declined, 
demonstrated by an improvement measure score of less than zero, will 
receive a measure-level Star Rating less than 3 stars. Further, CMS 
designed the hold harmless provisions as a safeguard for contracts 
maintaining high performance at the measure-level or at the contract's 
highest Star Rating to ensure that the improvement measure-level Star 
Ratings provide a true signal.
    Comment: A commenter suggested reducing the number of improvement 
measures with a focus on newer measures.
    Response: CMS appreciates this comment. For a measure to be 
included in the improvement calculation, the measure must have numeric 
value scores in both the current and prior year and not have had a 
substantive specification change during those years. In addition, the 
improvement measure will not include any data on measures that are 
already focused on improvement (for example, HOS measures focused on 
improving or maintaining physical or mental health). CMS has focused on 
all measures that meet these criteria to create incentives to improve 
care across a broad spectrum of measures. Limiting the set of measures 
used to determine the improvement measure to strictly new measures has 
the potential of limiting

[[Page 16560]]

the focus of improvement activities by a contract. CMS is committed to 
incentivizing contracts to provide the best quality and care to 
beneficiaries. Striving for continuous improvement across all aspects 
of care would be compromised if the focus of improvement was restricted 
to newer measures only.
    Comment: A commenter suggested that CMS ensure that MA contracts 
that are subject to the use of the improvement measures realize a 
benefit from their inclusion.
    Response: CMS has developed a hold harmless provision for a highly-
rated contract's highest rating. All other contracts have the 
improvement measure(s) included in their rating. CMS believes the 
information provided by the ratings must be a true reflection of the 
quality and experience of beneficiaries enrolled in the contract. 
Ensuring that MA contracts that are subject to the use of the 
improvement measures realize a benefit from their inclusion has the 
potential of distorting the signal and does not align with the Star 
Ratings program's guiding principles.
    Comment: A commenter suggested removing the improvement measure in 
the future to streamline and simplify the Star Ratings program.
    Response: CMS disagrees with the commenter. CMS recognizes the 
importance of acknowledging quality improvement in health and drug 
plans. The improvement measures provide an additional dimension to the 
Star Ratings program. At this time, there are no plans to remove the 
measures from the Star Ratings program as we are committed to improving 
the quality of care and experiences for Medicare beneficiaries.
    Comment: A commenter questioned whether the measures Getting Needed 
Care and Customer Service are included in the improvement measure set.
    Response: Annually, CMS reviews the Star Ratings measure set to 
identify the improvement measures. Both Getting Needed Care and 
Customer Service meet the inclusion criteria for an improvement measure 
and will be designated as improvements measures in the 2021 Star 
Ratings program. A specification change prompted a temporary exclusion 
of these measures from the improvement measure in the 2018 Star 
Ratings.
    Comment: A commenter believes that there exists a potential 
disadvantage for SNPs and Medicare/Medicaid plans due to their 
propensity of having lower enrollments which ultimately results in 
fewer of these types of plans from meeting the requirements for the 
calculation of an improvement measure rating. The issue, the commenter 
believes, is attenuated by the sampling requirements for a subset of 
the population, like the HOS measures.
    Response: CMS appreciates these comments. The contract must have a 
minimum number of numeric scores and measures of a certain type to 
reliably determine an improvement measure score. To date, we have not 
seen an issue with smaller contracts obtaining an improvement measure 
score.
    Comment: Some commenters suggested increased transparency in the 
determination of the improvement measure because of the complexity of 
its determination. Other commenters expressed the concern regarding 
their ability to predict the improvement measure-level Star Ratings. 
Further, commenters requested clearer explanations of the methodology.
    Response: The Star Ratings program is designed to incentivize 
contracts to provide the best care to their beneficiaries. The 
improvement measure employs two consecutive years of data. To realize 
the goal of the best care, contracts must continually seek ways to 
improve the care they provide. The improvement measures provides a 
quantification of the improvement made in the two-year period.
    CMS will apply the methodology explained in the preamble and 
adopted in the regulations at Sec. Sec.  422.164(f) and 423.184(f). The 
improvement methodology is detailed in the annual Technical Notes 
available at http://go.cms.gov/partcanddstarratings. CMS is always 
willing to answer questions related to the calculation of the Star 
Ratings including the improvement measure methodology. Further, upon 
request, CMS will provide a detailed calculation worksheet for a 
contract's improvement measures. Contracts should contact the Part C & 
D Star Ratings Team at [email protected] for answers to 
any questions related to the MA Star Ratings.
    Comment: A commenter urged CMS to review the rules guiding the 
selection of the improvement measures to ensure that each measure is 
under the control of the contract and that the measure is not topped 
out.
    Response: CMS supports the request for reviewing the measures 
designated for use in the improvement measures. CMS annually reviews 
the measures used in the Star Ratings and releases the measures that 
will be used to determine the improvement measures in the draft Call 
Letter. Although some measures may show uniform high performance across 
contracts suggesting that they are topped out, CMS needs to balance 
these concerns with how critical the measures are to improving care, 
the importance of not creating incentives for a decline in performance 
after the measures transition out of the Star Ratings, and the 
availability of alternative related measures which address the specific 
clinical concerns. MAOs and Part D sponsors have control over all 
measures included in the Star Ratings' program; thus, the measures 
selected for the improvement measure(s) are all under the control of 
the contract.
    Comment: A commenter suggested several adjustments to address their 
belief that the improvements measure is based on the following 
perceived flawed assumptions: all plans have the same opportunity to 
improve on both mature and new measures year after year; high- and low-
performing plans have equal opportunity for improvement; and the hold 
harmless provision protects plans. The suggested adjustments included: 
The use of a log scale for evaluating performance instead of a linear 
scale; weighting improvement achieved relative to current performance; 
and adjusting the threshold for significant improvement. (The commenter 
suggested changing the level of significance to 0.025 as opposed to 
0.05, or in other words employing the threshold of 1.645 instead of 
1.96 in the testing for significance.)
    Response: CMS appreciates the comments and the suggested 
enhancements for the improvement measure methodology. CMS remains 
cognizant of the additional challenges for improvement for contracts 
with high performance on their highest rating and at the individual 
measure level. CMS does not believe the underlying assumptions for the 
methodology for the determination of the improvement measure-level Star 
Ratings is flawed. There is less room for improvement for contracts 
that are highly-rated, thus there is a hold harmless provision for a 
contract's highest rating. In addition, there is less room for 
improvement for a measure score if a contract is performing at the 
highest rating, 5 stars, for each of the two consecutive years examined 
for the improvement score. CMS implemented a hold harmless provision at 
the measure level to ensure a contract receiving 5 stars for each year 
of the two years examined would not be subject to the possible 
categorization of a significant decline for the measure.
    At this time, CMS employs a level of significance of 0.05 for all 
significance testing across the aspects of the methodology. The use of 
a 0.05 level of significance is typical for statistical analyses. CMS 
will consider the

[[Page 16561]]

suggestions as we enhance the Star Ratings methodology to best address 
the concerns of our stakeholders while maintaining the integrity of the 
Star Ratings system.
    Comment: Some commenters suggested that the improvement measures 
should consider measure-level Star Ratings and the measure score in the 
hold harmless provision. Some commenters provided examples of an 
increase in a measure-level Star Rating for a specific measure used in 
the improvement measure that was accompanied by a significant decrease 
in the measure score. Commenters believe that such scenarios should be 
part of the hold harmless provision or considered counted as an not 
applicable (NA) measure, those not factoring in the determination of 
the improvement measure score.
    Response: CMS will consider a potential enhancement to the hold 
harmless provision that considers both the measure-level Star Rating 
and the measure score. Any changes would be proposed through future 
rulemaking.
    Comment: Some commenters suggested that a measure that receives 5 
stars for each of the two years should be a positive influence on the 
improvement measure score and counted as a significant improvement.
    Response: CMS appreciates this feedback. A measure used for the 
determination of the improvement measure score that receives a measure-
level Star Rating of 5 stars in each of the two years examined would be 
subject to the 5-star measure hold harmless rule and would benefit from 
the 5-star measure-level Star Rating in the calculation of the summary 
or overall rating. In addition, contracts do have the opportunity to 
earn a reward factor for high and stable relative performance across 
measures pursuant to Sec. Sec.  422.166(f)(1) and 423.186(f)(1) 
discussed in section II.A.11.s of this final rule.
    Comment: Some commenters recommended a predictable gold standard be 
established for determining meaningful improvement as a set percentage 
reduction of a sub-optimal measure rate. The commenters believe this 
approach would result in a more tailored approach of meaningful 
improvement per contract and recognize the natural concept of 
diminishing returns. For example, if a 5 percent reduction in the sub-
optimal rate was classified as meaningful, an increase of 1 percent for 
a contract whose rate was 80 percent in year 1 would be a meaningful 
improvement (1/(100 - 80) or 5 percent) while a contract with a rate of 
60 percent in year 1 would need an increase in their rate of 2 percent 
(an increase to 62 percent) for a 5 percent reduction which would be 
classified as a meaningful reduction in their suboptimal rate (2/(100 - 
60) or 5 percent).
    Response: We will consider these comments for the future as we make 
enhancements to this measure.
    Comment: A few commenters recommended that CMS either adjust its 
methodology and assign ``not applicable'' when determining 
``Improvement, Decline, or No Change'' for measures that increased in 
measure-level Star Ratings in the year two of the comparison or add 
these measures to the ``held harmless'' provision for measures. The 
commenters noted that the current methodology for a measure is based on 
measure scores as opposed to measure-level Star Ratings.
    Response: CMS appreciates this feedback. CMS will further consider 
the measure-level hold harmless provisions to examine the influence of 
the measure scores and measure-level Star Ratings on the improvement 
measures.
    Comment: Some commenters supported a revision to the hold harmless 
measure provision for an improvement measure when a contract received 
5-star ratings for each of the 2 years examined. Although the 
commenters believe that the current measure-level hold harmless does 
align with its intent to prevent an adverse impact on a contract's 
rating, a few commenters suggested modifying the provision to allow a 
measure-level Star Rating of 5 stars for each of the 2 years examined 
to be counted as a significant improvement in the measure's associated 
net improvement category. Other commenters suggested a hold harmless 
provision if mathematically it is not possible to have a 5-star measure 
score difference that would be classified as significant improvement. A 
commenter suggested another version of a measure-level hold harmless in 
which an adjustment factor would be employed for contracts that had 
incremental improvement at the measure-level score but who could not 
attain ``Significant Improvement'' due to performance requirements 
above 100 percent (mathematically) and when the current measure-level 
hold harmless provision would not be applied. Further, the commenter 
believes the adjustment factor would acknowledge the increased 
difficulty in moving from 2 to 3 versus 4 to 5.
    Response: CMS appreciates this feedback. CMS will further consider 
these suggestions for a future enhancement to the hold harmless 
provision at the measure-level.
    Comment: A commenter suggested using a logarithmic scale instead of 
a linear scale in the significance testing for classifying significant 
changes to the measure score to address the law of diminishing returns.
    Response: CMS appreciates the careful consideration of the 
improvement measure methodology. CMS is cognizant of the additional 
challenges for both highly-rated contracts and contracts that receive a 
5 star measure-level rating for each of the two years examined used 
determining the improvement measure. Improvement is easier at the 
summary levels for a contract that is not highly-rated. Likewise, 
improvement for an individual measure is easier when there is more room 
for improvement.
    The current hold harmless provisions were designed to address the 
concern related to the concept of diminishing returns. The improvement 
measure safeguards for contracts at the highest-rating level by 
contract-type and at the measure-level determination of the improvement 
scores allow a transparent method of addressing the challenges of 
improvement for high performing contracts.
    The suggested use of a logarithmic scale instead of a linear scale 
will be considered during our ongoing review of the methodology. Any 
enhancements to the methodology must be balanced by the approachability 
of the methodology to our stakeholders including the beneficiaries.
    Comment: A commenter suggested creating an improvement score for 
measures that could potentially be part of the improvement measures, 
but only have one year's worth of data. The commenter noted that 
improvement activities begin during the first year of a measure being 
included in the Star Ratings program. The focus on a first year measure 
coupled with the significant impact of the improvement measure on a 
contract's rating according to the commenter justified first year 
measures being included in the improvement measure.
    Response: CMS has designed the improvement measures to assess the 
level of improvement from one year to the next.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the 
improvement measure provisions as proposed in Sec. Sec.  422.164(f) and 
423.184(f) with minor modifications. First, in the regulation text at 
Sec. Sec.  422.164(f)(4)(vi) and 423.184(f)(4)(vi), we have corrected 
the

[[Page 16562]]

cross reference to Sec. Sec.  422.166(a)(2)(i) through (iii) and 
422.186(a)(2)(i) through (iii) for the clustering of the improvement 
measure to clarify the methodology for converting the improvement 
measure scores to measure-level Star Ratings. Second, we are also 
finalizing Sec.  422.164(f)(4)(vi) without the sentence that provided 
for separate measure thresholds for the Part D improvement score for 
MA-PDs and PDPs in favor of revising the first sentence as follows: 
``The Part D improvement measure cut points for MA-PDs will be 
determined using separate clustering algorithms in accordance with 
Sec. Sec.  422.166(a)(2)(i) through (iii) and 423.186(a)(2)(i) through 
(iii) of this chapter.''
k. Data Integrity
    The data underlying a measure score and rating must be complete, 
accurate, and unbiased for it to be useful for the purposes we have 
proposed at Sec. Sec.  422.160(b) and 423.180(b). As part of the 
current Star Ratings methodology, all measures and the associated data 
have multiple levels of quality assurance checks. Our longstanding 
policy has been to reduce a contract's measure rating if we determine 
that a contract's measure data are incomplete, inaccurate, or biased. 
Data validation is a shared responsibility among CMS, CMS data 
providers, contractors, and Part C and D sponsors. When applicable (for 
example, data from the IRE, PDE, call center), CMS expects sponsoring 
organizations to routinely monitor their data and immediately alert CMS 
if errors or anomalies are identified so CMS can address these errors.
    We proposed to codify at Sec. Sec.  422.164(g) and 423.184(g) 
specific rules for the reduction of measure ratings when CMS identifies 
incomplete, inaccurate, or biased data that have an impact on the 
accuracy, impartiality, or completeness of data used for the impacted 
measures. Data may be determined to be incomplete, inaccurate, or 
biased based on a number of reasons, including mishandling of data, 
inappropriate processing, or implementation of incorrect practices that 
impacted specific measure(s). One example of such situations that give 
rise to such determinations includes a contract's failure to adhere to 
HEDIS, HOS, or CAHPS reporting requirements. Our modifications to 
measure-specific ratings due to data integrity issues are separate from 
any CMS compliance or enforcement actions related to a sponsor's 
deficiencies. This policy and these rating reductions are necessary to 
avoid falsely assigning a high star to a contract, especially when 
deficiencies have been identified that show we cannot objectively 
evaluate a sponsor's performance in an area.
    As a standard practice, we check for flags that indicate bias or 
non-reporting, check for completeness, check for outliers, and compare 
measures to the previous year to identify significant changes which 
could be indicative of data issues. CMS has developed and implemented 
Part C and Part D Reporting Requirements Data Validation standards to 
assure that data reported by sponsoring organizations pursuant to 
Sec. Sec.  422.516 and 423.514 satisfy the regulatory obligation. 
Sponsor organizations should refer to specific guidance and technical 
instructions related to requirements in each of these areas. For 
example, information about HEDIS measures and technical specifications 
is posted on: http://www.ncqa.org/HEDISQualityMeasurement/HEDISMeasures.aspx. Information about Data Validation of Reporting 
Requirements data is posted on: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/PartCDDataValidation.html and https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxContracting_ReportingOversight.html.
    We proposed, in paragraphs (g)(1)(i) through (iii), rules for 
specific circumstances where we believe a specific response is 
appropriate. First, we proposed a continuation of a current policy: To 
reduce HEDIS measures to 1 star when audited data are submitted to NCQA 
with an audit designation of ``biased rate'' or BR based on an 
auditor's review of the data if a plan chooses to report; this proposal 
will also apply when a plan chooses not to submit and has an audit 
designation of ``non-report'' or NR. Second, we proposed to continue to 
reduce Part C and D Reporting Requirements data, that is, data required 
pursuant to Sec. Sec.  422.514 and 423.516, to 1 star when a contract 
did not score at least 95 percent on data validation for the applicable 
reporting section or was not compliant with data validation standards/
sub-standards for data directly used to calculate the associated 
measure. In our view, data that do not reach at least 95 percent on the 
data validation standards are not sufficiently accurate, impartial, and 
complete for use in the Star Ratings. We explained in the preamble that 
as the sponsoring organization is responsible for these data and 
submits them to CMS, a negative inference is appropriate, to conclude 
that performance is likely poor. Third, we proposed a new specific rule 
to implement scaled reductions in Star Ratings for appeal measures in 
both Part C and Part D.
    The data downgrade policy was adopted to address instances when the 
data that will be used for specific measures are not reliable for 
measuring performance due to their incompleteness or biased/erroneous 
nature. For instances where the integrity of the data is compromised 
because of the action or inaction of the sponsoring organization (or 
its subcontractors or agents), this policy reflects the underlying 
fault of the sponsoring organization for the lack of data for the 
applicable measure. Without some policy for reduction in the rating for 
these measures, sponsoring organizations could ``game'' the Star 
Ratings and merely fail to submit data that illustrate poor 
performance. As stated in the proposed rule, we believe that removal of 
the measure from the ratings calculation will unintentionally reward 
poor data compilation and submission activities such that our only 
recourse is to reduce the rating to 1 star for affected measures.
    For verification and validation of the Part C and D appeals 
measures, we proposed to use statistical criteria to determine if and 
how a contract's appeals measure-level Star Ratings would be reduced 
for missing IRE data. We explained that the proposed criteria would 
allow us to use scaled reductions for the appeals measures to account 
for the degree to which the data are missing. The completeness of the 
IRE data is critical to allow fair and accurate measurement of the 
appeals measures. All plans are responsible and held accountable for 
ensuring high quality and complete data to maintain the validity and 
reliability of the appeals measures.
    In response to past stakeholder concerns about CMS's prior practice 
of reducing measure ratings to one star based on any finding of data 
inaccuracy, incompleteness, or bias, CMS initiated the Timeliness 
Monitoring Project, TMP, in CY 2017.\55\ The first submission for the 
TMP was for the measurement year 2016 related to Part C organization 
determinations and reconsiderations and Part D coverage determinations 
and redeterminations. The timeframe for the submitted data was 
dependent on the enrollment of the contract, with smaller

[[Page 16563]]

contracts submitting data from a 3-month period, medium-sized contracts 
submitting data from a two-month period, and larger contracts 
submitting data from a one-month period.\56\
---------------------------------------------------------------------------

    \55\ This project was discussed in the November 28, 2016 HPMS 
memo, ``Industry-wide Appeals Timeliness Monitoring.'' https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Industry-wide-Timeliness-Monitoring.pdf. https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Industry-wide-Appeals-Timeliness-Monitoring-Memo-November-28-2016.pdf.
    \56\ Contracts with a mean annual enrollment of less than 50,000 
are required to submit data for a three-month time period. Contracts 
with a mean enrollment of at least 50,000 but at most 250,000 are 
required to submit data for a two-month time period. Contracts with 
a mean enrollment greater than 250,000 are required to submit data 
for a one-month period.
---------------------------------------------------------------------------

    We proposed to use TMP data and other data sources whenever 
possible, such as information from audits, to determine whether the 
data at the Independent Review Entity (IRE) are complete and to 
evaluate the level of missing data. Given the financial and marketing 
incentives associated with higher performance in Star Ratings, 
safeguards are needed to protect the Star Ratings from actions that 
inflate performance or mask deficiencies.
    We proposed to reduce a contract's Part C or Part D appeal measures 
Star Ratings for IRE data that are not complete or otherwise lack 
integrity based on the TMP or audit information. The reduction would be 
applied to the measure-level Star Ratings for the applicable appeals 
measures. There are varying degrees of data issues and as such, we 
proposed a methodology for reductions that reflects the degree of the 
data accuracy issue for a contract instead of a one-size fits all 
approach. The proposed methodology employs scaled reductions, ranging 
from a 1-star reduction to a 4-star reduction; the most severe 
reduction for the degree of missing IRE data would be a 4-star 
reduction which will result in a measure-level Star Rating of 1 star 
for the associated appeals measures (Part C or Part D). The data source 
for the scaled reduction is the TMP or audit data, however the specific 
data used for the determination of a Part C IRE data completeness 
reduction are independent of the data used for the Part D IRE data 
completeness reduction. If a contract receives a reduction due to 
missing Part C IRE data, the reduction would be applied to both of the 
contract's Part C appeals measures. Likewise, if a contract receives a 
reduction due to missing Part D IRE data, the reduction would be 
applied to both of the contract's Part D appeals measures. We solicited 
comment on this proposal and its scope; we were looking in particular 
for comments related to how to use the process in this proposal to 
account for data integrity issues discovered through means other than 
the TMP and audits of sponsoring organizations.
    CMS's proposed scaled reduction methodology is a three-stage 
process using the TMP or audit information to determine: first, whether 
a contract may be subject to a potential reduction for the Part C or 
Part D appeals measures; second, the basis for the estimate of the 
error rate; and finally, whether the estimated error rate is 
significantly greater than the cut points for the scaled reductions of 
1, 2, 3, or 4 stars.
    Once the scaled reduction for a contract is determined using this 
methodology, the reduction is applied to the contract's associated 
appeals measure-level Star Ratings. The minimum measure-level Star 
Rating is 1 star. If the difference between the associated appeals 
measure-level Star Rating (before the application of the reduction) and 
the identified scaled reduction is less than one, the contract receives 
a measure-level Star Rating of 1 star for the appeals measure.
    Under the proposed methodology, the error rate for the Part C and 
Part D appeals measures using the TMP or audit data and the projected 
number of cases not forwarded to the IRE for a 3-month period is used 
to identify contracts that may be subject to an appeals-related IRE 
data completeness reduction. We proposed a minimum error rate to 
establish a threshold for the identification of contracts that may be 
subject to a reduction. The establishment of the threshold focuses the 
possible reductions on contracts with error rates that have the 
greatest potential to distort the signal of the appeals measures. Since 
the timeframe for the TMP data is dependent on the enrollment of the 
contract, (with smaller contracts submitting data from a 3-month 
period, medium-sized contracts submitting data from a 2-month period, 
and larger contracts submitting data from a one-month period), the use 
of a projected number of cases over a 3-month period allows a 
consistent time period for the application of the criteria proposed.
    The calculated error rate formula (Equation 1) for the Part C 
measures is determined by the quotient of the number of cases not 
forwarded to the IRE and the total number of cases that should have 
been forwarded to the IRE. The number of cases that should have been 
forwarded to the IRE is the sum of the number of cases in the IRE 
during TMP or audit data collection period and the number of cases not 
forwarded to the IRE during the same period.
[GRAPHIC] [TIFF OMITTED] TR16AP18.010

    The calculated error rate formula (Equation 2) for the Part D 
measures is determined by the quotient of the number of untimely cases 
not auto-forwarded to the IRE and the total number of untimely cases.
[GRAPHIC] [TIFF OMITTED] TR16AP18.020

    Under the proposed methodology, the projected number of cases not 
forwarded to the IRE in a 3-month period is calculated by multiplying 
the number of cases found not to be forwarded to the IRE based on the 
TMP or audit data by a constant determined by the TMP time period. 
Contracts with mean annual enrollments greater than 250,000 that 
submitted data from a 1-month period would have their number of cases 
found not to be forwarded to the IRE based on the TMP data multiplied 
by the constant 3.0. Contracts with mean enrollments of 50,000 but at 
most 250,000 that submitted data from a 2-month period would have their 
number of cases found not to be forwarded to the IRE based on the TMP 
data multiplied by the constant 1.5. Small contracts with mean 
enrollments less than 50,000 that submitted data for a 3-month period 
would have their number of cases found not to be forwarded to the IRE 
based on the TMP data multiplied by the constant 1.0.

[[Page 16564]]

    We proposed that contract ratings be subject to a possible 
reduction due to lack of IRE data completeness if both following 
conditions are met:
     The calculated error rate is 20 percent or more.
     The projected number of cases not forwarded to the IRE is 
at least 10 in a 3-month period.
    The requirement for a minimum number of cases is needed to address 
statistical concerns with precision and small numbers. If a contract 
meets only one of the conditions, the contract would not be subject to 
reductions for IRE data completeness issues.
    If a contract is subject to a possible reduction based on the 
aforementioned conditions, a confidence interval estimate for the true 
error rate for the contract is calculated using a Score Interval 
(Wilson Score Interval) at a confidence level of 95 percent.
    The midpoint of the score interval will be determined using 
Equation 3.
[GRAPHIC] [TIFF OMITTED] TR16AP18.011

    The z score that corresponds to a level of statistical significance 
of 0.05, commonly denoted as
[GRAPHIC] [TIFF OMITTED] TR16AP18.022

but for ease of presentation represented here as z. (The z value that 
will be used for the purpose of the calculation of the interval is 
1.959964.).
    For the Part C appeals measures, the midpoint of the confidence 
interval is calculated using Equation 3 along with the calculated error 
rate from the TMP, which is determined by Equation 1. The total number 
of cases in Equation 3 is the number of cases that should have been in 
the IRE for the Part C TMP data.
    For the Part D appeals measures, the midpoint of the confidence 
interval is calculated using Equation 3 along with the calculated error 
rate from the TMP, which is determined by Equation 2. The total number 
of cases in Equation 3 is the total number of untimely cases for the 
Part D appeals measures.
    Letting the calculated error rate be represented by p and the total 
number of cases represented as n, Equation 3 can be streamlined as 
Equation 4:
[GRAPHIC] [TIFF OMITTED] TR16AP18.012

    The lower bound of the confidence interval estimate for the error 
rate is calculated using Equation 5 below:
[GRAPHIC] [TIFF OMITTED] TR16AP18.021

    For each contract subject to a possible reduction, the lower bound 
of the interval estimate of the error rate will be compared to each of 
the thresholds in Table 4. If the contract's calculated lower bound is 
higher than the threshold, the contract will receive the reduction that 
corresponds to the highest threshold that is less than the lower bound. 
In other words, the contract's lower bound is being employed to 
determine whether the contract's error rate is significantly greater 
than the thresholds of 20 percent, 40 percent, 60 percent, and 80 
percent. The proposed scaled reductions are in Table 4, and were 
proposed in narrative form at paragraph (g)(1)(iii)(D) of both 
regulations.
    We further proposed that the reductions due to IRE data 
completeness issues be applied after the calculation of the measure-
level Star Rating for the appeals measures. The proposed reduction 
would be applied to the Part C appeals measures and/or the Part D 
appeals measures.
    We noted in the proposed rule that a contract's lower bound could 
be statistically significantly greater than more than one threshold. We 
proposed that the reduction be determined by the highest threshold that 
the contract's lower bound exceeds. For example, if the lower bound for 
a contract is 64.560000 percent, the contract's estimated value is 
significantly greater than the thresholds of 20 percent, 40 percent, 
and 60 percent because the lower bound value 64.560000 percent is 
greater than each of these thresholds. The lower bound for the 
contract's confidence interval is not greater than 80 percent. 
Therefore, in this example, the contract will be subject to the 
reduction that corresponds to the 60 percent threshold, which is three 
stars.

 Table 4--Appeals Measure Star Ratings Reductions by the Incomplete Data
                               Error Rate
------------------------------------------------------------------------
                                                           Reduction for
 Proposed thresholds using the lower bound of confidence  incomplete IRE
         interval estimate of the error rate (%)           data (stars)
------------------------------------------------------------------------
20......................................................               1
40......................................................               2
60......................................................               3
80......................................................               4
------------------------------------------------------------------------

    We proposed regulation text at Sec.  422.164(g)(1)(iii)(A) through 
(N) and Sec.  423.184(g)(1)(iii)(A) through (K) to codify these 
parameters and formulas for the scaled reductions. We noted in the 
proposed rule that the proposed text for the Part C regulation includes 
specific paragraphs related to MA and MA-PD plans that are not included 
in the proposed text for the Part D regulation but that the two are 
otherwise identical.
    In addition, we proposed in Sec. Sec.  422.164(g)(2) and 
423.184(g)(2) to authorize reductions in a Star Rating for

[[Page 16565]]

a measure when there are other data accuracy concerns (that is, those 
not specified in paragraph (g)(1)). We proposed an example in paragraph 
(g)(2) of another circumstance where CMS will be authorized to reduce 
ratings based on a determination that performance data are incomplete, 
inaccurate, or biased: the failure of a contract to adhere to the 
HEDIS, CAHPS, or HOS reporting requirements. We also proposed this 
other situation would result in a reduction of the measure rating to 1 
star.
    We noted in the proposed rule that we had taken several steps in 
past years to protect the integrity of the data we use to calculate 
Star Ratings. We welcomed comments about alternative methods for 
identifying inaccurate or biased data and comments on the proposed 
policies for reducing stars for data accuracy and completeness issues 
and comments on the proposed methodology for scaled reductions for the 
Part C and Part D appeals measures to address the degree of missing IRE 
data.
    We received the following comments on our proposals and our 
responses follow:
    Comment: There was overwhelming support for the use of scaled 
reductions for the completeness of the IRE data for the appeals 
measures. Some commenters explicitly stated that the use of scaled 
reductions avoids the one-size-fits-all approach.
    Response: CMS appreciates the overwhelming support for the proposed 
scaled reduction methodology.
    Comment: Some commenters suggested other potential criteria for 
consideration for the scaled reductions methodology. A commenter 
suggested CMS consider the volume of appeals instead of plan size for 
determining the reductions. Other commenters suggested including 
enrollment as part of the rules for the allowable excluded number of 
cases, using the timely percentages as basis for scaled reduction, or 
using the errors relative to enrollment level as the thresholds.
    Response: CMS appreciates the careful consideration of alternative 
options for the scaled reduction methodology. A thorough examination 
and identification of potential unintended consequences must be done 
for any possible modification to the Star Ratings methodology. 
Additional analysis will be done to further explore relations among 
enrollment, appeals volume, untimely, and timely percentages. CMS 
believes the proposed methodology provides the best foundation for 
scaled reductions and will consider these comments as we contemplate 
future enhancements.
    Comment: Some commenters expressed support for the data integrity 
policies for non-appeals measures. A commenter supported the proposal 
to reduce a contract's measure-level Star Rating to 1-star for measures 
related to Part C and D reporting requirements measures when the 
contract does not meet CMS expectations for data validation. Another 
commenter supported the reduction for HEDIS measures that received an 
audit designation of ``Biased Rate.'' Another commenter supported the 
high standard of 95 percent on validation audits, but believed it is 
important to distinguish between generally well-functioning plans that 
may have an occasional error versus plans that have significant, 
systematic errors.
    Response: CMS appreciates the support of the data integrity 
policies. The data integrity policies align with our commitment to data 
quality and preserves the integrity of the Star Ratings. CMS believes 
the data integrity policies are designed to distinguish between 
occasional errors and systematic issues. For example, both the 
validation audits and scaled reduction methodology allow for the 
occasional error and target only those contracts that exceed a 
specified error rate.
    Comment: A commenter requested clarification on how CMS plans to 
use the Data Validation Audit.
    Response: The Data Validation Audit is one method to ensure the 
data used for Star Ratings are accurate. The two Star Rating measures 
(SNP Care Management (Part C) and Medication Therapy Management (MTM) 
Program Completion Rate for Comprehensive Medication Reviews (CMR) 
(Part D)) are based on Part C and D Reporting Requirements data and 
calculated using data reported by plan sponsors and validated via an 
independent data validation using CMS standards. Per the Star Ratings 
Technical Notes, contracts that did not score at least 95 percent on 
data validation for these reporting sections and/or were not compliant 
with data validation standards/sub-standards for at least one of the 
data elements used to calculate the measures are not rated in this 
measure, and the contract's measure score is reduced to 1 star. CMS has 
relied on the Data Validation Audit to confirm the integrity of these 
plan-reported data since these measures were first added to the Star 
Ratings program. In the 2019 draft Call Letter CMS proposed to define a 
contract as being non-compliant if it either receives a ``No'' or a 1, 
2, or 3 on the 5-point Likert scale in the specific data element's data 
validation in order to align with changes in the Data Validation Audit.
    If further clarification is needed, please feel free to contact the 
Part C&D Data Quality Team at: [email protected]
    Comment: Some commenter expressed concern or opposed using audit 
findings as a data source to validate the appeals measures.
    Response: The Timeliness Monitoring Project (TMP) data will be the 
primary data used to validate the completeness for the Part C and D 
appeals measures. However, CMS may also use audit data to validate the 
appeals measures if additional information is uncovered during the 
audit process that demonstrates that the data for the appeals measures 
are not complete.
    Comment: A commenter requested clarification regarding the use of 
TMP data that are submitted at the parent-organization level. 
Specifically, the commenter was unsure if the reporting level would be 
at contract level or all contracts under the parent organization would 
receive the same scaled reduction.
    Response: Although the data for the TMP are submitted by the parent 
organization, the observations are recorded at the contract level. The 
TMP data for each parent organization are disaggregated to contract-
level data. The scaled reduction would be separately and independently 
determined for each contract under a parent organization. If a contract 
has no untimely cases or no cases that should have been forwarded to 
the IRE in the TMP timeframe, the contract would not be subject to a 
possible IRE data completeness reduction for the associated appeals 
measure. This analysis would be done on a contract-by-contract basis 
using only data for the applicable contract.
    Comment: A commenter expressed concern about the lack of a data-
driven methodology used to determine data integrity issues. Further the 
commenter asked for a data-driven, streamlined approach that does not 
use audit data.
    Response: The Star Ratings program and its associated methodology 
generally employ a comprehensive, scientific, data-driven approach. CMS 
has moved away from relying on audit data for determining the 
completeness of the appeals measures with the introduction of the TMP 
data. However, we are not adopting a rule to prohibit use of audit data 
where such data are reliable and relevant to understanding and 
determining whether the data used for a particular measure (even 
appeals measures) are erroneous, incomplete or biased.
    Comment: Some commenters requested additional information on the 
timeline for contracts to submit

[[Page 16566]]

information on scaled reductions along with simulations to allow 
contracts to better understand the impact of the scaled reduction 
methodology. Another commenter requested that CMS share all simulated 
data related to scaled reductions.
    Response: CMS will issue a memo each year outlining the timeframe 
associated with the TMP data collection. The TMP data used for the Star 
Ratings program will align with the measurement period of the Star 
Ratings year.
    The first submission for the TMP focused on the 2016 measurement 
year for Part C organization determinations and reconsiderations and 
Part D coverage determinations and redeterminations. CMS gained 
valuable insight about the audit universes, and the completeness of the 
IRE data.
    In December 2017, CMS provided each contract with the results of 
its TMP analysis. The Part C and D IRE data completeness percentage 
provided is equivalent to the calculated error rate discussed in the 
scaled reduction methodology section outlined in the NPRM. A contract 
can simulate the scaled reduction for the 2018 Star Ratings appeals 
measures by following the methodology for scaled reductions. First, a 
contract can use the data provided to determine whether it would be 
subject to a possible reduction due to lack of IRE data completeness 
based on the calculated error rate and projected number of cases not 
forwarded to the IRE. (To determine the projected number of cases the 
factor based on the enrollment needs to be multiplied by the number of 
cases detailed on the December report.) Next, if the contract is 
subject to a possible reduction, the lower bound of the Wilson Score 
interval is calculated using the formulas in the NPRM along with the 
calculated error rate. The lower bound can then be compared to the 
thresholds in Table 3 to identify the reduction to the associated 
appeals measure-level Star Ratings.
    Comment: A commenter did not believe the exclusion of a measure 
affected by data integrity issues is sufficient to prevent 
gamesmanship. Instead, the commenter suggested a hybrid approach that 
the commenter believes is less punitive. This method would exclude 
measures that received 4 or 5 stars and would levy an automatic 
reduction to 1 star for data integrity issues for measures that 
received 3 or less stars.
    Response: The accuracy of the measure data is key to the Star 
Ratings methodology. Excluding a measure from the Star Ratings due to 
data integrity issues instead of using a measure-level Star Rating of 1 
distorts the signal of the true quality and performance of a contract 
and does not align with the intent of the data integrity policies. We 
therefore disagree with the commenter.
    Comment: Some commenters supported expanding polices to reduce Star 
Ratings when the data are not reported or do not meet validation 
requirements. A few commenters suggested the use of scaled reductions 
for all measures in the Star Ratings program including HEDIS measures. 
Another commenter supported expanding the scaled reductions to other 
measures with special consideration of organizations demonstrating 
commitment to compliance.
    Response: CMS appreciates the support of the data integrity policy 
and will consider expanding the policies to be as comprehensive as 
feasible. Currently, for most measures, including HEDIS measures, we do 
not have enough information to calculate scaled reductions.
    Comment: Some commenters expressed concern regarding the possible 
use of audit data. The commenters stated that using audit data results 
in artificially inflated ratings for contracts that are not audited 
compared to contracts that are audited. A commenter stated the goals 
and analytic approaches associated with an audit do not align with 
those of the Star Ratings program. In addition, a commenter wanted any 
findings from enforcement activities excluded from the Star Ratings 
since not all contracts are audited each year. A commenter requested 
information about how CMS would ensure equity between audited and non-
audited contracts. In addition, another commenter asked for 
clarification of the `other data' that may be used for assessing data 
completeness. A commenter encouraged CMS immediately remove the impact 
of audit findings on the Star Ratings for the determination of 2019 
QBPs.
    Response: CMS appreciates the comments. All contracts are required 
to submit TMP data on an annual basis. The TMP data are typically the 
same data used for CMS program audits but are collected from all MA and 
Part D sponsoring organizations which shall ensure equity among all 
contracts. As part of the 2019 draft Call Letter, CMS proposed to 
remove the Beneficiary Access and Performance Problems (BAPP) measure 
from the Star Ratings. This proposal was finalized in the 2019 Final 
Call Letter to remove the BAPP measure from the Star Ratings program 
effective for the 2019 Star Ratings.
    Comment: A commenter suggested a hold harmless provision when there 
are data issues. The commenter provided the example of the measure of 
providing translation services that was removed from the Star Ratings 
in the past for contracts that have worked hard to perform well on a 
measure.
    Response: CMS removes measures from the Star Ratings if a 
systematic issues exists with data quality across all (or a majority 
of) contracts as described in Sec. Sec.  422.164(b) and 423.184(b). It 
is the policy of CMS not to assign measure-level Star Ratings if data 
issues are present across the board that suggest that the measure 
results are not reliable. When systemic data issues are present for a 
measure, it is difficult to accurately determine performance across 
contracts. The policy proposed for adding, updating and removing 
measures is presented in Sec. Sec.  422.164 and Sec. Sec.  423.184. The 
removal of measures from the Star Ratings is detailed in in Sec. Sec.  
422.164(b) and Sec. Sec.  423.184(b).
    Comment: A few commenters expressed concern that the CMS approach 
for data integrity issues for HEDIS measures is duplicative of the 
HEDIS audit process.
    Response: The data integrity policy for HEDIS measures uses the 
information provided by the NCQA compliance auditor, and thus aligns 
with their findings.
    Comment: A commenter stated that the reductions in the Star Ratings 
for integrity blurs the distinction between quality measurement and 
compliance and audit activities. Further, the commenter stated that the 
focus of the ratings should be clinical quality and beneficiary 
satisfaction. Another commenter expressed concern of the continuation 
of the downgrade to 1-star for the HEDIS and measures related to the 
Part C&D reporting requirements.
    Response: CMS considers data quality as paramount to accurate and 
reliable measurement. As such, CMS uses multiple sources of information 
to assess the multiple facets of data quality. The Star Ratings were 
designed to provide a true signal of the quality and performance of a 
contract. Star Ratings that are generated from data that lack quality 
or, in other words, flawed data--whether because of bias, 
incompleteness, or inaccuracy--impact the integrity of the ratings. 
Star Ratings that do not provide a true signal of the quality and 
performance of the Medicare health and drugs plans offered under a 
contract threaten the core of the Star Ratings program. CMS is 
committed to maintaining the integrity of the ratings. By taking steps 
to downgrade measure ratings when underlying data

[[Page 16567]]

quality issues exists, CMS is preserving the integrity of the Star 
Ratings and incentivizing sponsoring organizations to take steps to 
improve data integrity and eliminate problems.
    Comment: Some commenters suggested modifications to other facets of 
the data integrity policy. A commenter suggested that if an identified 
data issue did not harm beneficiaries, plans should be able to resubmit 
the data with limited penalty. Other commenters stated that CMS should 
provide contracts the opportunity to correct data errors without 
penalties. A commenter suggested that contracts should be offered a 
preliminary review of their data midway through the reporting year to 
allow identification of any issues and the chance to correct them 
before the end of the year. Another commenter suggested that CMS take 
into account the necessary distinction between a deliberate submission 
of inaccurate data and the unintentional occurrence of minor errors and 
mistakes when addressing data integrity. In addition, the commenter 
outlined an approach to penalize plans based on beneficiary impact, 
nature of issue, health plan activity, history of data integrity 
issues, and timing that would be reviewed by a third party.
    Response: CMS appreciates the careful consideration and suggestions 
for potential revisions to the data integrity policy. The data 
underlying a measure score and rating must be complete, accurate, and 
unbiased to allow the Star Ratings to be a true reflection of a 
contract's quality and performance. CMS's longstanding policy has been 
to reduce a contract's measure rating if a contract's measure data are 
incomplete, inaccurate, or biased but, as the proposal of scaled 
reductions indicates, CMS will consider and implement alternatives and 
improvements. We must, however, remain mindful of the timing and 
resource considerations at play with the annual release of Star 
Ratings.
    Data validation is a shared responsibility among CMS, CMS data 
providers, contractors, and Part C and D sponsors. CMS encourages 
organizations to routinely monitor their data and immediately alert CMS 
if errors or anomalies are identified so CMS can address these errors. 
Contracts are afforded opportunities to review their data before the 
Star Ratings are calculated, during data collection and during the Plan 
Preview periods for the Star Ratings. CMS will continue to review the 
policies and solicit feedback from stakeholders.
    Comment: A few commenters expressed concern about the perceived 
punitive nature of the data integrity policies. A commenter suggested 
that contracts should be rewarded if they have near-perfect 
performance. For example, the commenter suggested that contracts that 
receive a 5-Star Rating on the Part D Appeals Timeliness measure and do 
not qualify for the Part D Appeals Upheld measure because they received 
less than 10 appeals, should automatically receive a 5-Star Rating on 
the Part D Appeals Upheld measure.
    Response: CMS believes the integrity of the data is fundamental to 
the Star Ratings program. CMS maintains high standards for data quality 
to ensure that the Star Ratings are a true reflection of the quality, 
performance and experience of the beneficiaries enrolled in MA and Part 
D contracts. CMS employs a data-driven approach for determining the 
measure-level Star Ratings. The data integrity policies serve to 
preserve the integrity of the Star Ratings and encourage contracts and 
sponsors to strive for the highest data quality; they are not designed 
or intended to be punitive. The measure level reductions for data 
integrity concerns are not made to punish a sponsor but rather to 
reflect that the data available are incomplete and inaccurate.
    In the commenter's example, the contract did not meet the minimum 
number of cases reviewed by the IRE to be measured in the Appeals 
Upheld measure. This specification is necessary to ensure an adequate 
sample of cases for which to evaluate the contract's original 
decisions. The contract's TMP results regarding the completeness of the 
IRE data has no relevance on whether CMS can evaluate the contract in 
this measure. It remains that CMS cannot reliably calculate a percent 
of cases upheld by the IRE if there are too few IRE cases reviewed for 
the contract.
    Comment: A commenter suggested the removal of the Part C and D 
appeals measures until CMS can adequately address the underlying data 
integrity issues that are associated with the IRE and contracts.
    Response: CMS is firmly committed to the integrity of the Star 
Ratings systems. CMS believes that the data integrity policy and the 
rating reductions are necessary to avoid falsely assigning a high star 
to a contract, especially when deficiencies have been identified that 
show CMS cannot objectively evaluate a sponsor's performance in an 
area. To address challenges in validating the appeals measures, CMS 
implemented the collection of the TMP data. Concerns and reviews to 
assure data integrity will remain for as long as necessary to collect 
data in order to provide reliable Star Ratings and comparable 
information about plan quality and performance. CMS believes that our 
rule, as proposed and finalized, strikes the right balance in support 
of the underlying policies.
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing data integrity 
provisions as proposed at Sec. Sec.  422.164(g) and 423.184(g) without 
substantive modification. We are finalizing the following minor 
editorial changes to the regulation text: (1) In Sec.  
422.164(g)(1)(ii) to add a reference to ``substandards'' as well as 
standards that govern data validation; (2) in Sec.  422.164(g)(1)(iii) 
to improve the flow of the last sentence in the introductory paragraph 
and to correct the verb tenses in paragraphs (A), (C) and (K); (3) in 
Sec.  423.184(g)(1)(i) to identify the data that are subject to data 
validation; (4) in Sec.  423.184(g)(1)(ii) to add the sentence proposed 
as paragraph (ii)(A) to the introductory paragraph and redesignate the 
remaining paragraphs; and (5) in redesignated Sec.  
423.184(g)(1)(ii)(A), (C), and (F) to correct the verb tenses and 
capitalization of ``Star Ratings''. Finally, in Sec.  423.184(g)(1)(ii) 
A-L we aligned the regulatory text with Sec.  422.164(g)(1)(ii) A-N 
where appropriate. Sec.  422.164(g)(1)(ii) A-N has more provisions to 
account for the differences in calculations between Part C and D 
appeals measures.
l. Measure-Level Star Ratings
    We proposed in Sec. Sec.  422.166(a) and 423.186(a) the methods for 
calculating Star Ratings at the measure level. As part of the Part C 
and D Star Ratings system, Star Ratings are currently calculated at the 
measure level. To separate a distribution of scores into distinct 
groups or star categories, a set of values must be identified to 
separate one group from another group. The set of values that break the 
distribution of the scores into non-overlapping groups is a set of cut 
points. We proposed to continue to determine cut points by applying 
either clustering or a relative distribution and significance testing 
methodology; we proposed to codify this policy in paragraphs (a)(1) of 
each section. We proposed in paragraphs (a)(2) and (a)(3) of each 
section that for non-CAHPS measures (including the improvement 
measures, which were specifically addressed in paragraphs (a)(2)(iii), 
we would use a clustering methodology and that for CAHPS measures, we 
would use relative distribution and significance testing. Measure 
scores will be converted to a 5-

[[Page 16568]]

star scale ranging from 1 to 5, with whole star increments. A rating of 
5 stars will indicate the highest Star Rating possible, while a rating 
of 1 star will be the lowest rating on the scale. We proposed to use 
the two methodologies described as follows to convert measure scores to 
measure-level Star Ratings.
    We proposed to use the clustering method for all Star Ratings 
measures, except for the CAHPS measures. For each individual measure, 
we would determine the measure cut points using all measure scores for 
all contracts required to report that do not have missing, flagged as 
biased, or erroneous data. For the Part D measures, we proposed to 
determine MA-PD and PDP cut points separately. The scores would be 
grouped such that scores within the same rating (that is 1 star, 2 
stars, etc.) are as similar as possible, and scores in different 
ratings are as different as possible. The hierarchical clustering 
algorithm and the associated tree and cluster assignments using SAS (a 
statistical software package) are currently used to determine the cut 
points for the assignment of the measure-level Star Ratings. We stated 
that we would continue use of this software, but that improvements in 
statistical analysis would not result in rulemaking or changes in these 
eventual rules providing for the use of a clustering methodology. We 
stated our belief that the software used to apply the clustering 
methodology is generally irrelevant.
    Conceptually, the clustering algorithm identifies natural gaps 
within the distribution of the scores and creates groups (clusters) 
that are then used to identify the cut points that result in the 
creation of a pre-specified number of categories. The Euclidean 
distance between each pair of contracts' measure scores serves as the 
input for the clustering algorithm. The hierarchical clustering 
algorithm begins with each contract's measure score being assigned to 
its own cluster. Ward's minimum variance method is used to separate the 
variance of the measure scores into within-cluster and between-cluster 
sum of squares components in order to determine which pairs of clusters 
to merge. For the majority of measures, the final step in the algorithm 
is done a single time with five categories specified for the assignment 
of individual scores to cluster labels. The cluster labels are then 
ordered to create the 1 to 5-star scale. The range of the values for 
each cluster (identified by cluster labels) is examined. We proposed 
that this final range of values and labels would be used to determine 
the set of cut points for the Star Ratings as follows: The measure 
score that corresponds to the lower bound for the measure-level ratings 
of 2 through 5 will be included in the star-specific rating category 
for a measure for which a higher score corresponds to better 
performance; for a measure for which a lower score is better, the 
process will be the same except that the upper bound within each 
cluster label will determine the set of cut points; the measure score 
that corresponds to the cut point for the ratings of 2 through 5 will 
be included in the star-specific rating category; and in cases where 
multiple clusters have the same measure score value range, those 
clusters will be combined, leading to fewer than 5 clusters. Under our 
proposal to use clustering to set cut points, we stated that we would 
require the same number of observations (contracts) within each rating 
and instead will use a data-driven approach.
    As proposed in paragraphs (a)(2)(iii) of each section the 
improvement measures for Part C and Part D would be determined using 
the hierarchical clustering algorithm twice, once for raw scores of 
zero or greater and again for raw scores below for the identification 
of the cut points that will allow the conversion of the improvement 
measure scores to the star scale. The Part D improvement measure score 
clustering for MA-PDs and PDPs will be reported separately. Improvement 
scores of zero or greater would be assigned at least 3 stars for the 
improvement Star Rating, while improvement scores of less than zero 
would be assigned either 1 or 2 stars. For contracts with improvement 
scores greater than or equal to zero, the clustering process will 
result in three clusters with measure-level Star Ratings of 3, 4, or 5 
with the lower bound of each cluster serving as the cut point for the 
associated Star Rating. For those contracts with improvement scores 
less than zero, the clustering algorithm will result in two clusters 
with measure-level Star Ratings of 1 or 2..
    We proposed in paragraphs (a)(3) of each section to use another 
method using percentile standing relative to the distribution of scores 
for other contracts, measurement reliability standards, and statistical 
significance testing to determine star assignments for the CAHPS 
measures. This method will combine evaluating the relative percentile 
distribution of scores with significance testing and measurement 
reliability standards in order to maximize the accuracy of star 
assignments based on scores produced from the CAHPS survey. For CAHPS 
measures, contracts are first classified into base groups by 
comparisons to percentile cut points defined by the current-year 
distribution of case-mix adjusted contract means. Percentile cut points 
are rounded to the nearest integer on the 0-100 reporting scale, and 
each base group includes those contracts whose rounded mean score is at 
or above the lower limit and below the upper limit. Then, the number of 
stars assigned is determined by the base group assignment, the 
statistical significance and direction of the difference of the 
contract mean from the national mean, an indicator of the statistical 
reliability of the contract score on a given measure (based on the 
ratio of sampling variation for each contract mean to between-contract 
variation), and the standard error of the mean score. Table C4, which 
we proposed to codify in narrative form at Sec. Sec.  422.166(a)(3) and 
423.186(a)(3), details the CAHPS star assignment rules for each rating. 
We proposed that all statistical tests, including comparisons involving 
standard error, would be computed using unrounded scores.
    We proposed that if the reliability of a CAHPS measure score is 
very low for a given contract, less than 0.60, the contract would not 
receive a Star Rating for that measure. For purposes of applying the 
criterion for 1 star on Table 4, at item (c), low reliability scores 
are defined as those with at least 11 respondents and reliability 
greater than or equal to 0.60 but less than 0.75 and also in the lowest 
12 percent of contracts ordered by reliability. The standard error is 
considered when the measure score is below the 15th percentile (in base 
group 1), significantly below average, and has low reliability: In this 
case, 1 star will be assigned if and only if the measure score is at 
least 1 standard error below the unrounded cut point between base 
groups 1 and 2. Similarly, when the measure score is at or above the 
80th percentile (in base group 5), significantly above average, and has 
low reliability, 5 stars would be assigned if and only if the measure 
score is at least 1 standard error above the unrounded cut point 
between base groups 4 and 5.

[[Page 16569]]



                  Table 5--CAHPS Star Assignment Rules
------------------------------------------------------------------------
          Star                  Criteria for assigning Star Ratings
------------------------------------------------------------------------
1.......................  A contract is assigned one star if both
                           criteria (a) and (b) are met plus at least
                           one of criteria (c) and (d):
                          (a) its average CAHPS measure score is lower
                           than the 15th percentile; AND
                          (b) its average CAHPS measure score is
                           statistically significantly lower than the
                           national average CAHPS measure score;
                          (c) the reliability is not low; OR
                          (d) its average CAHPS measure score is more
                           than one standard error (SE) below the 15th
                           percentile.
2.......................  A contract is assigned two stars if it does
                           not meet the one[dash]star criteria and meets
                           at least one of these three criteria:
                          (a) its average CAHPS measure score is lower
                           than the 30th percentile and the measure does
                           not have low reliability; OR
                          (b) its average CAHPS measure score is lower
                           than the 15th percentile and the measure has
                           low reliability; OR
                          (c) its average CAHPS measure score is
                           statistically significantly lower than the
                           national average CAHPS measure score and
                           below the 60th percentile.
3.......................  A contract is assigned three stars if it meets
                           at least one of these three criteria:
                          (a) its average CAHPS measure score is at or
                           above the 30th percentile and lower than the
                           60th percentile, AND it is not statistically
                           significantly different from the national
                           average CAHPS measure score; OR
                          (b) its average CAHPS measure score is at or
                           above the 15th percentile and lower than the
                           30th percentile, AND the reliability is low,
                           AND the score is not statistically
                           significantly lower than the national average
                           CAHPS measure score; OR
                          (c) its average CAHPS measure score is at or
                           above the 60th percentile and lower than the
                           80th percentile, AND the reliability is low,
                           AND the score is not statistically
                           significantly higher than the national
                           average CAHPS measure score.
4.......................  A contract is assigned four stars if it does
                           not meet the 5-star criteria and meets at
                           least one of these three criteria:
                          (a) its average CAHPS measure score is at or
                           above the 60th percentile and the measure
                           does not have low reliability; OR
                          (b) its average CAHPS measure score is at or
                           above the 80th percentile and the measure has
                           low reliability; OR
                          (c) its average CAHPS measure score is
                           statistically significantly higher than the
                           national average CAHPS measure score and
                           above the 30th percentile.
5.......................  A contract is assigned five stars if both
                           criteria (a) and (b) are met plus at least
                           one of criteria (c) and (d):
                          (a) its average CAHPS measure score is at or
                           above the 80th percentile; AND
                          (b) its average CAHPS measure score is
                           statistically significantly higher than the
                           national average CAHPS measure score;
                          (c) the reliability is not low; OR
                          (d) its average CAHPS measure score is more
                           than one SE above the 80th percentile.
------------------------------------------------------------------------

We requested comments on our proposed methods to determine cut points.
    In the proposed rule, we also acknowledged our past practice of 
publishing pre-determined 4-star thresholds for certain measures. We 
asked commenters who supported the return of the pre-determined 4-star 
thresholds to provide suggestions on how to minimize the risk of 
``misclassifying'' a contract's performance. For example, 
misclassification occurs when scoring a ``true'' 4-star contract as a 
3-star contract, or vice versa. The potential for misclassification is 
increased if the cut points result in the creation of ``cliffs'' 
between adjacent categories within the Star Ratings that could lead to 
the potential of different ratings between contracts with nearly 
identical Star Ratings that lie on the opposite sides of a fixed 
threshold. In addition, we ask commenters that supported pre-determined 
thresholds ways in which CMS can continue to create incentives for 
quality improvement. We also solicited comments on alternative 
recommendations for revising the cut point methodology. We summarized 
examples of alternatives we were considering: Methodologies that will 
minimize year-to-year changes in the cut points by setting the cut 
points so they are a moving average of the cut points from the 2 or 3 
most recent years; and setting caps on the degree to which a measure 
cut point could change from one year to the next. We solicited comments 
on these particular methodologies and recommendations for other ways to 
provide stability for cut points from year to year.
    We received the following comments on our proposals and our 
responses follow:
    Comment: There was widespread support for the use of the clustering 
algorithm to determine the cut points, although the overwhelming 
majority recommended some changes to how CMS determines the cut points.
    Response: CMS appreciates the support of the use of the clustering 
algorithm for the determination of the cut points. CMS carefully 
reviewed the feedback which reflects very diverse and conflicting 
opinions on the appropriate way to set cut points. CMS is actively 
considering a wide range of options for modifying the approach for 
determining cut points and needs to fully simulate alternative options 
in order to avoid implementing an option that could have unintended 
consequences. Thus, we are finalizing the clustering algorithm for the 
determination of cut points (for non-CAHPS measures) as proposed while 
we continue to simulate alternative options. CMS will use the feedback 
from this NPRM to guide and examine options for an enhanced methodology 
for converting the measure scores to measure-level Star Ratings, which 
would be proposed in a future regulation.
    Comment: The majority of commenters listed or identified several 
desirable attributes for the cut points, including having them be 
predetermined and released before the beginning of the measurement 
period, and increasing the stability and predictability of them. A 
handful of commenters noted that the cut points must represent 
meaningful differences among the star categories.
    Many commenters expressed concern about the influence of outliers 
on the cut points. Some of the suggestions for decreasing the influence 
of outliers included removing them from the clustering algorithm, using 
a trimmed data set, or raising the minimum measure-level denominator 
threshold from 30 to 100 to reduce the number of outliers based on 
small numbers. In addition, many commenters that expressed a preference 
for stability supported a cap, a restriction on the maximum movement 
for a measure's cut points from one year to the next, to achieve the 
desired characteristic. A commenter suggested employing a cap similar 
to NCQA's method which relies on assigning a cap based on the maximum 
change in the relative distribution of the measure scores. The 
commenter believed this would allow

[[Page 16570]]

CMS's clustering methodology to move cut points (for example, moving 
the 4 and 5 star cut points up) without extreme changes based on the 
movement of relatively few MA contracts. Another commenter who 
supported stability stated that the thresholds from one year to the 
next should not be allowed to decrease. The majority of commenters who 
supported caps did not provide a specific value or methodology, but 
rather the advantages that caps would allow.
    Some commenters suggested averaging cut points over multiple years 
for stability. Many commenters referenced CMS's previous policy that 
identified 4-star predetermined thresholds for specific measures and 
supported their return. A few commenters supported a weighted average 
based on several years of data to determine the cut points. A few 
commenters supported using a multiple-year trend to project measure cut 
points in advance of the measurement period.
    Response: We appreciate the careful consideration of possible 
modifications to the methodology used for determining the cut points 
for the conversion of measure scores to the measure-level Star Ratings 
scale. CMS is examining a number of potential options for determining 
cut points that would capture the greatest number of desirable 
attributes that our stakeholder have identified (pre-determined, 
stable, predictable cut points with minimal (if any) influence by 
outliers, restricted movement across years) while maintaining the 
integrity of the Star Ratings in order to propose a new or enhanced 
policy for establishing measure-level ratings in the near future. We 
believe that the number and scope of alternatives require additional 
consideration and testing before we can finalize a different 
methodology for setting cut points for non-CAHPS measures. In the 
meantime, we believe that the clustering methodology presents a valid 
approach to accurately reflect the quality of care for MA and Part D 
sponsors, while creating incentives for continued quality improvement. 
The goal of clustering is to assign stars that maximize the differences 
across star categories and minimize the differences within star 
categories to minimize the risk of misclassification. The clustering 
methodology also accounts for changes in the distribution of scores 
over time. We understand the desire to create more stability in the 
assignment of cut points and in performance expectations, but we want 
to ensure that any potential alternative methodologies do not create 
unintended consequences.
    Comment: Some commenters stated their support for transparency. 
Some commenters believe that increased transparency can be achieved by 
releasing all data for the Star Ratings program. A commenter suggested 
that CMS improve transparency in national performance reflected in 
display measures by calculating and publishing individual measure cut 
points for display measures instead of national averages. Other 
commenters believe transparency would be achieved by the implementation 
of pre-determined thresholds before the start of the measurement 
period.
    Response: CMS appreciates these comments. CMS agrees with the 
commenters that transparency in the ratings system is important. Each 
year CMS releases public use files of the performance data underlying 
the Star Ratings, available at http://go.cms.gov/partcanddstarratings. 
In addition, the cut points for the specific Star Ratings' year are 
available in the annual Technical Notes using the same link used for 
the data sets. A Cut Point Trend document is updated and released 
annually to provide a single source for multiple years of Star Ratings 
cut points. The Cut Point Trend document is organized in a user-
friendly format by measure and is available using the aforementioned 
link.
    Display measures are collected through data sources such as 
Medicare Part C and Part D reporting requirements, Part D Prescription 
Drug Event (PDE) data, Healthcare Effectiveness Data and Information 
Set (HEDIS) information, and Consumer Assessment of Healthcare 
Providers and Systems (CAHPS) surveys. The display measures are not 
included in determination of the Star Ratings on Medicare Plan Finder 
and thus, are not assigned Star Ratings. Display measures provide 
useful information about plan quality that sponsors can take action 
upon in order to improve the quality of care provided to their members. 
To allow comparisons, national averages of the display measure scores 
are available in the annual MA Part C & D Measure Technical Notes. (The 
display measure data set and Technical Notes are posted on the same 
site as the MA Star Ratings information.)
    CMS is examining a number of potential options for determining cut 
points that would capture the greatest number of desirable attributes 
that the commenters have identified (pre-determined, stable, 
predictable cut points with minimal (if any) influence by outliers, 
restricted movement across years) while maintaining the integrity of 
the Star Ratings. CMS is simulating the alternatives to the current cut 
point methodology. Further, CMS is identifying potential unintended 
consequences and examining ways to mitigate any identified risk to the 
integrity of the Star Ratings program. CMS is finalizing the clustering 
algorithm for the determination of cut points as proposed based on the 
positive and useful aspects of that methodology and to allow us the 
time to fully consider the options suggested by our stakeholders for 
enhancements to make it an even stronger methodology for converting the 
measure scores to measure-level Star Ratings. Any changes would be 
proposed in a future regulation.
    Comment: Some commenters suggested alternative methodologies to 
determine cut points. A commenter suggested the use of a forced 
distribution rather than clustering to capture the true distribution of 
plan performance; assigning cut points by applying an adjustment factor 
to the prior year's results based on historical performance; or 
calculating the average change in the median from the prior 3 years and 
apply that to determine the current cut points. A few commenters 
suggested using the industry average. A commenter suggested using the 
industry average as the basis of a 3-star rating.
    Response: CMS appreciates these comments. CMS believes that using a 
data driven approach to determine cut points aligns with our policies 
and guiding principles. As part of our guiding principles, we want to 
develop an enhanced methodology that ensures that the ratings are a 
true reflection of plan quality and minimizes the risk of 
misclassification. A forced distribution carries a high risk of 
misclassification because the cut points would not maximize the 
differences of contracts across star categories and minimize the 
differences of contracts within the same star category. An average as 
the basis of a 3-star rating would not accurately take into account the 
skewed distribution of many measures. CMS is examining a number of 
potential options for determining cut points while maintaining the 
integrity of the Star Ratings, including examining whether we can 
adjust prior performance results to determine current cut points. CMS 
will propose and solicit comment on an enhanced cut point methodology 
in a future regulation.
    Comment: Some commenters stated that the current clustering 
algorithm to identify the cut points for the Star Ratings' measures 
does not always accurately reflect the quality improvement that 
contacts have achieved especially for measures scores

[[Page 16571]]

with a limited range in their distribution. Some commenters explicitly 
stated their opposition to some of the proposed methodologies. A 
commenter was against a moving average approach amid concerns of the 
longevity of such a method. Another commenter did not support caps due 
to the belief that caps would mask true performance. Another commenter 
did not support weighted clustering. A commenter suggested benchmarking 
independent of clustering to determine the cut points; the commenter 
justified the recommendation based on the belief that increases in the 
average measure scores over time leads to decreased variability of plan 
performance and tight clustering of plan performance which results in 
insignificant percentile scores having large impacts on the Star 
Ratings.
    Response: CMS appreciates our stakeholder's feedback and will use 
it to guide the development of an enhanced methodology. So as not to 
implement a methodology that may inordinately increase the risk of 
misclassification, CMS will analyze and simulate the options to assess 
the impact of the methodology on the Star Ratings. The goal of 
clustering and the elimination of pre-determined 4-star thresholds for 
the 2016 Star Ratings was to more accurately measure performance.
    The current methodology for converting measure scores to measure-
level Star Ratings for non-CAHPS measures identifies the gaps that 
exist within the distribution of scores based on the criterion for 
assigning the groups. If the distribution is extremely restricted such 
that 5 unique groups cannot be formed, the output will result in 5 
groups that are not unique. In this rare situation, there would be less 
than 5 star categories and the ordered groups will be assigned the 
higher ratings on the scale.
    Comment: A commenter expressed concern about determining cut points 
using all MA data because such an approach fails to take into account 
the significant underlying differences in enrollment of plans. The 
commenter supported both stratified reporting and the determination of 
cut points after grouping plans into relevant cohorts (stratification 
at the contract level on key population characteristics, such as 
proportion Dual/LIS/Disabled).
    Response: CMS appreciates this feedback. The Star Ratings system 
does not determine cut points for subsets of the population because it 
does not align with its underlying principles. However, CMS has 
developed the Categorical Adjustment Index (CAI), which is a factor 
that is added to or subtracted from a contract's Overall and/or Summary 
Star Ratings to adjust for the average within-contract disparity in 
performance associated with a contract's percentages of beneficiaries 
with Low Income Subsidy/Dual Eligible (LIS/DE) and disability status. 
These adjustments are performed both with and without the improvement 
measures included. The value of the CAI varies by a contract's 
percentages of beneficiaries with Low Income Subsidy/Dual Eligible 
(LIS/DE) and disability status. In addition, CMS displays Part C and D 
performance data stratified by race and ethnicity at: https://www.cms.gov/About-CMS/Agency-Information/OMH/research-and-data/statistics-and-data/stratified-reporting.html.
    Comment: A commenter expressed support of the identification of cut 
points, as they can provide insight into performance throughout the 
year, leading to greater quality improvements.
    Response: CMS appreciates this support of the identification and 
utility of cut points.
    Comment: A commenter requested simulations on the proposed cut 
point methodologies.
    Response: CMS remains committed to transparency. CMS regularly 
solicits and values the feedback from our stakeholders. The feedback 
received guides the development of the policy options. CMS will 
continue to remain transparent in the development process for an 
enhanced cut point methodology as we move forward to propose a 
modified, new, or different policy for the assignment of measure-level 
Star Ratings.
    Comment: A commenter urged CMS to re-evaluate the cut points to 
ensure the Star Ratings accurately reflect plan quality and are based 
on evidence. The commenter expressed concern about the number of 
measures within the MA Star Ratings program that are based on physician 
action and compliance. In order for plans to comply with and earn 
incentives from CMS, the commenter believes that plans must often set 
unrealistic targets within their physician contracts in order for the 
plan to score well due to the Star Ratings cut points. The commenter 
believes that there may be instances when compliance with a measure is 
contrary to appropriate care, and contracts may be penalized.
    Response: CMS appreciates this comment. Plans should always set 
clinically appropriate targets for their physicians. There is no reason 
why the current methodology for setting the cut points to assign 
ratings to raw performance scores would require a physician to provide 
inappropriate care.
    Comment: CMS received a handful of comments related to converting 
CAHPS scores to stars. There was support for the current methodology 
(which was proposed) although several commenters suggested the cut 
points are too narrow and a few would like to re-implement pre-
determined cut points for CAHPS. A commenter stated that the relative 
distribution and significance testing methodology in CAHPS is biased in 
a negative direction and that these adjustments do not appropriately 
address the variability in CAHPS survey results.
    Response: We appreciate comments received on the CAHPS methodology. 
Three factors enter into CAHPS star assignment: The ranking of the 
contract in relation to other contracts, a statistical significance 
test that takes into consideration the degree of certainty that the 
score is above or below the national average, and examination of 
measure reliability. The significance test is applied in the same way 
in the positive and negative directions and is not biased. CAHPS 
measures meet high standards of reliability and thus variability in the 
scores reflects variability in performance. This methodology improves 
the performance of the star system and ensures that 4 and 5 stars are 
reserved for contracts with strong evidence of high performance and 
that 1 and 2 stars are reserved for contracts with strong evidence of 
low performance. We note that the base group is not an entitlement to a 
certain Star Rating.
    Previous analyses of CAHPS scores have suggested that seemingly 
small differences of 1 point on a 0-100 scale are meaningful; 
differences of 3 points can be considered medium, and differences of 5 
points can be considered large.\57\ For instance, a 3-point increase in 
some CAHPS measures has been associated with a 30 percent reduction in 
disenrollment from health plans, which suggests that even ``medium'' 
differences in CAHPS scores may indicate substantially different care 
experiences.\58\
---------------------------------------------------------------------------

    \57\ Paddison CAM, Elliott MN, Haviland AM, Farley DO, 
Lyratzopoulos G, Hambarsoomian K, Dembosky JW, Roland MO. (2013). 
``Experiences of Care among Medicare Beneficiaries with ESRD: 
Medicare Consumer Assessment of Healthcare Providers and Systems 
(CAHPS) Survey Results.'' American Journal of Kidney Diseases 61(3): 
440-449.
    \58\ Lied, T.R., S.H. Sheingold, B.E. Landon, J.A. Shaul, and 
P.D. Cleary. (2003). ``Beneficiary Reported Experience and Voluntary 
Disenrollment in Medicare Managed Care.'' Health Care Financing 
Review 25(1): 55-66.

---------------------------------------------------------------------------

[[Page 16572]]

Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the 
methodology to determine cut points as proposed in Sec. Sec.  
422.166(a) and 423.186(a). CMS is committed to incorporating the 
feedback received from commenters on the methodology for determining 
cut points for non-CAHPS measures and will thoroughly analyze other 
potential methodologies to ensure that unintended consequences are 
avoided and the cut points resulting from any enhancements are 
consistent with principles and policy goals for the Star Ratings 
system. Changes to the methodology for the determination of cut points 
for non-CAHPS measures will be proposed in a future rule.
    We are finalizing the methodology to determine cut points for CAHPS 
measures in Sec. Sec.  422.166(a)(3) and 423.186(a)(3) substantively as 
proposed. We are finalizing the regulation text with minor technical 
revisions to improve readability.
m. Hierarchical Structure of the Ratings
    We proposed to continue our existing policy to use a hierarchical 
structure for the Star Ratings. Currently, and as proposed, the basic 
building block of the MA Star Ratings system is the measure. Because 
the MA Star Ratings system consists of a large collection of measures 
across numerous quality dimensions, the measures will be organized in a 
hierarchical structure that provides ratings at the measure, domain, 
Part C summary, Part D summary, and overall levels. The proposed 
regulations text at Sec. Sec.  422.166 and 423.186 are built on this 
structure and provides for calculating ratings at each ``level'' of the 
system. The organization of the measures into larger groups increases 
both the utility and efficiency of the rating system. At each 
aggregated level, ratings are based on the measure-level stars. Ratings 
at the higher level are based on the measure-level Star Ratings, with 
whole star increments for domains and half-star increments for summary 
and overall ratings; a rating of 5 stars will indicate the highest Star 
Rating possible, while a rating of 1 star will be the lowest rating on 
the scale. Half-star increments are used in the summary and overall 
ratings to allow for more variation at the higher hierarchical levels 
of the ratings system. We believe this greater variation and the 
broader range of ratings provide more useful information to 
beneficiaries in making enrollment decisions while remaining consistent 
with the statutory direction in sections 1853(o) and 1854(b) of the Act 
to use a 5-star system. These policies for the assignment of stars will 
be codified with other rules for the ratings at the domain, summary, 
and overall level. Domain ratings employ an unweighted mean of the 
measure-level stars, while the Part C and D summary and overall ratings 
employ a weighted mean of the measure-level stars and up to two 
adjustments. We proposed to codify these policies at paragraphs (b)(2), 
(c)(1) and (d)(1) of Sec. Sec.  422.166 and 423.186.
    We received the following overall comments on our proposal and our 
response follows:
    Comment: All commenters supported the existing hierarchical 
structure of the Star Ratings program and its associated policies.
    Response: CMS appreciates the continued support of the existing 
organization of the Star Ratings measures and the policies associated 
with it. CMS firmly believes the structure increases the utility and 
efficiency of the rating system and appreciates the positive response 
to it.
n. Domain Star Ratings
    Groups of measures that together represent a unique and important 
aspect of quality and performance are organized to form a domain. 
Domain ratings summarize a plan's performance on a specific dimension 
of care. Currently the domains are used purely for purposes of 
displaying data on Medicare Plan Finder to organize the measures and 
help consumers interpret the data. We proposed to continue this policy 
at Sec. Sec.  422.166(b)(1)(i) and 423.186(b)(1)(i).
    At present, there are nine domains--five for Part C measures for 
MA-only and MA-PD plans and four for Part D measures for stand-alone 
PDP and MA-PD plans. We proposed to continue to group measures for 
purposes of display on Medicare Plan Finder and to continue use of the 
same domains as in current practice in Sec. Sec.  422.166(b)(1)(i) and 
423.196(b)(1)(i). The current domains are listed in Tables 5 and 6.

                         Table 6--Part C Domains
------------------------------------------------------------------------
                                 Domain
-------------------------------------------------------------------------
Staying Healthy: Screenings, Tests and Vaccines.
Managing Chronic (Long Term) Conditions.
Member Experience with Health Plan.
Member Complaints and Changes in the Health Plan's Performance.
Health Plan Customer Service.
------------------------------------------------------------------------


                         Table 7--Part D Domains
------------------------------------------------------------------------
                                 Domain
-------------------------------------------------------------------------
Drug Plan Customer Service.
Member Complaints and Changes in the Drug Plan's Performance.
Member Experience with the Drug Plan.
Drug Safety and Accuracy of Drug Pricing.
------------------------------------------------------------------------

    Currently, Star Ratings for domains are calculated using the 
unweighted mean of the Star Ratings of the included measures. They are 
displayed to the nearest whole star, using a 1-5 star scale. We 
proposed to continue this policy at paragraph (b)(2)(ii). We also 
proposed that a contract must have stars for at least 50 percent of the 
measures required to be reported for that domain for that contract type 
to have that domain rating calculated; we explained this was necessary 
to have enough data to reflect the contract's performance on the 
specific dimension. For example, if a contract is rated only on one 
measure in Staying Healthy: Screenings, Tests and Vaccines, that one 
measure will not necessarily be representative of how the contract 
performs across the whole domain so we do not believe it is appropriate 
to calculate and display a domain rating. We proposed to continue this 
policy by providing, at paragraph (b)(2)(i), that a minimum number of 
measures must be reported for a domain rating to be calculated.
    We received the following comments on our proposal and our 
responses follow:
    Comment: Commenters supported the use of the current domains and 
the associated policies related to the calculation of the Star Ratings 
for domains.
    Response: CMS appreciates our stakeholders' support of the use of 
the domains and associated policies related to the domains.
    Comment: A commenter noted the usefulness of the domains for 
displaying the data on Medicare Plan Finder (MPF). In addition, the 
commenter believed the domains helped consumers interpret the data on 
MPF.
    Response: The domains were designed to summarize a plan's 
performance on a specific dimension of care. CMS appreciates the 
positive feedback related to domains and the agreement that they serve 
not only to organize data on MPF, but also serve as an aid to 
consumers' interpretation of the data displayed.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above,

[[Page 16573]]

we are finalizing the provisions identifying the domains and for rating 
at the domain level as proposed at Sec. Sec.  422.166(b) and 423.186(b) 
without modification.
o. Part C and D Summary Ratings
    In the current rating system the Part C summary rating provides a 
rating of the health plan quality and the Part D summary rating 
provides a rating of the prescription drug plan quality. We proposed, 
at Sec. Sec.  422.166(c) and 423.186(c), to codify regulation text 
governing the adoption of Part C summary ratings and Part D summary 
ratings. An MA-only plan and a Part D stand-alone plan will receive a 
summary rating only for, respectively, Part C measures and Part D 
measures.
    First, in paragraphs (c)(1) of each section, we proposed the 
overall formula for calculating the summary ratings for Part C and Part 
D. Under current policy, the summary rating for an MA-only contract is 
calculated using a weighted mean of the Part C measure-level Star 
Ratings with up to two adjustments: The reward factor (if applicable) 
and the Categorical Adjustment Index (CAI). Similarly, the current 
summary rating for a PDP contract is calculated using a weighted mean 
of the Part D measure-level Star Ratings with up to two adjustments: 
The reward factor (if applicable) and the CAI. We proposed in 
Sec. Sec.  422.166(c)(1) and 423.186(c)(1) that the Part C and Part D 
summary ratings would be calculated as the weighted mean of the 
measure-level Star Ratings with an adjustment to reward consistently 
high performance (reward factor) and the application of the CAI, 
pursuant to paragraph (f) (where we proposed the specifics for these 
adjustments) for Parts C and D, respectively.
    Second, and also consistent with current policy, we proposed an MA-
only contract and PDP would have a summary rating calculated only if 
the contract meets the minimum number of rated measures required for 
its respective summary rating: A contract must have scores for at least 
50 percent of the measures required to be reported for the contract 
type to have the summary rating calculated. We proposed to codify the 
necessary text as paragraph (c)(2)(i) of Sec. Sec.  422.166 and 423.186 
the same rules will be applied to both the Part C and Part D summary 
ratings for the minimum number of rated measures. We proposed that 
these regulations would also apply to calculating the summary Part C 
and Part D ratings of MA-PD plan; the MA-PD plan would have to meet the 
minimum number of rated measures for each summary rating type. We also 
proposed (at paragraph (c)(2)(ii)) that the improvement measures 
themselves are not included in the count of minimum number of measures 
for the Part C or Part D summary ratings. Third, we proposed a 
paragraph (c)(3) in both Sec. Sec.  422.166 and 423.186 to provide that 
the summary ratings are on a 1 to 5 star scale in half-star increments. 
Traditional rounding rules would be employed to round the summary 
rating to the nearest half-star. We explained in connection with this 
proposal how the policies proposed in Sec. Sec.  422.166(h) and 
423.186(h) regarding posting summary ratings on MPF would apply. The 
summary rating would be displayed in HPMS and Medicare Plan Finder to 
the nearest half star if a contract had not met the measure requirement 
for calculating a summary rating, the display in HPMS (and on Medicare 
Plan Finder) for the applicable summary rating would be the flag, ``Not 
enough data available'' or if the measurement period is less than 1 
year past the contract's effective date the flag would be, ``Plan too 
new to be measured.''
    We solicited comments on the calculations for the Part C and D 
summary ratings. We received the following comments on our proposal and 
our responses follow:
    Comment: The majority of the commenters supported the policies, 
methodology, and display of the summary ratings as proposed.
    Response: CMS appreciates the ongoing support of the summary 
ratings.
    Commenter: A commenter recommended a revision to the rule that 
requires a contract to have numeric scores for at least 50 percent of 
the required measures for the summary-specific rating to have a summary 
rating calculated. The commenter suggested a change to the rule such 
that a summary rating would be calculated if a contract had at least 
half of the weighted value of the full measure set for the summary-
specific rating.
    Response: CMS appreciates the feedback for a possible revision to 
the rule that determines whether a summary rating would be calculated. 
The Part C summary rating provides a rating of the health plan quality 
and the Part D summary rating provides a rating of the prescription 
drug plan quality. The summary ratings include information from 
multiple dimensions of quality and performance. CMS plans to evaluate 
the suggestion of using 50 percent of the total weighted value of the 
measure set as the threshold for calculating summary ratings to examine 
whether such a change would still allow an accurate reflection of the 
quality of the health plan or prescription drug plan.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
governing summary ratings as proposed at Sec. Sec.  422.162(c) and 
423.182(c) without modification.
p. Overall Rating
    The overall Star Rating is a global rating that summarizes the 
plan's quality and performance for the types of services offered by the 
plans under the rated contract. We proposed at Sec. Sec.  422.166(d) 
and 423.186(d) to codify the standards for calculating and assigning 
overall Star Ratings for MA-PD contracts. The overall rating for an MA-
PD contract is proposed to be calculated using a weighted mean of the 
Part C and Part D measure level Star Ratings, respectively, with an 
adjustment to reward consistently high performance described in 
paragraph (f)(1) and the application of the CAI, pursuant to described 
in paragraph (f)(2).
    Consistent with current policy, we proposed at paragraph (d)(2) 
that an MA-PD would have an overall rating calculated only if the 
contract receives both a Part C and Part D summary rating and has 
scores for at least 50 percent of the required measures for the 
contract type. As with the Part C and D summary ratings, the Part C and 
D improvement measures will not be included in the count for the 
minimum number of measures for the overall rating. Any measure that 
shares the same data and is included in both the Part C and Part D 
summary ratings would be included only once in the calculation for the 
overall rating. For example, the measures ``Members Choosing to Leave 
the Plan'' and ``Complaints about the Plan'' use the same data for both 
the Part C and Part D measure for an MA-PD plan and under the proposal, 
would be counted only once for the overall rating. As with summary 
ratings, we proposed that overall MA-PD ratings would use a 1 to 5 star 
scale in half-star increments; traditional rounding rules would be 
employed to round the overall rating to the nearest half-star. These 
policies are proposed as paragraphs (d)(2)(i) through (iv).
    We also explained in the proposed rule how the overall rating would 
be posted in accordance with our general proposed policy at Sec. Sec.  
422.166(h) and 423.186(h), including the specific messages for lack of 
ratings for certain reasons. Applying that rule, if an MA-

[[Page 16574]]

PD contract has only one of the two required summary ratings, the 
overall rating would not be calculated and the display in HPMS would be 
the flag, ``Not enough data available.''
    For QBP purposes, low enrollment contracts and new MA plans are 
defined in Sec.  422.252. Low enrollment contract means a contract that 
could not undertake Healthcare Effectiveness Data and Information Set 
(HEDIS) and Health Outcomes Survey (HOS) data collections because of a 
lack of a sufficient number of enrollees to reliably measure the 
performance of the health plan; new MA plan means an MA contract 
offered by a parent organization that has not had another MA contract 
in the previous 3 years. Low enrollment contracts and new plans do not 
receive an overall or summary rating because of the lack of necessary 
data. However, they are treated as qualifying plans for the purposes of 
QBPs. Section 1853(o)(3)(A)(ii)(II) of the Act, as implemented at Sec.  
422.258(d)(7), provides that for 2013 and subsequent years, CMS shall 
develop a method for determining whether an MA plan with low enrollment 
is a qualifying plan for purposes of receiving an increase in payment 
under section 1853(o). This determination is applied at the contract 
level and thus determines whether a contract (meaning all plans under 
that contract) is a qualifying contract. The statute, at section 
1853(o)(3)(A)(iii) of the Act, provides for treatment of new MA plans 
as qualifying plans eligible for a specific QBP. We therefore proposed, 
at Sec. Sec.  422.166(d)(3) and 423.186(d)(3), that low enrollment 
contracts (as defined in Sec.  422.252 of this chapter) and new MA 
plans (as defined in Sec.  422.252 of this chapter) do not receive an 
overall and/or summary rating; they will be treated as qualifying plans 
for the purposes of QBPs as described in Sec.  422.258(d)(7) of this 
chapter. The QBP levels for each rating area are announced through the 
process described for changes in and adoption of payment and risk 
adjustment policies in section 1853(b) of the Act. We noted that this 
aspect of the proposal would merely codify existing policy and 
practice.
    We received the following comments on our proposal and our 
responses follow:
    Comment: Commenters supported the use of the overall rating as a 
global rating that summarizes a contract's quality and performance, as 
well as the proposal to use the current policies for calculating and 
publishing the overall rating.
    Response: CMS values the support of the overall rating and its 
associated methodology.
    Comment: A commenter suggested a revision to the rule for 
calculating the overall rating for an MA-PD contract. As done currently 
and proposed, an MA-PD contract must have both (Part C and Part D) 
summary ratings and measure scores for at least 50 percent of the 
required measures based on contract-type (exclusive of the improvement 
measures) to have an overall rating. The commenter suggested that an 
overall rating for an MA-PD contract require measure scores that total 
at least half of the weighted value of the full measure set.
    Response: CMS appreciates the suggestion of alternative 
requirements for the calculation of an overall rating. Changing the 
requirement for the calculation of an overall rating to be based on the 
majority of the total weight of the Star Ratings measures has the 
potential of confusing the global nature of the overall rating. There 
are substantially more Part C measures in the Star Ratings and the 
total weight of the Part C measures exceeds that of the Part D 
measures. By requiring a contract to have both a Part C and D summary 
rating coupled with the requirement of at least 50 percent of the 
measures, CMS has minimized the potential for the overall rating being 
determined primarily by dimensions of health plan quality instead of 
both health plan and prescription drug plan quality.
    Comment: A commenter suggested the use of a percentile rank 
threshold for the determination of a 5-star overall rating, thus 
allowing the recognition of top performers along with the ability to 
enroll members year-round.
    Response: While CMS thanks the commenter for its suggestion, CMS 
disagrees with using percentile ranking as a threshold for calculating 
overall ratings. One of the underlying design principles of the MA and 
Part D Star Ratings is to incentivize plans to provide the best health 
care possible to our beneficiaries. This underlying principle is 
reflected in the manner that measure scores are converted to Star 
Ratings, as well as the aggregation of the measure-level Star Ratings 
to an overall rating. (Measure-level Star Ratings are the basic 
building block, of the overall rating.) A percentile rank threshold 
approach for the overall rating does not align with the principles of 
the Star Ratings methodology and would arbitrarily apply a threshold 
that could be perceived as a subjective value that would ultimately 
separate 5-star contracts from all other contracts.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
for overall ratings as proposed at Sec. Sec.  422.162(d) and 423.182(d) 
without modification.
q. Measure Weights
    Prior to the 2012 Part C and D Plan Ratings (now known as Star 
Ratings), all individual measures included in the program were weighted 
equally, suggesting equal importance. Based on feedback from 
stakeholders, including health and drug plans and beneficiary advocacy 
groups, we moved to provide greater weight to clinical outcomes and 
lesser weight to process measures. Patient experience and access 
measures were also given greater weight than process measures, but not 
as high as outcome measures. The differential weighting was implemented 
to help create further incentives to drive improvement in clinical 
outcomes, patient experience, and access. These differential weights 
for measures were implemented for the 2012 Ratings following a May 2011 
Request for Comments and adopted in the CY2013 Rate Announcement and 
Final Call Letter.
    In the Contract Year 2012 Final Rule for Changes to the Medicare 
Advantage and the Medicare Prescription Drug Benefit Programs rule (79 
FR 21486), we stated that scoring methodologies should also consider 
improvement as an independent goal. To this end, we implemented in the 
CY 2013 Rate Announcement the Part C and D improvement measures that 
measure the overall improvement or decline in individual measure scores 
from the prior to the current year. Given the importance of recognizing 
quality improvement as an independent goal, for the 2015 Star Ratings, 
we proposed and subsequently finalized through the 2015 Rate 
Announcement and final Call Letter an increase in the weight of the 
improvement measure from 3 times to 5 times that of a process measure, 
which is weighted as 1. This weight aligns the Part C and D Star 
Ratings program with value-based purchasing programs in Medicare fee-
for-service which take into account improvement.
    We proposed in Sec. Sec.  422.166(e) and 423.186(e) to continue the 
current weighting of measures in the Part C and D Star Ratings program 
by assigning the highest weight (5) to improvement measures, followed 
by outcome and intermediate outcome measures (weight of 3), then by 
patient experience/

[[Page 16575]]

complaints and access measures (weight of 1.5), and finally process 
measures (weight of 1). We also solicited feedback about increasing the 
weight of the patient experience/complaints and access measures and 
stated our interest in stakeholder feedback on this potential change in 
order to reflect better the importance of these issues in plan 
performance. If we were to increase the weight, we asked for feedback 
about increasing it from a weight of 1.5 to between 1.5 and 3, similar 
to outcome measures. This increased weight would reflect CMS's 
commitment to serve Medicare beneficiaries by putting patients first, 
including their assessments of the care received by plans. We solicited 
comment on this point, particularly the potential change in the weight 
of the patient experience/complaints and access measures.
    Table C7 includes the proposed measure categories, the definitions 
of the measure categories, and the weights. In calculating the summary 
and overall ratings, a measure given a weight of 3 counts three times 
as much as a measure given a weight of 1. In section II.A.11. of the 
proposed rule, we proposed (as Table C2) the measure set and included 
the category and weight for each measure, consistent with this proposal 
for weighting measure by category. We proposed that as new measures are 
added to the Part C and D Star Ratings, we would assign the measure 
category based on these categories and the regulation text proposed at 
Sec. Sec.  422.166(e) and 423.186(e), subject to two exceptions. For 
the first exception, we proposed to codify current policy in paragraphs 
(e)(2) of each section and to assign new measures to the Star Ratings 
program a weight of 1 for their first year in the Star Ratings. In 
subsequent years the weight associated with the measure weighting 
category would be used. This is consistent with current policy.

                          Table 8--Proposed Measure Categories, Definitions and Weights
----------------------------------------------------------------------------------------------------------------
              Measure category                                    Definition                          Weight
----------------------------------------------------------------------------------------------------------------
Improvement.................................  Part C and Part D improvement measures are derived               5
                                               through comparisons of a contract's current and
                                               prior year measure scores.
Outcome and Intermediate Outcome............  Outcome measures reflect improvements in a                       3
                                               beneficiary's health and are central to assessing
                                               quality of care. Intermediate outcome measures
                                               reflect actions taken which can assist in
                                               improving a beneficiary's health status.
                                               Controlling Blood Pressure is an example of an
                                               intermediate outcome measure where the related
                                               outcome of interest will be better health status
                                               for beneficiaries with hypertension.
Patient Experience/Complaints...............  Patient experience measures reflect beneficiaries'             1.5
                                               perspectives of the care and services they
                                               received.
Access......................................  Access measures reflect processes and issues that              1.5
                                               could create barriers to receiving needed care.
                                               Plan Makes Timely Decisions about Appeals is an
                                               example of an access measure.
Process.....................................  Process measures capture the health care services                1
                                               provided to beneficiaries which can assist in
                                               maintaining, monitoring, or improving their
                                               health status.
----------------------------------------------------------------------------------------------------------------

    For the second exception, we proposed (at Sec. Sec.  422.166(e)(3) 
and 423.186(e)(3)) again to codify current policy and to apply a 
special rule for MA-PD and Part D contracts that have service areas 
that are wholly located in Puerto Rico. We recognize the additional 
challenge unique to Puerto Rico related to the medication adherence 
measures used in the Star Ratings program due to the lack of Low Income 
Subsidy (LIS). For the 2017 Star Ratings, we implemented a different 
weighting scheme for the Part D medication adherence measures in the 
calculation of the overall and summary Star Ratings for contracts that 
solely serve a population of beneficiaries in Puerto Rico. We proposed, 
at Sec. Sec.  422.166(e)(3) and 423.186(e)(3), to continue to reduce 
the weights for the adherence measures to 0 for the summary and overall 
rating calculations and maintain the weight of 3 for the adherence 
measures for the improvement measure calculations for contracts with 
service areas that are wholly located in Puerto Rico. We requested 
comment on our proposed weighting strategy for Measure Weights 
generally and for Puerto Rico, including the weighting values 
themselves.
    We received the following comments on our proposal and our 
responses follow:
    Comment: Multiple commenters requested CMS not to increase the 
weight of patient experience/complaints and access measures from a 
weight of 1.5 up to 3. Many of the commenters requested to maintain the 
current weight; however, others requested that CMS decrease the weight 
of patient experience measures citing survey reliability and sampling 
concerns with patient experience surveys. They stated that patient-
reported data are not as reliable as claims, prescription drug event 
data, medical charts, and other data sources. They believe that these 
measures are unfairly subjective and that more weight should be placed 
on more reliable and objective measures like clinical and outcome 
measures. Many cited concerns with response rates, sample size of 
patient experience surveys, and other factors in which the plan has 
less control, as well as industry concerns around accuracy of survey 
responses and research suggesting a weak relationship between care 
received and survey responses. A commenter supported increasing the 
weight of access and patient experience measures that are not based on 
survey data. A commenter opposed the weight increase until we have 
better measures in these areas.
    Response: We refer commenters to section II.A.11.i and Table C2A 
and the narrative comment and responses that follow, which give 
background and additional justification for CAHPS measures. While we 
acknowledge that the CAHPS survey captures individuals' perspectives on 
their experiences of care, it is anchored in measureable aspects of 
care and so can be measured reliably. In addition, CAHPS surveys were 
developed with broad stakeholder input, including a public solicitation 
of measures and a Technical Expert Panel, and the opportunity for 
anyone to comment on the surveys through multiple public comment 
periods through the Federal Register. CMS encourages all plans to 
familiarize themselves with the survey methodology and to review the 
background materials available on the MA and PDP CAHPS website that 
validate the CAHPS measures.
    CMS has pledged to put patients first and to empower patients to 
work with their doctors to make health care decisions that are best for 
them. An increased weight for patient experience/complaints and access 
measures reflects

[[Page 16576]]

CMS's commitment to serve Medicare beneficiaries by including their 
assessments of the care received by plans. In addition, CAHPS measures 
and positive clinical outcomes have been shown to be related. While 
patient experience is an inherently important dimension of healthcare 
quality, it is also the case that the preponderance of evidence shows 
that better patient experience is associated with better patient 
adherence to recommended treatment, better clinical processes, better 
hospital patient safety culture, better clinical outcomes, reduced 
unnecessary healthcare use, and fewer inpatient 
complications.59 60 A recent study found that higher quality 
for patient experience had a statistically significant association with 
lower rates of many in-hospital complications and unplanned 
readmissions to the hospital within 30 days. In other words, better 
patient experience according to the CMS hospital Star Ratings is 
associated with favorable clinical outcomes.\61\ An increased weight 
also reflects the importance of these beneficiary-centered issues in 
plan performance.
---------------------------------------------------------------------------

    \59\ Price, R.A., Elliott, M.N., Zaslavsky, A.M., Hays, R.D., 
Lehrman, W.G., Rybowski, L., & Cleary, P.D. (2014). Examining the 
role of patient experience surveys in measuring health care quality. 
Medical Care Research and Review, 71(5), 522-554.
    \60\ Price, R.A., Elliott, M.N., Cleary, P.D., Zaslavsky, A.M., 
& Hays, R.D. (2015). Should health care providers be accountable for 
patients' care experiences?. Journal of general internal medicine, 
30(2), 253-256.
    \61\ Trzeciak, Stephen et al. ``Association Between Medicare 
Star Ratings for Patient Experience and Medicare Spending per 
Beneficiary for US Hospitals.'' Journal of patient experience 4.1 
(2017): 17-21. PMC. Web. 2 Feb. 2018.
---------------------------------------------------------------------------

    Further, access to health services is a critical issue in the 
healthcare sector and to Medicare beneficiaries. Lack of access can 
result in unmet health needs, delays in receiving the appropriate care, 
inability to access preventative services, unreasonable financial 
burdens, and preventable hospitalizations.\62\ For these reasons, 
access measures, such as appeals measures and call center measures, are 
crucial in the Star Ratings system. Increasing the weight for these 
measures highlights the importance of capturing access to care within 
MA and Part D plans.
---------------------------------------------------------------------------

    \62\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Access-Measures.pdf.
---------------------------------------------------------------------------

    To best meet the needs of our beneficiaries, CMS believes that we 
must listen to their perceptions of care, as well as ensure they have 
access to needed care. Commenters representing beneficiaries strongly 
supported an increase in the weight of the patient experience of care 
and access measures. Therefore, we will finalize an increase in the 
weight for these two categories of measures from 1.5 to 2. Given the 
importance of hearing the voice of patients when evaluating the quality 
of care provided, CMS intends to further increase the weight of these 
measures in the future, so we welcome stakeholder feedback on how to 
improve the CAHPS survey, including the topics it covers, and 
suggestions for additional access measures or modifications to existing 
ones. We expect this change to increase the highest rating for 
approximately 8 percent of contracts and to have no impact on the 
majority of other contracts, while also demonstrating CMS's commitment 
to evaluate the quality of care provided as experienced by 
beneficiaries. Please send feedback about CAHPS to [email protected] 
and feedback about access measures to [email protected].
    Comment: A handful of commenters strongly supported the proposed 
weight increase of patient experience/complaints and access measures. 
They emphasized the importance of the beneficiary and caregiver 
perspectives and noted that the beneficiary's voice is an important 
indicator for plan performance in key areas such as the ease of access 
to needed drugs and treatments as well as plan responsiveness to appeal 
requests. Commenters said that by increasing the weights of these 
measures, CMS ensures that beneficiaries are seeing Star Ratings that 
reflect what they are likely to find important about their plan 
selections. These commenters also believed that assessments of quality 
and value by the patient are currently under-valued in Part C and D. 
Therefore, they believed patient experience/complaints and access 
measures should receive a higher weight than the current 1.5.
    Response: CMS appreciates this feedback and agrees the voice of the 
beneficiary must be heard as part of evaluating the quality of health 
and drug plans.
    Comment: CMS received several comments requesting to decrease and 
reclassify HOS measures on Improving or Maintaining Physical and Mental 
Health to receive a patient experience weight of 1.5 or process measure 
weight of 1, as opposed to their current outcome weight of 3. Some 
commenters believed there are methodological limitations to the HOS, 
and they stated that it does not provide a reliable evaluation of the 
patient experience because it relies on variables such as memory and 
the patient's physical and mental status at the time of survey 
completion. We also received comments that because the HOS measures are 
patient-reported measures (in response to survey questions) they are 
not true measures of health outcomes and should be weighted no higher 
than 1 or 1.5.
    Response: We refer the commenter to Table C2 in section II.A.11., 
which gives background and additional justification for HOS measures. 
The HOS assesses health outcomes for randomly selected beneficiaries 
from each health plan over a two-year period by using baseline 
measurement and a two-year follow up. CMS recognizes that the Physical 
Component Score (PCS) and the Mental Component (MCS) may decline over 
time and that health maintenance, rather than improvement, is a more 
realistic clinical goal for many older adults. MAOs are asked to 
improve or maintain the physical and mental health of their members. 
Change scores are constructed and the results compare actual to 
expected changes in physical and mental health. Therefore, the 
Improving or Maintaining Physical and Mental Health measures are not 
patient experience measures because they measure whether plan member's 
physical and mental health is the same or better than expected after 2 
years. While the data come from the HOS, they measure beneficiary 
outcomes and therefore are appropriately classified as outcome measures 
with a weight of 3.
    Additionally, the HOS was developed and continues to be refined 
under the guidance of a Technical Expert Panel comprised of individuals 
with specific expertise in the health care industry and outcomes 
measurement. HOS analysts apply the most recent advances in summarizing 
physical and mental health outcomes results and appropriate risk 
adjustment techniques. CMS also solicits stakeholder input, including 
public solicitation of measures and the opportunity for anyone to 
comment on the survey through multiple public comment periods through 
the Federal Register.
    Comment: A few commenters sought clarification on differences in 
the weights between the Part C and Part D Statin measures. Two 
organizations recommended classifying both the Part C Statin Therapy 
for Patients with Cardiovascular Disease (SPC) and the Part D Statin 
Use in Persons with Diabetes (SUPD) measures as process measures with a 
weight of 1. A commenter supported the weight for the Statin measure 
developed by PQA.
    Response: CMS appreciates the feedback and clarifies the weighting 
decision for each measure below. The Part C Statin Therapy for Patients 
with Cardiovascular Disease (SPC) measure is

[[Page 16577]]

the percent of plan members (males 21-75 years of age and females 40-75 
years of age) who were identified as having clinical atherosclerotic 
cardiovascular disease (ASCVD) and were dispensed at least one high or 
moderate-intensity statin medication. The Part C measure focuses on 
patients who were dispensed one prescription and whether the patient 
filled the medication at least once. Therefore, it is a process measure 
and will receive a weight of 1. The Part D measure is the percent of 
the number of plan members 40-75 years old who were dispensed at least 
two diabetes medication fills and received a statin medication fill. 
Receiving multiple fills indicates the patient continues to take the 
medication and therefore suggests adherence. The Part D measure is not 
a process measure. Continuing to take the prescribed medication is 
necessary to reach clinical/therapeutic goals. Thus, the Part D measure 
is an intermediate outcome measure and will receive a weight of 3.
    Comment: A couple of commenters requested a decrease in the 
improvement measures from the current weight of 5 to a weight of 3 
(like outcome measures). They stated the measures diminish the 
importance of clinical measures and mislead Medicare beneficiaries 
about which are the highest quality health plans.
    Response: CMS recognizes the importance of acknowledging quality 
improvement in health and drug plans. The decision to assign a weight 
of 5 for the improvement measures was originally made to align the Part 
C and D Star Ratings program with value-based purchasing programs in 
Medicare fee-for-service which heavily weight improvement. As part of 
the Part C and D Star Ratings program, we are committed to improving 
the quality of care and experiences for Medicare beneficiaries. Through 
assigning a weight of 5 to improvement, CMS encourages MA and Part D 
contracts to focus on improving the quality of care provided.
    With regard to overall ratings, improvement measures contribute 
significantly less than outcome measures overall. For example for the 
2018 Star Ratings for an MA-PD that does not include a SNP, the overall 
contribution of the improvement measures to the overall rating is close 
to 14 percent, but the overall contribution of outcome and intermediate 
outcome measures is 33 percent.
    CMS believes that continuous improvement is necessary to reach the 
goal of providing the best care to our beneficiaries. While the 
improvement measures are weighted the most of any category in the Star 
Ratings, the improvement measure is a single measure that encompasses 
care across multiple dimensions.
    Comment: A commenter recommended that CMS weight MA-PD and PDP 
measures differently based on the plan's ability to influence outcomes 
on a measure, for example statin use in persons with diabetes. PDPs 
should have less weight placed on measures that largely depend on 
provider behavior, which they have very little ability to impact.
    Response: Currently the only Part D outcome measures are adherence 
measures. CMS disagrees that stand-alone PDPs have very little 
influence on beneficiaries' medication adherence. There are many 
strategies that can be used to improve a beneficiary's medication 
adherence in addition to prescriber interventions, such as refill 
reminders, formulary and benefits design, and medication therapy 
management programs. Plan sponsors can also leverage network pharmacy 
relationships to address medication adherence issues, facilitate 
medication synchronization, or provide education and counseling. In the 
absence of a contact phone number for the beneficiary, it may be 
beneficial to use these interventions to reach the beneficiary at the 
place of dispensing. Furthermore, MA-PDs and PDPs are rated separately 
to account for delivery system differences. Lastly, adherence measures 
will now be included in the CAI to account for LIS beneficiaries which 
we discuss in more detail in section II.A.11.t.
    Comment: A commenter recommended decreasing the weighting of a 
topped out measure rather than discontinuing the measure.
    Response: Measure scores are determined to be `topped out' when 
they show high performance and little variability across contracts, 
making the measure unreliable. CMS removes measures that show low 
statistical reliability so as to move swiftly to ensure the validity 
and reliability of the Star Ratings, even at the measure level. 
However, CMS will retain measures at the same weight if for example, 
performance in a given measure has just improved across all contracts, 
or if no other measures capture a key focus in Star Ratings. CMS will 
take this comment into consideration as we make future enhancements in 
the Star Ratings program.
    Comment: Multiple commenters supported assigning new measures a 
weight of 1 for the first year.
    Response: CMS appreciates the support of the proposed weighting for 
new measures.
    Comment: A commenter supported the weighting for the adherence 
measures in Puerto Rico.
    Response: CMS appreciates the support of the proposed Puerto Rico 
weights.
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
governing the weight of measures as proposed in Sec. Sec.  422.166(e) 
and 423.186(e) with modification. CMS is finalizing the weight of 
patient experience/complaints and access measures at 2 in paragraphs 
(e)(iii) and (iv) given the importance of hearing the perspectives and 
voice of patients in times of need.
r. Application of the Improvement Measure Scores
    Consistent with current policy, we proposed at Sec. Sec.  
422.166(g) and 423.186(g) a hold harmless provision for the inclusion 
or exclusion of the improvement measure(s) for highly-rated contracts' 
highest ratings. We proposed, in paragraphs (g)(1)(i) through (iii), a 
series of rules that specify when the improvement measure is included 
in calculating overall and summary ratings.
    Under our proposal, MA-PDs would have the hold harmless provisions 
for highly-rated contracts applied for the overall rating. For an MA-PD 
that receives an overall rating of 4 stars or more without the use of 
the improvement measures and with all applicable adjustments (CAI and 
the reward factor), a comparison of the rounded overall rating with and 
without the improvement measures would be done. The overall rating with 
the improvement measures used in the comparison would include up to two 
adjustments, the reward factor (if applicable) and the CAI. The overall 
rating without the improvement measures used in the comparison would 
include up to two adjustments, the reward factor (if applicable) and 
the CAI. The higher overall rating would be used for the MA-PD 
contract's overall rating. For an MA-PD that has an overall rating of 2 
stars or less without the use of the improvement measure and with all 
applicable adjustments (CAI and the reward factor), we proposed the 
overall rating would exclude the improvement measures; for all others, 
the overall rating would include the improvement measure.
    MA-only and PDPs would have the hold harmless provisions for 
highly-

[[Page 16578]]

rated contracts applied for the Part C and D summary ratings, 
respectively. For an MA-only or PDP contract that receives a summary 
rating (with applicable adjustments) of 4 stars or more without the use 
of the improvement measure, a comparison of the rounded summary rating 
with and without the improvement measure would be done. The higher 
summary rating would be used for the summary rating for the contract's 
highest rating. For MA-only and PDPs with a summary rating (with 
applicable adjustments) of 2 stars or less without the use of the 
improvement measure would exclude the improvement measure. For all 
others, the summary rating would include the improvement measure. MA-
PDs would have their summary ratings calculated with the use of the 
improvement measure regardless of the value of the summary rating.
    In addition, at paragraph (g)(2), we also proposed text to clarify 
that summary ratings use only the improvement measure associated with 
the applicable Part C or D performance.
    We solicited comments on the hold harmless improvement provision we 
proposed to continue to use, particularly any clarifications in how and 
when it should be applied.
    We received the following comments on our proposal and our 
responses follow:
    Comment: A commenter recommended the exclusion of the hold harmless 
provision for a highly-rated contract if the contract would realize a 
decrease in their overall rating. In addition, the commenter supported 
a hold harmless provision for plans that would be at risk of receiving 
a low performing icon due to application of the quality improvement 
measures.
    Response: CMS currently and as proposed, has a safeguard for 
highly-rated contracts. CMS applies the hold harmless provision for a 
highly-rated contract's highest rating. As proposed, a contract that 
receives 4 stars or more without the use of the improvement measures 
and with all applicable adjustments (CAI and the reward factor) will 
have their final overall rating as the higher of either the rating 
calculated including or excluding the improvement measure(s). CMS 
believes the hold harmless provision is appropriate to apply for 
highly-rated contracts since they have less room for improvement and, 
consequently, may have lower scores for the improvement measure(s).
    CMS believes that the Star Ratings should signal the true quality 
of the contract. A hold harmless provision for contracts that are in 
jeopardy of a low performing icon does not align with the intent of the 
Star Ratings program and threatens its integrity. Low performing 
contracts, including those at risk of receiving a low performing icon, 
have plenty of room for improvement and should not need a hold harmless 
provision.
    Comment: A commenter expressed support for all rules that guide the 
application of the improvement measure(s) in calculating overall and 
summary ratings.
    Response: CMS appreciates the support of the policies that guide 
the application of the improvement measure(s) in the Star Ratings.
    Comment: Overall, commenters supported the use of the hold harmless 
provision for a highly-rated contract's highest rating. However, 
several commenters advocated a modification to the hold harmless 
provision for highly-rated MA-PDs such that the overall rating would be 
determined by the highest rating among the overall rating calculated 
with including both improvement measures, excluding both improvement 
measures, using only the Part C improvement measure, or using only the 
Part D improvement measure.
    Response: CMS appreciates the support of a hold harmless provision 
for a highly-rated contract's highest rating. CMS is committed to 
providing a true signal of the overall quality to beneficiaries who use 
Medicare Plan Finder to aid in the selection of a plan that is right 
for them. Eliminating the use of one of the improvement measure ratings 
in calculating the overall rating has the potential to distort the 
signal for beneficiaries. The overall rating is designed as a global 
rating of the quality of both the health plan and prescription drug 
plan benefits for an MA-PD. While we do agree there is justification 
for a hold harmless provision for a highly-rated MA-PD, CMS is 
committed to preserving the integrity of the rating system. Removing 
one facet of the rating system (Part C or Part D improvement measure) 
while not the other, has the potential to undermine the primary 
function of the rating system. Therefore, we are not finalizing the 
revisions requested by the commenter(s).
    Comment: Some commenters did not support excluding the improvement 
measure(s) from use in a contract's highest rating (with applicable 
adjustments) if the contract received 2 stars or less without the use 
of the improvement measure. The commenters believed that limiting the 
measure to only plans with at least 2.5 stars goes against the 
objective of the improvement measure in encouraging and rewarding 
improvements in performance, particularly among lower-rated plans.
    Response: CMS appreciates the careful review of the proposed policy 
related to the application of the improvement measure(s) for a 
contract's highest rating. After thoughtful deliberation of the 
recommendation of our commenters, CMS has decided to modify the 
proposed methodology for the application of the improvement measures. 
The methodology will be changed such that if the highest rating for a 
contract is less than 4 stars without the use of the improvement 
measure(s) and with all applicable adjustments (CAI and the reward 
factor), the rating will be calculated with the improvement measure(s). 
The modification of the application of the improvement measure(s) 
preserves the safeguard for a highly-rated contract's highest rating, 
but removes what could be perceived as a safeguard for contracts with a 
highest rating of 2 stars or less. In other words, if an MA-PD has an 
overall rating of less than 4 stars without the use of the improvement 
measures and with all applicable adjustments, the improvement measures 
will be used in the calculation of the overall rating. If an MA-only 
contract has a Part C summary rating of less than 4 stars without the 
use of the Part C improvement measure and with all applicable 
adjustments, the Part C improvement measure will be used in the 
determination of the contract's Part C summary rating. If a PDP has a 
Part D summary rating of less than 4 stars without the use of the Part 
D improvement measure and with all applicable adjustments, the Part D 
improvement measure will be used in the determination of the contract's 
Part D summary rating. (An MA-PD will have the Part C or Part D 
improvement measure included in the calculation of the respective Part 
C and Part D summary ratings, because the summary ratings are not the 
highest rating for this type of contract.) The only modification will 
be for contracts with a highest rating of 2 stars or less. After 
consideration of the comments received, we believe it is reasonable to 
also include any applicable improvement measure(s) for contracts with a 
highest rating of 2 stars or less so that the highest rating reflects 
whether the overall quality is improving, staying the same, or 
declining.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
addressing use of the improvement measure in summary and overall 
ratings as proposed at Sec. Sec.  422.162(g) and

[[Page 16579]]

423.182(g) with one substantive modification. We are not finalizing 
what was proposed for contracts with a 2-star summary or overall rating 
(with applicable adjustments). We are also finalizing a revision to the 
rule for summary or overall ratings (with applicable adjustments) of 
less than 4 stars to include as well contracts with overall or summary 
ratings of 2 stars.
s. Reward Factor (Formerly Referred to as Integration Factor)
    In 2011, the integration factor was added to the Star Ratings 
methodology to reward contracts that have consistently high 
performance. The integration factor was later renamed the reward 
factor. (The reference to either reward or integration factor refers to 
the same aspect of the Star Ratings.) This factor is calculated 
separately for the Part C summary rating, Part D summary rating for MA-
PDs, Part D summary rating for PDPs, and the overall rating for MA-PDs. 
It is currently added to the summary (Part C or D) and overall rating 
of contracts that have both high and stable relative performance for 
the associated summary or overall rating. The contract's performance is 
assessed using its weighted mean relative to all rated contracts 
without adjustments.
    We proposed to codify the calculation and use of the reward factor 
in Sec. Sec.  422.166(f)(1) and 423.186(f)(1); our proposal was to 
generally codify the current practice for the reward factor. Under our 
proposal, the contract's stability of performance would be assessed 
using its weighted variance relative to all rated contracts at the same 
rating level (overall, summary Part C, and summary Part D). The Part D 
summary thresholds for MA-PDs would be, like current practice 
determined independently of the thresholds for PDPs.
    We proposed to update annually the performance and variance 
thresholds for the reward factor based upon the data for the Star 
Ratings year, consistent with current policy. A multistep process would 
be used to determine the values that correspond to the thresholds for 
the reward factors for the summary and/or overall Star Ratings for a 
contract. The determination of the reward factors would rely on the 
contract's ranking of its weighted variance and weighted mean of the 
measure-level stars to the summary or overall rating relative to the 
distribution of all contracts' weighted variance and weighted mean to 
the summary and/or overall rating. Under the proposal a contract's 
weighted variance would be calculated using the quotient of the 
following two values: (1) The product of the number of applicable 
measures based on rating-type and the sum of the products of the weight 
of each applicable measure and its squared deviation \63\ and (2) the 
product of one less than the number of applicable measures and the sum 
of the weights of the applicable measures. A contract's weighted mean 
performance would be found by calculating the quotient of the following 
two values: (1) The sum of the products of the weight of a measure and 
its associated measure-level Star Ratings of the applicable measures 
for the rating-type and (2) the sum of the weights of the applicable 
measures for the rating type. The thresholds for the categorization of 
the weighted variance and weighted mean for contracts would be based 
upon the distribution of the calculated values of all rated contracts 
of the same type. Because highly-rated contracts may have the 
improvement measure(s) excluded in the determination of their final 
highest rating, each contract's weighted variance and weighted mean 
would be calculated both with and without the improvement measures.
---------------------------------------------------------------------------

    \63\ A deviation is the difference between the performance 
measure's Star Rating and the weighted mean of all applicable 
measures for the contract.
---------------------------------------------------------------------------

    Under the methodology CMS proposed for this factor, a contract's 
weighted variance would be categorized into one of three mutually 
exclusive categories, identified in Table C8A, based upon the weighted 
variance of its measure-level Star Ratings. Its ranking would be 
relative to all other contracts' weighted variance for the rating type 
(Part C summary for MA-PDs and MA-only, overall for MA-PDs, Part D 
summary for MA-PDs, and Part D summary for PDPs), and the manner in 
which the highest rating for the contract was determined--with or 
without the improvement measure(s). For an MA-PD's Part C and D summary 
ratings, its ranking is relative to all other contracts' weighted 
variance for the rating type (Part C summary, Part D summary) with the 
improvement measure. Similarly, a contract's weighted mean would be 
categorized into one of three mutually exclusive categories, identified 
in Table C8B, based on its weighted mean of all measure-level Star 
Ratings and its ranking relative to all other contracts' weighted means 
for the rating type (Part C summary for MA-PDs and MA-only, overall, 
Part D summary for MA-PDs, and Part D summary for PDPs) and the manner 
in which the highest rating for the contract was determined--with or 
without the improvement measure(s). For an MA-PD's Part C and D summary 
ratings, its ranking would be relative to all other contracts' weighted 
means for the rating type (Part C summary, Part D summary) with the 
improvement measure. Further, the same threshold criterion would be 
employed per category regardless of whether the improvement measure was 
included or excluded in the calculation of the rating. The values that 
correspond to the thresholds would be based on the distribution of all 
rated contracts and determined with and without the improvement 
measure(s) and exclusive of any adjustments. Table C8A details the 
criteria for the categorization of a contract's weighted variance for 
the summary and overall ratings. Table C8B details the criteria for the 
categorization of a contract's weighted mean (performance) for the 
overall and summary ratings. Like current practice, the values that 
correspond to the cutoffs would be provided each year during the plan 
preview and are published in the Technical Notes.

                                      Table 8A--Categorization of a Contract Based on Its Weighted Variance Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Variance category                                                                 Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low.............................................  Below the 30th percentile.
Medium..........................................  At or above the 30th percentile to less than the 70th percentile.
High............................................  At or above the 70th percentile.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 16580]]


                                   Table 8B--Categorization of a Contract Based on Weighted Mean (Performance) Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Weighted mean (performance) category                                                        Ranking
--------------------------------------------------------------------------------------------------------------------------------------------------------
High............................................  At or above the 85th percentile.
Relatively High.................................  At or above the 65th percentile to less than the 85th percentile.
Other...........................................  Below the 65th percentile.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    These definitions of high, medium, and low weighted variance 
ranking and high, relatively high, and other weighted mean ranking were 
proposed to be codified in narrative form in paragraph (f)(1)(ii).
    A contract's categorization for both weighted mean and weighted 
variance determines the value of the reward factor. Table C9 shows the 
values of the reward factor based on the weighted variance and weighted 
mean categorization; we proposed to codify these values (in a narrative 
description) in paragraph (f)(1)(iii). The weighted variance and 
weighted mean thresholds for the reward factor are available in the 
Technical Notes and updated annually.

       Table 9--Categorization of a Contract for the Reward Factor
------------------------------------------------------------------------
                                        Weighted mean
         Weighted variance              (performance)      Reward factor
------------------------------------------------------------------------
Low...............................  High................             0.4
Medium............................  High................             0.3
Low...............................  Relatively High.....             0.2
Medium............................  Relatively high.....             0.1
High..............................  Other...............             0.0
------------------------------------------------------------------------

    We proposed to continue the use of a reward factor to reward 
contracts with consistently high and stable performance over time. 
Further, we proposed to continue to employ the same methodology to 
categorize and determine the reward factor for contracts. As proposed 
in paragraphs (c)(1) and (d)(1), these reward factor adjustments would 
be applied at the summary and overall rating level.
    We received the following comments on our proposal and our 
responses follow:
    Comment: The majority of commenters were supportive of the 
continued use of the reward factor. A commenter expressed support 
specifically related to the reward methodology and the codification of 
the calculation of the reward factor.
    Response: CMS appreciates our stakeholders' support of the reward 
factor.
    Comment: A commenter expressed support of the use of a reward 
factor for the overall rating, but was concerned that the proposed (and 
current) methodology for calculating the reward factor did not 
consistently award contracts that maintained high performance and 
demonstrated incremental improvement at the measure level. Further, the 
commenter linked the potential for a high performing contract not 
receiving a reward factor to flaws in the assignment of measure cut 
points.
    Response: CMS appreciates the careful consideration of the reward 
factor. Since the reward factor is a rating-specific factor, a contract 
can qualify for the reward based on its summary or overall (or both) 
rating if a contract has both high and stable relative performance. CMS 
believes the reward factor methodology identifies the contracts that 
have both high and stable relative performance and recognizes that such 
performance may exist overall (Part C and D performance) or in one 
particular area (health plan quality and performance domain on Part C 
measures or the prescription drug plan quality and performance domain 
on Part D measures). Since the reward factor is based on a relative 
performance, it serves to incentivize plans and recognize plans that 
provide the highest and consistent level of care as reflected in their 
ratings. Ratings calculated using a consistent methodology allow to the 
identification of top performers based on rankings.
    Comment: A commenter suggested that CMS annually publish the list 
of reward factor recipients. The commenter referenced the publication 
of the Categorical Adjustment Index (CAI) final adjustment categories 
for contracts to support the request. Further, the commenter believed 
that the publication of the reward factor recipients would maintain the 
attributes of fairness and transparency of the Star Ratings system.
    Response: CMS appreciates this feedback. As noted in the comment, 
the CAI final adjustment categories per contract are available in the 
annual public use files available using the following link: http://go.cms.gov/partcanddstarratings. While the thresholds for the reward 
factor are published each year in the Technical Notes, the recipients 
of the reward factor are not part of the public use files. However, we 
are persuaded that this is important information for beneficiaries and 
could assist in providing greater transparency into the development and 
assignment of the Star Ratings. Therefore, CMS will begin incorporating 
information related to the distribution and characteristics of 
contracts receiving the reward factor in the annual Fact Sheet for the 
2021 Star Ratings.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
as proposed at Sec. Sec.  422.162(f1) and 423.182(f)(1) without 
modification.
t. Categorical Adjustment Index
    As we discussed in the proposed rule, a growing body of evidence 
links the prevalence of beneficiary-level social risk factors with 
performance on measures included in Medicare value-based purchasing 
programs, including MA and Part D Star Ratings. With support from our 
contractors, we undertook research to provide scientific evidence as to 
whether MA organizations or Part D sponsors that enroll a 
disproportionate number of vulnerable beneficiaries are systematically 
disadvantaged by the current Star Ratings. In 2014, we issued a Request 
for Information to gather information directly from organizations

[[Page 16581]]

to supplement the data that CMS collects, as we believe that plans and 
sponsors are uniquely positioned to provide both qualitative and 
quantitative information that is not available from other sources. In 
February and September 2015, we released details on the findings of our 
research.\64\ We also reviewed reports about the impact of socio-
economic status (SES) on quality ratings, such as the report published 
by the NQF posted at www.qualityforum.org/risk_adjustment_ses.aspx and 
the Medicare Payment Advisory Commission's (MedPAC) Report to the 
Congress: Medicare Payment Policy posted at http://www.medpac.gov/docs/default-source/reports/march-2016-report-to-the-congress-medicare-payment-policy.pdf?sfvrsn=0. More recently, we have been reviewing 
reports prepared by the Office of the Assistant Secretary for Planning 
and Evaluation (ASPE \65\) and the National Academies of Sciences, 
Engineering, and Medicine on the issue of measuring and accounting for 
social risk factors in CMS's value-based purchasing and quality 
reporting programs, and we have been considering options on how to 
address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors of Medicare beneficiaries on quality 
measures and measures of resource use in nine Medicare value-based 
purchasing programs. The report also included considerations for 
strategies to account for social risk factors in these programs. A 
January 10, 2017 report released by the National Academies of Sciences, 
Engineering, and Medicine provided various potential methods for 
measuring and accounting for social risk factors, including stratified 
public reporting.\66\
---------------------------------------------------------------------------

    \64\ The February release can be found at https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovgenin/performancedata.html.
    The September release can be found at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Research-on-the-Impact-of-Socioeconomic-Status-on-Star-Ratingsv1-09082015.pdf.
    \65\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \66\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press--https://www.nap.edu/catalog/21858/accounting-for-social-risk-factors-in-medicare-payment-identifying-social.
---------------------------------------------------------------------------

    We have also engaged NCQA and the PQA to examine their measure 
specifications used in the Part C and Part D Star Ratings program to 
determine if re-specification is warranted. The majority of measures 
used for the Star Ratings program are consensus-based. Measure 
specifications can be changed only by the measure steward (the owner 
and developer of the measure). Thus, measure scores cannot be adjusted 
for differences in enrollee case mix unless the specifications for the 
measure are adjusted by the measure steward. Measure re-specification 
is a multiyear process. For example, NCQA has a standard process for 
reviewing any measure and determining whether a measure requires re-
specification. NCQA's re-evaluation process is designed to ensure any 
resulting measure updates have desirable attributes of relevance, 
scientific soundness, and feasibility:
     Relevance describes the extent to which the measure 
captures information important to different groups, for example, 
consumers, purchasers, policymakers. To determine relevance, NCQA 
assesses issues such as health importance, financial importance, and 
potential for improvement among entities being measured.
     Scientific soundness captures the extent to which the 
measure adheres to clinical evidence and whether the measure is valid, 
reliable, and precise.
     Feasibility captures the extent to which a measure can be 
collected at reasonable cost and without undue burden. To determine 
feasibility, NCQA also assesses whether a measure is precisely 
specified and can be audited. The overall process for assessing the 
value of re-specification emphasizes multi-stakeholder input, use of 
evidence-based guidelines and data, and wide public input.
    Beginning with 2017 Star Ratings, we implemented the CAI that 
adjusts for the average within-contract disparity in performance 
associated with the percentages of enrollees who receive a low income 
subsidy and/or are dual eligible (LIS/DE) and/or have disability 
status. We developed the CAI as an interim analytical adjustment while 
we developed a long-term solution. The adjustment factor varies by a 
contract's categorization into a final adjustment category that is 
determined by a contract's proportion of LIS/DE and enrollees with 
disabilities. By design, the CAI values are monotonic in at least one 
dimension (LIS/DE or disability status) and thus, contracts with larger 
LIS/DE and/or disability percentages realize larger positive 
adjustments. MA-PD contracts can have up to three rating-specific CAI 
adjustments--one for the overall Star Rating and one for each of the 
summary ratings (Part C and Part D). MA-only contracts can have one 
adjustment for the Part C summary rating. PDPs can have one adjustment 
for the Part D summary rating. We proposed to codify the calculation 
and use of the CAI in Sec. Sec.  422.166(f)(2) and 423.186(f)(2), while 
we consider other alternatives for the future.
    As has been done with the 2017 and 2018 Star Ratings, we proposed 
that the adjusted measure scores of a subset of the Star Ratings 
measures would serve as the foundation for the determination of the 
index values. Measures would be excluded as candidates for adjustment 
if (A) the measures are already case-mix adjusted for SES (for example, 
CAHPS and HOS outcome measures); (B) the focus of the measurement is 
not a beneficiary-level issue but rather a plan or provider-level issue 
(for example, appeals, call center, Part D price accuracy measures); 
(C) the measure is scheduled to be retired or revised during the Star 
Rating year in which the CAI is being applied; or (D) the measure is 
applicable to only Special Needs Plans (SNPs) (for example, SNP Care 
Management, Care for Older Adults measures). We proposed to codify 
these paragraphs for determining the measures for CAI values at 
paragraph (f)(2)(ii). In addition, the 2017 and 2018 Ratings were based 
on a group of measures from within the cohort identified using these 
rules.
    The categorization of a beneficiary as LIS/DE for the CAI would 
rely on the monthly indicators in the enrollment file. For the 
determination of the CAI values, the measurement period would 
correspond to the previous Star Ratings year's measurement period. For 
the identification of a contract's final adjustment category for its 
application of the CAI in the current year's Star Ratings program, the 
measurement period would align with the Star Ratings year. If a 
beneficiary was designated as full or partially dually eligible or 
receiving an LIS at any time during the applicable measurement period, 
the beneficiary would be categorized as LIS/DE. For the categorization 
of a beneficiary as disabled, we would employ the information from the 
Social Security Administration (SSA) and Railroad Retirement Board 
(RRB) record systems. Disability status would be determined using the 
variable original reason for entitlement (OREC) for Medicare. The 
percentages of LIS/DE and disability per contract would rely on the 
Medicare enrollment data from the applicable measurement year. The

[[Page 16582]]

counts of beneficiaries for enrollment and categorization of LIS/DE and 
disability would be restricted to beneficiaries who are alive for part 
or all of the month of December of the applicable measurement year. 
Further, a beneficiary would be assigned to the contract based on the 
December file of the applicable measurement period. We proposed to 
codify these standards for determining the enrollment counts at 
paragraph (f)(2)(i)(B).
    Using the subset of the measures that meet the basic inclusion 
requirements, we proposed to select the measure set for adjustment 
based on the analysis of the dispersion of the LIS/DE within-contract 
differences using all reportable numeric scores for contracts receiving 
a rating in the previous rating year. For the selection of the Part D 
measures, MA-PDs and PDPs will be independently analyzed. For each 
contract, the proportion of enrollees receiving the measured clinical 
process or outcome for LIS/DE and non-LIS/DE beneficiaries would be 
estimated separately, and the difference between the LIS/DE and non-
LIS/DE performance rates per contract will be calculated. CMS proposed 
to use a logistic mixed effects model for estimation purposes that 
includes LIS/DE as a predictor, random effects for contract and an 
interaction term of contract and LIS/DE. Using the analysis of the 
dispersion of the within-contract disparity of all contracts included 
in the modelling, the measures for adjustment would be identified 
employing the following decision criteria: (A) A median absolute 
difference between LIS/DE and non-LIS/DE beneficiaries for all 
contracts analyzed is 5 percentage points or more or \67\ (B) the LIS/
DE subgroup performed better or worse than the non-LIS/DE subgroup in 
all contracts. We proposed to codify these paragraphs for the selection 
criteria for the adjusted measures for the CAI at paragraph 
(f)(2)(iii).
---------------------------------------------------------------------------

    \67\ The use of the word `or' in the decision criteria implies 
that if one condition or both conditions are met, the measure will 
be selected for adjustment.
---------------------------------------------------------------------------

    In addition, we proposed that the Part D measures for PDPs would be 
analyzed independently at paragraph (f)(2)(iii)(C). In order to apply 
consistent adjustments across MA-PDs and PDPs, the Part D measures 
would be selected by applying the selection criteria to MA-PDs and PDPs 
independently and, then, selecting measures that met the criteria for 
either delivery system. We explained that under our proposal the 
measure set for adjustment of Part D measures for MA-PDs and PDPs would 
be the same after applying the selection criteria and pooling the Part 
D measures for MA-PDs and PDPs. We proposed to codify these paragraphs 
for the selection of the adjusted measure set for the CAI for MA-PDs 
and PDPs at (f)(2)(iii)(C). We solicited comment on the proposed 
methodology and criteria for the selection of the measures for 
adjustment.
    We also addressed how we would release our findings publicly. While 
the CAI would be employed, we proposed to release on CMS.gov an updated 
analysis of the subset of the Star Ratings measures identified for 
adjustment using this rule as ultimately finalized. Basic descriptive 
statistics posted would include the minimum, median, and maximum values 
for the within-contract variation for the LIS/DE differences. We also 
proposed that the set of measures for adjustment for the determination 
of the CAI would be announced in the draft Call Letter in paragraph 
(f)(2)(iii).
    We proposed, at paragraph (f)(2)(iv) of each regulation, to 
determine the adjusted measure scores for LIS/DE and disability status 
from regression models of beneficiary-level measure scores that adjust 
for the average within-contract difference in measure scores for MA or 
PDP contracts. We proposed an approach to determine the adjusted 
measure scores that approximates case-mix adjustment using a 
beneficiary-level, logistic regression model with contract fixed 
effects and beneficiary-level indicators of LIS/DE and disability 
status, similar to the approach currently used to adjust CAHPS patient 
experience measures. However, unlike CAHPS case-mix adjustment, the 
only adjusters would be LIS/DE and disability status.
    We explained that under our proposal, the sole purpose of the 
adjusted measure scores would be for the determination of the CAI 
values. They would be converted to a measure-level Star Rating using 
the measure thresholds for the Star Ratings year that corresponds to 
the measurement period of the data employed for the CAI determination. 
All contracts would have their adjusted summary rating(s) and for MA-
PDs, an adjusted overall rating, calculated employing the standard 
methodology proposed at Sec. Sec.  422.166 and 423.186 (which would 
also be outlined in the Technical Notes each year), using the subset of 
adjusted measure-level Star Ratings and all other unadjusted measure-
level Star Ratings. In addition, all contracts would have their summary 
rating(s) and for MA-PDs, an overall rating, calculated using the 
traditional methodology and all unadjusted measure-level Star Ratings.
    As described in Sec. Sec.  422.166 (f)(2)(v) and 423.186(f)(2)(v) 
for the annual development of the CAI, the distribution of the 
percentages for LIS/DE and disabled using the enrollment data that 
parallels the previous Star Ratings year's data would be examined to 
determine the number of equal-sized initial groups for each attribute 
(LIS/DE and disabled). The initial categories would be created using 
all groups formed by the initial LIS/DE and disabled groups. The total 
number of initial categories would be the product of the number of 
initial groups for LIS/DE and the number of initial groups for the 
disabled dimension.
    The mean difference between the adjusted and unadjusted summary or 
overall ratings per initial category would be calculated and examined. 
The initial categories will then be collapsed to form the final 
adjustment categories. The collapsing of the initial categories to form 
the final adjustment categories would be done to enforce monotonicity 
in at least one dimension (LIS/DE or disabled). The mean difference 
within each final adjustment category by rating-type (Part C, Part D 
for MA-PD, Part D for PDPs, or overall) would be the CAI values for the 
next Star Ratings year.
    We explained in the proposed rule that the percentage of LIS/DE is 
a critical element in the categorization of contracts into the final 
adjustment category to identify a contract's CAI. Starting with the 
2017 Star Ratings, we have applied an additional adjustment for 
contracts that solely serve the population of beneficiaries in Puerto 
Rico to address the lack of LIS in Puerto Rico. That adjustment results 
in a modified percentage of LIS/DE beneficiaries that is subsequently 
used to categorize contracts into the final adjustment category for the 
CAI.
    We proposed to continue this adjustment at paragraph (f)(2)(vi) and 
to calculate the contract-level modified LIS/DE percentage for Puerto 
Rico using the following sources of information: The most recent data 
available at the time of the development of the model of both the 1-
year American Community Survey (ACS) estimates for the percentage of 
people living below the Federal Poverty Level (FPL) and the ACS 5-year 
estimates for the percentage of people living below 150 percent of the 
FPL, and the Medicare enrollment data from the same measurement period 
used for the Star Ratings year. We proposed that the data to develop 
the model would be limited to the 10 states, drawn from the 50 states 
plus the District of Columbia, with the highest proportion of people 
living below the FPL as identified by the 1-year ACS

[[Page 16583]]

estimates. Further, the Medicare enrollment data would be aggregated 
from MA contracts that had at least 90 percent of their enrolled 
beneficiaries with mailing addresses in the 10 highest poverty states. 
A linear regression model would be developed using the known LIS/DE 
percentage and the corresponding DE percentage from the subset of MA 
contracts.
    We explained that the estimated slope from the linear regression 
approximates the expected relationship between LIS/DE for each contract 
in Puerto Rico and its DE percentage. The intercept term would be 
adjusted for use with Puerto Rico contracts by assuming that the Puerto 
Rico model will pass through the point (x, y) where x is the observed 
average DE percentage in the Puerto Rico contracts based on the 
enrollment data, and y is the expected average percentage of LIS/DE in 
Puerto Rico. The expected average percentage of LIS/DE in Puerto Rico 
(the y value) would be estimated by multiplying the observed average 
percentage of LIS/DE in the 10 highest poverty states by the ratio 
based on the most recent 5-year ACS estimates of the percentage living 
below 150 percent of the FPL in Puerto Rico compared to the 
corresponding percentage in the set of 10 states with the highest 
poverty level. (Further details of the proposed methodology, which is 
currently used, can be found in the CAI Methodology Supplement 
available at http://go.cms.gov/partcanddstarratings.)
    Using the model developed from this process, the estimated modified 
LIS/DE percentage for contracts operating solely in Puerto Rico would 
be calculated. We proposed that the maximum value for the modified LIS/
DE indicator value per contract will be capped at 100 percent and that 
all estimated modified LIS/DE values for Puerto Rico would be rounded 
to 6 decimal places when expressed as a percentage.
    We proposed to continue to employ the LIS/DE indicator for 
contracts operating solely in Puerto Rico while the CAI is being used 
as an interim analytical adjustment. Further, we proposed that the 
modeling results would continue to be detailed in the appendix of the 
Technical Notes and the modified LIS/DE percentages would be available 
for contracts to review during the plan previews.
    We proposed to continue the use of the CAI while the measure 
stewards continue their examination of the measure specifications and 
ASPE completes their studies mandated by the IMPACT Act and formalizes 
final recommendations. Contracts would be categorized based on their 
percentages of LIS/DE and disability using the data as outlined 
previously. The CAI value would be the same for all contracts within 
each final adjustment category. The CAI values would be determined 
using data from all contracts that meet reporting requirements from the 
prior year's Star Rating data. The CAI calculation for the PDPs would 
be performed separately and use the PDP specific cut points. Under our 
proposal, CMS would include the CAI values in the draft and final Call 
Letter attachment of the Advance Notice and Rate Announcement each year 
while the interim solution is applied. The values for the CAI value 
would be displayed to 6 decimal places. Rounding would take place after 
the application of the CAI value and if applicable, the reward factor; 
standard rounding rules would be employed. (All summary and overall 
Star Ratings are displayed to the nearest half-star.)
    In the proposed rule, CMS noted that while recommendations from the 
ASPE report, findings from measure developers, and work by NQF on risk 
adjustment for quality measures is considered, we are continuing to 
collaborate with stakeholders. As noted, we seek to balance accurate 
measurement of genuine plan performance, effective identification of 
disparities, and maintenance of incentives to improve the outcomes for 
disadvantaged populations. Keeping this in mind, we continue to solicit 
public comment on whether and how we should account for low SES and 
other social risk factors in the Part C and D Star Ratings.
    As noted in the proposed rule, we look forward to continuing to 
work with stakeholders as we consider the issue of accounting for LIS/
DE, disability and other social risk factors and reducing health 
disparities in CMS programs. We are continuing to consider options on 
to how to measure and account for social risk factors in our Star 
Ratings program. Although a sponsoring organization's administrative 
costs may increase as a result of enrolling significant numbers of 
beneficiaries with LIS/DE status or disabilities, our research thus far 
has demonstrated that the impacts of SES on the quality ratings are 
quite modest, affect only a small subset of measures, and do not always 
negatively impact the measures. Because CMS will like to better 
understand whether, how, and to what extent a sponsoring organization's 
administrative costs differ for caring for low-income beneficiaries, we 
explicitly solicited comment on that topic. Administrative costs may 
include non-medical costs such as transportation costs, coordination 
costs, marketing, customer service, quality assurance and costs 
associated with administering the benefit. We stated our belief that 
the proposal demonstrated our continued commitment toward ensuring that 
all beneficiaries have access to and receive excellent care, and that 
the quality of care furnished by plans is assessed fairly in CMS 
programs.
    We received the following comments on our proposal and our 
responses follow:
    Comment: There was immense support and acclaim for the work that 
CMS continues to do related to the impact of sociodemographic factors 
on the Star Ratings.
    Response: CMS appreciates the continued support of our 
stakeholders, government agencies, and the research community.
    Comment: Overall, commenters supported the continued use of the 
CAI, but the majority of commenters suggested some enhancements to the 
current methodology (which we would continue to use under our 
proposal). Many commenters believe that the selection rules for 
adjusted measures are somewhat arbitrary or restrictive and result in a 
small subset of adjusted measures. These commenters suggested expanding 
the number of measures for adjustment. The suggested enhancements for 
increasing the number of adjusted measures focused on modifying the 
selection rules. Commenters suggested revising the second set of 
selection criteria that are based on the within-contract disparity 
analysis across contracts, which would result in a larger set of 
adjusted measures. The suggested modifications included a revision of 
the percentage used for the median absolute difference between LIS/DE 
and non-LIS/DE beneficiaries for all contracts analyzed. Some 
commenters suggested changing the currently employed value of 5 
percentage points to a lower values, such as 1 or 2 percentage points. 
A commenter suggested that the percentage for the rule vary based on 
the measure, such that the number is meaningful for the particular 
measure. A commenter suggested modifying the selection rule from the 
proposed one that uses the entire range of the within-contract 
disparities to instead identify the measures where the LIS/DE subgroup 
performed better or worse than the non-LIS/DE subgroup (basing the 
second selection rule to the middle 90 percent of the differences in 
the distribution of the within-contract disparity analysis).
    Response: CMS is grateful for the continued support of our 
stakeholders related to the design and development

[[Page 16584]]

of the CAI. CMS developed two sets of rules to determine the adjusted 
measure set: First, the rules to determine the measures that comprise 
the candidate measure set for adjustment and second, the rules applied 
to the candidate set to identify the measures to be adjusted to 
determine the values of the CAI. The candidate measure set includes the 
measures in the Star Ratings that have varying levels of a LIS/DE/
disabled effect. The second set of rules relies on the analysis of the 
variability of the within-contract differences of LIS/DE and non-LIS/DE 
beneficiaries. The application of the second set of selection rules 
identified the measures in the candidate set that demonstrated an LIS/
DE effect at a level that qualified them for adjustment.
    After thoughtful and careful deliberation of the recommendations of 
our stakeholders, CMS will finalize modified selection rules for 
identifying the adjusted measures: We will not finalize the second set 
of rules for determining the adjusted measure set that we proposed at 
paragraphs (f)(2)(iii)(A) through (C) that provided for identifying 
measures for adjustment based on an analysis of the dispersion of the 
LIS/DE within contract differences. Under the rule we are finalizing, 
the 2021 CAI values will be determined using all measures in the 
candidate measure set for adjustment identified by application of 
paragraphs (f)(2)(ii)(A) through (D). A measure will be adjusted if it 
remains after applying the following four bases for exclusions as 
follows: The measure is already case-mix adjusted for SES (for example, 
CAHPS and HOS outcome measures); the focus of the measurement is not a 
beneficiary-level issue but rather a plan or provider-level issue (for 
example, appeals, call center, Part D price accuracy measures); the 
measure is scheduled to be retired or revised during the Star Rating 
year in which the CAI is being applied; or the measure is applicable to 
only Special Needs Plans (SNPs) (for example, SNP Care Management, Care 
for Older Adults measures). With this modification to the CAI 
calculations, the ratings will continue to be data driven in order to 
be a true reflection of plan quality and enrollee experience, and 
continue to treat all contracts fairly and equally. The modification 
will only eliminate the selection rule in regards to the size of the 
within contact differences. This selection rule was originally 
developed based on a goal of adjusting measures only when there are 
substantive LIS/DE within contract measure disparities. Commenters 
suggested that this selection rule should be relaxed or eliminated. In 
cases where there is little or no difference in the LIS/DE within 
contract performance, there will be very minimal or no impact on the 
calculation of the CAI values. Previously, we have excluded measures 
from this calculation when the effects were very small. With this 
modification based on the comments received and further analysis, these 
measures will be included but will have a very minimal impact on the 
CAI values.
    Comment: Some commenters suggested including a hold harmless 
provision for the application of the CAI for plans with limited LIS/DE 
populations. Some commenters believed contracts should not be subject 
to negative adjustments because they have a low percentage of LIS/DE or 
disabled enrollees. A commenter suggested a hold harmless provision for 
contracts that upon the application of the CAI, would have their 
ratings fall below a particular threshold.
    Response: As summarized in the NPRM, research indicates disparities 
exist in performance measures that are influenced by an individual's 
sociodemographic factors. The CAI was designed to account for the 
disparities that were revealed in our research and to adjust for those 
disparities in order to allow fair comparisons among contracts. The CAI 
is determined using the data from the Star Ratings program. Instead of 
a one-size fits-all approach to address the impact of the socioeconomic 
factors on the Star Ratings, the CAI allows a tailored approach by the 
categorization of a contract into final adjustment category that is 
based on the percentage of LIS/DE and disabled beneficiaries enrolled 
in a contract. In addition, the CAI values are a series of values based 
on the rating-type (overall, Part C summary, Part D summary). Further, 
the CAI values for the Part D summary ratings are contract-type 
specific and a different set of values are developed for MA-PDs and 
PDPs.
    CMS remains committed to our fundamental principles, which includes 
incentivizing contracts to provide the best quality of care to all of 
their enrollees and providing accurate information to beneficiaries to 
allow comparisons among contracts for plan choice. A hold harmless 
provision for the CAI that specifically targets contracts with limited 
LIS/DE populations or contracts that would realize a negative impact 
does not align with the underlying principles of the Star Ratings 
program or the fundamental design principles of the CAI. Such a 
provision could have the unintended consequence of limiting quality 
improvement and innovation for the care of the LIS/DE/disabled 
population, as well as distort the signal of the Star Ratings.
    Comment: Several commenters were critical of codifying an interim 
response and expressed concern that it would impede a long-term 
response.
    Response: CMS's goal is to develop a long-term solution that 
addresses the LIS/DE/disabled effect revealed in our research. Any 
response, long- or short-term, must align with our policy and program 
goals. CMS is confident that we can maintain our agility and 
responsiveness even when codifying the interim solution. The use of the 
CAI as an interim response affords CMS the time to carefully consider 
each potential solution, to continue our collaboration with 
stakeholders, to incorporate the findings of the research community, 
and to include the anticipated recommendations in ASPE's second Report 
to Congress that will be released in 2019.
    Comment: Some commenters encouraged the continued collaboration 
with ASPE and measure developers.
    Response: CMS remains firmly committed to our continued research 
and collaboration with our stakeholders including researchers, 
industry, measure stewards, and other governmental agencies. The 
development of a long-term solution that best addresses any sensitivity 
of the Star Ratings to the beneficiaries enrolled in MA and PDP 
contracts is only possible through continued collaboration and feedback 
from our stakeholders.
    Comment: Some commenters believe that the CAI is an insufficient 
adjustment and advocated for a larger adjustment. Further, some of the 
commenters justified a larger adjustment due to the higher costs 
associated with caring for traditionally underserved vulnerable 
populations. A few of the commenters suggested the use of an equity 
bonus, as suggested in ASPE's first Report to Congress, to address the 
additional costs for serving traditionally underserved populations.
    Response: CMS believes that any policy response must delineate the 
two distinct aspects of the LIS/DE or disability issue--quality and 
payment. The Star Ratings program focuses on accurately measuring the 
quality of care provided, so any response must focus on enhancing the 
ability to measure actual quality differences among contracts. To 
address the LIS/DE and disability issue CMS must accurately address any 
sensitivity of the ratings to the composition of the beneficiaries 
enrolled in a contract at the basic

[[Page 16585]]

building block of the rating system, the measure. CMS believes the CAI 
addresses the quality measurement aspect of the issue at hand. In 
addition, CMS has encouraged the measure stewards to examine our 
findings and undertake an independent evaluation of the measures' 
specifications to determine if measure re-specification is warranted. 
Additionally, the payment response which is not the focus of this 
regulation focuses on payment accuracy for beneficiaries with different 
dual statuses, differentiated by aged or disabled status, by improving 
the predictive performance of the CMS-HCC risk-adjustment model to take 
into account the unique cost patterns of each of these subgroups of 
beneficiaries.
    Comment: Some commenters suggested adjusting for both within- and 
between-contract differences. The commenters referenced one of the two 
findings in ASPE's Report to Congress that found differences in plan 
performance between contracts serving primarily LIS/DE and disabled 
populations and those who do not even after adjusting for patient-mix.
    Response: As summarized in the NPRM, CMS's focus on within-contract 
disparities for the development of the CAI aligns with the 
recommendations of the research community including the National 
Quality Forum (NQF), MedPAC, and ASPE. CMS conducted an in-depth 
examination of the possible sensitivity of the Star Ratings to the 
composition of a contract's enrollees using a multi-faceted, 
comprehensive approach. One analysis permitted the estimation of 
within-contract differences associated with LIS/DE or disability to 
quantify the LIS/DE/disabled effect. Within-contract differences are 
differences that may exist between subgroups of enrollees in the same 
contract (for example, if LIS/DE enrollees within a contract have a 
different mean or average performance on a measure than non-LIS/DE 
enrollees in the same contract). These differences may be favorable or 
unfavorable for LIS/DE and/or disabled beneficiaries. Between-contract 
differences in performance associated with LIS/DE or disability status 
(``between-contract LIS/DE and/or disability disparities'') are the 
possible additional differences in performance between contracts 
associated with the contract's proportion of LIS/DE and disabled 
enrollees that remain after accounting for within-contract disparities 
by LIS/DE and disability status. If LIS/DE or disabled beneficiaries 
are more or less likely than other beneficiaries to be enrolled in 
lower-quality contracts, then between-contract disparities may 
represent true differences between contracts in quality. Because of 
this possibility, we are concerned that adjustment of between-contract 
disparities could mask true differences in quality.
    Adjusting for within-contract disparities is an approach aligned 
with the consensus reflected in the NQF report on sociodemographic 
adjustment, which states that, ``. . . only the within-unit effects are 
adjusted for in a risk adjustment procedure because these are the ones 
that are related specifically to patient characteristics rather than 
differences across units'' (National Quality Forum, 2014). Our research 
focused on measuring within-contract differences in performance for 
LIS/DE and/or disabled compared to non-LIS/DE and non-disabled 
beneficiaries.
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act, Pub. L. 113-185) instructs the Office of the Assistant 
Secretary for Planning and Evaluation (ASPE) to conduct a study that 
examines the effect of individuals' SES on quality measures, resource 
use, and other measures for individuals under the Medicare program. 
Because ASPE's research agenda aligns closely with our goals, we have 
worked and continue to work collaboratively with ASPE and other 
governmental agencies to broaden and expand the focus of the issue. In 
December, 2016 ASPE released its findings to Congress using readily 
available data which includes data from the Star Ratings program. In 
it, ASPE supported the use of the CAI in the Star Ratings program 
including our focus on the within-contract disparities.
    ASPE will release a second Report to Congress in the fall of 2019 
that will focus on the impact of SES on quality and resource use in 
Medicare using measures (for example, education and health literacy) 
from other data sources. Once the report is released, CMS will 
carefully review the report and all recommendations contained within 
it.
    Comment: A commenter specifically offered to collaborate with CMS.
    Response: CMS appreciates the willingness, support, and dedication 
of our stakeholders to improve the health of our beneficiaries. We 
value the feedback and suggestions provided by our stakeholders. 
Comments and suggestions are welcome throughout the year. Outside of 
formal comments periods, stakeholders can contact us via email at the 
following address: [email protected].
    Comment: A commenter suggested comparison of like plans for 
adjustment specifically comparing Dual-Special Needs Plans (D-SNPs) to 
D-SNPs. The commenter believed this would allow an apples-to-apples 
comparison in regards to performance reimbursement.
    Response: The CAI adjusts for the average within-contract 
disparities across all contracts required to report using the adjusted 
measures set as the basis of the adjustment. Contracts, including D-
SNPs, are categorized based on their percentages of LIS/DE and disabled 
beneficiaries. The adjustment is designed to be monotonic, or in other 
words, contracts with higher percentages of LIS/DE or disabled 
beneficiaries will realize a larger adjustment. While the CAI does not 
compare D-SNPs to D-SNPs, the adjustment does account for the higher 
percentages of LIS/DE and disabled beneficiaries in a contract by 
categorizing the contracts in the higher final adjustment categories 
and thus, the categories with the higher adjustments.
    The CAI is designed to address the sensitivity of the Star Ratings 
to the composition of the enrollees in a contract. The Star Ratings are 
designed for quality measurement and not for payment purposes. The 
design and development of the CAI was done to address measurement and 
not payment.
    Comment: A commenter suggested increasing the adjustment for the 
two highest adjustment categories ) in order to have a more significant 
impact on the overall Star Rating The commenter believed the underlying 
efforts are significantly different for contracts with high percentages 
of LIS/DE/disabled enrollees. Further, the commenter believed there are 
administrative challenges and higher costs associated with promoting 
beneficiary compliance in servicing vulnerable populations.
    Response: The use of a consistent methodology and a data-driven 
approach precludes the possibility of an increase in the adjustment in 
a subset of the final adjustment categories. The CAI is designed from a 
quality measurement perspective and not payment. (The CAI methodology 
is detailed in the CAI Supplement available at http://go.cms.gov/partcanddstarratings.)
    Comment: A commenter recommended enhancing the categorization of 
contracts specifically noting that the number of initial categories for 
MA-PDs increased from 50 to 60 categories when comparing the 2017 to 
2018 CAI, but the number of initial categories for PDPs categories 
remained at 16 categories.
    Response: The number of groups in each dimension (LIS/DE and 
disabled) are determined after reviewing each of the distributions 
using the percentages of LIS/DE and disabled across all contracts (MAs 
and PDPs are examined

[[Page 16586]]

separately) using the applicable data. The MA LIS/DE distribution for 
the 2018 CAI had shifted slightly as compared to the data for the 2017 
CAI development, so the decision was made to increase the number of 
initial groups for the LIS/DE dimension and maintain the same number of 
groups for the disabled dimension. The number of initial categories for 
the 2018 CAI values was increased from 50 (10 LIS/DE groups and 5 
groups for disability) to 60 (12 LIS/DE groups and 5 groups for 
disability). The use of additional initial categories in 2018 did not 
significantly impact the number of final adjustment categories (FAC) 
since the collapsing of the initial categories is done to maintain 
monotonicity and maintain a minimum number of contracts per FAC, while 
striving for a minimum differential between the FACs. After examining 
the distributions for PDPs, the use of the same number of initial 
groups for each dimensions was determined to be appropriate. Additional 
initial categories do not enhance or refine the final adjustment 
categories, but rather can cause instability in the CAI values.
    Comment: A few commenters suggested stratifying all measures by 
LIS/DE and disabled status.
    Response: At this time, the National Committee for Quality 
Assurance (NCQA) \68\ and the Pharmacy Quality Alliance (PQA) \69\ have 
recommended stratification for a subset of their measures that are used 
in the Star Ratings program. CMS is waiting for ASPE to complete their 
research under the IMPACT Act before developing an Agency-coordinated 
approach to the display of measures.
---------------------------------------------------------------------------

    \68\ A summary of the NCQA analysis and recommendations can be 
accessed at: http://www.ncqa.org/hedis-quality-measurement/research/hedis-and-the-impact-act.
    \69\ The PQA summary can be accessed at: SDS Risk Adjustment PQA 
PDC CMS Part D Stars.
---------------------------------------------------------------------------

    Comment: A commenter suggested the creation of a structural measure 
that reflects the support for LIS/DE and disabled beneficiaries 
provided by a contract.
    Response: CMS appreciates the suggestion. CMS is currently 
examining the feasibility of a health equity measure that could be 
potentially proposed in the future.
    Comment: A few commenters recommended that CMS proceed with 
caution, citing concerns with creating a double-standard or tiered 
system, or masking disparities. A commenter expressed strong support of 
CMS in seeking to utilize the Star Rating system to encourage 
continuous quality improvement in the MA and Prescription Drug 
programs, providing oversight to ensure accuracy and transparency, and 
not accepting any changes to performance measurement that would lead to 
masking disparities and harming disadvantaged patients. Another 
commenter recommended that CMS monitor how adjustments to the Star 
Ratings affect the quality of care received by LIS/DE and disabled 
enrollees.
    Response: CMS is committed to making informed decisions based on 
thoughtful and careful consideration of any unintended consequences of 
a particular approach. CMS has focused on the within-contract 
disparities, because we do not want to mask true differences in quality 
across contracts. CMS is transparent in the development process and 
seeks the input of our stakeholders, HHS partners, and other government 
agencies. CMS thoroughly examines any proposed modification using a 
comprehensive approach which commonly includes multiple rounds of 
simulations. Further, CMS strives to identify any potential unintended 
consequences of any possible change and to develop strategies to 
mitigate any potential risks to the integrity of the Star Ratings 
system. Upon implementation, CMS maintains vigilance in its review and 
monitoring of the change to ensure that the policy goals that prompted 
the modification have been met.
    Comment: Several commenters suggested working with measure 
developers.
    Response: CMS has been working closely with the measure developers 
for the measures used in the Star Ratings program and will continue to 
do so.
    Comment: A commenter suggested that CMS set minimum standards for 
measure developers that include testing and considerations for 
adjustments. Further, the commenter believes that the research should 
be made public to align with the goal of transparency.
    Response: While CMS does collaborate with the measure developers of 
the measures used in the Star Ratings program, they remain independent 
entities that are the stewards and shepherds of their own measures. 
Both National Committee for Quality Assurance (NCQA) and Pharmacy 
Quality Alliance (PQA) have well-defined processes in place for 
revising or updating their measures. Public comment is solicited during 
their review process, as well as feedback from their many stakeholders 
including the medical community.
    Comment: A commenter inquired about the future use of the 
stratified measures proposed by PQA and NCQA.
    Response: Both NCQA and PQA will be modifying the measure 
specifications for a subset of their measures that are used in the Star 
Ratings program and will require stratified reporting. A summary of the 
NCQA analysis and recommendations can be accessed at: http://www.ncqa.org/hedis-quality-measurement/research/hedis-and-the-impact-act. A summary of the modification of the PQA measures can be accessed 
at: SDS Risk Adjustment PQA PDC CMS Part D Stars. CMS will be reviewing 
the data submitted as a result of these changes in the measure 
specifications which impacts the measures' reporting requirements. CMS 
will be developing a proposal for the use of the revised data through 
future rulemaking.
    Comment: A commenter supported an additional adjustment for all 
plans serving vulnerable populations outside of the CAI.
    Response: At this time, CMS' response to the LIS/DE/disabled effect 
is the CAI. As our research and that of our stakeholders, government 
agencies, and measure developers evolves, CMS will be developing a 
long-term response and will take the commenters' recommendations into 
account as part of that.
    Comment: Some commenters suggested incorporating other factors that 
are well-known as predictors of medication adherence and other Star 
Rating quality outcomes.
    Response: CMS continues to conduct research on the underlying 
factors driving the LIS/DE/disability effect. In addition, CMS has been 
working closely with the measure developers for the measures used in 
the Star Ratings program. Further, we continue to collaborate with 
stakeholders and other governmental agencies including ASPE. ASPE will 
release a second Report to Congress in the fall of 2019 that will focus 
on the impact of SES on quality and resource use in Medicare using 
measures (for example, education and health literacy) from other data 
sources.
    Comment: Some commenters stated that geographic and unique 
characteristics that could affect Star Ratings performance should also 
be assessed and addressed.
    Response: CMS continues to conduct research on the underlying 
factors driving the LIS/DE/disability effect. CMS has examined the 
sociodemographic correlates with a subset of the HEDIS measures used in 
the Star Ratings program. CMS is committed to identifying the cause of 
any sensitivity of the Star Ratings to the composition of enrollees in 
a contract. CMS continues to examine geographic variation, as well as 
unique attributes of both beneficiaries and contracts that

[[Page 16587]]

may play a role in the disparity in performance among subpopulations.
    Comment: A commenter took the opportunity to note that, as the 
Agency moves forward with developing a Quality Rating System (QRS) for 
Medicaid managed care organizations, many of the considerations that 
apply to the Medicare Star Ratings program will likely have 
implications for, and interactions with, this new Medicaid QRS.
    Response: Although this comment is outside the scope of this rule, 
we note that the MA Star Ratings Team is engaged with the team leading 
the development of the QRS for Medicaid.
    Comment: Some commenters encouraged CMS to explore adjusting for 
social risk factors at the measure-level or for the overall Star Rating 
System. A commenter specifically recommended that at minimum, age and 
gender should be used for adjusting all measures in the Star Ratings 
program.
    Response: A measure specification details the adjustments for a 
measure. Only a measure steward may make revisions to the measure 
specification. CMS continues to engage in conversation with the measure 
stewards of the Star Ratings measures.
    CMS is continuing research and collaboration with our stakeholders 
to develop a long-term response to the sensitivity of the Star Ratings 
to the composition of enrollees in a contract.
    Comment: A commenter requested additional detail regarding the 
selection of the Medication Adherence for Hypertension for adjustment 
in the MA-PD and PDP contracts while not providing an adjustment on the 
other two medication adherence measures.
    Response: As discussed in the proposed rule, CMS initially 
developed and used two sets of rules to determine the adjusted measure 
set: First, the rules to determine the measures that comprise the 
candidate measure set for adjustment and second, the rules applied to 
the candidate set to identify the measures to be adjusted to determine 
the values of the CAI. The second set of rules relied on the analysis 
of the variability of the within-contract differences of LIS/DE and 
non-LIS/DE beneficiaries.
    After thoughtful and careful deliberation of the recommendations of 
our stakeholders, CMS will modify the selection rules for identifying 
the adjusted measures by eliminating the second set of rules for 
determining the adjusted measure set. The 2021 CAI values will be 
determined using all measures in the candidate measure set for 
adjustment, thus eliminating the second set of selection rules. A 
measure will be adjusted if it remains after applying the exclusions as 
follows: The measure is already case-mix adjusted for SES (for example, 
CAHPS and HOS outcome measures), if the focus of the measurement is not 
a beneficiary-level issue but rather a plan or provider-level issue 
(for example, appeals, call center, Part D price accuracy measures), if 
the measure is scheduled to be retired or revised during the Star 
Rating year in which the CAI is being applied, or if the measure is 
applicable to only Special Needs Plans (SNPs) (for example, SNP Care 
Management, Care for Older Adults measures).
    For the 2021 Star Ratings program, all three medication adherence 
measures will be designated as an adjusted measure for the 
determination of the CAI.
    Comment: A commenter expressed support of the additional adjustment 
for contracts operating in Puerto Rico.
    Response: CMS appreciates the positive feedback regarding the 
additional adjustment for contracts that operate solely in Puerto Rico. 
CMS believes the adjustment allows for an equitable application of the 
CAI for the subset of contracts for which it applies.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
as proposed at Sec. Sec.  422.166(f)(2) and 423.186(f)(2) with 
modifications to Sec. Sec.  422.166(f)(2)(iii) and 423.186(f)(2)(iii). 
The 2021 CAI values will be determined using all measures in the 
candidate measure set for adjustment. A measure will be adjusted if it 
remains after applying the exclusions as follows: The measure is 
already case-mix adjusted for SES (for example, CAHPS and HOS outcome 
measures), if the focus of the measurement is not a beneficiary-level 
issue but rather a plan or provider-level issue (for example, appeals, 
call center, Part D price accuracy measures), if the measure is 
scheduled to be retired or revised during the Star Rating year in which 
the CAI is being applied, or if the measure is applicable to only 
Special Needs Plans (SNPs) (for example, SNP Care Management, Care for 
Older Adults measures).
u. High and Low Performing Icons
    We proposed regulation text to govern assignment of high and low 
performing icons at Sec. Sec.  422.166(h)(1) and 423.186(h)(1). We 
proposed to continue current policy that a contract receives a high 
performing icon as a result of its performance on the Part C and D 
measures. The high performing icon is assigned to an MA-only contract 
for achieving a 5-star Part C summary rating, a PDP contract for a 5-
star Part D summary rating, and an MA-PD contract for a 5-star overall 
rating.
    We proposed that a contract receives a low performing icon as a 
result of its performance on the Part C or Part D summary ratings. The 
low performing icon will be calculated by evaluating the Part C and 
Part D summary ratings for the current year and the past 2 years (for 
example, the 2016, 2017, and 2018 Star Ratings). If the contract had 
any combination of Part C and Part D summary ratings of 2.5 or lower in 
all 3 years of data, it will be marked with a low performing icon. A 
contract must have a summary rating in either Part C or Part D for all 
3 years to be considered for this icon. These rules were proposed for 
codification at Sec. Sec.  422.166(h)(1)(i) and (ii)(A) and 
423.186(h)(1)(i) and (ii)(A).
    We also proposed, at paragraph (h)(1)(ii)(B), to continue our 
policy of disabling the Medicare Plan Finder online enrollment function 
for Medicare health and prescription drug plans with the low-performing 
icon to ensure that beneficiaries are fully aware that they are 
enrolling in a plan with low quality and performance ratings; we 
believe this is an important beneficiary protection to ensure that the 
decision to enroll in a low rated and low-performing plan has been 
thoughtfully considered. Beneficiaries who still want to enroll in a 
low-performing plan or who may need to in order to get the benefits and 
services they require (for example, in geographical areas with limited 
plans) would be warned, via explanatory messaging of the plan's poorly-
rated performance, and directed to contact the plan directly to enroll.
    We received the following comments to our proposal and our 
responses follow:
    Comment: Commenters overwhelmingly expressed support for the icons, 
as well as our policy of disabling the online enrollment option for 
contracts with the low-performing icon. A commenter suggested requiring 
3 years of high performance to qualify for a high-performing icon, and 
another commenter suggested CMS include a full explanation for 
beneficiaries when the low-performing icon is assigned.
    Response: We appreciate this support and the suggestions made. We 
will take them under consideration.
    Comment: We received one comment requesting that CMS create a 
separate icon to provide beneficiaries with information about a 
contract's audit performance.

[[Page 16588]]

    Response: CMS does note on Medicare Plan Finder when contracts are 
under sanction. We appreciate this suggestion to share additional 
information regarding contract audit scores and Civil Money Penalties 
on Plan Finder.
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized earlier, we are finalizing the 
provisions for high and low performing icons and enrollment process 
limitations as proposed at Sec. Sec.  422.166(h)(1) and 423.186(h)(1) 
without modification.
v. Plan Preview of Star Ratings
    We proposed in Sec. Sec.  422.166(h)(2) and 423.186(h)(2) that CMS 
have plan preview periods before each Star Ratings release, consistent 
with current practice. Part C and D sponsors can preview their Star 
Ratings data in HPMS prior to display on the Medicare Plan Finder. We 
currently use two preview periods. During the first plan preview, we 
expect Part C and D sponsors to closely review the methodology and 
their posted numeric data for each measure. The second plan preview 
includes any revisions made as a result of the first plan preview. In 
addition, our preliminary Star Ratings for each measure, domain, 
summary score, and overall score are displayed. During the second plan 
preview, we expect Part C and D sponsors to again closely review the 
methodology and their posted data for each measure, as well as their 
preliminary Star Rating assignments. We proposed that CMS continue to 
offer plan preview periods before each Star Ratings release (meaning 
the display in the MPF), but to not codify the details of each period 
because over time the process has evolved to provide more data to 
sponsors to help validate their data. We explained in the proposed rule 
that we envision the plan preview periods to continue to evolve in the 
future and do not believe that codifying specific display content is 
necessary.
    We also emphasized in the proposed rule how it is important that 
Part C and D sponsors regularly review their underlying measure data 
that are the basis for the Part C and D Star Ratings. For measures that 
are based on data reported directly from sponsors, any issues or 
problems should be raised well in advance of CMS' plan preview periods. 
A draft version of the Technical Notes has traditionally been and will 
in the future be available during the first plan preview. The draft is 
then updated for the second plan preview and finalized when the ratings 
data have been posted to Medicare Plan Finder.
    We received the following comments on our proposal and our 
responses follow:
    Comment: Several commenters expressed support for the continuation 
of plan preview periods. One specifically mentioned agreeing with CMS' 
decision not to codify the details at this time.
    Response: CMS appreciates this support.
    Comment: Several commenters acknowledged the importance of 
reviewing their data throughout the year. A commenter suggested that 
CMS release Star Ratings for marketing purposes by August 15 each year; 
another suggested that preview periods be at least four weeks long. 
Several commenters also suggested additional data they believed would 
be helpful for CMS to provide during plan previews. For example, a few 
specifically requested that CMS release improvement measure calculation 
worksheets for all contracts during the preview. Another commenter 
requested more timely and frequent drug list and PDE edit updates to 
ensure reporting accuracy, as well as additional reporting on adherence 
measures.
    Response: CMS strives to allow plans as much time as possible to 
preview their data but there are operational constraints that limit how 
soon Star Ratings can be made available for plan preview. The data time 
frame for several measures currently runs through June of each year, 
and CMS does not receive all of the data until the end of July. The 
first plan preview currently starts in early August, the second plan 
preview starts in September, and the public release on MPF is in 
October. In between plan preview periods CMS must make any necessary 
corrections to the data, so four-week preview periods are not feasible 
operationally. Many datasets and reports are available for ongoing 
monitoring purposes prior to Star Rating plan previews. We urge Part C 
and D sponsors to regularly review their underlying measure data that 
are the basis for the Part C and D Star Ratings and immediately alert 
CMS if errors or anomalies are identified so any issues can be resolved 
prior to the first plan preview period. For measures that are based on 
data reported directly from sponsors, any issues or problems can and 
should be raised well in advance of CMS's plan preview periods.
    CMS appreciates comments received about additional data that could 
be provided during previews. The improvement calculation emulation 
worksheets are available to sponsoring organizations to preview their 
own improvement scores per contract during the second plan preview; 
these can be requested by contacting [email protected].
    We note the NDC files are updated three times for a given 
measurement year's PDEs. For 2018 PDEs, the PQA, as custodian of a 
measure, publishes the NDC lists in both February and July 2018, and 
again in February 2019 allowing sponsors multiple opportunities to 
identify missing NDCs/drugs prior to the release of the April 2019 
report that includes all 2018 to-date processed PDEs and the first Star 
Ratings plan preview in August/early September 2019. Furthermore, the 
PQA's NDC update schedule does not preclude a Part D sponsor from 
internally updating its NDC list more frequently, monitoring its 
performance and implementing timely interventions including those that 
could occur at the point-of-sale. We believe this implementation 
timeframe is reasonable and appropriate, and defer to the measure 
custodian for revisions.
    For several Patient Safety measures CMS provides each Part D 
contract a file containing their beneficiary-level adjusted and 
unadjusted rates that can be used by the contract to independently test 
their internal reporting processes and assess the impact of adjustment 
factors. In particular, the adherence measure report provides up to 
70,000 beneficiary enrollment episodes (including begin and end dates) 
where the beneficiary was not adherent, along with the adjusted and 
unadjusted numerator and denominator days used in the beneficiary's PDC 
calculations. The size of the adherence beneficiary sample should be 
sufficient to perform the PDC calculation to address systematic issues 
as requested.
    Comment: Several commenters suggested that CMS post national Star 
Ratings data during the plan preview period.
    Response: The purpose of the plan previews is for sponsors to 
review and raise any questions about their own plan's data prior to the 
public release of data for all plans on Medicare.gov. This allows for 
any necessary corrections to be made prior to the Star Ratings data 
being public. Releasing national Star Ratings data (meaning data about 
other plans' ratings) would not serve this purpose. Further, to the 
extent that errors are identified and changes need to be made to data, 
it would mean that updates to the national data render earlier release 
inaccurate and less useful.

[[Page 16589]]

Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized above, we are finalizing the provisions 
for plan previews as proposed at Sec. Sec.  422.166(h)(2) and 
423.186(h)(2) without modification.
w. Technical Changes
    We also proposed a number of technical changes to other existing 
regulations that refer to the quality ratings of MA and Part D plans; 
we proposed to make technical changes to refer to the proposed new 
regulation text that provides for the calculation and assignment of 
Star Ratings. Specifically, we proposed:
     In Sec.  422.258(d)(7), to revise paragraph (d)(7) to 
specify that beginning with 2012, the blended benchmark under 
paragraphs (a) and (b) will reflect the level of quality rating at the 
plan or contract level, as determined by the Secretary. The quality 
rating for a plan is determined by the Secretary according to the 5-
star rating system (based on the data collected under section 1852(e) 
of the Act) specified in subpart D of this part 422. Specifically, the 
applicable percentage under paragraph (d)(5) must be increased 
according to criteria in paragraphs (d)(7)(i) through (v) if the plan 
or contract is determined to be a qualifying plan or a qualifying plan 
in a qualifying county for the year.
     In Sec.  422.260(a), to revise the paragraph to specify 
that the provisions of this section pertain to the administrative 
review process to appeal quality bonus payment status determinations 
based on section 1853(o) of the Act and that such determinations are 
made based on the overall rating for MA-PDs and Part C summary rating 
for MA-only contracts for the contract assigned pursuant to subpart 166 
of this part 422.
     In Sec.  422.260(b), to revise the definition of ``quality 
bonus payment (QBP) determination methodology'' to mean the quality 
ratings system specified in subpart 166 of this part 422 for assigning 
quality ratings to provide comparative information about MA plans and 
evaluating whether MA organizations qualify for a QBP.
     In Sec.  422.504(a)(18), to revise paragraph (a)(18) to 
state to maintain a Part C summary plan rating score of at least 3 
stars pursuant to the 5-star rating system specified in subpart 166 of 
this part 422. A Part C summary plan rating is calculated as provided 
in Sec.  422.166.
     In Sec.  423.505(b)(26), to revise paragraph (b)(26) to 
state maintain a Part D summary plan rating score of at least 3 stars 
pursuant to the 5-star rating system specified in part 423 subpart D. A 
Part D summary plan rating is calculated as provided in Sec.  423.186.
    We welcomed comment on these technical changes and whether there 
are additional changes that should be made to account for our proposal 
to codify the Star Ratings methodology and measures in regulation text.
    We did not receive any comments on the proposed technical changes 
and therefore are finalizing them. However, we noted in our review that 
in several of these technical corrections, the text mistakenly referred 
to ``subpart 166'' or ``subpart 186'' which is incorrect. The quality 
rating system regulations are finalized in subpart D of part 422 and 
part 423, so we are finalizing these technical changes with the correct 
reference to ``subpart D''.
12. Any Willing Pharmacy Standards Terms and Conditions and Better 
Define Pharmacy Types (Sec. Sec.  423.100, 423.505)
    Section 1860D-4(b)(1)(A) of the Act and Sec.  423.120(a)(8)(i) 
require a Part D plan sponsor to contract with any pharmacy that meets 
the Part D plan sponsor's standard terms and conditions for network 
participation. Section 423.505(b)(18) requires Part D plan sponsors to 
have a standard contract with reasonable and relevant terms and 
conditions of participation whereby any willing pharmacy may access the 
standard contract and participate as a network pharmacy.
    In the proposed rule, we intended to clarify that the any willing 
pharmacy requirement applies to all pharmacies, regardless of how they 
have organized one or more functional lines of pharmacy business. 
Second, we proposed to revise the definition of retail pharmacy and 
define mail-order pharmacy. Third, we proposed to clarify our 
regulatory requirements for what constitutes ``reasonable and 
relevant'' standard contract terms and conditions. Finally, we proposed 
to codify our existing guidance with respect to when a pharmacy must be 
provided with a Part D plan sponsor's standard terms and conditions.
    We received the following comments and our response follows:
    Comment: A large number of Part D enrollees expressed appreciation 
for our series of any willing pharmacy proposals, while other 
commenters expressed concerns with our preamble discussion because they 
believed that CMS was considering eliminating or otherwise changing the 
ability for Part D plan sponsors to develop and maintain preferred 
pharmacy networks. Some commenters contended that Part D enrollees are 
able to exercise freedom of choice without any willing pharmacy 
mandates, and that preferred pharmacy networks are popular among 
beneficiaries. A number of other independent pharmacies requested that 
we consider extending any willing pharmacy provisions to preferred 
pharmacy networks in future rulemaking, and several Part D plan 
sponsors thanked us for recognizing that we should not limit the 
ability of Part D plan sponsors to develop and maintain preferred 
pharmacy networks.
    Response: We believe that the commenters who thought our proposal 
was intended to restrict Part D plan sponsors' ability to have 
preferred pharmacy networks misunderstood the proposal. The proposed 
rule's discussion of any willing pharmacy standard terms and conditions 
requirements, proposed definitions of retail and mail-order pharmacies, 
and accreditation requirements in standard terms and conditions were 
not intended to limit Part D plan sponsors' ability to develop and 
maintain preferred pharmacy networks. On the contrary, we explicitly 
stated in the proposed rule that we were attempting to ensure that Part 
D plan sponsors could continue to develop and maintain preferred 
networks while complying with the any willing pharmacy requirement, 
which applies to standard terms and conditions.
    Comment: Some commenters asked us to abandon the any willing 
pharmacy construct within the Part D program. A commenter pointed out 
that the any willing pharmacy provision would require Part D plan 
sponsors to contract with any pharmacy who agrees to meet the terms and 
conditions of the organization, whether or not the pharmacy's 
participation in the network is necessary for the Part D plan sponsor 
to satisfy geographic access needs. This commenter contended that the 
any willing pharmacy provision is unnecessary because sponsors are 
already motivated to provide access to a broad number of pharmacies 
because Part D enrollees select a health or prescription drug plan 
based on its ability to provide broad access by having pharmacy 
networks in place across many geographic areas. Other commenters stated 
that CMS' proposal only addressed pharmacy complaints and was 
unnecessary because the proposed rule provided nothing to suggest that 
Part D enrollees were dissatisfied with how Part D plan sponsors 
develop and maintain their contracted pharmacy networks. Other 
commenters believed that our any

[[Page 16590]]

willing pharmacy proposals violate the spirit of the non-interference 
clause at Sec.  1860D-11(i) of the Act. Additionally, a number of 
pharmacies submitted comments that Part D plan sponsors offer 
reimbursement rates below acquisition costs, that CMS should codify its 
sub-regulatory guidance regarding unreasonably low reimbursement rates 
as a means to subvert the convenient access standards, or that the 
extended definition of reasonable and relevant should prevent financial 
terms and conditions that result in a negotiated reimbursement rate, 
that, inclusive of payment and adjustment, results in a loss to the 
provider, as such a term that would not be ``reasonable.''
    Response: The any willing pharmacy requirement is statutory and CMS 
does not have the discretion to abandon it. CMS has already established 
through rulemaking that Part D plan sponsors must contract with any 
pharmacy that meets the Part D plan sponsor's standard terms and 
conditions for network participation (Sec.  423.120(a)(8)(i)) and offer 
a standard contract with reasonable and relevant terms and conditions 
of participation whereby any willing pharmacy may access the standard 
contract and participate as a network pharmacy (Sec.  423.505(b)(18)). 
It is within our authority and appropriate for CMS to provide 
additional clarification of these regulatory requirements when 
necessary to help ensure they are being effectuated in accordance with 
the statutory requirement. While we did not propose to further specify 
``reasonable and relevant'' standard terms and conditions in this 
rulemaking, and generally would prefer not to do so for the reason we 
have provided in prior rulemaking (that is, to provide plans with 
maximum flexibility to structure standard terms and conditions) (see 70 
FR 4254), we will consider it in the future if we find that our current 
requirements are no longer sufficient to implement the statutory any 
willing pharmacy requirement as a result of the changing pharmaceutical 
distribution marketplace.
    Additionally, the non-interference clause at section 1860D-11(i) of 
the Act does not prohibit us from establishing or clarifying regulatory 
requirements to implement the any willing pharmacy requirement. Since 
the inception of the Part D program, consistent with the non-
interference clause, CMS has declined to intervene in negotiations or 
disputes involving payment-related contractual terms. However, within 
the limits of our authority, we also have a duty to implement and 
enforce other statutory requirements to promote competition and have 
pursued goals such as increasing the transparency of prices and 
minimizing barriers to entry to the extent possible while still 
ensuring quality. Accordingly, CMS has always interpreted the any 
willing pharmacy requirement to require Part D sponsors to offer 
reasonable and relevant contract terms and conditions to minimize 
barriers to pharmacy network participation and we maintain that 
requirement in this rule. Our clarifications are intended to ensure 
that such contract terms and conditions offered by Part D sponsors 
remain reasonable and relevant in light of the changes and innovations 
in pharmacy practice and business models since the beginning of the 
Part D program.
    Finally, the proposed rule explicitly addressed the any willing 
pharmacy requirement in relationship to complaints received from Part D 
enrollees (such as, confusion concerning Part D enrollee cost-sharing 
expectations). Further, although we believe they misunderstood our 
proposal, many of the Part D enrollees that commented on our proposed 
rule specifically communicated their dislike of preferred pharmacy 
networks.
    We believe our clarifications on application of the statutory any 
willing pharmacy requirement, address Part D enrollee and marketplace 
confusion, maintain Part D plan sponsor flexibility, and address recent 
innovations pharmacy business and care delivery models.
    Comment: Several commenters expressed concern that our proposals 
would lead to more fraud, waste, and abuse in the Part D program. A 
commenter provided two examples of fraud, waste, and abuse that 
resulted in both pharmacies being terminated and prohibited from 
reapplying to be a contracted network pharmacy. Another commenter 
expressed concerns that they encountered fraudulent claims in 
situations where Part D enrollees received prescriptions by mail that 
they never requested from a pharmacy in another state and from a 
provider in yet another state. A commenter suggested that CMS should 
allow Part D plan sponsors to suspend claims when fraud is suspected.
    Response: While we thank the commenters for their views, we fail to 
see how our clarifications would have any impact on Part D plan 
sponsors' abilities to combat fraud, waste, and abuse. Part D plan 
sponsors are required at Sec.  423.504(b)(4)(vi) to take appropriate 
steps to combat fraud, waste, and abuse, and such terms and conditions 
are in no way prohibited, so long as they are reasonable and relevant. 
That is, should a pharmacy violate the relevant terms and conditions, 
or have a history of doing so, a Part D plan sponsor would have no 
obligation to contract with the pharmacy under the any willing pharmacy 
requirement.
    Comment: Some commenters suggested that CMS should explore policy 
options to encourage Part D plan sponsors to offer medically complex 
patients reduced/zero cost sharing when utilizing high-touch pharmacy 
models to support both patient-centered care and the goals of 
Medication Therapy Management.
    Response: We thank the commenters, however these comments are 
beyond the scope of this rule.
a. Any Willing Pharmacy Required for All Pharmacy Business Models
    With the pharmaceutical distribution and pharmacy practice 
landscape evolving rapidly, and because pharmacies' business and 
service delivery models now frequently perform multiple pharmacy 
practice functions, many pharmacies no longer fit squarely into 
traditional pharmacy type classifications. For example, compounding 
pharmacies and specialty pharmacies, including but not limited to 
manufacturer-limited-access pharmacies, and those that may specialize 
in certain drugs, disease states, or both, are increasingly common, and 
Part D enrollees increasingly need access to specialty drugs. In the 
preamble to final rule published on January 28, 2005 (January 2005 
final rule) (70 FR 4194), which implemented Sec.  423.120(a)(8)(i) and 
Sec.  423.505(b)(18), we indicated that standard terms and conditions, 
particularly for payment terms, could vary to accommodate geographic 
areas or types of pharmacies, so long as all similarly situated 
pharmacies were offered the same terms and conditions. In the original 
rule that implemented the Part D program (70 FR 4194, January 28, 
2005), we defined certain types of pharmacies (that is, retail, mail 
order, Long Term Care (LTC)/institutional, and I/T/U [Indian Health 
Service, Indian tribe or tribal organization, or urban Indian 
organization]) at Sec.  423.100 to operationalize various statutory 
provisions that specifically mention these types of pharmacies (for 
example, section 1860D-4(b)(1)(C)(iv) of the Act). However, these 
definitions were never intended to limit the scope of the any willing 
pharmacy requirement. Nevertheless, we received a number of complaints 
that some Part D plan sponsors have declined to permit willing 
pharmacies to participate in

[[Page 16591]]

their networks on the grounds that they do not meet the Part D plan 
sponsor's definition of a pharmacy type for which it has developed 
standard terms and conditions. Therefore, we clarified in the preamble 
to the proposed rule that, although Part D plan sponsors may continue 
to tailor their standard terms and conditions for various types of 
pharmacies, Part D plan sponsors may not exclude pharmacies with unique 
or innovative business or care delivery models from participating in 
their contracted pharmacy network on the basis of not fitting in the 
Part D plan sponsor's pharmacy type classification.
    We received the following comments and our response follows:
    Comment: A commenter contended that CMS is reading ``that meets the 
terms and conditions under the plan'' out of the statute.
    Response: We take this comment to mean that commenter believes that 
we are reading ``A prescription drug plan shall permit the 
participation of any pharmacy'' at section 1860D-4(b)(1)(A) of the Act 
to the exclusion of ``that meets the terms and conditions under the 
plan'' in the same paragraph. We disagree. We are concerned that such 
an interpretation conflates a Part D plan sponsor's ability to develop 
and maintain preferred pharmacy networks with the any willing pharmacy 
provision, thereby effectively nullifying the any willing pharmacy 
provision. The ``reasonable and relevant'' requirement strikes the 
right balance in the inherent tension between the statutory any willing 
pharmacy and preferred pharmacy network provisions. We believe it is 
necessary to require terms and conditions to be reasonable and relevant 
to avoid subverting the any willing pharmacy requirement entirely. 
Consequently, CMS requires the standard terms and conditions under the 
plan to be reasonable and relevant.
    In order to be reasonable and relevant, such terms and conditions 
must pertain to the pharmacy's business and services as allowed under 
its license(s). While traditionally such terms and conditions could 
easily be established based upon classification as a retail or mail-
order pharmacy, our intent is to illustrate that those traditional 
labels likely do not sufficiently encompass today's evolving pharmacy 
practice. Pharmacies complained to us that they had been excluded from 
network participation, not because they were unwilling or unable to 
meet the standard contracting terms and conditions, but because their 
business and service delivery models represented hybrids that did not 
squarely meet any of the definitions by which Part D plan sponsors 
typically classify pharmacies. Again, CMS is not prescribing what the 
terms and conditions have to be; we were only clarifying that they must 
actually be reasonable and relevant to those functions performed, and 
not theoretically reasonable and relevant based upon outdated pharmacy 
classifications that do not accurately reflect today's pharmacy 
business model(s) and practices.
    Comment: Some commenters contended that our proposal effectively 
classifies all pharmacies as similarly situated and would require Part 
D plan sponsors to require a single standard contract for all 
pharmacies, regardless of their business models or type of 
classification. We received comments from several pharmacies with 
innovative pharmacy practice models, including one that possesses 
elements of mail-order, retail, and long term care but doesn't squarely 
meet any one of those definitions.
    Response: We disagree. We explicitly stated in our proposed rule 
and reiterate here that Part D plan sponsors may continue to tailor 
their standard terms and conditions to various types of pharmacies. We 
also said that pharmacies whose pharmacy practice business and service 
delivery model crosses multiple functions would be considered to be 
similarly situated for each of the pharmacy types they represent. By 
referring to pharmacy types, we mean the types of services provided by 
the pharmacy. While some pharmacies may still offer exclusively one 
type of service, an increasing number of pharmacies are offering 
innovative and multiple types of services that do not fit within the 
traditional pharmacy classifications. Consequently, we are merely 
stating that Part D plan sponsors need to offer standard terms and 
conditions that are reasonable and relevant for the types of services 
being provided by the pharmacy, which could be accomplished via 
multiple contracts or addenda that are specific to types of services. 
For example, a pharmacy that predominantly provides retail services but 
also provides mail services would presumably be offered terms and 
conditions that are reasonable and relevant to both types of services. 
It is up to Part D plan sponsors to determine if this is best 
accomplished with multiple contracts based upon service type, addenda 
to a single contract, or another type of contract that accommodates 
unique and innovate pharmacy practice business and care delivery 
models.
    Comment: Some commenters suggested that best practice requires 
pharmacies that perform multiple functions to maintain and use a unique 
National Provider Identifier (NPI)/National Council for Prescription 
Drug Programs (NCPDP) identification number for each designation/
function. Other commenters added that the NCPDP telecommunication 
standards named under HIPAA for pharmacy claim submission allow the 
pharmacy to indicate the appropriate pharmacy service type at a claim 
level, thus enabling the Part D plan sponsor to determine under which 
network the claim is processed for reimbursement and allows pharmacies 
to be held accountable at a claim level to the threshold associated 
with that designation. A commenter suggested that our proposed changes 
would require modification of NCPDP standards, which is a time 
intensive process.
    Response: CMS thanks the commenters for their perspective. Because 
telecommunications standards accommodate a retail pharmacy service type 
which pharmacies could continue to use, we do not believe our any 
willing pharmacy clarifications will require changes to NCPDP 
standards. The industry, through NCPDP, could redefine the retail 
pharmacy service type. Nevertheless, claims processing should not be 
impacted.
    Comment: A number of pharmacies commented that Part D plan sponsors 
or PBMs only make standard terms and conditions for a retail network 
available to pharmacies that express interest in network participation 
and do not advertise the existence of any other ``type'' of network.
    Response: Part D plan sponsors must provide the standard terms and 
conditions that are requested by the pharmacy. While pharmacies may 
request any standard terms and conditions offered by the Part D plan 
sponsor, it is incumbent upon the pharmacy to request terms and 
conditions that are applicable to the business model(s) and types of 
services the pharmacy provides so that the terms and conditions offered 
are reasonable and relevant. The pharmacy cannot expect to receive 
reasonable and relevant terms and conditions if the Part D plan sponsor 
is not made aware of different types of services the pharmacy seeking 
network participation provides.
    Comment: Several commenters agreed that declining a pharmacy's 
request for network participation exclusively on the basis of its 
multiple pharmacy service offerings is inappropriate, and that Part D 
plan sponsors should be permitted to grant applying pharmacies entry 
into the network for services based on the

[[Page 16592]]

pharmacy's ability to comply with the terms and conditions specific to 
each service model individually. Commenters urged us to clarify that 
nothing precludes a Part D plan sponsor from structuring standard terms 
and conditions addressing a particular pharmacy practice model or 
models and applying those terms and conditions to pharmacies providing 
multiple pharmacy services. Other commenters urged us to clarify 
whether CMS is stating that a pharmacy can participate under multiple 
contracts with a Part D plan sponsor and/or whether a pharmacy can 
choose which terms and conditions under which it wants to participate 
with that Part D plan sponsor. Additionally, other commenters urged us 
to clarify whether Part D plan sponsors should develop standard terms 
and conditions applicable to unique and innovative pharmacy business 
models as they arise, or, if they should engage in individual 
negotiations to determine mutually acceptable reasonable and relevant 
terms with such pharmacies. Another commenter suggested CMS should 
acknowledge that contractual terms and conditions that do not directly 
address unique pharmacy and business and service models would likely 
not be reasonable and relevant. Finally, another commented asked, if 
pharmacies are counted in multiple categories, what is the impact on 
inclusion in access standards?
    Response: We thank the commenters for their support and for 
requesting these clarifications. We have recognized since our January 
2005 final rule that pharmacies may have multiple functional lines of 
business, including retail pharmacies that may offer home delivery 
services (see 70 FR 4235 and 4255). Additionally, existing operational 
guidance states ``[Part D] Plan sponsors may submit data for pharmacies 
that serve multiple roles as retail or mail order and LTC, HI, or LA 
pharmacies'' (see our Pricing Data Requirements and Submission Calendar 
guidance, available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxContracting_FormularyGuidance.html). To the extent a pharmacy serves 
multiple roles, that pharmacy may be counted toward multiple access 
standards.
    We agree with the commenters' assessments of our intent. While Part 
D plan sponsors should develop standard terms and conditions applicable 
to unique and innovative pharmacy business models, we can envision 
circumstances where individual negotiations to determine mutually 
acceptable reasonable and relevant terms with such pharmacies could 
also apply. Later in this section of this final rule, we discuss in 
greater detail situations where individual negotiations may be 
appropriate. For example, if a pharmacy offers retail and home infusion 
services, the Part D plan sponsor must offer that pharmacy its standard 
terms and conditions for both the retail and home infusion pharmacy 
functions. If the pharmacy is able to agree to and demonstrate 
compliance with the Part D plan sponsor's standard retail terms and 
conditions, but not the Part D plan sponsor's standard home infusion 
terms and conditions, the pharmacy should be granted access to the Part 
D plan sponsor's contracted retail pharmacy network, and not the Part D 
plan sponsor's contracted home infusion network (until such time that 
the pharmacy is willing and able to comply with the Part D plan 
sponsor's standard home infusion terms and conditions). When the 
pharmacy is willing and able to comply with both the Part D plan 
sponsor's retail and home infusion terms and conditions, that pharmacy 
may be counted for purposes of both retail convenient access standards 
and home infusion network adequacy standards.
    As discussed previously, Part D plan sponsors must provide standard 
terms and conditions that are applicable to the pharmacy requesting the 
terms and conditions. Conversely, we would not expect Part D plan 
sponsors to provide standard terms and conditions that are not 
applicable to the pharmacy requesting the terms and conditions. We 
agree with the commenter that standard contracting terms and conditions 
that do not directly address unique pharmacy and business and service 
models would likely not be reasonable and relevant.
    Comment: A number of commenters urged CMS to routinely review Part 
D plan sponsors' terms and conditions and require complete transparency 
as to what constitutes ``reasonable and relevant'' by disclosing 
standard contracting terms and conditions to the public. Other 
commenters urged that CMS should create an independent audit and review 
process, perhaps by a third party, by which a pharmacy can challenge 
and/or appeal specific standard terms and conditions that it believes 
do not meet the any willing pharmacy reasonable and relevant standard. 
Another commenter recommended that CMS should allow Part D plan 
sponsors the flexibility to develop standard terms and conditions as 
they deem appropriate, but require them to submit a justification for 
reasonableness and relevance.
    Response: We did not propose the changes that the commenters 
recommend, and for reasons noted elsewhere in this preamble, we decline 
to adopt them now. However, we reserve the right to review all 
contracting terms and conditions and investigate complaints regarding 
compliance with our rules.
b. Revise the Definition of Retail Pharmacy and Add a Definition of 
Mail-Order Pharmacy
    In creating the Part D program, the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) 
added the convenient access provision of section 1860D-4(b)(1)(C) of 
the Act and the level playing field provision of section 1860D-
4(b)(1)(D) of the Act. The convenient access provision, as codified at 
Sec.  423.120(a)(1)-(7), requires Part D plan sponsors to secure the 
participation in their networks a sufficient number of pharmacies that 
dispense (other than by mail order) drugs directly to patients to 
ensure convenient access (consistent with rules established by the 
Secretary) and includes special provisions for standards with respect 
to Long Term Care (LTC) and I/T/U pharmacies (as defined at Sec.  
423.100). The level playing field provision, as codified at Sec.  
423.120(a)(10), requires Part D plan sponsors to permit enrollees to 
receive benefits (which may include a 90-day supply of drugs or 
biologicals), including extended days' supplies, through a pharmacy 
(other than a mail-order pharmacy), although the Part D plan sponsor 
may require the enrollee to pay a higher level of cost-sharing to do 
so.
    We currently define ``retail pharmacy'' at Sec.  423.100 to mean 
``any licensed pharmacy that is not a mail-order pharmacy from which 
Part D enrollees could purchase a covered Part D drug without being 
required to receive medical services from a provider or institution 
affiliated with that pharmacy.'' Although we did not define ``non-
retail pharmacy,'' Sec.  423.120(a)(3) provides that ``a Part D plan's 
contracted pharmacy network may be supplemented by non-retail 
pharmacies, including pharmacies offering home delivery via mail-order 
and institutional pharmacies,'' provided the convenient access 
requirements are met (emphasis added). In the preamble to our January 
2005 final rule, we also stated, ``examples of non-retail pharmacies 
include I/T/U, FQHC, Rural Health Center (RHC) and hospital and other 
provider-based pharmacies, as well as Part D [plan]-owned and operated

[[Page 16593]]

pharmacies that serve only plan members'' (see 70 FR 4249). We also 
stated in that rule that ``home infusion pharmacies will not count 
toward Part D plans' pharmacy access requirements (at Sec.  
423.120(a)(1)) because they are not retail pharmacies'' and assumed 
most specialty pharmacies to be a specialized subset of home infusion 
pharmacies, such that access to specialty pharmacies that did not 
provide home infusion services could be adequately addressed by out-of-
network rules at Sec.  423.124 (see 70 FR 4250).
    Since 2005, our regulation at Sec.  423.120(a) has included access 
requirements for retail, home infusion, LTC, and I/T/U pharmacies. 
While non-retail pharmacies like home infusion and LTC pharmacies do 
not count toward the retail pharmacy access requirements, we allow Part 
D plan sponsors to count certain non-retail pharmacies, specifically I/
T/U, FQHC, and RHC pharmacies toward the retail pharmacy access 
requirements (see 70 FR 4248). Consequently, in light of the rapidly 
evolving pharmacy practice landscape, and given that it expressly 
excludes only one type of non-retail pharmacy, that is, mail-order 
pharmacies, without a corresponding definition of that term, we believe 
that our definition of retail pharmacy has been a source of confusion.
    Therefore, to clarify what a retail pharmacy is, we proposed to 
revise the definition of retail pharmacy at Sec.  423.100. First, we 
noted that the existing definition of ``retail pharmacy'' is not in 
alphabetical order, and we proposed a technical change to move it such 
that it will appear in alphabetical order. Second, we proposed to 
incorporate the concepts of being open to the walk-in general public 
and retail cost-sharing such that the definition of retail pharmacy 
would be ``any licensed pharmacy that is open to dispense prescription 
drugs to the walk-in general public from which Part D enrollees could 
purchase a covered Part D drug at retail cost sharing without being 
required to receive medical services from a provider or institution 
affiliated with that pharmacy.''
    As mentioned previously, since the inception of the Part D program, 
Part D statute, regulations, and sub-regulatory guidance have referred 
to ``mail-order'' pharmacy and services without defining the term 
``mail order.'' While mail-order pharmacies could be considered one of 
several subsets of non-retail pharmacies, we never defined the term 
mail-order pharmacy in regulation, nor have we specified access or 
service-level requirements at Sec.  423.120(a) for mail-order 
pharmacies. Unclear references to the term ``mail order'' have 
generated confusion in the marketplace over what constitutes ``mail-
order'' pharmacy or services. This confusion has contributed to 
complaints from pharmacies and Part D enrollees regarding how Part D 
plan sponsors classify pharmacies for network participation, the Plan 
Finder, and Part D enrollee cost-sharing expectations. Additionally, we 
received complaints from pharmacies that may offer home delivery 
services by mail among other services offered by their overall 
operation, but that are not mail-order pharmacies as Part D plan 
sponsors have traditionally defined the term. These pharmacies have 
complained because Part D plan sponsors singularly classified them as 
mail-order pharmacies for network participation despite their other 
non-mail-order services and required them to be licensed in all United 
States, territories, and the District of Columbia, as would be required 
for traditional mail-order pharmacies providing the Part D plan 
sponsor's mail-order benefit at mail-order cost sharing. Therefore, to 
clarify what a mail-order pharmacy is, we proposed to define mail-order 
pharmacy at Sec.  423.100 as a licensed pharmacy that dispenses and 
delivers extended days' supplies of covered Part D drugs via common 
carrier at mail-order cost sharing.
    We solicited comment on our proposed modification to the definition 
of retail pharmacy and our proposed definition of mail-order pharmacy. 
Specifically, we solicited comment regarding whether stakeholders 
believe these definitions strike the right balance to resolve confusion 
in the marketplace, afford Part D plan sponsor flexibility, and 
incorporate recent innovations in pharmacy business and care delivery 
models.
    We received the following comments and our response follows:
    Comment: A number of commenters expressed strong support for our 
definitions of retail pharmacy, mail-order pharmacy, and for declining 
to further define specialty pharmacy and non-retail pharmacy.
    Response: We thank the commenters for their support.
    Comment: A commenter asked why the definition of retail pharmacy 
excluded physician- and hospital-owned pharmacies.
    Response: We thank the commenter for the question and assume the 
commenter is referring to the phrase ``without being required to 
receive medical services from a provider or institution affiliation 
with that pharmacy.'' This language exists in our current definition at 
Sec.  423.100. However, this language does not refer to pharmacy 
ownership and instead has to do with being closed to the walk-in 
general public. To the extent that a physician, physician group, 
hospital, or health system owns and operates a retail pharmacy that 
accepts and dispenses prescriptions that are not limited to its own 
prescriber network, such a pharmacy could be counted toward the 
convenient access standards.
    Comment: Several commenters requested that we expand our definition 
of ``network pharmacy'' and interpretation of ``any willing pharmacy'' 
to include dispensing physicians. Alternatively, other commenters 
suggested that CMS should reiterate that accreditation provisions do 
not apply to dispensing physicians as physicians are not pharmacies, 
and urged us not to impede any provisions that impede physician 
dispensing.
    Response: We thank the commenters but these comments are outside 
the scope of this rule.
    Comment: A number of commenters suggested that we should add 
``primarily,'' ``predominantly,'' ``routinely,'' or other similar terms 
to the definitions of retail and mail-order pharmacy, similar to 
Medicaid's definition. Some commenters suggested that we adopt 
Medicaid's definition. Some commenters suggested that we should specify 
a threshold for these terms or by which a pharmacy could be considered 
one type of pharmacy or another, such as 50 or 95 percent of the 
pharmacy's prescription volume. A commenter added that there is a 
fundamental difference between a retail pharmacy that provides some 
home delivery by mail and a mail-order pharmacy that provides some 
retail services. Another commenter urged us to specify that a retail 
pharmacy cannot simultaneously be a mail-order pharmacy, or vice-versa.
    Response: We thank the commenters for their perspectives. As 
discussed in the preamble to the proposed rule, the pharmacy types we 
defined and proposed to modify and define in regulation describe 
pharmacy practice business and service delivery functions that an 
individual pharmacy may perform, solely, or in combination. We are 
clarifying the definition of retail pharmacy for purposes of 
establishing which pharmacies in a Part D plan sponsor's contracted 
pharmacy network can count toward Part D convenient access standards 
under Sec.  423.120(a)(1). The purpose of these definitions is not 
related to contracting terms between the Part D plan sponsor and 
pharmacy, or any willing pharmacy. We understand that our proposed 
definitions of retail

[[Page 16594]]

and mail-order pharmacy could be narrower, but we do not believe that 
we need to establish a threshold for purposes of evaluating convenient 
access standards and are not otherwise defining it for purposes of 
establishing which terms and conditions are reasonable and relevant.
    Similarly, we proposed a definition of mail-order pharmacy for the 
very specific reason of clarifying Part D enrollee cost-sharing 
expectations and differentiating national mail-order pharmacies that 
contract with Part D plan sponsors to provide the Part D plan sponsors' 
mail-order benefits from pharmacies that otherwise deliver some or all 
of their business through mail service without providing the Part D 
plan sponsors' mail order benefits. It was not intended to preclude 
terms and conditions that are reasonable and relevant to mail-service 
delivery by all pharmacies.
    Comment: Some commenters requested that we should define a 
threshold for ``extended days' supply'' since retail pharmacies also 
dispense extended days' supplies.
    Response: The level playing field provision of the statute (section 
1860D-4(b)(1)(D) of the Act) provides parity for retail pharmacies to 
provided extended days' supplies like mail-order pharmacies. While the 
statute refers to 90-days' supplies, we are aware that, based on 
package sizes, extended days' supplies span a range, for example, 
between 63 and 100 days, and that Part D plan sponsors have 
operationalized parity with retail pharmacies for these quantities, in 
part, to reduce waste. We therefore believe it would be inappropriate 
for us to proscribe a threshold that could unintentionally restrict the 
arrangements for extended days' supplies that Part D plan sponsors have 
made with retail pharmacies or generate dispensing waste.
    Comment: A number of commenters objected to our use of the phrase 
``to the walk-in general public'' in our proposed definition of retail 
pharmacy, and some asked us to expressly state that mail-order 
pharmacies are closed to the walk-in general public. Other commenters 
felt that the definition of mail-order pharmacy was overly restrictive 
and only applied to closed-door mail-order pharmacies.
    Some commenters expressed concern about traditional mail-order 
pharmacies that have constructed the appearance of an open-door 
pharmacy in an effort to participate in a retail network even though 
such pharmacy conducts virtually all of their business by mail and has 
no or very few patients that walk in for prescriptions. Additionally, 
some commenters expressed concern that while such pharmacies may 
technically be open to the walk-in general public, they are located in 
obscure locations, such as in industrial parks, or have minimal 
signage. Commenters added that when such pharmacies appear in the 
directory as ``retail'' pharmacies, it creates beneficiary confusion. 
In that vein, a commenter provided an extensive list of standards they 
believed should be required to determine if a pharmacy maintains a 
legitimate retail pharmacy presence. Some commenters believed they 
would not be able to classify such pharmacies as mail-order pharmacies 
because technically having a public-facing door, they met the 
definition of retail.
    Other commenters expressed concern that the idea of retail as a 
``walk-in'' enterprise is outdated because patients increasingly expect 
to receive their medications delivered even by their local community 
retail pharmacies. Similarly, a commenter ask that we replace the word 
``to'' with ``for.''
    Response: We thank the commenters for these perspectives. Our 
definition of retail pharmacy is necessary for purposes of applying the 
convenient access standards and does not address whether terms and 
conditions of a standard network contract are reasonable and relevant. 
Only the actual business being performed by the pharmacy can dictate 
what terms and conditions may be reasonable and relevant. Additionally, 
we note that our definition of retail pharmacy does not specify that 
the pharmacy operates exclusively to the walk-in general public, nor 
did our proposed definition of mail-order pharmacy specify that the 
pharmacy operate exclusively by mail. Because the statutory convenient 
access provision explicitly discusses the dispensing of drugs directly 
to patients, we will maintain the word ``to'' in lieu of ``for.''
    In these examples, assuming there is legitimate pharmacy practice 
activity, such pharmacies maintain a substantial mail-order line of 
business, and a minimal retail line of business, but nonetheless, both. 
We reiterate that it is incumbent upon the pharmacy to inform Part D 
plan sponsors of all the types of services they provide so that the 
Part D plan sponsor may provide applicable reasonable and relevant 
standard terms and conditions. Moreover, while the standard terms and 
conditions for the retail function could reasonably incorporate the 
elements the commenter listed, we do not believe it is appropriate for 
CMS to specify such granular requirements in our definition of retail 
pharmacy.
    CMS is also aware that some state pharmacy practice acts do not 
distinguish mail-order pharmacies from other types of pharmacies, and 
may have a requirement for all pharmacies to offer general public 
access. Therefore, specifying that a mail-order pharmacy be closed to 
the general walk-in public may unintentionally create a conflict with 
some state pharmacy practice acts.
    Comment: Several commenters suggested that dispensing and 
delivering drugs to an individual's home gives rise to unique quality, 
safety, privacy, and timeliness considerations as compared to retail 
dispensing, which CMS explicitly recognized when it considered its own 
timely delivery standard on mail-order pharmacies. Another commenter 
added that if distinctions in terms and conditions relevant to mail-
order, specialty, and compounding pharmacies are not allowed to be used 
for standard networks, Part D enrollee safety may be jeopardized. 
Another commenter suggested that the definition of mail-order pharmacy 
should ensure that pharmacies are licensed in all of the states in 
which they are practicing. Several commenters contended that they have 
trusted relationships with their patients and, because some of their 
patients are Part D enrollees who have dual residences during various 
parts of the year, that their patients prefer to continue to work with 
their pharmacy instead of a mail-order pharmacy that would mail 
prescriptions to them at their other residence.
    Response: We thank the commenters for their perspectives. We 
believe that the commenter who thought our proposal was intended to 
restrict Part D plan sponsors' ability to make distinctions in standard 
terms and conditions relevant to mail-order, specialty, and compounding 
pharmacies misunderstood the proposal. We agree that mailing 
prescriptions involves unique considerations, for which reasonable and 
relevant standard terms and conditions may be required for retail 
pharmacies or other unique pharmacy practice business and service 
delivery models that include a mail component. Reasonable and relevant 
standard terms and conditions applicable to the functions a particular 
pharmacy practice business or service delivery model performs may be 
required, even if those functions cross multiple traditional pharmacy 
type classifications.
    Existing quality assurance regulations at Sec.  423.153(c)(1) 
require that Part D plan sponsors have representation that

[[Page 16595]]

network providers are required to comply with minimum standards for 
pharmacy practice as established by the states. Every state, and the 
District of Columbia (state) requires pharmacies to be licensed in the 
state in which they are located.\70\ However, CMS recognizes that there 
are differential licensure requirements for prescriptions mailed across 
state lines. Some states require out-of-state pharmacies to be licensed 
in their state, by nature of mailing prescriptions to Part D enrollees 
located in their state, but others do not. Additionally, to the extent 
a state does not require a pharmacy mailing prescriptions into it to be 
licensed in such state, it would be unreasonable for a Part D plan 
sponsor to require that a pharmacy be licensed in such state, 
particularly if licensure in such state requires an address, physical 
or otherwise, in such state. Therefore, CMS does not believe that the 
commenters' additional licensure language is necessary for the 
definition of mail-order pharmacy and additionally has concerns about 
the imposition of such a standard term or condition for pharmacies, 
retail or otherwise, which perform a mail function.
---------------------------------------------------------------------------

    \70\ This also applies to the U.S. territories of Puerto Rico, 
Guam, and the U.S. Virgin Islands, which have their own boards of 
pharmacy. Other U.S. territories may not have designated boards of 
pharmacy. For the few pharmacies located there, pharmacies are 
licensed through the territory's all-inclusive department of health 
or require and subsequently reciprocate licensure from another U.S. 
state or territory.
---------------------------------------------------------------------------

    Comment: A commenter contended that our proposal appeared to be 
based on the assumption that Part D plan sponsors prohibit pharmacies 
from participating in their networks because they provide drugs through 
home delivery, adding that this is not generally an accurate 
understanding of pharmacy contracting practices. The commenter added 
that it was more likely that a Part D plan sponsor would require a 
pharmacy that wants to receive payment for drugs delivered to a Part D 
enrollee's home to meet certain terms and conditions relating to the 
quality, safety, and timeliness of such drug delivery as a condition of 
coverage of such drugs. Some commenters referred us to some Part D plan 
sponsors' standard terms and conditions. Another commenter opined that 
pharmacies that complained to us may not have adequately understood 
their contracting terms and conditions secondary to participation in a 
pharmacy services administrative organization (PSAO), citing anecdotes 
that PSAOs do not adequately communicate terms and conditions to the 
pharmacies they represent.
    Response: We thank the commenter for this perspective, but we 
disagree. Pharmacies referred us to standard contracting terms and 
conditions that explicitly prohibited pharmacies in retail networks 
from mailing any prescriptions, with network termination as the 
consequence, and not case-by-case nonpayment of covered Part D drugs 
mailed by that pharmacy. In addition to the areas addressed in the 
proposed rule, we were particularly concerned by requirements in 
standard terms and conditions that stipulated thresholds for obtaining 
patient assistance, prescription dispensing capacity, or personnel and 
equipment requirements that are not commensurate with or reasonable to 
the size and prescription volume of the pharmacy. The comment related 
to whether a pharmacy participated in a PSAO is outside the scope of 
this rule.
    Comment: A number of commenters were opposed to our incorporation 
of the concept of cost sharing into our proposed definitions of retail 
and mail order pharmacy. Some commenters believed this would also 
require us to define retail cost sharing and mail-order cost sharing as 
terms in regulation. Others suggested that because we did not also 
propose to define these terms in regulation, our proposed definitions 
were effectively meaningless, and we would not have solved the problem 
we were trying to address.
    Other commenters opposed the incorporation of cost sharing in the 
definitions or retail and mail-order pharmacy, contending that the 
proposal instituted a price structure in violation of section 1860D-
11(i)(2) of the Act. Another commenter believed that inclusion of cost 
sharing in the definitions of retail and mail-order pharmacy would 
force Part D plan sponsors to offer higher payments to all network 
pharmacies when most pharmacies have agreed to receive lower payment 
rates. Another commenter offered that because Part D plan sponsors are 
not required to have a mail-order benefit, and thus would not have 
preferential mail-order cost-sharing, such a plan could not 
operationalize our proposed definition of mail-order pharmacy and would 
risk beneficiary confusion.
    Response: As discussed in the proposed rule, because the statute 
itself discusses retail and mail-order pharmacy in terms of 
differential cost sharing between the two, it is not unreasonable that 
we would incorporate those concepts into a regulatory definition. CMS 
has always left the definition and fee structure of the mail-order 
benefit and mail-order cost sharing to Part D plan sponsors. Therefore, 
we disagree that our proposal sought to impose a price structure. 
Rather, we wanted to align the definitions of retail and mail-order 
pharmacy with Part D plan sponsors' own operational definitions of 
mail-order benefit and mail-order cost sharing.
    Comment: A number of commenters, both in favor and opposed, 
similarly interpreted our proposed definition of mail-order pharmacy in 
such a way that would restrict Part D plan sponsors' ability to impose 
standard terms and conditions regarding the provision of mail services.
    Response: It has become clear from these comments that commenters, 
both in favor and opposed, misinterpreted our proposed definition of 
mail-order pharmacy well beyond our intended purposes for defining it 
(that is, for purposes of Part D enrollee cost-sharing expectations, 
the Plan Finder, and how Part D plan sponsors classify pharmacies for 
network participation). We consider the key feature of the mail-order 
benefit to be extended days' supplies at preferential cost sharing (see 
the 2014 Final Call Letter available at (see the 2014 Final Call Letter 
available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/Announcement2014.pdf). CMS has 
always left the definition of the mail-order benefit to Part D plan 
sponsors. Insofar as a Part D plan sponsor defines their mail-order 
benefit to provide services to an expanded geographic service area (for 
example, all 50 United States, departments, territories, and the 
District of Columbia), standard terms and conditions that require 
pharmacies who contract to provide the mail-order benefit to provide 
services to those areas could be reasonable and relevant. We make a 
distinction, however, between service level requirements applicable to 
mailing prescriptions, and those that pertain to providing the Part D 
plan sponsor's mail-order benefit. While standard terms and conditions 
imposing service level requirements applicable to mailing prescriptions 
may be reasonable and relevant, we would not expect a Part D plan 
sponsor to require a pharmacy that provides home delivery service by 
mail to also require such pharmacy to contract to provide the Part D 
plan's mail-order benefit in order to do so.
    Because our proposed definition of mail-order pharmacy was 
fundamentally unlike our other pharmacy type definitions which are

[[Page 16596]]

necessary to establish access standards, we no longer find it would be 
beneficial to have a defined term. Additionally, we will rely on Part D 
plan sponsors to make sure their Part D enrollees understand which 
pharmacies are contracted to provide their mail-order benefit (if they 
have one), and to ensure they have reasonable and relevant terms and 
conditions for all pharmacies that deliver by mail that take into 
consideration the difference between traditional mail order that 
services the entire country from those that operate in more targeted 
geographic areas. Consequently, we are not finalizing our proposed 
definition of mail-order pharmacy, and will not define mail-order 
pharmacy in regulation at this time.
    Comment: A number of commenters expressed concern that it is not 
clear how non-PBM-owned specialty pharmacies or other innovative 
business models fit into the proposed definitions of retail and mail-
order pharmacy. Various commenters urged us to adopt a definition of 
specialty pharmacy, including network adequacy standards for specialty 
pharmacies, specialty drugs, or both. However, commenters were divided 
on the critical elements that should comprise such a definition or set 
of standards. Commenters variably considered accreditation, other 
quality standards and service level expectations, drug cost, certain 
drugs, and certain disease states, or suggested the adoption of 
existing definitions from various trade associations. A commenter 
suggested that a regulatory definition is needed because specialty 
pharmacies may try to hold themselves out to be retail pharmacies in an 
attempt to avoid accreditation or skimp on the level of services 
required for specialty drugs. Conversely, a commenter believed our 
proposal to define mail-order pharmacy and clarify the definition of 
retail pharmacy without defining specialty pharmacy might create a 
perverse incentive for medications normally dispensed in less expensive 
dispensing channels (for example, retail pharmacies) to be diverted to 
more expensive dispensing channels (for example, specialty pharmacies). 
A commenter asked how Part D plan sponsors and PBMs could be expected 
to follow regulations if terms are not defined, as this leads to a 
subjective definition on a plan-by-plan basis and could lead to 
confusion. Finally, absent a definition or access standards, some 
commenters urged us to monitor whether Part D enrollees have 
appropriate access to products that are distributed through specialty 
pharmacies, and a commenter provided a study methodology.
    Response: Because specialty pharmacies' pharmacy practice business 
and service delivery models are so varied, we hesitate to say they are 
a particular ``type'' of pharmacy. As discussed in the proposed rule, 
because the pharmacy practice landscape is changing so rapidly, and 
because the considerations are so varied, we continue to believe any 
attempt by us to define specialty pharmacy could prematurely and 
inappropriately interfere with the marketplace. Consequently, although 
we will continue to consider it for future policy-making, we continue 
to decline to propose a definition of specialty pharmacy at this time. 
Unless they perform a retail function, specialty pharmacies would be 
classified as non-retail pharmacies. Additionally, as we discuss later 
in this section of this final rule, CMS supports Part D plan sponsors 
that want to negotiate additional terms and conditions in exchange for, 
for example, designating a pharmacy with a special label such as a 
``specialty'' pharmacy in the Part D plan sponsor's contracted pharmacy 
network. Although we appreciate the commenter's concerns, we are 
concerned about circulating definitions of specialty pharmacy that 
limit high-touch clinical services to high-cost, high-risk medications 
when such services for inexpensive, yet high-risk, medications may also 
be warranted, particularly in frail or fragile Part D enrollees who are 
still in the community. Nonetheless, we reiterate here that Part D plan 
sponsors must offer specialty pharmacies standard terms and conditions 
that are reasonable and relevant to the specialty pharmacy's pharmacy 
practice business or service delivery model.
    We thank the commenters for their suggestions on methodologies, and 
may consider this for future analysis or policy making.
    Comment: Some pharmacies commented that Part D plan sponsors are 
fulfilling pharmacy network requirements for home infusion pharmacies 
by reporting retail pharmacies that do not meet the guidelines 
discussed in Chapter 5 of the Medicare Prescription Drug Benefit 
Manual, Section 50.4. Other commenters added that retail and mail-order 
pharmacies should not be included in the home infusion network adequacy 
calculation. Some commenters offered that CMS should develop an 
expanded set of any willing pharmacy regulations specific to long term 
care pharmacy, and that CMS should revisit its definition of long term 
care pharmacy, including basing its definition of long term care 
pharmacy services more on patient care characteristics rather than 
particular settings of care. A commenter objected to CMS' prohibition 
on using active pharmaceutical ingredients (APIs) to compound 
prescription drugs instead of those produced by manufacturers. Another 
commenter alleged that our use of compounding pharmacy as an example, 
despite existing policies regarding compounded prescriptions, seemed to 
indicate that we were encouraging the participation of more compound 
pharmacies in the Part D program.
    Response: We thank the commenters for this perspective. While we 
may consider these items for future policy making, they are outside the 
scope of this rule. However, we reiterate, to the extent a pharmacy 
serves multiple roles, they must be offered reasonable and relevant 
standard terms and conditions applicable to the pharmacy practice 
functions they perform, and they may be counted toward multiple access 
standards.
    In summary, we have removed the concept of retail cost sharing from 
our definition of retail pharmacy, and we are not adopting a definition 
of mail-order pharmacy. The definition of retail pharmacy at Sec.  
423.100 will be ``any licensed pharmacy that is open to dispense 
prescription drugs to the walk-in general public from which Part D 
enrollees could purchase a covered Part D drug without being required 
to receive medical services from a provider or institution affiliated 
with that pharmacy.''
c. Treatment of Accreditation and Other Similar Any Willing Pharmacy 
Requirements in Standard Terms and Conditions
    Since the beginning of the Part D program, we have considered 
standard terms and conditions for network participation to set a 
``floor'' of minimum requirements by which all similarly situated 
pharmacies must abide. We further believe it is reasonable for a Part D 
plan sponsor to require additional terms and conditions beyond those 
required in the standard contract for network participation for 
pharmacies to obtain preferred status or to belong to a specially 
labeled subset (for example, because we have not defined the term, 
``specialty pharmacies''). Therefore, we implemented the requirements 
of section 1860D-4(b)(1)(A) of the Act by requiring that standard terms 
and conditions must be ``reasonable and relevant,'' but declined to 
further define

[[Page 16597]]

``reasonable and relevant'' in order to provide Part D plan sponsors 
with maximum flexibility to structure their standard terms and 
conditions.
    As the specialty drug distribution market has grown, so has the 
number of organizations competing to distribute or dispense specialty 
drugs, such as pharmacy benefit managers (PBMs), health plans, 
wholesalers, health systems, physician practices, retail pharmacy 
chains, and small, independent pharmacies (see the URAC White Paper, 
``Competing in the Specialty Pharmacy Market: Achieving Success in 
Value-Based Healthcare,'' available at http://info.urac.org/specialtypharmacyreport). CMS is concerned that Part D plan sponsors 
might use their standard pharmacy network contracts in a way that 
inappropriately limits dispensing of specialty drugs to certain 
pharmacies. In fact, we have received complaints from pharmacies that 
Part D plan sponsors have begun to require accreditation of pharmacies, 
including accreditation by multiple accrediting organizations, or 
additional Part D plan-/PBM-specific credentialing or other network 
criteria, for network participation.
    We agree that there is a role in the Part D program for pharmacy 
accreditation, to the extent pharmacy accreditation requirements in 
network agreements promote quality assurance. However, we raised the 
concern that inconsistent and/or duplicative application of such 
requirements held out to promote quality may be circumventing the any 
willing pharmacy requirements and does not, in fact, represent the 
``floor.''
    We solicited comment on the role of pharmacy accreditation in the 
Part D program. We received the following comments and our response 
follows:
    Comment: A number of commenters suggested CMS should codify its 
existing guidance regarding specialty drugs.
    Response: We thank the commenters and will consider this for future 
rulemaking.
    Comment: A number of commenters representing Part D plan sponsors, 
PBMs, and independent specialty pharmacies believed that we were 
conflating preferred pharmacy networks with specialty pharmacies.
    Response: We thank the commenters for this perspective. We clarify 
that we did not intend for these terms to be interpreted as 
interchangeable. Section 1860D-4(b)(1)(B), as codified at Sec.  
423.120(a)(9), allows Part D plan sponsors to establish preferred 
pharmacy networks. Additionally, the term ``preferred pharmacy'' is 
defined at Sec.  423.100. However, because CMS does not define 
``specialty pharmacy,'' we have left the definition and fee structure 
of ``specialty pharmacies'' and ``specialty networks'' to Part D plan 
sponsors. Part D plan sponsors may create a specially labeled subset of 
``specialty pharmacies'' for their pharmacy network called a 
``specialty network.'' Such specially labeled pharmacies could be 
further differentiated as standard/non-preferred or preferred.
    Comment: Several commenters thanked us, while a number of 
commenters were concerned, that we were altogether eliminating the 
ability of Part D plan sponsors to impose accreditation requirements. A 
commenter suggested that CMS was backtracking from our previous 
guidance that accreditation can serve as part of the ``floor'' for 
standard contracting. A commenter urged us to allow accreditation that 
supports access needs. Several commenters urged us to affirmatively 
prohibit accreditation.
    Response: As discussed previously, we agree that there is a role in 
the Part D program for pharmacy accreditation, to the extent pharmacy 
accreditation requirements in network agreements promote quality 
assurance. In particular, we support Part D plan sponsors that want to 
negotiate an accreditation requirement in exchange for, for example, 
designating a pharmacy with a special label such as a ``specialty'' 
pharmacy or as a preferred pharmacy in the Part D plan sponsor's 
contracted pharmacy network.
    However, CMS remains concerned that, in some cases, Part D plan 
sponsors may be requiring accreditation or ``quality assurance'' 
standard terms and conditions that may unnecessarily preclude pharmacy 
network participation or limit the availability of certain drugs to 
certain pharmacies, especially if such terms and conditions are not 
being required consistently among similarly situated pharmacies. While 
we recognize that allowances must be made for waiving standard terms 
and conditions in certain situations to accommodate unique geographic 
issues or ensure access to specific drugs, we generally believe 
``quality assurance'' requirements, more so than other terms and 
conditions, that are meant to establish a ``floor'' in any willing 
pharmacy standard terms and conditions, would be consistently required 
and less varied across the plan network. To the extent the exception 
becomes the rule, it is questionable that such quality assurance or 
accreditation terms and conditions reflect standard terms and 
conditions.
    In situations where it is necessary for terms and conditions to be 
altered, CMS believes it may be more appropriate for Part D plan 
sponsors to explore reasonable alternatives with such pharmacies, in 
lieu of waiving such requirements outright if they are truly necessary 
for ensuring a minimum quality standard. This may involve negotiations 
to determine mutually acceptable reasonable and relevant terms and 
conditions that could also be offered to other pharmacies that have not 
yet achieved such quality standards as a means to establish a more 
achievable de facto ``floor.'' Insofar as standard terms and conditions 
contain any such requirement, it must be reasonable and relevant to the 
pharmacy practice functions performed by the pharmacy's business and 
service delivery model, and particularly with regard to a standard held 
out to promote quality, as the ``floor,'' we would expect it to be 
applied consistently.
    Comment: Several commenters provided that accreditation is best 
performed by an independent, third-party actor, and that accreditation 
serves as an independent validation of excellence. A commenter 
contended that hundreds of pharmacies that have obtained their pharmacy 
accreditation certifications are small, community, and regional 
pharmacies, however, a number of pharmacies commented that they have 
achieved accreditation, but have done so through other accrediting 
bodies that Part D plan sponsors would not recognize or because they 
were forced to do so. A number of commenters contended that if 
accreditation is to be required, the accreditation standards must be 
public, transparent, and/or consensus based. Several commenters 
believed that CMS should establish accreditation standards, and that 
CMS approval should be the only requirement for acceptance of 
accreditation, similar to LTC pharmacies and DMEPOS providers. Some 
commenters contended that our allowance of pharmacy accreditation in 
the Part D program requires CMS to communicate standard criteria to 
Part D plan sponsors and PBMs. Many commenters contended neither Part D 
plan sponsors nor PBMs may arbitrarily exclude pharmacies utilizing 
other nationally recognized accreditation organizations, and that Part 
D plan sponsors/PBMs should not be able to mandate the use of 
particular accreditation organizations. A commenter offered an 
extensive edit to Sec.  423.505 to this effect.
    Response: Small, community and regional pharmacies have complained 
to us about excessive barriers to entry, and

[[Page 16598]]

alleged that they only underwent accreditation because they were forced 
to do so. Otherwise, they would have been cut out of approximately 75 
to 80 percent of the market. While we support the use of third party 
accreditation, we are concerned that Part D plan sponsors may require 
or do not recognize one accreditation certification versus another when 
pharmacies have already obtained an accreditation certification from a 
different organization, voluntarily or as a requirement from another 
plan sponsor or PBM. We believe it is unrealistic to expect pharmacies 
to obtain multiple accreditation certifications, which would be 
required if multiple Part D sponsors require accreditation by a 
specific accrediting organization.
    We expressed concern in the proposed rule that inconsistent and/or 
duplicative application of such requirements held out to promote 
quality may be circumventing the any willing pharmacy requirements and 
does not, in fact, represent the ``floor.'' However, we reiterate here 
that we support Part D plan sponsors that want to negotiate an 
accreditation requirement in exchange for, for example, designating a 
pharmacy with a special label such as a ``specialty'' pharmacy or as a 
preferred pharmacy in the Part D plan sponsor's contracted pharmacy 
network. While we did not propose specific accreditation standards, we 
will consider it in the future if we find that our current requirements 
are no longer sufficient to implement the statutory any willing 
pharmacy requirement as a result of accreditation requirements imposed 
by Part D plan sponsors. Similar to our work with the Pharmacy Quality 
Alliance, CMS generally supports the adoption of quality standards that 
are public, transparent, and consensus-based. While CMS appreciates the 
commenters' concerns that accreditation is best performed by an 
independent, third-party actor, we did not consider such a policy 
change in the proposed rule and would need to consider the issue 
further.
    We also thank the commenter for their suggested edits to Sec.  
423.505 and may consider them for future policy making.
    Comment: Some commenters objected to our use of the term 
``credentialing,'' contending that credentialing and accreditation are 
different things and accreditation picks up where credentialing leaves 
off. Some commenters provided that, as a tool of quality assurance, 
PBMs look to accreditation as a validation of excellence to ensure that 
their network has the capacity to fully provide highly specialized 
services, and rejected any suggestions that the value or impact of 
accreditation in promoting quality assurance is mitigated by the manner 
of a network agreement deployed by a Part D plan sponsor.
    Response: While some Part D plan sponsors or PBMs may use alternate 
terminology, we have seen documents that label such additional Part D 
plan sponsor- or PBM-specific criteria as ``credentialing.'' 
Nonetheless, we have attempted to clarify the terminology in this final 
rule by also incorporating ``other network criteria.'' We reiterate 
that while the Part D program does not define ``specialty pharmacy'' or 
``specialty network,'' any such requirements in Part D plan sponsors' 
standard terms and conditions must be reasonable and relevant to the 
pharmacy practice functions performed by the specific pharmacy's 
business and service delivery model, and particularly with regard to 
standard terms and conditions held out to promote quality, which, as 
the ``floor,'' must be applied consistently.
    Comment: A commenter provided that North Dakota and New Hampshire 
have enacted laws prohibiting PBMs from requiring additional 
accreditation other than the requirement of the applicable state board 
of pharmacy. Another commenter offered that they have seen situations 
where state standards are insufficient, unenforced, or unmonitored.
    Response: CMS thanks the stakeholder for this information, and 
encourages commenters to keep us apprised of such examples. However, at 
present, we continue to believe state pharmacy practice acts represent 
a reasonably consistent minimum standard of practice.
    Comment: Some commenters believed that our rule would limit the 
dispensing of specialty drugs only to drugs for which there are FDA-
mandated REMS processes, which is such a small proportion of drugs that 
it is insufficient as a quality standard for the growing number of Part 
D enrollees treated by specialty drugs.
    Response: This was not our intent. As we discussed in the proposed 
rule, because a pharmacy's ability to dispense certain drugs is not 
dependent on it having the ability to dispense other drugs, it is not 
relevant for Part D plan sponsors to require pharmacies to dispense a 
particular roster of certain drugs or drugs for certain disease states 
in order to receive standard terms and conditions for network 
participation as a contracted network pharmacy for that Part D plan 
sponsor. Beyond drugs whose dispensing is limited by FDA-mandated REMS 
processes or applicable state law(s), Part D plan sponsors may limit, 
on a drug-by-drug basis, the dispensing of additional Part D drugs 
which require extraordinary special handling, provider coordination, or 
patient education, when appropriate dispensing cannot be performed by a 
network pharmacy (that is, a contracted network pharmacy that has not 
agreed, is not capable, or is not appropriately licensed to provide 
this level of service for such drugs, individually, or in combination). 
(For operational guidance on this policy, see Section 50.3 of Chapter 5 
of the Medicare Prescription Drug Benefit available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/MemoPDBManualChapter5_093011.pdf) A 
Part D plan sponsor may, however, require pharmacies to dispense a 
roster of certain drugs or drugs for certain disease states in order to 
participate in the Part D plan sponsor's preferred pharmacy network or 
be designated as belonging to a specially-labeled subset of the Part D 
plan sponsor's contracted pharmacy network (for example, the Part D 
plan sponsor's ``specialty network'').
    As an example, a pharmacy which identifies as a ``specialty 
pharmacy'' approaches a Part D plan sponsor to participate in the Part 
D plan sponsor's contracted pharmacy network. The Part D plan sponsor 
must provide the pharmacy with standard terms and conditions that are 
reasonable and relevant to the pharmacy practice functions performed by 
the specific pharmacy's business and service delivery model (including 
consistently applied terms and conditions held out to promote quality). 
The Part D plan sponsor may have additional terms and conditions for 
that pharmacy to secondarily participate in either the Part D plan 
sponsor's preferred pharmacy network or ``specialty network.'' Even if 
the pharmacy holds itself out as a ``specialty pharmacy,'' if the 
pharmacy is not capable or does not agree to meet such additional terms 
and conditions, the Part D plan sponsor may preclude that pharmacy from 
participating in the Part D plan sponsor's preferred pharmacy network 
or ``specialty network.'' However, the Part D plan sponsor may not 
preclude the pharmacy from participating in the broader contracted 
pharmacy network, so long as it is willing and able to meet reasonable 
and relevant standard terms and conditions. Additionally, consistent 
with our longstanding policy, we would not expect Part D plan sponsors 
to limit the dispensing of certain drugs

[[Page 16599]]

(including, but not limited to, drugs on the ``specialty/high cost 
tier'') or drugs for certain disease states, individually, or in 
combination, to a subset of network pharmacies if a contracted network 
pharmacy not belonging to such subset: (1) Is capable of and 
appropriately licensed under applicable state and Federal law(s), 
including FDA-mandated REMS processes, for doing so, and (2) agrees to 
meet the Part D plan sponsor's reasonable and relevant extraordinary 
special handling, provider coordination, or patient education 
requirements in standard terms and conditions.
    Comment: A commenter contended that, since there is no entity that 
accredits LTC pharmacies specifically, Part D plan sponsor/PBM 
accreditation requirements are particularly onerous for LTC pharmacies.
    Response: CMS thanks the commenter. In 2005, CMS published Long 
Term Care guidance, which included Long Term Care Pharmacy Performance 
and Service Criteria (available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/downloads/LTCGuidance.pdf). As discussed previously, CMS would not expect Part D 
plan sponsors or PBMs to impose accreditation requirements beyond CMS 
Long Term Care Pharmacy Performance and Service Criteria.
d. Timing of Contracting Requirements
    CMS has received complaints over the years from pharmacies that 
have sought to participate in a Part D plan sponsor's contracted 
network but have been told by the Part D plan sponsor that its standard 
terms are not available until the Part D plan sponsor has completed all 
other network contracting. In other instances, pharmacies have told us 
that Part D plan sponsors delay sending them the requested terms and 
conditions for weeks or months or require pharmacies to complete 
extensive paperwork demonstrating their eligibility to participate in 
the Part D plan sponsor's network before the sponsor will provide a 
document containing the standard terms and conditions. CMS believes 
such actions have the effect of frustrating the intent of the any 
willing pharmacy requirement, and as a result, we believe it is 
necessary to codify specific procedural requirements for the delivery 
of pharmacy network standard terms and conditions.
    To this end, we proposed to establish deadlines by which Part D 
plan sponsors must furnish their standard terms and conditions to 
requesting pharmacies. The first deadline we proposed to establish is 
the date by which Part D plan sponsors must have standard terms and 
conditions available for pharmacies that request them. By mid-September 
of each year, Part D plan sponsors have signed a contract with CMS 
committing them to delivering the Part D benefit through an accessible 
pharmacy network during the upcoming year and have provided information 
about that network to CMS for posting on the Medicare Plan Finder 
website. At that point, Part D plan sponsors should have had ample 
opportunity to develop standard contract terms and conditions for the 
upcoming plan year. Therefore, we proposed to require at Sec.  
423.505(b)(18)(i) that Part D plan sponsors have standard terms and 
conditions readily available for requesting pharmacies no later than 
September 15 of each year for the succeeding benefit year.
    The second deadline we proposed concerns the promptness of Part D 
plan sponsors' responses to pharmacy requests for standard terms and 
conditions. As discussed previously, we proposed to require all Part D 
plan sponsors to have standard terms and conditions developed and ready 
for distribution by September 15. Therefore, we proposed to require at 
Sec.  423.505(b)(18)(ii) that, after that date and throughout the 
following plan year, Part D plan sponsors must provide the applicable 
standard terms and conditions document to a requesting pharmacy within 
two business days of receipt of the request. Part D plan sponsors will 
be required to clearly identify for interested pharmacies the avenue 
(for example, phone number, email address, website) through which they 
can make this request. In instances where the Part D plan sponsor 
requires a pharmacy to execute a confidentiality agreement with respect 
to the terms and conditions, the Part D plan sponsor will be required 
to provide the confidentiality agreement within two business days after 
receipt of the pharmacy's request and then provide the standard terms 
and conditions within 2 business days after receipt of the signed 
confidentiality agreement. While Part D plan sponsors may ask 
pharmacies to demonstrate that they are qualified to meet the Part D 
plan sponsors' standard terms and conditions before executing the 
contract, Part D plan sponsors will be required to provide the pharmacy 
with a copy of the contract terms for its review within the two-day 
timeframe. This requirement will permit pharmacies to do their due 
diligence with respect to whether a Part D plan sponsor's standard 
terms and conditions are acceptable at the same time Part D plan 
sponsors are conducting their own review of the qualifications of the 
requesting pharmacy. We specifically solicited comment on whether these 
timeframes are the right length to address our goal but are 
operationally realistic. We also request examples of situations where a 
longer timeframe might be needed.
    We received the following comments and our response follows:
    Comment: Many commenters expressed support for our proposal to 
establish timeframes for the delivery of standard contracting terms and 
conditions to requesting pharmacies.
    Response: CMS appreciates the supportive comments.
    Comment: Some commenters recommended changes to the date we 
proposed as the deadline by which all Part D plan sponsors would be 
required to have standard terms and conditions available for requesting 
pharmacies. We proposed a September 15 deadline for making available 
contracts with an effective date of the following January 1. Some 
commenters recommended earlier deadlines of July 15 or September 1, 
maintaining that such dates would afford more time for pharmacies to 
review and execute contracts and have their network participation 
reflected in the Medicare Plan Finder (MPF) display of the sponsor's 
plan information for the upcoming year. This information is posted on 
October 1 to support the annual election period (AEP), which begins on 
October 15. The commenters noted that sponsors must submit their Part D 
bids by early June each year, which they claim includes a certification 
of their networks, and therefore they should be in a position after 
that date to develop standard terms and conditions that support the 
benefit plans they proposed to CMS. Another commenter suggested that 
the deadline be set at 30 days prior to the start of the upcoming plan 
year (for example, approximately December 1 of each year).
    Response: In setting the deadline by which Part D plan sponsors 
must have standard terms and conditions available for requesting 
pharmacies, we must strike a balance between a date by which Part D 
plan sponsors can be reasonably certain of their plan pricing for the 
coming year and a date by which pharmacies must start the contracting 
process so that they can participate meaningfully in a sponsor's Part D 
network, including the beneficiary election process, for a particular 
plan year. To do that, we selected September 15 because it was a date 
by which we could be certain that the annual bid

[[Page 16600]]

review process would be completed. It was also a date that would afford 
pharmacies seeking standard contracts the opportunity to have their 
participation in a Part D plan sponsor's network made public during the 
annual election period since sponsors can make five MPF data 
submissions after September 15 that will be reflected in the five MPF 
display updates CMS makes during the AEP.
    We believe the proposed July 15 and September 1 deadlines are too 
early. The bid review and negotiation process following the bid 
submission deadline in early June usually does not conclude until the 
end of August. Before this date, the pricing and formularies associated 
with a Part D plan sponsor's Part D bids may vary, and it would be a 
burden on Part D plan sponsors to require them to develop standard 
terms and conditions in an uncertain pricing environment. Also, Part D 
plan sponsors are not required to certify their pharmacy network as 
part of their bid submission, and it is common for sponsors to continue 
to build their pharmacy networks after the bid deadline. The suggested 
December 1 deadline would tilt too far in the other direction, giving 
Part D plan sponsors more time to develop standard terms and conditions 
but effectively locking pharmacies seeking such contracts out of the 
AEP, to the detriment of the pharmacies as well as their potential Part 
D customers.
    Based on our review of the many comments in support of the 
September 15 deadline we proposed and our consideration of the 
alternative dates suggested by some commenters, we believe September 15 
effectively allows us to administer the any willing pharmacy 
requirement in a way that best balances the needs of Part D plan 
sponsors and pharmacies. Therefore, we will finalize the date as 
proposed.
    Comment: Several commenters addressed our proposal to establish a 
requirement that Part D plan sponsors respond within 2 business days to 
a pharmacy's request for standard terms and conditions. Many agreed 
with our proposed deadline, while others recommended longer time 
frames, ranging from 5 to as many as 15 business days. Most commenters 
recommending a deadline of more than 2 days noted that we had proposed 
a particularly tight timeframe which left little time to accommodate 
unforeseen or extenuating circumstances that might arise related to 
responding to a pharmacy's request. These included difficulties in 
verifying contact information and in determining the type of contract 
(for example, retail, mail order) a requesting pharmacy should be 
provided.
    Response: CMS originally proposed the 2-day response deadline in an 
effort to ensure that Part D plan sponsor's responses to requests from 
pharmacies for standard terms and conditions are not met with undue 
delays, so that the pharmacies can begin their review of the terms at 
the same time sponsors are conducting their due diligence on the 
requesting pharmacies. We appreciate that many commenters with 
significant experience in building contracted Part D pharmacy networks 
have explained how the 2-day timeframe leaves little room for any 
foreseeable communication or processing glitches and how a longer 
timeframe would be more practical to implement. While we see the need 
for a longer timeframe, we also do not want to establish a new deadline 
that reduces the sense of urgency that sponsors should bring to their 
compliance with their obligations under the any willing pharmacy 
requirement. After considering the range of recommended response 
deadlines, we believe that 7 business days are sufficient to allow Part 
D plan sponsors time to address any extenuating circumstances that may 
arise from a contract request and is a reasonable maximum period for 
pharmacies to have to wait to receive the contracting documents they 
requested. The 7-day timeframe provides a more forgiving margin within 
which a sponsor can resolve its own or a pharmacy's error related to a 
request for standard terms and conditions. Such errors could include a 
lack of clarity in a pharmacy's initial request or the submission of a 
request to a part of the sponsor's organization unrelated to its Part D 
administration, making it necessary to re-assign the request to the 
correct department for response. Any of these issues would likely take 
additional days to address, placing the sponsor out of compliance with 
the stricter 2-day timeframe. Given the range of potential missteps in 
the contracting process, it is important to establish a timeframe broad 
enough to accommodate the resolution of most types of issues. We 
believe that 7 business days, a period of a little more than a calendar 
week, is a long enough period for sponsors to respond to all forms of 
pharmacy requests for standard terms and conditions. Any longer 
timeframe would diminish requesting pharmacies' opportunity to have 
contracts in place during the AEP. Under the 7-day timeframe, a 
pharmacy requesting standard terms and conditions in mid-September 
should expect to receive the documents by late September or early 
October, assuming that the sponsor requires takes the maximum 7 
business days to provide both a non-disclosure agreement and the actual 
contracting terms. This timeframe could permit a pharmacy to enter into 
a contract by the start of the AEP on October 15 and have information 
about its participation in the sponsor's Part D network made public 
through its own notices to its customers as well as through sponsor 
marketing materials and the MPF. A timeframe longer than 7 business 
days would likely push pharmacies' opportunity to contract into 
November, thus excluding them from the critical early weeks of the AEP.
    Comment: Some commenters noted that they recommended a required 
response time of more than two days to allow time for sponsors to 
determine the type of contract for which the requesting pharmacy 
qualifies. For some commenters, this process involves requiring a 
pharmacy to complete a questionnaire before the requested terms and 
conditions are provided. Commenters also expressed concern that a 
required response time would compromise Part D plan sponsors' ability 
to conduct background checks on requesting pharmacies as part of 
necessary fraud prevention efforts.
    Response: In our proposal, we made a distinction between sponsors 
providing requested copies of standard terms and conditions and 
sponsors executing such agreements. We noted that Part D plan sponsors 
could ask pharmacies to demonstrate that they are qualified to enter 
into a particular contract before executing the contract. Our goal in 
proposing required timeframes for responses to requests for standard 
terms and conditions was to ensure that pharmacies have the same 
opportunity that Part D plan sponsors have to conduct due diligence 
prior to entering into a contractual relationship. We took this step in 
an effort to remove the roadblock that some requesting pharmacies have 
faced when sponsors have required pharmacies to apply for a contract 
before they are even permitted to see the terms. We do not propose to 
mandate that Part D plan sponsors contract with pharmacies that do not 
meet reasonable and relevant requirements.
    In particular, we emphasize that the requirements related to the 
deadline for responding to contract requests do not in any way preclude 
sponsors from applying to pharmacies requesting standard terms and 
conditions the same fraud prevention review protocols that they already 
use to evaluate other pharmacies seeking a Part D contract. As noted 
above, Part D plan sponsors may

[[Page 16601]]

conduct their regular fraud prevention review of a pharmacy prior to 
executing a standard contract and may decline to enter into the 
contract if the review indicates that the pharmacy poses a legitimate 
fraud risk.
    Comment: Some commenters expressed concern that if Part D plan 
sponsors are not permitted to evaluate whether a pharmacy qualifies for 
a certain type of standard terms and conditions, sponsors may be 
required in some instances to disclose proprietary information to 
parties to whom it should not be shown. The commenters fear that some 
pharmacies might abuse this process by requesting sets of standard 
terms and conditions for which they know they are not qualified just to 
collect sets of such documents to share with other sponsors or 
pharmacies.
    Response: We note in our proposed rule that Part D plan sponsors 
could require requesting pharmacies to enter into non-disclosure 
agreements prior to the delivery of standard terms and conditions. In 
that situation, the deadline for responding to the pharmacy would first 
apply to the delivery of the non-disclosure agreement. Once the 
pharmacy returned the executed agreement, the clock on the deadline 
would re-set, and the Part D plan sponsor would be required to deliver 
the terms and conditions to the pharmacy within the required timeframe. 
The use of appropriate non-disclosure agreements by sponsors should 
substantially reduce the risk that pharmacies would request contract 
terms just to develop a ``contract library'' to share with others.
    As we noted above, Part D plan sponsors' use of questionnaires or 
other methods to evaluate a pharmacy's eligibility for a particular 
type of contract before the Part D plan sponsor provides the requested 
document is one of the specific issues we intended to address with this 
proposal. Therefore, to comply with this proposed timing requirement, 
Part D plan sponsors will be required to provide pharmacies with any 
set of standard terms and conditions a pharmacy requests. As we noted 
above, Part D plan sponsors may evaluate a pharmacy's eligibility for a 
particular contract during the period after the delivery of the 
requested document but before executing the contract. We expect both 
parties, Part D plan sponsors and pharmacies, to operate in good faith 
in carrying out the contracting process under the any willing pharmacy 
provisions. Therefore, pharmacies should only request contracts for the 
types of services they truly believe they are qualified to offer and to 
be forthcoming in describing their range of operations as part of their 
request. In turn, Part D plan sponsors will be expected to work 
cooperatively with pharmacies in identifying the types of Part D 
services the pharmacies can effectively provide to their plan 
enrollees.
    Comment: A commenter noted that CMS was not proposing to establish 
a deadline by which a pharmacy and a Part D plan sponsor would need to 
execute a contract containing standard terms and conditions but that 
CMS's expectation is that Part D plan sponsors should not cause undue 
delay to completion of the contracting process.
    Response: The commenter is correct. We did not propose to establish 
a deadline for the execution of a contract containing a set of standard 
terms and conditions. The appropriate timing in each instance would be 
influenced by the facts surrounding each request, including the type of 
requesting pharmacy, the complexity of its operations, and the regular 
process for conducting due diligence adopted by the relevant Part D 
plan sponsor.
    After consideration of the public comments received, we are 
finalizing Sec.  423.505(b)(18)(i) as proposed and finalizing a change 
to Sec.  423.505(b)(18)(ii) by deleting ``2 business days'' and 
replacing it with ``7 business days.''
13. Changes to the Days' Supply Required by the Part D Transition 
Process (Sec.  423.120)
    We promulgated regulations under the authority of section 1860D-
11(d)(2)(B) of the Act to require Part D sponsors to provide for an 
appropriate transition process for enrollees prescribed Part D drugs 
that are not on the prescription drug plan's formulary (including Part 
D drugs that are on a sponsor's formulary but require prior 
authorization or step therapy under a plan's utilization management 
rules). Section 423.120(b)(3) requires that a Part D sponsor provide 
certain enrollees access to a temporary supply of drugs within the 
first 90 days of a new plan enrollment by ensuring a temporary fill 
when an enrollee requests a fill of a non-formulary drug during this 
time period. In the outpatient setting, the supply must be for at least 
30 days of medication. In the long-term care (LTC) setting, this supply 
must be for at least 91 days and may be up to 98 days, consistent with 
the 14-day-or-less dispensing increment for brand drugs required by our 
April 15, 2011 final rule (76 FR 21460 and 21526).
    We proposed to make two changes to these regulations. First, we 
proposed to shorten the required transition days' supply in the long-
term care (LTC) setting to the same supply currently required in the 
outpatient setting. Second, we proposed a technical change to the 
current required days' transition supply in the outpatient setting to 
be a month's supply.
    In discussing previous revisions to our transition regulations, we 
noted that in requiring multiple fills for the entire length of the 90-
day transition period in our April 15, 2010 final rule, we had pointed 
out that the often complex needs of LTC residents frequently involved 
multiple drugs and necessitated longer periods in order to successfully 
transition to new drug regimens. (CMS-4085-F, 75 FR 19678).
    However, in proposing to revise the transition days' supply in the 
LTC setting to be the same as for outpatient setting, we observed that, 
after more than 10 years of experience with Part D in LTC facilities, 
we had not seen the concerns that we expressed in the 2010 final rule 
materialize, and were not aware of any evidence that transition for a 
Part D beneficiary in the LTC setting necessarily takes any longer than 
it does for a beneficiary in the outpatient setting. We also observed 
that LTC facilities often contract with a single LTC pharmacy, as well 
staff or visiting physicians, and they would be readily available to 
address transition drug needs. Further, we noted that LTC facilities 
had many years' experience with the Medicare Part D program generally 
and transition specifically. Lastly, we stated that we had continuing 
concerns about drug waste and the costs associated with such waste in 
the LTC setting.
    We also proposed to change the current requirement for a 30 days' 
transition supply to a ``month's supply'', currently codified for 
outpatient supply at Sec.  423.120(b)(3)(iii)(A). We observed that we 
had received a number of inquiries from Part D sponsors regarding 
scenarios involving medications that do not easily add up to a 30 days' 
supply when dispensed. (For example, for drugs that typically are 
dispensed in 28-day packages, we noted that we historically required 
plans to dispense more than one package to comply with the 30 day 
requirement in the text of the regulation.) We noted that, if 
finalized, this change would mean that the regulation would require 
that a transition fill be for a supply of at least a month of 
medication, unless the prescription is written by the prescriber for 
less. We further noted the supply would be for at least the days' 
supply that the applicable Part D prescription drug plans has approved 
in its plan

[[Page 16602]]

benefit package submitted to CMS for the relevant plan year, unless the 
prescription was written by the prescriber for less.
    We stated that together, our two proposals--if finalized--would 
mean that Sec.  423.120(b)(3)(iii)(A) would be consolidated into Sec.  
423.120(b)(3)(iii) to read that the transition process must ``[e]nsure 
the provision of a temporary fill when an enrollee requests a fill of a 
non-formulary drug during the time period specified in paragraph 
(b)(3)(ii) of this section (including Part D drugs that are on a plan's 
formulary but require prior authorization or step therapy under a 
plan's utilization management rules) by providing a one-time, temporary 
supply of at least a month's supply of medication. When the 
prescription is written by a prescriber for less than a month's supply 
the Part D sponsor must allow multiple fills to provide up to a total 
of a month's supply of medication.'' Section 423.120(b)(3)(iii)(B) 
would be eliminated.
    We received the following comments and our response follows:
    Comment: Commenters offered support for the transition proposal on 
the basis that it would eliminate additional drug waste and costs, 
require minimal information technology effort, and make operations more 
efficient by providing uniformity across settings. A commenter 
suggested the impact on beneficiaries would be minimal. Another 
commenter noted that setting the LTC supply to the same required in 
outpatient and changing the supply to be a month's supply would provide 
easier explanations of rejected claims on CMS auditing and monitoring 
projects. A commenter suggested the extended LTC days supply was no 
longer necessary because CMS had additional beneficiary protections in 
place to handle the coverage of non-formulary drugs. A commenter 
requested that we include information about this change in the 
transition fill letter and Annual Notice of Change (ANOC) document, and 
another commenter encouraged CMS to conduct educational outreach to 
ensure successful implementation.
    Response: We appreciate the commenters' support. We will update our 
model ANOC, Evidence of Coverage (EOC), formulary, and model transition 
letters to reflect that fact that Part D sponsors are now required to 
provide as a minimum (unless prescriptions are written for fewer days) 
an approved month's supply for enrollees in both the outpatient and LTC 
settings. We will also consider other ways to educate LTC facilities on 
the policy change.
    Comment: Commenters opposed the proposal to reduce the transition 
supply for the LTC setting from 90 days to conform to the supply 
offered in the outpatient setting. Pointing to the complex needs of LTC 
beneficiaries who often have concurrent chronic diseases and take many 
drugs (10 or more), commenters expressed concern that changing 
formulary prescriptions for medical conditions could potentially harm 
LTC beneficiaries who are some of the most vulnerable patients in the 
Part D program. Other commenters pointed out that a month was not long 
enough because providers and pharmacists need to transition multiple 
formulary alternatives in a sequence rather than all at once in order 
to pinpoint which drugs caused adverse reactions. Commenters pointed to 
specific drug challenges, such as overdoses or the fact that changes to 
hypertension medications could lead to falls, as the cause for 
necessity of more gradual transitions for certain drugs or therapeutic 
drug classes. A commenter recommended that CMS require a 90 day supply 
of certain therapeutic drug classes (for instance, antidepressants, 
beta-blockers for cardiovascular disease; and Parkinson's disease) to 
reduce the risk of adverse events.
    Another commenter stated a month's supply was not adequate because 
Part A nursing facility (NF) regulations on physician services at 42 
CFR 483.30(b) require a physician to visit residents only a minimum of 
once every 60 to 70 days after the first 90 days of admission, while 
another commenter stated that LTC facilities needed to reach the same 
professionals who wrote the prescription for the medication no longer 
on formulary rather than any other prescriber. Some commenters provided 
specific examples and anecdotal experience with the LTC transition 
policy. A commenter stated that it took longer than 30 days to arrange 
for transition changes of beneficiaries typically on large numbers of 
drugs at times, such as when dual eligibles were reassigned to new 
zero-premium plans. Commenters expressed concern that delays in 
acquiring medications could result in increased healthcare expenses, 
such as emergency room visits, hospitalizations, or readmissions, and 
several commenters requested that we limit the transition supply to 60 
days rather than a month's supply.
    Response: We appreciate the commenters' concerns on ensuring and 
promoting health, but believe that a month's supply is adequate to 
achieve this goal. As to the comments that sequential introduction of 
medications would be necessary, we appreciate that beneficiaries in LTC 
facilities often take large numbers of drugs. However, we do not 
believe that beneficiaries would often require transition supplies for 
all the drugs they are taking. Rather, we believe that our robust 
formulary requirements make it unlikely that, for instance, a 
beneficiary taking 10 drugs who transitions to a new Part D plan would 
find all 10 of those drugs are now non-formulary drugs which would 
require a transition supply. We decline to carve out exceptions for 
drug classes to avoid creating further complications.
    In addition, we also do not believe that only the prescriber who 
originates a prescription can address drug changes. And while Part A 
regulations only require physician visits every 60 to 70 days, we do 
not believe this would result in an inability to arrange for 
alternative prescriptions when necessary during a 30 day transition 
time frame. It is our understanding that LTC facilities frequently call 
physician offices to update prescriptions. And the regulation itself is 
not limited to specifying the frequency of physician visits, but 
requires that individuals admitted to facilities remain under the care 
of a physician. There is no time limit on 42 CFR 483.30(a), which 
requires NFs to ensure that the medical care of each resident is 
supervised by a physician--a service we believe would include 
prescribing drugs. Further, under Sec.  483.30(d), facilities must 
provide physician services 24 hours a day in case of emergency. In the 
event that a beneficiary needed medication on an emergency basis, we 
believe these rules would require the physician to be available to 
prescribe it.
    In response to comments on operational challenges, we note that in 
some cases LTC facilities will have the information to anticipate and 
plan for some transition changes ahead of time--for instance, 
beneficiaries are informed about prospective plan changes well in the 
advance of effective dates. Additionally, beneficiaries concerned about 
losing access to drugs formerly on their formularies may request 
coverage through the exception and appeals process. For these reasons, 
we decline to adopt the commenters' recommendations.
    Comment: Several commenters suggested that the reason CMS had not 
seen evidence of problems in LTC facilities was partly because CMS had 
the appropriate longer transition fill policy in place. Commenters 
urged CMS not to finalize the proposal in the absence of new 
information indicating concerns CMS noted in 2010 no longer exist. A 
commenter noted it was likely

[[Page 16603]]

polypharmacy (which we interpret to mean the concurrent use of multiple 
medications) had increased among LTC beneficiaries over the last 
decade.
    Response: Based on the maturity of the Part D program and increase 
in the knowledge and experience that health care professionals have 
gained over the decade managing medication prescribing with formulary 
adherence has led us to believe this change will not harm 
beneficiaries. Additionally, through our audit and monitoring processes 
CMS continues to oversee Part D sponsors adherence to the coverage 
determination process requirements for timeliness.
    Comment: Some commenters suggested that changing the LTC transition 
fill to a month's supply would have a minimal impact on reducing drug 
cost and waste. A commenter noted that Part D sponsors do not receive 
the 90 day supply at once and are limited to dispensing 14 day (or 
less) increments in the LTC setting. Another commenter suggested there 
was no reason the current policy would create waste because 
substitutions typically occurred when the transition supply of the non-
formulary drug was exhausted, with LTC beneficiaries' physicians 
generally substituting a new on-formulary drug for the non-formulary 
drug at the end of the transition period. Another commenter suggested 
that limiting the 90 day supply to three 30 day supplies could 
eliminate potential waste.
    Response: We agree that Part D sponsors cannot dispense more than a 
14 day supply at a time. However, we remain concerned that LTC 
facilities are relying on the provision of 90 day supplies rather than 
transitioning Part D beneficiaries to their new plan formularies 
sooner. This delay may lead to prolonged use of less cost effective 
formulary alternatives which may lead to an overall increase to program 
expenditures.
    Comment: A commenter suggested that LTC pharmacies that bill on a 
``post consumption'' method (in which the claims are submitted at the 
end of the month to reflect drugs actually taken by beneficiaries) 
would as a practical matter often receive much less than a month's 
notice that the transition supply was exhausted.
    Response: The current transition period for new enrollees and 
continuing enrollees affected by negative new benefit year changes is 
90 days post enrollment or the start of a new year. CMS expects that 
LTC pharmacies utilize processes currently in place for formulary and 
benefit adherence when medications are prescribed and provided outside 
of the transition period.
    Comment: Commenters, including many who otherwise supported the 
proposal, suggested that referring to a ``month'' was vague and could 
create uncertainty for Part D sponsors and confuse beneficiaries--
possibly leading to interruptions in coverage. To address their 
concerns, some commenters requested that CMS set a minimum number of 
days' supply that would constitute a month's transition supply. Other 
commenters requested that CMS add language to the regulatory text to 
clarify that a month's transition supply corresponds to the number of 
days the Part D sponsor designated as its applicable month's supply in 
its plan benefit package submitted to CMS for the relevant plan year. A 
commenter asserted that the policy to state that the month's supply 
will be what was submitted in the PBP or what the provider prescribes, 
whichever is less, is confusing.
    Response: We agree with the commenters' suggestion that we clarify 
in the regulatory text at Sec.  423.120(b)(3)(iii) that a month's 
supply means the month's supply approved in a plan's bid. Specifically, 
we refer to an ``approved month's supply'' at Sec.  423.120(b)(3)(iii), 
which is the terminology also used in the daily cost sharing regulatory 
text at Sec.  423.153 and the definition of daily cost sharing rate 
found in Sec.  423.100.
    This change to the regulatory text defines that a month's supply is 
what the Part D plan sponsor designates as the applicable month's 
supply in its plan benefit package (PBP) submitted to CMS for the 
relevant plan year. For example, if the Part D sponsor submitted ``30 
days'' in the PBP as its month's supply at retail, and the transition 
supply is dispensed at retail, then 30 days is also considered the 
applicable month's supply for the transition supply. If the Part D 
sponsor had designated 31 days as its month supply at retail in the 
PBP, then the applicable month's supply for the retail transition 
supply would be 31 days. Similarly, if the Part D sponsor had 
designated 31 (or 32) days as its LTC month's supply in the PBP, then 
the applicable month's supply for the LTC transition supply would be 31 
(or 32) days. We do not believe this will cause confusion. We note that 
this is how a month's supply is applied for Part D plans outside of the 
transition supply requirement; meaning, the days in a month's supply 
can vary from plan to plan and are included in plan documents that 
beneficiaries receive. (We additionally are conforming the requirements 
related to formulary changes to reflect an approved month's supply in 
Sec.  423.120(b)(5). See Section II.A.14, Expedited Substitutions of 
Certain Generics and Other Midyear Formulary Changes.)
    In addition, transition policy currently found in Sec.  
423.120(b)(3)(iii)(A) provides that, among other things, the transition 
supply ``must be for at least 30 days of medication, unless the 
prescription is written by a prescriber for less than 30 days''. We so 
limit this supply because pharmacies cannot dispense more medication 
than the amount specified in the prescription by the prescriber. A 
pharmacy could not dispense more than a 10 day transition supply to an 
enrollee whose prescriber only writes a prescription for a 10 day 
supply of medication. The enrollee could only receive more medication 
if he or she received another prescription from a prescriber. Under the 
finalized regulation, the Part D sponsor would be required to provide 
at a minimum a total transition supply equal to the month's supply 
specified in the PBP.
    Comment: Commenters submitted a number of questions about 
prepackaging, for example, a commenter suggested that CMS clarify that 
a month's supply would be considered 30 days unless packaging dictated. 
In another example, a commenter recommended that CMS confirm that a 
drug package in an unbreakable 28 day supply would meet the one month 
supply requirement for transition fill. Other commenters requested that 
CMS provide specific examples of how the transition policy would apply 
or confirm their understanding of the policy as set forth in the 
examples the commenters provided with different quantities (such as 17 
or 21 day supplies) and types of drugs (such as insulin or creams).
    Response: We appreciate the requests for more direction; however, 
the very nature of these disparate inquiries and suggestions has lead 
us to conclude that we cannot provide bright line guidance at this 
level of detail that could address all the different scenarios. Part D 
plans have been administering prepackaged drug supplies since 2006 
outside of transition, and we believe they have established policies 
and procedures to determine what constitutes at least a month's supply 
of prepackaged drugs to be dispensed as a transition supply. For this 
reason, we believe the requested clarification is unnecessary.
    Comment: A commenter suggested CMS permit the proposed changes to 
the transition policy only if patient costs would remain the same or 
less than previously. Another asserted that the

[[Page 16604]]

change to a month's supply would save money for Part D sponsors at the 
expense of beneficiaries.
    Response: The proposal would not increase beneficiary costs because 
it provides a sufficient supply for beneficiaries and prescribers to 
transition to formulary alternatives or to request a formulary 
exception.
    Comment: A commenter noted that the transition from the home to an 
LTC facility can be extremely stressful for elderly patients, which 
presents a risk to patient safety, for example due to the risk of falls 
from hypertension medication changes. This commenter asserted that 
rushing to change their drug regimens would heighten these concerns. 
Another commenter noted the need to wholesale switch multiple 
medications simultaneously to meet a new Part D formulary requirements 
when beneficiaries are transitioned into a nursing home or other LTC 
facility is fraught with danger, and risks overdosing of patients, 
which poses a significant health risk. A commenter urged CMS to instead 
increase the transition days' supply of medication from 90 to 120 days 
when an LTC patient's payer status transfers from Medicare Part A to 
Medicare Part D.
    Response: CMS acknowledges the concerns of the commenters. 
Understanding these risks before the implementation of the Medicare 
Part D program led CMS to require that each Part D sponsor maintain a 
uniform formulary regardless of the treatment setting, for example, 
outpatient or LTC. Therefore, beneficiaries stabilized on certain 
medication regimens at home would be able to continue on the same 
regimen, without disruption, when admitted to an LTC facility. This 
proposal pertains to our transition policy which, as always, applies to 
situations involving either a new plan enrollee or continuing enrollee 
of a Part D plan affected by a negative formulary change in a new 
benefit year. Our specific proposal with regard to Part D beneficiaries 
in LTC facilities who qualify for a transition supply (that we did not 
propose to and are not changing) was to change the supply that Part D 
sponsors are required to dispense from 91-98 days' supply to a month's 
supply. We note that no change is being proposed to current policy 
addressing the need for at least a 31-day emergency supply for current 
enrollees in the LTC setting found in the Medicare Prescription Drug 
Benefit Manual, Chapter 6, Sec.  30.4.6, as we believe that many of the 
commenters are referring to medication change issues in an LTC facility 
when a Part D beneficiary is discharged from a hospital or other 
skilled setting that was not dispensing medications under the 
beneficiary's Part D benefit.
    Comment: A commenter suggested that there was no justification to 
require multiple fills to provide for up to a total month's supply of 
medication and that CMS use this opportunity to restate its proposed 
change to require that a transition fill in the outpatient setting be a 
one-time, temporary supply of a least a month of medication, unless the 
prescription is written by a prescriber for less than a month's supply.
    Response: We did not propose to change our existing policy that 
requires multiple fills to provide for up to a full transition supply, 
and we therefore decline to adopt such a change in this final rule.
    After consideration of the public comments received, we are 
finalizing our transition proposal with the modifications to the 
regulation text discussed below.
    In Sec.  423.120(b)(3)(iii), we are inserting reference to an 
``approved month's supply'' to replace a ``month's supply'' in three 
places.
    The transition fill policy is being finalized with modifications. 
To summarize, the final transition fill supply policy effective for 
plan year 2019 is to require Part D sponsors to provide as a minimum 
(unless prescriptions are written for fewer days) an approved month's 
supply for enrollees in both the outpatient and LTC settings. Please 
note that we also are finalizing a revision to Sec.  
423.120(b)(3)(i)(B) to state that the transition process is not 
applicable in cases in which a Part D sponsor substitutes a generic 
drug for a brand name drug as specified under paragraph Sec.  
423.120(b)(3)(iv). See II.A.14 Expedited Substitutions of Certain 
Generics and Other Midyear Formulary Changes.
14. Expedited Substitutions of Certain Generics and Other Midyear 
Formulary Changes (Sec. Sec.  423.100, 423.120, and 423.128)
    Section 1860D-4(b)(3)(E) of the Act requires Part D sponsors to 
provide ``appropriate notice'' to the Secretary, affected enrollees, 
authorized prescribers, pharmacists, and pharmacies regarding any 
decision to either: (1) Remove a drug from its formulary, or (2) make 
any change in the preferred or tiered cost-sharing status of a drug. 
Section 423.120(b)(5) implements that requirement by defining 
appropriate notice as that given at least 60 days prior to such change 
taking effect during a given contract year. Under Sec.  
423.128(d)(2)(iii), Part D sponsors must also have an internet website 
that provides current and prospective Part D enrollees with at least 60 
days' notice regarding the removal or change in the preferred or tiered 
cost-sharing status of a Part D drug on its Part D plan's formulary. 
The general notice requirements and burden are currently approved by 
OMB under control number 0938-0964 (CMS-10141).
    In our proposed rule, we noted that while MedPAC had observed that 
the continuity of a plan's formulary is very important to all 
beneficiaries in order to maintain access to the medications that were 
offered by the plan at the time the beneficiaries enrolled, the 
commission had also pointed out in the same report that, among other 
things, CMS could provide Part D sponsors with greater flexibility to 
make changes such as adding a generic drug and removing its brand name 
version without first receiving agency approval. (MedPAC, Report to the 
Congress: Medicare and the Health Care Delivery System, June 2016, page 
192 (hereafter June 2106 MedPAC Report).)
    We stated in our preamble that this proposed rule would implement 
MedPAC's recommendation by permitting generic substitutions without 
advance approval and discussed other ways we could better facilitate 
midyear changes. We described the specific changes listed below and 
explained how they would work with current requirements (in related 
areas such as beneficiary communications and the exceptions and appeals 
process) to maintain beneficiary protections.
    Specifically, we proposed:
    (1) Adding new paragraph (b)(5)(iv) to Sec.  423.120 to permit Part 
D sponsors meeting all requirements to immediately remove brand name 
drugs (or to make changes in their preferred or tiered cost-sharing 
status), when those Part D sponsors replace the brand name drugs with 
(or add to their formularies) newly approved generics rated 
therapeutically equivalent by the Food and Drug Administration (FDA) to 
the brand name drug--rather than having to wait until the direct notice 
and formulary change request requirements have been met.
    (2) Revising Sec.  423.120(b)(6) to allow sponsors to make those 
specified generic substitutions at any time of the year rather than 
waiting for them to take effect two months after the start of the plan 
year.
    (3) Adding Sec.  423.120(b)(5)(iv)(C) through (E) to require 
advance general and retrospective direct notice to enrollees and notice 
to entities.

[[Page 16605]]

    (4) Revising Sec.  423.128(d)(2)(iii) to clarify the timing of 
online notice requirements.
    (5) Revising Sec.  423.120(b)(3)(i)(B) to except specified generic 
substitutions from our transition policy.
    (6) Revising Sec.  423.100 to clarify that our definition of 
``affected enrollees'' applies to changes affecting enrollee access in 
the current plan year.
    We further stated that we were addressing stakeholder requests for 
greater flexibility to make midyear formulary changes in general by 
proposing to change the Sec.  423.120(b)(5)(i) notice requirement when 
(aside from expedited generic substitutions and drugs deemed unsafe or 
withdrawn from the market) drug removal or changes in cost-sharing 
would affect enrollees. Specifically, we proposed to change the minimum 
60 days' notice to all entities prior to the effective date of changes 
and at least 60 days' direct notice to affected enrollees or a 60 day 
refill upon the request of an affected enrollee, to at least 30 days' 
notice to all entities prior to the effective date of changes and at 
least 30 days' direct notice to affected enrollees or a one month 
refill upon the request of an affected enrollee.
    (We also noted that we were proposing to amend the refill amount to 
months (namely a month) rather than days (it was 60 days previously) to 
conform to a proposed revision to the transition policy regulations at 
Sec.  423.120(b)(3).) For further discussion, see section II.A.13 of 
this proposed rule, Changes to the Days' Supply Required by the Part D 
Transition Process (Sec.  423.120) (hereafter referred to as section 
II.A.13. Transition Process).
    We received the following comments and our responses follow:
a. Issues Related to Expediting Certain Generic Substitutions and Other 
Midyear Formulary Changes
    Comment: Commenters voiced general support for the entire proposal 
and its flexibilities. Many commenters supported--often strongly--the 
proposal to permit certain immediate generic substitutions for a 
variety of reasons. They stated that increasing and accelerating access 
to generic medications could lead to greater competition, more options, 
and lower costs for Medicare beneficiaries and the program. They 
favored the proposal for aligning Part D policy to Medicaid and 
commercial insurance practices, and noted that the majority of State 
pharmacy boards supported mandatory generic substitution when 
available. Several observed that the proposal would decrease inventory 
carrying costs of brand name drugs for retail pharmacies.
    While many commenters underscored their support for the general 
concept of generic substitutions, some provided support at a more 
granular level. We received specific support for permitting certain 
generic substitutions any time during the plan year; conforming the 
definition of an affected enrollee to mean enrollees taking the drug 
who will be affected during the current plan year; not requiring a 
transition for immediate generic substitutions; requiring advance 
general notice followed by retrospective direct notice; and 
encouraging, but not requiring, Part D sponsors to provide 
retrospective notice no later than by the end of the month after which 
the change becomes effective. A commenter recommended that we continue 
not to require Part D sponsors to implement generic substitutions in 
order to provide them flexibility so they can administer brand name 
drugs to patients who may medically require them.
    A commenter specifically concurred that robust CMS requirements 
provided the necessary beneficiary protections and that 30 days 
provided enough time for the time for an enrollee to change to an 
alternative drug or obtain a formulary exception.
    Response: We thank those commenters for their support of both our 
proposed policies.
    Comment: While often stating that they supported the concept of 
providing Part D sponsors with more formulary flexibilities many 
commenters opposed--often strongly--the specifics of our proposal for 
various reasons bulleted below. The bulk of specific comments focused 
on the proposal to permit immediate generic substitutions under Sec.  
423.120(b)(5)(iv) and related proposals. However, many of the same--as 
applicable--points were directed towards our proposal to reduce the 
advance notice and refill supply for other midyear formulary changes 
required under Sec.  423(b)(5)(i) from 60 to 30 days and from 60 days 
to a month. (For purposes of this preamble, we will refer to these 
changes as ``other midyear formulary changes''. This section a. of 
comments and responses discusses comments covering other midyear 
formulary changes in addition to comments focusing on immediate generic 
substitutions. Section b. covers comments that only discussed immediate 
generic substitutions and section c. covers an issue specific to other 
midyear formulary changes.)
     Commenters voiced concerns that beneficiaries with no (or 
less) advance notice would have no opportunity to discuss the 
transition and therapeutic options with their providers before taking a 
new medication. Commenters suggested that patients require quality 
information and that without such knowledge, beneficiaries might be 
confused to receive drugs at point of sale that did not have the same 
brand name, shape, or color as their earlier drug and possibly decide 
not to take them.
     Many observed that failure to adhere to a prescribed drug 
could adversely affect beneficiary health, and stated that this could 
also lead to increased costs elsewhere in the health care system.
     Some commenters professed concern that the changes would 
promote ``bait and switch'' situations in which beneficiaries enrolled 
in plans believing they would have access to certain medications only 
to find out midyear (with no or little notice) that the plan no longer 
covers those medications.
     Commenters contended that removing advance notice for 
generic substitutions (and reducing notice of other midyear formulary 
changes) eliminated an important beneficiary protection. They stated 
that advance general notice in the Evidence of Coverage (EOC) did not 
offer sufficient information to determine whether a change in medicine 
was appropriate and was ineffective given the increasingly complex and 
confusing nature of plan benefit designs and drug formularies. 
Commenters also opined that direct notice after the fact would be 
inadequate to satisfy the intent of the Part D statutory provisions 
concerning beneficiary access to medically necessary medications.
     Many commenters contended that generic drugs could not 
always substitute for brand name drugs because not all drugs are 
bioequivalent, and recommended that we provide beneficiaries with more 
time to speak to health care providers before switching certain 
medications to avoid adverse results including death. Commenters 
suggested that we except specific drugs or classes or types of drugs 
such as drugs treating hematologic diseases and disorders, epilepsy, 
and cancer and drugs with a narrow therapeutic range. Others noted that 
inactive ingredients could be harmful for patients with allergies or 
conditions such as certain autoimmune diseases and that switching 
medications could be antithetical to the overall treatment regimen for 
people taking a variety of drugs. A commenter requested that we 
acknowledge the unique differences of complex generic drugs as compared 
to simple generics as recognized under

[[Page 16606]]

existing FDA guidance, while another urged us not only to ensure that 
experts reviewing midyear changes for Part D sponsors had the expertise 
to understand molecular and genetic diagnostics and targeted precision 
medicine therapeutics but also to require that their credentials be 
provided to the public. Others generally objected to midyear formulary 
changes that, for instance, were not medically necessary.
    Response: We appreciate concerns about beneficiary health and the 
importance of continuity of care. However, we believe that the policy 
as proposed strikes the right balance between providing beneficiaries 
with access to needed drugs and Part D sponsors with flexibility to 
administer their formularies. Given the context of strong Medicare 
beneficiary protections--including the availability of the formulary 
exceptions process--and the workings of the pharmacy market, we believe 
beneficiaries will not be harmed by these changes and possibly might 
benefit if the added formulary flexibility permits their plans to 
maintain high quality formularies with lower costs.
    The policies we are finalizing in this rule provide more 
flexibility with respect to when certain formulary changes, including 
generic substitutions, can be made but do not change what formulary 
changes we permit. As noted in the information collection requirements 
section of this rule, our long-standing practice has been to approve 
all generic substitutions that would meet the requirements of this 
proposed provision--which again means that the proposed provisions will 
just permit the same allowable substitutions to take place sooner. And, 
rather than try to parse out the equivalency of specific drugs, as was 
discussed in the preamble to the proposed rule, we rely on Food and 
Drug Administration (FDA) determinations that the generic equivalents 
are interchangeable. Our proposal also does not change the types of 
other midyear formulary changes that we permit.
    We also believe that consumers have a general familiarity with 
generic drugs that further mitigates against possible confusion. At 
this time, many people understand that generics are commonly 
substituted for brand name drugs and that they may look different from 
the drugs they are replacing. We do not believe that Medicare 
beneficiaries would be any more surprised by their different appearance 
or name or likely to stop taking the drug as a result than enrollees in 
commercial drug plans. We believe that Medicare beneficiaries generally 
would understand they could contact their pharmacists (who are trained 
to answer such questions) or their providers for assistance. 
Beneficiaries who have more recently transitioned from employer plans 
may, in fact, already be familiar with automatic generic substitutions, 
which may have occurred under their prior plans with no advance notice. 
Under our proposal, which we are finalizing in this final rule, all 
beneficiaries would receive advance general notice that such certain 
generic substitutions could take place immediately. Section 
423.120(b)(5)(iv) requires the notice to appear in the formulary and 
other applicable beneficiary communication materials, which as 
discussed in the proposed rule, would include the EOC. Beneficiaries 
currently taking the drug would receive direct notice afterward.
    Enrollees who are affected by other midyear formulary changes would 
receive 30 days' advance notice before the change takes effect, or as 
applicable, notice of the change and an approved month's refill. They 
could use that time before the change takes effect to contact their 
providers or request an exception.
    Lastly, as we discussed in the proposed rule, we believe 
beneficiaries affected by either proposal will be sufficiently 
protected by the robust coverage determination and appeal process, 
including the right of an enrollee or his or her prescriber to request 
an exception to their plan's utilization management (UM) criteria, 
tiered cost-sharing structure, or formulary. We are not proposing to 
change our exceptions and appeals processes. Beneficiaries who, for 
instance, try a generic drug or other drug added as a result of other 
midyear formulary changes and find out the drug is less effective or 
causes adverse effects, have the right to request an exception to 
obtain coverage of another drug based on medical necessity.
    Comment: Some commenters suggested that if we were to finalize the 
proposed changes, that we require at least some more notice--for 
instance, 45 or 30 days' notice before permitting generic 
substitutions. Commenters pointed out that the National Association of 
Insurance Commissioners (NAIC) model guidelines on Prescription Drug 
Benefit Management Model Act (#22) required a minimum 60-day advance 
notice for both generic and non-generic substitutions. (A commenter 
pointed out that an NAIC subgroup recently recommending revisions to 
the section did not change the 60 day notice.) Others noted that the 
June 2016 MedPAC report, which we cited for support in our preamble, 
did not recommend that we remove the advance notice for generic 
substitutions, but rather envisioned that the 60-day advance written 
notice to beneficiaries would stay in place along with any formulary 
flexibilities. (June 2016 MedPAC Report, page 195).
    Response: We appreciate that the June 2016 MedPAC report assumed we 
would not change our beneficiary advance notice. And, we acknowledge 
that when we first finalized the 60 days advance notice in our January 
2005 preamble, we referenced the NAIC model guidelines (January 28, 
2005, 70 FR 4265). However, the fact that the NAIC subgroup did not 
recently recommend a change does not mean that a change is 
inappropriate. Not only has the pharmaceutical marketplace changed 
since 2005, but also our experience with the Part D program since then 
indicates that other beneficiary protections to address formulary 
changes including the exceptions process are sufficient.
    Under the generic substitutions policies that we are finalizing, 
beneficiaries will receive advance general notice that certain generic 
substitutions may occur immediately, as well as direct notice 
thereafter. We released our proposed rule after the NAIC and MedPAC 
materials were published, which means that at the time they recommended 
60 days' advance notice these entities could not have taken into 
account that we would require the additional beneficiary protection of 
advance general notice. We believe that this advance general notice for 
generic substitutions, for reasons stated elsewhere in this preamble, 
sufficiently balances beneficiaries' needs with the need for additional 
formulary flexibility. Regardless of when they receive their notices of 
formulary changes, beneficiaries have the right to request an 
exception. Again, we are mindful of beneficiary impact and take this 
step only with the knowledge that we would permit Part D sponsors to 
only substitute equivalent generic drug products that the FDA has 
determined to be interchangeable; that our program provides strong 
beneficiary protections; and we are not aware that this longstanding 
commercial practice has harmed patients.
    We also believe that 30 days' notice, and an approved month's 
supply as required, are sufficient for other midyear formulary changes. 
In generally recommending a 60 day advance notice period, MedPAC and 
NAIC did not specifically analyze whether 30 days might provide enough 
notice for the

[[Page 16607]]

limited number of particular changes falling under the notice 
provisions of Sec.  423.120(b)(5)(i). Furthermore, the same beneficiary 
protections that apply for permitted generic substitutions would apply 
in the case of other midyear formulary changes. As we noted in our 
proposed rule, the reduction to 30 days and an approved month's supply 
would align these requirements with the timeframes for transition 
fills, and we have seen no evidence to suggest that 30 days has been an 
insufficient days' supply for transition fills.
    Comment: Several commenters requested that we consider more ways to 
provide formulary flexibility by, for instance, looking to employer 
practices or developing more midyear changes to prevent fraud, waste, 
and abuse. Another commenter suggested that requiring enrollee 
notifications when a drug becomes generically available could defeat 
the cost-savings potential.
    Response: We believe that the flexibilities currently available 
(such as utilization management (UM) criteria) along with both our 
proposals (to permit immediate generic substitutions and expedite 
notice of other midyear formulary changes) include those flexibilities 
that would work best within the requirements of the current Part D 
program. To the extent not prohibited, Part D sponsors may also use 
strategies implemented by employers in the commercial world. As to 
fraud, waste, and abuse, we believe that permitting immediate generic 
substitutions as specified would assist Part D sponsors to preventing 
waste of unnecessary expenditures by allowing them to substitute less 
expensive generics for brand name drugs sooner. We did not intend to 
address fraud or abuse concerns with our proposal to expedite midyear 
formulary changes. Given that Part D sponsors are statutorily required 
to provide appropriate notice before removing a drug from its formulary 
or making any change in a drug's preferred or tiered cost-sharing 
status, we decline to dispense entirely with notice requirements for 
generic substitutions. Instead, the revised notice requirements that we 
are finalizing in this rule are intended to reduce burden and increase 
formulary flexibility within the confines of the statutory 
requirements.
    Comment: Several commenters sought clarification regarding the 
relationship between our regulatory proposal and maintenance and non-
maintenance formulary changes outlined in our guidance. A commenter 
requested that we identify the specific maintenance and non-maintenance 
other midyear formulary changes that do not fall within the 
requirements for immediate generic substitutions and that would require 
a 30 day prospective notice and a month's fill, as applicable, while 
another queried whether current timing limitations still applied to the 
other midyear formulary changes that did not fall within the 
requirements for immediate generic substitutions or if they could be 
implemented at any time of the year. A commenter encouraged us to 
consider modifying notice requirements depending on the application of 
our proposal to non-maintenance changes.
    Response: Section 423.120(b)(5) did not, and with the changes we 
are finalizing in this rule, does not, differentiate between 
maintenance or non-maintenance formulary changes; rather, those terms 
are used in our formulary guidance to describe different types of 
midyear formulary changes. With our proposed revisions, the regulation 
establishes different notice requirements for three types of midyear 
changes: (i) Substitutions of newer generics that meet the requirements 
of Sec.  423.120(b)(5)(iv) as proposed; (ii) drugs removed from 
formularies on the basis that they are deemed unsafe by the FDA or 
withdrawn by their manufacturer consistent with current Sec.  
423.120(b)(5)(iii); and (iii) all other midyear formulary changes that 
do not fall into one of the first two types, which are governed by 
Sec.  423.120(b)(5)(i) and, as finalized, would require 30 days advance 
notice to affected enrollees (as defined in Sec.  423.100) and, as 
applicable, an approved month's fill for affected enrollees (as defined 
in Sec.  423.100).
    While the changes we are finalizing to Sec.  423.120(b)(5) reduce 
the number of days' direct advance notice required for other midyear 
formulary changes from 60 to 30 days, they do not otherwise change 
requirements or guidance applicable to these other midyear formulary 
changes. Thus, consistent with the changes we are finalizing in this 
rule, Part D sponsors are required, for example, to provide current and 
prospective Part D enrollees with at least 30 days' prior notice on 
their websites of other midyear formulary changes (Sec.  
423.128(d)(2)(iii)).
    Comment: Commenters expressed concerns that lack of advance direct 
notice for certain generic substitutions would harm pharmacies because, 
without sufficient opportunity to stock the new generics, they could be 
obligated to dispense brand name drugs without reimbursement from Part 
D sponsors. Some commenters expressed particular concerns about home 
infusion and LTC pharmacies by, for instance, pointing out that LTC 
pharmacies might not have access to wholesalers at night and during the 
weekend, and asking that we require Part D sponsors to notify network 
LTC pharmacies before implementing formulary changes. A commenter also 
pointed out that reducing the notice from 60 to 30 days for other 
midyear formulary changes would provide problems unique to LTC 
facilities. Because they do not always have immediate access to 
guardians or the ability to open resident mail, the time frame for 
making decisions about drugs or moving from plans would be very 
compressed.
    Response: While we understand the commenters' concerns, we do not 
believe immediate generic substitution is unique to Medicare policy, 
and so therefore are not persuaded that we need special rules for Part 
D. Many commercial insurers and states require immediate generic 
substitutions, and we are not aware that this has posed significant 
problems for pharmacies serving commercial or Medicaid enrollees, and 
so we have no reason to believe the problems the commenters identify 
would be any more prevalent in Medicare. We assume manufacturers want 
to move their drugs to pharmacies as soon as possible. It is also our 
understanding that wholesalers send out alerts and literature about new 
generics to alert pharmacies that they are about to enter the market--
which means it is less likely they will be caught unawares. As such, we 
do not see any reason that LTC pharmacies would merit a different 
approach. For the above reasons, we decline to adopt the commenters' 
suggestions. We encourage Part D sponsors to be mindful of drug 
availability when setting effective dates for generic substitutions.
    As for other midyear formulary changes, we currently do not find it 
is necessary to carve out an exception for LTC facilities. Pharmacies--
including LTC pharmacies-presumably will still receive notice timely 
and have the opportunity to reach out to beneficiaries, providers, and 
LTC facilities regarding those midyear formulary changes.
    Comment: A commenter requested that we clarify that online postings 
would be considered sufficient notice for SPAPs, entities providing 
other coverage, authorized prescribers, network pharmacies, and 
pharmacists for all types of midyear negative formulary changes.
    Response: Online postings that are otherwise consistent with our 
requirements for notice to specified entities may constitute sufficient 
notice of both immediate generic substitutions and other midyear 
formulary changes.

[[Page 16608]]

    Comment: A commenter suggested that requiring errata sheets for 
generic substitutions could defeat the cost-savings potential, while 
another requested that we generally change the timing of errata sheet 
distributions.
    Response: We did not make any proposals with respect to errata 
sheets, and therefore decline to make any policy changes with respect 
to them at this time.
b. Comments Specific to Immediate Generic Substitutions
    Comment: A number of commenters urged us not to limit immediate 
substitutions of certain generics to those new to the market. They 
noted that Part D sponsors may not immediately place new drugs on 
formularies for a variety of reasons. For instance, there might only be 
a limited supply of drugs or the drug might not yet be available in all 
markets, such as in United States territories. A few noted that generic 
drugs may not initially be priced much lower than brand name drugs. 
Commenters suggested we permit immediate generic substitutions to occur 
any time within a year after a generic is available on the market or 
until the first day of the month following the end of patent challenge 
exclusivity. Another commenter stated it would be reasonable to require 
Part D sponsors to provide CMS with the reasons for the delay. 
Conversely, other commenters supported the proposal to permit Part D 
sponsors only to immediately substitute newly marketed generics.
    Response: We are persuaded that we should not limit immediate 
substitutions to generic drugs based upon the availability of limited 
formulary update windows after initial formulary submission because 
there are many reasons that Part D sponsors might not make (or in some 
cases not be able to make) substitutions as soon as a generic drug is 
released. We appreciated and considered the different suggestions 
offered. However, we believe an approach that relies on tracking a 
generic approval or marketing date to this extent could be overly 
burdensome for us and plans, and confusing for beneficiaries. 
Additionally, implementing a policy that parses out detailed scenarios 
in which we would permit immediate generic substitutions would seem to 
defeat our goal of creating easier formulary flexibility, and requiring 
Part D sponsors to explain reasons for each delay they might make would 
increase burden.
    Rather, to simplify policy and to encourage Part D sponsors to 
substitute generic drugs more often, we plan to limit market 
availability to the time of the initial formulary submission. 
Specifically, we are revising Sec.  423.120(b)(5)(iv)(B) to provide 
that: A Part D sponsor that otherwise meets our requirements may 
immediately remove a brand name drug if it previously could not have 
included the brand name drug's therapeutically equivalent generic 
because the generic drug was not available on the market at the time 
the Part D sponsor submitted its initial formulary for approval. Part D 
sponsors that otherwise meet our requirements at Sec.  
423.120(b)(5)(iv) do not need to submit their formulary changes to CMS 
before they make a generic substitution. Part D sponsors can 
immediately substitute generic drugs for brand name drugs at the time 
that they submit their formulary changes to CMS, or alternatively, 
substitute generic drugs on their formularies and submit their changes 
to CMS during the next available update window that occurs after they 
have made any changes. Consistent with the policy we are finalizing in 
this rule, Part D sponsors that follow our requirements can substitute 
generic drugs released to market after their initial formulary 
submissions for the next year.
    Comment: A few commenters suggested that failure to provide advance 
notice of generic drug substitutions might mean an unexpected change in 
copay or coinsurance could stress beneficiaries or cause them not to 
take their drugs. Noting that generics could have higher cost-sharing 
than brand products during the coverage gap, a commenter recommended 
that we amend the policy to ensure a beneficiary in the coverage gap 
who is prescribed a generic drug would not pay more than he or she 
would for the brand name drug.
    Response: As we discussed earlier in these responses, this 
regulation is not changing the standards applied regarding generic 
substitutions, but rather changing notice requirements in order to 
permit the those substitutions to take place sooner. That said, we 
acknowledge that there could be an unexpected increase in cost sharing, 
but believe that such an occurrence generally would be limited to the 
coverage gap in 2019. Our intent was that Part D sponsors only be 
permitted to immediately substitute generic drugs if in addition to all 
other requirements (including application of the same or less 
restrictive UM criteria), the more recently released therapeutically 
equivalent generic drug is on the same or lower cost-sharing tier--not 
simply the same or lower cost-sharing. To make this clearer, are 
revising Sec.  423.120(b)(5)(iv)(A) to require that Part D sponsors add 
a therapeutically equivalent generic drug to its formulary ``on the 
same or lower cost-sharing tier'' rather than ``with the same or lower 
cost-sharing''.
    Beneficiaries will pay the same or less out of pocket in instances 
in which enrollees pay a set copay because Sec.  423.120(b)(5)(iv)(A) 
would require that a generic drug appear on the same or a less costly 
tier than the brand name drug it replaces. In contrast, in cases of 
coinsurance, the amount paid out of pocket by an enrollee for a generic 
drug theoretically could increase if the negotiated price for the 
generic drug is more than the brand name drug. But, although generics 
might initially have negotiated prices that are not much lower than the 
brand name drug, we are not aware of situations in which such generic 
drugs actually have higher negotiated prices. Therefore, with the 
exception of the defined standard cost sharing in the coverage gap in 
2019, we do not believe beneficiaries will pay higher cost sharing for 
these generic substitutions.
    We acknowledge that because beneficiaries currently pay a larger 
percentage for generics than for brand name drugs during the coverage 
gap under the defined standard benefit, (up until 2020), the cost 
sharing for generics could be higher than that of brand name drugs 
during that benefit phase. However, this dynamic has existed since the 
beginning of the coverage gap closing in 2011 when beneficiaries began 
paying 50 percent for brand name drugs and 93 percent for generic drugs 
in the gap. The generic cost sharing percentage has been decreasing 
each year and will be the same 25 percent cost sharing as brand name 
drugs beginning in 2020.
    Comment: A commenter requested that we confirm that the proposal to 
permit specified immediate generic substitutions would also apply to 
protected class generics, while another contended that because we did 
not consider the six protected classes, our proposal was contrary to 
the statutory requirement of section 1860D-4(b)(3)(G) of the Act 
requiring Part D sponsors to offer access to ``all'' drugs in those 
specified categories.
    Response: We disagree that our proposal is contrary to section 
1860D-4(b)(3)(G) of the Act, which expressly permits the Secretary to 
establish exceptions to permit Part D sponsors to exclude from their 
formularies, or otherwise limit access to, Part D drugs that are 
otherwise required to be included in the formulary as drugs of clinical 
concern. We established an

[[Page 16609]]

exception through rulemaking at Sec.  423.120(b)(2)(vi)(A), which 
specifies that drug products rated as therapeutically equivalent by the 
FDA are excepted from the six classes of clinical concern specified in 
section 1860D-4(b)(3)(G)(iv) of the Act. Therefore, if a new generic in 
one of the protected classes enters the market, plan sponsors would be 
able to make an immediate generic substitution, consistent with the 
requirements we are finalizing at Sec.  423.120(b)(5)(iv).
    Comment: Noting, for instance, that it would create significant 
savings, commenters urged us to allow in the future, or even clarify 
that we currently meant to allow, Part D sponsors to substitute new to 
market biosimilars or at least interchangeable biological products. 
Conversely, others stated that they supported the fact that our 
proposal currently did not apply to biosimilar biologics. Several 
commenters, including one who was concerned that our provision would 
pave the way for such an expansion, requested that we ensure that 
biosimilars be excluded from future generic substitutions. They 
suggested, for instance, that they were not therapeutically equivalent 
and that applying this policy would result in third parties other than 
physicians taking beneficiaries off of stable medications. A number of 
commenters urged CMS to revisit treatment of biosimilar and 
interchangeable biological products with regard to mid-year formulary 
changes at such time as the FDA approves the first interchangeable 
biological product.
    Response: Our proposal to permit certain immediate generic 
substitutions did not apply to biological products. Rather, Sec.  
423.120(b)(5)(iv)(A) permits these substitutions only when the new 
generic drug is therapeutically equivalent (as defined in Sec.  
423.100). That said, as interchangeable biological products become 
available, we would consider whether additional regulatory changes 
would be warranted.
    Comment: Noting that we stated we did not believe that the 
transition policy is appropriate for immediate generic substitutions, a 
commenter requested that we clarify whether it would apply for generic 
substitutions that do not meet the requirements of Sec.  
423.120(b)(5)(iv). A commenter queried as to whether the exemption of 
immediate generic substitutions from the transition fill policy would 
only apply to those drugs removed based on this process, and whether 
new enrollees joining a plan during the plan year would be subject to 
the same requirement.
    Response: We proposed to revise only the transition policy as 
regards immediate generic substitutions: under Sec.  
423.120(b)(3)(i)(B), the transition requirements do not apply for Part 
D sponsors that make such substitutions consistent with Sec.  
423.120(b)(5)(iv). The proposed regulation would not otherwise change 
the application of transition policy to other instances.
    Comment: Commenters pointed out that there was no need to permit 
immediate generic substitutions because Part D sponsors had numerous 
other UM controls such as step therapy and prior authorization, which 
they had successfully used to influence beneficiary choices. A 
commenter also opined that there was no reason to eliminate advance 
notice aside from reducing plan administrative tasks because Part D 
sponsors know about the timing of generic releases well in advance.
    Response: We agree that Part D sponsors currently have other UM 
controls that provide some flexibility; however, our goal is to provide 
even more flexibility in addition to those tools to promote and permit 
Part D sponsors to switch to generic drugs even sooner after their 
release date than we currently permit. And a central goal of this 
proposal is to reduce plan administrative tasks--albeit while still 
maintaining beneficiary protections.
    Comment: A commenter recommended that CMS codify the requirement 
that plans must give direct notice to affected beneficiaries by the end 
of the month in which the changes take place. Another commenter 
recommended that we require Part D sponsors to notify enrollees of 
generic substitutions as soon as they occur including providing notice 
at the point of sale (POS) before prescriptions are filled if that is 
the earliest opportunity for notice.
    Response: While we appreciate the idea, we do not currently have in 
place the means to provide this POS notice and believe implementing 
such a system would create a burden at odds with our goal of promoting 
more flexible formulary administration because of the resources and 
time required to build such a system. We also decline at this time to 
set hard deadlines because we believe that Part D sponsors have an 
incentive to provide beneficiaries with information on specific changes 
timely and, as noted earlier may, for generic substitutions that take 
place before the start of the next plan year, be able to provide notice 
before the change takes effect.
    Comment: A few commenters suggested that if we were to still 
require direct notice, that we remove information from the direct 
notice about how to request exceptions to avoid creating the 
expectation that enrollees could qualify for exceptions without trying 
generics. Another commenter voiced concern about the fact that our 
preamble stated that enrollees could not be certain that they ``would 
be better served by taking no medication'' unless they first tried the 
generic equivalent. Noting that there could be sound medical reasons to 
believe alternatives could cause particular beneficiaries harm, the 
commenter requested that we clarify that no appeals standard applied to 
require an enrollee to try an alternative drug before an exception can 
or must be provided.
    Response: We disagree that retaining information in the direct 
notice about the availability of the exceptions process would create 
undue expectations, particularly given that this information already is 
required at Sec.  423.120(b)(5)(i)(E), which we did not propose to 
change. In discussing our reasoning for proposing to permit immediate 
generic substitutions without requiring that the plan provide a 
transition fill, we did not intend to suggest that the standards for 
exceptions (which are described in the statute) would change. 
Exceptions will remain subject to the standards set forth in Sec.  
423.578.
    Comment: Suggesting that the direct notice repeats information 
already included in the EOB, a few commenters recommended that we 
remove the direct notice requirement for immediate generic 
substitutions. Another commenter requested that we confirm that we 
meant to apply the EOB timeframe when we encouraged Part D sponsors to 
provide retrospective direct notice of immediate generic substitutions 
``no later than by the end of the month after which the change becomes 
effective'' such that a Part D sponsor making a generic substitution 
effective in April would have until the end of May to notify affected 
members.
    Response: We did not propose to remove the direct notice 
requirements for specified generic substitutions but rather to remove 
the requirement that they be provided in advance of the permitted 
substitutions, and we therefore decline to eliminate them now. We did 
not intend to apply the EOB timeframe specified at Sec.  423.128(e)(6) 
to the requirement to provide direct retrospective notice of immediate 
generic substitutions, but if Part D sponsors wish to include the 
direct retrospective notice in their EOBs, they could do so. Those so 
choosing must make sure the EOB

[[Page 16610]]

contents comply with the notice requirements of Sec.  
423.120(b)(5)(iv). (We intend to update our model EOB in this regard.) 
And while we currently intend to permit this flexibility, we continue 
to encourage Part D sponsors to provide direct and other notice as soon 
as possible. For instance, we see no impediments to providing online 
notice of changes if not before or on the effective date of a generic 
substitution, at least shortly thereafter.
    Comment: A commenter noted that we had not proposed any 
requirements for Part D sponsors to update the content of formularies 
available to beneficiaries after making immediate generic 
substitutions.
    Response: While we did not propose new beneficiary communications 
requirements specific to the content of formularies posted online or 
provided on paper, current regulations continue to apply. However, as 
noted in our proposed rule, we decided not to require a regulatory 
deadline because we anticipate that Part D sponsors will be promptly 
updating the formularies posted online. At a minimum, Part D sponsors 
must comply with Sec.  423.128(d)(2)(ii) which still requires Part D 
sponsors to update their websites to reflect their current formularies 
at least monthly. Additionally, we are finalizing revisions to Sec.  
423.128(d)(2)(iii), which currently requires Part D sponsors to provide 
notice online to current and prospective enrollees regarding midyear 
formulary changes, to require that the notice be provided timely under 
Sec.  423.120(b)(5).We further believe that Part D sponsors would have 
the incentive to update their formularies timely to encourage 
beneficiaries to move to the newly substituted drugs and to avoid 
beneficiary confusion.
    Comment: A commenter queried: if a generic is released in October 
and the brand is on both the current year and the next year's 
formulary, could the sponsor remove the brand from following year's 
formulary, but leave the current year formulary unchanged?
    Response: A Part D sponsor that met all requirements of Sec.  
423.120(b)(5)(iv) would be able to substitute the generic for the brand 
drug in the following year's formulary, but leave the brand drug on the 
current year's formulary. Alternatively, the Part D sponsor could 
substitute the generic for the brand name drug on both formularies at 
the same time, consistent with the requirements we are finalizing in 
this rule for immediate generic substitutions.
    Comment: Characterizing the proposal as a major policy change, a 
commenter recommended that we test its implementation before shortening 
the notice provisions. Another commenter requested that we monitor the 
rate at which formularies are updated to reflect changes in coverage.
    Response: We do not believe it is necessary for us to test 
implementation of this provision. We do not view it as a major policy 
change because, as discussed above, we have permitted Part D sponsors 
to make midyear formulary changes for some time and are merely changing 
the timing of implementation and notice rather than the kinds of 
changes that can be made. Lastly, given that we currently audit 
formulary administration and maintain a robust formulary monitoring 
program, we do not see the need to implement a model test.
    Comment: A few commenters were concerned that generic drugs would 
not be timely added to our Formulary Reference File (FRF). We also 
received detailed questions regarding how the proposed change would 
affect operations related to matters such as pharmacy information 
systems, HPMS negative change requests, and FRF release dates and UM 
criteria.
    Response: Part D sponsors are permitted to cover drugs that are not 
on the FRF, so long as they have determined that the drug product meets 
the definition of a Part D drug. We appreciated the operational 
inquiries and plan to update guidance as appropriate.
c. Issue Related to Other Midyear Formulary Changes
    Comment: Commenters responding to another section of the proposed 
rule, II.A.13 Changes to the Days' Supply Required by the Part D 
Transition Process, suggested that referring to a ``month's'' supply 
rather than a ``30 day'' transition supply was vague and could create 
uncertainty for Part D sponsors and confuse beneficiaries--possibly 
leading to interruptions in coverage.
    Response: To address the concerns, in finalizing the change to our 
transition requirements, we plan to revise Sec.  423.120(b)(3)(iii) to 
refer to ``an approved month's supply'' rather than ``a month's 
supply'' so that it would be clear that we mean a month's supply in 
accordance with the month's supply approved in a plan's bid. (See 
section II.A.13 Transition Process for more discussion of that issue.) 
In our provision on notice of formulary changes, we originally proposed 
to revise the days' supply referenced in formulary changes to conform 
to that of the proposed transition provision, from a 30 day supply to a 
month's supply in Sec.  423.120(b)(5)(i)(B). However, for the same 
reasons we noted with respect to the transition requirements, we 
believe it is appropriate to conform the reference to supply for notice 
of formulary changes to that used for transition supply. Therefore, in 
Sec.  423.120(b)(5)(i)(B) rather than requiring ``a month's supply'' at 
the time an affected enrollee requests a refill of the Part D drug, we 
will require ``an approved month's supply''.
    After consideration of the public comments received, we are 
finalizing our proposal on expedited substitutions of certain generics 
and other midyear formulary changes with the following modification as 
discussed and as follows:
    In Sec.  423.120(b)(3)(i)(B), we are removing an extraneous 
reference to ``and (b)(6)''.
    In Sec.  423.120(b)(5)(i)(B), we are removing the phrase ``a 
month's supply'' and adding in its place the phrase ``an approved 
month's supply''.
    In Sec.  423.120(b)(5)(iv)(A), we are removing the phrase 
``formulary with the same or lower cost-sharing'' and adding in its 
place the phrase ``formulary on the same or lower-cost-sharing tier''.
    In Sec.  423.120(b)(5)(iv)(B), we are removing the phrase 
``requested CMS formulary approval'' and replacing it with ``submitted 
its initial formulary for CMS approval''.
15. Similar Treatment of Biosimilar and Interchangeable Biological 
Products and Generic Drugs for Purposes of LIS Cost Sharing
    Similar to the introduction of an abbreviated approval pathway for 
generic drugs provided by the Hatch-Waxman Amendments in 1984 to spur 
more competition through quicker approvals and introduction of lower 
cost therapeutic alternatives in the marketplace, Congress enacted the 
``Biologics Price Competition and Innovation Act of 2009'' to balance 
innovation and consumer interests. Specifically, section 7002 of the 
PPACA amended section 351 of the Public Health Service Act (PHSA) (42 
U.S.C. 262), adding a subsection (k) to create an abbreviated licensure 
pathway for biological products that are demonstrated to be either 
``biosimilar'' to or ``interchangeable'' with a United States Food and 
Drug Administration (FDA) licensed reference biological product. 
According to the FDA, ``a biosimilar product is a biological product 
that is approved based on a showing that it is highly similar to an 
FDA-approved biological product, known as a reference product, and has

[[Page 16611]]

no clinically meaningful differences in terms of safety and 
effectiveness from the reference product. Only minor differences in 
clinically inactive components are allowable in biosimilar products.'' 
However, ``an interchangeable biological product is biosimilar to an 
FDA-approved reference product and meets additional standards for 
interchangeability. An interchangeable biological product may be 
substituted for the reference product by a pharmacist without the 
intervention of the health care provider who prescribed the reference 
product.'' (See http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/) Biological products 
approved under section 351 of the PHSA (42 U.S.C. 262) are listed in 
the FDA's Purple Book: Lists of Licensed Biological Products with 
Reference Product Exclusivity and Biosimilarity or Interchangeability 
Evaluations, available at http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/ucm411418.htm. Part D plan sponsors are also encouraged to monitor the 
FDA's website for new biologics license application (BLA) approvals at 
http://www.accessdata.fda.gov/scripts/cder/drugsatfda/index.cfm?fuseaction=Reports.ReportsMenu.
    Sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-iii) of the Act 
specify lower Part D maximum copayments for individuals who do not 
receive the low-income subsidy (LIS) and are in the catastrophic phase 
of the benefit and for LIS-eligible individuals, respectively, for 
generic drugs and preferred drugs that are multiple source drugs (as 
defined in section 1927(k)(7)(A)(i) of the Act) than are available for 
all other Part D drugs. Because biosimilar and interchangeable 
biological products do not meet the section 1927(k)(7) definition of a 
multiple source drug or the CMS definition of a generic drug at Sec.  
423.4, biosimilar and interchangeable biological products are subject 
to the higher Part D maximum copayments for non-LIS Part D enrollees in 
the catastrophic portion of the benefit and for LIS eligible 
individuals in any phase of the benefit applicable to all other Part D 
drugs. Consequently, treatment of biosimilar and interchangeable 
biological products, which are generally high-cost, specialty drugs, as 
brands for the purposes of LIS cost sharing and non-LIS catastrophic 
cost sharing generated a great deal confusion and concern for Part D 
plan sponsors and advocates alike, and CMS received numerous requests 
to redefine generic drug at Sec.  423.4. Advocates expressed concerns 
that LIS enrollees were required to pay the higher brand copayment for 
biosimilar biological products. Stakeholders who contacted us asserted 
treatment of biosimilar biological products as brands for purposes of 
LIS cost-sharing creates a disincentive for LIS enrollees to choose 
lower cost alternatives. Some of these stakeholders also expressed 
similar concerns for non-LIS enrollees in the catastrophic portion of 
the benefit.
    Consequently, we proposed to revise the definition of generic drug 
at Sec.  423.4 to include biosimilar and interchangeable biological 
products approved under section 351(k) of the PHSA solely for purposes 
of cost-sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-
iii) of the Act by:
    (1) Redesignating the existing definition as paragraph (i), and
    (2) Adding a new paragraph (ii) to state ``for purposes of cost 
sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D) of the Act 
only, a biological product for which an application under section 
351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is 
approved.''
    We solicited comment on this proposed change to the definition of 
generic drug at Sec.  423.4.
    We received the following comments and our response follows:
    Comment: A number of commenters expressed strong support for CMS' 
proposed change to the definition of generic drug, noting that it would 
spur greater price competition, expand access for Part D enrollees, 
help restrain growth in Part D program spending, reduce costs when 
medically appropriate, and improve the overall biologic marketplace. 
Some commenters expressed support of this proposal, contending that it 
would help non-LIS Part D enrollees in the coverage gap.
    Response: We thank the commenters for their support. With regard to 
commenters who suggested the proposal would be beneficial to non-LIS 
Part D enrollees in the coverage gap since, we believe these commenters 
may have misunderstood our proposal. Our proposal would affect non-LIS 
cost sharing for enrollees who are in the catastrophic portion of the 
benefit. Further discussion of CMS treatment of biosimilar and 
interchangeable biological products during the coverage gap is 
discussed later in this comment and response.
    Comment: A commenter requested clarification on whether CMS' usage 
of the term ``biosimilar'' means ``non-interchangeable biosimilar.''
    Response: When CMS uses the term ``biosimilar'' or ``biosimilar 
biological product,'' we mean a biological product licensed under 
section 351(k) of the PHSA that has not been determined by the FDA to 
be ``interchangeable'' to the reference biological product. However, 
biological products licensed under section 351(k) of the PHSA are 
inclusive of biosimilar and interchangeable biological products. 
Consequently, because we proposed to apply our policy with regard to 
cost-sharing to biological products licensed under section 351(k) of 
the PHSA, it would apply equally to biosimilar and interchangeable 
biological products.
    Comment: A commenter contended that CMS' proposal would require 
Part D plan sponsors to place biosimilar and interchangeable biological 
products within their generic tier. In contrast, other commenters 
suggested that because biosimilar biological products are usually 
specialty drugs, the proposal was not necessary because most Part D 
plan sponsors' formularies include a specialty tier. Other commenters 
suggested that CMS should work with Part D plan sponsors to address 
cost-sharing issues through their benefit design and cost-sharing 
structure. Finally, another commenter suggested that our policy would 
diminish the ability of Part D plans and manufacturers to negotiate.
    Response: We disagree with commenters that the proposal would 
require plan sponsors to place biosimilar or interchangeable biological 
products on certain tiers. While biosimilar biological products are 
likely to be placed on a Part D plan sponsor's specialty tier, we 
explicitly stated in our proposed regulatory language that this change 
only applies to statutory cost-sharing for certain Part D enrollees and 
would not impact which tier Part D plan sponsors place a particular 
biosimilar biological product. Moreover, since the start of the Part D 
program, with few exceptions, CMS has generally left tiering 
assignments to Part D plan sponsors. Consequently, because the 
provision applies to statutory cost-sharing and not tier placement, we 
do not believe that Part D plan sponsors' or manufacturers' ability to 
negotiate preferable terms for formulary placement will be impacted.
    Comment: A commenter suggested CMS exceeded its statutory authority 
to redefine generic drug in the manner we proposed, adding that the 
terms ``multiple source drug'' and ``generic

[[Page 16612]]

drug'' have specific meanings in the Part D statute that do not 
encompass biosimilar biological products.
    Response: We disagree with the commenter. While the statute defines 
multiple-source drug at section 1927(k)(7) of the Act, the statute does 
not include a definition of generic drug for purposes of the Part D 
program. Consequently, through notice and comment rulemaking, CMS 
finalized the definition of generic drug at Sec.  423.4 in the January 
2005 final rule (70 FR 4194).
    Comment: Although a number of commenters thanked us for resolving 
confusion relative to all LIS Part D enrollee cost-sharing and non-LIS 
catastrophic cost sharing, commenters opposed to our proposal uniformly 
contended that our policy would create confusion in the marketplace on 
a number of grounds, which they added could ultimately jeopardize Part 
D enrollee safety.
    Commenters contended that our proposal inappropriately equates 
biosimilar biological products with generic drugs for purposes of their 
scientific and clinical applications. Commenters stated that biosimilar 
biological products are not interchangeable like therapeutically 
equivalent generic drugs, and that CMS should make clear that generic 
drugs are different from biosimilar biological products. A commenter 
requested clarification on how our proposal affects formulary 
requirements, specifically with regard to the requirement at Sec.  
423.120(b)(2)(i) that each formulary have at least two Part D drugs for 
each category and class submitted on the formulary file (except as 
noted in Sec.  423.120(b)(2)(ii)).
    In addition, commenters contended that it would contribute to 
confusion regarding variable rules for treatment of biosimilar 
biological products across CMS programs, including case-by-case 
determinations for formulary requirements, treatment as branded 
products for the Medicaid Drug Rebate program, treatment as multi-
source generic drugs for purposes of Medicare Part B, and similar to 
generic drugs, treatment as non-applicable drugs for purposes of the 
Coverage Gap Discount Program (Discount Program). Similarly, a number 
of commenters urged CMS to categorize biosimilar and interchangeable 
biological products approved under section 351(k) of the PHSA as 
applicable drugs for purposes of the Discount Program. Some commenters 
suggested that CMS could accomplish this by using waiver authority 
under section 1860D-14A(g)(2)(A) to exempt biosimilar and 
interchangeable biological products from their statutory treatment as 
non-applicable drugs under the Discount Program.
    Response: We stated in the proposed rule that this change would 
only apply to cost-sharing for certain Part D enrollees. This policy 
does not change or supersede our existing formulary requirements for 
biosimilar biological products that we addressed in the March 30, 2015 
Health Plan Management (HPMS) memorandum entitled ``Part D Requirements 
for Biosimilar Follow-On Biological Products'' which is available on 
the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/HPMS/HPMS-Memos-Archive-Annual-Items/SysHPMS-Memo-Archive-%E2%80%93-2015-Qtr1.html.
    We appreciate the concerns about biosimilar and interchangeable 
biological products being treated differently under different CMS 
programs. However, to serve different purposes, CMS' statutory 
authority treats biosimilar and interchangeable biological products 
differently across CMS programs. Since the proposed rule was published, 
CMS notes that section 53113 of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123) amended section 1860D-14A(g)(2)(A) of the Act to sunset the 
exclusion of biological products approved under section 351(k) of the 
PHSA from the Discount Program. We further note that since the proposed 
rule was published, Medicare Part B policy changes for biosimilar 
biological products that were discussed in the CY 2018 PFS final rule 
(see CMS-1676-F, 82 FR 52976) took effect January 1, 2018. As a result, 
newly approved biosimilar biological products with a common reference 
product will no longer be grouped into the same Medicare Part B billing 
code. These two policy changes, when taken together with the policy we 
are finalizing now provide for greater alignment of biological products 
approved under section 351(k) of the PHSA across CMS programs and 
encourage the use and development of these products.
    Although we attempted to clarify that we were not equating 
biosimilar and interchangeable biological products to generic drugs for 
any other purpose than cost sharing intended to encourage utilization 
of lower-cost alternatives, we are persuaded by comments that our 
proposed approach to include biosimilar and interchangeable biological 
products in our definition of generic drug still could be 
misinterpreted and create further confusion about the broader treatment 
of biosimilar and interchangeable biological products under the Part D 
program. In consideration of comments regarding the definition of 
generic drug, we are not finalizing our proposal at Sec.  423.4 to 
revise the definition of generic drug.
    Section 1860D-14(a)(1)(D)(ii)-(iii) of the Act establishes that the 
copayment amount cannot exceed the higher statutory threshold ($3 in 
2006 as increased by Consumer Price Index percentage increase) for 
drugs other than generic drugs or preferred drugs that are multiple 
source (as defined in 1927(k)(7)(A)(i) of the Act). However, the 
statute does not prohibit CMS from establishing a lower maximum copay 
amount for other drugs since, by definition, such copay would not 
exceed the statutory maximum. By establishing a lower maximum copay for 
biosimilar and interchangeable biological products that is equivalent 
to the lower copay required for generic and preferred multiple source 
drugs, CMS achieves the same goal intended by our original proposal, 
but now does so without the confusion that would result from defining 
biosimilar and interchangeable biological products as generic drugs for 
this limited purpose. We believe this approach should avoid any 
confusion that would cause stakeholders to misinterpret this policy as 
applying more broadly.
    While the statutory authority under section 1860D-14(a)(1)(D)(ii)-
(iii) of the Act establishes a maximum statutory copay for LIS 
enrollees, thereby providing us with the flexibility to establish a 
lower copay amount for biosimilar and interchangeable biological 
products, section 1860D-2(b)(4) of the Act specifies a copayment 
threshold that is ``equal to'' the higher amount for any other drug 
that is not a generic drug or preferred drug that is a multiple source 
drug (as defined under section 1927(k)(7)(A)(i) of the Act). Therefore, 
CMS does not have the flexibility to establish a lower copay amount for 
biosimilar and interchangeable biological products for non-LIS 
enrollees that have reached the catastrophic phase of the benefit. 
Nevertheless, as illustrated by some comments below, we do not 
anticipate this will have any practical effect on non-LIS cost sharing 
in the catastrophic phase because such enrollees are required to pay 
cost sharing that is equal to the greater of the applicable copay 
amount ($3.35/$8.35 in 2018) or 5 percent. Given the high cost of 
biological products in general, the non-LIS catastrophic cost sharing 
will almost certainly be 5 percent.
    In light of the comments, we now believe the better approach to 
encourage

[[Page 16613]]

utilization of biosimilar and interchangeable biological products via 
LIS cost sharing is to include them in Sec.  423.782(a)(2)(iii)(A) and 
Sec.  423.782(b)(3). The revised paragraphs will specify the following:
     A copayment amount of not more than $1 for a generic drug, 
biological product for which an application under section 351(k) of the 
Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred 
drugs that are multiple source (as defined under section 
1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for 
years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A) 
for the percentage increase in the Consumer Price Index, rounded to the 
nearest multiple of 5 cents or 10 cents, respectively; or''
     For covered Part D drugs above the out-of-pocket limit 
(under Sec.  423.104(d)(5)(iii)) in 2006, copayments not to exceed $2 
for a generic drug, biological product for which an application under 
section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is 
approved, or preferred drugs that are multiple source drugs (as defined 
under section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug. 
For years beginning in 2007, the amounts specified in section (b)(3) 
for the previous years increased by the annual percentage increase in 
average per capita aggregate expenditures for covered Part D drugs, 
rounded to the nearest multiple of 5 cents, respectively.
    Comment: Some commenters suggested that the cost-sharing reduction 
for LIS Part D enrollees ($1.25 versus $3.35 for dually eligible 
enrollees and $3.70 versus $8.35 for non-dually eligible enrollees) is 
insignificant and does not warrant the change.
    Response: We disagree. While differences in cost-sharing of $1.10, 
and $4.65 may be inconsequential to many Part D enrollees, we believe 
this change promotes medication adherence in the LIS enrollee 
population, in addition to encouraging the use of biosimilar and 
interchangeable biological products in the market.
    Comment: A commenter urged CMS to work with the FDA to create 
different approval pathways for biosimilar and interchangeable 
biological products. The commenter added approval of biosimilar and 
interchangeable biological products is fundamentally different from the 
FDA's distinct approval pathways for other types of drugs and 
biological products which address only one category of follow-on 
product compared to the reference product (for example, section 
505(b)(1) versus section 505(b)(2) of the Federal Food, Drug, and 
Cosmetic Act (FDCA), New Drug Application (NDA) versus Abbreviated New 
Drug Application (ANDA), whereas the approval pathway under section 
351(k) of the PHSA addresses two different categories of biological 
products (that is, biosimilar and interchangeable biological products) 
when compared to a reference biological product approved under section 
351(a) of the PHSA, and all three categories of biological products 
receive a Biologics License Application (BLA) approval.
    Commenters stated that biological products currently approved 
through the pathway described by section 505(b)(2) of the FDCA are 
currently treated as applicable drugs for purposes of the Discount 
Program. In March 2020, an approved application for a biological 
product under section 505 of the FDCA will be deemed to be a license 
for the biological product under section 351 of the PHSA. FDA has not 
yet described whether an approved application for a biological product 
under section 505 of the FDCA will be deemed to be a license for the 
biological product under section 351(a) or 351(k) of the PHSA. As such, 
some commenters urged CMS to preemptively classify biological products 
approved under section 505(b)(2) of the FDCA as non-applicable drugs 
for the Discount Program, while other commenters urged CMS to take the 
position that they will remain classified as applicable drugs for 
purposes of the Discount Program.
    Finally, some commenters suggested that, similar to generic 
utilization rate, CMS should begin to actively monitor usage of follow-
on biological products across CMS programs by setting up appropriate 
infrastructure as a policy priority for the Agency.
    Response: We thank the commenters. While we may consider them for 
future policy making, these comments are beyond the scope of this rule. 
However, CMS notes that since the proposed rule was published, section 
53113 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) amended 
section 1860D-14A(g)(2)(A) of the Act to sunset the exclusion of 
biological products licensed under section 351(k) of the PHSA from the 
Discount Program.
    In summary, in consideration of the comments received, we are not 
finalizing our proposal to revise the definition of generic drug. 
Instead, in this final rule, we are revising Sec.  
423.782(a)(2)(iii)(A) and Sec.  423.782(b)(3) by adding ``, biological 
products for which an application under section 351(k) of the Public 
Health Service Act (42 U.S.C. 262(k)) is approved,''.
16. Eliminating the Requirement To Provide PDP Enhanced Alternative 
(EA) to EA Plan Offerings With Meaningful Differences (Sec.  423.265)
    CMS has the authority under section 1857(e)(1) of the Act, 
incorporated for Part D by section 1860D-12(b)(3)(D) of the Act, to 
establish additional contract terms that CMS finds ``necessary and 
appropriate,'' as well as authority under section 1860D-11(d)(2)(B) of 
the Act to propose regulations imposing ``reasonable minimum 
standards'' for Part D sponsors. Using this authority we issued 
regulations in 2010, at Sec.  423.265(b)(2), that established our 
authority to deny bids that are not meaningfully different from other 
bids submitted by the same organization in the same service area. Our 
application of this authority has eliminated PDP sponsors' ability to 
offer more than one basic plan in a PDP region since all basic plan 
benefit packages must be actuarially equivalent to the standard benefit 
structure discussed in the statute, and in guidance we have also 
limited to two the number of enhanced alternative plans that we approve 
for a single PDP sponsor in a PDP region.
    One of the underlying principles in the establishment of the 
Medicare Part D prescription drug benefit is that both market 
competition and the flexibility provided to Part D sponsors in the 
statute will result in the offering of a broad array of cost effective 
prescription drug coverage options for Medicare beneficiaries. We wish 
to continue the trend of using transparency, flexibility, program 
simplification, and innovation to transform the MA and Part D programs 
for Medicare enrollees to have options that fit their individual health 
needs. To that end, we have reconsidered the position that two enhanced 
plans offered by a plan sponsor could vary with respect to their plan 
characteristics and benefit design, such that they might appeal to 
different subsets of Medicare enrollees, but in the end have similar 
out-of-pocket beneficiary costs. We do however continue to believe that 
a meaningful difference, that takes into account out-of-pocket costs, 
be maintained between basic and enhanced plans to ensure that there is 
a meaningful value for beneficiaries given the supplemental Part D 
premium associated with the enhanced plans. Therefore, effective for 
Contract Year (CY) 2019, we proposed to revise the Part D regulations 
at Sec.  423.265(b)(2) to eliminate the PDP EA to EA meaningful 
difference requirement, while maintaining the requirement that enhanced 
plans be meaningfully different from the basic

[[Page 16614]]

plan offered by a plan sponsor in a service area. We believe these 
proposed revisions will help us accomplish the balance we wish to 
strike with respect to encouraging competition and plan flexibilities 
while still providing PDP choices to beneficiaries that represent 
meaningful choices in benefit packages.
    We also announced our future intent to reexamine, with the benefit 
of additional information, how we define the meaningful difference 
requirement between basic and enhanced plans offered by a PDP sponsor 
within a service area. We recognize that the current OOPC methodology 
is only one method for evaluating whether the differences between plan 
offerings are meaningful, and will investigate whether the current OOPC 
model or an alternative methodology should be used to evaluate 
meaningful differences between PDP offerings. While we intend to 
conduct our own analyses, we also solicited stakeholder input on how to 
define meaningful difference as it applies to basic and enhanced Part D 
plans. CMS will continue to provide guidance for basic and enhanced 
plan offering requirements in the annual Call Letter.
    We received the following comments and our responses follow:
    Comment: Commenters opposed to this proposal expressed concerns 
that Medicare beneficiaries will be faced with even more plans to 
choose from, resulting in ``choice overload'' and beneficiary confusion 
when trying to distinguish between plan options. Several of these 
commenters were at least encouraged to see that CMS intends to maintain 
the meaningful difference requirement between basic and enhanced PDP 
offerings.
    Response: We appreciate the concerns raised about potential 
beneficiary confusion. We believe that the tools CMS provides for 
beneficiaries to make decisions (for example, Medicare Plan Finder, 
Medicare and You Handbook, 1-800-MEDICARE) and our enforcement of 
communication and marketing requirements address these concerns. The 
current approach to define meaningful difference is based on a model 
tool that takes into account a cohort of Medicare beneficiaries in 
aggregate and is intended to identify a meaningful value between plan 
comparisons based on that cohort's utilization run through a plan's 
benefit design and formulary. An individual beneficiary's utilization 
may not mirror that of the model cohort, so we continue to strongly 
encourage individual beneficiaries to use the Medicare Plan Finder tool 
and the many other resources that CMS makes available to assist them in 
finding the plan that best meets their unique needs. In proposing to 
maintain the meaningful difference requirement between basic and 
enhanced plans, our intent is to ensure that a meaningful value 
continues to exist for those beneficiaries choosing an enhanced plan 
that has an associated supplemental Part D premium. We anticipate 
another positive outcome of this proposed change will be a potential 
reduction in Part D supplemental premiums, as sponsors will not be 
forced to make benefit changes to comply with a requirement that 
ultimately results in higher supplemental premiums for beneficiaries.
    Comment: A subset of commenters who opposed this proposal stated 
that a quantifiable measure provides valuable information to 
beneficiaries and ensures substantial differences between plans. While 
the commenters believe using the OOPC model as the only measure of 
meaningful difference is a flawed approach, they believe CMS should 
maintain the requirement between enhanced plans but allow plan sponsors 
to seek waivers by providing alternate evidence of meaningful 
difference if the meaningful difference threshold is not met.
    Response: We disagree with the commenter's suggested approach to 
maintain the PDP EA to EA meaningful difference requirement but allow 
sponsors to seek waivers if the meaningful difference threshold(s) are 
not met. The use of a waiver or justification process introduces 
additional subjectivity into the benefit review.
    Comment: A commenter stated that it is crucial that CMS continue to 
limit plan sponsors to offering no more than two EA plans in each 
region.
    Response: We agree and wish to clarify that the proposed changes to 
the meaningful difference requirement for PDP plan offerings does not 
change CMS's intention to use our bid negotiation authority to limit to 
three, the number of plans approved within a PDP region by a parent 
organization (one required basic plan and no more than two enhanced 
plans). The potential increase in plan offerings that we discuss takes 
into account only the addition of a second enhanced plan by any parent 
organization that currently offers a single enhanced plan within a PDP 
region. It is CMS's intent to maintain a balance with respect to 
encouraging competition and plan flexibilities while still providing 
PDP choices to beneficiaries that represent meaningful choices in 
benefit packages. To the extent that CMS finds the elimination of the 
EA to EA meaningful difference requirement results in potential 
beneficiary confusion or harm, CMS will consider reinstating the 
requirement between EA plans through future rulemaking or consider 
taking some other action.
    Comment: A commenter urged CMS to share data that suggests the 
meaningful difference requirement is in fact preventing innovation by 
plans.
    Response: We do not have data that this requirement specifically 
hinders innovation. However, for a number of years we have heard from 
plan sponsors their belief that this requirement is arbitrary, 
potentially harmful to the competitive Part D market, and results in 
plans that are becoming increasingly unaffordable for many 
beneficiaries. This proposal aims to combat these concerns, with the 
added benefit of allowing for flexibility in benefit design.
    Comment: Several commenters supported the proposal to eliminate the 
PDP EA to EA meaningful difference requirement, applauding CMS efforts 
to increase innovation and plan flexibilities. In addition to those 
flexibilities, a few commenters noted the potential this proposal has 
to decrease total Part D premiums, due to lower supplemental Part D 
premiums associated with enhanced plans not needing to meet this 
requirement, and to increase beneficiaries' choice of coverage options. 
Comments supportive of the proposed change suggested it will eliminate 
unneeded disruption and provide more plan stability to beneficiaries 
currently enrolled in second EA plans, as sponsors will not be forced 
to adjust benefits to comply with changing requirements.
    Response: We appreciate the comments received in support of this 
proposal to eliminate the PDP EA to EA meaningful difference 
requirement. The closure of the coverage gap has introduced challenges 
for plan sponsors to meet the EA to EA meaningful difference 
requirement, as the provision of additional coverage in the gap has 
been a key approach sponsors have used to meet the meaningful 
difference requirement. We agree with the concern that continued 
enforcement of this requirement could result in disruption and 
instability for beneficiaries as it may necessitate Part D sponsors to 
significantly modify their benefit structure from year-to-year or even 
require them to non-renew a plan if unable to attain the out-of-pocket 
threshold that has been set annually. The proposal could also result in 
plan offerings that are more competitive and market-driven within a 
less restrictive regulatory framework. We agree that

[[Page 16615]]

elimination of this requirement may offer plan sponsors additional 
flexibilities in terms of their plan benefit designs. As previously 
noted in the NPRM, we agree that it is possible for plan sponsors to 
offer unique benefit designs that attract different subsets of Medicare 
beneficiaries but have similar estimated out-of-pocket costs. Arguably, 
an EA plan that completely waives the deductible could be attractive to 
one subset of enrollees, while another EA plan that instead offers 
reduced cost-sharing or provides supplemental coverage of drugs that 
are excluded under Part D might attract a different subset of 
enrollees. While providing for different benefit designs, these two 
plans could have similar estimated out-of-pocket costs.
    Comment: Some commenters urged the agency to eliminate the 
meaningful difference test in all instances for PDPs (that is, also 
between basic to EA plans), and pursue a suitable replacement that 
would provide more meaningful decision support for beneficiaries during 
open enrollment. A commenter claimed that the meaningful difference 
requirement may stifle innovation, reduce consumer choice, and impose 
additional costs on plans. The commenter further asserted that the 
current OOPC difference between basic and EA PDP offerings remains too 
high, which may make enhanced plans very expensive and cost prohibitive 
for many beneficiaries, further limiting consumer choice.
    Response: We disagree with completely eliminating the meaningful 
difference requirement across all PDP offerings. While we support the 
flexibility and competition that this proposal to eliminate the 
meaningful difference requirement between enhanced plans will 
stimulate, we believe it is important to balance this with a need to 
ensure beneficiaries have a meaningful choice between plans, especially 
when some of those plans include an additional supplemental Part D 
premium. Eliminating the meaningful difference requirements between the 
basic and enhanced plan offerings could result in sponsor behaviors 
that adversely affect the program, such as the creation of enhanced 
plan options designed solely to engage in risk segmentation. Healthier 
beneficiaries may be increasingly incentivized to enroll in enhanced 
plans, leading to a higher risk pool in the basic plans. This could 
ultimately result in increasing bids and premiums for basic plans, 
given that LIS auto-enrollment is limited to basic plans. The fact that 
CMS pays most of the premium for LIS beneficiaries means that total 
government cost would likely increase.
    Comment: A commenter suggested that the meaningful difference rules 
also be relaxed in the case of acquisitions/mergers so that multiple 
plan options can exist between the two merged entities for multiple 
years.
    Response: Current regulations at Sec.  423.272(b)(3)(ii) offer this 
flexibility, providing a two-year transition period following a new 
acquisition before a PDP plan sponsor will be held to the requirement 
that its bids be substantially different. Revisions to Sec.  
423.272(b)(3)(ii) will be made to better align the requirements with 
the proposed change for Sec.  423.265(b)(2), specifically to remove the 
reference that benefit package or plan costs being substantially 
different from ANY (emphasis added) other bid submitted by the same 
Part D sponsor and to refer the reader to Sec.  423.265(b)(2) that will 
reflect the provision change which identifies which plan benefit types 
are expected to be substantially different.
    Comment: A commenter interpreted the proposal as rescinding CMS's 
policy that a second EA plan provide brand gap coverage, and noted that 
removing this policy also has the capability to increase plan 
flexibilities and increase beneficiary plan choice.
    Response: As part of our application of the meaningful difference 
requirement to stand-alone PDPs, CMS reviewed additional enhanced PDPs 
within a service area with the expectation that they represent a higher 
value than the first enhanced plan and as such would include additional 
gap cost-sharing reductions for at least 10 percent of their formulary 
brand drugs. We confirm that elimination of the meaningful difference 
requirement between PDP enhanced plans would also eliminate this 
expectation.
    Comment: With respect to our request for stakeholder input on how 
to redefine the meaningful difference requirement between basic and 
enhanced PDP offerings, we received very few detailed proposals, but 
many responses encouraged transparency and stakeholder input on any 
contemplated changes. With respect to potential modifications to the 
current OOPC model, two suggestions were received. One recommendation 
is for CMS to reconsider the approach to have non-formulary drugs be 
priced at the cost-sharing of the Part D sponsor's formulary exceptions 
tier rather than priced at the retail cash price. The other recommended 
that CMS set a consistent and reasonable OOPC differential that does 
not change from year to year, suggesting that this approach would 
afford sponsors more predictability and could reduce unnecessary 
changes, while still ensuring beneficiaries receive meaningful value.
    With respect to potential alternatives to the OOPC model, two 
suggestions were received. One recommendation was for CMS to establish 
a minimum actuarial difference between basic and enhanced plans (for 
example, 20 percent average member cost-sharing for an enhanced plan 
vs. 25 percent average member cost-sharing for a basic plan). Another 
commenter suggested that CMS allow plans to demonstrate a meaningful 
difference between plan offerings by providing an actuarial attestation 
as to their actuarial value differences, while allowing actuaries to 
use a utilization profile that is representative of their population 
for quantifying differences in actuarial value (without the impact of 
selection effect or risk score differential).
    Response: We appreciate the thoughtful input on how to redefine 
what constitutes a meaningful difference between basic and enhanced PDP 
offerings. Both the recommendations to improve upon the OOPC model and 
the alternative approaches will be carefully considered by CMS as we 
evaluate options moving forward. For CY 2019, CMS intends to maintain 
the current methodology to set a basic to enhanced OOPC differential 
threshold.
    Comment: A significant number of commenters strongly believe that 
significant efforts need to be made to ensure beneficiary information 
tools are enhanced to improve upon the plan election experience. Some 
commenters recommended research focusing on understanding beneficiary 
perceptions of value and meaningful difference. Several commenters 
provided specific recommendations to enhance the Medicare Plan Finder 
(MPF); one such suggestion is to add flags within the system to 
highlight benefit enhancements, such as reduced cost sharing, 
additional coverage in the gap, reduced deductible or coverage of 
excluded Part D drugs. Another commenter suggested CMS modify the MPF 
to allow beneficiaries to filter and/or sort plans by enhanced features 
(for example, ``Show me plans in my area that offer no deductible''). 
Some commenters suggested that if CMS intends to finalize this 
proposal, it be postponed until those enhancements to beneficiary tools 
have been implemented.
    Response: These recommendations are outside of the scope of this 
final rule provision. We do however agree with the need for clear and 
complete

[[Page 16616]]

information and intend to continue improving the MPF to make it as user 
friendly as possible. We encourage third party organizations that 
support beneficiaries in their decision-making to take advantage of 
existing resources (for example, public use files (PUF) available for 
the Part D program).
    After consideration of all of the comments received, we are 
finalizing our proposal to revise Sec.  423.265(b)(2) to eliminate the 
PDP EA to EA meaningful difference requirement, while maintaining the 
requirement that enhanced plans be meaningfully different from the 
basic plan offered by a plan sponsor in a service area. We are also 
modifying the language of Sec.  423.272(b)(3)(ii) to make the 
provisions governing the meaningful difference transition period 
following a plan sponsor acquisition consistent with the new 
requirements stated at Sec.  423.265(b)(2).
17. Request for Information Regarding the Application of Manufacturer 
Rebates and Pharmacy Price Concessions to Drug Prices at the Point of 
Sale
    In this proposed rule, we solicited comment on potential policy 
approaches for applying some manufacturer rebates and all pharmacy 
price concessions to drug prices at point of sale under Part D. We 
received over 1,400 responses to this request for information. We thank 
the commenters for the thought, time, and effort that went into 
developing these detailed responses. We will carefully review all input 
received from stakeholders as we continue our efforts to meaningfully 
address rising prescription drug costs for beneficiaries.
    We further note that the President's Fiscal Year 2019 Budget 
included a proposal similar to the point-of-sale rebate policy 
considered in this request for information. As explained in the request 
for information, we believe the statute provides us with discretion to 
require that Part D sponsors apply at least a portion of the 
manufacturer rebates and all pharmacy price concessions they receive to 
the price of a Part D drug at the point of sale. Any new requirements 
regarding the application of rebates at the point of sale would be 
proposed through notice and comment rulemaking, in the future.

B. Improving the CMS Customer Experience

1. Restoration of the Medicare Advantage Open Enrollment Period 
(Sec. Sec.  422.60, 422.62, 422.68, 423.38 and 423.40)
    Section 17005 of the 21st Century Cures Act (the Cures Act) 
modified section 1851(e)(2) of the Act to eliminate the Medicare 
Advantage Disenrollment Period (MADP) and to establish, beginning in 
2019, a new open enrollment period (OEP) to be held from January 1 to 
March 31 each year. Subject to the MA plan being open to enrollees as 
provided under Sec.  422.60(a)(2), the OEP allows individuals enrolled 
in an MA plan to make a one-time election during the first 3 months of 
the calendar year to switch MA plans or to disenroll from an MA plan 
and obtain coverage through Original Medicare. In addition, this 
provision affords newly MA-eligible individuals (those with Part A and 
Part B) who enroll in a MA plan, the opportunity to also make a one-
time election to change MA plans or drop MA coverage and obtain 
Original Medicare.
    Pursuant to the statute, newly eligible MA individuals can only use 
the OEP during the first 3 months in which they have both Part A and 
Part B. Under existing regulation (Sec.  422.68(c)), enrollments made 
using the OEP are effective the first of the month following the month 
in which the enrollment is made. In addition, an MA organization has 
the option under section 1851(e)(6) of the Act to voluntarily close one 
or more of its MA plans to OEP enrollment requests. If an MA plan is 
closed for OEP enrollments, then it is closed to all individuals in the 
entire plan service area who are making OEP enrollment requests. All MA 
plans must accept OEP disenrollment requests, regardless of whether or 
not it is open for enrollment.
    The OEP, as enacted, permits changes to Part D coverage for 
individuals who, prior to the change in election during the OEP, were 
enrolled in an MA plan. As eligibility to use the OEP is available only 
for MA enrollees, the ability to make changes to Part D coverage is 
limited to any individual who uses the OEP; however, the OEP does not 
provide enrollment rights to any individual who is not enrolled in an 
MA plan during the applicable 3-month period. Individuals who use the 
OEP to make changes to their MA coverage may also enroll in or 
disenroll from Part D coverage. For example, an individual enrolled in 
an MA-PD plan may use the OEP to switch to: (1) Another MA-PD plan; (2) 
an MA-only plan; or (3) Original Medicare with or without a PDP. The 
OEP will also allow an individual enrolled in an MA-only plan to switch 
to--(1) another MA-only plan; (2) an MA-PD plan; or (3) Original 
Medicare with or without a PDP. However, this enrollment period does 
not allow for Part D changes for individuals enrolled in Original 
Medicare, including those with enrollment in stand-alone PDPs.
    In addition, individuals with enrollment in Original Medicare or 
other Medicare health plan types, such as cost plans, are not able use 
the OEP to enroll in an MA plan, regardless of whether or not they have 
Part D. Furthermore, unsolicited marketing is prohibited by statute 
during this period, and is discussed in section II.B.5.c of this final 
rule.
    To implement the changes required by the Cures Act, we proposed the 
following revisions:
     Amend current Sec.  422.62(a)(5) and add Sec. Sec.  
423.38(e) and 423.40(e) to establish the new OEP starting 2019 and the 
corresponding limited Part D enrollment period.
     Amend Sec. Sec.  422.62(a)(7), 422.68(f), 423.38(d) and 
423.40(d) to end the MADP at the end of 2018.
     Remove current regulations in Sec.  422.62(a)(3) and 
(a)(4) that outline historical OEPs which are no longer in effect and 
renumber the enrollment periods which follow them. As such, we proposed 
that Sec.  422.62(a)(5) become Sec.  422.62(a)(3), and both Sec. Sec.  
422.62(a)(6) and (a)(7) be renumbered as Sec. Sec.  422.62(a)(4) and 
(a)(5), respectively.
     Amend new redesignated paragraph (a)(4) (proposed to be 
redesignated from (a)(6)) to make two technical changes to replace the 
phrase ``as defined by CMS'' with ``as defined in Sec.  422.2'' and to 
capitalize ``original Medicare.''
     As discussed in section II.B.5.c, Sec. Sec.  422.2268 and 
423.2268 will be revised to prohibit marketing to MA enrollees during 
the OEP.
     Conforming technical edits to update cross references in 
Sec. Sec.  422.60(a)(2), 422.62(a)(5)(iii), and 422.68(c).
    We received the following comments and our response follows:
    Comment: We received a number of comments supporting the 
restoration of the Medicare Advantage OEP. Commenters noted that the 
OEP reflects the Administration's focus on consumer choice and 
competition, provides additional time for beneficiaries to make health 
plan decisions and ensures beneficiaries are enrolled in plans that 
best suits their needs and budgets, by affording an opportunity to make 
a change from the MA plan previously

[[Page 16617]]

chosen during the Annual Election Period (AEP).
    Response: We thank commentators for their support of this proposal.
    Comment: A couple of commenters requested clarification on the 
ability to use other election periods such as the 5-Star special 
enrollment period (SEP) or the SEP for individuals in the Program of 
All-inclusive Care for the Elderly (PACE) to make changes outside the 
OEP.
    Response: We note that the OEP has no effect on other valid 
election periods, except that the Cures Act eliminates the Medicare 
Advantage Disenrollment Period (MADP) after 2018. The OEP is an 
additional statutory enrollment period that allows individuals enrolled 
in an MA plan to make a one-time election during the first 3 months of 
the calendar year.
    Comment: A commenter asked whether the OEP was applicable to cost 
plans. The commenter further questioned if CMS intends to revise the 
current SEP to enroll in a PDP, or provide a corresponding SEP for cost 
plans with Part D to accept new enrollees.
    Response: An individual enrolled in a cost plan may not use the OEP 
to make a change. Additionally, an individual cannot use the OEP to 
disenroll from an MA plan and enroll in a cost plan. As noted in 
statute, an individual is solely able to switch from one MA plan to 
another MA plan or from an MA plan to Original Medicare. As part of 
that enrollment change, the individual may add, drop, or keep Part D 
coverage; those enrolling in Original Medicare may enroll in a stand-
alone Part D plan. If an individual makes a change from an MA plan to 
Original Medicare during the OEP, he or she can enroll in a cost plan 
if the cost plan is open for enrollment. They would not, however, be 
able to enroll in Part D without another valid enrollment period. Open 
enrollment periods for cost plans are outlined in Sec.  417.426.
    Comment: A commenter wanted to understand whether the OEP allowed 
only for changes from one contract to another, or if it allowed for 
changes within a contract (that is, from one Plan Benefit Package (PBP) 
to another PBP).
    Response: The OEP permits individuals to switch to any MA plan in 
which they are eligible to join (that is, lives in service area, etc.). 
This includes switches from PBP to PBP, contract to contract under a MA 
organization, or from one MA organization to another.
    Comment: We received a comment suggesting CMS exercise 
discretionary authority and expand the MA OEP to all beneficiaries.
    Response: While the MA OEP, as enacted, provides a 3-month window 
for beneficiaries in an MA plan to make a change in their enrollment if 
they are dissatisfied with their choice during the AEP, we do not have 
the discretionary authority of expanding the scope to all 
beneficiaries. In our view, broadening the scope of this election 
period would contradict the intent of the statute.
    Comment: A few commenters recommended CMS conduct robust 
beneficiary outreach and education on the OEP to ensure beneficiaries 
are aware of the enrollment changes, including their rights and 
responsibilities, in order to mitigate confusion and potential 
disruption.
    Response: We appreciate the comments. We will take the necessary 
steps to ensure that beneficiaries are made aware of the new OEP and 
its timeframe. We believe that through education efforts directed to 
beneficiaries by CMS and plans (that is, 2019 Medicare & You handbook, 
Medicare.gov, member materials), beneficiaries will have sufficient 
notification to make their health plan decisions.
    Comment: A couple commenters requested CMS issue clear expectations 
and guidance as soon as possible to detail the changes afforded by the 
MA OEP, including the ability to make changes to Part D coverage, and 
the effective dates for OEP elections to adequately prepare MA 
organizations for enrollees.
    Response: CMS will issue guidance in a timely manner to provide 
plans time to implement. However, the discussion and regulation changes 
in this final rule should provide plans the information and guidance 
necessary to proceed and implement changes during the OEP.
    Comment: Several commenters opposed the establishment of the OEP 
and requested narrowing those eligible to use it. A commenter indicated 
narrowing the eligibility requirements would prevent ``gaming'' (that 
is, allowing MA beneficiaries, already enrolled in an MA plan for the 
previous year, to use a secondary open enrollment period). Many 
commenters suggested limiting its use to only permit individuals to 
return to their prior plan or Original Medicare. They indicate such 
change would allow enrollees to ``correct'' coverage decisions with 
which the beneficiary may not be satisfied and would reduce the 
opportunity for agents to market coverage that may not meet the needs 
of the beneficiary. The commenters believe that allowing beneficiaries 
who are already enrolled in an MA plan for the entire previous year to 
use a secondary open enrollment period could result in inappropriate 
``gaming''; the commenters urged CMS to consider a more narrow 
interpretation of the eligibility and/or mechanisms to monitor abuse of 
this provision.
    Response: We thank the commenters for their suggestions. We 
disagree with narrowing the scope of those eligible or limiting the MA 
choices in the OEP to only the previous MA plan in which the 
beneficiary was enrolled, as the individual may have different needs 
than the previous year. In our view, Congress intended for enrollees to 
be able to select any MA plan that best meets their needs or select 
Original Medicare, if they prefer that healthcare option. Further, we 
believe the statute is clear on the scope of choices permitted to 
enrollees during the OEP.
    Comment: A commenter opposed the restoration of the MA OEP to all 
MA enrollees. The commenter believed it would create a new special 
enrollment period for all MA-PD beneficiaries and offer an unlimited 
ability to switch MA plans or disenroll from MA, which conflicts with 
the proposed changes to limit SEP enrollments for those dually-eligible 
for Medicare and Medicaid. The commenter recommended CMS consider 
retaining the current MADP and offer the OEP through March 31 of each 
year solely for dually eligible individuals in conjunction with the 
proposed rule to limit Part D SEP for the remainder of the year.
    Response: Under the new statutory provisions in section 1851(e)(2), 
individuals enrolled in MA plans may make one change during the first 3 
months of the plan year to switch to another MA plan or select Original 
Medicare coverage. Individuals that use the OEP to make a change would 
generally retain that coverage for the remainder of the coverage year 
unless they qualify for another SEP. While we appreciate the 
commenter's suggestions, the statute mandates the establishment of the 
OEP and the discontinuation of the MADP.
    Comment: Another commenter opposed the law change from the MADP to 
the OEP but acknowledged the requirements are set forth by Congress. 
The commenter asked for clarification on who is eligible for the new 
OEP and how this change affects a new enrollment in Part D if the 
beneficiary returns to FFS. The commenter further requested CMS clarify 
whether the OEP is open to all MA enrollees, including those who had an 
opportunity to make changes during the previous AEP and elected not to.
    Response: The OEP is open to all MA enrollees, even if they chose 
to remain

[[Page 16618]]

in their current MA plan during the previous AEP. As noted earlier, 
during the OEP, individuals who disenroll from an MA plan and obtain 
coverage through Original Medicare may also enroll in stand-alone Part 
D coverage.
    Comment: A few commenters stated that the OEP could inadvertently 
degrade the value of MA plans with 5-Star ratings as high-quality MA 
organizations are granted year-round enrollment. A commenter asked CMS 
to identify a comparable opportunity for plans achieving 5-Star status 
in order to maintain incentives for these plans.
    Response: While the new MA OEP provides individuals with an 
opportunity to switch to another MA plan, it is limited to, the first 3 
months of the year (or of the enrollment for newly eligible 
beneficiaries), unlike the year-round special enrollment period 
available to enroll in a 5-Star MA plan. As discussed in section 
II.B.5.c, plans may not conduct targeted marketing to those in the OEP. 
We believe that the benefit provided to a 5-Star MA plan--that they may 
market and enroll the rest of the year--is a valuable incentive to 
achieve a high quality rating. We note that the MA OEP provides an 
opportunity for individuals who may not be satisfied with their plan 
choice for the new year, regardless of the plan's rating, to find 
another MA plan that meets their needs or to select original Medicare. 
CMS continues to encourage plans to strive for the highest quality.
    Comment: We received numerous comments related to the ability to 
conduct marketing during the OEP.
    Response: We appreciate and acknowledge all comments. A discussion 
related to marketing during the OEP and responses to those specific 
comments can be found in section II.B.5.c.
    We thank all the commenters for their feedback and suggestions. We 
note that there was a technical error in the language proposed in Sec.  
423.40(e). This new section should have been titled ``PDP enrollment 
period to coordinate with the MA open enrollment period.'' We have made 
this correction in this final rule.
    After review and consideration of all comments on the restoration 
of the OEP, we are finalizing the revisions to Sec. Sec.  422.60(a), 
422.62(a), 422.68, 423.38(d) and (e), and 423.40(d) and (e) as 
proposed, with the technical modification noted above.
2. Reducing the Burden of the Compliance Program Training Requirements 
(Sec. Sec.  422.503 and 423.504)
    Sections 1857(e) and 1860D-12(b)(3)(D) of the Act specify that 
contracts with MA organizations and Part D sponsors shall contain other 
terms and conditions that the Secretary may find necessary and 
appropriate. We have previously established that all Part C and Part D 
sponsoring organizations must have the necessary administrative and 
management arrangements to have an effective compliance program, as 
reflected in Sec.  422.503(b)(4)(vi) and Sec.  423.504(b)(4)(vi). 
Effective compliance programs are those designed and implemented to 
prevent, detect and correct Medicare non-compliance, fraud waste and 
abuse and address improper conduct in a timely and well-documented 
manner. Medicare non-compliance may include inaccurate and untimely 
payment or delivery of items or medical services, complaints from 
providers and enrollees, illegal activities and unethical behavior. 
While there is no ``one-size fits all'' program for every sponsoring 
organization, there are seven core elements that must exist to have an 
effective compliance program that is tailored to the organization's 
unique operations, compliance risks, resources and circumstances. These 
7 core elements are codified in current regulations at Sec. Sec.  
422.503(b)(4)(vi)(A) through (G) and 423.504(b)(4)(vi)(A) through (G). 
One of the 7 core elements is training and education. Current 
regulations require compliance programs for Part C and Part D 
sponsoring organizations that must include training and education 
between the compliance officer and the sponsoring organization's 
employees, senior administrators, governing body members as well as 
their first-tier, downstream and related entities (FDRs).
    FDRs have long complained of the burden of having to complete 
multiple sponsoring organizations' compliance trainings and the amount 
of time it can take away from providing care to beneficiaries. In the 
May 23, 2014 final rule (79 FR 29853 and 29855)), we attempted to 
resolve this burden by developing our own web-based standardized 
compliance program training modules and establishing, that FDRs were 
required to complete the CMS training to satisfy the compliance 
training requirement. This requirement was applicable beginning January 
1, 2016. The mandatory use of the CMS training by FDRs was designed to 
ensure that FDRs will only have to complete the compliance training 
once on an annual basis. The FDRs could then provide the certificate of 
completion to all Part C and Part D sponsoring organizations they 
served, hence, eliminating the prior duplication of effort that so many 
FDRs stated was creating a huge burden on their operation.
    However, after implementation of the new CMS training, we continued 
to receive hundreds of inquiries and concerns from sponsors and FDRs 
regarding their difficulties with adopting CMS' compliance training to 
satisfy the compliance program training requirement. While CMS' 
previous market research indicated that this provision would mitigate 
the problems raised by FDRs who held contracts with multiple sponsors 
and who completed repetitive trainings for each sponsor with which they 
contract, in practice, we learned that the problems persisted. Many 
sponsoring organizations required their own plan specific training, as 
part of their contract with their FDRs, in addition to the CMS 
training. Also, sponsoring organizations were unwilling to identify 
which critical positions within the FDR were subject to the training 
requirement. As a result, FDRs were still being subjected to multiple 
sponsors' specific training programs. Furthermore, stakeholders have 
indicated that the requirement has increased the burden for various 
Part C and Part D program stakeholders, including hospitals, suppliers, 
health care providers, pharmacists and physicians, all of which may be 
considered FDRs. Since the implementation of the mandatory CMS-
developed training has not achieved the efficiencies intended, we 
proposed to delete the provisions from the Part C and Part D 
regulations that require use of the CMS-developed compliance training.
    In addition, we believe that the broader requirement that 
sponsoring organizations provide compliance training to their FDRs no 
longer promotes the effective and efficient administration of the 
Medicare Advantage and Prescription Drug programs. Part C and Part D 
sponsoring organizations have evolved greatly and their compliance 
program operations and systems are well established. Many of these 
organizations have developed effective training and learning models to 
communicate compliance expectations and ensure that employees and FDRs 
are aware of the Medicare program requirements. Also, the attention 
focused on compliance program effectiveness by CMS' Part C and Part D 
program audits has further encouraged sponsors to continually improve 
their compliance operations.
    CMS does not generally interfere in private contractual matters 
between sponsoring organizations and their FDRs. Pursuant to Sec.  
422.504(i)(1) and Sec.  423.505(i)(1), sponsoring organizations

[[Page 16619]]

maintain ultimate responsibility for adhering to and otherwise fully 
complying with all terms and conditions of its contract with CMS. Our 
contract is with the sponsoring organization, and sponsoring 
organizations are ultimately responsible for compliance with all 
applicable statutes, regulations and sub-regulatory guidance, 
regardless of who is performing the work. Additionally, delegated 
entities range in size, structure, risks, staffing, functions, and 
contractual arrangements which necessitates the sponsoring organization 
have discretion in its method of oversight to ensure compliance with 
program requirements. This may be accomplished through routine 
monitoring and implementing corrective action, which may include 
training or retraining as appropriate, when non-compliance or 
misconduct is identified.
    We will continue to hold sponsoring organizations accountable for 
the failures of their FDRs to comply with Medicare program 
requirements, even with these proposed changes. Existing regulations at 
Sec.  422.503(b)(4)(vi) and Sec.  423.504(b)(4)(vi) require that every 
sponsoring organization's contract must specify that FDRs must comply 
with all applicable federal laws, regulations and CMS instructions. 
Additionally, we audit sponsoring organizations' compliance programs 
when we conduct routine program audits, and our audit process includes 
evaluations of sponsoring organizations' monitoring and auditing of 
their FDRs as well as FDR oversight. Our audits also evaluate formulary 
administration and processing of coverage and appeal requests in the 
Part C and Part D programs. FDRs often perform some or all of these 
functions for sponsoring organizations, so if they are non-compliant, 
it will come to light during the program audit and the sponsoring 
organization will ultimately be held responsible for the FDRs' failure 
to comply with program requirements.
    Given that compliance programs are very well established and have 
grown more sophisticated since their inception, coupled with 
stakeholders' desire to perform well on audit, the CMS training 
requirement is not the driver of performance improvement or FDR 
compliance with key CMS requirements. Given this accumulated program 
experience and the growing sophistication of stakeholders' compliance 
operations, as well as our continuing requirements on sponsoring 
organizations for oversight and monitoring of FDRs, we no longer 
believe requiring sponsoring organizations to impose the compliance 
training requirements on their FDRs is the best way to achieve 
compliance. Specifically, we proposed to remove the phrases in 
paragraphs (C)(1) and (C)(2) that refer to first tier, downstream and 
related entities and remove the paragraphs specific to FDR training at 
Sec. Sec.  422.503(b)(4)(vi)(C)(2) and (3) and 423.504(b)(4)(vi)(C)(3) 
and (4). Those proposed changes include restructuring Sec.  
422.503(b)(4)(vi)(C)(1) (with the proposed revisions) into two 
paragraphs (that is, paragraph (C)(1) and (C)(2)) to separate the scope 
of the compliance training from the frequency with which the training 
must occur, as these are two distinct requirements. With this proposed 
revision, the organization of Sec.  422.503(b)(4)(vi)(C) will mirror 
that of Sec.  423.504(b)(4)(vi)(C). Further, we proposed to revise the 
text in Sec.  423.504(b)(4)(vi)(C)(2) to track the phrasing in Sec.  
422.503(b)(4)(vi)(C)(2), as reorganized. The technical changes were 
designed to eliminate any potential ambiguity created by different 
phrasing in what we intend to be identical requirements as to the 
timing requirements for the training. We also believe these technical 
changes make the requirements easier to understand.
    Compliance training will still be required of MA and Part D 
sponsoring organizations, their employees, chief executives or senior 
administrators, managers, and governing body members. The primary goal 
of deleting the compliance training requirement for FDRs is to reduce 
administrative burden on both sponsors and FDRs, but also allow MA and 
Part D sponsoring organizations the flexibility to oversee FDR 
compliance with Medicare Part C and D requirements in a way that is 
tailored to its organization, operations, resources and risks. We 
believe sponsoring organizations are in the best position to determine 
the most effective way to monitor and track compliance and fraud, waste 
and abuse (FWA) responsibilities and contractual obligations amongst 
their FDRs. We requested comments concerning these proposals and 
suggestions on other options we could implement to accomplish the 
desired outcome.
    We received the following comments and our response follows:
    Comment: A few commenters stated the current training requirements 
and process meet their needs because they had already invested 
resources to develop efficient systems for ensuring their FDRs 
satisfied the general compliance requirement. They expressed that 
eliminating the CMS compliance training for FDRs will add new 
administrative burden on sponsors to ensure CMS standards are met and 
holding FDRs accountable will be more challenging.
    Response: While we recognize some sponsors were able to utilize our 
training requirements as a means to ensure FDRs at least completed 
compliance training, we believe by deleting this requirement we are 
affording sponsors much greater flexibility in designing an FDR 
oversight structure that best suits the needs of each sponsors' 
organization. Sponsoring organizations are free to choose the most 
effective and efficient method for ensuring that all their FDRs are in 
compliance with all applicable laws, rules, and regulations, and 
Medicare requirements (for example, training, attestations, reports, 
routine monitoring and auditing, and/or corrective actions). 
Additionally, sponsoring organizations should continue to evaluate 
their contractual arrangements with their FDRs to ensure appropriate 
levels of accountability for compliance are in place.
    Comment: Several commenters suggested that FDRs should be held to 
the same compliance program training requirements as sponsoring 
organizations.
    Response: CMS does not interfere in private contractual matters or 
written arrangements between sponsoring organizations and their FDRs. 
CMS' contract is with the sponsoring organization and sponsoring 
organizations are ultimately accountable for the performance of their 
FDRs compliance with applicable statutes, regulations and standards. 
Sponsoring organizations are required to develop an effective oversight 
structure for their FDRs. As part of routine monitoring activities, 
sponsoring organizations should evaluate whether regulatory 
requirements and accountability measures are included in contractual 
agreements. The burden of monitoring and documenting an FDR's 
compliance with applicable standards ultimately rests with the 
sponsoring organization.
    Comment: A few commenters stated that sponsoring organizations and 
FDRs may incorrectly interpret the new proposed rule to mean compliance 
training is not required. A commenter suggested that not requiring 
training will lead to confusion, reduce provider compliance and 
increase compliance risks across the Medicare program.
    Response: This change eliminates the CMS requirement for FDRs to 
complete compliance program training. However, FDRs are still required 
to comply with all statutes, regulations, and CMS program specific 
requirements. CMS recognizes that sponsoring organizations may continue 
to have requirements in

[[Page 16620]]

their contracts setting out their expectations with respect to 
oversight of FDRs' compliance with statutes, regulations, and CMS 
program specific requirements. If sponsors choose to include a 
compliance program training requirement as part of their contract with 
FDRs that is a private contractual matter between the FDR and 
sponsoring organization. Such training would not be prohibited by these 
rules as amended.
    Comment: A commenter suggested that CMS create user-friendly 
compliance training content for FDRs.
    Response: CMS did develop a generalized training that was available 
24/7 on the CMS Medicare Learning Network Learning Management System. 
The overwhelming feedback we received was that the training content did 
not alleviate the large administrative burden associated with 
compliance training and, that the training was too generic to be 
helpful to most FDRs.
    Comment: A commenter requested clarification on whether FDRs who 
are enrolled in Medicare will continue to receive the ``deemed'' status 
for FWA training. Commenters also requested clarification on who was 
deemed for purposes of the FWA training requirement (for example, 
whether deeming was limited to just the hospital participating in 
Medicare FFS or extends to their hospital's employees)?
    Response: This provision eliminates Parts C and D compliance 
program and FWA training for FDRs. Therefore, deeming of these training 
requirements is no longer relevant for the Part C and D program.
    Comment: A commenter questioned how this provision affects PACE 
organizations.
    Response: This provision does not directly apply to all PACE 
organizations. However, PACE organizations that offer qualified 
prescription benefits are Part D plan sponsors that must comply Part D 
requirements and regulations in part 423 unless they are waived.
    Comment: A commenter questioned how this provision affects agents 
and brokers.
    Response: If FDRs, agents and brokers would be subject to the 
contract requirements sponsoring organizations have for FDRs. As this 
final rule would remove a specific CMS compliance training requirement 
for FDRs, agents and brokers would not be required to take this 
specific CMS compliance training either. Other regulations and 
requirements applicable to agents and brokers are outside of the scope 
of this proposal.
    Comment: Several commenters inquired if FDR oversight requirements 
and expectations will be updated in Chapter 9 of Pub. 100-18, Medicare 
Prescription Drug Manual, and Chapter 21 of Pub. 100-16 of the Medicare 
Advantage Manual immediately following the implementation of the final 
rule. The commenters suggested that feedback should be solicited from 
sponsoring organizations to assist with providing industry best 
practices for communicating and monitoring FDR compliance.
    Response: We always welcome feedback from sponsoring organizations 
and FDRs with respect to improving our sub-regulatory guidance and 
communicating expectations. We acknowledge that policy, technology and 
Medicare business practices continue to evolve. We intend to update 
Chapters 9 and 21, respectively and issue a draft to obtain public 
comment.
    Comment: Multiple commenters recommended that CMS continue to 
maintain the CMS standardized training modules and make them available 
on the CMS Medicare Learning Network (MLN) as an acceptable form of 
training for situations where sponsoring organizations choose to 
require FDRs to complete compliance training or where FDRs found the 
CMS training to be more convenient to complete. Additionally, 
commenters stated that CMS should increase the MLN's tracking and 
reporting capabilities (that is to create a searchable database to 
confirm who has taken the training and reports that could be issued to 
sponsoring organizations) for compliance training requirements.
    Response: CMS is unable, at this time, to provide the capacity for 
a searchable database of users who have completed training or a system 
that would allow reports to be sent to sponsoring organizations 
regarding the training status of various FDR organizations. We also 
believe that leaving the compliance training on the MLN website could 
create confusion among sponsoring organizations and FDRs. Therefore, 
this training course may be removed from the Medicare Learning Network 
website.
    Comment: Sponsoring organizations, FDRs (that is, hospitals, 
physicians, pharmacies and health care providers) and other 
stakeholders wrote in support of the provision, agreeing that it would 
significantly reduce burden on FDRs.
    Response: We thank the commenters for their support.
    After careful consideration of all the comments received, we are 
finalizing this proposal without modification.
3. Medicare Advantage Plan Minimum Enrollment Waiver (Sec.  422.514(b))
    Under section 1857(b) of the Act, CMS may not enter into a contract 
with an MA organization unless the organization complies with the 
minimum enrollment requirement. Under the basic rule at Sec.  
422.514(a), to provide health care benefits under the MA program, MA 
organizations must demonstrate that they have the capability to enroll 
at least 5,000 individuals, and provider sponsored organizations (PSOs) 
must demonstrate that they have the capability to enroll at least 1,500 
individuals. If an MA organization intends to offer health care 
benefits outside urbanized areas as defined in Sec.  422.62(f), then 
the minimum enrollment level is reduced to 1,500 for MA organizations 
and to 500 for PSOs. The statute permits CMS to waive this requirement 
in the first 3 years of the contract for an MA contract applicant. We 
previously codified this authority at Sec.  422.514(b) and limited it 
to circumstances where the MA contract applicant is capable of 
administering and managing an MA contract and is able to manage the 
level of risk required under the contract. 63 FR 35099, June 26, 1998, 
as amended at 65 FR 40328, June 29, 2000. We proposed to revise Sec.  
422.514 regarding the minimum enrollment requirements to improve 
program efficiencies.
    Currently, MA organizations, including PSOs, with an approved 
minimum enrollment waiver for their first contract year have the option 
to resubmit the waiver request for CMS in the second and third year of 
the contract. In conjunction with the waiver request, the MA 
organization must continue to demonstrate the organization's ability to 
operate and demonstrate that it has and uses an effective marketing and 
enrollment system, despite continued failure to meet the minimum 
enrollment requirement. In addition, the current regulation limits our 
authority to grant the waiver in the third year to situations where the 
MA organization has at least attained a projected number of enrollees 
in the second year. Since 2012, we have not received any request for 
waiver to the minimum enrollment requirement during the second and 
third year of the contract. Rather, we only received minimum enrollment 
waiver requests through the initial application process.
    We believe the current requirement to resubmit the waiver in the 
second and third year of the contract is unnecessary. The statute does 
not require a reevaluation of the minimum enrollment standard each year 
and

[[Page 16621]]

plainly authorizes a waiver ``during the first 3 contract years with 
respect to an organization.'' The current minimum enrollment waiver 
review in the initial MA contract application provides CMS the 
confidence to determine whether an MA organization may operate for the 
first 3 years of the contract without meeting the minimum enrollment 
requirement. CMS currently monitors low enrollment at the plan benefit 
package (PBP) level. We note that a similar provision in current Sec.  
422.506(b)(1)(iv) permits CMS to terminate an MA contract (or terminate 
a specific plan benefit package) if the MA plan fails to maintain a 
sufficient number of enrollees to establish that it is a viable 
independent plan option for existing or new enrollees. In addition, 
compliance with Sec.  422.514 is required under Sec.  422.503(a)(13). 
If an organization's PBP does not achieve and maintain enrollment 
levels in accordance with the applicable low and minimum enrollment 
policies in existing regulations, CMS may move to terminate the PBP 
absent an approved waiver from CMS during the first 3 years of the 
contract pursuant to Sec.  422.510(a).
    We proposed to only review and approve waivers through the MA 
application process as opposed to the current practice of reviewing 
annual requests and, potentially, requests from existing MA 
organizations that fail to maintain enrollment in the second or third 
year of operation.
    We proposed to revise the text in Sec.  422.514(b) to provide that 
the waiver of the minimum enrollment requirement may be in effect for 
the first 3 years of the contract. Further, we proposed to delete all 
references to ``MA organizations'' in paragraph (b) to reflect our 
proposal that we will only review and approve waiver requests during 
the contract application process.
    We also proposed to delete current paragraphs (b)(2) and (b)(3) in 
their entirety to remove the requirement for MA organizations to submit 
an additional minimum enrollment waiver annually for the second and 
third years of the contract. Finally, the proposed text also included 
technical changes to redesignate paragraphs (b)(1)(i) through (iii) as 
(b)(1) through (3), consistent with regulation style requirements of 
the Office of the Federal Register.
    We received the following comments, and our response follows:
    Comment: We received several comments, primarily from plans, 
expressing support for the proposal to remove the requirement for MA 
organizations to resubmit the minimum enrollment waiver requests during 
the second and third year of a contract. These commenters also support 
the proposal to approve the minimum enrollment waiver for 3 years in 
year 1 of the contract as part of the initial application process. 
Several commenters noted that the requirement to resubmit the waiver in 
the second and third year of the contract created unnecessary burden on 
organizations, with a commenter noting that organizations already 
demonstrate their capacity to bear risk during the waiver submission 
for the first year in the application process. A commenter expressed 
support for this proposal because an approved 3-year minimum enrollment 
waiver encourages entry into the MA-PD market from smaller 
organizations that require more time to ramp up their operations.
    Response: We appreciate the commenters' support for the proposal 
and agree that removing the resubmission of the minimum enrollment 
waiver in the second and third year of the contract eliminates an 
unnecessary burden for organizations. We also agree that approving the 
minimum enrollment waiver for organizations for a 3-year period 
supports market entry for smaller organizations.
    Comment: A commenter expressed concern that the proposal to remove 
the requirement to resubmit the minimum enrollment waiver in the second 
and third years of the contract would discourage MA organizations from 
engaging in market strategies to increase their enrollment.
    Response: We disagree that removing our requirement to re-submit 
the minimum enrollment waiver in the second and third year of the 
contract would discourage organizations from increasing their market 
share in the MA-PD program. As stated in our proposal, CMS monitors low 
enrollment at the plan benefit package (PBP) level. After the third 
contract year, the provision at Sec.  422.506(b)(1)(iv) allows CMS to 
terminate an MA contract (or terminate a specific plan benefit package) 
if the MA plan fails to maintain a sufficient number of enrollees to 
establish that it is a viable independent plan option for existing or 
new enrollees. We believe that our ability to terminate the contract or 
plan for low enrollment after the third year provides sufficient 
incentive for new organizations to market and grow their enrollment 
during years 2 and 3 of the contract.
    Comment: A commenter expressed concern that low contract enrollment 
can impact an organization's financial capability and that financial 
problems could result in disruption of services to their enrollees. The 
commenter recommended that CMS retain the existing policy to review 
waiver requests on an annual basis to protect beneficiaries from 
disruptions in their care.
    Response: We disagree that the review of waiver requests on an 
basis is necessary to monitor the financial stability of organizations 
or compliance with other MA requirements (such as benefit 
administration). CMS requires that organizations meet all applicable 
state licensure and fiscal soundness requirements or compliance with 
other MA requirements (such as benefit administration). According to 
Sec. Sec.  422.504(a)(14) and 422.516(a)(5), CMS monitors an 
organization's compliance with fiscal soundness requirements, primarily 
through independently audited annual financial statements and other 
required documentation for the legal entity. All organizations must 
submit audited annual financial statements and some organizations may 
also be required or notified by CMS to submit quarterly financial 
statements in certain situations. CMS believes that these requirements 
provide adequate assurance that organizations contracting with CMS are 
financially viable while protecting Medicare beneficiaries from 
disrupted access to care.
    After considering these comments, we are finalizing the revisions 
to Sec.  422.514 as proposed.
4. Revisions to Timing and Method of Disclosure Requirements 
(Sec. Sec.  417.427, 422.111 and 423.128)
    As provided in sections 1852(c)(1) and 1860D-4(a)(1)(A) of the Act, 
Medicare Advantage (MA) organizations and Part D sponsors must disclose 
detailed information about the plans they offer to their enrollees ``at 
the time of enrollment and at least annually thereafter.'' The Act 
specifies this detailed information in section 1852(c)(1), and also 
requires additional information specific to the Part D benefit under 
section 1860D-4(a)(1)(B). Under Sec.  422.111(a)(3), CMS requires MA 
plans to disclose this information to each enrollee ``at the time of 
enrollment and at least annually thereafter, 15 days before the annual 
election period.'' A similar rule for Part D sponsors is found at Sec.  
423.128(a)(3). Additionally, Sec.  417.427 directs 1876 cost plans to 
follow the disclosure requirements in Sec.  422.111 and Sec.  423.128. 
In making the changes proposed here, we will also affect 1876 cost 
plans, though it is not necessary to change the regulatory text at 
Sec.  417.427.

[[Page 16622]]

    Sections 422.111(b) and 423.128(b) of the Part C and Part D program 
regulations, respectively, describe the information plans must 
disclose. The content listed in Sec.  422.111(b) is found in an MA 
plan's Evidence of Coverage (EOC) and provider directory. The content 
listed in Sec.  422.111(b) is found in an MA plan's Evidence of 
Coverage (EOC), summary of benefits, and provider directory. The 
content listed in Sec.  423.128(b) is found in a Part D Sponsor's EOC, 
summary of benefits, formulary, and pharmacy directory. Section 
422.111(h)(2)(i) requires that plans must maintain an internet website 
that contains the information listed in Sec.  422.111(b) and also 
states that posting the EOC, Summary of Benefits, and provider network 
information on the plan's website ``does not relieve the MA 
organization of its responsibility under Sec.  422.111(a) to provide 
hard copies to enrollees.''
    We initially proposed, and will finalize, two changes to the 
disclosure requirements, but will also finalize a third change in 
response to comments received. First, we proposed to revise Sec. Sec.  
422.111(a)(3) and 423.128(a)(3) to require MA organizations and Part D 
sponsors to provide the information in paragraph (b) of the respective 
regulations by the first day of the annual enrollment period, rather 
than 15 days before. Second, we proposed to add the phrase ``in the 
manner specified by CMS'' to Sec.  422.111(a) and to modify the 
sentence in Sec.  422.111(h)(2)(ii) which states that posting documents 
on the plan's website does not relieve the plan of responsibility to 
provide hard copies to enrollees in order to provide authority for CMS 
to permit MA plans to provide these documents by directing enrollees to 
the website posting of the documents. We proposed to revise the 
sentence to add ``upon request'' to the existing regulatory language to 
make it clear when any document that is required to be delivered under 
paragraph (a) in a manner that includes provision of a hard copy upon 
request, posting the document on the website (whether that document is 
the EOC, directory information or other materials) does not relieve the 
MA organization of the responsibility to deliver hard copies upon 
request. Finally, in response to a comment we received with which we 
agreed, we intend to further revise Sec.  422.111(h)(2)(ii) and to add 
new Sec.  422.111(h)(2)(iii) to make explicit that the Summary of 
Benefits be provided in hard copy when directed to do so by CMS. We 
intend the final rule to authorize CMS to direct the manner in which 
plans provide the documents and information subject to paragraph (a) to 
enrollees; as discussed in the proposed rule, we intend to use that 
authority to provide MAOs the flexibility to deliver certain required 
documents--such as the EOC and provider directory but not the Summary 
of Benefits--through electronic delivery or posting on the website in 
conjunction with delivery of a hard copy notice (describing how the 
information and materials are available) and provision of a hard copy 
upon request. We believe this final rule will allow plans to take 
advantage of technological developments and reduce the amount of mail 
enrollees receive from plans.
    Prior to the 2009 contract year, Sec. Sec.  422.111(a) and 
423.128(a) required the provision of the materials in their respective 
paragraphs (b) at the time of enrollment and at least annually 
thereafter, but did not specify a deadline. In the September 18, 2008, 
final rule, CMS required MA organizations to send this material to 
current enrollees 15 days before the annual election period (AEP) (73 
FR 54216). The rationale for this requirement was to provide 
beneficiaries with comprehensive information prior to the AEP so that 
they could make informed enrollment decisions.
    However, we have found through consumer testing that the large size 
of these mailings overwhelmed enrollees. In particular, the EOC is a 
long document that enrollees found difficult to navigate. Enrollees 
were more likely to review the Annual Notice of Change (ANOC), a 
shorter document summarizing any changes to plan benefits beginning on 
January 1 of the upcoming year, if it was separate from the EOC. 
Current sections 422.111(d) and 423.128(g)(2) require MA organizations 
and Part D sponsors to provide the ANOC to all enrollees at least 15 
days before the AEP.
    The ANOC is intended to convey all of the information essential to 
an enrollee's decision to remain enrolled in the same plan for the 
following year or choose another plan during the AEP. CMS's research 
and experience have indicated that the ANOC is particularly useful to 
and used by enrollees. Therefore, we did not propose to change the 
Sec. Sec.  422.111(d) and 423.128(g) requirements that the ANOC be 
received 15 days prior to AEP.
    Unlike the ANOC, the EOC is a document akin to a contract that 
provides enrollees with exhaustive information about their medical 
coverage and rights and responsibilities as members of a plan. The 
provider directory, pharmacy directory, and formulary also contain 
information necessary to access care and benefits. As such, CMS 
requires MA organizations and Part D sponsors to make these documents 
available at the start of the AEP, so CMS proposed to amend Sec. Sec.  
422.111(a)(3) and 423.128(a)(3) to remove the current deadline and 
insert ``by the first day of the annual election period.'' To the 
extent that enrollees find the EOC, provider directory, pharmacy 
directory, and formulary useful in making informed enrollment 
decisions, CMS believes that receipt of these documents by the first 
day of the AEP is sufficient. Any changes in the plan rules reflected 
in these documents for the next year must be adequately described in 
the ANOC (per Sec.  422.111(d)), which is provided at least 15 days 
before the AEP.
    This change will also provide an additional 2 weeks for MA 
organizations and Part D plan sponsors to prepare, review, and ensure 
the accuracy of the EOC, provider directory, pharmacy directory, and 
formulary documents. CMS considers the additional time for the EOC 
important due to the high number of errors that plans self-identify in 
the document through errata sheets they submit to CMS and mail to 
beneficiaries. In late-2016 and early-2017 for the 2017 plan year, MA 
and Part D plans overall submitted 166 ANOC/EOC errata, which 
identified 221 ANOC errors and 553 EOC errors in the 2017 plan 
materials. Additional time to produce the EOC will give plans more time 
to conduct quality assurance and improve accuracy and result in fewer 
errata sheets in the future.
    In addition to the proposed changes in Sec. Sec.  422.111(a)(3) and 
423.128(a)(3), we also proposed that we would use the authority to 
direct the manner of delivery under paragraph (a) to give plans more 
flexibility to provide certain materials specified in Sec.  422.111(b) 
electronically. The language in Sec.  422.111(h)(2)(ii) requiring hard 
copies of the specified documents first appeared in the January 28, 
2005, final rule (70 FR 4587) in Sec.  422.111(f)(2). At that time, MA 
plans were not required to maintain a website, but if they chose to 
they were required to include the EOC, Summary of Benefits, and 
provider network information on the website. However, plans were 
prohibited from posting these documents online as a substitute for 
providing hard copies to enrollees. A subsequent final rule, published 
April 15, 2011, established that MA plans are required to maintain an 
internet website at Sec.  422.111(h)(2) and moved the requirement that 
posting documents on the plan website did not substitute for

[[Page 16623]]

hard copies from Sec.  422.111(f)(12) to Sec.  422.111(h)(2)(ii) (76 FR 
21502).
    There is no parallel to Sec.  422.111(h)(2)(ii) in Sec.  423.128. 
Instead, Sec.  423.128(a) states that Part D sponsors must disclose the 
information in paragraph (b) in the manner specified by CMS. Section 
423.128(d)(2)(i) requires Part D sponsors to maintain an internet 
website that includes information listed in Sec.  423.128(b). CMS sub-
regulatory guidance has instructed plans to provide the EOC in hard 
copy, but we believe that the proposed regulatory text for Sec.  
422.111(a) will permit delivery by notifying enrollees of the internet 
posting of the documents, subject to the right to request hard 
copies.\71\ As explained in the proposed rule regarding the changes to 
Sec.  422.111, we intend to use the authority provided by this rule to 
give plans the flexibility to provide certain documents such as the EOC 
and the provider network information in an electronic manner and 
format. We intend to change the relevant sub-regulatory guidance to 
coincide with this as well.
---------------------------------------------------------------------------

    \71\ Medicare Marketing Guidelines, section 60.6, issued July 
20, 2017, https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/Downloads/CY-2018-Medicare-Marketing-Guidelines_Final072017.pdf.
---------------------------------------------------------------------------

    In the preamble to the 2005 final rule, we noted that the 
prohibition on substituting electronic posting on the MA plan's 
internet site for delivery of hardcopy documents was in response to 
comments recommending this change (70 FR 4623). At the time, we did not 
believe enough Medicare beneficiaries used the internet to permit 
posting the documents online in place of mailing them.
    In the 12 years since the rule was finalized, research indicates 
that internet use has increased significantly among Medicare 
beneficiaries. Drawing on nationally representative surveys, the Pew 
Research Center found that 67 percent of American adults age 65 and 
older use the internet. Half of seniors have broadband available at 
home. Internet use increases even more among seniors age 65-69, of 
which 82 percent use the internet and 66 percent have broadband at 
home.\72\ Electronic documents include advantages such as word search 
tools, the ability to magnify text, screen reader capabilities, and 
bookmarks or embedded links, all of which make documents easier to 
navigate. Given that the younger range of Medicare beneficiaries have a 
higher rate of internet access, we believe the number of beneficiaries 
who ``use the internet'' will only continue to grow with time. Posted 
electronic documents can also be accessed from anywhere the internet is 
available.
---------------------------------------------------------------------------

    \72\ Pew Research Center, May 2017, ``Tech Adoption Climbs Among 
Older Adults'', http://www.pewinternet.org/2017/05/17/tech-adoption-climbs-among-older-adults/.
---------------------------------------------------------------------------

    As mentioned previously, the EOC sometimes contains errors. To 
correct these, MA and Part D plans currently have to mail errata sheets 
and post an updated version online. The hardcopy version of the EOC is 
then out-of-date. Beneficiaries either have to refer to errata sheets 
in addition to the hardcopy EOC or go online to access a corrected EOC. 
Increasing beneficiary use of the electronic, online EOC ensures that 
beneficiaries are using the most accurate information. Under this 
proposal to permit flexibility for us to approve non-hard-copy delivery 
in some cases, we intend to continue requiring hardcopy mailings of any 
ANOC or EOC errata.
    Plans have also continued to request CMS give plans the flexibility 
to provide the EOC electronically. They have frequently cited the 
expense of printing and mailing large documents. Medicaid managed care 
plans already have the flexibility to provide directories, formularies, 
and member handbooks (similar to the EOC) electronically, per 
Sec. Sec.  438.10(h)(1), 438.10(h)(4)(i), and 438.10(g)(3) 
respectively.
    To begin addressing this, in the Medicare Marketing Guidelines 
released July 2, 2015, CMS notified plans that they could mail either a 
hardcopy provider and/or pharmacy directory or a hardcopy notice to 
enrollees instructing them where to find the directories online and how 
to request a hard copy. That guidance has been moved to Chapter 4, 
section 110.2.3, of the Medicare Managed Care Manual. If plans choose 
to mail a notice with the location of the online directory rather than 
a hard copy, the notice must include: A direct link to the online 
directory, the customer service number to call and request a hard copy, 
and if available the email address to request a hard copy. The notice 
must be distinct, separate, and mailed with the ANOC/EOC.\73\ Section 
60.4 of the Medicare Marketing Guidelines released July 20, 2017, 
extends the same flexibility to formularies, with the same required 
content in the notice identifying the location of the online formulary. 
As CMS has received few complaints from any source about this new 
process, we believe allowing plans the option to use a similar strategy 
for additional materials is appropriate. In addition, we believe that 
it is appropriate to codify the authority to permit this flexibility in 
the applicable regulation.
---------------------------------------------------------------------------

    \73\ Medicare Managed Care Manual Chapter 4--Benefits and 
Beneficiary Protections, Rev. 121, issued April 22, 2016, https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/mc86c04.pdf.
---------------------------------------------------------------------------

    We intend to issue sub-regulatory guidance to identify permissible 
manners of disclosure under this final rule; we expect such guidance 
will be similar to the current guidance for the provider directory, 
pharmacy directory, and formulary regarding dissemination of the EOC. 
Importantly, neither the proposal nor this final rule eliminate the 
requirement for plans to provide accessible formats of required 
documents. As recipients of federal funding, plans are obligated to 
provide materials in accessible formats upon request, at no cost to the 
individual, to individuals with disabilities, under Section 504 of the 
Rehabilitation Act of 1973 and Section 1557, and to take reasonable 
steps to provide meaningful access, including translation services, to 
individuals who have limited English proficiency under Title VI of the 
Civil Rights Act of 1964 and Section 1557.
    To create the flexibility for delivery of required materials, CMS 
proposed to modify Sec.  422.111(h)(2)(ii) and to revise Sec.  
422.111(a). The proposed changes will align Sec. Sec.  422.111(a) and 
423.128(a) to authorize CMS to provide flexibility to MA plans and Part 
D sponsors to use technology to provide beneficiaries with information. 
As the current version of Sec.  422.111(a) and (h)(2) require hard 
copies, we believe this proposal will ultimately result in reducing 
burden and providing more flexibility for sponsoring organizations.
    We received the following comments on our proposals regarding the 
time and manner of delivery of required materials to MA and Part D plan 
enrollees, and our response follows:
    Comment: Many commenters indicated unequivocal support for the 
provision as proposed.
    Response: We appreciate the support of the proposed change.
    Comment: Many commenters indicated that they did not support the 
proposal to allow plans to deliver certain required documents 
electronically and only provide hard copy versions of those required 
documents upon request. These commenters expressed concern that there 
are still many beneficiaries who do not have easy access to electronic 
documents, especially those in rural areas and those who are of 
advanced age.
    Response: We appreciate the concern that these commenters have 
about Medicare beneficiaries' ability to access electronic documents. 
We believe that the hard copy notification of the ability to request a 
hard copy as well as the

[[Page 16624]]

electronic status and availability of the documents should mitigate 
this as enrollees who want or need hard copies will be able to call the 
plan to request them. Additionally, we know from our experience 
administering the program that many of these beneficiaries rely on 
family members and friends to review important documents for them, and 
that these family members and friends will be more likely to have 
access to electronic versions of the required documents. As an 
additional measure, we intend to suggest in our subregulatory guidance 
regarding use of electronic delivery, that when a beneficiary requests 
hard copy delivery of a required document in place of electronic 
delivery, the plan may wish to continue to provide hard copies to that 
beneficiary on an ongoing basis, so that the beneficiary does not have 
to request hard copy format again. Finally, as we indicated earlier, 
the number of beneficiaries who have access to electronic mediums such 
as broadband internet access is growing every year. We believe we have 
placed sufficient protections in place and have addressed the growing 
desire for electronic versions of required documents.
    Comment: A commenter requested that we exclude the Summary of 
Benefits from electronic delivery citing the importance of hard copy 
for this document in the beneficiary's process of choosing to remain in 
a current plan or choose a new plan.
    Response: We agree with this comment and are finalizing additional 
revisions to Sec.  422.111(h)(2)(ii) and new text in Sec.  
422.111(h)(2)(iii). The new paragraph (h)(2)(iii) provides that posting 
the Summary of Benefits does not relieve the obligation to provide hard 
copies of the document to enrollees when CMS determines that it is in 
the best interest of the beneficiary. CMS considers the Summary of 
Benefits, unlike the EOC, to be a marketing material because its 
primary purpose is to influence a prospective enrollee's decision to 
enroll in a plan. For example, agents use the Summary of Benefits as a 
tool to help sell plans to prospective enrollees. It indicates key 
benefits in a standardized arrangement, providing the beneficiary with 
a safeguard to confirm what the agent has presented. On the other hand, 
the EOC is a document delivered after a beneficiary has made an 
enrollment decision and is, in essence, a contract between a current 
enrollee and the plan, articulating rights and responsibilities, as 
well as detailed guidance on how to interact with the plan. CMS 
believes that enrollees should not have to take an extra step to find 
the Summary of Benefits when enrolling in a plan. Because plans provide 
the Summary of Benefits with an enrollment mechanism, to avoid an extra 
step, the Summary of Benefits must be available in the same format as 
the enrollment mechanism. To that end, when plans provide a paper 
application to a prospective enrollee, CMS instructs the plan to also 
provide a paper Summary of Benefits along with the paper application.
    Comment: Many commenters indicated support for the proposed 
changes, but also requested additional considerations that mainly fell 
into two areas: (1) A request to allow plans the option to include the 
hard copy notification about electronic posting of the EOC and provider 
directories along with the ANOC; and (2) a request to allow plans the 
option to include other information with the ANOC, especially 
additional benefit information (for example, supplemental benefits) as, 
while CMS requires plans to provide this information, CMS currently 
prohibits plans from providing this information with the ANOC.
    Response: We also agree with both suggestions regarding the ANOC. 
We are revisiting our prior guidance (section 60.6 in the 2018 Medicare 
Marketing Guidelines document) prohibiting plans from providing other 
materials along with the ANOC as we make the changes to align our 
subregulatory guidance with this final rule.
    As discussed earlier, we are finalizing as proposed revisions to 
Sec.  422.111(a)(3) and Sec.  423.128(a)(3) to require delivery by the 
beginning of the Annual Coordinated Election Period of the Evidence of 
Coverage and other materials and information described in paragraph (b) 
of each regulation. In addition, we are finalizing revisions to the 
regulation text as follows:

--In Sec.  422.111(a), the proposed revision to add ``in the manner 
specified by CMS'' at the end of the introductory sentence;
--in Sec.  422.111(h)(2)(ii), the proposed revision to specify that 
posting of the EOC and provider directory--but not the summary of 
benefits--on the plan's website does not relieve the plan of the 
obligation to provide hard copies of those materials upon request under 
paragraph (a) when requested by the beneficiary;
--in Sec.  422.111(h)(2)(iii), new text to move the requirement to post 
the Summary of Benefits on the plan's website from paragraph (h)(2)(ii) 
to this new paragraph and a provision clarifying that posting does not 
relieve the plan of the obligation to deliver hard copies of the 
Summary of Benefits when CMS determines that it is in the best interest 
of beneficiaries.

    These revisions authorize CMS to specify the manner of delivery of 
materials described in paragraph (b) of both Sec. Sec.  422.111 and 
423.128, and to clarify that posting of certain information or 
materials on the MA organization's website does not relieve the 
organization of the obligation to provide information in hard copy when 
beneficiaries request hard copy.
5. Revisions to Parts 422 and 423, Subpart V, Communication/Marketing 
Materials and Activities
    Section 1851(h) of the Act prohibits Medicare Advantage (MA) 
organizations from distributing marketing materials and application 
forms to (or for the use of) MA eligible individuals unless the 
document has been submitted to the Secretary at least 45 days (10 days 
for certain materials) prior to use and the document has not been 
disapproved. Further, in section 1851(j), the Secretary is authorized 
to adopt standards regarding marketing activities, and the statute 
identifies certain prohibited activities. While the Act requires the 
submission and review of the marketing materials and applications, it 
does not provide a definition of what materials fall under the umbrella 
term ``marketing.'' Sections 1806D-1(d)(3)(B)(iv) and 1860D-4(l) of the 
Act provide similar restrictions on use of marketing and enrollment 
materials and activities to promote enrollment in Part D plans.
    Section 1876(c)(3)(C) of the Act states that no brochures, 
application forms, or other promotional or informational material may 
be distributed by cost plan to (or for the use of) individuals eligible 
to enroll with the organization under this section unless (i) at least 
45 days before its distribution, the organization has submitted the 
material to the Secretary for review, and (ii) the Secretary has not 
disapproved the distribution of the material. As delegated this 
authority by the Secretary, CMS reviews all such material submitted and 
disapproves such material upon determination that the material is 
materially inaccurate or misleading or otherwise makes a material 
misrepresentation. Similar to 1851(h) of the Act, section 1876(c)(3)(C) 
of the Act focuses more on the review and approval of materials as 
opposed to providing an exhaustive list of materials that will qualify 
as marketing or promotional information and materials. As part of the 
implementation of section 1876(c)(3)(C) of the Act, the regulation 
governing cost plans at Sec.  417.428(a)

[[Page 16625]]

refers to Subpart V of part 422 for marketing prohibitions and 
requirements. Throughout this proposal, the changes discussed for MA 
organizations/MA plans and prescription drug plan (PDP) sponsors/Part D 
plans apply as well to cost plans subject to the same requirements as a 
result of this cross-reference.
    Section 422.2260(1)-(4) of the Part C program regulations currently 
identifies marketing materials as any materials that: (1) Promote the 
MA organization, or any MA plan offered by the MA organization; (2) 
inform Medicare beneficiaries that they may enroll, or remain enrolled 
in, an MA plan offered by the MA organization; (3) explain the benefits 
of enrollment in an MA plan, or rules that apply to enrollees; and (4) 
explain how Medicare services are covered under an MA plan, including 
conditions that apply to such coverage. Section 423.2260(1)-(4) applies 
identical regulatory provisions to the Part D program.
    Sections 422.2260(5) and 423.2260(5) provide specific examples of 
materials under the ``marketing materials'' definition, which include: 
General audience materials such as general circulation brochures, 
newspapers, magazines, television, radio, billboards, yellow pages, or 
the internet; marketing representative materials such as scripts or 
outlines for telemarketing or other presentations; presentation 
materials such as slides and charts; promotional materials such as 
brochures or leaflets, including materials for circulation by third 
parties (for example, physicians or other providers); membership 
communication materials such as membership rules, subscriber 
agreements, member handbooks and wallet card instructions to enrollees; 
letters to members about contractual changes; changes in providers, 
premiums, benefits, plan procedures etc.; and membership activities 
(for example, materials on rules involving non-payment of premiums, 
confirmation of enrollment or disenrollment, or no claim specific 
notification information).
    Finally, Sec. Sec.  422.2260(6) and 423.2260(6) provide a list of 
materials that are not considered marketing materials, including 
materials that are targeted to current enrollees; are customized or 
limited to a subset of enrollees or apply to a specific situation; do 
not include information about the plan's benefit structure; and apply 
to a specific situation or cover claims processing or other operational 
issues.
    We proposed several changes to Subpart V of the part 422 and 423 
regulations. To better outline these proposed changes, they are 
addressed in four areas of focus: (a) Including ``communication 
requirements'' in the scope of Subpart V or parts 422 and 423, which 
will include new definitions for ``communications'' and ``communication 
materials'' in Sec. Sec.  422.2260 and 423.2260; (b) amending 
Sec. Sec.  422.2260 and 423.2260 to add a definition of ``marketing'' 
in place of the current definition of ``marketing materials'' and to 
provide lists identifying marketing materials and non-marketing 
materials; (c) adding new regulation text to prohibit marketing during 
the Open Enrollment Period proposed in section II.B.1 of this proposed 
rule; (d) technical changes to other regulatory provisions as a result 
of the changes to Subpart V. To the extent necessary, CMS relies on its 
authority to add regulatory and contract requirements to the cost plan, 
MA, and Part D programs to propose and (ultimately) adopt these 
changes. In addition, section 1876(c)(3)(C) authorizes CMS to adopt 
conditions and procedures under which a cost plan informs potential 
enrollees about the cost plan, which would clearly cover the scope of 
regulations proposed in this section that will be applicable to cost 
plans. We note as well that sections 1851(h) and (j) of the Act (cross-
referenced in sections 1860D-1 and 1860D-4(l)) of the Act address 
activities and direct that the Secretary adopt standards limiting 
marketing activities, which CMS interprets as permitting regulation of 
communications about the plan that do not rise to the level of 
activities and materials that specifically promote enrollment.
a. Revising the Scope of Subpart V To Include Communications and 
Communications Materials
    The current version of Subpart V of parts 422 and 423 focuses on 
marketing materials, as opposed to other materials currently referred 
to as ``non-marketing'' in the sub-regulatory Medicare Marketing 
Guidelines. This leaves a regulatory void for the requirements that 
pertain to those materials that are not considered marketing. 
Historically, the impact of not having regulatory guidance for 
materials other than marketing has been muted because the current 
regulatory definition of marketing is so broad, resulting in most 
materials falling under the definition. The overall effect of this 
combination--no definition of materials other than marketing and a 
broad marketing definition--is that marketing and communications with 
enrollees became synonymous.
    With this CMS proposal to narrow the marketing definition, we 
believe there is a need to continue to apply the current standards to 
and develop guidance for those materials that fall outside of the 
proposed definition. We proposed changing the title of each Subpart V 
by replacing the term ``Marketing'' with ``Communication.'' We proposed 
to define in Sec. Sec.  422.2260 and 423.2260 the terms 
``communications'' (activities and use of materials to provide 
information to current and prospective enrollees) and ``communications 
materials'' (materials that include all information provided to current 
members and prospective enrollees). We proposed that marketing 
materials (discussed later in this section) will be a subset of 
communications materials. In many ways, the proposed definition of 
communications materials is similar to the current definition of 
marketing materials; the proposed definition has a broad scope and will 
include both mandatory disclosures that are primarily informative and 
materials that are primarily geared to encourage enrollment.
    In addition to these proposals related to defined terms and 
revising the scope of Subparts V in parts 422 and 423, we proposed 
changes to the current regulations at Sec. Sec.  422.2264 and 423.2264 
and Sec. Sec.  422.2268 and 423.2268 that are related to our proposal 
to distinguish between marketing and communications.
    CMS proposed, through revisions to Sec. Sec.  422.2268 and 
423.2268, to apply some of the current standards and prohibitions 
related to marketing to all communications and to apply others only to 
marketing. Marketing and marketing materials will be subject to the 
more stringent requirements, including the need for submission to and 
review by CMS. Under this proposal, we stated in the proposed rule, 
those materials that are not considered marketing, per the proposed 
definition of marketing, will fall under the less stringent 
communication requirements.
    With regard to Sec. Sec.  422.2264 and 423.2264, we specifically 
proposed the following changes:
     Deletion of paragraph (a)(3), which currently provides for 
an adequate written explanation of the grievance and appeals process to 
be provided as part of marketing materials. In our view grievance and 
appeals communications will not be within the scope of marketing as 
proposed in this rule.
     Deletion of paragraph (a)(4), which provides for CMS to 
determine that marketing materials include any other information 
necessary to enable

[[Page 16626]]

beneficiaries to make an informed decision about enrollment. The intent 
of this section was to ensure that materials which include measuring or 
ranking mechanisms such as Star Ratings were a part of CMS's marketing 
review. We proposed deleting this section as the exclusion list to be 
codified at Sec.  422.2260(c)(2)(ii) ensures materials that include 
measuring or ranking standards will be considered marketing, thus 
making Sec. Sec.  422.2264(a)(4) and Sec.  423.2264(a)(4) duplicative.
     Deletion of paragraph (e), which requires sponsoring 
organizations to provide translated materials in certain areas where 
there is a significant non-English speaking population. We proposed to 
recodify these requirement as a general communication standard in 
Sec. Sec.  422.2268 and 423.2268, at new paragraph (a)(7). As part of 
the redesignation of this requirement as a standard applicable to all 
communications and communication materials, we also proposed revisions. 
First, we proposed to revise the text so that it is stated as a 
prohibition on sponsoring organizations: Sponsoring organizations may 
not, for markets with a significant non-English speaking population, 
provide materials, as defined by CMS, unless in the language of these 
individuals. We proposed adding the statement of ``as defined by CMS'' 
to allow the agency the ability to define the significant materials 
that will require translation. We proposed deleting the word 
``marketing'' so the second sentence now reads as ``materials,'' to 
make it clear that the updated section applies to the broader term of 
communications rather than the more narrow term of marketing.
    In addition, we proposed to revise Sec. Sec.  422.2262(d) and 
423.2262(d) to delete the term ``ad hoc'' from the heading and 
regulation text in favor of referring to ``communication materials'' to 
conform to the addition of communication materials under Subpart V.
    Current regulations at Sec. Sec.  422.2268 and 423.2268 list 
prohibited marketing activities. These activities include items such as 
providing meals to potential enrollees, soliciting door to door, and 
marketing in provider settings. With the proposal to distinguish 
between overall communications and marketing activities, we proposed to 
break out the prohibitions into categories: Those applicable to all 
communications (activities and materials) and those that are specific 
to marketing and marketing materials. In reviewing the various 
standards under the current regulations to determine if they will apply 
to communications or marketing, we looked at the each standard as it 
applied to the new definitions under Subpart V. Prohibitions that offer 
broader beneficiary protections and are currently applicable to a wide 
variety of materials are proposed here to apply to communications 
activities and communication materials; this list of prohibitions is 
proposed as paragraph (a). Conversely, prohibitions that are currently 
targeted to activities and materials that are within the narrower scope 
of marketing and marketing materials are proposed at paragraph (b) as 
prohibitions on marketing. We did not propose to expand the list of 
prohibitions, but proposed to notate which prohibitions are applicable 
to which category. The only substantive change proposed is in 
connection with paragraph (a)(7), which we discuss earlier in this 
section. We solicited comment on our proposed distinctions between 
these types of prohibitions and whether certain standards or 
prohibitions from current Sec. Sec.  422.2268 and 423.2268 should apply 
more narrowly or broadly than we have proposed.
b. Amending the Regulatory Definition of Marketing and Marketing 
Materials
    In conjunction with adding new proposed communication requirements, 
we also proposed a definition of ``marketing'' to be codified in 
Sec. Sec.  422.2260 and 423.2260. We proposed to delete the current 
text in that section defining only ``marketing materials'' to add a new 
definition of ``marketing'' and lists of materials that are ``marketing 
materials'' and that are not. Specifically, the term ``marketing'' was 
proposed as the use of materials or activities by the sponsoring 
organization (that is, the MA organization, Part D Sponsor, or cost 
plan, depending on the specific part) or downstream entities that are 
intended to draw a beneficiary's attention to the plan or plans and 
influence a beneficiary's decision making process when making a plan 
selection; this last criterion would also be met when the intent is to 
influence an enrollee's decision to remain in a plan (that is, 
retention-based marketing).
    The current regulations address both prohibited marketing 
activities and marketing materials. The prohibited activities are 
directly related to marketing activities, but the current definition of 
``marketing materials'' is overly broad and has resulted in a 
significant number of documents being classified as marketing 
materials, such as materials promoting the sponsoring organization as a 
whole (that is, brand awareness) rather than materials that promote 
enrollment in a specific Medicare plan. We believe that Congress' 
intent was to target for prior CMS review and approval those materials 
that could mislead or confuse beneficiaries into making an adverse 
enrollment decision. Since the original adoption of Sec. Sec.  422.2260 
and 423.2260, CMS has reviewed thousands of marketing materials, 
tracked and resolved thousands of beneficiary complaints through the 
complaints tracking module (CTM), conducted secret shopping programs of 
MA plan sales events, and investigated numerous marketing complaints. 
These efforts have provided CMS insight into the types of plan 
materials that present the greatest risk of misleading or confusing 
beneficiaries. Based on this experience, we believe that the current 
regulatory definition of marketing materials is overly broad. As a 
result, materials that pose little to no threat of a detrimental 
enrollment decision fall under the current broad marketing definition 
and are required to follow the associated marketing requirements, 
including submission to CMS for potential review under limited 
statutory timeframes. CMS believes that the level of scrutiny required 
on numerous documents that are not intended to influence an enrollment 
decision, combined with associated burden to sponsoring organizations 
and CMS, is not justified. By narrowing the scope of materials that 
fall under the scope of marketing, we stated that the proposal would 
allow us to better focus review on those materials that present the 
greatest likelihood for a negative beneficiary experience.
    We proposed to more appropriately implement the statute by 
narrowing the definition of marketing to focus on materials and 
activities that aim to influence enrollment decisions. We believe this 
is consistent with Congress's intent. Moreover, the new definition 
differentiates between providing factual information about the plan or 
benefits (that is, the Evidence of Coverage (EOC)) versus persuasively 
conveying information in a manner designed to prompt the beneficiary to 
make a new plan decision or to stay with their current plan (for 
example, a flyer that touts a low monthly premium). As discussed later, 
the majority of member materials will no longer fall within the 
definition of marketing under the proposal. The EOC, subscriber 
agreements, and wallet card instructions are not developed nor intended 
to influence enrollment decisions. Rather, they are utilized for 
current enrollees to understand the full scope of and the rules 
associated with their plan. We believe the proposed new marketing 
definition appropriately

[[Page 16627]]

safeguards potential and current enrollees while not placing an undue 
burden on sponsoring organizations. Moreover, those materials that will 
be excluded from the marketing definition will fall under the proposed 
definition of communication materials, with what we believe are more 
appropriate requirements. Enrollment and mandatory disclosure materials 
continue to be subject to requirements in Sec. Sec.  422.60(c), 
422.111, 423.32(b), and 423.128.
    Second, we proposed to revise the list of marketing materials, 
currently codified at Sec. Sec.  422.2260(5) and 423.2260(5), and to 
include it in the proposed new Sec. Sec.  422.2260 and 423.2260. The 
current list of examples includes: Brochures; advertisements in 
newspapers and magazines, and on television, billboards, radio, or the 
internet; social media content; marketing representative materials, 
such as scripts or outlines for telemarketing or other presentations; 
and presentation materials such as slides and charts. In conjunction 
with the proposed new definition of marketing, we proposed to remove 
from the list of examples items such as membership communication 
materials, subscriber agreements, member handbooks, and wallet card 
instructions to enrollees, as they did not fall under the proposed 
regulatory definition of marketing. The proposed text complements the 
new definition by providing a concise non-exhaustive list of example 
material types that will be considered marketing.
    Third, we proposed to revise the list of exclusions from marketing 
materials, currently codified at Sec. Sec.  422.2260(6) and 
423.2260(6), and to include it in the proposed new Sec. Sec.  422.2260 
and 423.2260 to identify the types of materials that will not be 
considered marketing. Materials that do not include information about 
the plan's benefit structure or cost sharing or do not include 
information about measuring or ranking standards (for example, star 
ratings) will be excluded from marketing. In addition, materials that 
do mention benefits or cost sharing, but do not meet the definition of 
marketing as proposed here, will also be excluded from marketing. We 
also proposed, in the preamble, that required materials in Sec.  
422.111 and Sec.  423.128 not be considered marketing, unless otherwise 
specified, and, separately, materials specifically designated by us as 
not meeting the definition of the proposed marketing definition based 
on their use or purpose; however, the proposed regulation text (82 FR 
56505-06 and 52525) combined these categories inadvertently so that the 
proposed regulation text excluded from the definition of marketing 
materials those that are required by Sec. Sec.  422.111 or 423.128 
unless CMS specified otherwise because of the use or purpose of the 
materials. We proposed to revise the list of exclusions from marketing 
materials to maintain the current beneficiary protections that apply to 
marketing materials but to narrow the scope of CMS's review and 
approval responsibilities to exclude materials that are unlikely to 
lead to or influence an enrollment decision.
    Our proposal was intended to exclude from marketing any materials 
that do not include information about the plan's benefit structure or 
cost-sharing. We believe that materials that do not mention benefit 
structure or cost sharing will not be used to make an enrollment 
decision in a specific Medicare plan, rather they will be used to drive 
beneficiaries to request additional information that will fall under 
the new definition of marketing. Similarly, we want to be sure it is 
clear that the use of measuring or ranking standards, such as the CMS 
Star Ratings, even when not accompanied by other plan benefit structure 
or cost sharing information, could lead a beneficiary to make an 
enrollment decision; we therefore proposed to exclude materials that do 
not have such rankings or measurements from marketing. In addition, we 
proposed to exclude materials that mention benefits or cost sharing but 
do not otherwise meet the proposed definition of marketing. The goal of 
this proposal is to exclude member communications that convey important 
factual information that is not intended to influence the enrollee's 
decision to make a plan selection or to stay enrolled in their current 
plan. An example is a monthly newsletter to current enrollees reminding 
them of preventive services at $0 cost sharing.
    In addition, proposed to exclude those materials required under 
Sec.  422.111 (for MA plans) and Sec.  423.128 (for Part D sponsors), 
unless otherwise specified by CMS because of their use or purpose. This 
proposal is intended to exclude post-enrollment materials that we 
require be disclosed and distributed to enrollees, such as the EOC. 
Such materials convey important plan information in a factual manner 
rather than to entice a prospective enrollee to choose a specific plan 
or an existing enrollee to stay in a specific plan. In addition, either 
these materials use model formats and text developed by us or are 
developed by plans based on detailed instructions on the required 
content from us; this high level of standardization by us on the front-
end provides the necessary beneficiary protections and negates the need 
for our review of these materials before distribution to enrollees.
    The proposed changes do not release cost plans, MA organizations, 
or Part D sponsors from the requirements in sections 1876(c)(3)(C), 
1851(h), and 1860D-1(b)(1)(B)(vi) of the Act to have application forms 
reviewed by CMS as well. To clarify this requirement, we proposed to 
revise Sec.  417.430(a)(1) and Sec.  423.32(b), which pertain to 
application and enrollment processes, to add a cross reference to 
Sec. Sec.  422.2262 and 423.2262, respectively. The cross references 
directly link enrollment applications back to requirements related to 
review and distribution of marketing materials. These proposed changes 
update an old cross-reference, codify existing practices, and are 
consistent with language already in Sec.  422.60(c).
c. Prohibition of Marketing During the Open Enrollment Period
    The 21st Century Cures Act (the Cures Act) amended section 
1851(e)(2) of the Act by adding a new continuous open enrollment and 
disenrollment period (OEP) for MA and certain PDP members. Elsewhere in 
this final rule (section II.B.1 (Restoration of the Medicare Advantage 
Open Enrollment Period (Sec. Sec.  422.60, 422.62, 422.68, 423.38 and 
423.40)), we finalize that revision to the MA regulations. As part of 
establishing this OEP, the Cures Act prohibits unsolicited marketing 
and mailing marketing materials to individuals who are eligible for the 
new OEP. We proposed to add a new paragraph (b)(10) \74\ to both 
proposed Sec. Sec.  422.2268 and 423.2268 to apply this prohibition on 
marketing. We also requested comment on how the agency could implement 
the statutory requirement. The new OEP is not available for enrollees 
in Medicare cost plans; therefore, these limitations apply to MA 
enrollees and to any PDP enrollee who was enrolled in an MA plan the 
prior year. CMS expressed concern in the proposed rule that it may be 
difficult for a sponsoring organization to limit marketing to only 
those individuals who have not yet enrolled in a plan during the OEP. 
We noted that one mechanism could be to limit marketing entirely during 
that period, but were concerned that such a prohibition would be too 
broad. We proposed a ``knowing'' standard instead, believing that it 
would both effectuate the statutory provision and avoid against overly 
broad

[[Page 16628]]

implementation. We solicited comment on how a sponsoring organization 
could appropriately control who would or should be marketed to during 
the new OEP, such as through as mailing campaigns aimed at a more 
general audience.
---------------------------------------------------------------------------

    \74\ The proposed rule, at 82 FR 56436, mistakenly referred to 
paragraph (b)(9) as the location of this new proposed text.
---------------------------------------------------------------------------

d. Technical Changes to Other Regulatory Provisions as a Result of the 
Changes to Subpart V
    As previously stated, because of the broad regulatory definition of 
marketing, the term marketing became synonymous with communications 
from the plan to enrollees or potential enrollees. As a result of our 
proposal to define both ``marketing'' and ``communications,'' we 
proposed a number of technical changes that we believe are necessary to 
update regulation text that uses the term marketing throughout parts 
422 and 423. Accordingly, we proposed the following technical changes 
in Part C:
     In Sec.  422.54, we proposed to update paragraphs 
(c)(1)(i) and (d)(4)(ii) to replace ``marketing materials'' with 
``communication materials.''
     In Sec.  422.62, we proposed to update paragraph 
(b)(3)(B)(ii) by replacing ``in marketing the plans to the individual'' 
with ``in communication materials.''
     In Sec.  422.102(d), we proposed to use ``supplemental 
benefits packaging'' instead of ``marketing of supplemental benefits.''
     In Sec.  422.206(b)(2)(i), we proposed to replace ``Sec.  
422.80 (concerning approval of marketing materials and election 
forms)'' with ``all applicable requirements under subpart V''.
     In Sec.  422.503(b)(4)(ii), we proposed to replace the 
term ``marketing'' with the term ``communication.''
     In Sec.  422.510(a)(4)(iii), we proposed to remove the 
word ``marketing'' so that the reference is to the broader Subpart V.
    CMS has had longstanding authority to initiate ``marketing 
sanctions'' in conjunction with enrollment sanctions as a means of 
protecting beneficiaries from the confusion that stems from receiving 
information provided by a plan that is--as a result of enrollment 
sanctions--unable to accept enrollments. In this rulemaking, CMS 
proposed to replace the term ``marketing'' with ``communications'' in 
Sec.  422.750 and 422.752 to reflect its proposal for Subpart V. The 
proposal to change the terminology was not intended or designed to 
expand the scope of CMS's authority with respect to sanction 
regulations. Rather, CMS sought to preserve the existing reach of the 
sanction authority it currently has--to prohibit any communications 
under the current broad definition of ``marketing materials'' from 
being issued by a sponsoring organization while that entity is under 
sanction. For this reason, CMS proposed the following changes to 
Sec. Sec.  422.750 and 422.752:
     In Sec.  422.750, we proposed to revise paragraph (a)(3) 
to refer to suspension of ``communication activities.''
     In Sec.  422.752, we proposed to replace the term 
``marketing'' in paragraph (a)(11) and the heading for paragraph (b) 
with the term ``communications.''
    We did not propose any changes to the use of the term ``marketing'' 
in Sec. Sec.  422.384, 422.504(a)(17), 422.504(d)(2)(vi), or 422.514, 
as those regulations use the term in a way that is consistent with the 
proposed definition of the term ``marketing,'' and the underlying 
requirements and standards do not need to be extended to all 
communications from an MA organization.
    We also proposed the following technical changes in Part D:
     In Sec.  423.38(c)(8)(i)(C), we proposed to revise the 
paragraph to read: ``The organization (or its agent, representative, or 
plan provider) materially misrepresented the plan's provisions in 
communication materials.''
     In Sec.  423.504(b)(4)(ii), we proposed to replace 
``marketing'' with ``communications'' to reflect the change to Subpart 
V.
     In Sec.  423.505(b)(25), we proposed to replace 
``marketing'' with ``communications'' to reflect the change to Subpart 
V.
     In Sec.  423.509(a)(4)(V)(A), we proposed to delete the 
word ``marketing'' and instead simply refer to Subpart V.
    For the reasons explained in connection with our proposal to revise 
the Part C sanction regulations, we also proposed the following 
changes: \75\
---------------------------------------------------------------------------

    \75\ We note that the proposed rule preamble (82 FR 56437) 
mistakenly did not include a discussion of the specific Part D 
regulation sections that we proposed to revise in connection with 
CMS sanction authority; however, the proposed regulation text (82 FR 
56524) did include the proposed change.
---------------------------------------------------------------------------

     In Sec.  423.750, we proposed to revise paragraph (a)(3) 
to refer to suspension of ``communication activities.''
     In Sec.  423.752, we proposed to replace the term 
``marketing'' in paragraph (a)(9) and the heading for paragraph (b) 
with the term ``communications.''
    We did not propose any changes to the use of the term ``marketing'' 
in Sec. Sec.  423.505(d)(2)(vi), 423.871(c), or 423.756(c)(3)(ii), as 
those regulations use the term in a way that is consistent with the 
proposed definition of the term ``marketing,'' and the underlying 
requirements and standards do not need to be extended to all 
communications from a PDP sponsor.
    We solicited comment on the proposed technical changes, 
particularly whether a proposed revision would be more expansive than 
anticipated or have unintended consequences for sponsoring 
organizations or for CMS's oversight and monitoring of the MA and Part 
D programs.
    In conclusion, we stated our belief that our proposals would 
maintain the appropriate level of beneficiary protection and facilitate 
and focus our oversight of marketing materials, while appropriately 
narrowing the scope of what is considered marketing. We believe 
beneficiary protections are further enhanced by adding communication 
materials and associated standards under Subpart V. These changes would 
allow CMS to focus its oversight efforts on plan marketing materials 
that have the highest potential for influencing a beneficiary to make 
an enrollment decision that is not in the beneficiary's best interest. 
We solicited comment on these proposals and whether the appropriate 
balance is achieved with the proposed regulation text.
e. Comments and Reponses on Proposals Related to Communications and 
Marketing
    CMS was pleased to see a large number of comments in support of 
using the narrower definition for ``marketing,'' and the new term 
``communications'' in Subpart V. Commenters in favor of the proposed 
changes indicated that the proposed new definitions appropriately 
safeguard prospective and current enrollees, while not placing an undue 
burden on MA plans and Part D plan sponsors. In that same vein, 
commenters expressed that the proposed changes allow for a less 
burdensome approach to communicating with beneficiaries. Other 
commenters said that the new definition of marketing was logical and 
aligns with the layman's definition of ``marketing.''
    We received the following comments, and our response follows:
    Comment: Many commenters in favor of the proposed changes to 
Subpart V asked CMS to provide more information on what materials would 
fall under the definition of marketing and what materials would fall 
under the definition of communications, but not marketing. Moreover, 
commenters requested additional information on

[[Page 16629]]

whether or not communication materials that are not marketing materials 
would still be submitted to CMS for review. Several commenters 
suggested materials, such as standardized models, be considered 
communications, but not marketing. Many of these comments acknowledged 
that they expected such detail to be captured in sub-regulatory 
guidance, such as the MMG. Additionally, a subset of commenters 
reiterated the importance of CMS working with industry to develop 
updated sub-regulatory guidance for marketing and communications.
    Response: CMS agrees that sub-regulatory guidance is the more 
appropriate vehicle for applying the definitions and identifying what 
types of materials are marketing and what types are communications. As 
such, we intend to develop a successor to the current MMG that will 
include guidance for both communications and marketing. CMS will seek 
comment as a part of the development of the new guidelines.
    Comment: A commenter who supported the updates to Subpart V urged 
CMS to further refine the definition of marketing to include materials 
or activities targeting ``prospects'' and not current enrollees.
    Response: CMS disagrees with this suggestion and believes that the 
definition of marketing, as proposed and finalized, correctly focuses 
on all beneficiaries, including existing, new and potential enrollees 
of a plan, when the intent is to draw attention to the plan and 
influence the individual's plan selection. Plans market to their 
current members for the purposes of ``upselling'' or retention and such 
efforts are appropriately subject to our marketing oversight and 
regulations. Additionally, we note that this final rule includes a 
provision (in finalized Sec.  422.2260 and Sec.  423.2260) that 
authorizes CMS to characterize materials that fall under Sec.  422.111 
and Sec.  423.128 as not marketing materials based on their use and 
purpose; therefore, many required materials will fall under the broad 
communication definition.
    We generally agree with the commenter(s) that required and 
standardized materials, such as the EOC, directories, and materials 
required under Sec. Sec.  422.111 and 423.128, should generally fall 
under communications rather than marketing materials under the 
definition we proposed and are finalizing here. We are finalizing an 
exclusion from marketing materials that provides that unless CMS 
provides otherwise, materials required under Sec. Sec.  422.111 and 
423.128 are not marketing materials. To the extent that a document (or 
materials) required by those regulations appears to serve a marketing 
purpose, meaning that it is promotional materials or designed to 
influence an enrollment decision instead of providing factual 
information that is required to be disclosed under the Medicare 
program, we believe it is important that the regulation text provide 
CMS the authority to designate the document as a marketing material 
subject to the higher level of scrutiny.
    Comment: Several commenters were not in favor of the changes to 
Subpart V and expressed concern that CMS is reducing oversight of 
important plan materials while proposing to give plans more flexibility 
on plan design and in the types of benefits that can be offered. The 
majority of these comments focused on concerns regarding CMS's proposal 
to no longer designate and review the EOC as a marketing material. 
These commenters believed this proposal suggested CMS was stepping back 
from its oversight responsibilities.
    Response: CMS understands the concern and assures the commenters 
that our oversight of the EOC will not change for a few reasons. First, 
the EOC is based on a model material created by CMS and therefore is a 
document over which CMS already has a high level of oversight and 
monitoring. Second, the benefits information used to populate the EOC 
is derived from the plan's bid submission, which goes through its own 
CMS-based review.
    Third, for over 10 years, EOCs have been submitted to CMS as a 
marketing material under ``File and Use.'' As a result, the EOCs have 
not been prospectively reviewed upon submission but CMS has 
historically exercised oversight of the accuracy of EOCs through 
retrospective reviews, timeliness monitoring studies, and by collecting 
and analyzing EOC-based errata reported by the plans. The vast majority 
of EOC errors have been identified through these retrospective 
processes. We do not expect these oversight and enforcement processes 
to change with the regulation changes in this final rule. In addition, 
with this regulatory change, CMS will retain oversight authority over 
any current marketing material that will become a communication 
material as a result of the changes to Subpart V, principally the 
changes to Sec. Sec.  422.2262, 422.2264, 422.2268, 423.2262, 423.2264 
and 423.2268. In particular, we proposed and are finalizing, with 
slight grammatical revisions, text to Sec. Sec.  422.2262(d) and 
423.2262(d) to provide authority for CMS to review materials--whether 
communications or marketing--after release and use of the materials by 
the sponsoring organization. The regulation authorizes CMS to direct 
modification or stopped use of the materials to clarify that CMS's 
ability to oversee and enforce compliance with the limits on 
communications and marketing is not limited to the pre-use review and 
approval required for marketing materials.
    Comment: Some commenters expressing concern with the changes to 
Subpart V asked that CMS monitor the impact of this change and revisit 
or reverse course if there is clear evidence that beneficiaries are 
receiving inaccurate or incomplete plan materials.
    Response: CMS agrees that monitoring and evaluation are critical 
parts of the oversight process and that protection of beneficiaries is 
a primary goal. The authority outlined earlier will keep CMS well-
equipped to monitor any communication issues and to act as needed 
without additional regulatory changes. In addition to the more formal 
processes, CMS may act on any information received from Medicare 
beneficiaries, typically through our Complaints Tracking Module (CTM), 
as well as complaints received from competing plans.
    Comment: CMS received several comments asking how the changes to 
Subpart V will impact D-SNPs whose materials are also reviewed by the 
state. A reviewer suggested that CMS work with the states to develop 
joint guidance.
    Response: In general, CMS does not believe that the changes to 
Subpart V will have an impact on D-SNPs that is different from the 
impact on other MA plans and Part D plan sponsors. Currently, most 
marketing reviews are conducted separately by both CMS and the states 
for materials used by D-SNPs. The changes to Subpart V will result in 
some materials currently defined as marketing not being subject to 
prior review and approval by CMS. This, however, should have no bearing 
on any state requirements that may necessitate state review. 
Additionally, states retain authority to control and supervise Medicaid 
managed care plans, even if those plans also have Part C or Part D 
contracts. State Medicaid agencies also may establish or modify 
requirements with respect to review of D-SNP materials as part of the 
contract required under Sec.  422.107.
    Comment: CMS also received several provider-focused comments 
expressing an overarching concern with how the restriction of marketing 
in the health care setting impacts a provider's ability

[[Page 16630]]

to counsel patients about coverage options, particularly if a patient 
can benefit from coordinated, accountable care in MA. A commenter 
suggested that CMS exclude from the definition of marketing materials 
under section 422.2260 any communications from providers or MAOs to 
their patients regarding their care, including communications regarding 
cost-sharing responsibilities or listing the plans in which a provider 
participates. The same commenter noted that CMS does not generally 
require providers to seek CMS's approval for communications with 
patients who are enrolled in traditional Medicare. Further, they 
expressed that as long as the provider-patient or MAO-patient 
communication does not serve to ``influence a beneficiary's decision-
making process when making a MA plan selection or influence a 
beneficiary's decision to stay enrolled in a plan,'' then such 
communications regarding cost-sharing obligations should not be subject 
to CMS review simply because the patient receives Medicare benefits 
through an MAO.
    Response: CMS's restrictions on sales and marketing in the health 
care setting, which are required by section 1851(j)(1)(D) of the Act, 
were never intended to preclude a doctor from discussing MA with 
patients. Rather, the requirements prohibit a sponsoring organization 
(including its officials, employees, contractors, participating 
providers, the agents, brokers, and other third parties representing 
such organization) from marketing to a Medicare beneficiary in the 
health care setting. Based on the examples provided, combined with the 
changes made to Subpart V, CMS does not believe that discussions about 
cost-sharing responsibilities of a patient, identifying the plans with 
which a provider participates, or about patient care are considered 
marketing. As the commenter points out, such discussions are intended 
to educate a beneficiary about the merits of the MA program and the 
respective responsibilities of the patient and the provider under MA 
coverage, not to influence a beneficiary's decision-making process. 
However, certain activities or discussions undertaken by a provider 
could be marketing, such as distribution of brochures or appointment 
forms for specific plans or attempting to persuade a beneficiary to 
select a specific plan. Based on the comments received, we will clarify 
this distinction in sub-regulatory guidance.
    Comment: Another commenter stated that any attempts to use 
information to intentionally mislead beneficiaries when selecting a 
plan or choosing to utilize a specific pharmacy (including the use of 
the term ``preferred'') should be expressly prohibited. The commenter 
continued that all information provided to beneficiaries should be 
inclusive, complete, and accurate to allow the beneficiary to make 
their own decisions regarding which plan to select and which pharmacy 
to use.
    Response: CMS agrees with the commenter that all information 
provided to beneficiaries should be inclusive, complete, and accurate 
to allow the beneficiary to make their own decisions regarding which 
plan to select and which pharmacy to use. The regulations finalized 
today, as do the current regulations, explicitly prohibit the provision 
or information or other activities that mislead beneficiaries at 
paragraphs (a)(1) and (2) of Sec. Sec.  422.2268 and 423.2268. However, 
we disagree with the commenter's suggestion that the use of the term 
``preferred'' should not be allowed. CMS allows for preferred 
pharmacies where the copay may be lower for the beneficiary (Sec.  
423.120(a)(9)) and we believe that conveying this potential cost 
savings to enrollees is important.
    Comment: CMS received a comment outlining the unique challenges of 
ESRD beneficiaries and that treatment area is an ideal location for 
clinical and non-clinical staff to help beneficiaries assess their 
coverage choices.
    Response: CMS appreciates the real-world insight that this example 
provides. However, the restriction on marketing in the health care 
setting is statutory. By contrast, any activities that would fall under 
the new definition of communications, but not marketing, are allowed in 
the health care setting, so long as the communication activity complies 
with new Sec. Sec.  422.2268(a) and 423.2268(a). Plan-specific 
materials that are still considered marketing may not be distributed in 
areas where care is delivered. But a provider may discuss the MA 
program with the patient and make the plan's marketing materials 
available in common areas.
    CMS received overwhelming support for extending the translation 
requirement proposed at Sec. Sec.  422.2268(a)(7) and 423.2268(a)(7).
    Comment: Several commenters expressed that they were pleased that 
CMS proposed to extend its current document translation requirement to 
``communications'' designated by CMS rather than limiting it to certain 
marketing documents. The commenters asked that CMS adopt this change 
and, in implementation, expand the list of specific documents that are 
subject to translation rules. The commenters continued that, currently, 
many important documents are not translated, such as notices that 
beneficiaries are being denied services or will be disenrolled for 
failure to pay premiums.
    Response: CMS appreciates the supportive feedback. We are 
finalizing the regulatory language at Sec.  422.2268(a)(7) and Sec.  
423.2268(a)(7) to require translation of ``vital materials'' as opposed 
to materials ``as defined by CMS''. We believe that this standard will 
provide sufficient flexibility to sponsoring organizations in 
connection with mere marketing materials as well as provide 
beneficiaries with access to the information and materials that are 
vital to coverage. In conjunction with the final regulation, CMS 
intends to develop a successor to the current MMG that will include 
guidance for both communications and marketing. In this sub-regulatory 
guidance, we intend to provide additional guidance explaining which 
documents and materials are vital materials that must be translated. We 
also remind commenters and plans that this regulation is not the only 
legal obligation for MA organizations and Part D sponsors with regard 
to Medicare beneficiaries who have limited English proficiencies. As 
recipients of federal funding, plans are obligated to provide materials 
in accessible formats upon request, at no cost to the individual, to 
individuals with disabilities, under Section 504 of the Rehabilitation 
Act of 1973 and Section 1557, and to take reasonable steps to provide 
meaningful access, including translation services, to individuals who 
have limited English proficiency under Title VI of the Civil Rights Act 
of 1964 and Section 1557. Guidance about obligations under these other 
statutes is available from the Office for Civil Rights. Further, we 
note that Sec.  422.111(h)(1)(iii) and Sec.  423.128(d)(1)(iii) require 
the call centers of sponsoring organizations to provide interpreters to 
enrollees who are LEP or do not speak English, without limitation based 
on the number of enrollees in a service area that are LEP or do not 
speak English.
    Comment: Several commenters asked that CMS change the current 
translation standard, which only covers languages spoken by five 
percent or more of the population in the service area. The commenters 
expressed concern that the current rule means that, except for a couple 
small pockets, the only required language for translation is Spanish.
    Response: CMS uses U.S. Census Bureau's American Community Survey 
data to determine which PBPs must provide translated materials and has 
determined that five percent of a language spoken in service area is an

[[Page 16631]]

appropriate threshold for translation requirements. We reiterate that 
other laws also apply to sponsoring organizations and this marketing 
and communication regulation is not the only applicable provision for 
ensuring access for beneficiaries with limited English proficiency. For 
example, as recipients of federal financial assistance, MA plans and 
Part D prescription drug plans are subject to the nondiscrimination 
requirements under Title VI of the Civil Rights Act of 1964 and Section 
1557 and their implementing regulations (45 CFR parts 80 and 92).
    Comment: A commenter asked if the language used in Sec. Sec.  
422.2268(a)(7) and 423.2268(a)(7) was error in the wording, as the 
commenter found it unclear.
    Response: The language is correct. It is written in the context of 
what plans cannot do. Paragraph (a)(7), as proposed and finalized, 
prohibits plans from providing materials in markets with significant 
non-English speaking populations unless the communications are in the 
language of the non-English speaking populations. We believe that this 
is a clear statement of the intended prohibition.
    We received a number of comments based on the updates to Sec. Sec.  
422.2268 and 423.2268 to address section 1851(e)(2) of The 21st Century 
Cures Act (the Cures Act). Overall, comments were evenly split among 
those in favor of CMS's proposed language and those commenters who 
suggested alternative methods of addressing the Cures Act prohibition 
on marketing during the new OEP. There were no commenters in favor of a 
broader prohibition on marketing during the OEP.
    Comment: Several commenters were in favor of CMS's use of the term 
``knowingly'' stating that it would protect a plan from the marketing 
prohibition when the plan does not know that the beneficiary is 
enrolled in an MA plan at the time.
    Response: CMS appreciates feedback and concurrence.
    Comment: Some commenters suggested that, during the OEP, marketing 
could be acceptable if it did not include any reference to the OEP.
    Response: CMS appreciates the suggestion; however, using the term 
``knowingly'' takes into account the recipient as well as the content 
of the message so we believe that a prohibition that only addressed the 
term ``OEP'' would be too narrow to satisfy the statute. For example, 
if a plan were to send messaging specifically calling out the OEP, that 
would be knowingly targeting. Likewise, if a plan was aware that an 
individual had already made an enrollment decision during the AEP, 
sending unsolicited marketing materials to that individual, even if the 
OEP was not mentioned, would be considered ``knowingly targeting''. To 
that point, as finalized, the regulation accomplishes what the 
commenters have suggested, as well as addresses marketing to specific 
individuals that are able to make a plan selection during the OEP.
    Comment: Another commenter stated that marketing often takes the 
form of educating beneficiaries about their options and their rights to 
change plans, or remain in their plan if they are satisfied. 
Restricting such marketing will effectively undo much of the ``good'' 
that was established under OEP, discouraging beneficiaries from 
exploring various plan options and selecting the plan that is best for 
them, and their families. The commenter supported a policy which would 
allow marketing to all beneficiaries during OEP, including those 
beneficiaries eligible for OEP. In particular, the commenter asserted 
that it would be largely unworkable to limit marketing only to a subset 
of individuals who have not yet enrolled in a plan during OEP. The 
commenter offered that one potential option is to only prohibit direct 
marketing communications to OEP beneficiaries, but permit broader 
communications including: Television ads, general mailing campaigns, 
internet marketing, and radio ads during the OEP.
    Response: The statute prohibits unsolicited marketing and the final 
regulation has been updated to reflect this. Neither the statute nor 
regulation restricts a plan from providing educational materials or 
marketing materials if and when the beneficiary proactively reach out 
looking for OEP help. To that end, CMS supports each plan's ability to 
reactively respond to beneficiaries when it comes to the OEP. CMS 
disagrees that plans should be able to market its coverage under the 
guise of help.
    CMS believes that the intent of Congress was to allow beneficiaries 
to make an enrollment decision during the OEP, but not for it to be a 
second opportunity for plans to proactively persuade or attempt to 
persuade beneficiaries to switch plans. Prohibiting plans from 
knowingly targeting beneficiaries during the OEP addresses Congress's 
intent while affording plans with the flexibility to still conduct 
marketing to other potential enrollees, such as age-ins. Upon review of 
the proposed rule, in light of these comments, we are finalizing the 
proposed regulation text with the addition of the word ``unsolicited'' 
to modify ``marketing materials'' to be consistent with the statute and 
to clarify that responses to inquiries from beneficiaries is not 
prohibited.
    Comment: A commenter suggested the ``knowing'' standard would 
unfairly disadvantage MA plans where a beneficiary might already be 
enrolled, since that plan would be more likely to know that the 
enrollee was enrolled in an MA plan during the previous year. If 
another MA plan does not know that enrollees are already enrolled, that 
MA plan could market to those enrollees, potentially influencing 
enrollees to switch plans. This standard would not be in the best 
interest of beneficiaries and could cause market disruption. The 
commenter recommended that CMS create a standard where marketing during 
OEP is not targeted to specific enrollees, thus plans would be 
permitted to run general marketing campaigns (plan-specific or on the 
MA and/or Part D program). This type of standard would satisfy 
statutory requirements, would reduce beneficiary confusion, and would 
ensure that plans are on a level playing field.
    Response: CMS appreciates the commenter sharing this concern. Our 
goal is to implement the Congressional intent without creating an 
additional undue burden to plans. In addition, the OEP does not impact 
those beneficiaries who are aging into the Medicare program and have 
not yet made an enrollment decision, as they are still in their the 
Initial Coverage Election Period (ICEP). We believe that tying the 
marketing prohibition to a ``knowingly'' standard implements the 
statute while avoiding an unnecessary burden on plans and sponsoring 
organizations. It is true that a plan that just processed an enrollment 
may have more knowledge of the status of a beneficiary, yet we believe 
that ``knowingly'' also address the content of the message, which 
should mitigate the concern by not permitting other organizations to 
specifically target such individuals with marketing that touts the 
ability to make another plan choice via the OEP.
    Comment: A commenter stated that implementing these marketing 
limitations could prevent a plan from sending marketing mailings to 
individuals who are not enrolled in a plan, but would otherwise be 
eligible (for example, age-ins). The commenter states that it is 
important to note that a purchased mail list could not accurately 
exclude individuals already enrolled in a Medicare Advantage plan. The 
commenter also asked if there could be exceptions to such a prohibition 
for marketing mailings intended to reach

[[Page 16632]]

individuals eligible to enroll in an MA plan outside of using the OEP 
election period (for example, a targeted age-in mailing).
    Response: The intent of the guidance is not to restrict plans' 
ability to use mailings or other marketing aimed at individuals aging 
into the Medicare program who have not yet made an enrollment decision. 
Such marketing would focused on the fact that these age-ins are a 
entering (or have entered) the Initial Coverage Election Period. In 
this instance, if a plan buys a list of age-ins and sends general 
marketing mailers to all on the list, but some of those on the list 
have already selected an MA plan during their Initial Coverage Election 
Period, CMS would not consider it knowingly targeting based on the 
content of the message combined with the fact that the plan would have 
no way of knowing that an enrollment decision had already been made. In 
this instance, the content of the marketing must not address or include 
a reference to the OEP or the opportunity to make an additional 
enrollment change during their first 3 months of coverage.
    Comment: A commenter asked how OEP marketing restrictions will 
impact access for dually-eligible members who want to move during that 
time to a FIDE or other highly integrated D-SNP. The commenter stated 
that CMS should also allow marketing to dually eligible beneficiaries 
for integrated FIDE and D-SNPs during the OEP.
    Response: CMS does not intend the restriction of OEP marketing to 
impact any D-SNP marketing. Barring information to the contrary, such 
marketing appears aimed at dually eligible individuals who are using 
the Part D SEP that is available to dually-eligible beneficiaries other 
LIS eligible individuals, rather than use of the OEP, for changing 
enrollment. This would indicate that the plan is not knowingly 
targeting those in the OEP, which is what the rule, as proposed and 
finalized, prohibits.
    Comment: A commenter expressed concern that an organization could 
use their Medigap line of business using a generic marketing line of, 
``not happy with your plan, change now'' to generate leads. This would 
generate inquiries from those in a MA plan, at which point the company 
can steer the conversation to their MA products. The commenter 
suggested that, if CMS is going to offer the open enrollment window, 
CMS should allow marketing in order to keep the playing field equal.
    Response: While veiled by the use of Medigap, CMS would still 
consider the situation described by the commenter as targeted marketing 
performed by the MA organization, if the intent is to get those in the 
OEP to switch MA plans rather than actually marketing a Medigap plan. 
CMS does not believe the answer is to allow marketing across the board, 
as that would only exacerbate the concern and conflict with the 
statute.
    Comment: A commenter asked if it is possible that during the Open 
Enrollment Period a beneficiary may request marketing materials from 
different plans if they were unhappy with their plan and wanted to 
switch. This information would inform them about their choices.
    Response: The statute clearly prohibits unsolicited marketing. CMS 
agrees that providing marketing materials and other information in 
response to a request from a beneficiary is allowed under this final 
rule as it is at the beneficiary's request and hence not unsolicited. 
To address this, we have updated the regulatory language in the final 
rule to specifically state unsolicited.
    Comment: A commenter requested a clarification if this also 
includes marketing to beneficiaries aging into Medicare.
    Response: The exclusion is directed to those eligible for the OEP, 
including newly eligible enrollees. For more information about the OEP, 
we direct readers to section II.B.1 of this final rule.
    Comment: A commenter asked if Medicare Advantage plans that have 
achieved a 5-Star plan rating are allowed to market to beneficiaries 
all year round. The commenter also asked if CMS will be allowing an 
exception to the statutory requirements of The 21st Century Cures Act 
to allow 5-Star plans year round marketing.
    Response: With the exception of targeted marketing to those in the 
OEP and marketing prior to October 1 for the next contract year, all 
plans may market year round. What distinguishes 5-Star plans is that 
they may also enroll year round pursuant to the SEP we have adopted 
under our authority at Sec. Sec.  422.64(b)(4) and 423.38(c), which 
could make marketing year round more advantageous and effective. 
However, 5-Star plans may not target those in the OEP; we believe that 
5-star plans would not need to target enrollees in the OEP, however, 
because the beneficiary could enroll in a 5-star plan at any time 
during the year as a result of the plan's 5-Star status. To that point, 
CMS believes that a 5-Star plan marketing its 5-Star status and the 
ability to enroll year round does not prove that the MA organization is 
knowingly targeting those who may also be eligible for the OEP.
    Comment: Several commenters expressed concern with brokers' 
activities, with a commenter stating the OEP should not be a time for 
aggressive marketing tactics or a time in which brokers are 
incentivized to promote beneficiaries to switch plans. Several 
commenters suggested that CMS should consider monitoring for churn of 
beneficiaries among multiple plans and possible beneficiary confusion 
during the OEP. Similarly, another commenter asked how this will be 
enforced and where a beneficiary should report marketing abuse.
    Response: CMS agrees with the commenter that the OEP should not be 
a time for plans and brokers to aggressively market. Further, CMS 
believes this very concern is what prompted Congress to include the OEP 
marketing restrictions in the statute. CMS will monitor for violations 
of the prohibition of knowingly marketing to beneficiaries in the OEP 
and take appropriate compliance or enforcement action. CMS encourages 
beneficiaries to report any abusive, confusing or misleading marketing 
practices by plans, agents and brokers by contacting contact 1-800-
Medicare. In addition, we encourage reports of potential violations of 
this requirement.
    Comment: A commenter asked that education about this prohibition to 
be targeted to all related industries and interest groups so that all 
entities that may target this vulnerable population will understand the 
law and the consequences for knowing violations.
    Response: CMS agrees that compliance with this provision is the 
responsibility of plans and their first tier, related and downstream 
entities, including agents and brokers. CMS will include additional 
sub-regulatory guidance on this change in the law and reminds plans 
that they are responsible for the activities of their downstream 
entities, including agents and brokers.
    Comment: CMS received a number of comments requesting the agency to 
define ``unsolicited marketing'' as it appears in the statute.
    Response: We do not believe that is necessary and do not adopt a 
definition of the phrase in this final rule. CMS believes the intent of 
Congress was for plain and ordinary meaning of those words to apply, 
consistent with CMS's existing guidance on the prohibition on 
unsolicited direct contact required by section 1851(j)(1)(A) of the 
Act.
    After considering these comments, we are finalizing the proposed 
changes related to marketing and communications requirements as 
proposed with some modifications:

[[Page 16633]]

    We are finalizing the new definitions proposed at Sec. Sec.  
422.2260 and 423.2260 with corrections to the list of exclusions from 
marketing materials (as noted in section II.B.5.b) to exclude 
disclosures required by Sec. Sec.  422.111 and 423.128 unless CMS 
directs otherwise and to exclude materials specifically designated by 
CMS as not meeting the definition of the proposed marketing definition 
based on their use or purpose. We are also finalizing technical and 
editorial corrections to the text, including the removal of the 
incorrect paragraph designations in Sec.  423.2260 and alignment of the 
text in Sec. Sec.  422.2260 and 423.2260.
    We are finalizing the amendment to Sec. Sec.  422.2262(d) and 
423.2262(d), the revisions to Sec. Sec.  422.2264 and 423.2264, and the 
revisions to Sec. Sec.  422.2268 and 423.2268 as substantially as 
proposed, with modifications in paragraph (a)(7) that the translation 
provision is applicable to ``vital documents'' instead of to documents 
specified by CMS and in paragraph (b)(10) to add the modifier 
``unsolicited'' before the phrase ``marketing materials.''
    We are finalizing as proposed the technical amendments described in 
section II.B.5.d of this final rule with modifications in Sec. Sec.  
422.62(b)(3)(B)(ii) and Sec.  423.38(c)(8)(i)(C) to clarify that the 
special enrollment period is available when the sponsoring organization 
``(or its agent, representative, or plan provider) materially 
misrepresented the plan's provisions in communications as outlined in 
subpart V of this part.'' These technical amendments are necessary 
because after we published the proposed rule, we discovered that our 
proposed change limited this authority to only written communications. 
This was not our intent. In addition, among the minor edits to improve 
the regulation text in subpart V of parts 422 and 423, we are 
finalizing a correction to the internal cross-reference in Sec. Sec.  
422.2274 and 423.2274 to cite to paragraph ``(b)(2)(iii)'' instead of 
``(b)(3)(iii)'' in newly redesignated paragraph (b)(2)(ii)(A).
6. Lengthening Adjudication Timeframes for Part D Payment 
Redeterminations and IRE Reconsiderations (Sec. Sec.  423.590 and 
423.636)
    Sections 1860D-4(g) and (h) of the Act require the Secretary to 
establish processes for initial coverage determinations and appeals 
similar to those used in the Medicare Advantage program. In accordance 
with section 1860D-4(g) of the Act, Sec.  423.590 establishes Part D 
plan sponsors' responsibilities for processing redeterminations, 
including adjudication timeframes. Pursuant to section 1860D-4(h) of 
the Act, Sec.  423.600 sets forth the requirements for an independent 
review entity (IRE) for processing reconsiderations.
    We proposed changes to the adjudication timeframe for Part D 
standard redetermination requests for payment at Sec.  423.590(b) and 
the related effectuation provision Sec.  423.636(a)(2). Specifically, 
we proposed to change the timeframe for issuing decisions on payment 
redeterminations from 7 calendar days from the date the plan sponsor 
receives the request to 14 calendar days from the date the plan sponsor 
receives the request. This proposed 14-day timeframe for issuing a 
decision related to a payment request will also apply to the IRE 
reconsideration pursuant to Sec.  423.600(d). We did not propose to 
make changes to the existing requirements for making payment. When 
applicable, the Part D plan sponsor must make payment no later than 30 
days from receipt of the request for redetermination, or the IRE 
reconsideration notice, respectively.
    We received the following comments and our responses follow:
    Comment: We received many comments, primarily from plans, 
expressing support for the proposed change to the payment adjudication 
timeframe from 7 to 14 calendar days at the redetermination and 
reconsideration levels. Commenters noted that, because payment requests 
involve an enrollee who has already received the medication, allowing 
the plan 14 calendar days (instead of 7 calendar days) to process the 
payment request would allow the plan to prioritize requests for 
coverage where the enrollee has not yet accessed the prescription drug, 
particularly during times when the plan sponsor is experiencing a high 
volume of requests. Commenters noted that this would ensure adequate 
resources are directed to processing more time-sensitive pre-service 
requests where the beneficiary has not yet obtained the drug. 
Commenters also expressed support for this proposal for the reason that 
it could reduce the number of unfavorable decisions made due to 
insufficient information to support the request. Some of these 
commenters requested that CMS consider lengthening the timeframe for 
other decisions, such as coverage determinations.
    Response: We appreciate the commenters' support for the proposal 
and agree that allowing an additional 7 calendar days to process 
payment requests will result in a more thorough review of the payment 
request which may lead to fewer unfavorable decisions due to 
insufficient information to support the request. We also agree that 
affording more time for payment requests will permit plan sponsors to 
better prioritize requests for coverage; this will help plan sponsors 
efficiently allocate resources to more time-sensitive pre-service 
requests where the beneficiary has not yet obtained the drug.
    Comment: Several commenters expressed concern about the effect of 
this proposed change on beneficiaries and encouraged CMS to keep the 
existing adjudication deadline for plan sponsors and the IRE. Some 
commenters noted concern about the increased financial burden this 
proposal would place on enrollees given that many Medicare 
beneficiaries are on limited budgets. A commenter noted that enrollees 
who wait up to a month to learn that their case has been decided 
against them would have to either pay for the drug out of pocket again 
or get a prescription for an alternative drug within a short time 
period. Commenters believed these options jeopardize enrollees' access 
to needed drugs. A commenter asked for clarification on when payment 
must be made to an enrollee if a favorable decision is issued.
    Response: We'd like to clarify that, contrary to the statement of a 
commenter, enrollees will not have to wait ``up to a month'' to receive 
a plan sponsor's redetermination decision on a request for payment. Our 
proposal was to extend the adjudication timeframe for payment cases 
from 7 to 14 calendar days. While we acknowledge that extending the 
adjudication timeframe for 7 calendar days at the redetermination and 
IRE level increases the length of time the enrollee will wait for a 
decision, we do not believe that an additional 7 calendar days to 
receive notice on a payment request will create access issues for 
enrollees, given that the enrollee has already received the drug. We 
believe the additional 7 calendar days plan sponsors and the IRE will 
have to gather information and process these requests could be 
beneficial to enrollees because decisions are likely to be informed 
which, in turn, will potentially result in fewer payment decisions 
being denied and subject to further appeal.
    The change we proposed is limited to payment requests where the 
enrollee has already received the drug, so we believe there is minimal 
to no risk that an additional 7 calendar days to process these requests 
will adversely affect the health of an enrollee who has requested

[[Page 16634]]

reimbursement. As we noted in the proposed rule, when coverage is 
approved, the plan must make payment to the affected enrollee no later 
than 30 calendar days after the date the plan sponsor receives the 
redetermination request. In other words, the change to a 14 calendar 
day adjudication timeframe will not change the time in which the plan 
sponsor has to issue payment to the enrollee.
    We believe the proposed change to a 14 calendar day timeframe is an 
appropriate balance between plan sponsors' need to obtain information 
to thoroughly evaluate a payment request and the interest of enrollees 
in receiving prompt notice on a payment request. We believe the 
proposed change will enhance efficiency in the adjudication of these 
types of cases, reduce adverse payment decisions, and reduce the number 
of late cases that have to be auto-forwarded to the IRE. As previously 
noted, the proposed change to a 14-calendar day adjudication timeframe 
will also apply to payment requests processed by the Part D IRE. 
Because the enrollee has received the prescription drug that is subject 
to the payment request, we disagree with commenters who believe the 
additional time will needlessly delay access to treatment. We believe 
that allowing plan sponsors and the IRE additional time to obtain 
necessary documentation and thoroughly review the case will be 
beneficial overall and that the advantages offset the additional 7 
calendar days an enrollee may have to wait for a decision on a payment 
request.
    Comment: A commenter noted that there's no evidence to support the 
proposed change and that, instead of increasing the timeframe, CMS 
should enforce current timeframes and delay implementation of this 
change until the extended timeframe can be tied to specific enhanced 
performance standards, with substandard performance resulting in 
financial consequences for plans. Another commenter noted that new 
protocols will need to be issued and that timeliness calculations for 
data universe fields will need to be adjusted.
    Response: CMS has received significant feedback from plan sponsors 
regarding the difficulties encountered with receiving information 
necessary to process requests in a timely manner. CMS has also received 
feedback that there should be greater consistency in the appeals 
process. As noted in the proposed rule, implementing a 14 calendar day 
timeframe for redeterminations and IRE reconsiderations involving 
payment requests will establish consistency with the timeframe for 
coverage determinations that involve a request for payment. Since these 
are cases where the enrollee has already obtained the drug, we believe 
it's reasonable to afford plan sponsors and the IRE additional time to 
obtain the documentation necessary to support a favorable decision on 
the request. We acknowledge that audit protocols and related materials 
will need to be modified to comport with the new 14 calendar day 
payment timeframe for redeterminations in order to measure plan 
performance in meeting this timeframe. We agree with the commenter that 
plan sponsors' performance in meeting this new timeframe for payment 
redeterminations should be evaluated, but disagree that implementation 
of the new timeframe should be delayed.
    Comment: A commenter that expressed support for the proposal noted 
that CMS should align the coverage determination payment timeline with 
the existing redetermination timeline of 30 calendar days.
    Response: We appreciate the commenter's support for the proposal, 
but wish to clarify that the existing redetermination timeframe is 72 
hours for expedited requests and 7 calendar days for standard 
redetermination requests.
    After consideration of the public comments received, we are 
finalizing this provision as proposed.
7. Elimination of Medicare Advantage Plan Notice for Cases Sent to the 
IRE (Sec.  422.590)
    In accordance with section 1852(g) of the Act, our current 
regulations at Sec. Sec.  422.578, 422.582, and 422.584 provide MA 
enrollees with the right to request reconsideration of a health plan's 
initial decision to deny Medicare coverage. Pursuant to Sec.  422.590, 
when the MA plan upholds initial payment or service denials, in whole 
or in part, it must forward member case files to an independent review 
entity (IRE) contracted with CMS to review plan-level appeals. Pursuant 
to Sec.  422.590(f), MA plans must notify enrollees upon forwarding 
cases to the IRE.
    We proposed to revise Sec.  422.590 to remove paragraph (f) to 
delete the requirement for plans to notify enrollees upon forwarding 
cases to the IRE. The Part C IRE will continue to be contractually 
responsible for notifying enrollees upon receipt of cases from MA 
plans. We proposed this change to ease burden on MA plans without 
compromising notice to the enrollee (or other party) of the progress of 
the appeal and to allow MA plans to redirect resources to time-
sensitive activities, such as review of coverage requests and improved 
efficiency in appeals processing and provision of health benefits.
    We received the following comments and our responses follow:
    Comment: We received many comments expressing strong support for 
our proposal to eliminate the MA notice when plans forward cases to the 
Part C IRE. A majority of commenters agreed that the current MA plan 
notice requirement is duplicative and unnecessary, as the Part C IRE 
also is responsible for notifying an enrollee that it has received the 
case. These commenters indicated that the redundant notice is costly, 
elimination of this unnecessary notice will reduce beneficiary 
confusion, and the proposed change is in line with current paperwork 
reduction initiatives.
    Response: We agree with the commenters that this proposal will ease 
unnecessary administrative burden on MA plans while favorably impacting 
enrollees. We expect this change to increase beneficiary understanding 
and allow plans to redirect resources previously allocated to issuing 
this notice to more patient-care related, time-sensitive activities. We 
appreciate the comment that this proposal is consistent with the 
agency's Patients Over Paperwork initiative to reduce paperwork and 
agree the change will benefit beneficiaries, plans and providers.
    Comment: A few commenters suggested CMS implement additional 
measures related to the proposal--such as setting a timeframe by which 
the IRE must acknowledge receipt of a member's case (for example, 
within 5 days).
    Response: CMS agrees an enrollee must receive timely notice when 
his or her case is forwarded to the Part C IRE. We will continue 
analyzing notification timeframes as we endeavor to ensure the IRE's 
notification process is timely and efficient. We note that a regulatory 
change would not be necessary as CMS contracts with the Part C IRE and 
may implement changes to certain parts of the IRE's workload and 
deadlines through that contract.
    Comment: Some commenters recommended other programmatic 
improvements--including issuance of new protocols used during program 
audits or the timeliness monitoring project to delete the applicable 
timeliness calculations for this notice. Other commenters recommended 
we consider electronic issuance of IRE notifications to enrollees.

[[Page 16635]]

    Response: While the commenter's suggestions are outside the scope 
of this rule, we appreciate these comments and will ensure the 
suggestions are appropriately conveyed.
    Comment: Some commenters generally support this change, but 
requested additional clarification. For example, a few commenters 
inquired whether MA plans may voluntarily continue the current practice 
of notifying their members upon forwarding cases to the IRE. These 
commenters indicated providing notices to members on an optional basis 
could prevent increased member inquiries. Another commenter sought 
clarification regarding Appendix 10 of Chapter 13 of the Medicare 
Managed Care manual--a sample (model) notice (``Notice of Appeal 
Status'') provided to plans for the purpose of informing enrollees 
whose cases are forwarded to the IRE for review. Another commenter 
indicated Appendix 10 includes redundant information the IRE is 
expected to provide. While another commenter inquired whether MA plans 
would continue to have the full adjudication timeframe to forward the 
denied case to the IRE or if the MAO's processing timeframe would be 
reduced.
    Response: We would like to clarify that this change does not 
preclude plans from continuing to notify enrollees upon forwarding 
cases to the IRE; plans are permitted to continue the current practice 
of notifying members upon forwarding case files to the IRE if they 
choose to do so. We will no longer expect plans to use CMS' Model 
Notice of Appeal Status (Appendix 10 of Chapter 13 of the Medicare 
Managed Care manual) after the end of the 2018 plan year. By removing 
the requirement that MA plans must notify beneficiaries upon forwarding 
cases to the Part C IRE, we no longer expect plans to use CMS' Model 
Notice of Appeal Status; thus, inclusion of duplicative language on the 
model notice is unnecessary as well as moot. While plans opting to 
notify members upon forwarding cases to the IRE may continue using CMS' 
model notice, CMS will no longer expect MA plans to utilize the current 
model notice. Changes to processing timeframes are outside the scope of 
this rule but we note that Sec.  422.590(a), (b) and (d), which control 
the timeframe for service, payment and expedited reconsiderations, are 
not being amended in this rule; those provisions require that an MA 
plan prepare a written explanation and send the case file to the 
independent entity contracted by CMS as expeditiously as the enrollee's 
health condition requires, but no later than the timeframe specific to 
the type of reconsideration.
    Comment: A few commenters objected to this proposal, indicating 
that MA enrollees expect to receive notices from their plans and would 
find notices from the IRE confusing. Another commenter asserted the 
provision of this notice is not a burden on MA plans. A commenter 
anticipated the Part C IRE's notification would not be as timely as 
plan notification and some asked CMS to eliminate IRE notice instead of 
eliminating MA plan notice.
    Response: We disagree with the commenters. While MA enrollees 
expect to receive material from their plans, we believe that enrollees 
who are awaiting appeals decisions anticipate notification from the 
Medicare IRE to confirm the IRE has actually received the case and what 
the beneficiary can expect next. Mandatory materials sent by MA plans 
to enrollees, such as Medicare's integrated denial notice, describe the 
IRE-level of review following denial at the MA plan reconsideration 
stage. Additionally, even before this change was proposed, the IRE was 
required to provide a notice to enrollees. We also believe 
beneficiaries welcome knowing an independent, outside entity, under 
contract with Medicare, is reviewing their health plan's initial 
coverage denial. As set forth in our regulatory impact analysis, we 
believe that providing this notice is a burden for MA plans and an 
unnecessary one at that. Eliminating this duplicative notice will 
relieve an unnecessary burden on MA plans. We will continue to work 
closely with the IRE--through CMS' contract oversight and evaluation 
efforts and by promulgating additional contractor guidance, as needed--
to ensure Medicare beneficiaries nationwide receive timely notice in a 
consistent form and manner.
    After consideration of the public comments received, we are 
finalizing this amendment to delete paragraph (f) and redesignate the 
subsequent paragraphs of Sec.  422.590 as proposed.
8. E-Prescribing and the Part D Prescription Drug Program; Updating 
Part D E-Prescribing Standards
a. Legislative Background
    Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended title XVIII 
of the Act to establish a voluntary prescription drug benefit program 
at section 1860D-4(e) of the Act. Among other things, these provisions 
required the adoption of Part D e-prescribing standards. Prescription 
Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations 
offering Medicare Advantage-Prescription Drug Plans (MA-PD) are 
required to establish electronic prescription drug programs that comply 
with the e-prescribing standards that are adopted under this authority. 
There is no requirement that prescribers or dispensers implement e-
prescribing. However, prescribers and dispensers who electronically 
transmit prescription and certain other information for covered drugs 
prescribed for Medicare Part D eligible beneficiaries, directly or 
through an intermediary, are required to comply with any applicable 
standards that are in effect.
    For a further discussion of the statutory basis for this rule and 
the statutory requirements at section 1860D-4(e) of the Act, please 
refer to section I. (Background) of the E-Prescribing and the 
Prescription Drug Program proposed rule, published February 4, 2005 (70 
FR 6256).
b. Regulatory History
    Transaction standards are periodically updated to take new 
knowledge, technology, and other considerations into account. As CMS 
adopted specific versions of the standards when it adopted the 
foundation and final e-prescribing standards, there was a need to 
establish a process by which the standards could be updated or replaced 
over time to ensure that the standards did not hold back progress in 
the industry. We discussed these processes in the November 7, 2005 
final rule (70 FR 67579).
    The discussion noted that the rulemaking process will generally be 
used to retire, replace, or adopt a new e-prescribing standard, but it 
also provided for a simplified ``updating process'' when a non-HIPAA 
standard could be updated with a newer ``backward-compatible'' version 
of the adopted standard. In instances in which the user of the later 
version can accommodate users of the earlier version of the adopted 
non-HIPAA standard without modification, it noted that notice and 
comment rulemaking could be waived, and the use of either the new or 
old version of the adopted standard would be considered compliant upon 
the effective date of the newer version's incorporation by reference in 
the Federal Register. We utilized this streamlined process when we 
published an interim final rule with comment on June 23, 2006 (71 FR 
36020). That rule recognized NCPDP SCRIPT 8.1 as a backward compatible 
update to the NCPDP SCRIPT 5.0 for the specified transactions, thereby 
allowing

[[Page 16636]]

for use of either of the two versions in the Part D program. Then, on 
April 7, 2008, we used notice and comment rulemaking (73 FR 18,918) to 
finalize the identification of the NCPDP SCRIPT 8.1 as a backward 
compatible update of the NCPDP SCRIPT 5.0, and, effective April 1, 
2009, retire NCPDP SCRIPT 5.0 and adopt NCPDP SCRIPT 8.1 as the 
official Part D e-prescribing standard for the specified transactions. 
On July 1, 2010, CMS utilized the streamlined process to recognize 
NCPDP SCRIPT 10.6 as a backward compatible update of NCPDP SCRIPT 8.1 
in an interim final rule (75 FR 38026). We finalized the NCPDP SCRIPT 
10.6 as a Backward Compatible Version of NCPDP SCRIPT 8.1, and retired 
NCPDP SCRIPT 8.1 and adopted the NCPDP SCRIPT 10.6 as the official Part 
D e-Prescribing Standard for the specified transactions in the CY 2013 
Physician Fee Schedule, effective November 1, 2013. For a more detailed 
discussion, see the CY 2013 PFS final rule (77 FR 69329 through 69333).
c. Proposed Adoption of NCPDP SCRIPT Version 2017071 as the Official 
Part D E-Prescribing Standard for Certain Specified Transactions, 
Retirement of NCPDP SCRIPT 10.6, Proposed Conforming Changes Elsewhere 
in Sec.  423.160, and Correction of a Historic Typographical Error in 
the Regulatory Text Which Occurred When NCPDP SCRIPT 10.6 Was Initially 
Adopted
    We proposed to adopt the NCPDP SCRIPT 2017071 as the official Part 
D e-prescribing standard for certain specified transactions, and to 
retire the current standard (NCPDP SCRIPT version 10.6). Unlike past 
updates to the part D e-prescribing standards, as version 2017071 is 
not fully backward compatible with version 10.6, we were unable to 
propose a transition period in which use of either the new or old 
version of the adopted standard would be considered compliant upon the 
effective date of the newer version's incorporation by reference in the 
Federal Register. While moving directly from one version to another may 
present challenges, we believe that the new version provides the 
opportunity to standardize additional transactions over what was 
possible with the current version, and, as noted in our proposed rule, 
we believe that those added transactions and the improvements to the 
existing transactions would, among other things, improve communications 
between the prescriber and dispensers.
    Specifically, in addition to the transactions for which prior 
versions of NCPDP SCRIPT were adopted (as reflected in the current 
regulations at 423.160(b)), we proposed to require use of NCPDP SCRIPT 
2017071 for the following new transactions:
     Prescription drug administration message,
     New prescription requests,
     New prescription response denials,
     Prescription transfer message,
     Prescription fill indicator change,
     Prescription recertification,
     Risk Evaluation and Mitigation Strategy (REMS) initiation 
request,
     REMS initiation response, REMS request, and
     REMS response.
    To implement these proposed policies, we proposed to revise Sec.  
423.160(b)(1)(iv) so as to limit its application to transactions before 
January 1, 2019 and add a new Sec.  423.160(b)(1)(v). As amended, the 
requirement at Sec.  423.160(b)(1)(v) would identify the standards that 
will be in effect for the named transactions on or after January 1, 
2019.
    We also proposed adoption of NCPDP SCRIPT 2017071 as the official 
Part D e-prescribing standard for the medication history transaction at 
Sec.  423.160(b)(4) and proposed to retire NCPDP SCRIPT versions 8.1 
and 10.6 for medication history transactions transmitted on or after 
January 1, 2019. Furthermore, we proposed to amend Sec.  423.160(b)(1) 
by modifying Sec.  423.160(b)(1)(iv) to limit usage of NCPDP SCRIPT 
version 10.6 to transactions before January 1, 2019, and proposed to 
add Sec.  423.160(b)(1)(v) to require use of NCPDP SCRIPT Version 
2017071 on or after January 1, 2019. Furthermore, we proposed to amend 
Sec.  423.160(b)(2) by adding Sec.  423.160(b)(2)(iv) to name NCPDP 
SCRIPT Version 2017071 for the applicable transactions. Finally, we 
proposed to incorporate NCPDP SCRIPT version 2017071 by reference in 
our regulations at 42 CFR 423.160(c)(1)(vii).
    We also solicited comments regarding the impact of these proposed 
effective dates on industry and other interested stakeholders, and 
proposed a technical correction of a prior regulation. On July 30, 
2012, we published a regulation (CMS-1590-P), which established version 
10.6 as the Part D e prescribing standard effective March 1, 2015 for 
the electronic transactions listed in Sec.  423.160(b)(2)(iii). 
However, despite the preamble discussion's clear adoption of NCPDP 
SCRIPT 10.6 as the Part D e-prescribing standard for the listed 
transactions, due to a typographical error, Sec.  423.160(b)(1)(iv) of 
the regulation text erroneously cross-referenced the standard named in 
(b)(2)(ii) (NCPDP SCRIPT 8.1), rather than that named in (b)(2)(iii) 
(NCPDP SCRIPT 10.6). We proposed a correction of this typographical 
error by changing the reference at Sec.  423.160(b)(1)(iv) to reference 
(b)(2)(iii) instead of (b)(2)(ii).
    We received the following comments and our response follows:
    Comment: Many commenters urged CMS to adopt the NCPDP SCRIPT 
electronic Prior Authorization (ePA) transaction for the Part D 
program. They note that ePA is more efficient for prescribers, 
pharmacies, plans, and patients.
    Response: We understand that Part D plans are anxious to adopt the 
NCPDP SCRIPT ePA standard. However, the HIPAA standard transaction for 
prior authorization does not accept the NCPDP SCRIPT ePA standard. In 
order for CMS to adopt the 2017071 for use in the Part D e-prescribing 
program, the HIPAA standard transaction would need to be modified to 
allow for use of an NCPDP SCRIPT ePA standard. Such HIPAA changes will 
need to occur in a Departmental regulation, and cannot be effectuated 
in a CMS regulation. If the HIPAA regulations are modified, CMS will be 
able to propose adoption of the NCPDP SCRIPT ePA for use in the Part D 
e-prescribing program.
    Comment: We received a variety of comments concerning the amount of 
lead time needed to adopt a new standard. Some commenters requested 
that CMS' proposed time frame for implementing the new NCPDP SCRIPT 
version be extended. Several commenters expressed the desire to begin 
using the new standard immediately after the rule is finalized but 
wanted to accommodate other plans who were not ready to adopt the 
standard. These commenters favored a gradual transition whereby plans 
could opt to adopt Version 2017017 voluntarily when the final rule is 
published or be permitted to use Version 10.6 for 18 to 24 months 
thereafter. A commenter asked CMS not to require implementation of the 
new NCPDP SCRIPT version on a Federal holiday or in January, since 
plans would be in the midst of open season.
    Response: Comments have persuaded us that it will take some plans 
more time to update the standard than we had previously anticipated. We 
also appreciate that many plans would like to begin using the new 
standard immediately. Given these two viewpoints we would have liked to 
have proposed a phased-in transition for plans to use when implementing 
the new NCPDP SCRIPT version. However, because we understand that 
Version 2017017 is not backwards compatible to Version 10.6, this is 
not a feasible option, necessitating a hard cut off point. We also 
understand that some industry partners would prefer not to

[[Page 16637]]

implement the new NCPDP SCRIPT version on January 1 however, Section 
1860D-12(f)(2) prohibits the implementation of ``significant'' 
regulatory requirements on a prescription drug plan other than at the 
beginning of the year. Therefore, in order to ensure that all Part D 
plans, prescribers and dispensers are able to make a successful 
transition to the new part D e-prescribing standard, and that the 
transition is compliant with statutory requirements, we are delaying 
the implementation date until January 1, 2020 subject to the additional 
conditions regarding certain ONC standards discussed infra. This will 
provide affected organizations additional time to develop and test the 
new requirements.
    Comment: A few commenters noted that the use of medication history 
transactions would help the industry address opioid overuse and asked 
that CMS add them to the list of named transactions.
    Response: The adoption of the 2017071 version of the NCPDP SCRIPT 
medication history transaction was proposed in the final rule, but, as 
was done historically, we proposed to codify it separately from the 
other transactions at Sec.  423.160(c)(1)(vii). Furthermore, we 
proposed to incorporate the 2017071 proposed transactions at Sec.  
423.160(b)(4)(ii), which we believe would include RxHistory Request and 
RxHistory Response. As a result of positive feedback to these 
proposals, subject to the additional conditions regarding certain ONC 
standards discussed infra, we do intend to finalize these proposals 
effective January 1, 2020.
    Comment: A commenter stated that although the Password Change 
Transaction remains in the 2017017 NCPDP SCRIPT Standard, its use is 
not universally supported and that some payers have replaced these 
transactions with alternative enhanced security authentication 
measures. The commenter asked CMS to remove the Password Change 
Transaction from the final rule.
    Response: We appreciate the comment, and understand that some 
industry partners are exploring different procedures for processing 
password resets which may obviate the need for the NCPDP SCRIPT 
standard Password Change Transaction. Given the evolution of these 
processes and the importance of ensuring up-to-date security processes 
for sensitive health information, we have removed the Password Change 
Transaction from the final rule pending further review.
    Comment: A commenter correctly noted that the proposed rule 
mentions some of the changes in the new standard, but it doesn't 
mention all of them. Specifically, the commenter asked whether a new 
field for language access is included in the transactions we are 
adopting from version 2017071.
    Response: The language field was added to a prior NCPDP SCRIPT 
standard, Version 10.11, and has not been removed in any subsequent 
updates. Therefore the language field continues to be included in all 
versions after 10.11 including Version 2017017. That said, we did not 
propose to adopt NCPDP SCRIPT 2017071 for that transaction in the 
context of the part D e-prescribing program, so the public is free 
absent other program standards to the contrary to convey such content 
using whatever standard or means they wish to use.
    Comment: A few commenters noted that this NPRM proposed use of a 
different version of the NCPDP SCRIPT standard in Part D than is used 
in other programs managed by HHS. These commenters expressed concern 
that this may create confusion in the industry. Specifically, 
commenters noted ONC's Electronic Health Record Certification Program 
which currently utilizes the NCPDP SCRIPT Version 10.6.
    Response: HHS has a history of harmonizing NCPDP SCRIPT versions 
across the various programs which it manages. For example, please see 
the final rule titled, ``Health Information Technology: Standards, 
Implementation Specifications, and Certification Criteria for 
Electronic Health Record Technology, 2014 Edition; Revisions to the 
Permanent Certification Program for Health Information Technology'' (77 
FR 54163, 54198-54200), in which HHS aligned its programs to prior 
versions of the part D e-prescribing standard. We anticipate similar 
action in this context, and are confident that the necessary proposals 
are currently under development. Each Agency and Office within the 
Department adheres to a different regulatory schedule so that 
regulations are published at different intervals. Nevertheless, with 
the adoption of this version of the NCPDP SCRIPT standard for Part D 
prescribing, HHS remains committed to continued agency coordination to 
ensure alignment, interoperability, and the adoption of the most 
appropriate standard and version for each use case. We are therefore 
modifying our proposal to adopt NCPDP SCRIPT 20170171 by conditioning 
the effective date of our adoption of the proposed on corresponding 
regulatory action being taken to update the Health IT Certification 
Criteria to NCPDP SCRIPT 2017071 for the named transactions effective 
the January 1, 2020 implementation date.
    Comment: A commenter asked whether stakeholders are required to 
adopt all transactions within the NCPDP SCRIPT standard or only those 
which are applicable to their business purpose.
    Response: PDP sponsors and MA organizations offering MA-PD are 
required to establish electronic prescription drug programs that comply 
with adopted e-prescribing standards. Other organizations such as 
prescribers or dispensers only need to implement the adopted 
transactions under that standard that they use in their part D e-
prescribing operations. If there are any questions on which 
transactions apply to a business case, organizations should consult the 
Business process descriptions documented within the version 2017071 
NCPDP SCRIPT standard implementation guide.
    Comment: A commenter pointed out that the named transactions are 
inconsistent with the current implementation guide Version 20170171. 
The commenter asked that CMS reflect the updated nomenclature and 
transaction types throughout.
    Response: We appreciate this comment, and acknowledge that NCPDP 
made what we understand to be non-substantive changes to their 
nomenclature. The final regulatory text therefore reflects those non-
substantive changes to the names of the transactions from those which 
appeared in our proposed regulation. We have amended the regulatory 
text in the final rule to adopt the updated names.
    Comment: A commenter suggested that we defer naming the REMS-
related transactions until the Risk Evaluation and Mitigation 
Strategies (REMS) program transactions are proven compared to other 
standards before mandating the 2017071 version of the NCPDP SCRIPT 
standard for REMS usage.
    Response: We disagree, and have included the REMS-related 
transactions in our final rule. The FDA designed the REMS program to 
mitigate serious drug-related risks associated with the some 
medications, a goal which CMS whole heartedly supports. Use of the REMS 
transactions will allow REMS requirements to be completed within 
existing healthcare workflows, which will be critical as the REMS 
program includes more medications. Absent these transactions the 
successful management of the REMS would require manual intervention for 
pharmacists and prescribers. Manual maintenance of REMS program data 
would be

[[Page 16638]]

particularly difficult because each REMS has specific safety measures 
unique to the risks associated with a particular drug. For these 
reasons CMS strongly supports using electronic processes to support 
this important drug safety initiative.
    Comment: A commenter recommended that CMS immediately adopt the 
updated NCPDP Telecommunication Standard D.0 which allows the 
conditional use of the field ``Quantity Prescribed'' to communicate the 
actual quantity prescribed by the provider. The commenter stated that 
adoption of the field would promote more appropriate beneficiary access 
to controlled substances, reduce the industry's administrative burden, 
and eliminate the misidentification of partially-filled prescriptions 
as refills.
    Response: CMS is aware of the concerns noted. The NCPDP 
Telecommunications Standard D.0 was adopted to include specific 
implementation guides, and it is a HIPAA standard, so we'd need to 
await the HIPAA standard changing. As noted above, proposals to modify 
HIPAA transactions are promulgated by the Department, not CMS, under a 
different rule-making authority. This suggestion is therefore outside 
the scope of this rule.
    We received broad support for updating the NCPDP SCRIPT standard to 
Version 2017071, along with concerns about the implementation date and 
technical concerns about the transactions named. Based on comments 
received we are finalizing this provision with modifications and have 
conditionally moved the effective date to January 1, 2020, to give ONC 
time to update its Electronic Health Record certification program to 
the NCPDP SCRIPT 2017071 standard.
Summary and Availability of Incorporation by Reference Material
    The Office of the Federal Register (OFR) has regulations concerning 
incorporation by reference. 1 CFR part 51. For a final rule, agencies 
must discuss in the preamble to the NPR ways that the materials the 
agency proposes to incorporate by reference are reasonably available to 
interested persons or how the agency worked to make the materials 
reasonably available. In addition, the preamble to the final rule must 
summarize the materials.
    Consistent with those requirements CMS has established procedures 
to ensure that interested parties can review and inspect relevant 
materials. The updates to the Part D prescribing standards has relied 
on the NCPDP SCRIPT Implementation Guide Version 2017071 approved July 
28, 2017. Members of the NCPDP may access these materials through the 
member portal at www.ncpdp.org; non-NCPDP members may obtain these 
materials for information purposes by contacting the Centers for 
Medicare & Medicaid Services (CMS), 7500 Security Boulevard, Baltimore, 
Maryland 21244, Mailstop C1-26-05, or by calling (410) 786-3694.
    This regulation codifies adoption of the NDPDP SCRIPT Standard 
Version 2017071, and retirement of the current NCPDP SCRIPT Version 
10.6, as the official electronic prescribing standard for transmitting 
prescriptions and prescription-related information using electronic 
media for covered Part D drugs for Part D eligible individuals.
    The NCPDP SCRIPT standards are used to exchange information between 
prescribers, dispensers, intermediaries and Medicare prescription drug 
plans. Although e-prescribing is optional for physicians and 
pharmacies, the Medicare Part D statute and regulations require drug 
plans participating in the prescription benefit to support electronic 
prescribing, and physicians and pharmacies who elect to transmit e 
prescriptions and related communications electronically must utilize 
the adopted standards. The updated NCPDP SCRIPT standards have been 
requested by the industry and include electronic standards for 
transactions that are commonly used such as the transmittal of new 
prescriptions, changes to existing prescriptions, requests for 
renewals, and transfers of prescriptions between pharmacies. These 
enhancements will provide a number of efficiencies which the industry 
and CMS supports.
9. Reduction of Past Performance Review Period for Applications 
Submitted by Current Medicare Contracting Organizations (Sec. Sec.  
422.502 and 423.503)
    In April 2010, we clarified our authority to deny contract 
qualification applications from organizations that have failed to 
comply with the requirements of a Medicare Advantage or Part D plan 
sponsor contract they currently hold, even if the submitted application 
otherwise demonstrates that the organization meets the relevant program 
requirements. 75 FR 19677. As part of that rulemaking, we established, 
at Sec.  422.502(b)(1) and Sec.  423.503(b)(1), that we will review an 
applicant's prior contract performance for the 14-month period 
preceding the application submission deadline (see 75 FR 19684 through 
19686). We conduct that review in accordance with a methodology we 
publish each year; \76\ to the methodology scores each applicant's 
performance by assigning weights based on the severity of its non-
compliance in several performance categories. Under the annual contract 
qualification application submission and review process we conduct, 
applicants and renewing organizations must submit the application by a 
date, usually in mid-February, announced by us. We proposed to reduce 
the past performance review period from 14 months to 12 months after 
consideration of our experience.
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    We originally established the 14-month review period because it 
covered the time period from the start of the preceding contract year 
through the date on which CMS receives contract applications for the 
upcoming contract year. We believed at the time that the combination of 
the most recent complete contract year and the 2 months preceding the 
application submission provided us with the most complete picture of 
the most relevant information about an applicant's past contract 
performance. Our application of this authority since its publication 
has prompted comments from contracting organizations that the 14-month 
period is too long and is unfair as it is applied. In particular, 
organizations have noted that non-compliance that occurs during January 
and February of a given year is counted against an organization in 2 
consecutive past performance review cycles while non-compliance 
occurring in all other months is counted in only one review cycle. The 
result is that some non-compliance is ``double counted'' based solely 
on the timing of the non-compliance and can, depending on the severity 
of the non-compliance, prevent an organization from receiving CMS 
approval of its application for 2 consecutive years. Rather than 
creating a gap in the look-back period, as we were concerned in 2010, 
75 FR 19685, we now believe a 12-month look-back period provides a more 
accurate period to consider. When we established the 14-month review 
period, we did so based in part on the belief that it was necessary to 
include in the period a full contract year (that is, January through 
December) of performance to be certain that our review captured an 
applicant's most recent full cycle of performance in order to capture 
all relevant aspects of an organization's performance. As we have 
implemented the 14-month review

[[Page 16639]]

period, we have learned that the contract year, as a unit of measure, 
adds little value to our annual analysis. The January-through-December 
period is most significant because it covers the period during which 
the organization must provide approved benefits to its enrollees, but 
it does not truly reflect the schedule under which we make the contract 
compliance and performance determinations that we have adopted as 
factors in the past performance methodology. For example, compliance 
notices, audit reports and star ratings are often by necessity issued 
following the conclusion of a particular contract year. Therefore, an 
accurate review of a contract's past performance, conducted as part of 
the annual application review cycle, does not depend on our being 
certain that the review period covers a full contract year that begins 
two Januarys before an application deadline. As part of an annual 
process, the period need cover only 12 months.
    We continue to believe that an applicant's most recent contract 
performance is important to consider in each review cycle. Therefore, 
we proposed to revise Sec.  422.502(b)(1) and Sec.  423.503(b)(1) to 
reduce the review period from 14 to 12 months. This will effectively 
establish a new review period for every application review cycle of 
March 1 of the year preceding the application submission deadline 
through February 28 (February 29 in leap years) of the year in which 
the application is submitted and will eliminate the counting of 
instances of non-compliance in January and February of each year in 2 
separate application cycles. We also proposed to have this review 
period change reflected consistently in the Part C and D regulation by 
revising both Sec.  422.502(b)(2) and Sec.  423.503(b)(2) to state that 
CMS may deny an application from an existing Medicare Advantage or Part 
D plan sponsor in the absence of a record of at least 12, rather than 
14, months of Medicare contract performance by the applicant. We 
clarified in the proposed rule that our proposal would not change any 
other aspect of our consideration of past performance in the 
application process.
    We received the following comments and our response follows:
    Comment: All commenters expressed support for the reduction of the 
past performance review period from 14 to 12 months.
    Response: We appreciate the statements of support for our proposal.
    Comment: Some commenters urged that the proposed 12-month period 
cover a calendar year (that is, January through December) rather than 
the March through February period that immediately precedes the 
application. These commenters noted that the calendar year review 
period would allow CMS to let potential contract applicants know 
whether CMS would deny their applications based on poor past 
performance before they committed resources to preparing and submitting 
applications.
    Response: As we discussed when we proposed this change, we believe 
it is critical that CMS consider an applicant's most recent record of 
contract performance at the time of the submission of the application 
to CMS in February. The adoption of a calendar year past performance 
period would create an unacceptable gap between the end of the review 
period and the application deadline. Therefore, we will not accept this 
recommendation.
    While we cannot accommodate the recommendation that we adopt a 
calendar year review period, we note that CMS makes past performance 
resources available to organizations that they can use in making the 
decision to invest resources in preparing an application. Each year, 
CMS conducts mid-year performance reviews of contracting organizations 
and share those results with the organizations. While the results of 
such reviews are not final, they give organizations a real sense of how 
CMS views their contract performance to that point in the year. We also 
draft the annual past performance methodology in a way that allows 
organizations to track their own past performance scores throughout the 
year, allowing the organizations to determine, as the year goes on, the 
likelihood that CMS will deny their planned application.
    Comment: A commenter provided a series of recommendations for 
modifications to the methodology CMS adopts each year to evaluate 
applicants' past performance record (for example, changes in weights 
assigned to certain areas of performance, evaluation of performance at 
the contract, rather than organization, level).
    Response: Since these comments do not address the duration of the 
past performance review period, they are outside the scope of our 
proposal. We will take the comments under consideration for review of 
the methodology in the future.
    Based on our review of comments expressing broad support for the 
reduction of the past performance review period, we are finalizing the 
amendments to Sec. Sec.  422.502(b)(1) and (2) and 423.503(b)(1) and 
(2) as proposed.
10. Preclusion List Requirements for Prescribers in Part D and 
Individuals and Entities in MA, Cost Plans, and PACE
a. Part D Provisions
(1) Background
(a) 2014 Final Rule
    On May 23, 2014, we published a final rule in the Federal Register 
titled ``Medicare Program; Contract Year 2015 Policy and Technical 
Changes to the Medicare Advantage and the Medicare Prescription Drug 
Benefit Programs'' (79 FR 29844). Among other things, this final rule 
implemented section 6405(c) of the Affordable Care Act, which provides 
the Secretary with the authority to require that prescriptions for 
covered Part D drugs be prescribed by a physician enrolled in Medicare 
under section 1866(j) of the Act (42 U.S.C. 1395cc(j)) or an eligible 
professional as defined at section 1848(k)(3)(B) of the Act (42 U.S.C. 
1395w-4(k)(3)(B)). More specifically, the final rule revised Sec.  
423.120(c)(5) and added new Sec.  423.120(c)(6), the latter of which 
stated that for a prescription to be eligible for coverage under the 
Part D program, the prescriber must have (1) an approved enrollment 
record in the Medicare fee for service program (that is, original 
Medicare); or (2) a valid opt out affidavit on file with a Part A/Part 
B Medicare Administrative Contractor (A/B MAC).
    The purpose of this change was to help ensure that Part D drugs are 
prescribed only by qualified prescribers. In a June 2013 report titled 
``Medicare Inappropriately Paid for Drugs Ordered by Individuals 
Without Prescribing Authority'' (OEI-02-09-00608), the Office of 
Inspector General (OIG) found that the Part D program improperly paid 
for drugs prescribed by persons who did not appear to have the 
authority to prescribe. We also noted in the final rule the reports we 
received of prescriptions written by physicians with suspended licenses 
having been covered by the Part D program. These reports raised 
concerns within CMS about the propriety of Part D payments and the 
potential for Part D beneficiaries to be prescribed dangerous or 
unnecessary drugs by individuals who lack the authority or 
qualifications to prescribe medications. Given that the Medicare FFS 
provider enrollment process, as outlined in 42 CFR part 424, subpart P, 
collects identifying information about providers and suppliers who wish 
to enroll in Medicare, we believed that forging a closer link between 
Medicare's coverage of Part D drugs and the provider enrollment process 
would

[[Page 16640]]

enable CMS to confirm the qualifications of the prescribers of such 
drugs. That is, requiring Part D prescribers to enroll in Medicare 
would provide CMS with sufficient information to determine whether a 
physician or eligible professional is qualified to prescribe Part D 
drugs.
    We stated in the May 23, 2014 final rule that the compliance date 
for our revisions to new Sec.  423.120(c)(6) would be June 1, 2015. We 
believed that this delayed date would give physicians and eligible 
professionals who would be affected by these provisions adequate time 
to enroll in or opt-out of Medicare. It would also allow CMS, A/B MACs, 
Medicare beneficiaries, and other impacted stakeholders sufficient 
opportunity to prepare for these requirements.
(b) 2015 Interim Final Rule
    On May 6, 2015, we published in the Federal Register an interim 
final rule with comment period (IFC) titled ``Medicare Program; Changes 
to the Requirements for Part D Prescribers'' (80 FR 25958). This IFC 
made changes to certain requirements outlined in the May 23, 2014 final 
rule related to beneficiary access to covered Part D drugs.
    First, we changed the compliance date of Sec.  423.120(c)(6) from 
June 1, 2015 to January 1, 2016. This was designed to give all affected 
parties more time to prepare for the additional provisions included in 
the IFC.
    Second, we revised paragraph Sec.  423.120(c)(6)(ii) to address a 
gap in Sec.  423.120(c)(6) regarding certain types of prescribers. 
Revised paragraph (c)(6)(ii) stated that pharmacy claims and 
beneficiary requests for reimbursement for Part D prescriptions written 
by prescribers other than physicians and eligible professionals who are 
nonetheless permitted by state or other applicable law to prescribe 
medications (defined in Sec.  423.100 as ``other authorized 
prescribers'') will not be rejected or denied, as applicable, by the 
pharmacy benefit manager (PBM) if all other requirements are met. This 
meant that the enrollment requirement specified in Sec.  423.120(c)(6) 
would not apply to other authorized prescribers--that is, to 
individuals who are ineligible to enroll in or opt out of Medicare 
because they do not meet the statutory definition of ``physician'' or 
``eligible professional'' yet who are otherwise legally authorized to 
prescribe drugs.
    Third, and to help ensure that beneficiaries would not experience a 
sudden lapse in Part D prescription coverage upon the January 1, 2016 
effective date, we added a new paragraph Sec.  423.120(c)(6)(v). This 
provision stated that a Part D sponsor or its PBM must, beginning on 
January 1, 2016 and upon receipt of a pharmacy claim or beneficiary 
request for reimbursement for a Part D drug that a Part D sponsor or 
PBM would otherwise be required to reject or deny, as applicable, under 
Sec.  423.120(c)(6):
     Provide the beneficiary with:
    ++ A 3-month provisional supply of the drug (as prescribed by the 
prescriber and if allowed by applicable law); and
    ++ Written notice within 3 business days after adjudication of the 
claim or request in a form and manner specified by CMS; and
     Ensure that reasonable efforts are made to notify the 
prescriber of a beneficiary who was sent the notice referred to in the 
previous paragraph.
    The 3-month provisional supply and written notice were intended to 
(1) notify beneficiaries that a future prescription written by the same 
prescriber would not be covered unless the prescriber enrolled in or 
opted-out of Medicare, and (2) give beneficiaries time to make 
arrangements to continue receiving the prescription if the prescriber 
of the medication did not intend to enroll in or opt-out of Medicare.
(c) Preparations for Enforcement of Part D Prescriber Enrollment 
Requirement
    Immediately after the publication of the previously mentioned May 
23, 2014 final rule, we undertook major efforts to educate affected 
stakeholders about the forthcoming enrollment requirement. Numerous 
prescribers have, in preparation for the enforcement of Sec.  
423.120(c)(6), enrolled in or opted out of Medicare. However, we noted 
in the November 28, 2017 proposed rule that based on internal CMS data 
as of July 2016, approximately 420,000 prescribers--or 35 percent of 
the total 1.2 million prescribers of Part D drugs--whose prescriptions 
for Part D drugs would be affected by the requirements of Sec.  
423.120(c)(6) have yet to enroll or opt out. Several provider 
organizations, moreover, expressed concerns about the enrollment 
requirements. They contended that (1) most prescribers pose no risk to 
the Medicare program; and (2) certain types of physicians and eligible 
professionals prescribe Part D drugs only very infrequently. Their 
general position, in short, was that the burden to the prescriber 
community would outweigh the payment safeguard benefits of Sec.  
423.120(c)(6). After the publication of the IFC, and based on our 
desire to give prescribers and other stakeholders more time to prepare 
for the enrollment requirements, we announced a phased-in enforcement 
of the enrollment requirements and stated that full enforcement would 
be delayed until January 1, 2019. However, the concerns of these 
provider organizations remained.
    Recognizing these concerns, and wanting to reduce as much burden as 
possible for providers without compromising our program integrity 
objectives, we proposed in the November 28, 2017 proposed rule several 
changes to Sec.  423.120(c)(6) as well as to several other provisions, 
which we describe below.
(2) Proposed Provisions
    In accordance with section 1871 of the Act, within 3 years of the 
publication of the May 6, 2015 IFC, we must either publish a final rule 
or publish a notice of a different timeline. If we were to finalize the 
proposals described in the November 28, 2017 proposed rule, we would 
not finalize the provisions of the IFC. Instead, the regulations 
contained in this final rule would supersede our earlier rulemaking.
    We proposed an effective date for our proposed provisions in Sec.  
423.120(c)(5) of 60 days after the publication of a final rule. We 
proposed an effective date of our proposed revisions to Sec.  
423.120(c)(6) of January 1, 2019.
(a) Prescriber NPI Validation on Part D Claims
    In the May 6, 2015 IFC, we revised Sec.  423.120(c)(5), which 
addresses the submission and validation of National Provider 
Identifiers (NPIs) of Part D prescribers, to state that before January 
1, 2016, the following are applicable:
     In paragraph (c)(5)(i), we stated that a Part D sponsor 
must submit to CMS only a prescription drug event (PDE) record that 
contains an active and valid individual prescriber NPI.
     In paragraph (c)(5)(ii), we stated that a Part D sponsor 
must ensure that the lack of an active and valid individual prescriber 
NPI on a network pharmacy claim does not unreasonably delay a 
beneficiary's access to a covered Part D drug, by taking the steps 
described in paragraph (c)(5)(iii) of this section.
     In paragraph (c)(5)(iii), we stated that the sponsor must 
communicate at point-of-sale whether or not a submitted NPI is active 
and valid in accordance with this paragraph (c)(5)(iii).
    ++ In paragraph (c)(5)(iii)(A), we stated that if the sponsor 
communicates that the NPI is not active and valid, the sponsor must 
permit the pharmacy to (1) confirm that the NPI is active and valid; or 
(2) correct the NPI.

[[Page 16641]]

    ++ In paragraph (c)(5)(iii)(B), we stated that if the pharmacy:
    ++ Confirms that the NPI is active and valid or corrects the NPI, 
the sponsor must pay the claim if it is otherwise payable; or
    ++ Cannot or does not correct or confirm that the NPI is active and 
valid, the sponsor must require the pharmacy to resubmit the claim 
(when necessary), which the sponsor must pay, if it is otherwise 
payable, unless there is an indication of fraud or the claim involves a 
prescription written by a foreign prescriber (where permitted by State 
law).
     In paragraph (c)(5)(iv), we stated that a Part D sponsor 
must not later recoup payment from a network pharmacy for a claim that 
does not contain an active and valid individual prescriber NPI on the 
basis that it does not contain one, unless the sponsor--
    ++ Has complied with paragraphs (c)(5)(ii) and (iii) of this 
section;
    ++ Has verified that a submitted NPI was not in fact active and 
valid; and
    ++ The agreement between the parties explicitly permits such 
recoupment.
     In paragraph (c)(5)(v), we stated that with respect to 
requests for reimbursement submitted by Medicare beneficiaries, a Part 
D sponsor may not make payment to a beneficiary dependent upon the 
sponsor's acquisition of an active and valid individual prescriber NPI, 
unless there is an indication of fraud.
    We noted in the November 28, 2017 proposed rule that these 
provisions, which focused on NPI submission and validation, were no 
longer effective because the January 1, 2016 end-date for their 
applicability had passed. We further explained that prior to the 
January 1, 2016 date, the Medicare Access and CHIP Reauthorization Act 
of 2015 (MACRA) was signed into law on April 16, 2015 (shortly before 
the IFC was finalized). Section 507 of MACRA amended section 1860D-4(c) 
of the Act (42 U.S.C. 1395w-104(6)) by requiring that pharmacy claims 
for covered Part D drugs include prescriber NPIs that are determined to 
be valid under procedures established by the Secretary in consultation 
with appropriate stakeholders, beginning with plan year 2016.
    In light of the enactment of MACRA, we issued a guidance memo on 
June 1, 2015 titled, ``Medicare Prescriber Enrollment Requirement 
Update'' (memo). The memo noted that Sec.  423.120(c)(5) would no 
longer be applicable beginning January 1, 2016 due to the IFC we had 
published, but that its several of its provisions reflected certain 
existing Part D claims procedures established by the Secretary that 
would comply with section 507 of MACRA. The provisions in Sec.  
423.120(c)(5) that reflected the procedures that would comply with 
section 507 were the following:
     Paragraph (c)(5)(iii).
     Paragraph (c)(5)(iii)(A).
     Paragraph (c)(5)(iii)(B)(1). (Paragraph (c)(5)(iii)(B)(2) 
would not comply with section 507 because the sponsor has no evidence 
that the NPI is active or valid.)
     Paragraph (c)(5)(iv).
     Paragraph (c)(5)(v).
    Given this, we proposed in the November 28, 2017 proposed rule to 
include these provisions in new paragraph (c)(5). They were to be 
enumerated as, respectively, new paragraphs (c)(5)(ii), (c)(5)(ii)(A), 
(c)(5)(ii)(B), (c)(5)(iii), and (c)(5)(iv). Paragraphs (c)(5)(i), 
(c)(5)(ii), and (c)(5)(iii)(B)(2) were not to be included in new 
paragraph (c)(5). We also noted in the November 28, 2017 proposed rule 
that in the May 6, 2015 IFC, we revised Sec.  423.120(c)(6)(i) to 
require a Part D plan sponsor to reject, or require its pharmaceutical 
benefit manager (PBM) to reject, a pharmacy claim for a Part D drug, 
unless the claim contained the NPI of the prescriber who prescribed the 
drug. This provision, too, reflected existing Part D claims procedures 
and policies that comply with section 507 of MACRA. We therefore 
proposed to retain this provision and sought comment on associated 
burdens or unintended consequences and alternative approaches. However, 
we proposed to move it from paragraph (c)(6) to paragraph (c)(5) so 
that most of the NPI provisions in Sec.  423.120 were included in one 
paragraph. We stated in the proposed rule that these new provisions 
would not only effectively implement section 507 of MACRA but also 
enhance Part D program integrity by streamlining and strengthening 
procedures for ensuring the identity of prescribers of Part D drugs.
(b) Targeted Approach to Part D Prescribers and Provisional Supply
    We outlined in the proposed rule our belief that the most effective 
means of reducing the burden of the Part D enrollment requirement on 
prescribers, Part D plan sponsors, and beneficiaries without 
compromising our payment safeguard aims would be to concentrate our 
efforts on preventing Part D coverage of prescriptions written by 
prescribers who pose an elevated risk to Medicare beneficiaries and the 
taxpayer-funded Trust Funds. In other words, rather than require the 
enrollment of Part D prescribers regardless of the possible level of 
risk posed, we proposed to focus on preventing payment for Part D drugs 
prescribed by demonstrably problematic prescribers. We therefore 
proposed to establish a ``preclusion list'' that would include such 
individuals and would deny payment for Part D drugs they prescribe. 
That is, we proposed to replace the prescriber enrollment requirement 
outlined in Sec.  423.120(c)(6) with a claims payment-oriented 
approach. The specific provisions we proposed are as follows:
     In Sec.  423.100, we proposed to delete the definition of 
``other authorized prescriber'' and add the following:
    ++ Preclusion List means a CMS compiled list of prescribers who:
    ++ Meet all of the following requirements:
    ++ The prescriber is currently revoked from the Medicare program 
under Sec.  424.535.
    ++ The prescriber is currently under a reenrollment bar under Sec.  
424.535(c).
    ++ CMS determines that underlying conduct that led to the 
revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph, CMS 
considers the following factors: (1) The seriousness of the conduct 
underlying the prescriber's revocation; (2) the degree to which the 
prescriber's conduct could affect the integrity of the Part D program; 
and (3) any other evidence that CMS deems relevant to its 
determination; or
    ++ Meet both of the following requirements:
    ++ The prescriber has engaged in behavior for which CMS could have 
revoked the prescriber to the extent applicable if he or she had been 
enrolled in Medicare.
    ++ CMS determines that the underlying conduct that would have to 
the revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph, CMS 
considers the following factors: (1) The seriousness of the conduct 
involved; (2) the degree to which the prescriber's conduct could affect 
the integrity of the Part D program; and (3) any other evidence that 
CMS deems relevant to its determination
     In paragraph (c)(6)(i), we proposed to state: ``Except as 
provided in paragraph (c)(6)(iv) of this section, a Part D sponsor must 
reject, or must require its PBM to reject, a pharmacy claim for a Part 
D drug if the individual who prescribed the drug is included on the 
preclusion list, defined in Sec.  423.100.'' This will ensure that Part 
D

[[Page 16642]]

sponsors comply with our proposed requirement that claims involving 
prescribers who are on the preclusion list should not be paid.
     In paragraph (c)(6)(ii), we proposed to state as follows: 
``Except as provided in paragraph (c)(6)(iv) of this section, a Part D 
sponsor must deny, or must require its PBM to deny, a request for 
reimbursement from a Medicare beneficiary if the request pertains to a 
Part D drug that was prescribed by an individual who is identified by 
name in the request and who is included on the preclusion list, defined 
in Sec.  423.100.'' As with paragraph (c)(6)(i), this will ensure that 
Part D sponsors comply with our proposed requirement that payments not 
be made for prescriptions written by prescribers who are on the 
preclusion list.
     In paragraph (c)(6)(iii), we proposed to state: ``A Part D 
plan sponsor may not submit a prescription drug event (PDE) record to 
CMS unless it includes on the PDE record the active and valid 
individual NPI of the prescriber of the drug, and the prescriber is not 
included on the preclusion list, defined in Sec.  423.100, for the date 
of service.'' This is to help ensure that--(1) the prescriber can be 
properly identified, and (2) prescribers who are on the preclusion list 
are not included in PDEs.
     In paragraph (c)(6)(iv), we proposed to address the 
provisional coverage period and notice provisions, which we previously 
referred to, as follows:
    ++ A Part D sponsor or its PBM must not reject a pharmacy claim for 
a Part D drug under paragraph (c)(6)(i) or deny a request for 
reimbursement under paragraph (c)(6)(ii) unless the sponsor has 
provided the provisional coverage of the drug and written notice to the 
beneficiary required by paragraph (c)(6)(iv)(B).
    ++ Upon receipt of a pharmacy claim or beneficiary request for 
reimbursement for a Part D drug that a Part D sponsor would otherwise 
be required to reject or deny in accordance with paragraphs (c)(6)(i) 
or (ii), a Part D sponsor or its PBM must do the following:

--Provide the beneficiary with the following, subject to all other Part 
D rules and plan coverage requirements:
--A 90-day provisional supply coverage period during which the sponsor 
must cover all drugs dispensed to the beneficiary pursuant to 
prescriptions written by the individual on the preclusion list. The 
provisional supply period begins on the date-of-service the first drug 
is dispensed pursuant to a prescription written by the individual on 
the preclusion list.
--Written notice within 3 business days after adjudication of the first 
claim or request for the drug in a form and manner specified by CMS.
--Ensure that reasonable efforts are made to notify the prescriber of a 
beneficiary who was sent a notice under paragraph (c)(6)(iv)(B)(1)(ii).

     In new Sec.  423.120(c)(6)(v), we proposed that CMS would 
send written notice to the prescriber via letter of his or her 
inclusion on the preclusion list. The notice would contain the reason 
for the inclusion on the preclusion list and would inform the 
prescriber of his or her appeal rights. A prescriber may appeal his or 
her inclusion on the preclusion list in accordance with 42 CFR part 
498.
     In new Sec.  423.120(c)(6)(vi), we proposed that CMS has 
the discretion not to include a particular individual on (or, if 
warranted, remove the individual from) the preclusion list should it 
determine that exceptional circumstances exist regarding beneficiary 
access to prescriptions. In making a determination as to whether such 
circumstances exist, CMS will take into account--(1) the degree to 
which beneficiary access to Part D drugs would be impaired; and (2) any 
other evidence that CMS deems relevant to its determination.
    We also stated in the proposed rule the following:
     We proposed to keep an unenrolled prescriber on the 
preclusion list for the same length of time as the reenrollment bar 
that we could have imposed on the prescriber had he or she been 
enrolled and then revoked.
     Prescribers who were revoked from Medicare or, for 
unenrolled prescribers, engaged in behavior that could serve as a basis 
for an applicable revocation prior to the effective date of this rule 
(if finalized) could, if the requirements of Sec.  423.120(c)(6) are 
met, be added to the preclusion list upon said effective date even 
though the underlying action (for instance, felony conviction) occurred 
prior to that date. However, the Part D claim rejections by Part D 
sponsors and their PBMs under Sec.  423.120(c)(6) would only apply to 
claims for Part D prescriptions filled or refilled on or after the date 
he or she was added to the preclusion list; that is, sponsors and PBMs 
would not be required to retroactively reject claims based on the 
effective date of the revocation or, for unenrolled prescribers, the 
date of the behavior that could serve as a basis for an applicable 
revocation regardless of whether that date occurred before or after the 
effective date of this rule.
    We also solicited comment on the following:
     An alternative by which we would first identify, through 
PDE data, those providers who are prescribing drugs to Medicare 
beneficiaries. This would significantly reduce the universe of 
prescribers who are on the preclusion list and reduce the government's 
surveillance of prescribers that are not prescribing to Part D 
beneficiaries. We anticipated that this could create delays in our 
ability to screen providers due to data lags and may introduce some 
program integrity risks. We were particularly interested in hearing 
from the public on the potential risks this could pose to 
beneficiaries, especially in light of our efforts to address the 
opioids epidemic.
     Whether the actions referenced in Sec.  424.535(a) are 
appropriate grounds for inclusion on the preclusion list.
     Whether actions other than those referenced in Sec.  
424.535(a) should constitute grounds for inclusion on the preclusion 
and, if so, what those specific grounds are.
     Suggestions for means of monitoring abusive prescribing 
practices and appropriate processes for including such prescribers on 
the preclusion list.
     A reasonable time period for Part D sponsors/PBMs to 
incorporate the preclusion list into their claims adjudication systems, 
and whether and how our proposed regulatory text needs to be modified 
to accommodate such a time period.
     What limits or other guardrails CMS should set with 
respect to number of doses, initial dosing, and type of product for 
opioid prescriptions for particular clinical presentations (including 
acute pain, chronic pain, hospice setting and so forth).
     An alternative method of ensuring beneficiaries have 
access to opioids as necessary would be to require the sponsor 
immediately provide a transfer to a new provider when the first 
provider is on the preclusion list.
(c) Appeals
    In our revisions to Sec.  423.120(c)(6), we proposed to permit 
prescribers who are on the preclusion list to appeal their inclusion on 
this list in accordance with 42 CFR part 498. We believed that given 
the aforementioned pharmacy claim rejections that would be associated 
with a prescriber's appearance on the preclusion list, due process 
warranted that the prescriber have the ability to challenge this via 
appeal. Any appeal under this proposed provision, however, would be 
limited strictly to the individual's inclusion on the preclusion list. 
The proposed appeals process would neither include nor affect

[[Page 16643]]

appeals of payment denials or enrollment revocations, for there are 
separate appeals processes for these actions. In addition, we would 
send written notice to the prescriber of his or her inclusion on the 
preclusion list. The notice would contain the reason for the inclusion 
and would inform the prescriber of his or her appeal rights. This was 
to ensure that the prescriber is duly notified of the action, why it 
was taken, and his or her ability to challenge our determination.
    Consistent with our proposed provision in Sec.  423.120(c)(6) 
regarding appeal rights, we proposed to update several other regulatory 
provisions regarding appeals:
     We proposed to revise Sec.  498.3(b) to add a new 
paragraph (20) stating that a CMS determination to include a prescriber 
on the preclusion list constitutes an initial determination. This 
revision would help enable prescribers to utilize the appeals processes 
described in Sec.  498.5.
     In Sec.  498.5, we proposed to add a new paragraph (n) 
that would state as follows:
    ++ In paragraph (n)(1), we proposed that any prescriber 
dissatisfied with an initial determination or revised initial 
determination that he or she is to be included on the preclusion list 
may request a reconsideration in accordance with Sec.  
[thinsp]498.22(a).
    ++ In paragraph (n)(2), we proposed that if CMS or the prescriber 
under paragraph (n)(1) is dissatisfied with a reconsidered 
determination under Sec.  498.5(n)(1), or a revised reconsidered 
determination under Sec.  498.30, CMS or the prescriber is entitled to 
a hearing before an administrative law judge (ALJ).
    ++ In paragraph (n)(3), we proposed that if CMS or the prescriber 
under paragraph (n)(2) is dissatisfied with a hearing decision as 
described in paragraph (n)(2), CMS or the prescriber may request review 
by the Departmental Appeals Board (DAB) and the prescriber may seek 
judicial review of the DAB's decision.
    In addition, given that a beneficiary's access to a drug may be 
denied because of the application of the preclusion list to his or her 
prescription, we believe the beneficiary should be permitted to appeal 
alleged errors in applying the preclusion list.
    We also solicited comment on whether a different appeals process is 
warranted and, if so, what its components should be.
b. Part C/Medicare Advantage Cost Plan and PACE Provisions
(1) Background
(a) 2016 Final Rule
    On November 15, 2016, CMS published a final rule in the Federal 
Register titled ``Medicare Program; Revisions to Payment Policies Under 
the Physician Fee Schedule and Other Revisions to Part B for CY 2017; 
Medicare Advantage Bid Pricing Data Release; Medicare Advantage and 
Part D Medical Loss Ratio Data Release; Medicare Advantage Provider 
Network Requirements; Expansion of Medicare Diabetes Prevention Program 
Model; Medicare Shared Savings Program Requirements'' (81 FR 80169). 
This rule contained a number of requirements, foremost of which was the 
addition of new Sec.  422.222 to require providers and suppliers that 
furnish health care items or services to a Medicare enrollee who 
receives his or her Medicare benefit through an MA organization to be 
enrolled in Medicare and be in an approved status no later than January 
1, 2019. (The term ``MA organization'' refers to both MA plans and MA 
plans that provide drug coverage, otherwise known as MA-PD plans.) We 
also added a requirement in new Sec.  422.204(b)(5) that required MA 
organizations to comply with the provider and supplier enrollment 
requirements referenced in Sec.  422.222. Other provisions were also 
added or revised to reflect the requirements in Sec.  422.222.
    We believed that these new requirements, as they pertained to MA, 
were necessary to help ensure that Medicare enrollees receive items or 
services from providers and suppliers that are fully compliant with the 
requirements for Medicare enrollment. We also believed they would, as 
with the previously mentioned Part D requirement, assist our efforts to 
prevent fraud, waste, and abuse, and to protect Medicare enrollees, by 
allowing us to carefully screen all providers and suppliers (especially 
those that potentially pose an elevated risk to Medicare) to confirm 
that they are qualified to furnish Medicare items and services. Indeed, 
although Sec.  422.204(a) required MA organizations to have written 
policies and procedures for the selection and evaluation of providers 
and suppliers that conform with the credentialing and recredentialing 
requirements in Sec.  422.204(b), CMS has not historically had direct 
oversight over all network providers and suppliers under contract with 
MA organizations. While there are CMS regulations governing how and 
when MA organizations can pay for covered services, those are tied to 
statutory provisions. We concluded that requiring Medicare enrollment 
in addition to the existing MA credentialing requirements will permit a 
closer review of MA providers and suppliers, which could, as warranted, 
involve rigorous screening practices such as risk-based site visits 
and, in some cases, fingerprint-based background checks, an approach we 
already take in the Medicare Part A and Part B provider and supplier 
enrollment arenas.
(b) Preparations for Part C Enrollment
    As with our Part D enrollment requirement, we promptly commenced 
outreach efforts after the publication of the November 15, 2016 final 
rule. We communicated with Part C provider associations and MA 
organizations regarding, among other things, the general purpose of the 
enrollment process, the rationale for Sec.  422.222, and the mechanics 
of completing and submitting an enrollment application. According to 
recent CMS internal data, approximately 933,000 MA providers and 
suppliers are already enrolled in Medicare and meeting the MA provider 
enrollment requirements. However, as of April 2017, roughly 120,000 MA-
only providers and suppliers remain unenrolled in Medicare. This is 
approximately 11% of all MA providers and suppliers. While there may be 
overlap between the Part C and D provider and prescriber populations, 
it is minor at approximately 25,000 providers. Concerns have been 
raised by the MA community over the enrollment requirement, principally 
over the burden involved in enrolling in Medicare while having to also 
undergo credentialing by their respective health plans.
    We recognized and shared these concerns. We believed that the 
Medicare enrollment requirement could result in a duplication of effort 
and, consequently, impose a burden on MA providers and suppliers. While 
we maintained that Medicare enrollment, in conjunction with MA 
credentialing, is the most thorough means of confirming a provider's 
compliance with Medicare requirements and of verifying the provider's 
qualifications to furnish services and items, we believe that an 
appropriate balance can be achieved between this program integrity 
objective and the desire to reduce the burden on the provider and 
supplier communities. Given this, we proposed in the November 28, 2017, 
to utilize the same ``preclusion list'' concept in MA that we are 
proposing for Part D and to eliminate the current enrollment

[[Page 16644]]

requirement in Sec.  422.222. We believe this approach will allow us to 
concentrate our efforts on preventing MA payment for items and services 
furnished by providers and suppliers that could pose an elevated risk 
to Medicare beneficiaries and the Trust Funds, an approach, as 
previously mentioned, similar to the risk-based process in Sec.  
424.518.
    To this end, we proposed the following provisions, which included 
those permitting provider and beneficiary appeals similar those we 
previously mentioned for Part D.
(2) Specific Regulatory Changes
    Given the foregoing discussion, we proposed the following 
regulatory changes. We note that many of the revisions below merely 
involved changing references to ``enrollment'' to ``preclusion list'' 
to reflect the proposed replacement of the former requirement with the 
latter. We also proposed the deletion of several sections that we 
believed were no longer needed because of our proposed preclusion list 
policy.
     In Sec.  417.478, we proposed to revise paragraph (e) as 
follows:
    ++ In new paragraph (e)(1), we proposed to state that the 
prohibitions, procedures and requirements relating to payment to 
individuals and entities on the preclusion list (defined in Sec.  422.2 
of this chapter) apply to HMOs and CMPs that contract with CMS under 
section 1876 of the Act.
    ++ In new paragraph (e)(2), we proposed to state that in applying 
the provisions of Sec. Sec.  422.2, 422.222, and 422.224 under 
paragraph (e)(1) of this section, references to part 422 of this 
chapter must be read as references to this part, and references to MA 
organizations as references to HMOs and CMPs.
     In Sec.  417.484, we proposed to revise paragraph (b)(3) 
to state: ``That payments must not be made to individuals and entities 
included on the preclusion list, defined in Sec.  422.2.''
     In Sec.  422.2, we proposed to add a definition of 
``preclusion list'' that reads as follows:
    ++ Preclusion list means a CMS compiled list of individuals and 
entities that:
    ++ Meet all of the following requirements:
    ++ The individual or entity is currently revoked from Medicare 
under Sec.  424.535.
    ++ The individual or entity is currently under a reenrollment bar 
under Sec.  424.535(c).
    ++ CMS determines that the underlying conduct that led to the 
revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph, CMS will 
consider the following factors: (1) The seriousness of the conduct 
underlying the individual's or entity's revocation; (2) the degree to 
which the individual's or entity's conduct could affect the integrity 
of the Medicare program; (3) any other evidence that CMS deems relevant 
to its determination; or
    ++ Meet both of the following requirements:
    ++ The individual or entity has engaged in behavior for which CMS 
could have revoked the individual or entity to the extent applicable 
had they been enrolled in Medicare.
    ++ CMS determines that the underlying conduct that would have led 
to the revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph, CMS 
considers the following factors: (1) The seriousness of the conduct 
involved; (2) the degree to which the individual's or entity's conduct 
could affect the integrity of the Medicare program; and (3) any other 
evidence that CMS deems relevant to its determination.
     We proposed to delete Sec.  422.204(b)(5).
     We proposed to establish a new Sec.  422.204(c) that will 
require MA organizations to follow a documented process that ensures 
compliance with the preclusion list provisions in Sec.  422.222.
     We proposed to delete the existing version of Sec.  
422.222(a) and replace it with the following:
    ++ In Sec.  422.222, we proposed to change the title thereof to 
``Preclusion list''.
    ++ In paragraph (a)(1), we proposed to state that an MA 
organization shall not make payment for a health care item or service 
furnished by an individual or entity that is included on the preclusion 
list, defined in Sec.  422.2.
    ++ In paragraph (a)(2), we proposed to replace the existing 
language therein with a provision stating that CMS will send written 
notice to the individual or entity via letter of their inclusion on the 
preclusion list. The notice will contain the reason for the inclusion 
and will inform the individual or entity of their appeal rights. An 
individual or entity may appeal their inclusion on the preclusion list, 
defined in Sec.  422.2, in accordance with Part 498.
    ++ In paragraph (b), we proposed to state that an MA organization 
that does not comply with paragraph (a) of Sec.  422.222 may be subject 
to sanctions under Sec.  422.750 and termination under Sec.  422.510.
     In Sec.  422.224, we proposed to:
    ++ Change the title thereof to ``Payment to individuals and 
entities excluded by the OIG or included on the preclusion list.''
    ++ Revise paragraph (a) to state that an MA organization may not 
pay, directly or indirectly, on any basis, for items or services (other 
than emergency or urgently needed services as defined in Sec.  422.113) 
furnished to a Medicare enrollee by any individual or entity that is 
excluded by the Office of the Inspector General (OIG) or is included on 
the preclusion list, defined in Sec.  422.2''.
    ++ Revise paragraph (b) to state that if an MA organization 
receives a request for payment by, or on behalf of, an individual or 
entity that is excluded by the OIG or an individual or entity that is 
included on the preclusion list, defined in Sec.  422.2, the MA 
organization must notify the enrollee and the excluded individual or 
entity or the individual or entity included on the preclusion list in 
writing, as directed by contract or other direction provided by CMS, 
that payments will not be made. Payment may not be made to, or on 
behalf of, an individual or entity that is excluded by the OIG or is 
included on the preclusion list.''
     In Sec.  422.501(c), we proposed to do the following:
    ++ Revise paragraph (c)(1)(iv) to read: ``Documentation that 
payment for health care services or items is not being and will not be 
made to individuals and entities included on the preclusion list, 
defined in Sec.  422.2.''
    ++ Revise paragraph (c)(2) to replace the language beginning with 
``including providing documentation . . .'' with ``including providing 
documentation that payment for health care services or items is not 
being and will not be made to individuals and entities included on the 
preclusion list, defined in Sec.  422.2.''
     In Sec.  422.504, we proposed to do the following:
    ++ Replace the language in paragraph (a)(6) that reads ``Medicare 
provider and supplier enrollment requirements'' with ``the preclusion 
list requirements in Sec.  422.222 and Sec.  422.224.''
    ++ Revise paragraph (i)(2)(v) to read, ``they will ensure that 
payments are not made to individuals and entities included on the 
preclusion list, defined in Sec.  422.2.''
     In Sec.  422.510(a)(4), we proposed to revise paragraph 
(xiii) to read: ``Fails to meet the preclusion list requirements in 
accordance with Sec. Sec.  422.222 and 422.224.''
     In Sec.  422.752, we proposed to revise paragraph (a)(13) 
to read: ``Fails to comply with Sec. Sec.  422.222 and 422.224,

[[Page 16645]]

that requires the MA organization not to make payment to excluded 
individuals and entities, nor to individuals and entities included on 
the preclusion list, defined in Sec.  422.2.''
     In Sec.  460.40, we proposed to revise paragraph (j) to 
state: ``Makes payment to any individual or entity that is included on 
the preclusion list, defined in Sec.  422.2 of this chapter.''
     In Sec.  460.50, we proposed to revise paragraph 
(b)(1)(ii) by changing the current language following ``including'' to 
read ``making payment to an individual or entity that is included on 
the preclusion list, defined in Sec.  422.2 of this chapter.''
     We proposed to delete Sec.  460.68(a)(4).
     We proposed to delete Sec.  460.70(b)(1)(iv).
     We proposed to delete Sec.  460.71(b)(7).
     In Sec.  460.86, we proposed to revise paragraphs (a) and 
(b) to state as follows:
    ++ Paragraph (a) would specify that a PACE organization may not 
pay, directly or indirectly, on any basis, for items or services (other 
than emergency or urgently needed services as defined in Sec.  460.100) 
furnished to a Medicare enrollee by any individual or entity that is 
excluded by the OIG or is included on the preclusion list, defined in 
Sec.  422.2.
    ++ Paragraph (b) will specify that if a PACE organization receives 
a request for payment by, or on behalf of, an individual or entity 
excluded by the OIG or on the preclusion list, the organization must 
notify the enrollee that is included on the preclusion list in writing, 
that payments will not be made. Payment may not be made to, or on 
behalf of, an individual or entity excluded by the OIG or is included 
on the preclusion list.
    ++ We also proposed to change the title of Sec.  460.86 to 
``Payment to individuals and entities that are excluded by the OIG or 
are included on the preclusion list.''
     In Sec.  498.3(b), we proposed to add a new paragraph (20) 
stating that a CMS determination that an individual or entity is to be 
included on the preclusion list constitutes an initial determination.
     In Sec.  498.5, we proposed to add a new paragraph (n) 
that would state as follows:
    ++ In paragraph (n)(1), we proposed that any individual or entity 
dissatisfied with an initial determination or revised initial 
determination that they are to be included on the preclusion list may 
request a reconsideration in accordance with Sec.  [thinsp]498.22(a).
    + In paragraph (n)(2), we proposed that if CMS or the individual or 
entity under paragraph (n)(1) is dissatisfied with a reconsidered 
determination under (n)(1), or a revised reconsidered determination 
under Sec.  498.30, CMS or the individual or entity would be entitled 
to a hearing before an ALJ.
    ++ In paragraph (n)(3), we proposed that if CMS or the individual 
or entity under paragraph (n)(2) is dissatisfied with a hearing 
decision as described in paragraph (n)(2), CMS or the individual or 
entity may request review by the DAB and the individual or entity may 
seek judicial review of the DAB's decision.
    In addition, given that a beneficiary's access to health care items 
or services may be impaired because of the application of the 
preclusion list to his or her item or service, we believed the 
beneficiary should be permitted to appeal alleged errors in applying 
the preclusion list. We solicited comment whether additional 
beneficiary protections, such as notices to enrollees when an 
individual or entity that has recently furnished services or items to 
the enrollee is placed on the preclusion list or a limited and 
temporary coverage approval when an individual or entity is first 
placed on the preclusion list but is in the middle of a course of 
previously covered treatment, should also be included these rules upon 
finalization.
     We proposed to revise Sec.  422.310 to add a new paragraph 
(d)(5) to require that, for data described in paragraph (d)(1) as data 
equivalent to Medicare fee-for-service data (which is also known as MA 
encounter data), MA organizations must submit a National Provider 
Identifier in a Billing Provider field on each MA encounter data 
record, per CMS guidance. While the NPI is a required data element for 
the X12 837 5010 format (as set forth in the TR3 guides cited in the 
Background), CMS has not codified a regulatory requirement that MA 
organizations include the Billing Provider NPI in encounter data 
records. The proposed amendment would implement that requirement. We 
also proposed to include the phrase ``per CMS guidance'' to allow CMS 
to take into account situations where there is no bill (no claim for 
payment) in an MA organization's system.
     We also proposed that both basic and supplemental benefits 
should be subject to the payment prohibition that is tied to the 
preclusion list. We believed that restricting the payment prohibition 
to only one of these two categories will undercut the effectiveness of 
our preclusion list proposal.
     We noted that while there would be separate regulatory 
provisions for Part C and Part D, there would not be two separate 
preclusion lists: one for Part C and one for Part D. Rather, there 
would be a single preclusion list that included all affected 
individuals and entities. Having one joint list, we believed, will make 
the preclusion list process easier to administer.
    We also solicited comment on the following matters:
     An alternative by which CMS would first identify through 
encounter data those providers or suppliers furnishing services or 
items to Medicare beneficiaries.
     Whether the actions referenced in Sec.  424.535(a) are 
appropriate grounds for inclusion on the preclusion list.
     Whether actions other than those referenced in Sec.  
424.535(a) should constitute grounds for inclusion on the preclusion 
and, if so, what those specific grounds are.
     Suggestions for means of monitoring potentially abusive MA 
practices involving providers and suppliers, and appropriate processes 
for including such providers and suppliers on the preclusion list.
c. Comments Received
    We received 74 comments and our responses follows. We note that 
many comments concerning the overall preclusion list did not clearly 
distinguish between the Part D and MA provisions of the proposed rule. 
We are therefore grouping these comments together without delineating 
between the two programs. Comments concerning other topics, however, 
such as provisional supply and appeals, are clearly denoted as such.
(1) General Comments Concerning the Preclusion List Concept
    Comment: A number of commenters expressed support for our 
preclusion list proposal. Some commenters stated that the proposal will 
accomplish CMS' objective of ensuring that only qualified providers and 
suppliers provide services to Medicare beneficiaries, but in a 
significantly less burdensome way. Other commenters stated that basing 
prescription coverage on Medicare enrollment added duplicative and 
burdensome requirements on physicians and providers, leading to more 
waste and cost.
    Response: We appreciate the commenters' support.
    Comment: A number of commenters opposed our proposed preclusion 
list requirement. A commenter stated that while the proposed rule 
described the preclusion list as an effort to reduce the

[[Page 16646]]

burden on providers, the commenter believed it would actually be more 
inefficient to maintain two systems--specifically, the preclusion list 
and the traditional Medicare enrollment system--than to simply require 
all providers that seek to serve Medicare beneficiaries to enroll in 
traditional Medicare. The commenter believed this would be particularly 
onerous on CMS and providers given that nearly half of providers who 
serve MA enrollees are already enrolled in traditional Medicare. The 
commenter, as well as others, urged CMS to retain the current 
enrollment requirement, believing it to be, as stated in the proposed 
rule, the most thorough means of confirming a provider's compliance 
with Medicare requirements and of verifying the provider's 
qualifications to furnish services and items. Commenters added that 
Medicare enrollment remains the most effective way to protect all 
Medicare beneficiaries.
    Response: We recognize the commenters' concerns about the removal 
of the Part D and MA enrollment requirements and whether CMS would, 
consequently, remain able to confirm a prescriber's or provider's 
compliance with Medicare requirements. However, we respectfully decline 
to adopt the commenters' recommendation that we retain these enrollment 
requirements. We continue to believe that the most effective means of 
reducing the burden of the Part D and MA enrollment requirement on 
prescribers and providers would be to concentrate our efforts on 
preventing Part D coverage of prescriptions written by prescribers who 
pose an elevated risk to Medicare beneficiaries and the Trust Funds, 
and preventing MA payment for items and services furnished by providers 
and suppliers who pose an elevated risk to Medicare beneficiaries and 
the Trust Funds. Such an approach enables CMS to focus on prescribers 
and providers who pose threats to the Medicare program and its 
beneficiaries, while minimizing the burden on those who do not. We 
believe the criteria warranting a prescriber's or provider's addition 
to the preclusion list are sufficiently comprehensive such that this 
approach will effectively protect Medicare from making payments 
associated with Part D drugs prescribed by, or MA services provided by, 
problematic parties and prohibit such problematic parties from 
directing the care of program beneficiaries.
    While enrolling such prescribers and providers gives Medicare a 
greater degree of scrutiny in determining a prescriber's or provider's 
qualifications, we note that the perceived burden associated with this 
process could cause some prescribers and providers not to enroll in 
Medicare, thus possibly leading to access to care issues. For instance, 
according to a CMS analysis of prescriber enrollment trends, as of 
January 2017 there are close to 340,000 active Part D prescribers based 
on 2016 PDE data who are not enrolled in or opted-out of Medicare. The 
number of prescribers who are unenrolled constitutes an estimated 25 
percent of all identified Medicare prescribers nationwide in 2016. 
Further data suggests that an additional 18,000 new non-enrolled 
prescribers are identified each month. This amount of incoming 
prescribers, coupled with the 120,000 unenrolled MA providers 
referenced above, creates operational challenges that have led to 
delays in CMS' implementation of such an enrollment requirement.
    Also, we are unclear as to what the commenter means by provider 
burden. There is no provider burden associated with the preclusion 
list, except to the extent that we place a prescriber or provider on 
the preclusion list and the provider wishes to challenge that 
designation.
    Comment: A commenter noted that, according to a Government 
Accountability Office (GAO) study published in 2015, CMS currently 
furnishes insufficient oversight of MA provider networks. The commenter 
stated that there is no mechanism in place to assess the accuracy of 
the information submitted by or about MA plans to CMS and that CMS does 
not require MA plans to routinely submit updated network information 
for review. The commenter stated that FFS provider enrollment may 
provide a mechanism to assist CMS with ensuring the important 
beneficiary protection of network adequacy.
    Response: We appreciate the commenter's feedback. We clarify, 
however, that the MA program does have network adequacy requirements to 
ensure that network based MA plans have adequate providers under 
contract to furnish Part A and B services. Detailed information on the 
MA network adequacy requirements can be found in the health service 
delivery reference file located at the bottom of the CMS web page at 
the web link below: https://www.cms.gov/Medicare/Medicare-dvantage/MedicareAdvantageApps/index.html. We do not believe it would be 
appropriate to add an enrollment requirement for network providers 
merely for CMS to oversee the accuracy of network directories or to 
monitor network adequacy. CMS has developed other systems for those 
purposes.
    Comment: A commenter stated that based on CMS's estimates, 
approximately 10 percent of MA providers would be negatively impacted 
by a requirement to be enrolled in FFS Medicare. The commenter 
contended that CMS in the proposed rule did not (1) disclose in the 
proposed rule if losing 10 percent of providers would cause an access 
issue for Medicare beneficiaries, or (2) include additional rationale 
and justification for eliminating the requirement for enrollment. 
Without such additional justification, the commenter stated, it would 
be inappropriate to remove the enrollment requirement at this time.
    Response: We appreciate the commenter's feedback on the 
clarification needed in the final rule. With an estimated 1,053,000 
providers currently furnishing services and items to beneficiaries 
through MA plans, we currently estimate that at least 120,000 remain 
unenrolled in Medicare. While this may not seem significant on a 
national scale, it could negatively impact areas where the current 
provider-to-beneficiary ratio is disproportionate, especially noting 
the results of CMS' Part D enrollment efforts, as mentioned earlier. We 
would expect similar results if we were to undertake efforts to enroll 
Part C providers and suppliers. Considering the number of prescribers 
and providers that have not yet enrolled across both Part C and D and 
our concerns regarding the potential for access to care issues, we 
disagree with the commenter's suggestion that we continue the 
enrollment requirement and we decline to adopt changes to the proposal 
based on this feedback.
    Comment: A commenter stated that requiring providers to enroll in 
Medicare in order to serve MA plan enrollees ensures that all Medicare 
beneficiaries are served by providers that satisfy CMS's rigorous 
criteria. The commenter stated that removing the requirement that 
providers enroll in traditional Medicare in order to serve MA plan 
enrollees would eliminate a strong incentive for providers that serve 
MA enrollees to indeed enroll in traditional Medicare. The commenter 
believed that enrolling in traditional Medicare is an effective tool 
for protecting Medicare beneficiaries and saw no reason for CMS to 
abandon it. If, the commenter added, CMS decides to finalize the 
preclusion list requirement, the commenter urged that CMS make clear 
that any provider that is currently enrolled in traditional Medicare 
could not be placed on the

[[Page 16647]]

preclusion list. This guarantee, the commenter explained, would not 
apply to any providers that are revoked from Medicare or under a 
reenrollment bar; rather, it would simply establish that participation 
in traditional Medicare is sufficient for a provider to serve MA plan 
enrollees.
    Response: While we appreciate the commenter's concern, we reiterate 
our view that the criteria warranting a prescriber's or provider's 
addition to the preclusion list are comprehensive enough that this 
approach will provide sufficient program safeguards.
    Prescribers and providers currently enrolled in Medicare (and, 
therefore, not revoked) cannot also be included on the preclusion list 
because they would not meet the applicable criteria under, 
respectively, Sec. Sec.  423.100 and 422.2.
    Comment: Several commenters stated that the preclusion list would 
not protect beneficiaries to the extent that the current enrollment 
requirement would. The commenters explained that the enrollment 
process, through investigating applicants and preventing problems 
before they occur, ensures that Part D drugs are prescribed only by 
qualified prescribers. With the preclusion list, however, CMS would be 
relying on a retroactive approach such that it is only after a 
prescriber has already engaged in inappropriate activities that he or 
she would be put on the preclusion list. Reactive provisions such as 
the preclusion list, the commenters contended, must by their very 
nature lag behind proactive provisions such as enrollment requirements. 
The preclusion list proposal, therefore, may put beneficiaries at risk 
for inappropriate prescribing practices from physicians and eligible 
professionals who would not have successfully completed the enrollment 
process. Another commenter expressed serious concerns about 
implementing the preclusion list proposal in lieu of the current 
enrollment requirement. The commenter believed that the careful 
screening involved with the enrollment process is the best means of: 
(1) Ensuring that providers and suppliers are qualified to furnish 
services and are fully compliant with Medicare rules; and (2) 
preventing fraud, waste, and abuse.
    Response: We appreciate the commenters' concerns. While enrollment 
may provide more robust data we believe the preclusion list approach 
provides sufficient program safeguards to balance program integrity 
initiatives, provider burden, and our concerns regarding a potential 
access to care issue. Specifically, we will not limit our review or 
screening to only those prescribers present on PDE data but will also 
include those who potentially could prescribe based on other data in 
our internal systems. Therefore, we are not restricting our ability to 
preclude only those parties that are currently furnishing items and 
services for program beneficiaries. Under Sec.  423.120(c)(6), for 
instance, we will have the ability to preclude any prescriber, even 
prior to the prescriber showing up on PDE data, who meets the criteria 
for being placed on the preclusion list.
    Comment: A commenter stated that, according to the proposed rule, 
approximately 65 percent of those who were required to enroll or opt-
out under the May 23, 2014 final rule have done so. The commenter 
believed that this is an impressive figure and that, rather than 
eliminating the enrollment requirement altogether and relying on the 
complaints of those prescribers who found the process burdensome, CMS 
should proceed with the enrollment requirements and provide additional 
outreach regarding the enrollment process.
    Response: We appreciate the commenter's recommendation. As 
mentioned previously, however, and even after CMS undertook vigorous 
outreach activities after the May 23, 2014 final rule regarding the 
need to enroll, approximately 340,000 active Part D prescribers have 
neither enrolled in nor opted-out of Medicare. The loss of 340,000 
prescribers could potentially prove troublesome in areas where the 
prescriber population is already low and access to care is a serious 
concern. More specifically, even with a provisional fill option 
approximately 2.5 million Part D beneficiaries (based on analysis 
performed on 2015 and 2016 PDE data) could lose access to needed 
prescriptions if full enforcement of the enrollment requirement were to 
take effect on the scheduled date. Based on these figures, and our 
concerns for potential access issues we believe the preclusion approach 
would be more appropriate. We note again that an additional 18,000 new 
prescribers are identified each month. These incoming prescribers, 
coupled with the previously mentioned 340,000 unenrolled prescribers 
and 120,000 unenrolled MA providers, creates a significant workload.
    Comment: A commenter stated that in proposing to eliminate the 
enrollment requirement, CMS failed to consider or address continuity of 
and access to care issues. The commenter stated that the choice of 
Medicare options has serious consequences for access to services and 
physicians, and it is important that the impact on beneficiaries be 
considered. Not requiring MA providers to be enrolled in Medicare is 
particularly problematic for MA enrolled beneficiaries who are patients 
of a provider not enrolled in Medicare and who disenroll from the MA 
plan and elect traditional Medicare. Those beneficiaries, the commenter 
stated, would no longer be able to receive services from their regular 
physician and have them billed to fee-for-service Medicare. Another 
commenter, too, stated that not requiring MA providers to enroll in 
Medicare can create problems for beneficiaries who disenroll from a MA 
plan and elect traditional FFS Medicare.
    Response: We appreciate the commenter's feedback. In regard to 
beneficiaries leaving the MA program and defaulting to traditional 
Medicare, we are not aware of this as a significant issue nor was it a 
part of our rationale for the enrollment requirement. MA enrollees in 
particular are aware of the need to assess whether their health care 
providers are in a network of available providers when selecting among 
Medicare coverage options and therefore we expect them to able to ask 
the necessary questions of a treating provider when contemplating 
whether to switch to original FFS Medicare for coverage. In addition, 
we have already expressed our concerns regarding the number of 
unenrolled prescribers and providers and the access to care issues that 
could result if the Part D and MA enrollment requirements remain. We do 
not agree with the commenters that this issue arises with the frequency 
or scope to outweigh the policies we have articulated for our proposal 
and decision in this final rule about the enrollment requirement and 
preclusion list.
    Comment: Several commenters stated that while CMS gave adequate 
justification for why all applicable Part D prescribers and MA 
providers and suppliers should be enrolled in Medicare, CMS failed in 
the proposed rule to explain why earlier justifications are now wrong; 
specifically, that enrollment: (1) Ensures that Medicare enrollees 
receive items or services from providers and suppliers that are fully 
compliant with the requirements for Medicare enrollment; (2) assists in 
efforts to prevent fraud, waste, and abuse and to protect Medicare 
enrollees by allowing CMS to carefully screen all providers and 
suppliers to confirm that they were qualified to furnish Medicare items 
and services; (3) in addition to the existing MA credentialing 
requirements, permits ``a closer review'' of MA

[[Page 16648]]

providers and suppliers; and (4) is necessary due to the fact that CMS 
has access to information and data not available to MA organizations. 
Commenters also requested that CMS articulate meaningful arguments in 
favor of overturning the current enrollment policies.
    Response: The agency is updating its policy to reflect its 
experiences meeting the requirement of the aforementioned final rules, 
updated data analysis, and continued stakeholder engagement. CMS has 
worked diligently to enroll providers and suppliers in order to meet 
the requirements of the May 23, 2014 and November 15, 2016 final rules. 
As mentioned previously, enrollment can permit a greater degree of 
scrutiny in determining a prescriber or provider's qualifications. 
However, we are concerned that the perceived burden associated with 
enrollment may cause some providers to not enroll for purposes of 
furnishing items and services under Part C or to prescribe Part D 
drugs, which could potentially lead to access to care issues. Indeed, 
the significant number of prescribers and providers that remain 
unenrolled bear this out. Such a serious loss of prescribers and 
providers, should the enrollment requirements be enforced, could 
potentially impact patient care, especially for beneficiaries located 
in areas already experiencing access to care issues. Also, we reiterate 
our belief that the criteria warranting a prescriber's or provider's 
addition to the preclusion list are comprehensive enough to prohibit 
problematic prescribers and providers from receiving program dollars or 
directing the care of Medicare beneficiaries. In short, given the data 
analysis CMS has conducted regarding the number of prescribers and 
providers that remain unenrolled even after a vigorous outreach 
campaign, coupled with potential access to care concerns, we believe 
the preclusion list approach is a sufficient alternative to screening 
prescribers and providers given the concerns regarding a lack of 
providers enrolling to meet the enrollment requirement.
    Comment: Noting our concerns in the proposed rule about the 
potential burden of the enrollment process, a commenter stated that 
elimination of the enrollment requirement will merely transfer, rather 
than eliminate, this burden. The commenter explained that removing the 
enrollment requirement will deny MAOs a valuable and reliable data 
source when considering provider credentialing and network 
participation, meaning that MAOs may need to invest additional 
resources in developing fraud, waste, and abuse (FWA) investigations. 
The loss of prospective MA plan review of providers will only make the 
nature of credentialing and FWA programs even more cumbersome, and will 
create new incentives for plans to fill the oversight void left by the 
loss of MA program enrollment. As a result, the commenter stated, the 
MA program is likely to see little or no reduction in total 
administrative burden; to the contrary, a diversity of efforts among 
plans seeking to compensate for the loss of enrollment data may make 
program participation more burdensome for providers, who could be 
subject to new and unique review or verification requirements by plans. 
The commenter (1) concluded that the risks associated with elimination 
of current enrollment requirements outweigh any modest reduction to 
provider burden that may result and (2) urged CMS to retain the 
enrollment requirement.
    Response: We appreciate the commenter's feedback. However, we do 
not believe the preclusion list approach will require the plans to 
invest more heavily in developing resources to combat fraud, waste, and 
abuse, as the plans would continue utilizing their current resources 
and processes for credentialing network providers and fighting fraud, 
waste and abuse. We note that the MA and Part D programs have 
compliance and fraud, waste and abuse monitoring requirements that 
exist separate from the preclusion list (and provider enrollment) 
policy; those requirements are not being increased under this final 
rule. Nor does this final rule increase the burdens on MA plans related 
to provider credentialing. If the requirement to enroll were to remain, 
Medicare health and drug plans would adjudicate claims based on review 
of Medicare's enrollment data. Under the preclusion list approach, 
plans are completing the same task using preclusion data in place of 
enrollment data. The plans are not subject to any more burden than they 
would have been under the previous rule. CMS will maintain the 
responsibility of reviewing each provider and making the determination 
to place them on the list or not. Upon implementation of the preclusion 
list, there may be an increase in notification by plans to 
beneficiaries regarding the preclusion status of a provider they have 
received prescriptions or services from within the past 12-months. 
However, we believe this is only minimally more than the burden plans 
would have been subject to under the previous rule.
    Further, the preclusion list approach will place no burden on 
providers or prescribers as they will not need to take any action, 
unless they choose to appeal being added to the preclusion list. If any 
provider is concerned about burden for themselves or beneficiaries, 
they retain the option to enroll, and CMS is continuing to allow plans 
to require enrollment if they so choose. As long as the provider's 
enrollment is in good standing, he or she will not appear on the 
preclusion list.
    Comment: A commenter expressed concern that the proposed rule 
would, in actuality, result in increased regulation contrary to (1) 
Presidential Executive Order 13771 on Reducing Regulation and 
Controlling Regulatory Costs and (2) Presidential Executive Order 13777 
on Enforcing the Regulatory Reform Agenda. The commenter asked CMS to 
reconsider the preclusion list provisions in light of these executive 
orders.
    Response: We believe that the preclusion list concept complies with 
these Executive Orders because it reduces the burden on prescribers, 
providers, and plans.
    Comment: A commenter stated that CMS did not consider the effect of 
its preclusion list proposal on the protection of Qualified Medicare 
Beneficiaries (QMBs) from improper billing by in-network providers. The 
commenter stated that a provider's enrollment in Medicare gives CMS a 
direct path to enforcement against a provider that improperly bills a 
QMB. While recognizing that, by regulation, CMS requires plans to 
include billing protections in a provider contract, the commenter 
stated that this provision does not afford the beneficiary the same 
level of protection that is afforded by CMS's ability to enforce the 
Medicare provider's contract with the agency.
    Response We believe the contract provisions required between the MA 
plan and a network provider pursuant to Sec.  422.504(g)(1)(iii) are 
binding on providers; such agreements specify that QMBs must not be 
charged cost sharing when the state is responsible for paying such 
amounts under the Medicaid program. Further, the regulation at Sec.  
422.504(g) contains broader beneficiary protection requirements for MA 
organizations, including a requirement that the plan must indemnify the 
beneficiary from any fees that are the legal obligation of the MA 
organization for services furnished by providers that do not contract, 
or that have not otherwise entered into an agreement with the MA 
organization, to provide services to the organization's enrollees.
    Comment: A commenter recommended that CMS not eliminate its 
enrollment requirement but instead ascertain and attempt to address any

[[Page 16649]]

problems with the enrollment process. As an illustration, the commenter 
suggested that CMS inquire more deeply into the facts behind the 
120,000 MA providers that are not enrolled, such as determining whether 
non-enrollment is concentrated among particular provider types or 
specialties, particular geographic regions, or particular plan 
sponsors. If such concentrations exist, the commenter stated, CMS could 
consider extending the 2019 deadline and undertaking a more targeted 
outreach. Another commenter stated that in eliminating the proactive 
enrollment process that best protects beneficiaries and the Medicare 
program from fraud and abuse, CMS is proposing to take a step back in 
time, rather than a step forward. The commenter urged CMS to keep the 
enrollment requirements in place and to step up outreach to those who 
could have enrolled but have not.
    Response: We appreciate the commenters' recommendations. However, 
we disagree that more targeted outreach would further reduce the number 
of prescribers and providers not yet enrolled. This is because CMS, as 
previously stated, has already completed a vigorous Part D and MA 
enrollment campaign (including targeted outreach), yet the number of 
unenrolled prescribers and providers remains comparatively high, thus 
potentially creating significant access to care issues. Moreover, it 
would be inefficient to continue to pursue the enrollment approach 
given the current data and results from our Part D outreach efforts.
    Comment: A commenter urged CMS to examine whether the enrollment 
requirement has any substantial effect on a plan's ability to develop 
adequate provider networks. The commenter's experience is that plans 
are narrowing their networks as part of delivery strategies and not 
because there are not enough providers available. The commenter stated 
that the trend toward narrower networks increases the importance of 
having participating providers in those networks subject to the 
Medicare enrollment process. The commenter envisioned circumstances 
where highly specialized providers are needed and few within a 
specialty choose to enroll in Medicare, and stated that there may be 
other unique circumstances that would merit an exception to the general 
rule of Medicare enrollment. The commenter contended that CMS could 
develop an authorization process that allows for those special 
circumstances and permits plans to bring providers into their networks 
so that beneficiaries have adequate access. This narrower approach, the 
commenter believed, would be preferable to the preclusion list 
proposal.
    Response: We disagree with the commenter that the problems and 
concerns we articulated about implementation of the provider enrollment 
requirements are incorrect. It is our hope that by adopting a 
replacement for the provider enrollment requirements, a broader 
population of highly specialized providers will be able to provide 
services to MA beneficiaries, while prohibiting payment to providers 
that would typically be revoked from the program based on our 
authorities at Sec.  424.535. We believe the preclusion list approach 
broadens the provider population as we are no longer limiting 
beneficiaries to providers who would be Medicare enrolled and either in 
or out of network, but are limiting the population to only those who 
are not precluded.
    Further, with 120,000 MA network providers not currently enrolled, 
we feel the trend to narrower networks is not so prevalent that such a 
high volume could be explained as ``network attrition.''
    Comment: A commenter stated that CMS should take into account, in 
further consultation with states, how its proposed change from the 
enrollment requirement to a preclusion list may impact states given 
that: (1) State Medicaid programs use Medicare provider registration 
data as part of their respective Medicaid provider database and 
registration requirements; (2) various agencies in the states use 
Medicare certification of particular provider types as part of their 
respective provider licensure and registration requirements (for 
example, home health agencies, hospices); (3) states do not 
provisionally address provider circumstances of behavior that could 
result in revocations (as stated in proposed Sec.  423.100) and how 
such circumstances may be addressed differently by provider type; and 
(4) provider registration with state Medicaid agencies may be 
considered to be sufficient in representing effective and valid 
Medicare program registration by proxy, outside of any additional CMS 
provider preclusion list development, which also may be coordinated 
with the states.
    Response: We appreciate this recommendation and note that the 
impact on state Medicaid programs was contemplated when we formulated 
our preclusion list proposal. Concerning those providers that would no 
longer be required to enroll if the proposal is finalized--
specifically, those that are not currently enrolled in Medicare fee-
for-service--we believe that not requiring enrollment will have little 
to no impact on state Medicaid programs that require Medicare 
enrollment as a prerequisite to Medicaid enrollment because their 
reluctance to enroll in Medicare would extend to Medicaid as well based 
on our experience. Regarding providers that obtain Medicare 
certification, they typically do so in order to provide services in the 
Medicare fee for service program; thus, not requiring enrollment will 
have minimal impact on those providers that furnish covered services in 
states that require Medicare certification in their licensure or 
registration process. Finally, reliance on Medicaid registration would 
most likely pose a similar issue given that, in CMS' experience, 
providers who do not enroll with Medicare are most likely not enrolled 
or willing to enroll with Medicaid.
(2) Operational Matters Pertaining to the Preclusion List
    Comment: Many commenters expressed concern about the operational 
complexities of the preclusion list proposals and the lack of details 
thus far given. They urged CMS to provide as many operational details 
about how the preclusion list will be tested, accessed, updated, 
formatted, downloaded, etc., as early as possible to give all affected 
parties sufficient time to implement new processes.
    Response: We appreciate the commenter's concern. However, we 
believe these details would be best addressed outside of rulemaking, 
though we note our view that the preclusion list will be simpler to 
operationalize than an enrollment requirement because far fewer service 
and prescription claims will be impacted under Parts C and D. The list 
will be available via a secure server from which plans will be able to 
download the file.
    Comment: A commenter stated that it is not clear whether CMS 
proposed to create two preclusions lists, one for Part C and one for 
Part D. If CMS intends to create two preclusion lists, the commenter 
asked CMS (1) how it will reconcile the appearance of a provider on one 
list and not the other, and (2) whether one list will take precedence 
over the other.
    Response: There will be only one preclusion list, which both the 
Part D and MA programs will utilize.
    Comment: A number of commenters sought clarification on the 
relationship between the OIG exclusion list and the CMS preclusion 
list. The principal issues raised were as follows: (1)

[[Page 16650]]

Whether all parties on the OIG list would be included on the preclusion 
list; (2) coordination between the preclusion list, the OIG list, and 
other lists similar to the OIG exclusion list, such as the System for 
Award Management (SAM); (3) how plans should address situations where a 
prescriber or provider is on one list but not the other; (4) the 
hierarchical order of processing when a prescriber or provider appears 
on multiple lists (for example, whether the preclusion list or the OIG 
list takes precedence if a provider appears on both lists); and (5) 
whether the preclusion list criteria will differ from the OIG exclusion 
list criteria so as to ensure that prescribers and providers are not 
included on both lists.
    In addition, several commenters recommended that the preclusion 
list be combined with the OIG exclusion list so as to enhance 
efficiency and simplicity. A commenter stated that combining the lists 
would streamline implementation of the preclusion list requirement by 
allowing plans to leverage the current OIG exclusion list process, 
while another commenter expressed concern that two different notices 
would have to be sent to the beneficiary if the provider appeared on 
the preclusion and OIG lists, thus likely causing beneficiary 
confusion. Another commenter stated that if a provider were on both the 
preclusion list and the OIG exclusion list, this would present 
difficulties from a plan sponsor's operational standpoint, for provider 
remittances and beneficiary explanations of benefits can only report a 
single denial reason; this commenter recommended that CMS consider not 
including OIG excluded providers on the CMS preclusion list so that 
providers and beneficiaries have a singular reason for claims payment 
denial. Another commenter, however, recommended that the preclusion and 
OIG exclusion lists remain separate and distinct from one another with 
no overlap; if this recommendation cannot be realized, the commenter 
suggested that the OIG exclusion list take precedence over the 
preclusion list.
    Response: As stated in the proposed rule, the preclusion list will 
include those prescribers and providers that have engaged in behavior 
for which CMS could have revoked the prescriber or provider to the 
extent applicable if they had been enrolled in Medicare. A CMS 
revocation is based on Sec.  424.535, which includes the authority at 
Sec.  424.535(a)(2)(i) to revoke an enrolled party that is excluded or 
debarred (per the SAM) from the Medicare program. Therefore, if a 
prescriber or provider is placed on the OIG exclusion list or the SAM 
list, they will also be placed on the preclusion list. The only 
circumstance in which a prescriber or provider would show up on either 
one of the above-mentioned lists and not the preclusion list is if a 
delay occurs in including that prescriber or provider on the preclusion 
list after the party was added to the OIG list or SAM; in that 
instance, the plan should process in accordance with existing 
procedures.
    With respect to the commenter's concerns regarding notices, plans 
would only need to send one notice to beneficiaries notifying them of 
the prescriber's or provider's exclusion or preclusion.
    In determining which list will take precedence for the purpose of 
notifying the beneficiary and/or provider/supplier in the event of a 
payment denial, we will address this issue in guidance outside of 
rulemaking; in this guidance, we will take into account the fact that 
the plans do not currently check the SAM list. CMS is unable to combine 
both lists as they are implemented under different statutory and 
regulatory authorities. Plans will continue to check the OIG list as 
they have done in the past as the rule proposed no changes to that 
process. A provider or prescriber could be either excluded, precluded, 
or both. In any event, the claim must deny according to the procedures 
for each list.
    Comment: While expressing concerns regarding the operational 
challenges of enrolling prescribers that are not ``typical'' Medicare 
providers, a commenter expressed even greater concern about the 
preclusion list concept. The commenter believed that the preclusion 
list would overlap and include additional providers not on the OIG 
exclusion or SAM lists, thus creating additional operational and 
administrative challenges. The commenter added that most beneficiaries 
understand that if a provider or supplier has been excluded from 
receiving payment from all federal programs, their services cannot be 
covered by Medicare. Explaining to a beneficiary that a case-by-case 
determination has been made that his or her provider is not eligible 
for Medicare payment, the commenter contended, is very confusing and 
more likely to result in a beneficiary not receiving necessary 
treatment than to result in the prevention of fraud.
    Response: While we appreciate the commenter's concerns, we do not 
believe that administering the preclusion list would be any more 
difficult than the process currently used in rejecting claims for 
services from providers that are on the OIG exclusion list. Further, we 
do not believe that payment denials due to a party's inclusion on the 
preclusion list will cause confusion among beneficiaries; beneficiaries 
are currently aware that excluded provider claims will be denied, and 
the preclusion list is a similar concept.
    Comment: In raising the question of whether the preclusion list 
will be independent of the OIG exclusion list or if the OIG exclusion 
list will be incorporated by reference, a commenter also asked CMS to 
clarify whether the process for reinstatement and waiver applications 
will be identical for the two lists.
    Response: As already mentioned: (1) If a prescriber or provider is 
placed on the OIG exclusion list, they will also be placed on the 
preclusion list; and (2) we will address which list will take 
precedence for the purpose of notifying the beneficiary and/or 
provider/supplier in the event of a payment denial in guidance outside 
of rulemaking. CMS is unable to combine both lists as they are 
implemented under different statutory and regulatory authorities.
    The preclusion list will not employ a waiver process in contrast to 
the OIG list. In the case a provider or supplier that was excluded and 
is subsequently reinstated, unless enrolled in Medicare and 
concurrently revoked for the exclusion, the provider or supplier would 
remain on the preclusion list until the end of the enrollment bar 
period or until they enroll with Medicare. Medicare would not be made 
aware of the reinstatement until the provider attempted to enroll, at 
which point, if successfully enrolled, would be removed from the 
preclusion list.
    Comment: A commenter urged that CMS include precluded and excluded 
prescribers in a single file that is made available to the industry on 
a regular basis, rather than maintain a two-file approach.
    Response: We appreciate the commenter's recommendation. From an 
operational perspective, however, we are unable to combine the two 
files, for both are maintained under different regulatory authorities. 
We will address which list will take precedence for the purpose of 
notifying the beneficiary and/or provider/supplier in the event of a 
payment denial in guidance outside of rulemaking.
    Comment: A commenter asked whether the proposed preclusion list 
would eliminate the requirement to review the regional Medicare opt-out 
lists for practitioners.
    Response: The preclusion list concept will not alter this 
requirement.

[[Page 16651]]

    Comment: A commenter asked whether the proposed preclusion list 
will include the entire country.
    Response: We believe the commenter is seeking clarification as to 
the population of prescribers and providers that will be subject to the 
screening that would determine if a provider is placed on the 
preclusion list. Using CMS' internal data and systems, which includes 
but is not limited to, PECOS and National Plan and Provider Enumeration 
System (NPPES), we will screen any prescriber or provider that may or 
could potentially prescribe Part D drugs or furnish MA services or 
items to a Medicare beneficiary, through the fee-for-service program or 
a Medicare Advantage plan. The screening process will include providers 
and suppliers from the entire country.
    Comment: A commenter stated that while the preclusion list could 
help CMS combat fraud, waste, and abuse, the Part D preclusion list 
appears to only apply to prescribers, not to pharmacists or pharmacies. 
The commenter added that some pharmacies have been involved in fraud 
schemes and that, in the current opioid epidemic, pharmacies have 
occasionally been integral to many schemes where these medications are 
prescribed without legitimate medical use. Similar to the MA preclusion 
list provisions, the commenter recommended that the Part D preclusion 
list provisions apply to both individuals and entities (such as 
pharmacies).
    Response: We appreciate this recommendation and clarify that this 
is our intent. The preclusion list will prevent any individual or 
entity that is able to prescribe or provide services under the Medicare 
Part C and D programs from prescribing or providing those services, 
assuming they meet the criteria for inclusion on the preclusion list.
    Comment: A commenter asked whether (1) the preclusion list file 
will include termination dates as well as effective reinstatement 
dates, and (2) the prescriber will be removed from the file upon 
reinstatement.
    Response: The preclusion list will be updated once every 30 days. 
It is not necessary for the update to include the removal of any 
prescriber or provider's NPI whose reenrollment bar has expired, for 
the file will contain time periods for which each prescriber provider 
is precluded (an expiration date per se), similar to the OIG exclusion 
list. The time period for preclusion will be determined by CMS' current 
reenrollment bar criteria and will be applied to currently enrolled 
revoked providers and those providers who would have been revoked had 
they been enrolled in Medicare. Further, prescriptions ordered, or 
claims for reimbursement submitted, by a precluded provider will be 
denied based upon the effective date indicated in the list.
    Comment: With respect to PDE editing, a commenter asked whether CMS 
will use the creation date of the preclusion file or whether it will be 
based on the active preclusion file when the PDE is processed.
    Response: We believe these dates are insignificant given that 
claims will be edited based on the time period for which a provider is 
precluded as indicated in the preclusion list file.
    Comment: A commenter stated that CMS must ensure that the 
preclusion list is updated frequently and on a regular basis to 
minimize the lag time between when a provider is placed on said list to 
the time that information is available to health plans and other 
providers; the greater the lag time between preclusion and disclosure, 
the greater the potential of unknowingly filling a prescription written 
by such a provider. The commenter added that CMS must also ensure the 
preclusion list contains the vital information needed to properly 
identify a precluded prescriber, such as an NPI and the current 
practice address of the provider; the commenter stated that lack of a 
current address increases the difficulty in finding a provider on the 
preclusion list, especially when a provider has a common name that 
yields many search results.
    Response: As already mentioned, the preclusion list will be updated 
once every 30 days, and prescriptions ordered, or claims for 
reimbursement submitted, by a precluded provider will be denied 
according to the date specified on the preclusion list. The list will 
indicate the period for which the provider is precluded. Additionally, 
CMS will include the address data it has available from its internal 
data sources. We will also include the prescriber's or provider's NPI, 
name, and tax identification number, which will be sufficient to 
confirm that a particular prescriber or provider is on the preclusion 
list.
    Comment: Several commenters sought clarification on how the 
preclusion list information would be shared with health plans. A 
commenter asked whether the preclusion list will be published on a 
public site or a restricted site that only plan sponsors can access. 
Another commenter requested that CMS clarify when the file layout and 
location of the preclusion list of prescribers will be available.
    Response: The preclusion list will be available on a monthly basis 
via a secure website. As for making the file publicly available, CMS 
does not intend to make this information available to the public except 
as required by law. CMS notes that if the file were made public, the 
information in it could be used in an inappropriate manner and not for 
its intended purpose. Plans will be expected to download the monthly 
file, which we intend to make available to the plans by January 1, 
2019. We will address further operational details concerning the 
preclusion list in sub-regulatory guidance.
    Comment: Several commenters asked whether beneficiary notices would 
be required if the beneficiary's provider ended up on the preclusion 
list shortly after the beneficiary had been assigned or received care 
from the provider. If beneficiary notice is required, commenters asked 
whether distribution of the notice is the responsibility of the health 
plan or CMS.
    Response: Notice will be provided to beneficiaries at least 60 days 
prior to the prescriber or provider being added to the list. Whether 
the notice originates from CMS or plans will be addressed in guidance 
outside of rulemaking.
    Comment: A commenter asked whether a prescriber will be precluded 
immediately after it is included on the preclusion list or if CMS will 
permit different dates of preclusion effectiveness on a case-by-case 
basis.
    Response: As stated in the proposed rule, a prescriber's or 
provider's claims will be denied based on the effective date indicated 
in the preclusion list file.
    Comment: A commenter asked whether the preclusion list can be 
integrated into pharmacy software systems to ensure that medications 
are not dispensed if the prescriber is on the list.
    Response: We believe plans will integrate the list into their 
claims adjudication process in order to appropriately adjudicate 
pharmacy claims in real-time at the point of sale. We foresee this 
process as being similar to how plans currently use the OIG exclusion 
list.
    Comment: A commenter asked that CMS have specific administrative 
procedures in place to ensure that prescriptions dispensed without the 
pharmacy knowing a prescriber is on the preclusion list are adjudicated 
appropriately.
    Response: If a sponsor pays a pharmacy claim involving a 
prescription written by a precluded prescriber in error, we would 
expect that the sponsor would not recoup the payment from the pharmacy 
since the

[[Page 16652]]

pharmacy will not have access to the preclusion list.
    Comment: A commenter urged CMS to consider updating the preclusion 
list more frequently than monthly. The commenter expressed concern that 
only updating the preclusion list monthly could lead to situations 
where CMS may be aware that an individual should be removed from the 
preclusion list (such as the revocation ends on a day at the beginning 
of the month but they will not get off the preclusion list for an 
additional month, therefore essentially prolonging the revocation for 
longer than permitted by current regulation), but Part D sponsors have 
not yet been notified and, as a result, claims will reject and 
beneficiaries may not have access to their Part D prescriptions.
    Response: While we appreciate the commenter's recommendation, we 
note, for the purpose of comparison, that any enrolled provider revoked 
from Medicare does not have their billing privileges automatically 
restored upon the expiration of their enrollment bar; reinstated 
providers are required to submit an application for initial enrollment 
and are subject to the enrollment and screening requirements in 42 CFR 
part 424, subpart P as if they were initially enrolling. If the 
provider was not previously enrolled and does not wish to enroll, the 
time period the provider would have to wait for the list to be 
updated--30 days or less--is comparable to the time it may take a 
previously enrolled but revoked provider to re-enroll. Further, the OIG 
exclusion list works in a similar manner and is only updated once every 
30 days. If an excluded provider were reinstated on the first of the 
month, the provider would have to wait until the updated OIG list is 
released. Ultimately, our intent is to operationalize the preclusion 
list similar to how the OIG exclusion list is operationalized 
currently. We also note the notification to providers that they are on 
the preclusion list will communicate the date on which the provider's 
reenrollment bar will end and he or she will be eligible to begin 
prescribing or furnishing services.
    Comment: A commenter recommended that CMS publish the preclusion 
list in the same format and record layout as the current OIG exclusion 
list and, more specifically, to include the prescriber's NPI number on 
the preclusion list file so that the individual prescriber is 
accurately identified and appropriately included in the claims 
adjudication systems. The commenter also suggested the following: (1) 
The file should include the file extension (in other words, .csv); (2) 
the file should be placed on a public domain for download capability; 
and (3) CMS should maintain a file that tracks the history for those 
individuals and entities that are reinstated on the cumulative file, 
for this facilitates a more efficient process for updating provider 
records and processing claims.
    Response: We appreciate this feedback and will take it into 
consideration. We will provide a file extension upon making the file 
available. As for making the file publicly available, CMS does not 
intend to make this information available to the public except as 
required by law. CMS notes that if the file were made public, the 
information in it could be used in an inappropriate manner and not for 
its intended purpose.
    Further, we do not believe it will be necessary to create a 
historic tracking file as the preclusion list will be cumulative and as 
such will contain the time period for which a provider is precluded.
    Comment: A commenter recommended that each updated preclusion list 
file be effective at least five (5) business days after Part D sponsors 
receive it to allow them time to configure their claims adjudication 
systems with the most current version.
    Response: We appreciate the commenter's feedback and are finalizing 
the rule to include a period of at least 30 calendar days with which 
the plan will have to intake into their system the most current 
preclusion data.
    Comment: A commenter asked whether, if a claim for reimbursement is 
received several months after the date of service, CMS will require 
Part D sponsors to go back and review the preclusion list in effect at 
the time of the date of service. Another commenter sought clarification 
as to whether CMS will maintain an archive of the preclusion list files 
with the dates of enforcement.
    Response: We plan to make the preclusion list a cumulative file 
that will contain periods for which claims should be denied, meaning 
the list will contain start and end dates for preclusion periods. 
Accordingly, we believe that referring back to archived files will not 
be necessary.
    Comment: A commenter supported CMS' recommendation to leverage the 
PDE data as the initial data source for precluded provider analysis. 
The commenter stated, however, that any changes to the PDE layout to 
support these efforts will need to be outlined in technical guidance to 
ensure efficient and effective data exchanges.
    Response: We appreciate the commenter's support and agree any 
changes to PDE layout will need to be outlined in technical guidance 
issued outside of this rule.
    Comment: A commenter requested that all technical guidance related 
to ``other authorized prescribers'' be removed.
    Response: We appreciate the commenter's feedback. All provider 
types, including those that are not eligible to enroll but who are 
eligible to prescribe, will be subject to screening for placement on 
the preclusion list.
    Comment: A number of commenters sought clarification as to who 
notifies the beneficiary that their provider is on the preclusion list.
    Response: Plans will be responsible for notifying beneficiaries of 
their prescribers being placed on the preclusion list as stated at 
Sec.  423.120(c)(6). As for Part C beneficiaries whose provider is 
precluded, whether the notice originates from CMS or plans will be 
addressed in guidance outside of rulemaking.
    Comment: Several commenters asked for clarification on how to 
handle situations where a claim for a dual-eligible beneficiary comes 
from a prescriber who is on the preclusion list but is not excluded by 
Medicaid. Other commenters also requested that CMS explain how claims 
for dual-eligible beneficiaries should be handled.
    Response: If a Part D drug claim is rejected by the Part D plan 
because the prescriber is included on the preclusion list, the drug 
cannot be covered by Medicaid and eligible for federal financial 
participation (FFP) under Medicaid for dual eligible beneficiaries.
    Comment: A commenter stated that with new admissions, long-term 
care pharmacies often dispense the medication(s) without entering a 
claim in real-time because the relevant information received from the 
long-term care facility on the patient is incomplete. Should this occur 
with a provider on the preclusion list, a long-term care pharmacy would 
either have to spend resources to contest the denial of payment or bear 
the cost. To avoid undue costs and to prevent the pharmacy in this 
situation from inadvertently filling such prescriptions, the commenter 
requested that there be a standard process by which the plans or CMS 
inform long-term care pharmacies of providers included on the 
preclusion list.
    Response: We believe this is best addressed by the contract between 
the plan and the pharmacy.
    Comment: A commenter recommended that the final rule maintain the 
proposed language that payment denials would apply only to health care 
items or services furnished

[[Page 16653]]

on or after the date the individual or entity was added to the 
preclusion list.
    Response: We appreciate the commenter's recommendation and agree. 
We are maintaining the language in the proposed rule that payment 
denials or claim rejections occur only after the date on which a 
provider is placed on the preclusion list and are effective the date 
indicated on the preclusion list file. To clarify, the preclusion list 
will include the prospective specified time period for which the 
provider is precluded.
    Comment: With regard to beneficiary notification, a commenter urged 
CMS to consider permitting MA plans to follow existing processes, 
including, but not limited to, the termination of a contracted MA plan 
provider and subsequent notification to the beneficiary. Upon 
submission of a claim from an individual or entity that is on the 
preclusion list, the commenter explained, the claim would be denied and 
the beneficiary would not have any liability for the claim, yet the 
beneficiary would receive an explanation of benefits notifying the 
beneficiary of the claim denial and reason; if the claim is related to 
a contracted provider who was then terminated from a MA plan's network, 
the beneficiary would be notified of that status and the reason.
    Response: With respect to the process that occurs upon a claim 
being submitted for services furnished by a contracting provider, if 
the MA plan determines through its periodic review of provider 
credentialing that a contracting provider is no longer eligible to 
treat Medicare beneficiaries the MA plan will ensure that the provider 
does not furnish services for plan enrollees until such time as the 
provider is either terminated by the plan or the provider resolves the 
reason for being on the preclusion list. If a contracted precluded 
provider has treated plan enrollees, the enrollee will only be 
responsible for the plan allowed cost sharing and will be notified that 
the contracted provider is no longer available.
    Comment: A commenter requested that CMS clarify how ``entities'' 
would be identified on the preclusion list file and whether individual 
providers furnishing services under that entity would also be precluded 
(for example, if the individual providers under the entity are also 
precluded, the affiliated Type 1 NPIs will also be listed on precluded 
provider file).
    Response: Entities that provide health care services will be 
eligible to be placed on the preclusion list. Whether or not the 
individuals providing services under the entity depends on if the 
individual met the criteria for being placed on the list. Individuals 
under precluded entities will not automatically be precluded based on 
their association with a precluded entity.
    Comment: A commenter stated that, regardless of who furnishes 
notice to the beneficiary, CMS will need procedures in place to address 
beneficiary questions. If plan sponsors must notify the beneficiary, 
the commenter explained, the plan sponsor will have no access to the 
reason for the preclusion to be able to answer beneficiary questions.
    Response: We appreciate the commenter's feedback and will take into 
consideration that the plan will not have the specific reason. However, 
we believe this is an operational detail best addressed outside of 
rulemaking.
    Comment: A commenter stated that CMS should clarify whether the 
preclusion list will be shared with state Medicaid programs for 
inclusion in the state's Medicaid exclusion list. Another commenter 
stated that the preclusion list policies should apply to both the 
Medicare and Medicaid benefits where coordination occurs between these 
programs under Medicare/Medicaid Plans and Special Needs Plans. Another 
commenter expressed concern that the preclusion list will not be 
aligned with state lists and that the impact on the beneficiary at the 
point of sale will not be aligned between state and federal processes; 
the commenter stated that this would be particularly relevant for an 
MMP beneficiary. Another commenter recommended that for Medicare-
Medicaid Plans and Special Needs Plans involving situations where the 
prescriber is listed on the preclusion list, the beneficiary should not 
be eligible for coverage under both plans. The commenter believed that 
this would eliminate confusion for beneficiaries who have multiple 
prescriptions that could apply to either the Medicare benefit or the 
Medicaid benefit. Another commenter asked whether, for dual-eligible or 
Medicare-Medicaid Program beneficiaries, the drug can be covered under 
Medicaid or whether the final rule applies to both lines of business.
    Response: We appreciate the feedback of these commenters. In our 
experience, State Medicaid agencies do currently construct their own 
exclusion lists based on state-specific criteria. The criteria they use 
may or may not be consistent with the criteria used to determine if a 
provider should be placed on the preclusion list. At this time, we are 
not requiring states to utilize the preclusion as a means of excluding 
providers in the Medicaid program but we intend to make the preclusion 
list available to State Medicaid programs in the future and are 
exploring how best to share this information with states. Also, for 
dual eligible beneficiaries, if a Part D drug claim is rejected by the 
Part D plan because the prescriber is included on the preclusion list, 
the drug cannot be covered by Medicaid and eligible for federal 
financial participation (FFP) under Medicaid for dual eligible 
beneficiaries.
    Comment: A commenter urged CMS to work closely with industry 
stakeholders to define the minimum necessary attributes of the 
preclusion list file layout.
    Response: We appreciate the commenter's suggestion and will take 
this into consideration as we work to operationalize these 
requirements.
    Comment: A commenter asked that CMS confirm that, similar to the 
OIG excluded provider guidance, plan sponsors will not return reject 
code 569 (``Provide Notice: Medicare Prescription Drug Coverage and 
Your Rights'') on claims that reject as a result of a precluded 
provider.
    Response: We appreciate the commenter's question and will take this 
into consideration. However, we believe this is an operational detail 
best addressed outside of rulemaking.
    Comment: A commenter urged CMS to ensure that the list is available 
to prescribers so they are able to confirm their inclusion on the list 
independent of notification by a plan sponsor.
    Response: Prescribers will be notified in advance of being placed 
on the preclusion list as required by Sec.  423.120(c)(6). The 
notification would explain that the provider has met the criteria for 
preclusion and has the right to appeal that determination within 60 
days. Once a provider has exhausted their first level appeal process or 
has not submitted an appeal within 60 days, an additional 90-day period 
will lapse prior to their addition to the preclusion list. The 90-day 
period allows the plans 30-days to intake the preclusion data and a 60-
day beneficiary notification period. Subsequent updates to the list 
will provide any newly added provider with a 60-day appeals window but 
will not provide a 90-day period as discussed above, thus after 
implementation beneficiaries may not be notified that they may have 
received a prescription or services from a provider that is now 
precluded.
    We therefore believe it is unnecessary to provide the list to 
prescribers. As for making the file publicly available, CMS does not 
intend to make this

[[Page 16654]]

information available to the public except as required by law. CMS 
notes that if the file were made public, the information in it could be 
used in an inappropriate manner and not for its intended purpose.
    Comment: A commenter stated that CMS must notify prescribers when 
they are placed on the preclusion list. The commenter did not believe 
this administrative function should be the plan sponsors' 
responsibility.
    Response: We agree with the commenter. As written in the regulation 
text at Sec.  423.120(c)(6)(v)(A), ``CMS sends written notice to the 
prescriber via letter of his or her inclusion on the preclusion list.''
    Comment: A commenter stated that CMS should not duplicate exclusion 
efforts already administered via the OIG.
    Response: While we appreciate the commenter's feedback, we do not 
believe we are duplicating efforts currently undertaken by the OIG. We 
note that the preclusion list uses exclusion data from the OIG along 
with other provider data to create an alternative to enrollment. As 
previously stated, the preclusion list will include prescribers and 
providers who have engaged in behavior for which CMS has or could have 
revoked the prescriber or provider to the extent applicable if he or 
she had been enrolled in Medicare. Further, the intent of the 
preclusion list is to be broader than the OIG exclusion list, for it 
can include prescribers and providers who may not be excluded but still 
pose a threat to the program and/or beneficiaries.
    Comment: In response to our solicitation of comments, a commenter 
did not recommend any opioid-specific criteria for inclusion on the 
preclusion list. The commenter believed that the end result (for 
example, suspension/termination of medical and/or DEA license) should 
serve as the preclusion criteria.
    Response: We appreciate the commenter's feedback. We note that 
Medicare has the authority to revoke for improper prescribing practices 
(42 CFR 424.535(a)(14)), which includes a pattern or practice that is 
abusive or represents a threat to the health and safety of our 
beneficiaries. In screening nonenrolled providers, we would apply this 
authority in determining their inclusion on the list. Further, CMS has 
the ability to revoke providers for suspension or revocation of their 
DEA certification or registration, or loss of prescribing authority (42 
CFR 424.535(a)(13)).
    Comment: A number of commenters stated that monthly updates of the 
preclusion list would be inadequate and that the list should be updated 
weekly or no less than bi-monthly; a commenter stated that a reasonable 
timeframe for incorporating the preclusion list into its claims 
adjudication system would be within four (4) business days of the 
file's posting This commenter explained that upon removal or resolution 
of a provider's preclusion, the industry will need to be able to begin 
paying the claims as soon as possible in order to prevent beneficiary 
access issues. Even if a new override mechanism for data delays is 
created, the commenter continued, most pharmacies will be unwilling to 
override the rejection for fear of audit risk and/or payment 
recoupment. The commenter expressed concern that claims would be 
rejected for up to a month for prescribers whose preclusion statuses 
have been resolved. The same situation could happen with newly 
precluded prescribers; if an event occurs that warrants the 
prescriber's inclusion on the preclusion list, the commenter expressed 
concern over the prospect of paying claims for these prescribers for up 
to a full month, particularly if the prescriber's behavior places 
beneficiaries at risk. Other commenters shared these concerns.
    Response: We appreciate the commenter's concerns. We note, however, 
that the OIG list is posted every 30 days and plans are able to 
integrate that file into their systems in a reasonable amount of time. 
The preclusion list will be designed to be integrated in a similar 
manner and claims adjudicated in a similar process. We therefore 
believe that posting the list once every 30 days is sufficient. 
Further, the specific time period for which a provider is precluded 
will be identified on the file shared with plans.
    Comment: A commenter requested technical guidance for any PDE 
changes that will be needed to support the preclusion list process. 
Among the specific questions the commenter raised were: (1) Whether CMS 
could confirm that plans will no longer need to identify an exception 
for ``other authorized prescribers'' on the PDE, and that this field 
should be submitted with spaces or blanks; and (2) whether CMS 
anticipates any other changes to the PDE file layout and/or processes 
related to the preclusion list.
    Response: We will issue any necessary PDE guidance outside the 
regulatory process. We note that the regulatory text no longer refers 
to other authorized prescribers. Such a designation was necessary to 
identify which claims should be paid under an enrollment requirement 
since other authorized prescribers could not enroll. However, under the 
preclusion list requirement, only claims thatmust be rejected need to 
be identified.
    Comment: A commenter asked CMS to clarify the conduct that would 
lead to non-Medicare providers being included on the preclusion list.
    Response: As we stated in the proposed rule, the preclusion list 
will include those prescribers and providers that have engaged in 
behavior for which CMS could have revoked the prescriber or provider to 
the extent applicable if he or she had been enrolled in Medicare. CMS 
revokes providers based on the authorities located at 42 CFR 424.535. 
If it is determined that a prescriber or provider meets the criteria 
that would cause them to be revoked if he or she were enrolled in the 
program and the underlying cause for revocation is considered to be 
detrimental to the program, the prescriber or provider will be placed 
on the preclusion list. CMS would not have the authority outside of 
those listed at 42 CFR 424.535 to revoke a provider or therefore add 
them to the preclusion list.
    Comment: A commenter recommended that CMS provide sponsors with 
clarifications on the process of creating and maintaining the 
preclusion list, followed by an opportunity to submit comments and 
feedback.
    Response: We appreciate the commenter's question and will take this 
into consideration.
    Comment: A commenter recommended that CMS require plan sponsors to 
treat all precluded provider claims in the same manner regardless of 
the drug. If the CMS preclusion warrants a discretionary effective date 
based on the preclusion reason, the commenter stated that this should 
be managed by CMS.
    Response: We appreciate the commenter's recommendation and believe 
that it is consistent with our proposal. If a provider is placed on the 
preclusion list, any prescription drug claims submitted with the 
provider listed as the prescriber must be denied or rejected regardless 
of the drug or medication being prescribed.
    Comment: A commenter asked whether the range of providers defined 
as ``in scope'' for purposes of complying with the preclusion list 
requirement will be made clear for purposes of implementing the 
adjudication logic. As an illustration, the commenter asked whether 
providers (such as pharmacies) under MAOs would be designated as ``in 
scope'' for this requirement. If so, the commenter stated, CMS must 
provide clear instructions for sponsors to adjudicate claims (or not) 
involving situations where a pharmacy on the

[[Page 16655]]

preclusion list is in a position to fill a prescription for a non-
precluded prescriber.
    Response: We appreciate this comment and clarify that the 
preclusion list will include any prescriber or provider that falls 
within the preclusion list definition in, respectively, Sec. Sec.  
423.100 and 422.2.
    Comment: A commenter urged CMS to define how individuals/entities 
would be identified by CMS to add to the preclusion list and how the 
list will be created and maintained, followed by a comment opportunity 
for the industry to provide feedback.
    Response: As already mentioned, the preclusion list will include 
those prescribers and providers that have engaged in behavior for which 
CMS has or could have revoked the prescriber or provider to the extent 
applicable if the prescriber or provider was or had been enrolled in 
Medicare. CMS revokes prescribers and providers based on the 
authorities located at Sec.  424.535. If it is determined that a 
prescriber or provider has met the criteria that would cause the 
prescriber or provider to be revoked if they were enrolled with the 
program, or is revoked, and the underlying cause for revocation is 
considered detrimental to the Medicare program, the prescriber or 
provider will be placed on the preclusion list.
    Comment: A commenter recommended that CMS clarify how and in what 
instances CMS would apply sanctions to a plan that pays an individual/
entity on the preclusion list.
    Response: CMS will determine appropriate compliance action on a 
case-by-case basis. In doing so, CMS will weigh key factors such as 
beneficiary harm, and duration and extent of compliance failure.
    Comment: A commenter stated that a pharmacy often needs to send out 
medications for nursing home beneficiaries. If the preclusion list is 
not made readily available electronically, the commenter sought 
clarification as to which party would be responsible for payment of 
these medications.
    Response: As already mentioned, CMS will make the preclusion list 
available every 30 days via a secure server from which plans will be 
able to download the most up to date list. If the plan fails to utilize 
the most up-to-date version of the list, the plan is at risk of paying 
for prescriptions written by precluded prescribers.
    Comment: A commenter stated according to chapter 18, section 40.3.1 
of CMS' Prescription Drug Benefit Manual and in previous technical 
guidance, plans do not have to provide beneficiaries s with the 
standardized pharmacy notice (CMS-10147--Medicare Prescription Drug 
Coverage and Your Rights) if the reason for the reject is due to a 
provider who has been excluded from participation in the Medicare 
program. The commenter sought clarification that this policy will also 
apply to claims rejected due to a prescriber being on the preclusion 
list.
    Response: Regarding this particular technical guidance, it applies 
only to those prescribers who have been excluded by the OIG. Thus, if a 
beneficiary's prescribing provider is both excluded and is on the 
preclusion list, CMS will provide guidance on which list should take 
precedence in regard to how notification should be made to 
beneficiaries.
(3) Miscellaneous Payment Issues
    Comment: A number of commenters urged CMS to: (1) Include language 
to clearly identify the scope of the payment prohibition to 
individuals/entities on the preclusion list; and (2) clarify which 
payments to individuals/entities are permissible and which are not (for 
example, health care services only; administrative services also).
    Response: Payment for covered services or items furnished by a 
precluded prescriber or provider is prohibited under this rule, and the 
screening process for the preclusion list will apply to any prescriber 
or provider and not those conducting administrative services. However, 
we note that urgent and emergency services as defined in Sec.  422.113, 
are excluded as indicated in the regulatory text at Sec.  460.86(a) for 
Part C covered services and Sec.  422.224(a) for Part D covered drugs.
    Comment: A commenter noted that proposed Sec.  422.222(a) would 
prohibit payment for health care items and services. The commenter 
asked whether a person or entity could still be paid for administrative 
services furnished to the sponsor. If the person or entity can be paid 
for such services, the commenter suggested that this be made clear 
throughout the proposed preclusion list provisions, for some provisions 
refer to a general prohibition against ``payments'' while others 
reference a prohibition against payment for ``health care items and 
services.'' In this vein, the commenter also cited Sec.  422.224(a), 
which the commenter stated, appears to combine the payment prohibitions 
arising from an OIG exclusion with a party's inclusion on the 
preclusion list. The commenter found this confusing because a sponsor 
is precluded from paying a person who is excluded by the OIG for both 
health care services and administrative services, whereas CMS seemingly 
intends for the preclusion list prohibition to only apply to health 
care items and services. The commenter urged CMS to explain this 
distinction in Sec.  422.224.
    Response: As mentioned in our previous response, payment for 
covered services or items furnished by a precluded prescriber or 
provider is prohibited under this rule, and the screening process for 
the preclusion list will apply to any prescriber or provider and not 
those conducting administrative services. Further, administrative 
services may not be reimbursed via the claims process and therefore may 
not be subject to payment denials due to preclusion.
    Additionally, we note that urgent and emergency services as defined 
in Sec.  422.113, are excluded as indicated in the regulatory text at 
Sec.  460.86(a) for Part C covered services and Sec.  422.224(a) for 
Part D covered drugs.
    Comment: A commenter stated that the proposed provision to Sec.  
422.224(a) does not appear to exclude emergency or urgently needed 
services from the payment prohibition therein. The commenter 
recommended that CMS make clearer that such services are indeed 
excluded from Sec.  422.224(a)'s purview.
    Response: Ultimately, we do not believe that even emergency or 
urgent situations would warrant subjecting beneficiaries to care 
provided by providers who meet the preclusion list criteria and 
therefore, decline to adopt the commenter's recommendation in 
finalizing the rule.
    Comment: A commenter noted that Sec.  422.224(a) applies the 
preclusion list payment prohibition to Medicare enrollees of the MAO/
Medicare cost plan. An MAO or Medicare cost plan, the commenter 
explained, commonly offers other product lines besides the MA program 
or Medicare cost plan program that will cover Medicare enrollees; an 
example is the offering of commercial health plan coverage where an 
enrollee is covered under Medicare either as primary or secondary 
payer. The commenter stated that the OIG exclusion payment prohibitions 
extend to payments for these persons as well and asked whether CMS 
intended to extend the preclusion list payment prohibition to non-MA/
cost enrollees of an MAO or a Medicare cost plan.
    Response: We do not believe we have the authority to regulate 
commercial health plans or other non-Medicare product lines offered by 
the MAO.
(4) Application to Other Parties
    Comment: Since PACE organizations provide Medicare and Medicaid 
covered services, a commenter asked how the

[[Page 16656]]

preclusion list requirement will apply to staff and contractual 
individuals and entities that are not eligible to enroll in Medicare 
(for example, nurses, recreational therapists, drivers). The commenter 
sought clarification that such individuals and entities will not be 
vetted for inclusion on the preclusion list and that it will not be 
necessary to check these individuals and entities against the 
preclusion list. Another commenter interpreted the proposed preclusion 
list requirement (as well as the OIG exclusion list) to apply to: (1) 
The staff of the PACE organization (whether employed directly by or 
under contract with the organization); and (2) entities with which a 
PACE organization may contract to furnish care, such as inpatient 
hospitals, nursing homes, and post-acute care settings. The commenter 
did not, however, believe that the preclusion list proposal required 
the PACE organization to verify whether employees or contracted staff 
of a hospital or other provider entity with which the PACE organization 
contracts are included on the preclusion list. Likewise, the commenter 
did not believe the preclusion list policy included staff members of 
the PACE interdisciplinary team who are not eligible for Medicare 
provider or supplier enrollment, such as nurses, recreational 
therapists, and drivers. The commenter urged that CMS clarify these 
issues.
    Response: PACE would follow the same approach as MA organizations; 
that is, PACE would verify that contracted providers that furnish Part 
A and B services and items are not on the preclusion list. This would 
include those providers that are not otherwise eligible to enroll in 
Medicare. To address the specific points raised by the commenter, the 
administrative staff of the PACE organization would not be subject to 
the preclusion list requirements. Further, to the extent a PACE program 
contracts with a precluded provider, the requirements could only be 
applied if that entity or provider is visible on the claim. Regarding 
application of the preclusion list, we will hold PACE organizations to 
the same requirements as MAOs.
    Comment: A commenter asked whether CMS expects PACE organizations 
to hold contracted entities responsible for confirming that their 
staffs (whether employed or contracted) are not on the CMS preclusion 
list. The commenter recommended that the preclusion list requirements 
not extend beyond those individuals and entities with whom PACE 
organizations contract directly unless a similar requirement is 
implemented in fee-for-service Medicare such that hospitals, nursing 
homes, home health agencies, etc. are required to check their staff 
against the preclusion list. The commenter's concern is that by 
imposing an additional contractual requirement on PACE organizations, 
their ability to secure contracts may be negatively impacted. Also, the 
commenter urged that any requirement on PACE organizations for 
employees of contracted entities to be vetted against the CMS 
preclusion list be delayed until such a requirement for these employees 
exists in fee-for-service, at which time such a requirement would be 
universal and not applied distinctively by PACE (and MA) organizations.
    Response: As mentioned in our previous response, PACE would follow 
the same approach as MA organizations; specifically, PACE would verify 
that contracted providers that furnish Part A and B services and items 
are not on the preclusion list. This would include those providers that 
are not otherwise eligible to enroll in Medicare.
    Comment: Regarding the requirement to provide notice to PACE 
participants if a PACE organization receives a request for payment by 
an individual or entity excluded by the OIG or included on the 
preclusion list, a commenter asked CMS to consider the differences 
between PACE organizations and MA plans in implementing the notice 
requirement.
    Response: We appreciate the commenter's recommendation and will 
take this into consideration as we work to operationalize this 
requirement.
(5) Preclusion List Criteria
    Comment: Several commenters believed that some of the criteria to 
be used to make preclusion list determinations lack objectivity. A 
commenter cited the following examples: (1) The seriousness of the 
conduct underlying the prescriber's revocation; (2) the degree to which 
the [physician's] conduct could affect the integrity of the Part D/MA 
program; and (3) any other evidence that CMS deems relevant to its 
determination. The commenter stated that such criteria hurts the 
program by potentially limiting the pool of available clinicians for 
Medicare beneficiaries and puts the professional reputation of the 
physician in jeopardy; the commenter stated that once a clinician has 
been placed on the list, there will be professional consequences for 
him or her. The commenter did not believe that CMS' proposed appeals 
process is enough to address this concern. The commenter urged CMS to 
remove criteria that are subjective in nature in the final rule.
    Response: We appreciate the commenter's suggestion and believe the 
appeals process addresses this concern as no provider will be added to 
the preclusion list until they have exhausted their first level of CMS 
appeal or if they fail to appeal their addition to the list. 
Specifically, beneficiaries and Part C and D plans will not be notified 
of the provider's preclusion status until after this period in order to 
avoid negative consequences for a provider whose preclusion status is 
not yet final. In regard to the subjectivity of the preclusion list 
standards, we believe it is necessary to maintain this subjectivity 
given some providers are revoked for reasons that may not be considered 
detrimental to the program. For example, a provider may have failed to 
update an expired license.
    Ultimately, we believe the preclusion list approach will broaden 
the pool of available clinicians as they are no longer restricted by 
the requirement that they be enrolled in order to furnish items or 
services.
    Comment: A commenter expressed concern that the requirements for 
putting a prescriber on the preclusion list are too narrow. The 
commenter supported a means of including physicians or other 
prescribers on the preclusion list who have a history of problematic 
opioid prescriptions, or at least to flag such prescriptions if they 
would meet the requirements under the Plan Sponsor Drug Management Plan 
and do not meet any exemption.
    Response: We appreciate the commenter's recommendation and will 
take this into consideration in any future regulatory revisions of the 
preclusion list provisions. At this time, however, we are unable to 
adopt these recommendations in this final rule as such data is not 
readily accessible to make such a determination.
    Comment: A commenter recommended that Medicare revocation reasons 
Sec.  424.535(a)(6), (9), and (10) be excluded as reasons for a 
provider to be included on the preclusion list, for these reasons only 
apply to those that are enrolled in Medicare.
    Response: We agree that the revocation authorities at Sec.  
424.535(a)(6), (9), and (10) would not be applicable to prescribers and 
providers that are not Medicare enrolled but are evaluated for 
inclusion on the list. However, these revocation authorities will apply 
to prescribers and providers that are Medicare enrolled and are under 
review for inclusion on the list. Logically, we would not be able to 
evaluate non-Medicare enrolled providers against this criteria, and do 
not believe it is

[[Page 16657]]

necessary to specifically exclude these revocation authorities from the 
preclusion list criteria. To illustrate, the revocation authority at 
Sec.  424.535(a)(4) is based upon the provider indicating as true 
information that is in fact false or misleading on the enrollment 
application. The providers who will be precluded may not have enrolled 
with Medicare and therefore would not be subject to this revocation 
authority. We therefore decline to adopt the commenter's recommendation 
in finalizing the rule.
    Comment: A commenter recommended that CMS develop prescriber 
preclusion list criteria that focuses on beneficiary safety and 
mitigates the risks of opioid prescribing.
    Response: We believe that by utilizing Medicare's current 
revocation authorities as criteria to evaluate a prescriber's inclusion 
on the preclusion list, we are, in fact, safeguarding beneficiaries 
against overprescribing of opioids. The current revocation reasons at 
Sec.  424.535 allow CMS to exclude or remove from the program those 
prescribers who may prove to be a detriment to Medicare. The preclusion 
list expands CMS' authority by allowing the application of these 
revocation authorities to not only Medicare-enrolled prescribers and 
providers but also to any prescriber or provider that could potentially 
provide care to our beneficiaries, thus further broadening our ability 
to keep out problematic providers. We also reiterate that Medicare has 
two revocation authorities at Sec.  424.535(a)(13) and (14) that 
specifically focus on a prescriber's prescribing practices. The 
authority at (a)(14), for instance, gives Medicare the ability to 
revoke if a prescriber shows a pattern or practice of abusive 
prescribing that CMS determines is a threat to the health and safety of 
Medicare beneficiaries. Given this clarification, we respectfully 
decline to adopt the commenter's recommendation.
(6) NPI Issues
    Comment: Several commenters expressed support for our proposed 
changes to Sec.  423.120(c)(5).
    Response: We thank the commenters for their support.
    Comment: A commenter stated that Sec.  423.120(c) is among the 
sections of this rule that are listed as waived for PACE organizations. 
The commenter asked whether CMS intended to impose the requirements in 
proposed Sec.  423.120(c)(5) and Sec.  423.120(c)(6) on PACE 
organizations. If, the commenter asked, the requirements under proposed 
Sec.  423.120(c)(5) for an active and valid NPI on all pharmacy claims 
apply to PACE organizations, the commenter requested a waiver for PACE 
organizations of the requirement in proposed Sec.  423.120(c)(5)(ii) 
for Part D sponsors to communicate at point-of-sale if an NPI is active 
and valid. The commenter stated that such a waiver would be consistent 
with CMS' recognition of differences in how Part D may be implemented 
by PACE organizations and the way PACE organizations interact with 
their contracted pharmacies to obtain Part D drugs on behalf of their 
participants.
    Response: Section 423.120(c) is waived for PACE organizations, and 
no waiver is necessary. However, to the extent a PACE organization 
adjudicates claims electronically or contracts with a pharmacy to fill 
prescriptions on their behalf and such pharmacy adjudicates beneficiary 
claims electronically on behalf of PACE enrollees, PACE organizations 
must comply with the requirements of Sec.  423.120(c).
    Comment: A commenter sought confirmation that the NPI is intended 
for encounter data submitted to CMS via the Encounter Data System 
(EDS), and not the abbreviated format via the Risk Adjustment 
Processing System. The commenter also suggested that the proposed 
change to Sec.  422.310(d)(5) be revised to state as follows: ``(5) For 
data described in paragraph (d)(1) of this section as data equivalent 
to Medicare fee-for-service data, which is also known as MA encounter 
data submitted to CMS via the Encounter Data System (EDS), MA Plans 
must submit a NPI in a billing provider field on each MA encounter data 
record, per CMS guidance.''
    Response: The proposed provision at Sec.  422.310(d)(5) does refer 
only to encounter data. The record layout for Risk Adjustment 
Processing System (RAPS) data has not changed and is not addressed in 
this rule-making. Finally, we decline to accept the commenter's 
suggested revision to the regulation text, because the name of a system 
such as the EDS could change over time, and we believe it is clear that 
this provision applies to MA encounter data. Thus, we are finalizing 
paragraph (d)(5) as proposed.
    Comment: With respect to the requirement for a valid NPI on drug 
claims, a commenter stated that the beneficiary should not be held 
responsible for the price of the drug in the event of an invalid NPI.
    Response: We refer the commenter to Sec.  423.120(c)(5)(iv), which 
generally states that a sponsor may not make payment to a beneficiary 
dependent upon the sponsor's acquisition of an active and valid 
prescriber NPI in the case of a beneficiary request for reimbursement.
    Comment: A commenter noted that the MACRA legislation, which 
included the valid NPI requirement, was signed into law on April 16, 
2015 and became effective January 1, 2016. Accordingly, the commenter 
stated that it, alongside other major PBMs, has been enforcing the 
active NPI requirement at the point of sale since January 1, 2016. The 
commenter thus expressed confusion about the modifications to (c)(5) 
and the request for comments, and sought clarification from CMS 
regarding the intent of this modified guidance.
    Response: The modifications to (c)(5) are to comply with MACRA. In 
this regard, CMS previously issued guidance on June 1, 2015 \77\ that 
existing procedures to comply with the previous requirement at Sec.  
423.120(c)(5)(iii)(B)(2) which stated that a Part D sponsor must pay a 
claim even when the pharmacy does not correct the NPI or confirm that 
it is active and valid will no longer apply as of January 1, 2016. 
Thus, the modifications to (c)(5) are intended to remove this 
regulatory language because it does not comply with MACRA. Sponsors in 
compliance with the June 1, 2015 guidance should not have to change any 
existing claims procedures due to these modifications.
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    \77\ https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/HPMS-Memo-Prescriber-Enrollment-Enforcement-v06012015.pdf.
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    Comment: A commenter expressed support for the proposed amended 
requirements for risk adjustment data, but urged that CMS consider two 
related issues prior to final rulemaking. First, while standard claims 
transactions (which represent the vast majority of claims) include 
provider NPI data, a provider that submits a manual, paper claim may 
not have an NPI on file with the plan. Plans may engage in efforts to 
obtain an NPI, but responses to these efforts from an unaffiliated 
provider is not always timely. The commenter recommended that CMS adopt 
a limited exception to its proposed NPI requirement where a provider 
submits a paper claim and does not have an NPI on file with the 
receiving plan. Second, the commenter stated that a number of 
providers, including rehabilitation centers and durable medical 
equipment (DME) suppliers, are contracted by and bill plans under a 
group or ``Type 2'' NPI. The commenter stated that the proposed rule 
was not clear regarding whether CMS will accept a Type 2 NPI in 
satisfaction of the proposed encounter data standard. For plans that

[[Page 16658]]

currently accept and use Type 2 NPIs, capturing individual NPIs would 
likely require changes to both credentialing policies and contracting 
standards; the administrative burden of making these changes would be 
considerable. The commenter added that while the use of exclusively 
Type 1 NPIs could represent a very significant burden for some plans, 
the commenter did not believe that use of a Type 2 NPI would provide 
any less support for CMS' program integrity efforts than that provided 
by a Type 1 NPI. The commenter requested that the final rule provide 
allowances for submission of either Type 1 or Type 2 NPIs in risk 
adjustment encounter data.
    Response: MA organizations and other submitters of MA encounter 
data should follow the national implementation guides (known by the 
shorthand ``TR3 guides''): Standards for Electronic Data Interchange 
Technical Report Type 3, Health Care Claim: Institutional (837) and 
Standards for Electronic Data Interchange Technical Report Type 3, 
Health Care Claim: Professional (837), including the TR3 guidance for 
use of Type 1 and Type 2 NPIs. Submitters should also follow CMS' 
existing guidance regarding NPIs that is specific to encounter data 
submissions. For example, CMS released a December 21, 2017 memo 
``Encounter Data Record Submissions--NPI Submission Guidance--
Frequently Asked Questions (FAQ),'' released through CMS' Health Plan 
Management System (HPMS), which discusses situations under which 
default NPIs may be used. As noted in this memo, CMS expects the number 
of encounter data records (EDRs) with default NPIs for providers who 
would otherwise have an NPI (that is, not atypical providers) to be a 
very small percentage of an MAO's total EDR submissions. CMS is 
monitoring the level of default NPI use.
    Comment: A commenter urged CMS to enforce Section 507 of MACRA as 
effectively and efficiently as possible, taking into account the 
burdens that may be imposed on plans and providers, as well as on 
beneficiary access to needed medications. For example, the commenter 
cautioned that the proposed enforcement mechanism could prove 
problematic with respect to certain providers in limited contexts--such 
as teaching hospitals with residents and interns who may use the NPI of 
their attending physician. As such, the commenter encouraged CMS to 
provide additional clarity about how the final policy will be 
implemented to account for these and similar situations that may arise, 
in order to maintain beneficiary access.
    Response: Section 507 of MACRA amends section 1860D-4(c) of the 
Social Security Act (42 U.S.C. 1395w-104(c)) by requiring that pharmacy 
claims for covered Part D drugs include prescriber NPIs beginning 
January 1, 2016 that are determined to be valid under procedures 
established by the Secretary in consultation with appropriate 
stakeholders. MACRA does not address the issue of which NPI a pharmacy 
must use on a claim for a prescription written by a resident--only that 
is be active and valid. In addition, the modifications to (c)(5) are 
technical to make the regulatory text consistent with exiting law and 
guidance.
    Comment: A commenter urged CMS to consider how to mitigate 
potential access challenges created for patients when claims with 
invalid NPIs are submitted in error.
    Response: As already stated, section 507 of MACRA amends Section 
1860D-4(c) of the Social Security Act (42 U.S.C. 1395w-104(c)) by 
requiring that pharmacy claims for covered Part D drugs include 
prescriber NPIs beginning January 1, 2016 that are determined to be 
valid under procedures established by the Secretary in consultation 
with appropriate stakeholders. The modifications to (c)(5) are 
technical to make the regulatory text consistent with existing law and 
guidance.
    Comment: With the revisions to Sec.  423.120(c)(5) and based on 
section 507 of MACRA, a commenter sought clarification as to whether 
the 24-hour follow-up for the plan sponsor to work with the pharmacy to 
identify the prescriber NPI and resubmit the claim is no longer 
applicable. Another commenter asked whether, in instances when a 
pharmacy encounters an issue with a prescriber NPI and the pharmacy 
either cannot or does not correct the NPI, plans are still required to 
outreach to network pharmacies within 24 hours in an attempt to obtain 
a valid NPI.
    Response: Such outreach is no longer required. CMS' previous 
guidance in this regard was based upon the prior requirement--which the 
modifications to Sec.  423.120(c)(5) are removing--for sponsors to pay 
pharmacy claims with inactive and invalid NPIs when the pharmacy either 
could not or did not correct the prescriber NPI and then obtain the 
active and valid ones afterward.
    Comment: A commenter urged CMS to make two modifications to Sec.  
423.120(c)(5). First, the commenter suggested changes to new Sec.  
423.120(c)(5)(ii), which, as proposed, would require the sponsor at the 
point of sale to communicate whether a submitted NPI is active and 
valid to accommodate for long-term care (LTC) pharmacies where there is 
no point of sale. The commenter stated that this provision must contain 
a blanket exception for LTC pharmacies prohibiting the PDP or PBM from 
denying any claim by an LTC pharmacy. Second, the commenter sought 
revisions to new Sec.  423.120(c)(5)(iii)(B), which, as proposed, would 
permit a PDP or its PBM to deny reimbursement to a pharmacy that 
dispensed a drug prescribed by a physician without an NPI number under 
certain conditions; the commenter stated that this provision must 
contain a similar blanket exception prohibiting the denial of LTC 
pharmacy claims in all circumstances, given other regulatory 
requirements mandating that the prescription be filled. The commenter 
stated that the aforementioned changes must also be made to the 
proposed MA regulations. By making these changes, the commenter 
contended, CMS can ensure that LTC pharmacies are able to meet 
beneficiary needs as well as comply with other legal requirements 
mandating the dispensing of medications to nursing home residents.
    Response: Section 507 of MACRA requires that for plan year 2016 and 
thereafter, claims for covered Part D drugs must include an active and 
valid prescriber NPI. MACRA did not provide an exemption for pharmacy 
claims submitted by long-term care pharmacies. Therefore, we decline to 
create one in the technical change we are making to 423.120(c)(5) to 
comply with MACRA.
(7) Effective Date
    Comment: Many commenters expressed concern about the January 1, 
2019 effective date of the preclusion list requirement. Aside from the 
need for CMS to address all of the operational complexities of the 
requirement (for example, regarding file layouts, frequency of updates, 
interaction with other lists, types of payments affected) and to issue 
appropriate guidance to affected stakeholders, commenters noted several 
other reasons for the unworkability of the January 1, 2019 date. First, 
and most generally, stakeholders need enough time to adapt to and 
implement the new requirements. Second, plans may need to make system 
changes, with several commenters noting that some code values specific 
to prescriber enrollment will need to be sunsetted and potentially new 
values created. Third, plan sponsors will need sufficient opportunity 
and guidance to clearly understand, test, and use the new file layout, 
including how each field is to be

[[Page 16659]]

interpreted, and how the file may change over a given time period. 
Adhering to a January 1, 2019 date, some commenters cautioned, would 
lead to beneficiary confusion and delays in getting needed medications. 
Various commenters suggested an effective date of no earlier than 
January 1, 2020. Others recommended the following effective dates: (1) 
12 months after the preclusion list provisions are finalized or 
published; (2) at least twelve (12) months after CMS releases its final 
guidance, with all of the specifications, to have the preclusion list 
fully incorporated into its claims adjudication systems; or (3) a 
minimum of 18 months after the publication of necessary technical 
guidance and confirmed file layouts. Another commenter urged that the 
deadline for full incorporation should be a mid-year date (for example, 
July 1), as opposed to January 1. A mid-year deadline would allow Part 
D sponsors to focus more exclusively on this important system 
modification, while being able to adequately prepare for annual 
readiness implementation activities at the beginning of the calendar 
year. Another commenter stated that with a January 1, 2019 effective 
date, a fully functional production file is not likely to be provided 
to plan sponsors in time for full testing across various scenarios, 
such as transition periods and coverage reviews, by that date. The 
commenter asked whether CMS will acknowledge that flexibility on full 
implementation may be necessary.
    Response: We appreciate the commenters' concerns and 
recommendations. We recognize that operationalizing these changes 
across the Part D and MA programs will require effort and resources for 
plans and for CMS. However, we believe this approach is similar to how 
plans currently utilize the OIG exclusion list and should be 
operationalized in the same manner. We therefore believe that a 
significant amount of additional work will not be necessary. Although, 
the enrollment requirement may have been delayed various times, due to 
the decrease in burden under the preclusion list approach, we do not 
believe a delay is necessary and that the January 1, 2019 timeline is 
sufficient.
    Comment: Responding to our solicitation for comment regarding a 
reasonable time period for Part D sponsors and PBMs to incorporate the 
preclusion list into claims adjudication systems, a commenter suggested 
a 180-day period. This would give Part D sponsors and PBMs sufficient 
time to prepare their systems and operationalize the changes. The 
commenter added that after the initial incorporation, CMS should post 
the preclusion list by the 15th of every month and require Part D 
sponsors to utilize the list beginning on the first day of the 
following month.
    Response: We understand the commenter's concerns. As stated in our 
previous response, however, we believe that January 1, 2019 is the 
appropriate date. Further, we do not believe making the list available 
on the 15th of each month allows the plan enough time to properly 
ingest preclusion data into their claims adjudication systems.
(8) Provisional Supply
    Comment: A number of commenters opposed the provisional supply 
requirement and recommended its removal from the final rule for several 
reasons.
    First, they contended that the preclusion list is akin to the OIG 
exclusion list, for which there is no concomitant supply requirement. 
They explained that beneficiaries generally understand that 
prescriptions written by excluded parties will not be covered. They saw 
no reason for a provisional supply requirement for the preclusion list 
when there is none for the OIG exclusion list.
    Second, they stated that a problematic prescriber, especially one 
prescribing opioids or other potentially dangerous drugs, should not be 
entitled to payment, nor enable receipt of a medication for such a long 
period of time that may negatively impact a beneficiary. Indeed, 
several commenters specifically noted that the provisional fill 
requirement could harm beneficiaries. A commenter explained that 
prescribers on the preclusion list would likely have already been 
notified by CMS of that status, potentially several times. In this 
scenario, the precluded provider is aware of their status yet will 
continue to see Medicare patients and issue prescriptions for them. 
This places beneficiaries at risk, especially if the prescription 
issued involves controlled substances/opioids or other high-risk drugs.
    Third, concerns were expressed about the length of the provisional 
supply period, specifically with respect to cost and overutilization; 
particular concern was expressed about the burdens on plan sponsors of 
operating and administering the provisional fill requirement. A 
commenter, stating that the provisional supply requirement is highly 
complex, urged CMS to eliminate it. The commenter contended that if the 
preclusion list aims to identify problematic prescribers who, through 
their prescribing activity, pose a risk to beneficiaries, then CMS can 
manage patient access to care based on the post-dated preclusion 
effective date that is applied to the file. The commenter stated that: 
(1) This approach could address CMS' objective of preventing 
problematic prescribers from continuing to prescribe opioids; (2) 
supporting a 90-day or any other discretionary period determined by CMS 
before adding a prescriber to the preclusion list (post-beneficiary 
notification) would eliminate the need to provide provisional coverage 
at point of service; and (3) this would also solve the complexities 
that plans face in programming systems to track provisional supply and 
ensuring the program works in conjunction with other Medicare 
requirements, such as the transition fill program.
    Fourth, commenters outlined the difference between the original 
provisional fill policy, which was designed to minimize potential 
disruptions in access to needed drugs while prescribers were enrolling 
into Medicare, and the newly proposed requirement, which would apply to 
demonstrably problematic prescribers. Noting, again, that provisional 
fills are not available for prescriptions written by OIG excluded 
prescribers, commenters stated that there is no policy justification 
for having provisional fills for prescribers who have engaged in 
improper behavior.
    We note that a commenter recommended that CMS provide outreach to 
the prescriber and the beneficiary prior to including the prescriber on 
the preclusion list; specifically, once the appeal period ends and CMS 
adds the prescriber to the preclusion list, CMS would then notify the 
beneficiary. The prescriber would be added to the precluded list 90 
days after the beneficiary notification date. This, the commenter 
stated, would help eliminate the complexities of implementing the 
provisional supply process, as the 90-day period would be built into 
the effective date; CMS could add the end-date based on reenrollment 
bar criteria. The commenter added that its recommendation that the 
provisional supply requirement be eliminated would streamline point-of-
sale edits and avoid potential overlaps or conflicts with other 
programs, such as transition fill. The commenter also contended that 
this would deal with the immediate need to address opioid prescribing 
risks as well as reduces the likelihood of beneficiary disruption at 
point-of-sale.
    Response: We appreciate the commenters' concerns and 
recommendations. Given the commenter's points, we agree that the 
preclusion list will be operationalized

[[Page 16660]]

in the same manner as the OIG exclusion list and allowing a provisional 
fill for the preclusion list and not the exclusion list will cause 
confusion among beneficiaries. Second, we share the commenter's concern 
regarding problematic prescribers and their ability to continue 
prescribing controlled substances. Finally, we agree that the 
provisional fill requirement is highly complex and would represent 
additional burden for plans to implement as evidenced by many of the 
comments we received.
    Based on the large number of comments we received urging us to 
eliminate the provisional fill based on the concerns mentioned earlier 
CMS will not finalize the provisional supply requirement at Sec.  
423.120(c)(6)(v) and will not finalize the provisional fill as proposed 
in the interim final rule expiring in mid-May. Instead, CMS will only 
place a prescriber and their applicable preclusion period on the 
preclusion list after the prescriber has exhausted the appeals process 
(described in more detail below), plus an additional 90-day period, 
including a 60-day period for plans to ingest preclusion data and a 30-
day beneficiary notice period.
    Comment: A commenter asked whether the preclusion list will be on a 
per script basis or whether the plan can preliminarily notify the 
beneficiary that all scripts prescribed by a particular doctor on the 
preclusion list will be rejected.
    Response: Section 423.120(c)(6) requires the beneficiary to be 
notified within 3 days of adjudication of a claim written by a 
prescriber on the preclusion list. However, because we are not 
finalizing the provisional supply requirement, we are modifying the 
language to require the sponsors to send an advance notice to any 
beneficiary who has received a prescription from a precluded provider 
as soon as possible but that the beneficiary must receive such notice 
no later than 30 days prior to the initial publication of the 
preclusion list.
    Comment: Expressing concern that the proposed rule places the 
responsibility of managing provisional coverage on the industry, a 
commenter requested that CMS consider the numerous risks associated 
with the proposed provisional coverage period and support an alternate 
approach that allows CMS to manage patient access to care concerns with 
the use of post-dated preclusion effective dates. The commenter cited 
several risks. First, the commenter stated that unique provisional 
coverage rules based on the drug class will create beneficiary and 
prescriber confusion, as well as compromise existing claim adjudication 
hierarchical rules. Second, the commenter noted industry confusion as 
to whether a remaining days' supply would apply to the 90-day 
provisional coverage period, where prescriptions could require a 
shortened days' supply or the beneficiary could obtain up to 180 days' 
supply of a medication. The commenter cited the following scenario: (1) 
A prescriber's preclusion effective date is January 1, 2020; (2) the 
beneficiary obtains a 90-day supply of medication on January 1, 2020; 
(3) a provisional coverage period of January 1, 2020 through April 1, 
2020 is set at the beneficiary/prescriber level; and (4) on March 20, 
2020, the beneficiary requests a prescription refill for a 90-day 
supply. The commenter asked which of the following rules would apply: 
(a) The 90-day supply is covered, for the March 20 claim date of 
service is within the provisional coverage period; or (b) a 13-day 
supply is covered because there are only 13 days remaining (March 20 
through April 1) in the provisional coverage period.
    Response: We appreciate the commenters' concerns and 
recommendations. As already stated, however, we are not finalizing our 
proposed provisional fill policy.
    Comment: A commenter stated that although provisional fills would 
likely reduce such access disruptions for beneficiaries, potential 
beneficiary confusion associated with the conflicting messages 
(specifically, the message that prescriptions from the precluded 
provider cannot be filled in the future, with the exception of this one 
time) may only delay the disruption until the beneficiary seeks to 
refill the prescription at issue. At this point, the commenter stated, 
the disruption may be greater to the beneficiary because the delay in 
addressing the invalid prescription at the outset potentially risks 
non-adherence to the necessary medication while seeking a non-excluded 
prescriber to issue a substitute order.
    Response: We understand the commenter's concerns. However, as 
already mentioned, we are not finalizing our proposed provisional fill 
policy.
    Comment: For claims submitted after the provisional coverage 
period, a commenter asked whether these claims receive NCPDP Reject 
Code 569 (Provide Notice: Medicare Prescription Drug Coverage and Your 
Rights) or Reject Code 829 (Pharmacy Must Notify Beneficiary: Claim Not 
Covered Due To Failure To Meet Medicare Part D Active, Valid Prescriber 
NPI Requirements).
    Response: If payment is denied because the prescriber or provider 
is on the preclusion list, the beneficiary will not have the right to 
appeal. Therefore, it will not be necessary to use the NCPDP Reject 
code `569.
    Comment: A commenter asked whether the type of fill and prescriber 
type need to be included in the PDE.
    Response: We will issue any necessary PDE guidance outside of the 
regulatory process.
    Comment: A number of commenters supported our proposed provisional 
supply requirement, believing that it would ensure that beneficiaries 
continue to receive needed prescriptions while they find another 
prescriber.
    Response: While we appreciate the commenters' support, we have 
decided not to finalize our proposed provisional supply requirements 
for the reasons stated above. We believe a 60-day notification period 
for beneficiaries will provide ample time for those impacted 
individuals to locate a new provider. Any beneficiary who received 
services furnished by a precluded provider within the past 12 months of 
the implementation date of the preclusion list will be notified that 
they have 30 days to locate a new provider.
    Comment: Supporting the provisional supply requirement, a commenter 
encouraged CMS to ensure that information on the provisional supply 
requirement is provided to beneficiaries in advance to minimize 
confusion and disruption. The commenter added that CMS should carefully 
align the policies it finalizes with respect to the implementation of 
CARA in the context of the proposed prescriber preclusion list; this 
should include policies to ensure that enrollees with medical needs for 
pain medication will have appropriate access to that medication should 
a physician or other prescriber that prescribed pain medications for 
that enrollee be placed on the preclusion list. The commenter also 
stated that CMS should ensure that the provisional supply requirement 
is implemented in an administratively feasible manner, such that it is 
easily incorporated into prescription claims systems.
    Response: Given that we are not finalizing our proposed provisional 
supply requirements, we believe that these comments are moot.
    Comment: A commenter stated that in cases where timely access to 
needed opioids is medically appropriate, CMS should take steps to 
require Part D sponsors to provide timely transfer to a new prescriber 
when the first prescriber is on the preclusion list. Such an

[[Page 16661]]

approach will ensure that patients can obtain timely access to pain 
management while also allowing for an appropriate assessment for any 
substance use disorder and referral to treatment as needed.
    Response: We believe that the 60 day notification period (as 
mentioned above) will provide ample time for a patient to seek care 
from another prescriber.
    Comment: Several commenters noted that a provider could appear on 
both the Medicare Exclusion Database (MED) (which contains OIG 
exclusions) and the proposed preclusion list. This scenario, a 
commenter stated, could present operational challenges for plan 
sponsors, for while provisional fills do not apply to drugs prescribed 
by providers on the MED, they would apply to prescribers on the 
preclusion list. The commenter suggested that CMS consider not 
including providers on the MED on the CMS preclusion list; this would 
eliminate duplication and help ensure that plan sponsors have more 
clarity surrounding whether a provisional fill is required.
    Response: We recognize the commenters' concerns regarding the 
interaction between the MED and the preclusion list and its 
relationship to the provisional fill requirement. As already mentioned, 
however, we (1) are not finalizing our proposed provisional supply 
requirements and (2) will provide plans with guidance on which list 
should take precedence, in regard to beneficiary notification, when a 
provider appears on both lists.
    Comment: A commenter suggested that as an alternative to providing 
beneficiaries with a 90-day provisional supply of a drug, CMS could 
provide advance notice of a prescriber's placement on a preclusion list 
and make it effective 30 days after receipt; this way, Part D sponsors 
have time to run a report to identify affected beneficiaries and 
provide them with notice that they may obtain only one (1) additional 
prescription fill from the precluded prescriber.
    Response: We appreciate the commenter's suggestion, and note this 
is similar to the process we are finalizing as outlined above.
    Comment: A commenter asked whether CMS will use the claim 
processing date (as opposed to the date of service) to apply the 
provisional coverage rule. The commenter cited a scenario in which a 
drug is dispensed to a beneficiary (according to the date of service) 
prior to his or her prescriber's inclusion on the preclusion list but 
the pharmacy processes the claim after the date of inclusion; the 
commenter asked whether the 90-day provisional coverage period would 
begin on the date of service or on the date the claim is processed by 
the pharmacy. The commenter recommended that CMS use the claim 
processing date to apply the provisional coverage requirement.
    Response: While we appreciate the commenter's suggestion, we note 
that we are not finalizing our proposed provisional fill requirement.
    Comment: A commenter understood the provisional coverage policy to 
require that once the 90-day period commences, the beneficiary will be 
able to: (1) Fill any and all prescriptions from the precluded 
prescriber during this period; and (2) take multiple fills during the 
90-day provisional coverage period (for example, one 30-day fill, then 
another 30-day fill, and then a 90-day fill). The commenter sought 
clarification as to whether this is CMS' intention.
    Response: Given that we are not finalizing our proposed provisional 
supply requirements, we believe that this comment is moot.
    Comment: A commenter stated that if CMS is unable to eliminate the 
provisional supply requirement, CMS should furnish clarification 
regarding several issues. First, the commenter stated that previous 
technical guidance provided details around provisional supply being a 
lifetime edit; specifically, for medications prescribed by a precluded 
prescriber, this guidance clarified that beneficiaries who change 
pharmacies during a provisional supply period would still only receive 
one provisional supply of medication. Similarly, for beneficiaries who 
change plans within the same contract, if the plan sponsor or its PBM 
can determine via claims history that the beneficiary has already 
received a provisional supply, then the provisional supply requirement 
has been satisfied. The commenter asked CMS to confirm that these 
details from previous technical guidance still apply for provisional 
coverage. Second, if a single claim involves both a provisional supply 
and a transition supply, the commenter asked CMS to specify whether 
there will be a combination letter for the beneficiary notice. The 
commenter recommended that the notification process be kept separate 
for the two programs. The provisional supply notice would be less 
frequent than a transition letter, for only the initial dispensing 
event would trigger a letter advising the beneficiary of the issue with 
the prescriber. The transition notification should remain status quo 
and address the medication in question and educate the beneficiary 
about his/her appeal rights. Third, the proposed rule states that 
reasonable efforts must be made by the plan to the prescriber notifying 
them of a beneficiary who was sent a notice that the prescriber is 
being precluded. The commenter asked CMS to clarify whether this 
outreach is necessary given that CMS would have previously reached out 
to the prescriber prior to placement on the preclusion list. The 
commenter stated that CMS notes its intention to allow the normal Part 
D rules to apply for safety edits, prior authorization, quantity 
limits, etc., during the provisional coverage period. The commenter: 
(1) Contended that all appropriate edits for opioids should also apply 
during the provisional coverage period, as these are designed to 
prevent serious adverse events; and (2) recommended that all safety and 
utilization management edits remain the same during the provisional 
fill period, regardless of medication type (that is, opioids versus 
non-opioids).
    Response: We appreciate the commenter's concerns and 
recommendations and reiterate that we have decided not to finalize our 
proposed provisional supply requirement. Further, we will provide 
beneficiaries with a 30 day advance notice prior to prescriptions being 
rejected due to their prescriber being precluded.
    Comment: Several commenters stated that if the provisional supply 
requirement is retained, plan sponsors will require at least 12 months 
for its implementation. A commenter stated that plan sponsors will, 
during the 12-month period, need (1) CMS to release the specific 
provisional fill requirements, (2) model beneficiary notice letters, 
(3) guidance to better understand how provisional fills work when a 
prescriber is on both the preclusion and OIG lists, and (4) information 
on how provisional fills function in relation to the existing 
transitional fill requirements. Another commenter, noting the time and 
resources that will be required to make necessary updates required to 
sponsors' (and their contracted PBMs') IT systems, procedures, and 
operational policies, urged that the implementation date of the 
provisional supply requirement be delayed to a date determined to be 
feasible after consultation with sponsors and their contracted PBMs. 
Another commenter urged that CMS continue dialogue with industry 
partners on implementing the provisional fill functionality, including 
the establishment of an ``active date'' no sooner than 8 months after a 
production file is made available and the functional assumptions around 
the file are communicated to the industry.

[[Page 16662]]

    Response: While we appreciate the commenters' concerns and 
recommendations, we reiterate that we are not finalizing our proposed 
provisional supply provisions.
    Comment: Regarding the provisional supply requirement, a commenter 
stated the following: (1) Placing edits on opioids contradicts CMS' 
proposal that the definition of a drug is no longer needed; (2) the 
provisional supply provisions as stated lack clarity on the use of a 
``preclusion reason'' to be able to identify when a different 
provisional coverage period would apply; (3) it is unclear if the 
revised provisional coverage period applies across a beneficiary's 
lifetime (for example, changing plans, changing pharmacies) as was 
outlined in the prescriber enrollment provisional coverage technical 
guidance; (4) claims that meet both transitional fill and provisional 
coverage criteria will result in the beneficiary receiving two 
different notices; and (5) it is unclear how plan sponsors would 
coordinate the provisional coverage period and adhere to Sec.  
423.120(c)(6)(iii), which would state that a Part D plan sponsor may 
not submit a PDE record to CMS unless it includes on the PDE record the 
active and valid individual NPI of the prescriber of the drug, and the 
prescriber is not included on the preclusion list for the date of 
service.
    Response: We recognize the commenter's concerns and reiterate that 
we are not finalizing our proposed provisional supply provisions.
    Comment: A commenter expressed concern regarding the provisional 
supply language in Sec.  423.120(c)(6) that reads, ``. . . and if 
allowed by applicable law.'' The commenter believed that this implies a 
requirement to validate state-by-state prescriptive authority at the 
point of sale. The previous technical guidance, the commenter stated, 
made clear that this was not a point of sale requirement. The commenter 
asked that CMS confirm whether or not this is still true.
    Response: Given that we are not finalizing our proposed provisional 
supply requirements, we believe that this comment is moot.
    Comment: A commenter stated that stand-alone prescription drug 
plans (PDPs) and PBMs have no contractual relationship with network 
prescribers; only an MAPD with a contracted provider network could 
manage a requirement to transfer the beneficiary to a new provider upon 
preclusion. A commenter suggested that this could be managed through 
the provisional fill notification to the beneficiary, whereby the 
beneficiary is instructed that coverage will not continue after the 90-
day provisional period ends; also, MAPDs should be instructed to remove 
precluded prescribers from their provider network.
    Response: While we appreciate the commenter's suggestion, we 
reiterate that we are not finalizing our proposed provisional fill 
requirement. In addition, and with respect to the removal of precluded 
prescribers from an MAPD's network, we decline to make the commenter's 
recommendation as removing the provider seems redundant given they are 
already precluded.
    Comment: A commenter stated that the proposed provisional supply 
requirement failed to consider the way LTC pharmacies actually operate, 
particularly legal and regulatory requirements unique to LTC 
pharmacies. Unlike retail pharmacies that have access to real time 
adjudication at the pharmacy counter, LTC pharmacies often must 
dispense first, and adjudicate afterwards. The commenter stated that 
while the 90-day supply of medications permitted under (current and 
proposed) Sec.  423.120(c)(6) is appropriate, the proposed ``three-day 
fill'' exception for retail pharmacy is insufficient for an LTC 
pharmacy. The commenter stated that CMS must address this issue and 
prohibit PDPs/PBMs from denying claims that LTC pharmacies had to 
dispense before being able to verify an NPI number or a preclusion list 
listing.
    Response: With respect to NPIs, Section 507 of MACRA requires that 
for plan year 2016 and thereafter, claims for covered Part D drugs must 
include a valid prescriber NPI. MACRA did not provide an exemption for 
pharmacy claims submitted by long-term care pharmacies. Therefore, we 
decline to create one in the technical change we are making to 
423.120(c)(5) to comply with MACRA. With respect to the preclusion 
list, under the requirements we are finalizing, Part D sponsors are 
required to provide impacted beneficiaries with a 60 day advance notice 
which would sufficiently alert LTC facilities that there will be an 
upcoming issue with coverage for the beneficiaries' prescriptions under 
Part D.
(9) Appeals
    Comment: Several commenters contended that the administrative 
burden on both providers and payers could be reduced by allowing 
providers to appeal before being included on the preclusion list. A 
commenter suggested that once the initial determination is made, CMS 
should immediately send notice of the initial determination and the 
reasoning for inclusion. The notice should include a grace period of a 
length that CMS deems sufficient to file an appeal. During this grace 
period, CMS should not place the provider on the preclusion list. If, 
the commenter continued, the provider does not file an appeal by the 
end of the grace period, CMS should then add the provider on the 
preclusion list. If the provider does file an appeal, the provider 
should not be included on the preclusion list until the provider's 
appeal is upheld or the provider can no longer exercise the appeal 
options, whether due to lack of timely filing or because the appeals 
opportunity has been exhausted. The commenter contended that by 
forgoing immediate inclusion on the preclusion list when the initial 
determination has been made, CMS will reduce potential provider burden 
by limiting the number of appeals a provider has to file; as an 
illustration, the commenter stated that if the provider was 
accidentally included on the preclusion list, the provider would have 
sufficient time to correct the issue without suffering from a loss of 
revenue due to preclusion list-related denials. The commenter added 
that MA plans would also benefit from not having to manually overturn 
denials due to the provider's mistaken inclusion on the preclusion 
list; such a manual process, the commenter stated, only extends for a 
longer time the period between services rendered and reimbursement for 
those services.
    Another commenter stated that the approach described by the 
previous commenter would minimize beneficiary confusion and eliminate 
the need for a provisional fill requirement. Another commenter 
suggested that claims not be denied until the provider's appeal is 
completed and, if the provider loses their appeal, the provider then 
would be listed on the preclusion list. Another commenter, noting that 
our proposal that the preclusion list would be updated monthly, asked 
whether, if a prescriber appeals its inclusion on the preclusion list, 
it will require a month for the prescriber to be removed from the list 
in the event of a successful appeal.
    Response: We appreciate these comments and generally agree with 
them. Concerning appealing one's placement on the preclusion list, our 
proposal includes the right for providers or prescribers to appeal 
their inclusion on the preclusion list in accordance with the appeals 
process at 42 CFR part 498 that we had proposed in the November 28, 
2017 proposed rule.
    Prescribers and providers will only be placed on the list upon 
exhausting their first level appeal plus an additional 90-

[[Page 16663]]

day period. The 90-day period allows the plans 30-days to intake the 
preclusion data and a 60-day beneficiary notification period (That is, 
claims will not begin to be denied until the expiration of this 
additional 60-day beneficiary notification period.). Subsequent updates 
to the list will provide any newly added provider with a 60-day appeals 
window but will not provide a 90-day period as discussed above, thus 
after implementation beneficiaries may not be notified that they may 
have received a prescription or services from a provider that is now 
precluded. We note, however, that the appeals process is intended to 
permit a prescriber or provider to challenge CMS' placement of the 
prescriber or provider on the list and not to challenge the underlying 
reason for the revocation, OIG exclusion, or other adverse action that 
led to the preclusion list inclusion. Indeed, the preclusion appeals 
process would neither include nor affect appeals of payment denials or 
enrollment revocations, for there are separate appeals processes for 
these actions. Any appeal under this proposed provision will be limited 
strictly to the individual's inclusion on the preclusion list. In 
addition, CMS will send written notice to the provider of his or her 
inclusion on the preclusion list. The notice would contain the reason 
for the inclusion and would inform the providers of his or her appeal 
rights. This is to ensure that the prescriber or provider is duly 
notified of the action, why it was taken, and their ability to 
challenge CMS' determination.
    Comment: A commenter asked CMS to clarify how the appeal process 
would work and when reinstatements would occur. In the case of 
reinstatements, the commenter recommends that reinstatements take place 
when the next file is released, rather than mid-term, and that CMS not 
allow retroactive reinstatements.
    Response: As already mentioned, prescribers and providers will be 
afforded appeal rights based on the process at 42 CFR part 498. 
Concerning reinstatement, the preclusion list will include periods for 
which the prescriber or provider is unable to receive Medicare 
reimbursement or submit prescriptions reimbursable by the Medicare 
program; if a prescriber or provider is reinstated after further 
appeal, the list will be adjusted to remove the prescriber or 
provider's period of preclusion and the provider would no longer be 
subject to the payment prohibition. The removal would be applied 
retroactively. However, a provider or prescriber would need to resubmit 
any claims denied as a result of the preclusion.
    Comment: A commenter stated that CMS should handle any appeals. The 
commenter did not believe this administrative function should be the 
responsibility of plan sponsors.
    Response: We agree with the commenter. Appeals from precluded 
providers due to placement on the list, will be handled by CMS.
    Comment: A commenter requested clarification regarding a 
beneficiary's appeal rights for alleged errors in applying the 
preclusion list. The commenter stated that under existing CMS 
regulations, the denial of access to a Part D drug on the basis that 
the provider is excluded is not a coverage determination and does not 
trigger appeal or grievance rights. The commenter contended it 
therefore follows that if a beneficiary does not have access to a Part 
D drug because the prescriber is on the preclusion list, it is not a 
coverage determination and no appeal or grievance rights are triggered. 
Accordingly, the commenter recommended that CMS follow processes 
applicable in situations involving an excluded/sanctioned prescriber 
and not provide any appeal rights. The commenter also suggested that 
any beneficiary complaint about a denial due to an individual or entity 
included on the preclusion list be treated via the grievance process, 
as there is no beneficiary liability and, as such, nothing for the 
beneficiary to appeal. The commenter supported CMS' proposal of a 
separate appeals process for parties on the preclusion list should the 
latter disagree with CMS' decision to include them on the list. Another 
commenter recommended that in order to keep the preclusion list and OIG 
exclusion list processes aligned, CMS should not allow beneficiaries to 
appeal a prescriber preclusion. The commenter stated that CMS should 
either allow or disallow beneficiary appeals in both instances for 
consistency and to prevent beneficiary confusion; this is because 
beneficiaries, according to the commenter, will not understand the 
difference between an exclusion and a preclusion.
    Response: We agree with the commenters. We believe that the denial 
of access to a Part D drug on the basis that the provider is excluded 
by the OIG does not currently grant the beneficiary appeal rights, and 
we are finalizing a similar policy to a prescriber or provider being on 
the preclusion list.
    Comment: A commenter stated that if CMS allows beneficiaries to 
appeal a preclusion only, CMS should confirm whether the point of sale 
appeal notice (NCPDP Reject Code `569') requirement applies.
    Response: If payment is denied because the prescriber or provider 
is on the preclusion list, the beneficiary will not have the right to 
appeal. Therefore, it will not be necessary to use the NCPDP Reject 
code `569.'
    Comment: A commenter asked CMS to confirm that, prior to adding a 
prescriber to the preclusion list, the appeals timeframe must be 
exhausted. If CMS adds the prescriber to the preclusion list while the 
appeals timeframe is still in effect, the commenter stated that this 
could cause beneficiary disruption due to inappropriate rejects, 
especially if the prescriber's appeal is approved. Another commenter 
stated that plans will not have any authority over the preclusion list; 
therefore, they will not be able to address or resolve the 
beneficiary's appeal. The commenter stated that there will need to be a 
process in place to address beneficiary appeals, concerns, and 
questions about why their prescriber is being added to the preclusion 
list; plan sponsors will not have access to the reason for the 
preclusion to answer such questions.
    Response: As already mentioned, providers will be afforded appeal 
rights in accordance with the appeal process at 42 CFR part 498. With 
respect to the plans' ability to respond to beneficiary questions 
concerning a provider's inclusion on the preclusion, CMS will furnish 
guidance on this matter outside of rulemaking.
    Comment: A commenter asked CMS to align the appeals process with 
the provisional supply period so that an initial appeals determination 
would be rendered prior to the end of the provisional supply period. 
The commenter believed that this would help reduce patient care 
disruption when clinicians are incorrectly placed on the preclusion 
list.
    Response: As already stated, we are not finalizing our provisional 
supply proposal and will place a prescriber or provider on the 
preclusion list only after the prescriber or provider has exhausted 
their first level of appeal plus an additional 90-day period. The 90-
day period allows the plans 30-days to intake the preclusion data and a 
60-day beneficiary notification period. Subsequent updates to the list 
will provide any newly added provider with a 60-day appeals window but 
will not provide a 90-day period as discussed above, thus after 
implementation beneficiaries may not be notified that they may have 
received a prescription or services from a provider that is now 
precluded.

[[Page 16664]]

    Comment: A commenter stated that the proposed rule did not clarify 
what happens to a clinician who wins his or her initial redetermination 
but CMS challenges the redetermination. The commenter asked whether a 
provider is taken off the preclusion list if they are initially 
successful in their appeal but CMS challenged the decision.
    Response: As mentioned previously, prescribers and providers that 
are notified of their meeting the criteria for placement on the 
preclusion list will be afforded the formal appeals process at 42 CFR 
part 498 that as we proposed in the November 28, 2017 proposed rule. 
Prescribers and providers will only be placed on the list upon 
exhausting their first level appeal.
    Comment: A commenter agreed with CMS' proposal that individuals who 
are on the preclusion list should be permitted to appeal their 
inclusion on the list. However, the commenter asked CMS to issue 
additional operational guidance on the appeals process and, in 
particular, to provide additional detail about (1) the communications 
process if a prescriber's appeal was successful, and (2) the timeline 
for removing the prescriber from the preclusion list. Another commenter 
urged that CMS: (1) Clarify for plan sponsors and prescribers that CMS 
will handle any appeal requests directly rather than through plans, 
given that CMS gathered and acted on the information that placed the 
prescriber on the preclusion list; and (2) implement a process for 
notifying prescribers of a date after which adjudicators will stop 
their prescription claim processing.
    Response: As mentioned previously, prescribers and providers that 
are notified of their meeting the criteria for placement on the 
preclusion list will be afforded the formal appeals process at 42 CFR 
part 498 that as we proposed in the November 28, 2017 proposed rule. 
Prescribers and providers will only be placed on the list upon 
exhausting their first level appeal.
(10) Additional Comments
    Comment: A commenter stated that in CMS' implementation of the 
preclusion list, the beneficiary should be held harmless (unless the 
beneficiary has engaged in some manner of fraud).
    Response: We believe the contract provisions required between the 
MA plan and a network provider pursuant to Sec.  422.504(g)(1)(iii) are 
binding on providers; such agreements specify that QMBs must not be 
charged cost sharing when the state is responsible for paying such 
amounts under the Medicaid program. Further, the regulation at Sec.  
422.504(g) contains broader beneficiary protection requirements for MA 
organizations, including a requirement that the plan must indemnify the 
beneficiary from any fees that are the legal obligation of the MA 
organization for services furnished by providers that do not contract, 
or that have not otherwise entered into an agreement with the MA 
organization, to provide services to the organization's enrollees
    Comment: A commenter stated that if CMS removes the enrollment 
requirement, which the commenter opposed, CMS should (1) enact 
protections so that a beneficiary who disenrolls from an MA plan can 
continue to see a provider who did not enroll in Medicare and that the 
provider can be allowed to submit a claim to Medicare on behalf of the 
beneficiary, and (2) allow some flexibility for MA coverage of services 
of providers that are highly specialized and do not typically accept 
Medicare.
    Response: We appreciate the commenter's recommendation. In regard 
to beneficiaries leaving the MA program and defaulting to traditional 
Medicare, we are not aware of this as a significant issue nor was it a 
part of our rationale for the enrollment requirement. We also believe 
that the preclusion list approach will support the need for highly 
specialized providers. No longer needing to enroll, highly specialized 
providers can provide services to MA beneficiaries, while the 
preclusion list will prohibit those providers that would typically be 
revoked from the program based on our authorities at Sec.  424.535 from 
servicing MA beneficiaries.
    Comment: A commenter stated that the distribution of the preclusion 
list should include basic hold harmless and indemnification language in 
favor of the MAOs.
    Response: Response under development and will be furnished in the 
next round of clearance.
    Comment: A commenter urged CMS to expand efforts to coordinate and 
increase the sharing of information with other federal public programs, 
state medical boards, and other entities on potentially problematic 
prescribing to help inform the identification of prescribers who should 
appear on the preclusion list.
    Response: We appreciate the commenter's recommendation and will 
consider it as we work to operationalize the preclusion list 
requirement.
    Commenter: To ensure that MA plans have appropriate processes in 
place to screen providers, suppliers, and prescribers against the 
preclusion list, a commenter recommended including review as part of 
CMS' ongoing audit and monitoring activities, potentially as part of 
the Program Audits or the Industry Wide Timeliness Monitoring. 
Alternatively, the commenter stated, prescription drug events and/or 
risk adjustment data might be used as a means to confirm that plans are 
not paying providers and suppliers on the prelusion list.
    Response: We agree with the commenter. We will work to build such 
review processes into the already existing program audits as we 
operationalize this requirement.
    Comment: Several commenters asked CMS to confirm that, with the 
proposed removal of the enrollment requirement, MAOs will retain the 
right to require providers and suppliers offering services to 
beneficiaries to be enrolled in Medicare per their contracts.
    Response: MAOs can establish enrollment in Medicare as a 
contracting condition.
    Comment: A commenter stated that the proposed rule did not 
specifically mention how CMS will implement the exception for emergency 
and urgently needed services furnished by a provider on the preclusion 
list. The commenter suggested that CMS create a Healthcare Common 
Procedure Coding System (HCPCS) modifier for this exception to allow 
for timely, automated processing of claims. The commenter explained 
that if a provider on the preclusion list furnishes a service that 
meets the definition under Sec.  422.113 for emergency or urgently 
needed services, the provider should be required to include the 
assigned modifier on a claim; the modifier would alleviate the need for 
payers to manually review every claim in case a rare urgently needed or 
emergency service exception might apply. The commenter stated that CMS 
has this same processing mechanism in place for providers who have 
opted-out of Medicare; those providers must submit claims using HCPCS 
modifier GJ to signal that an urgently needed or emergency exception 
applies, and the commenter contended that CMS should create a separate 
and distinct modifier for preclusion list providers. If, the commenter 
stated, the scarcity of HCPCS modifiers warrants sufficient merit to 
outweigh the creation of a new modifier, the commenter recommended that 
CMS edit the GJ modifier so that it is required to be used by providers 
on the preclusion list in addition to Medicare opt-out providers.
    Response: We are not requiring that MAOs reference the preclusion 
list when paying non-contract providers though we believe it would be a 
best practice for MAOs to do so. However, if an MAO determines that a 
non-contract

[[Page 16665]]

provider is on the preclusion list and not eligible for Medicare 
payment the MAO should also not pay that provider consistent with the 
requirement that MAOs pay non-contract providers the same as Original 
Medicare as required under the MA regulations at Sec.  422.214. MAOs 
are required to ensure that their contracted providers are properly 
credentialed and not on the preclusion list. When periodically re-
validating credentialed providers the MAO should also re-verify that 
their contracted providers are not on the preclusion list.
    Comment: A commenter stated that a challenge associated with FFS 
provider enrollment for MA-only providers is the CMS policy that would 
terminate a provider's enrollment in FFS Medicare if at least one claim 
is not submitted within a 12-month period. If a provider has no 
intention of treating FFS Medicare beneficiaries, the provider would 
have to undertake the administrative burden of re-enrolling with FFS 
Medicare on an annual basis. The commenter recommended that CMS address 
this issue, specifically suggesting that the CMS-855 enrollment form be 
modified to allow a provider to indicate that he or she only intends to 
treat MA beneficiaries, thus eliminating the need for the provider to 
reenroll.
    Response: In finalizing this rule, we will no longer be requiring 
enrollment in Medicare FFS in order for providers to participate with 
MA plans. Even if we made the commenter's suggested change to the CMS-
855 forms, we still believe that this does not accurately address the 
large volume of prescribers and providers that have yet to enroll with 
the program. As already mentioned, there are close to 340,000 active 
Part D prescribers who are not enrolled in or opted-out of Medicare and 
120,000 MA providers that would require outreach and would need to 
enroll. We believe the success rate for enrollment of MA providers 
would be similar to that experienced with the Part D population. Based 
on these figures and our concerns for potential access to care issues, 
we again believe that this outweighs the benefits gained from requiring 
enrollment.
    Comment: A commenter contended that the proposed rule did not 
address the exemption from credentialing for ordering and referring 
dentists through PECOS, the Part D enrollment portal, or the paper CMS-
855O form. Also, the commenter asked how the proposed rule would affect 
the credentialing of ordering and referring dentists who refer oral 
biopsies for interpretation to a pathology lab.
    Response: The final rule will not apply to the existing enrollment 
requirement for ordering and referring providers at 42 CFR 424.507, 
which has been enforced since January 6, 2014. Thus, providers who 
order or refer would continue to need to enroll for certain ordered or 
referred services to be reimbursed.
    Comment: Several commenters noted that sections 6405(a) and (b) of 
the Affordable Care require physicians and eligible professionals who 
(1) order durable medical equipment, prosthetics, orthotics, and 
supplies or (2) certify home health services must be enrolled in 
Medicare or validly opted-out for the item or service to be covered. 
These requirements are currently codified in Sec.  424.507, are in 
effect, and are also applicable to physicians and eligible 
professionals who order imaging and clinical laboratory services. The 
commenters suggested that CMS (1) replace this current enrollment 
requirement with a preclusion list requirement akin to that described 
in this rule, and (2) work to seek legislative relief from section 6405 
of the Affordable Care Act.
    Response: We believe that the subject matter addressed by the 
commenter pertains to a different regulatory provision (Sec.  424.507) 
and is therefore outside the scope of this rule.
    Comment: With respect to the current version of Sec.  
423.120(c)(5)(v), a commenter stated that the U.S. Drug Enforcement 
Administration's 2010 Rule for Electronically Prescribing Controlled 
Substances defines identity proofing requirements for DEA Registrants 
(providers), which includes in-person identity proofing that involves 
checking identity documents such as a driver's license and/passport. 
Additionally, providers could be identity-proofed remotely by answering 
a series of questions that should be known only to them, typically 
based on information contained in one's credit report. This is known as 
knowledge-based verification (KBV). The commenter stated that KBV was 
not an optimal solution since: (1) Passing the questions is based on a 
combination of accuracy and timing; (2) the credit reporting agencies 
do not have data on 100 percent of health care providers; and (3) there 
have been cyber-attacks across healthcare industries, compromising 
personally identifiable data on Americans. Should CMS continue to use 
KBV, it should be augmented with other means as part of a risk based 
approach.
    Response: We appreciate this comment but believe it is outside the 
scope of this rule.
    Comment: A commenter stated that the Healthcare Information and 
Management Systems Society (HIMSS) formed the Identity Management Task 
Force that focused on policy and technical challenges relating to 
identity, attribute, and role-based access management, as it pertained 
to patient identity, provider identity and IT asset identities. The 
Task Force published: (1) ``Patient Portal Identity Proofing and 
Authentication'' in 2016; and (2) identity proofing and authentication 
recommendations for patients accessing their health information 
electronically. The commenter stated that while the paper defines best 
practices for patients, it leverages existing National Institute of 
Standards and Technology (NIST) guidance for identity proofing and 
authentication, and many of the cases are applicable to providers; the 
commenter recommended that CMS review them. The commenter also noted 
that NIST updated its Digital Identity Guidelines in July 2017 (NIST 
Special Publication 800-63A, ``Digital Identity Guidelines: Enrollment 
and Identity Proofing'') and that CMS should consider them as they 
relate to identity proofing providers.
    Response: We appreciate this comment but believe it is outside the 
scope of this rule.
    Comment: Several commenters stated that some dentists who opted out 
in order to comply with the Part D enrollment requirements did not 
realize that they would consequently be unable to furnish Part C items 
and services until after the initial 90-day period for withdrawing his 
or her opt-out affidavit had expired. The commenters urged CMS to 
permit its MACs to contact each dentist who has opted out and allow him 
or her to withdraw his or her affidavit even if the initial 90-day 
period has passed.
    Response: The November 28, 2017 proposed rule did not propose 
changes to current opt-out policy. We note that, as stated in chapter 
15 of the Medicare Benefit Policy Manual, if a physician or 
practitioner who has not previously opted out changes his or her mind 
after the Medicare contractor has approved the affidavit, the opt-out 
may be terminated within 90 days of the effective date of the 
affidavit. If the physician or practitioner has previously opted out, 
the physician or practitioner may cancel his or her opt-out by 
submitting a written notice to each Medicare enrollment contractor to 
which he or she would file claims absent the opt-out, not later than 30 
days before the end of the current 2-year opt-out period, indicating 
that the physician or practitioner does not want to extend the 
application of the opt-out affidavit for a subsequent 2-year period.

[[Page 16666]]

    Comment: A commenter stated that prescribing authority is already 
tied to a physician having a DEA number and not an NPI. Since 
physicians must already establish a relationship with the federal 
government through the DEA in order to prescribe, the commenter 
encouraged CMS to explore implementation of these policies though 
closer coordination with the DEA.
    Response: We appreciate this comment but believe it is outside the 
scope of this rule.
    Comment: In response to our solicitation of comments concerning 
additional solutions for beneficiaries who try to fill an opioid 
prescription from a provider on the preclusion list, a commenter stated 
that requiring a Part D sponsor to transfer beneficiaries from one 
medical provider to another is not feasible; the commenter explained 
that Part D sponsors do not have contracts with medical providers. The 
commenter also stated that any drug-specific carve out within the 
program at this time would add significant complexity in administering 
the preclusion list. The commenter thus made two recommendations. 
First, CMS should not pursue drug-specific solutions but should allow 
the flexibility to make decisions based on the totality of a 
prescriber's activity. Second, to the extent that CMS will require Part 
D sponsors to transfer beneficiaries to new prescribers, CMS should 
provide Part D sponsors with at least a 30-day notice to effectively 
assist the beneficiaries in the transition.
    Response: We appreciate the commenter's recommendation. We agree 
that a notice period is necessary to effectively transition 
beneficiaries. Accordingly, and as mentioned previously, we are 
specifying that after the prescriber or provider has exhausted their 
first level appeal, there will be a 90-day period, during which time 
the plan can begin working to transition the beneficiary to a new 
prescriber or provider. The 90-day period allows the plans 30-days to 
intake the preclusion data and a 60-day beneficiary notification 
period. Subsequent updates to the list will provide any newly added 
provider with a 60-day appeals window but will not provide a 90-day 
period as discussed above, thus after implementation beneficiaries may 
not be notified that they may have received a prescription or services 
from a provider that is now precluded.
    Comment: In response to our solicitation of comments on limits that 
should be set with respect to doses for opioid prescriptions, a 
commenter stated that CMS should manage the opioid epidemic outside of 
these proposed provisions. The commenter stated that creating separate 
policies for opioid and non-opioid medications: (1) Is extremely 
burdensome; and (2) introduces additional and unnecessary complexities 
into a new process when there are already better clinical programs in 
place to manage this crisis. The commenter encouraged CMS to issue 
uniform regulations regarding provisional fills and to utilize Part D 
sponsors' clinical programs to combat the opioid epidemic.
    Response: We appreciate the commenter's recommendation and note 
that we are not finalizing our proposed provisional supply policy. 
Further, the preclusion list approach will apply to prescribers of 
prescription drugs, including opioids.
    Comment: In response to our request for comment regarding whether 
additional beneficiary protections are necessary, a commenter made two 
recommendations. First, CMS should consider having notice requirements 
to ensure that all beneficiaries receiving care from an individual or 
entity placed on the preclusion list will be notified well in advance 
so that they can seek care and treatment elsewhere. Second, an 
exception should be made for those in the middle of a course of 
previously covered treatment so that their care is not interrupted.
    Response: As mentioned previously, we have proposed that after the 
prescriber or provider has exhausted their first level appeal, there 
will be a 90-day period The 90-day period allows the plans 30-days to 
intake the preclusion data and a 60-day beneficiary notification 
period, during which time we believe the plan will have adequate time 
to transition the beneficiary to a new prescriber or provider. 
Subsequent updates to the list will provide any newly added provider 
with a 60-day appeals window but will not provide a 90-day period as 
discussed above, thus after implementation beneficiaries may not be 
notified that they may have received a prescription or services from a 
provider that is now precluded. Finally, we decline to adopt additional 
requirements for beneficiary notice or exceptions to the preclusion 
list consequences in this final rule.
    Comment: While supportive of the preclusion list concept, a 
commenter expressed concern that the preclusion list requirement could 
(1) unnecessarily increase complexity in the Part D program, (2) expose 
Medicare beneficiaries to problematic prescribers, and (3) perpetuate a 
cycle where there is insufficient time to implement complex new 
requirements that have substantial operational challenges. To mitigate 
some of these issues, the commenter recommended that CMS create and 
manage a single prescriber preclusion list that is modeled after the 
OIG exclusion list so that the two files can be handled in a similar 
manner.
    Response: We agree with this recommendation and believe that the 
preclusion list concept would align with the OIG list and the process 
that Medicare health and drug plans use to handle prescribers and 
providers on that list. As already mentioned, we are not finalizing the 
90-day provisional supply period. CMS instead will place a prescriber 
or provider on the preclusion list after the prescriber or provider has 
exhausted their first level appeal plus an additional 90-day period, 
including a 60-day period for plans to ingest preclusion data and a 30 
day-beneficiary notice period.
    Comment: A commenter suggested that CMS adopt the following 
operational steps before a precluded provider edit occurs at the point 
of sale: (1) CMS conducts analysis and identifies the specific 
prescriber; (2) CMS notifies the prescriber of the pending precluded 
status and outlines the appeal process; (3) once the appeal period has 
concluded, CMS notifies the impacted beneficiaries; and (4) CMS adds 
the prescriber to the precluded provider file with a future effective 
date of 90 days after beneficiary notification, with CMS to add the 
precluded provider end-date based on reenrollment bar criteria. (The 
commenter contended that the failure to sufficiently post-date 
effective dates may create additional risks where CMS may need to 
support point-of-service override processes due to timing delays 
associated with monthly file updates.) The commenter believed that 
these steps would allow CMS to manage the provisional fill period and 
any variances across preclusion types or beneficiary risk levels (for 
example, opioids). Several other commenters recommended that CMS adopt 
this approach.
    Response: We appreciate the commenter's feedback and believe our 
approach allows ample notification time for beneficiaries and 
prescribers or providers. A prescriber or provider will only be placed 
on the preclusion list upon exhausting their first level appeal. 
However, before claims are impacted there will be a 90-day period. The 
90-day period allows the plans 30-days to intake the preclusion data 
and a 60-day beneficiary notification period, during which time the 
plan can begin working to transition the beneficiary to a new 
prescriber or provider. Subsequent updates to the list will provide any 
newly added provider with a 60-day

[[Page 16667]]

appeals window but will not provide a 90-day period as discussed above, 
thus after implementation beneficiaries may not be notified that they 
may have received a prescription or services from a provider that is 
now precluded.
    Comment: A commenter recommended that CMS provide MA plans with a 
30-day advance notice of the addition of individuals or entities to the 
preclusion list in order to (1) align with provider termination 
notification requirements and (2) assist MA plans in identifying and 
notifying beneficiaries of the individual's or entity's preclusion 
status.
    Response: We appreciate the commenter's feedback and, as stated 
earlier, agree that a 30-day period is necessary after the exhaustion 
of the provider or prescriber's first level appeal for adequate notice 
to be provided to MA plans. In addition, we believe that an additional 
60-day period is appropriate during which notification will be provided 
to the beneficiary. We are therefore finalizing a 90-day period between 
the end of the first level appeal and the placement of the provider or 
prescriber on the preclusion list. However, we will not finalize the 
provisional fill requirement.
    Subsequent updates to the list will provide any newly added 
provider with a 60-day appeals window but will not provide a 90-day 
period as discussed above, thus after implementation beneficiaries may 
not be notified that they may have received a prescription or services 
from a provider that is now precluded.
(d) Final Provisions
    Given the foregoing, we are finalizing as proposed all of the 
provisions we identified in section 10(a) and (b) above except as 
follows:
     We are changing Sec.  423.120(c)(6)(iv) to remove the 
provisional supply requirement and to revise the notice requirement as 
follows:
    ++ Paragraph (iv)(A) will state that a Part D sponsor or its PBM 
must not reject a pharmacy claim for a Part D drug under paragraph 
(c)(6)(i) of this section or deny a request for reimbursement under 
paragraph (c)(6)(ii) of this section unless the sponsor has provided 
the written notice to the beneficiary required by paragraph 
(c)(6)(iv)(B) of this section.
    ++ Paragraph (iv)(B)(1) will be revised to read as follows: 
``Subject to all other Part D rules and plan coverage requirements, 
provide an advance written notice to any beneficiary who has received a 
prescription from a prescriber on the preclusion list as soon as 
possible but to ensure that the beneficiary receives the notice no 
later than 30 days after publication of the most recent preclusion 
list.''
    ++ We are deleting paragraphs (iv)(B)(1)(i) and (ii). Paragraph 
(iv)(B)(1)(i), which deals with provisional drug supply, is no longer 
needed, while the language in paragraph (iv)(B)(1)(ii) will be merged 
into revised paragraph (iv)(B)(1).
    ++ In paragraph (iv)(B)(2), we are changing the reference to 
(c)(6)(iv)(B)(1)(ii) to (c)(6)(iv)(B)(1). This is because, as already 
mentioned, paragraph (c)(6)(iv)(B)(1)(ii) is being deleted and the 
language therein merged into paragraph (c)(6)(iv)(B)(1).
     Revise Sec.  422.222(a) to state: ``An MA organization may 
not pay, directly or indirectly, on any basis, for items or services 
furnished to a Medicare enrollee by any individual or entity that is 
excluded by the Office of the Inspector General (OIG) or is included on 
the preclusion list, defined in Sec.  422.2''. We note that the 
language that excluded emergency and urgently needed services from the 
scope of Sec.  422.222(a) has been removed. Sec.  422.222(a)
     Beneficiaries will not be permitted to appeal the 
application of the preclusion list to a particular prescriber, 
individual, or entity.
11. Removal of Quality Improvement Project for Medicare Advantage 
Organizations (Sec.  422.152)
    Section 1852(e) of the Act requires that Medicare Advantage (MA) 
organizations have an ongoing Quality Improvement (QI) Program for the 
purpose of improving the quality of care provided to enrollees in the 
organization's MA plans. The statute requires that the MA organization 
include a Chronic Care Improvement Program (CCIP) as part of the 
overall QI Program.
    Our regulations at Sec.  422.152 outline the QI Program 
requirements for MA organizations, which include the development and 
implementation of both Quality Improvement Projects (QIPs), at 
paragraphs (a)(3) and (d), and a CCIP, at paragraphs (a)(2) and (c). 
Both provisions require that the MA organization's QIP and CCIP address 
areas or populations identified by CMS.
    The January 2005 final rule (70 FR 4587) addressed the QI 
provisions added to section 1852(e) of the Act by the Medicare 
Modernization Act of 2003 (MMA). In that final rule, we specified in 
Sec.  422.152 that MA organizations must have ongoing QI Programs, 
which include chronic care programs, but CMS generally provided MA 
organizations the flexibility to shape their QI efforts to the needs of 
their enrollees.
    In the April 2010 final rule (75 FR 19677), CMS indicated concern 
that MA organizations were choosing QIPs and CCIPs that did not address 
QI areas that best reflected enrollee needs and that some MA projects 
focused more on improving processes rather than improving clinical 
outcomes. Therefore, we modified the regulation to provide for CMS to 
identify focus areas for QIPs and population areas for CCIPs. MA 
organizations retained the flexibility to identify topics for 
development of QIPs and CCIPs based on the needs of their population, 
but also had to implement QIPs and CCIPs as directed by CMS, which 
could identify general areas of focus that supported CMS quality 
strategies and initiatives.
    During this time, CMS was also concerned that MA organizations were 
employing inconsistent methods in developing criteria for QIPs and 
CCIPs. As a result, CMS also amended the regulation to require MA 
organizations to report progress in a manner identified by CMS. This 
allowed CMS to review results and extrapolate lessons learned and best 
practices consistently across the MA program.
    After making these regulation modifications, CMS issued a number 
sub-regulatory QIP and CCIP guidance documents to ensure that MA 
organizations reported and measured progress in a consistent and 
meaningful way. For example, the new Plan-Do-Study-Act QI model 
required MA organizations to place some structure and parameters around 
their QIPs and CCIPs, ultimately leading to more consistency.
    Through annual review of QIP and CCIP reporting submissions, CMS 
found its implementation of the QIP and CCIP requirements had become 
burdensome and complex, rather than streamlined and conformed to MA 
organizations' implementation of QIPs and CCIPs. The complex sub-
regulatory guidance led to a wide range of MA organization 
interpretations, resulting in extraneous, irrelevant, voluminous, and 
redundant information being reported to CMS. For example, many MA 
organizations merely re-iterated the CMS reporting requirements and did 
not provide quantitative data or demonstrate that they were meeting 
their intended project goals. Often, the results data lacked clarity 
and context and were difficult to interpret and validate. MA 
organizations cited numerous studies but did not indicate how they 
would use the information to improve enrollee outcomes.

[[Page 16668]]

    We gained little value from the information reported. As a result, 
we scaled down our sub-regulatory guidance in order to gain more 
concise and useful information with which to evaluate the outcomes and 
show any sort of attribution. Over the years, we have modified the 
reporting requirements in an attempt to gain specific and quantifiable 
project goals, clear and concise results data, a favorable effect on 
enrollee health outcomes, and meaningful descriptions of how the MA 
organization will disseminate those results amongst the industry to 
promote best practices.
    However, we also found that the scaled down guidance did not 
necessarily produce better outcomes in the review of annual updates. 
Continued evaluation through annual review of plan reported updates of 
the QIPs and CCIPs has led CMS to believe that the mandated QIPs in 
particular do not add significant value. Through annual review of plan-
reported updates, CMS has found that a number of QIPs implemented are 
duplicative of activities MA organizations are already doing to meet 
other plan needs and requirements, such as the CCIP and internal 
organizational focus on Part C Star Rating metrics. For example, we 
designated ``Reducing All-Cause Hospital Readmissions'' as the 2012 QIP 
topic. The QIPs for this topic often duplicated other CMS and MA 
organization care coordination initiatives aimed to improve transition 
of care across health care settings and reduce hospital readmissions. 
We found that many MA plans were already engaged in activities to 
reduce hospital readmissions because they are annually scored on their 
performance in this area (and many other areas) through Healthcare 
Effectiveness Data and Information Set (HEDIS), a set of plan 
performance and quality measures. Each year, MA organizations are 
required to report HEDIS data and are evaluated annually based on these 
measures. High performance on these measures also plays a large role in 
achieving high Star Ratings, which has beneficial payment consequences 
for MA organizations. This suggests that CMS direction and detailed 
regulation of QIPs is unnecessary as the Star Ratings program use of 
HEDIS measures (and other measures) incentivizes MA organizations 
sufficiently to focus on desired improvements and outcomes, perhaps by 
using different means than a QIP.
    Based on this, we concluded that the removal of the QIP and the 
continued CMS direction of populations for required CCIPs would allow 
MA organizations to focus on one project that supports improving the 
management of chronic conditions, a CMS priority, while reducing the 
duplication of other QI initiatives. We proposed to delete Sec. Sec.  
422.152(a)(3) and 422.152(d), which outline the QIP requirements. In 
addition, in order to ensure any references for other provisions in 
this section remain accurate, we proposed to reserve paragraphs (a)(3) 
and (d). The removal of these requirements will reduce burden on both 
MA organizations and CMS.
    We explained in the proposed rule that even with this proposed 
removal of the QIP requirements, the MA requirements for QI Programs 
will remain in place and be robust and sufficient to ensure that the 
requirements of section 1852(e) of the Act are met. As a part of the QI 
Program, each MA organization will still be required to develop and 
maintain a health information system; encourage providers to 
participate in CMS and HHS QI initiatives; implement a program review 
process for formal evaluation of the impact and effectiveness of the QI 
Program at least annually; correct all problems that come to its 
attention through internal, surveillance, complaints, or other 
mechanisms; contract with an approved Medicare Consumer Assessment of 
Health Providers and Systems (CAHPS[supreg]) survey vendor to conduct 
the Medicare CAHPS[supreg] satisfaction survey of Medicare plan 
enrollees; measure performance under the plan using standard measures 
required by CMS and report its performance to CMS; develop, compile, 
evaluate, and report certain measures and other information to CMS, its 
enrollees, and the general public; and develop and implement a CCIP. 
Further, CMS emphasizes here that MA organizations must have QI 
Programs that go beyond only performance of CCIPs that focus on 
populations identified by CMS. The CCIP is only one component of the QI 
Program, which has the purpose of improving care and provides for the 
collection, analysis, and reporting of data that permits the 
measurement of health outcomes and other indices of quality under 
section 1852(e) of the Act.
    We believe this proposed change will allow MA organizations to 
maintain existing health improvement initiatives and take steps to 
reduce the risk of redundancies or duplication. The remaining elements 
of the QI Program, including the CCIP, will maintain the intended 
purpose of the QI Program: That plans have the necessary infrastructure 
to coordinate care and promote quality, performance, and efficiency on 
an ongoing basis. As explained in the proposed rule, the proposed 
amendments do not eliminate the CCIP requirements that MA organizations 
address populations identified by CMS and report project status to CMS 
as requested. Per the April 2010 rule (75 FR 19677), we continue to 
believe that these other requirements are necessary to ensure that MA 
organizations are developing projects that positively impact 
populations identified by CMS and that progress is documented and 
reported in a way that is consistent with our requirements.
    We solicited comments on our proposal, including whether additional 
revision to Sec.  422.152 is necessary to eliminate redundancies CMS 
has identified in this preamble.
    We received the following comments, and our response follows:
    Comment: Most commenters expressed strong support for this proposal 
to remove the QIP requirement for MA organizations. A few supportive 
commenters suggested that CMS also remove the CCIP requirement for MA 
organizations. Specifically, the Medicare Payment Advisory Commission 
(MedPAC) encouraged CMS to remove as well the duplicative CCIP 
attestation because measures around prevalent chronic conditions are 
already measured in the star rating program (for example, diabetes, 
hypertension).
    Response: We appreciate the significant support for this proposal. 
We acknowledge the suggestion to also remove the CCIP requirement for 
MA organizations, and believe MedPAC has a valid concern that chronic 
condition measures are already measured in the star rating program. 
However, section 1852(e) of the Act requires that each MA organization 
include a CCIP as part of its required overall QI Program. Therefore, 
we will continue to require that MA organizations attest annually to 
having an ongoing CCIP and that the CCIP comply with the requirements 
issued by CMS under Sec.  422.152(a)(2) and (c).
    Comment: Another commenter expressed appreciation for CMS's interim 
sub-regulatory steps to streamline QIP and CCIP reporting requirements 
and reduce burden on both MA organizations and CMS (that is, for 
reporting associated with 2018 QIPs and CCIPs); the commenter 
encouraged CMS to continue to evaluate whether any additional steps can 
be taken for 2018 QIPs and CCIPs to further streamline reporting and 
reduce burden. Similarly, a commenter requested that

[[Page 16669]]

CMS make a decision on this proposal so as to limit the resources 
invested in developing a new 2018 QIP.
    Response: We would like to clarify that the required attestations 
for 2018 QIPs and CCIPs were already completed at the end of December 
2017. Therefore, all organizations should have already developed their 
2018 QIP plan and implemented it beginning on January 1, 2018. This 
final rule, making the proposed changes, will be applicable for the 
2019 MA plan requirements.
    Comment: Another commenter recommended that CMS take into account 
the impact on state external quality review organization (EQRO) 
evaluation activities that currently implement the optional use of MA 
organizations' QIP reports as part of annual reviews for Medicaid 
managed care plans, citing 42 CFR 438.360.
    Response: CMS's removal of the QIP requirement for MA organizations 
at Sec.  422.152(a)(3) and (d) does not alter the Medicaid managed care 
plan requirements at Sec.  438.360. If review of an MA organization's 
CCIP does not produce information that meets the conditions specified 
in Sec.  438.360(a), then this information could not be used to satisfy 
that regulation. Guidance on part 438 requirements is outside of the 
scope of this rule, but we appreciate the comment. We will consider how 
the QIP removal may impact state EQRO evaluation activities and may 
issue guidance as necessary to state Medicaid agencies.
    Comment: A commenter questioned whether CMS has intentions to make 
Medicare quality initiatives (that is, MA QI requirements) and Program 
of All-Inclusive Care for the Elderly (PACE) quality initiatives (that 
is, Quality Assessment and Performance Improvement or QAPI program) 
more comparable.
    Response: Although there are some similarities in the required 
quality initiatives for MA and PACE, the PACE QAPI program requirements 
are outside the scope of this rule. Due to the unique nature of the 
PACE model, we do not currently intend to align the requirements 
between the QIP and the QAPI program. However, we may consider doing so 
in the future.
    Comment: A few commenters opposed this proposal, believing that it 
is premature to eliminate the QIPs without careful evaluation and 
consideration of where overlaps occur and which QIPs lead to the 
greatest improvements. Instead of eliminating the QIPs for MA 
organizations, they suggested that CMS, when issuing mandatory topics 
for QIPs, take into account any relevant overlap to ensure QIPs are 
addressing the most important areas and taking into account other 
related activities.
    Response: We disagree with the suggestion that CMS retain the QIP 
and consider any relevant overlap and other related activities when 
issuing mandatory QIP topics instead of finalizing the removal of the 
QIP requirements in Sec.  422.152. Although we are eliminating the QIP 
requirement, MA organizations must still have a CCIP (section 1852(e) 
of the Act; 422.152(a)(2) and (c)). Through the CCIP, MA organizations 
must address chronically ill populations identified by CMS through a 
list of chronic conditions. However, MA organizations are not required 
to choose from this list and may choose other chronic conditions as 
appropriate to meet the needs of their enrollee population. We believe 
that this flexibility allows MA organizations to identify a focus area 
that does not overlap or duplicate other related activities, including 
star rating metrics. Alternatively, an MA organization may choose to 
design a CCIP that intentionally relates to other activities. We do not 
prohibit correlated quality activities, and MA organizations may take 
advantage of this flexibility.
    Comment: Another commenter expressing opposition for this proposal 
stated that the QIP requirements dovetail with existing Medicaid 
quality requirements and integrated programs have a unique opportunity 
to pursue joint Medicare and Medicaid QIPs. They feared that the 
lessening of CMS expectations in this area will result in less 
attention on such activities by dual eligible special needs plans (D-
SNPs).
    Response: We understand the commenter's concerns regarding joint 
Medicare and Medicaid quality initiatives. However, we believe that MA 
organizations offering integrated D-SNPs may still achieve this by 
connecting the Medicaid quality project with the required CCIP for MA. 
States may also strengthen quality requirements through State Medicaid 
Agency Contracts.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the QIP requirements for MA 
organizations in Sec.  422.152(a)(3) and (d), as proposed. We are 
reserving those paragraphs.
12. Reducing Provider Burden--Comment Solicitation
    In the proposed rule, we solicited comment on the nature and extent 
of the burden faced by providers pursuant to MA organizations' requests 
for medical records and for ideas to address the burden. We thank the 
over 40 commenters who responded. We plan to carefully review the 
information received, including ideas for continued conversations with 
stakeholders.

C. Implementing Other Changes

1. Reducing the Burden of the Medicare Part C and Part D Medical Loss 
Ratio Requirements (Sec. Sec.  422.2410, 422.2420, 422.2430, 422.2460, 
422.2480, 422.2490, 423.2410, 423.2420, 423.2430, 423.2460, 423.2480, 
and 423.2490)
a. Overview of Proposed Rule
    In the November 28, 2017 proposed rule (82 FR 56366), we proposed 
certain modifications to the medical loss ratio (MLR) requirements in 
the Medicare Part C and Part D programs. Briefly, we proposed to change 
the MLR calculation by including in the MLR numerator, as QIA, all 
expenditures for fraud reduction activities or for Medication Therapy 
Management (MTM) programs that meet the requirements of Sec.  
423.153(d). As explained in the proposed rule, we believe that the 
proposed inclusion of all fraud reduction activities in the MLR 
numerator as QIA renders extraneous the provision that provides an 
adjustment to incurred claims for amounts recovered through fraud 
recovery efforts, up to the amount of fraud reduction expenses. We also 
proposed to revise the MLR reporting requirements to significantly 
reduce the amount of MLR data that MA organizations and Part D sponsors 
submit to CMS on an annual basis. Finally, we proposed certain 
conforming and technical amendments, which are described in greater 
detail in section II.C.1.e. of this final rule.
b. Background
    The proposed rule provided background on the Part C and Part D 
medical loss ratio (MLR) requirements, including the statutory and 
regulatory authority. An MLR is expressed as a percentage, generally 
representing the percentage of revenue used for patient care rather 
than for such other items as administrative expenses or profit. In the 
May 23, 2013 Federal Register (78 FR 31284), we published a final rule 
that codified the MLR requirements for MA organizations and Part D 
sponsors (including organizations offering cost plans that provide the 
Part D benefit) in the regulations at 42 CFR part 422, subpart X and 
part 423, subpart X.
    For contract year 2014 and subsequent contract years, MA 
organizations and Part D sponsors are required to report their MLRs and 
are subject to financial and other penalties for a failure to meet the 
statutory

[[Page 16670]]

requirement that they have an MLR of at least 85 percent (see 
Sec. Sec.  422.2410 and 423.2410). Section 1857(e)(4) of the Act 
imposes several levels of sanctions for failure to meet the 85 percent 
minimum MLR requirement, including remittance of funds to CMS, a 
prohibition on enrolling new members, and ultimately contract 
termination. The minimum MLR requirement in section 1857(e)(4) of the 
Act, which is incorporated by reference in section 1860D-12(b)(3)(D) of 
the Act, creates incentives for MA organizations and Part D sponsors to 
reduce administrative costs, such as marketing costs, profits, and 
other uses of the funds earned by plan sponsors, and helps to ensure 
that taxpayers and enrolled beneficiaries receive value from Medicare 
health and drug plans.
    Section 1001(5) of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by section 10101(f) of the Health Care 
Reconciliation Act, also established a new MLR requirement under 
section 2718 of the Public Health Service Act (PHSA) that applies to 
issuers of employer group and individual market private insurance. We 
refer to the MLR requirements that apply to issuers of private 
insurance as the ``commercial MLR rules.'' Regulations implementing the 
commercial MLR rules are published at 45 CFR part 158.
c. Changes to the Calculation of the Medical Loss Ratio (Sec. Sec.  
422.2420, 422.2430, 423.2420, and 423.2430)
(1) Fraud Reduction Activities
    In the proposed rule, we explained that our general approach in 
developing the Medicare MLR rules has been to align with the commercial 
MLR rules in order to limit the burden on organizations that 
participate in both markets, and to make commercial and Medicare MLRs 
as comparable as possible for comparison and evaluation purposes, 
including by Medicare beneficiaries. However, we also recognized in the 
original MLR rule (78 FR 12429) that some areas of the commercial MLR 
rules would need to be revised to fit the unique characteristics of the 
MA and Part D programs.
    One area where we initially aligned the commercial and Medicare MLR 
rules was the treatment of expenditures related to fraud reduction 
efforts, which we defined to include both fraud prevention and fraud 
recovery (78 FR 12433). The Medicare MLR regulations adopted the same 
definitions of activities that improve healthcare quality (also 
referred to as quality improvement activities, or QIA), as had been 
adopted in the commercial MLR regulations at 45 CFR 158.150 and 158.151 
in order to facilitate uniform accounting for the costs of these 
activities across lines of business (78 FR 12435). Consistent with this 
policy of alignment, the Medicare MLR regulations at Sec. Sec.  
422.2430(b)(8) and 423.2430(b)(8) adopted the commercial MLR rules' 
exclusion of fraud prevention activities from QIA. The Medicare MLR 
regulations (Sec. Sec.  422.2420(b)(2)(ix) and 423.2420(b)(2)(viii)) 
further aligned with the commercial MLR rules' treatment of fraud-
related expenditures by allowing the amount of claim payments recovered 
through fraud reduction efforts, not to exceed the amount of fraud 
reduction expenses, to be included in the MLR numerator as a positive 
adjustment to incurred claims. The initial Medicare MLR proposed rule, 
published February 22, 2013 (78 FR 12433), explained that we considered 
this approach to be appropriate because without such an adjustment, the 
recovery of paid fraudulent claims would reduce an MLR and could create 
a disincentive to engage in fraud reduction efforts.
    In the November 28, 2017 proposed rule, we explained that we had 
reconsidered our policy regarding the treatment of fraud reduction 
expenses in the Medicare MLR numerator based on the specific 
characteristics of the MA and Part D programs. We noted that limiting 
or excluding amounts invested in fraud reduction undermines the federal 
government's efforts to combat fraud in the Medicare program; such 
action also reduces the potential savings to the government, taxpayers, 
and beneficiaries that robust fraud prevention efforts in the MA and 
Part D programs can provide. We also stated that fraud prevention 
activities can improve patient safety and deter the use of medically 
unnecessary services, which is part of the reason we require such 
activities as a condition of participation in the MA and Part D 
programs.
    For these reasons, we proposed certain changes to the treatment of 
expenses for fraud reduction activities in the Medicare MLR 
calculation. First, we proposed to revise the MA and Part D regulations 
by removing the current exclusion of fraud prevention activities from 
QIA at Sec. Sec.  422.2430(b)(8) and 423.2430(b)(8). Second, we 
proposed to expand the definition of QIA in Sec. Sec.  422.2430 and 
423.2430 to include all fraud reduction activities, including fraud 
prevention, fraud detection, and fraud recovery. Third, given the 
proposed revisions of the QIA definitions surrounding the treatment of 
fraud reduction activities, we proposed to no longer include in 
incurred claims the amount of claims payments recovered through fraud 
reduction efforts, up to the amount of fraud reduction expenses, in 
Sec. Sec.  422.2420(b)(2)(ix) and 423.2420(b)(2)(viii).
    We noted that MA organizations and Part D sponsors are required at 
Sec. Sec.  422.503(b)(4)(vi) and 423.504(b)(4)(vi), respectively, to 
adopt an effective compliance program which includes measures that 
prevent, detect, and correct fraud. We believe that the proposed change 
to include all expenditures in connection with fraud reduction 
activities as QIA-related expenditures in the MLR numerator best aligns 
with this Medicare contracting requirement. We are concerned that the 
current rules could create a disincentive to invest in fraud reduction 
activities, which is only partly mitigated by the current adjustment to 
incurred claims for amounts recovered as a result of fraud reduction 
activities, up to the amount of fraud reduction expenses. We believe 
that it is particularly important that MA organizations and Part D 
sponsors invest in fraud reduction activities as the Medicare trust 
funds are used to finance the MA and Part D programs. We believe that 
including the full amount of expenses for fraud reduction activities as 
QIA will provide an additional incentive for MA organizations and Part 
D sponsors to develop innovative and more effective ways to detect and 
deter fraud.
    We continue to believe that the minimum MLR requirement in the 
Medicare statute is intended to create an incentive to reduce 
administrative costs, marketing, profits, and other such uses of the 
funds that plan sponsors receive, and to ensure that taxpayers and 
enrolled beneficiaries receive value from Medicare health and drug 
plans. However, we also believe that MA organizations' and Part D 
sponsors' fraud reduction activities can potentially provide 
significant value to the government and taxpayers by reducing trust 
fund expenditures. When MA organizations and Part D sponsors prevent 
fraud and recover amounts paid for fraudulent claims, this lowers the 
overall cost of providing coverage to MA and Part D enrollees. Because 
MA organizations' and Part D sponsors' monthly payments are based in 
part on their claims experience in prior years, if MA organizations and 
Part D sponsors pay fewer fraudulent claims, this should be reflected 
in their subsequent cost projections, which will ultimately result in 
lower payments to MA organizations and Part D sponsors out of the 
Medicare

[[Page 16671]]

trust funds, and could also result in lower premiums or additional 
supplemental benefits for beneficiaries.
    As we explained in the proposed rule, we believe that the inclusion 
of expenditures for fraud reduction activities in the QIA portion of 
the MLR numerator, as proposed, makes it unnecessary to include in 
incurred claims the amount of claim payments recovered through fraud 
reduction efforts, up to the amount of fraud reduction expenses. We 
originally included an adjustment to incurred claims for claims 
payments recovered through fraud reduction efforts based on the 
rationale that, because the recovery of paid fraudulent claims reduces 
the amount of incurred claims in the MLR numerator, if expenditures for 
fraud reduction efforts were treated solely as nonclaims and nonquality 
improvement activities, this could create a disincentive to engage in 
fraud reduction activities. The adjustments to incurred claims under 
current Sec. Sec.  422.2420(b)(2)(ix) and 423.2420(b)(2)(viii) mitigate 
the potential disincentive to invest in fraud reduction activities 
insofar as MA organizations' and Part D sponsors' recoveries of paid 
fraudulent claims do not result in a reduction to incurred claims. 
Because this adjustment to incurred claims is only available to the 
extent that an MA organization or Part D sponsor recovers paid 
fraudulent claims, it encourages MA organizations and Part D sponsors 
to invest in tracking down and recouping amounts that have already been 
paid as a result of fraud, rather than in preventing payment of 
fraudulent claims. Under our proposal, claim payments recovered through 
fraud reduction efforts will no longer be included in the MLR numerator 
as a limited adjustment to incurred claims. Instead, all expenditures 
for fraud reduction activities will be included in the MLR numerator as 
QIA, even if such expenditures exceed the amount recovered through 
fraud reduction efforts. As a result, MA organizations and Part D 
sponsors will no longer have the same level of incentive to just pursue 
recovery of paid fraudulent claims, and may now be further incented to 
invest in fraud prevention. We believe that effective fraud reduction 
strategies will include efforts to prevent payment of fraudulent 
claims, and that the inclusion of all fraud reduction activities as QIA 
in the MLR numerator will strengthen the incentive to engage in these 
vital activities.
    In summary, we proposed the following regulatory revisions:
     Remove and reserve Sec. Sec.  422.2420(b)(2)(ix) and 
423.2420(b)(2)(viii).
     In Sec. Sec.  422.2430 and 423.2430, redesignate existing 
paragraphs (a)(1) and (a)(2) as (a)(2) and (a)(3), respectively.
     In Sec. Sec.  422.2430 and 423.2430, add new paragraph 
(a)(4) that lists activities that are automatically included in QIA.
     Redesignate the introductory text of Sec. Sec.  
422.2430(a) and 423.2430(a) as paragraphs (a)(1), and revise these 
newly designated paragraphs (a)(1) to specify that, for an activity to 
be included in QIA, it must either fall into one of the categories 
listed in newly redesignated (a)(2) and meet all of the requirements in 
newly redesignated (a)(3), or be listed in paragraph (a)(4).
     Remove and reserve Sec. Sec.  422.2430(b)(8) and 
423.2430(b)(8).
    We solicited comment on these proposed changes, particularly 
whether our proposal was based on the best understanding of the motives 
and incentives applicable to MA organizations and Part D sponsors to 
engage in fraud reduction activities. We also solicited comment on the 
types of activities that should be included in, or excluded from, fraud 
reduction activities. In addition, we solicited comment on alternative 
approaches to accounting for fraud reduction activities in the MLR 
calculation. In particular, we were interested in receiving input on 
the following:
     Whether fraud reduction activities should be included in 
quality improvement activities as proposed, or whether we should create 
a separate MLR numerator category for fraud reduction activities; and
     Whether fraud reduction activities should be subject to 
any or all of the exclusions from QIA at Sec. Sec.  422.2430(b) and 
422.2430(b). Although our proposal removes the exclusion of fraud 
prevention activities from QIA at Sec. Sec.  422.2430(b)(8) and 
423.2430(b)(8), it is possible that fraud reduction activities will be 
subject to one of the other exclusions under Sec. Sec.  422.2430(b) and 
423.2430(b), such as the exclusion that applies to activities that are 
designed primarily to control or contain costs (Sec. Sec.  
422.2430(b)(1) and 423.2430(b)(1)) or the exclusion of activities that 
were paid for with grant money or other funding separate from premium 
revenue (Sec. Sec.  422.2430(b)(1) and 423.2430(b)(3).)
    We received 43 comments pertaining to the proposed changes to the 
treatment of expenses for fraud reduction activities in the Medicare 
MLR calculation. The following is a summary of the comments we received 
on these proposals and our responses:
    Comment: A majority of the commenters supported the proposal to 
designate all fraud reduction activities as activities that improve 
healthcare quality, or QIA. A number of commenters noted that fraud 
prevention can improve patient safety, deter the use of medically 
unnecessary services, and can lead to higher levels of health care 
quality. Several commenters noted that they agreed with our conclusion 
that the MLR regulations' limited adjustment to incurred claims for 
fraud recoveries, up to the amount of fraud reduction expenditures, 
curtailed the incentive to invest in fraud prevention.
    Response: We appreciate the support.
    Comment: Several commenters opposed our proposal to include all 
expenditures for fraud reduction activities in the MLR numerator as 
expenditures for QIA. Some commenters that opposed our proposal argued 
that the MLR is supposed to represent the proportion of revenue that is 
spent on medical costs or improving healthcare quality, whereas amounts 
spent on fraud prevention, detection, and recovery provide little value 
to beneficiaries and represent administrative expenses that are part of 
a plan sponsor's cost of doing business. As such, the commenters argued 
the costs were not appropriate for inclusion in the numerator. Other 
commenters expressed concern that the proposal would encourage plans to 
adopt aggressive practices to reduce fraud, such as claim audits, that 
would ultimately increase provider burden.
    Response: We appreciate the concerns raised by the commenters. We 
respectfully disagree with the argument that fraud reduction expenses 
do not provide significant value to beneficiaries. We believe, and a 
number of commenters on the proposed rule noted, that fraud prevention 
can improve health care quality by ensuring that patients receive care 
that is legitimate and appropriate, and that providers have the 
appropriate credentials for the services they perform. In addition, as 
explained in the proposed rule, we believe that fraud reduction 
activities can lower the cost of care and reduce trust fund 
expenditures and thereby potentially provide value to beneficiaries, 
the government, and taxpayers.
    We acknowledge that the proposed inclusion of fraud reduction 
activities in the MLR numerator could encourage MA organizations and 
Part D sponsors to implement new practices for combatting fraud and 
that these may involve new administrative

[[Page 16672]]

requirements for providers. However, we note that MA organizations and 
Part D sponsors would no longer have the same level of incentive to 
``pay and chase'' claims in order to account for fraud reduction 
expenditures in the MLR numerator under the proposed rule; they would 
instead be further incented to implement pre-payment fraud prevention 
efforts, as they would now be able to include expenditures related to 
these efforts in their MLR numerator, regardless of whether they have 
recovered any claims payments through fraud reduction efforts. We 
believe that any increase in provider burden as a result of newly-
implemented pre-payment fraud prevention practices could potentially be 
offset by a reduction in the provider's burden associated with the need 
to contest efforts from health plans to recover claims already paid, as 
is necessary under the current rules for health plans' fraud reduction 
expenditures to have a positive impact on their MLR.
    Comment: A commenter requested that we amend the regulations for 
the commercial and Medicaid markets to align with the proposed changes 
to the treatment of fraud reduction expenditures in the Medicare MLR 
regulations.
    Response: The commercial and Medicaid MLR regulations are outside 
the scope of this final rule but we will take these comments under 
advisement.
    Comment: We received several comments that requested that we expand 
the proposal to include in QIA all efforts to reduce fraud, waste, and 
abuse.
    Response: We did not propose in this regulation to designate 
efforts to reduce waste and abuse as QIA for MLR purposes. We 
appreciate the comments we received on these issues, however, and will 
consider whether adding these activities to the QIA category of the MLR 
numerator should be incorporated into future rulemaking.
    Comment: We received one comment that directly addressed our 
solicitation in the proposed rule concerning the establishment of a new 
category in the MLR numerator for fraud reduction expenses. The 
commenter argued that treating fraud reduction expenses separately 
might encourage plan sponsors to pay more attention to fraud reduction 
activities and would make it easier to track, measure, and audit 
expenses that were allocated to this category. Many commenters 
supported the inclusion of fraud reduction activities in the QIA 
category of the MLR numerator, without expressing an opinion on whether 
we should instead create a new numerator category for fraud reduction 
expenses.
    Response: We thank the commenter for responding to our 
solicitation. We note that MA organizations and Part D sponsors are 
expected to keep track of any expenses they intend to include in the 
MLR numerator, regardless of how the expenses are categorized in the 
underlying analysis and data. Given that the majority of commenters 
indicated a preference for the proposed inclusion of fraud reduction 
activities in the QIA category of the MLR numerator, we have decided 
against establishing a separate numerator category for fraud reduction 
expenditures. We believe, as noted earlier and in the proposed rule, 
that fraud reduction is sufficiently related to and supports QIA to 
consider it properly part of that category.
    Comment: Several commenters responded to our solicitation for 
feedback on whether fraud reduction activities should be subject to any 
or all of the exclusions at Sec. Sec.  422.2430(b) and 422.2430(b). 
Several commenters recommended that we amend Sec. Sec.  422.2430(b)(1) 
and 423.2430(b)(1), which exclude from QIA any activities that are 
designed primarily to control or contain costs, to create an exception 
for fraud reduction activities. The commenters contended that fraud 
reduction activities could arguably be described as cost-control 
activities and expressed concern that a particular fraud reduction 
activity could (or would) be excluded from QIA due to concerns or 
confusion regarding this section of the regulation, thereby 
discouraging investment in such activities by some health plans that 
may be concerned about being out of compliance if they attempted to 
incorporate these expenses as QIA. A few commenters recommended that 
CMS remove the regulatory language at Sec. Sec.  422.2430(b)(5) and 
423.2430(b)(5) that excludes from QIA ``costs directly related to 
upgrades in health information technology that are designed primarily 
or solely to improve claims payment capabilities,'' as this would 
exclude investments in health IT that could be used to reduce the 
incidence of fraud, such as claims code auditing, pre-pay coding, 
physician-profiling, and audit/recovery operations. The commenters 
noted that this change to the regulatory language should retain the 
exclusion for costs related to claims adjudication systems.
    Response: We agree with the commenters that maintaining the current 
exclusion of cost-control activities without creating an exception for 
fraud reduction activities could cause confusion regarding which fraud 
reduction activities could be included in QIA. As explained earlier, 
one of the reasons we proposed to depart from the commercial MLR rules 
in our treatment of fraud reduction efforts is to encourage MA 
organizations and Part D sponsors to pay fewer fraudulent claims, which 
we believe will lower the overall cost of providing coverage to MA and 
Part D enrollees and potentially produce savings for beneficiaries, 
taxpayers, and the federal government. We believe that excluding from 
QIA fraud reduction activities that are designed primarily to control 
or contain costs would undermine the incentive to engage in fraud 
reduction activities.
    We also agree that the current exclusion of costs directly related 
to health IT that are designed primarily or solely to improve claims 
payment capabilities could be construed to exclude investments in 
technology solutions that are designed to enhance MA organizations' and 
Part D sponsors' ability to reduce the incidence of fraud. In order to 
avoid creating uncertainty about whether investments in health IT as a 
means of reducing fraud may be included in QIA, we believe it is 
appropriate that we revise Sec. Sec.  422.2430(b)(5) and 423.2430(b)(5) 
to specify that the exclusion of costs directly related to upgrades in 
health information technology that are designed primarily or solely to 
improve claims payment capabilities does not apply to costs that are 
related to fraud reduction activities under Sec. Sec.  
422.2430(a)(4)(ii) and 423.2430(a)(4)(ii).
    After consideration of the public comments received, we are 
finalizing the regulatory changes to paragraphs (a) of Sec. Sec.  
422.2430 and 423.2430 as proposed, with the following modifications. We 
are revising Sec. Sec.  422.2430(b)(1) and 423.2430(b)(1), which 
exclude from QIA activities that are designed primarily to control or 
contain costs, to provide an exception for fraud reduction activities. 
We are also revising the Sec. Sec.  422.2430(b)(5) and 423.2430(b)(5) 
to provide that costs related to fraud reduction activities under 
Sec. Sec.  422.2430(a)(4)(ii) and 423.2430(a)(4)(ii) are not subject to 
the exclusion that applies to costs directly related to upgrades in 
health information technology that are designed primarily or solely to 
improve claims payment capabilities.
(2) Medication Therapy Management (MTM) (Sec. Sec.  422.2430 and 
423.2430)
    In the May 23, 2013 final rule (78 FR 31294), we provided guidance 
that Medication Therapy Management (MTM) activities (defined at

[[Page 16673]]

Sec.  423.153(d)) qualify as QIA, provided they meet the requirements 
set forth in Sec. Sec.  422.2430 and 423.2430. To meet these 
requirements, the activity must be for a purpose identified in 
paragraph (a)(1) and: (1) Improve health quality; (2) increase the 
likelihood of desired health outcomes in ways that are capable of being 
objectively measured and of producing verifiable results; (3) be 
directed toward individual enrollees, specific groups of enrollees, or 
other populations as long as enrollees do not incur additional costs 
for population-based activities; and (4) be grounded in evidence-based 
medicine, widely accepted best clinical practice, or criteria issued by 
recognized professional medical associations, accreditation bodies, 
government agencies or other nationally recognized health care quality 
organizations. In our prior MLR rulemaking, we did not attempt to 
determine whether all MTM programs that comply with Sec.  423.153(d) 
will necessarily meet the QIA requirements at Sec.  422.2430 (for MA-PD 
contracts) and Sec.  423.2430 (for stand-alone Part D contracts). 
Subsequent to publication of the May 23, 2013 final rule, we received 
numerous inquiries seeking clarification whether MTM programs are QIA. 
To address those questions and resolve any ambiguities or 
uncertainties, we proposed to specifically address MTM programs in the 
MLR regulations.
    We proposed to modify our regulations at Sec. Sec.  422.2430 and 
423.2430 by adding new paragraph (a)(4)(i), which specifies that all 
MTM programs that comply with Sec.  423.153(d) and are offered by Part 
D sponsors (including MA organizations that offer MA-PD plans 
(described in Sec.  422.2420(a)(2)) are QIA. We believe that the MTM 
programs that we require under the Part D regulations improve quality 
and care coordination for Medicare beneficiaries. We also believe that 
allowing Part D sponsors to include compliant MTM programs as QIA in 
the calculation of the Medicare MLR will encourage sponsors to ensure 
that MTM is better utilized, particularly among standalone PDPs that 
may currently lack strong incentives to promote MTM.
    Furthermore, we have expressed concern that Part D sponsors may be 
restricting MTM eligibility criteria to limit the number of qualified 
enrollees, and we believe that explicitly including MTM program 
expenditures in the MLR numerator as QIA-related expenditures could 
provide an incentive to reduce any such restrictions. This is 
particularly important in providing individualized disease management 
in conjunction with the ongoing opioid crisis evolving within the 
Medicare population. We hope that, by removing any restrictions or 
uncertainty about whether compliant MTM programs will qualify for 
inclusion in the MLR numerator as QIA, the proposed changes will 
encourage Part D sponsors to strengthen their MTM programs by 
implementing innovative strategies for this potentially vulnerable 
population. We believe that beneficiaries with higher rates of 
medication adherence have better health outcomes, and that medication 
adherence can also produce medical spending offsets, which could lead 
to government and taxpayer savings in the trust fund as well as 
beneficiary savings in the form of reduced premiums. We solicited 
comment on these proposed changes.
    We received 39 comments pertaining to our proposal to amend the MLR 
regulations to specify that all MTM programs that comply with Sec.  
423.153(d) are QIA.
    Comment: Nearly all of the comments supported the proposal to 
explicitly designate MTM programs that comply with Sec.  423.153(d) as 
QIA for MLR purposes. A number of commenters noted that MTM programs 
promote medication adherence and care coordination, which contribute to 
improved health outcomes and a reduction in health care costs. Several 
commenters argued that eliminating uncertainty with respect to whether 
MTM expenditures will be included in the MLR numerator will encourage 
sponsors to expand access to MTM programs to include greater numbers of 
enrollees who may benefit from participation.
    Response: We appreciate the support.
    Comment: A commenter requested that we clarify that the Center for 
Medicare & Medicaid Innovation's (CMMI) Part D Enhanced MTM models are 
also QIA, thereby incentivizing participation in these models.
    Response: We have waived the MLR requirements to the extent 
necessary to permit all prospective payments for approved and 
permissible MTM services under the Part D Enhanced MTM model to be 
treated as QIA for purposes of MLR reporting. See ``Announcement of 
Part D Enhanced Medication Therapy Management Model Test'' (September 
28, 2015), available at https://innovation.cms.gov/Files/x/mtm-announcement.pdf.
    Comment: A commenter requested that we take steps to ensure that 
any required MTM programs established by plan sponsors do not create an 
undue administrative burden for prescribing physicians or medication 
denials and delays for patients.
    Response: We acknowledge the commenter's concerns about possible 
increases to physician burden or medication denials and delays for 
beneficiaries. However, this final rule addresses the designation of 
MTM programs that meet the requirements of Sec.  423.153(d) as QIA for 
MLR purposes; we believe that rules and requirements pertaining to the 
administration of MTM programs are outside the scope of this final 
rule.
    Comment: A commenter recommended that we only include MTM programs 
in QIA if the sponsor utilizes pharmacists at qualified long-term care 
pharmacies.
    Response: As noted earlier, one of the reasons we proposed to 
explicitly designate MTM programs that comply with Sec.  423.153(d) as 
QIA is to encourage sponsors to expand access to these programs. We do 
not believe that it is necessary to create additional requirements for 
MTM programs to qualify as QIA, beyond the requirements already present 
in Sec.  423.153(d).
    After consideration of the public comments received, we are 
finalizing without substantive our proposal to amend Sec. Sec.  
422.2430(a) and 423.2430(a) to specify that all MTM programs that 
comply with Sec.  423.153(d) are QIA.
(3) Additional Technical Changes to Calculation of the Medical Loss 
Ratio (Sec. Sec.  422.2420 and 423.2420)
    We also proposed technical changes to the MLR provisions at 
Sec. Sec.  422.2420 and 423.2420. In Sec.  422.2420(d)(2)(i), we are 
replacing the phrase ``in Sec.  422.2420(b) or (c)'' with the phrase 
``in paragraph (b) or (c) of this section''. In Sec.  423.2430, the 
regulatory text includes two paragraphs designated as (d)(2)(ii). We 
proposed to resolve this error by amending Sec.  423.2420 as follows:
     Revise paragraph (d)(2)(i) by adding at the end the text 
of the first paragraph designated as (d)(2)(ii).
     Remove the first paragraph designated as (d)(2)(ii).
    We received no comments on the proposed technical changes and 
therefore are finalizing the proposed changes to Sec. Sec.  422.2420(d) 
and 423.2420(d) without modification.
d. Proposed Regulatory Changes to Medicare MLR Reporting Requirements 
(Sec. Sec.  422.2460 and 423.2460)
    We proposed to reduce the MLR reporting burden by requiring MA 
organizations and Part D sponsors to submit the minimum amount of 
information that CMS needs in order to determine whether an MA or Part 
D contract has satisfied the minimum MLR requirement with respect to a

[[Page 16674]]

contract year, and whether the contract must remit funds to CMS or face 
additional sanctions.
    As we explained in the November 28, 2017 proposed rule (82 FR 
56459), our general approach when initially developing the Medicare MLR 
regulations was to align the Medicare MLR requirements with the 
commercial MLR requirements to the greatest extent possible. Consistent 
with this policy, when we originally developed the Medicare MLR 
reporting format, we attempted to model it on the tools used to report 
commercial MLR data. We believed at the time that this would limit the 
burden on organizations that participate in both markets. However, it 
was not possible to make these forms and reports identical due to 
differences in the types of data collected for purposes of commercial 
MLR reporting versus Medicare MLR reporting. We explained in the 
November 2017 proposed rule that we had become concerned that requiring 
health insurance issuers to complete what was ultimately a 
substantially different set of forms for Medicare MLR purposes had 
created an unnecessary additional burden. We noted that our proposal to 
reduce the burden of MLR reporting for the MA and Part D programs 
aligns with the directive in the January 30, 2017 Presidential 
Executive Order on Reducing Regulation and Controlling Regulatory Costs 
to manage the costs associated with the governmental imposition of 
private expenditures required to comply with Federal regulations.
    Specifically, we proposed that the Medicare MLR reporting 
requirements will be limited to the following data fields, as shown in 
Table E1:

 Organization name
 Contract number
 Adjusted MLR (which will be populated as ``Not Applicable'' or 
``N/A'' for non-credible contracts as determined in accordance with 
Sec. Sec.  422.2440(d) and 423.2440(d))
 Remittance amount

           Table 10--MLR Reporting for Fully Credible, Partially Credible, and Non-Credible Contracts
----------------------------------------------------------------------------------------------------------------
                                                                                               Remittance amount
                      Organization                          Contract No.     Adjusted MLR (%)         ($)
----------------------------------------------------------------------------------------------------------------
ABC, Inc...............................................              H1234               90.1                 $0
XYZ, LLC...............................................              S4321               84.8             17,420
MAO1, LLC..............................................              H4321                N/A                N/A
----------------------------------------------------------------------------------------------------------------

    We noted in the proposed rule that although we were proposing a 
significant reduction in the amount of MLR data that MA organizations 
and Part D sponsors must report to CMS on an annual basis, we did not 
propose to change our authority under Sec.  422.2480 or Sec.  423.2480 
to conduct selected audit reviews of the data reported under Sec. Sec.  
422.2460 and 423.2460 for purposes of determining that remittance 
amounts under Sec. Sec.  422.2410(b) and 423.2410(b) and sanctions 
under Sec. Sec.  422.2410(c), 422.2410(d), 423.2410(c), and 423.2410(d) 
were accurately calculated, reported, and applied. Moreover, MA 
organizations and Part D sponsors will continue to be required to 
retain documentation supporting the MLR data reported and to make 
available to CMS, HHS, the Comptroller General, or their designees any 
information needed to determine whether the data and amounts submitted 
with respect to the Medicare MLR are accurate and valid, in accordance 
with Sec. Sec.  422.504 and 423.505.
    We also proposed to make a technical change to Sec.  422.2460 by 
incorporating provisions which parallel the language of current 
paragraphs (b) and (c) of Sec.  423.2460 for purposes of the reporting 
requirements for contract year 2014 and subsequent contract years. This 
proposed technical change does not establish any new rules or 
requirements for MA organizations; it merely updates regulatory 
references that were overlooked in previous rulemaking.
    In summary, we proposed to revise the regulations at Sec. Sec.  
422.2460 and 423.2460 as follows:
     In Sec.  422.2460, redesignate the existing regulation 
text as paragraph (a).
     Revise newly designated Sec. Sec.  422.2460(a) and 
423.2460(a) by adding ``from 2014 through 2017'' after the phrase ``For 
each contract year'' in the first sentence to limit the more detailed 
MLR reporting requirement to that period, making minor grammatical 
changes to clarify the text, and by adding ``under this part'' to 
modify the phrase ``for each contract''.
     In Sec.  423.2460, redesignate existing paragraphs (b) and 
(c) as paragraphs (c) and (d), respectively.
     In Sec. Sec.  422.2460 and 423.2460, add a new paragraph 
(b) to require MA organizations and Part D plan sponsors with--
    ++ Fully credible and partially credible experience to report the 
Adjusted MLR for each contract for the contract year along with the 
amount of any owed remittance; and
    ++ Non-credible experience, to report that such experience was non-
credible.
    For each, the proposed text cross-references the applicable 
regulations for the determination of credibility, and for the general 
remittance requirement.
     In newly redesignated Sec.  423.2460(c), revise the text 
to refer to total revenue included in the MLR calculation rather than 
reports of that information.
     Add new paragraphs (c) and (d) to Sec.  422.2460 that 
mirror the text in Sec.  423.2460(c) and (d), as redesignated and 
revised.
    We received 33 public comments, some in support and some in 
opposition to our proposal to reduce the amount of MLR data that MA 
organizations and Part D sponsors submit to CMS on an annual basis. We 
received the following comments and our response follows:
    Comment: Most of the commenters supported our proposed changes to 
the MLR reporting requirements. Several commenters that supported the 
proposal expressed concern that the audit burden would increase once we 
started relying solely on audits to monitor compliance. Other 
commenters stated that although they supported the proposed reduction 
in the amount of MLR data they would be required to submit to us on an 
annual basis, they did not expect their MLR reporting burden to be 
significantly reduced since they would still be required to collect and 
analyze the same information in order to calculate the MLR percentage 
and remittance amount. A commenter asked that we issue guidance on how 
we will facilitate the current desk review in light of the proposed 
changes.
    Response: We appreciate the support. We do not expect that the 
proposed changes to the MLR reporting requirements would cause MLR 
audits to be more burdensome than the MLR audits that we have conducted 
in previous years. We acknowledge that MA organizations and Part D 
sponsors will continue to collect the same

[[Page 16675]]

information in order to calculate the MLR percentage and remittance 
amount. However, as we explained in section II.B.9 of the proposed rule 
(82 FR 56472), in estimating the reduction to the MLR reporting burden 
that would result from the proposed changes to the reporting 
requirements, we assumed that MA organizations and Part D sponsors 
would spend eleven fewer hours per contract performing the following 
tasks: (1) Reviewing the MLR report filing instructions and external 
materials referenced therein and to input all figures and plan-level 
data in accordance with the instructions; (2) drafting narrative 
descriptions of methodologies used to allocate expenses; (3) performing 
an internal review of the MLR report form prior to submission; (4) 
uploading and submitting the MLR report and attestation; and (5) 
correcting or providing explanations for any suspected errors or 
omissions discovered by CMS or our contractor during initial review of 
the submitted MLR report. We believe that the aggregate savings to MA 
organizations and Part D sponsors as a result of the proposed changes 
meaningfully reduce the burden of the MLR reporting requirements. The 
changes to the MLR reporting requirements in this final rule will not 
affect MLR reporting until MLR data for contract year 2018 is submitted 
in 2019. The desk reviews of MLR data submitted for contract years 2016 
and 2017 will not be affected by the changes to the reporting 
requirements.
    Comment: Several commenters objected to the proposal to reduce the 
amount of MLR data that MA organizations and Part D sponsors submit to 
CMS on an annual basis. Several commenters contended that we cannot 
conduct meaningful compliance oversight with the minimal amount of MLR 
data that we proposed to collect. Several commenters noted that it is 
important that we continue to have access to detailed data on spending 
for health care services and quality improvement activities by MA 
organizations and Part D sponsors. A few commenters argued that the 
lack of transparency into how an MLR is calculated will result in more 
``gaming'' of the MLR by MA organizations and Part D sponsors.
    Response: As noted earlier, we did not propose to change our 
authority under Sec. Sec.  422.2480 or 423.2480 to conduct selected 
audit reviews of the data reported under Sec. Sec.  422.2460 and 
423.2460, which includes the capability to request detailed data 
regarding the QIA expenditures included in the Medicare MLR, in order 
to determine that the MLR and remittance amounts were calculated and 
reported accurately, and that sanctions were appropriately applied. MA 
organizations and Part D sponsors will still be required to submit an 
attestation regarding the MLR data submitted, as they currently do. We 
believe that we can continue to effectively oversee MA organizations' 
and Part D sponsors' compliance with the MLR requirements by relying 
solely on audits. In addition, we note that MA organizations and Part D 
sponsors are required to submit and attest to the data that details 
their spending on enrollee health care services as part of their annual 
bids.
    Comment: A commenter indicated no objection to the proposed 
reduction in the amount of MLR data reported to CMS by MA organizations 
and Part D sponsors, but noted that, in order to monitor the financial 
performance of Medicare-Medicaid Plans, states would need to maintain 
their ability to specify and require detailed reporting of financial 
and MLR data through MIPAA contracting authority, Financial Alignment 
Initiatives, and other coordinated and integrated mechanisms.
    Response: We appreciate the commenter's interest in maintaining 
access to MLR data for Medicare-Medicaid Plans and other integrated 
care products. This final rule does not diminish states' existing 
authority to collect MLR data from such plans under state law, MIPAA 
contracting, or Medicaid managed care regulations, or terms of three-
way contracts for MMPs.
    Comment: A commenter recommended the mandatory retention period 
that applies to documents and records that support MAOs' and Part D 
sponsors' MLR calculations be shortened from 10 years to 3 years.
    Response: In their contracts with CMS, MA organizations and Part D 
sponsors agree to maintain for 10 years books, records, documents, and 
other records of accounting procedures and practices that are 
sufficient for CMS to conduct various reviews, audits, and inspections. 
Sec. Sec.  422.504(d) and 423.505(d). We are not persuaded that a 
shorter record retention period is appropriate for documents that 
support the MLR calculation.
    Comment: A commenter requested that we similarly reduce the amount 
of MLR data that is reported by commercial health insurance plans.
    Response: The MLR reporting requirements for commercial health 
insurance plans are outside the scope of this rule, but we will take 
these comments under advisement.
    Comment: A few commenters requested that we continue to develop and 
make available the reporting template as a tool to assist in 
calculating the MLR.
    Response: In section V.C.16 of the proposed rule (82 FR 56488), we 
explained that, if our proposed reduction in the amount of MLR data 
reported to CMS were to be finalized, we would reduce the amount we 
currently pay to contractors for software development, data management, 
and technical support related to MLR reporting. We intend to 
discontinue development of the more detailed MA and Part D reporting 
template after we collect the MLR reports for contract year 2017. We 
intend to continue to make available the prior years' more detailed MLR 
reporting templates (used in contract years 2014 through 2017) on the 
CMS website (CMS.gov) as well as in the Health Plan Management System 
(HPMS). Therefore, commenters can continue to utilize the prior years' 
more detailed MLR reporting templates to assist with their MLR 
calculations.
    Comment: A commenter requested that we provide instructions to aid 
MA organizations and Part D sponsors in the preparation of their 
simplified MLR data submissions, similar to the instructions that we 
provided to instruct MA organizations and Part D sponsors on how to 
complete the more detailed MLR reporting template.
    Response: As explained in the Supporting Statement accompanying the 
PRA listing for CMS Form Number CMS-10476 (published November 28, 
2017), respondents can continue to use the current instructions to 
familiarize themselves with the guidance specific to the calculation of 
the MLR, and we expect that the revised instructions (for contract year 
2018 and thereafter) will make minimal changes to address the 
simplified reporting requirements. We intend to make the revised MLR 
Data Submission Instructions available in subregulatory guidance for 
contract year 2018 MLR reporting. For more information, we refer 
readers to the Supporting Statement, which is available on the CMS 
website at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10476.html.
    After consideration of the public comments received, we are 
finalizing the changes to the MLR reporting requirements in Sec. Sec.  
422.2460 and 423.2460 as proposed.

[[Page 16676]]

e. Proposed Technical Changes to Medicare MLR Review and Non-Compliance 
and the Release of MLR Data (Sec. Sec.  422.2410, 422.2480, 422.2490, 
423.2410, 423.2480, and 423.2490)
    We proposed technical changes to the General Requirements, MLR 
review and non-compliance, and Release of MLR data provisions at 
Sec. Sec.  422.2410, 422.2480, 422.2490, 423.2410, 423.2480, and 
423.2490. The proposed technical changes bring these provisions into 
conformity with the more substantive regulatory text changes being 
proposed herein. The proposed technical changes do not establish any 
new rules or requirements for MA organizations or Part D sponsors. The 
proposed technical changes revise references to MLR reports to conform 
to our proposal to scale back Medicare MLR reporting so that we only 
require the submission of a limited number of data points, as opposed 
to a full report.
    We received no comments on these aspects of our proposal and 
therefore are finalizing the proposed technical changes to Sec. Sec.  
422.2410, 422.2480, 422.2490, 423.2410, 423.2480, and 423.2490 without 
modification.
2. Medicare Advantage Contract Provisions (Sec.  422.504)
    Under section 1857 of the Act, CMS enters into a contract with a 
Medicare Advantage (MA) organization, through which the organization 
agrees to comply with applicable requirements and standards. CMS has 
established and codified provisions of contracts between the MA 
organization and CMS at Sec.  422.504. We proposed to correct an 
inconsistency in the text that identifies the contract provisions 
deemed material to the performance of an MA contract.
    Section 422.504(a) states that compliance with paragraphs (1) 
through ((13)) is material to the performance of the MA contract; in 
addition, Sec.  422.504(a)(16) states that compliance with paragraphs 
(a)(1) through (a)(15) is material to the contract. Neither provision 
addresses paragraphs (a)(17) or (a)(18). These inconsistencies could 
cause confusion on the part of MA organizations and complicate CMS 
enforcement of the regulations.
    We proposed to correct the inconsistent language by revising the 
language in the introductory text in Sec.  422.504(a) and deleting 
paragraph Sec.  422.504(a)(16). With this revision, we proposed to 
renumber current paragraphs Sec. Sec.  422.504(a)(17) and (a)(18). The 
proposed revision to the paragraph (a) introductory text was to provide 
that compliance with all contract terms listed in paragraph (a) is 
material.
    We received no comments on this proposal and therefore are 
finalizing these changes to Sec.  422.504(a) as proposed without 
modification.
3. Late Contract Non-Renewal Notifications (Sec. Sec.  422.506, 
422.508, and 423.508)
    According to section 1857(c)(1) of the Act, CMS enters into 
contracts with MA organizations for a period of 1 year. As implemented 
by CMS for this provision, these contracts automatically renew absent 
notification by either CMS or the MA organization to terminate the 
contract at the end of the year. Section 1860D-12(b)(3)(B) of the Act 
makes this same process applicable to CMS contracts with Part D plan 
sponsors. CMS has implemented these provisions in regulations that 
permit MA organizations and Part D plan sponsors to non-renew their 
contracts, with CMS approval and consent necessary depending on the 
timeframe of the sponsoring organization's notice to CMS that a non-
renewal is desired. We proposed to clarify our operational policy that 
any request to terminate a contract after the first Monday in June is 
considered a request for termination by mutual consent.
    Under Sec.  422.506(a)(2)(i) and Sec.  423.507(a)(2)(i), contract 
non-renewals effective at the end of the one-year contract term must be 
submitted to CMS in writing by the first Monday in June. There may be 
instances where CMS accepts a late non-renewal notice after the first 
Monday in June for an MA contract if the non-renewal is consistent with 
the effective and efficient administration of the contract under Sec.  
422.506(a)(3). There is no corresponding regulatory provision affording 
CMS such discretion for Part D contracts (and we did not propose to add 
one).
    We have seen that many MA organizations do not understand that CMS 
treats non-renewals requested after the first Monday in June as an 
organization's request for a mutual termination pursuant to Sec.  
422.508 when determining whether it is in the best interest of the 
Medicare program to permit non-renewals in applying Sec.  
422.506(a)(3). Organizations that request a non-renewal of their 
contract after the first Monday in June must receive written 
confirmation from CMS of the termination by mutual consent pursuant to 
Sec.  422.508(a) (and Sec.  423.508(a) if an MA-PD plan) to be 
effectively relieved of their obligation to participate in the MA and, 
as applicable, Part D programs during the upcoming contract year. CMS 
has received a number of late non-renewal requests and has received 
questions from MA organizations inquiring why their request was not 
treated as a contract non-renewal, but rather as a termination by 
mutual consent.
    We proposed to modify Sec.  422.506(a)(3) to remove language that 
indicates late non-renewals may be permitted by CMS so that there will 
only be one process--mutual termination under Sec. Sec.  422.508--that 
is applicable if CMS or the organization is not taking action under 
Sec.  422.506(b) (Nonrenewal of contract) or Sec.  422.510 (Termination 
of contract by CMS). Also, we proposed to amend Sec. Sec.  
422.508(a)(3) and 423.508(a) to clarify that organizations that request 
to non-renew a contract after the first Monday in June are in effect 
requesting that CMS agree to mutually terminate their contract.
    We received the following comments, and our response follows:
    Comment: A commenter expressed support for our clarification that 
CMS considers MA organization non-renewal requests received after the 
first Monday in June as a request for mutual termination covered under 
Sec.  422.508. The commenter requested that CMS clarify any differences 
in the notification requirements and other processes for contracts that 
non-renew under Sec.  422.506 and contracts that mutually terminate 
under Sec.  422.508.
    Response: We appreciate the commenter's support for our proposal 
clarifying that CMS treats non-renewal requests received after the 
first Monday in June as a request to mutually terminate the contract. 
The provisions under Sec. Sec.  422.506(a)(2)(ii) and 422.508(a)(1) 
outline the notification requirements for contracts that non-renew and 
mutually terminate; CMS has provided guidance on these provisions in 
the Medicare Managed Care Manual, Chapter 11 and annual non-renewal and 
contract closeout guidance released in our Health Plan Management 
System.
    After considering this comment, we are finalizing our proposal to 
remove Sec.  422.506(a)(3) and to revise Sec. Sec.  422.508(a)(3) and 
423.508(a) without amendment.
4. Contract Request for a Hearing (Sec. Sec.  422.664(b) and 
423.652(b))
    Under the authority of section 1857(a) of the Act, CMS enters into 
contracts with MA organizations, which authorize them to offer MA plans 
to Medicare beneficiaries. Similarly, CMS contracts with Part D plan 
sponsors according to section 1860D-12(a) of the Act. CMS determines 
that an organization is qualified to hold an MA contract through the 
application process established at subpart K of 42 CFR part

[[Page 16677]]

422. CMS evaluates the qualifications of potential Part D plan sponsors 
according to subpart K of 42 CFR part 423. If CMS denies an 
application, organizations have the right to appeal CMS's decision 
under Sec. Sec.  422.502(c)(3)(iii) and 423.503(c)(3)(iii) using the 
procedures in subparts N of 42 CFR parts 422 and 423. We proposed to 
correct an inconsistency in the text that identifies CMS's deadline for 
rendering its determination on appeals of application denials.
    According to Sec. Sec.  422.660(c) and 423.650(c), CMS must issue a 
determination on appealed application denials by September 1 in order 
to enter into an MA contract for coverage starting January 1 of the 
following year. We codified this September 1 deadline in the April 15, 
2010, final rule (45 FR 19699). As stated in the 2009 proposed rule (74 
FR 54650 and 54651), we proposed to modify Sec. Sec.  422.660(c) and 
423.660(c), which then specified that the notice of any decision 
favorable to a Part C or D applicant must be issued by July 15 for the 
contract in question to be effective on January 1 of the following 
year. However, in that rulemaking, we inadvertently overlooked other 
regulatory provisions that address the date by which a favorable 
decision must be made on an appeal of a CMS determination that an 
entity is not qualified for a Part C or Part D contract. Section 
422.660(c) specifies that a notice of any decision favorable to the MA 
organization appealing a determination that it is not qualified to 
enter into a contract with CMS must be issued by September 1 for the 
contract to be effective on January 1. However, Sec.  422.664(b)(1) 
specifies that if a final decision is not reached by July 15, CMS will 
not enter into a contract with the applicant for the following year. 
Similarly, there is an inconsistency in regulations regarding the date 
by which a Part D sponsor must receive a CMS decision on an appeal. 
Section 423.650(c) specifies that a notice of any decision favorable to 
the MA organization appealing a determination that it is not qualified 
to enter into a contract with CMS must be issued by September 1 to be 
effective on January 1. However, Sec.  423.652(b)(1) specifies that if 
a final decision is not reached on CMS's determination for an initial 
contract by July 15, CMS will not enter into a contract with the 
applicant for the following year. We proposed to modify Sec. Sec.  
422.664(b)(1) and 423.652(b)(1) to align with the September 1 date 
codified in Sec. Sec.  422.660(c) and 423.650(c), which was codified on 
April 15, 2010.
    We received no comments on this proposal and therefore are 
finalizing the amendments to Sec. Sec.  422.664(b)(1) and 423.652(b)(1) 
without modification.
5. Physician Incentive Plans--Update Stop-Loss Protection Requirements 
(Sec.  422.208)
    Pursuant to section 1852(j)(4), MA organizations that operate 
physician incentive plans must meet certain requirements, which CMS has 
implemented in Sec.  422.208. MA organizations must assure that 
adequate and appropriate stop-loss insurance is provided to all 
physicians or physician groups that are at substantial financial risk 
under the MA organization's physician incentive plan (PIP). The current 
stop loss insurance deductible limits are identified in a table 
codified at Sec.  422.208(f)(2)(iii); that regulation was adopted in 
2000, and was based on a similar rule adopted for section 1876 risk 
plans pursuant to the similar physician incentive plan requirements 
under section 1876(i)(8). In recent years, CMS has received a number of 
requests to update the stop-loss insurance limits in Sec.  422.208 
associated with physician incentive plan (PIP) arrangements to better 
account for medical costs and utilization changes that have occurred 
since the final rule was published in the June 29, 2000, Federal 
Register (65 FR 40325).
    We proposed to change the existing regulation in three substantive 
ways:
     Update the stop-loss deductible limits at Sec.  
422.208(f)(2)(iii) and codify the methodology that CMS would use to 
update the stop-loss deductible limits in the future to account for 
changes in medical cost and utilization;
     Authorize, at paragraph Sec.  422.208(f)(3), MA 
organizations to use actuarially equivalent arrangements to protect 
against substantial financial loss under the PIP due to the risks 
associated with the large variety of potential risk arrangements.
     Modify paragraph 422.208(f)(2) to allow non-risk patient 
equivalents (NPEs), such as Medicare Fee-For-Service patients (FFS), 
who obtain some services from the physician or physician group to be 
included when determining the deductible.
    We received comments from 9 stakeholders regarding our proposal to 
update the physician incentive plan (PIP) rule. In this final rule we 
are finalizing the stop loss limits substantially as proposed but with 
modifications to adopt definitions and streamline the regulation text. 
The heart of our proposal--to adopt a methodology that can be applied 
to updated claims information in order to create tables that associate 
minimum attachment points for stop-loss coverage based on the panel 
size of the physician or physician groups that are at risk of 
substantial financial loss--is being finalized as proposed. Also, as we 
discuss below, we are considering future rulemaking to implement a more 
extensive update of the PIP regulation. Additionally, based on the 
comments we received on the proposed rule and our own review of the 
proposal, we are clarifying the methodology we proposed in determining 
when physicians and physician groups are at substantial financial risk 
and the resulting stop-loss insurance requirements. We are adopting 
limited changes to the regulation text (compared to the proposed 
regulation text) to clarify these changes and improve the readability 
of the text at Sec.  422.208; we are also adopting definitions for 
terms used in the final rule. This final rule also includes a 
correction to a typo in the Panel Size row 16,100, Net Benefit Premium 
column of the Combined Stop-Loss Insurance Deductible table (Table PIP-
11), which we discovered in our review for purposes of finalizing the 
proposed rule. As proposed, we will apply the methodology in the final 
regulation to provide sub-regulatory guidance (for example, in the 
annual CMS Call Letter) based on changes to medical costs and health 
care utilization patterns; these updates are anticipated to be in the 
form of a combined stop-loss insurance deductible table and a separate 
stop-loss insurance deductible table. As noted in the proposed rule, we 
believe this update to the regulation governing the stop loss insurance 
requirements is needed at this time given the changes in underlying 
medical costs since the tables were originally established. However, we 
are also aware that approaches to risk sharing have evolved since the 
physician incentive regulation was first established. Because of these 
health care contracting developments, we are considering more extensive 
changes to the physician incentive rule in the future. To that end, CMS 
will seek further dialogue with stakeholders on this topic to inform 
future rulemaking.
a. Determination of Substantial Financial Risk and Stop-Loss Insurance 
Requirements for Physicians and Physician Groups
    Under the current PIP regulation at Sec.  422.208, aggregate stop-
loss protection must cover 90 percent of the costs of referral services 
that exceed 25 percent of potential payments. Per patient stop-loss 
protection must cover 90 percent of the cost of referral services that 
exceed the per-patient deductible limit. The current stop-loss 
insurance deductible

[[Page 16678]]

limits are identified in a table codified at Sec.  422.208(f)(2)(iii). 
The current regulation contains a chart that identifies per-patient 
stop-loss deductible limits for single combined; separate 
institutional; and separate professional insurance. The current 
regulation establishes requirements for stop-loss attachment points 
(deductibles) based on the patient panel size. There is no requirement 
for stop-loss protection when the physician or physician group has a 
panel of risk patients of more than 25,000; we did not propose to 
change this requirement or the general rule that aggregate stop-loss 
protection must cover 90 percent of the costs of referral services that 
exceed 25 percent of potential payments. We noted in the proposed rule 
our belief that the general provisions in the current regulation--for 
example, the determination of substantial financial risk (see Sec.  
422.208(d)(2))--do not need to be updated. We did seek comment about 
whether the definitions of ``substantial financial risk'' and ``risk 
threshold'' contained in the current regulation should be revisited, 
including whether the current identification of 25 percent of potential 
payments codified in paragraph (d)(2) remains appropriate as the 
standard in light of changes in medical cost.
    We received the following comments and our responses follow:
    Comment: We received a question asking if a bonus based on both 
quality and utilization counts towards substantial financial risk.
    Response: The statute mandates protection for physicians and 
physician groups when risk of substantial financial loss is tied to 
referrals; therefore we must include incentives that are triggered by 
the level of referrals. This condition is not changed if quality is an 
additional trigger for the same referral based payment. However, we do 
exclude quality-only bonuses from determinations of substantial 
financial risk.
    Comment: We received two comments asking if bonus-only risk 
arrangements would be subject to the rule.
    Response: Bonus-only arrangements can tie part of physician 
compensation to reductions or limits in services and referrals. We 
interpret the statutory direction to include bonus-only risk 
arrangements in determining when a physician or physician group is at 
risk of substantial financial loss. Thus, an excessive bonus-only risk 
arrangement that exceeds the risk threshold and is payable due to a 
reduction in physician referrals for services, would be subject to the 
rule. This would be particularly true if the base payment before 
bonuses was a relatively low amount.
    Comment: Some commenters were concerned that the physician 
incentive rules could apply to payments made to physicians related to 
the quality of their care and patient satisfaction.
    Response: The Medicare statute at section 1852(j)(4) of the Social 
Security Act, which established the physician incentive regulation, 
requires that financial incentives related to referrals a physician 
makes are subject to the physician incentive rule. However, bonus 
payments or other payments to physicians for the quality of care 
furnished or patient satisfaction that are not tied to the referrals a 
physician makes are not subject to this rule.
    Comment: A commenter asked us to clarify the ``substantial 
financial risk'' test when an independent practice association (IPA), a 
management services organization (MSO), or any other type of 
intermediary negotiates with the MAO on behalf of physicians/physician 
groups.
    Response: The regulation provides that a physician/physician group 
is placed at substantial financial risk when the physician/physician 
group may lose (or fail to receive) 25% or more of potential payments 
as a result of use and cost of referral services. Payments based on 
other factors, such as quality of care furnished, are not considered in 
this determination. The substantial financial risk test is always 
focused on the potential payments to physicians/physician groups. The 
regulation provides, at paragraph (b), that it applies to an MA 
organization and any of its subcontracting arrangements that utilize a 
physician incentive plan in their payment arrangements with individual 
physicians or physician groups.
    If stop-loss protection is required, it is to be determined at 
either the physician/physician group level or the intermediary level as 
illustrated in the following cases.
    Case 1: In this case, the physicians/physician groups have an 
agreement with the intermediary for payments which are not influenced 
by the financial outcome of the intermediary. The intermediary does not 
share any additional payments with or reduce payments to the physician/
physician group based on use and costs of referral services. Withholds, 
bonuses, capitation, or any other similar arrangements are applied to 
payments only at the intermediary level and not to payments to those 
who provide health care services. If the physician/physician group will 
earn the same income regardless of their referral practices, there is 
no risk of substantial financial loss and stop-loss protection is not 
required by this regulation.
    Case 2: The intermediary shares additional payments based on use 
and costs of referral services with the contracted physicians/physician 
groups. The amount of the additional payment paid to each physician/
physician group is related to the referral services associated with 
that individual physician/physician group. In this case, the 
physicians/physician groups are at financial risk based on their 
referral patterns. The analysis must be performed at the physician/
physician group level to evaluate whether that risk is a substantial 
financial risk of 25% or more of potential payments for each physician/
physician group.
    Case 3: The intermediary shares additional payments based on use 
and costs of referral services with the contracted physicians/physician 
groups, but the amount of additional payments per physician/physician 
group are not related to the referral services of the individual 
physician/physician group. The additional payments are shared equally 
by all physicians/physician groups contracted with the intermediary 
based on the financial outcome of the intermediary. In this case, 
determination of substantial financial risk may be done at the 
intermediary level because the risk is evenly shared among all 
contracted physicians/physician groups. That is, the physicians/
physician groups may pool their membership to determine if they are at 
substantial financial risk.
    Case 4: The physicians/physician groups have an ownership stake in 
the intermediary. The intermediary shares additional payments based on 
use and costs of referral services with the contracted physicians/
physician groups. The amount of the additional payment paid to each 
physician/physician group is related to the referral services 
associated with that individual physician/physician group. In this 
case, the physicians/physician groups are at financial risk based on 
their referral patterns. The analysis must be performed at the 
physician/physician group level to evaluate whether that risk is a 
substantial financial risk of 25% or more of potential payments for 
each physician/physician group.
    Case 5: The physicians/physician groups have an ownership stake in 
the intermediary. The intermediary shares additional payments based on 
use and costs of referral services with the contracted physicians/
physician groups, but the amount of additional payments per physician/
physician group are not related the referral services of the individual 
physician/physician group.

[[Page 16679]]

The additional payments are shared equally by all physicians/physician 
groups contracted with the intermediary based on the financial outcome 
of the intermediary. In this case, determination of substantial 
financial risk may be done at the intermediary level because the risk 
is evenly shared among all contracted physicians/physician groups. That 
is, the physicians/physician groups may pool their membership to 
determine if they are at substantial financial risk.
    Comment: A few commenters asked if MA plans are required to pay for 
the stop loss coverage.
    Response: MA organizations are responsible for assuring that the 
coverage is in place. The regulation does not require MA organizations 
to pay for this coverage. Payment for the coverage may be negotiated 
between the MA organization and its network providers that participate 
in the physician incentive plan.
    Comment: We received one comment with regard to ensuring that MA 
plans have incentive programs that are open to all providers, including 
nurse practitioners, and not just physicians.
    Response: This comment is outside the scope of this regulation.
    We are not finalizing any changes to the definition of substantial 
financial risk or risk threshold.
b. Update Deductible Limits and Codify Methodology
    Our proposal to update the stop-loss deductible limits at Sec.  
422.208(f)(2)(iii) and codify the methodology that CMS would use to 
update the stop-loss deductible limits in the future was the most 
significant proposed change. We explained in the preamble that medical 
cost increases and changes in utilization that have occurred since 
adoption of the current rule raised concerns that the current 
regulation requires stop-loss insurance that is more conservative and 
more expensive than is necessary. The statute provides us with the 
authority to adopt standards identifying the adequate and appropriate 
amount of stop-loss coverage, taking into account patient panel size 
and other factors. In developing the new attachment points for the 
stop-loss protection required under the statute, we stated our belief 
that it is appropriate to furnish more flexibility for MA organizations 
and the physicians and physician groups that participate in PIPs to 
select between single combined stop-loss insurance and separate stop-
loss insurance for institutional services and professional services.
    We explained in the proposed rule the analysis we went through to 
develop tables that could be used to identify the specific deductibles 
for the required stop-loss protection. To develop the specific 
attachment points, we used a data-driven analysis using Medicare Part A 
and B claims data from 340,000 randomly selected beneficiaries. We 
believe that this sample size provided a statistically significant 
sample for purposes of the analysis. We assumed a multi-specialty 
practice, and estimated medical group income based on FFS claims, 
including payments for all Part A and B services. We used projections 
of net income based on services provided personally by individual 
physicians and directly by physician groups because that is how we have 
determined ``potential payments'' as defined in the existing 
regulation. We then used the central limit theorem to calculate the 
distribution of claim means for a multi-specialty group of any given 
panel size. This distribution was used to obtain, with 98 percent 
confidence, the point at which a multi-specialty group of a given panel 
size that engaged in a global capitation arrangement would, through 
referral services, lose more than 25 percent of its potential payments. 
We set that point--the threshold for loss of 25 percent of potential 
payments--as the single combined per patient deductible as illustrated 
in the Combined Stop-Loss Insurance Deductible Table (Table PIP-11), 
which was included in the preamble of the proposed rule. We performed 
an analysis for multiple panel sizes, which are also listed on Table 
PIP-11. We proposed to describe the methodology used for calculating 
Table PIP-11 in the regulation, at paragraphs (f)(2)(iii) and (iv), but 
did not propose to codify the table itself so that CMS could update the 
table in the future as necessary using the methodology and updated 
data. We proposed that the new rule (including the published Table PIP-
11) would apply for contract years beginning on or after January 1, 
2019 and until CMS published an update through the annual Call Letter 
or through other sub-regulatory guidance to MAOs.

         Table PIP-11--Combined Stop-Loss Insurance Deductibles
------------------------------------------------------------------------
                                                           Net benefit
             Panel size                Single combined    premium (NBP)
                                         deductible           PMPY
------------------------------------------------------------------------
400.................................            $5,000            $5,922
800.................................            10,000             4,891
1,400...............................            15,000             4,122
2,000...............................            20,000             3,514
3,300...............................            30,000             2,612
4,600...............................            40,000             1,984
5,800...............................            50,000             1,539
6,900...............................            60,000             1,216
7,900...............................            70,000               977
10,100..............................           100,000               553
12,300..............................           150,000               267
13,500..............................           200,000               159
14,800..............................           300,000                79
16,100..............................           500,000                28
16,800..............................         1,000,000                12
17,400-25,000.......................         2,000,000                 4
>25,000.............................      No Stop Loss                 0
------------------------------------------------------------------------

    We proposed at Sec.  422.208(f)(2)(iii)(A) that Table 1 be used to 
determine the maximum attachment point/maximum deductible for per-
patient-combined stop-loss insurance coverage that must be provided for 
90 percent of the costs

[[Page 16680]]

above the deductible or an actuarial equivalent deductible limit can be 
determined. The methodology for developing the table was described in 
proposed Sec.  422.208(f)(2)(iv). For panel sizes that fall between the 
table values, proposed Sec.  422.208(f)(2)(iii)(A) directed use of 
linear interpolation to identify the required deductible. In addition, 
our proposed Sec.  422.208(f)(2)(iii)(B) provided for use of Table 1 
when using non-risk patients equivalents in determining the panel size.
    In addition to the maximum deductible permitted for per-patient 
combined stop-loss protection, proposed Table 1 included a ``net 
benefit premium'' (NBP) column. We explained in the proposed rule how 
the NBP would be used to identify the attachment points for separate 
stop-loss insurance for institutional services and professional 
services when using the Separate Stop-Loss Insurance Deductibles Table 
(Table PIP-12). We explained how the NBP column would not be used when 
combined insurance was used to satisfy the stop-loss protection 
requirements in Sec.  422.208. The NBP is computed by dividing the 
total amount of stop-loss claims (90 percent of claims above the 
deductible) for that panel size by the panel size. We also explained 
how Table PIP-12 was calculated using a methodology similar to the 
calculation of Table PIP-11 and proposed to codify the methodology for 
developing Table PIP-12 in proposed Sec.  422.208(f)(2)(v) and (vi). 
Similar to our approach in Table PIP-11, we used Fee-For-Service 
Medicare Part A and Part B claims data to develop Table PIP-12. We 
estimated professional potential payments and institutional potential 
payments using the same data set as was used for populating Table PIP-
11. The central limit theorem was used to obtain the distribution of 
claim means, and deductibles were obtained at the 98 percent confidence 
level. The methodology and assumptions for Table PIP-12 were proposed 
to be codified in Sec.  422.208(f)(2)(vi) as the standards for 
developing and updating Table PIP-12 in the future as necessary.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR16AP18.013


[[Page 16682]]


[GRAPHIC] [TIFF OMITTED] TR16AP18.014

BILLING CODE 4120-01-C
    We also explained how our proposal would use Table PIP-12. The NBP 
would be identified from the third column of Table PIP-11, based on the

[[Page 16683]]

panel size for the applicable physician or physician group. Our 
proposal permitted use of linear interpolation for panel sizes that did 
not appear on Table PIP-11. The cell in Table PIP-12 with a numerical 
entry that is greater than or equal to the NBP would be selected; the 
associated combination of professional and institutional deductible 
levels for that NBP would be the maximum deductibles for the required 
stop-loss protection for each of those respective claims. The coverage 
identified using Table PIP-12 this way was proposed as the required 
stop-loss protection for separate per-patient coverage pursuant to 
proposed Sec.  422.208(f)(2). We proposed to codify the use of Table 
PIP-12 for deductibles for separate stop-loss insurance professional 
services and institutional services based on the NBP in paragraph 
(f)(2)(v).
    We solicited specific comments on the proposed regulation, as 
follows:
     Whether the methodology for developing Tables PIP-1 and 
PIP-2 as codified in proposed paragraphs (f)(2)(iv), (vi), and (vii) 
provided sufficient detail;
     Whether the proposed regulation text clearly identified 
how the tables should be used; and
     Whether we should finalize a specific schedule, such as 
annually or every 3 years, for updating the tables using the proposed 
methodologies, in order to ensure that the maximum deductibles are 
consistent with medical cost and utilization trends.
    We received the following comments and our responses follow:
    Comment: We received several comments in favor of CMS updating the 
deductible amounts.
    Response: We thank the commenters for the support. We are updating 
the deducible amounts and finalizing this regulation as proposed with 
clarifications and changes described in this final rule.
    Comment: Several commenters agreed with CMS that the stop loss 
tables should be regularly updated for cost and utilization. Some 
suggested a 2- to 3-year cycle.
    Response: We concur with this comment, will monitor cost and 
utilization every 2 to 3 years, and will implement future updates to 
the stop loss tables when CMS determines that changes in medical costs 
and changes in patterns of health care utilization justify an update.
    Comment: Some commenters stated that CMS should consider changes to 
the physician incentive plan rule to better reflect changes in the 
incentive arrangements that are currently being used. These commenters 
also asked that CMS consider a broad update to the rule and its 
underlying methodology and allow for greater stakeholder input. They 
also stated that the changes being proposed further complicate an 
already complicated regulation and add technical jargon.
    Response: CMS will seek further dialogue with stakeholders on this 
topic to inform future rulemaking. We are mindful of the need to 
minimize complexity and make our rules as transparent as possible. 
However, a degree of complication cannot be avoided in our attempt to 
add the flexibility needed to handle the many variations in risk 
sharing arrangements between MA plans and physicians. We replaced the 
term ``DGCP'' with the term ``risk patients,'' which we believe is 
clearer.
    Comment: A commenter requested that CMS add the following language 
to the regulation at Sec.  422.208(f)(2)(iii)(A) ``Stop-loss protection 
must cover 90 percent of costs of referral services above the 
deductible or an actuarial equivalent amount of the costs of referral 
services that exceed the per-patient deductible limit. The single 
combined deductible, for policies that pay 90 percent of costs of 
referral services above the deductible.''
    Response: We agree and have made this change to the regulation. We 
are finalizing paragraph (f)(2)(iii) with this statement. We are also 
finalizing the text to refer more consistently to ``the required stop-
loss protection'' to be clear that the protection described in this 
statement with the deductibles identified in the tables is required.
    Comment: Several commenters questioned CMS' interpretation of the 
definition of potential payments to physicians.
    Response: It is not our intention to change the definition of 
potential payments in the current regulation. Per the regulation, 
potential payments means the maximum payments possible to physicians or 
physician groups including payments for services they furnish directly, 
and additional payments based on use and costs of referral services 
such as withholds, bonuses, capitation or any other compensation to the 
physician or physician group. It does not include payments that ``pass 
through'' the physician or physician group to compensate other health 
care providers for referred services. In the development of Tables PIP-
11 and PIP-12, potential payments were derived from payments for Parts 
A and B services provided directly by the physician in the sample 
claims data. Our interpretation of potential payments is a reasonable 
approximation of what portion of the full global capitation amount can 
be expected to be earned by the physician or physician group including 
withholds and bonuses. We use this amount to trigger substantial 
financial risk in the determination of the maximum deductible in the 
Tables.
    Comment: Commenters requested that CMS to clarify how it defines 
``global capitation''.
    Response: We are finalizing a definition for the term ``Global 
capitation'' in Sec.  422.208(a) to avoid ambiguity. Global capitation 
means a specific type of ``capitation'' that includes both professional 
and institutional services. Services covered by global capitation may 
also include prescription drug benefits and supplemental benefits as 
well as basic benefits (as those terms are defined in Sec.  
422.100(c)). For purposes of Tables PIP-11 and PIP-12 global capitation 
includes all Parts A and B services except hospice. If the capitation 
for a physician group is different from all Parts A and B services 
except hospice, the group must use an actuarially equivalent amount of 
stop loss coverage.
    Comment: A commenter asked for more detail with respect to the 
description of the methodology including a detailed calculation for one 
of the cells in the table.
    Response: The methodology and calculation of the panel size for the 
Single Combined Deductible of $100,000 in the Combined Stop-Loss 
Insurance Deductible Table (Table PIP-11) is presented here and the 
parameters for the methodology for this table is finalized in paragraph 
(f)(2)(iv). Per the PIP regulation, if the physician incentive plan 
places a physician or physician group at substantial financial risk for 
services the physician or physician group does not furnish itself the 
MA organization must assure that the physician or physician group has 
stop loss protection. Substantial financial risk is defined to be 25 
percent of potential payments.
    We used the central limit theorem to determine the required panel 
size for each deductible level in Table PIP-11 and Table PIP-12. Our 
goal is to determine the number of individuals required for each 
deductible so that there is a 98 percent probability that actual 
referral claims net of deductible are less than the sum of expected 
referral claims net of deductible plus 25 percent of potential 
payments.
    We model the distribution of claim amounts using the following 
statistical formula and the Central Limit Theorem:
Aggregate referral claims for a group of n individuals

[[Page 16684]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.015

Where

Xi is the annual referral claim amount net of deductible paid by the 
physicians with mean ([micro]) and variance ([sigma]\2\) for an 
individual, calculated on a per capita basis. Xi is assumed to be 
independently and identically distributed for each individual. 
Statistics are calculated using a sample of 340,000 randomly 
selected beneficiaries from the Medicare Part A and B claims data 
excluding hospice,
[micro] is the population mean for physician paid referral claims 
net of the deductible,
[sigma] is the standard deviation for physician paid referral claims 
net of the deductible level.

    For this example, the standard deviation for an attachment point of 
$100,000 is $17,158, r is our estimate of potential payments which does 
not vary relative to the deductible and is calculated to be $1,400 
PMPY, n is the panel size, and N(n x [micro], n x [sigma]\2\) denotes 
the Normal distribution with mean, n x [micro], and variance, n x 
[sigma]\2\.
    Given the definitions and assumptions above, we solve for the 
following probability:

[GRAPHIC] [TIFF OMITTED] TR16AP18.023

Standardizing and solving for the Z value we attain the formula

(n[micro] + n0.25r - n[micro]) / ([sigma][radic]n) = Z0.98 = 
2.05 (Note that this is a one-tail test)
[GRAPHIC] [TIFF OMITTED] TR16AP18.019

    Therefore, the cell on the combined table with a deductible of 
$100,000 corresponds to at least 10,100 patients.
    The net premium is then calculated as 90% of the sum of the claims 
above $100,000, divided by the number of patients.
    Comment: We received a comment recommending that CMS consult with 
stop loss coverage experts in developing this regulation. We believe 
that this regulation, as finalized, is consistent with the applicable 
actuarial principles and practices.
    Response: Over the years, CMS has had numerous discussions with 
qualified actuaries regarding our method of determining stop-loss 
insurance requirements.
    After consideration of the comments, we are finalizing changes to 
the regulation text at Sec.  422.208(f)(2)(iii) through (vi) 
substantially as proposed. We are finalizing the five new definitions; 
the codification of the methodology CMS would use to update the stop-
loss deductible limits; and the requirements for using the tables to 
identify the stop-loss protection required when a multi-specialty 
physician practice in a global capitation arrangement is at risk for 
substantial financial loss; and regulation text reiterating that stop-
loss protection must cover at least 90 percent of the costs of referral 
services above the deductible or an actuarially equivalent amount of 
the costs of referral services that exceed the per-patient deductible 
limit. We are finalizing definitions for the terms ``Combined Stop-Loss 
Insurance Deductible Table (Table PIP-11)'' and the ``Separate Stop-
Loss Insurance Deductible Table (Table PIP-12)'' to refer to the tables 
developed using the methodologies codified at paragraphs (f)(2)(iv) and 
(vi). We are also finalizing definitions for the terms ``global 
capitation,'' ``net benefit premium,'' and ``non-risk patient 
equivalents'' as those terms are discussed above. Finally, we are also 
finalizing changes to the regulation compared to the proposal to better 
organize and clarify the requirements.
c. Actuarially Equivalent Arrangements
    We stated in the proposed rule that, over the past several years, 
MA organizations have requested that CMS update the tables as well as 
provide additional flexibilities around protection arrangements. We 
noted our belief that providing the flexibility to MA organizations to 
use actuarially equivalent arrangements is appropriate, as the nature 
of the PIP negotiated between the MA organization and physicians or 
physician groups might necessitate other arrangements to properly and 
adequately protect physicians from substantial financial risk. Examples 
we provided where actuarially equivalent modifications might be 
necessary included: Global capitation arrangements that include some, 
but not all Part A and B services; global capitation arrangements that 
include supplemental benefits and/or drug benefits; capitation 
arrangements that include only physician services; stop-loss policies 
with different coinsurances; stop-loss policies that use medical loss 
ratios (MLRs), which generally pay specific stop-loss amounts only to 
the extent that the overall aggregate MLR for the physician group 
exceeds a certain amount; stop-loss policies for exclusively primary 
care physicians; and risk arrangements on a quota share basis, which 
occurs when less than full capitation risk is transferred from a plan 
to a physician or physician group. We proposed to amend Sec.  422.208 
to provide, as a new paragraph (f)(3), that stop-loss protection would 
comply with the requirements so long as it were certified as 
actuarially equivalent to the coverage described in paragraph (2), 
meaning the coverage described in the tables developed using the 
methodology codified in paragraph (f)(2). We proposed that 
certification of the actuarially equivalent protection must be done by 
an actuary who meets the qualification standards established by the 
American Academy of Actuaries, follows the standards of the Actuarial 
Standards Board, develops the deductibles of the alternate coverage to 
be actuarially equivalent to the coverage in the tables, and makes the 
computations in accordance with generally accepted actuarial principles 
and practices.
    We received the following comments and our responses follow:
    Comment: We received many comments in favor of and two against 
allowing actuarial equivalent arrangements. Supporters welcome the 
flexibility for compliance with the PIP regulation. A commenter was 
concerned with added complexity and administrative burden, the other 
commenter pointed out a typographical error.
    Response: CMS is finalizing as proposed to allow actuarial 
equivalent arrangements. Given that the finalized tables address only 
multi-specialty provider groups selecting per-person stop-loss 
insurance, allowing actuarial equivalence is critical to meeting the 
requirements of this regulation. The typographical error referring to 
stop-loss protection for non-capitated

[[Page 16685]]

arrangements has been corrected in the final regulation text. We are 
finalizing Sec.  422.208(f)(3) as proposed to permit MA organizations 
to use other stop-loss protection arrangements so long as the following 
conditions are met: The deductibles for the alternate coverage are 
actuarially equivalent to the coverage described in paragraph (f)(2); 
the actuary makes the computations in accordance with generally 
accepted actuarial principles and practices; and the actuary is 
certified as meeting these requirements by actuaries who meet the 
qualification standards established by the American Academy of 
Actuaries and follow the practice standards established by the 
Actuarial Standards Board.
    After consideration of the comments, we are finalizing the 
regulation text in Sec.  422.208(f)(3) substantively as proposed with 
revisions to correct grammatical errors and to refer to the defined 
tables as appropriate.
d. Non-Risk Patient Equivalents Included in Panel Size
    We stated in the proposed rule that we believe the number of a 
physician's or physician group's non-risk patients should be taken into 
account when determining the stop-loss deductible(s) for risk 
arrangements. For example, a group with 50,000 non-risk patients and 
5,000 risk patients, needs less protection than a group with only 3,000 
non-risk patients and 5,000 risk patients. We proposed, at Sec.  
422.208(f)(2)(iii) and (v), to allow Non-risk patient equivalents 
(NPEs), such as Medicare FFS patients or commercial FFS patients, who 
obtain some services from the physician or physician group to be 
included in the panel size when determining the deductible. Under our 
proposal, NPEs are equal to the projected annual aggregate payments to 
a physician or physician group for non-global risk patients, both 
Medicare and non-Medicare, divided by an estimate of what the average 
capitation per member per year (PMPY) would be for all non-global risk 
patients. Both the numerator and denominator are for physician services 
that are rendered by the physician or physician group. We proposed that 
the deductible for the stop-loss insurance that is required under this 
regulation will be the lesser of: (1) The deductible for globally 
capitated patients plus $100,000; or (2) the deductible calculated for 
globally capitated patients plus NPEs. The deductible for these groups 
will be separately calculated using the tables and requirements in our 
proposed regulation at paragraphs (f)(2)(iii) and (v) and treating the 
two groups (globally capitated patients and globally capitated patients 
plus NPEs) separately as the panel size. We proposed the same 
flexibility for combined per-patient stop-loss insurance and the 
separate stop-loss insurances. We are finalizing this as proposed.
    We received the following comments and our responses follow:
    Comment: Several commenters asked CMS to clarify how non-risk 
patient equivalents (NPEs) are calculated and used.
    Response: NPEs are a measure of the number of non-risk patients, 
both Medicare and non-Medicare. To calculate NPEs, estimate the annual 
claims for physician rendered services for non-risk patients. Then 
estimate what a PMPY capitation for physician rendered services would 
be if non-risk patients were capitated for physician rendered services. 
The quotient is the number of NPEs. As noted above, we are finalizing a 
definition for the term to avoid ambiguity.
    For example, assume that the physician claims for non-risk patients 
is expected to be roughly $22 million. Assume that the average 
capitation for physician rendered services is $2,000. The number of 
NPEs would be $22 million divided by $2,000, which is 11,000 non-risk 
patient equivalents. This calculation provides a standard cost level 
for non-risk patients regardless of their utilization.
    To use, assume that the physician medical practice has 7,000 risk 
patients. One would first look up the deductible (or attachment point) 
for combined coverage using 7,000 patients. Then, look up the 
attachment point using 18,000 = (7,000 + 11,000) patients. The final 
attachment point is the lesser of the attachment point with 18,000 
patients, or $100,000 plus the attachment point with 7,000 patients. 
Therefore the NPEs can add a maximum of $100,000 to the combined 
attachment point.
    Comment: A commenter asked for clarification about how CMS, in its 
stop-loss methodology, determines what is a risk pool and how it 
affects the number of risk patients. Another commenter asked about the 
pooling level.
    Response: It is not our intent to alter the authority to pool 
patients provided in Sec.  422.208(g), which allows a physician or 
physician group to pool, under certain circumstances, the Medicare and 
Non-Medicare patients for whom they accept capitation risk to determine 
panel size. Stated differently, pooling allows at-risk commercial, at-
risk Medicare, and at-risk Medicaid patients to be considered in the 
determination of the panel size. With the amendment we are finalizing 
in Sec.  422.208(f)(2), we are authorizing the use of Non-risk Patient 
Equivalents (NPE) so that the panel size includes non-risk patients 
served by the physician or physician group. With regard to the level of 
pooling, if there is an intermediary involved, the pooling may be 
accomplished at the physician/physician group level or the intermediary 
level. See the response to the question regarding how the PIP 
regulation is applied when an intermediary is involved for guidance in 
section II.C.5.a of this final rule.
    Comment: Some commenters questioned how MA plans can satisfy their 
regulatory obligation given the situation in which physicians or 
physician groups will not share sufficient patient income information 
for the MA plan to determine NPE. Some suggested other measurements.
    Response: CMS will allow MA plan sponsors to accept attestations 
regarding the calculation of NPE from physicians or physician groups.
    Comment: A commenter recommended that CMS amend the regulation at 
(f) by adding a dollar sign when using the term DGCP + 100,000 so that 
it states DGCP + $100,000, and is therefore clear what unit is being 
applied. (See (f)(2)(iii)(B) and (f)(2)(v)(B).)
    Response: We agree and have made the change to the physician 
incentive regulation as proposed in the comment. We have also removed 
the reference to DGCP and replaced it with the phrase ``risk patients'' 
for continuity with the original regulation.
    We are finalizing amendments to Sec.  422.208 to permit use of the 
non-risk patient panel size in identifying the required stop-loss 
protection in paragraph (f)(2)(iii).
6. Changes to the Agent/Broker Compensation Requirements (Sec. Sec.  
422.2274 and 423.2274)
    Sections 103(b)(1)(B) and 103(b)(2) of the Medicare Improvements 
for Patients and Providers Act (MIPPA) revised section 1851(j)(2)(D) of 
the Act to charge the Secretary with establishing guidelines to 
``ensure that the use of compensation creates incentives for agents/
brokers to enroll individuals in the MA plan that is intended to best 
meet their health care needs.'' Section 103(b)(2) of MIPPA revised 
section 1860D-4(l)(2) of the Act to apply these same guidelines to Part 
D sponsors. CMS implemented these MIPPA-related changes in a May 23, 
2014 final rule (79 FR 29960). The 2014 final rule revised the 
provisions previously established in

[[Page 16686]]

the interim final rule (IFR) adopted on September 18, 2008 (73 FR 
54226).
    The IFR had established the previous compensation structure for 
agents/brokers as it applied to the MA and Part D programs. In 
particular, the IFR limited compensation for renewal enrollments to no 
greater than 50 percent of the rate paid for the initial enrollment on 
a 6-year cycle. This structure had proven to be complicated to 
implement and monitor, as it required the MA organization or Part D 
sponsor to track the compensation paid for every enrollee's initial 
enrollment and calculate the renewal rate based on that initial 
payment. To the extent that there was confusion about the required 
levels of compensation or the timing of compensation, it seemed that 
there was an uneven playing field for MA organizations and Part D 
sponsors operating in the same geographic area.
    In addition to the many inquiries from MA organizations and Part D 
sponsors regarding the correct calculation of agent/broker 
compensation, CMS found it necessary to take compliance actions against 
MA organizations and Part D sponsors for failure to comply with the 
compensation requirements. CMS's audit findings and monitoring efforts 
performed after implementation of the IFR showed that MA organizations 
and Part D sponsors were having difficulty correctly administering the 
compensation requirements.
    Also, we were concerned that the structure as it existed before the 
2014 revisions created an incentive for agents/brokers to move 
enrollees from a plan of one parent organization to a plan of another 
parent organization, even for like plan-type changes. That compensation 
structure resulted in different payments when a beneficiary moved from 
one plan to another like plan in a different organization. In such 
situations, the new parent organization would pay the agent 50 percent 
of the current initial rate of the new parent organization, not 50 
percent of the initial rate paid by the prior parent organization. 
Thus, in cases where the fair market value (FMV) for compensation had 
increased, or the other parent organization paid a higher commission, 
an incentive existed for the agent to move beneficiaries from one 
parent organization to another, rather than supporting the 
beneficiary's continued enrollment in the prior parent organization.
    In a 2014 proposed rule (79 FR 1918), we proposed to simplify 
agent/broker compensation rules to help ensure that plan payments were 
correct and establish a level playing field that further limited the 
incentive for agents/brokers to move enrollees for financial gain 
rather than for the beneficiary's best interest. In the final rule 
published on May 23, 2014, we codified technical changes to the 
language established by the IFR relating to agent/broker compensation, 
choosing instead to link payment rates for renewal enrollments to 
current FMV rates rather than the rate paid for the original (that is, 
initial) enrollment. These changes also effectively removed the 6-year 
cycle from the payment structure. We codified these changes in 
Sec. Sec.  422.2274(a), (b), and (h) for MA organizations and 
Sec. Sec.  423.2274(a), (b), and (h) for Part D sponsors.
    At that time, we should have also proposed to remove the language 
at Sec. Sec.  422.2274(b)(2)(i), 422.2274(b)(2)(ii), 423.2274(b)(2)(i), 
and 423.2274(b)(2)(ii), but we failed to do so. This language is no 
longer relevant, as the current compensation structure is not based on 
the initial payment, but having the language in the regulations has 
created confusion with plans and brokers.
    We proposed to make a technical correction to the existing 
regulatory language at Sec. Sec.  422.2274(b) and 423.2274(b). We 
proposed to remove the language at Sec. Sec.  422.2274(b)(2)(i), 
422.2274(b)(2)(ii), 423.2274(b)(2)(i), and 423.2274(b)(2)(ii). 
Additionally, we proposed to renumber the existing provisions under 
Sec. Sec.  422.2274(b) and 423.2274(b) for clarity.
    Although not summarized in the preamble of the proposed rule, we 
also proposed to correct the language in the newly redesignated Sec.  
423.2274(b)(2)(iii). The current regulation text reads, ``When a 
beneficiary disenrolls from an MA plan. . . .'' Because the reference 
is within the Part D regulations (section 423), the regulation should 
refer to Part D sponsors. We proposed regulation text to correct the 
text so that the reference to ``an MA plan'' instead refers to ``a Part 
D sponsor.'' (82 FR 56526)
    We received the following comments, and our response follows:
    Comment: A few commenters indicated support for the proposed change 
citing decreased burden on plans and requested that we adopt the change 
as proposed.
    Response: We appreciate the support for this provision.
    Comment: A commenter indicated support for the provision but also 
requested that CMS investigate current compensation and administrative 
fees charged by field marketing organizations (FMO) for exchanges.
    Response: We appreciate the support for the provision. The request 
to investigate the compensation and administrative fees of exchange 
FMOs is outside the scope of this regulation but we will take it under 
consideration.
    All of the comments we received were generally supportive, and 
therefore we are finalizing the proposal to redesignate paragraphs 
(b)(1)(iii) as (b)(1)(iv); redesignate paragraphs (b)(2)(iii) as 
(b)(1)(iii); remove paragraphs (b)(2)(i) and (ii); and redesignate 
paragraphs (b)(3) as paragraphs (b)(2) in Sec. Sec.  422.2274 and 
423.2274, without modification. In addition, we are finalizing the 
technical correction to newly redesignated paragraph Sec.  
423.2274(b)(2)(iii) to replace the reference to an MA plan with a 
reference to a Part D sponsor.
7. Changes to the Agent/Broker Requirements (Sec. Sec.  422.2272(e) and 
423.2272(e))
    Section 1851(h)(7) of the Act directs CMS to act in collaboration 
with the states to address fraudulent or inappropriate marketing 
practices. In particular, section 1851(h)(7)(A)(i) of the Act requires 
that MA organizations only use agents/brokers who have been licensed 
under state law to sell MA plans offered by those organizations. 
Section 1860D-4(l)(4) of the Act references the requirements in section 
1851(h)(7) of the Act and applies them to Part D sponsors. We have 
codified the requirement in Sec. Sec.  422.2272(c) and 423.2272(c).
    In the April 15, 2011, final rule (76 FR 21503 and 21504), we 
codified a provision in Sec. Sec.  422.2272(e) and 423.2272(e) that 
required MA organizations and Part D sponsors to terminate any employed 
agent/broker who became unlicensed. The provision also required MA 
organizations and Part D sponsors to notify any beneficiaries enrolled 
by the unqualified agent/broker of that agent/broker's status. Finally, 
the provision specified that the MA organization or Part D sponsor must 
comply with any request from the beneficiary regarding the 
beneficiary's options to confirm enrollment or make a plan change if 
the beneficiary requests such upon notification of the agent/broker's 
status.
    As discussed in the proposed rule, we have become aware since 
implementation of the provision in Sec. Sec.  422.2272(e) and 
423.2272(e) that the regulation does not allow latitude for punitive 
action by the sponsoring organization in situations when a license 
lapses. The MA organization or Part D sponsor may terminate the agent/
broker and immediately rehire the individual thereafter if licensure 
has been already reinstated or prohibit the agent/broker from ever 
selling the MA organization's or Part D sponsor's

[[Page 16687]]

products again. Discussions with the industry indicate that these two 
options are impractical due to their narrow limits. We believe agents/
brokers play a significant role in providing guidance to beneficiaries 
and are in a unique position to positively influence beneficiary 
choice. However, the statute directs CMS to require MA organizations 
and Part D sponsors to only use agents/brokers who are licensed under 
state law. We do not intend to change the regulation, at Sec. Sec.  
422.2272(c) and 423.2272(c), that requires agent/broker licensure as a 
condition of being hired by a plan, and will continue to review the 
licensure status of agents/brokers during those monitoring activities 
that focus on MA organizations' and Part D sponsors' marketing 
activities. CMS believes MA organizations and Part D sponsors should 
determine the level of disciplinary action to take against agents/
brokers who fail to maintain their license and have sold MA/Part D 
products while unlicensed, so long as the MA organization or Part D 
plan complies with the remaining statutory and regulatory requirements.
    We proposed to delete Sec. Sec.  422.2272(e) and 423.2272(e), the 
provisions that limit what MA organizations and Part D sponsors can do 
upon discovery that a previously licensed agent/broker has become 
unlicensed. Nonetheless, CMS may pursue compliance actions upon 
discovery of MA organizations and Part D sponsors who allow unlicensed 
agents/brokers to continue selling their products in violation of 
Sec. Sec.  422.2272(c) and 423.2272(c).
    Note that deleting paragraph (e) from Sec. Sec.  422.2272 and 
423.2272 removes language describing the opportunity beneficiaries have 
to select a different MA or Part D plan when the broker who enrolled 
them was unlicensed at the time the beneficiaries enrolled. Removing 
paragraph (e) from Sec. Sec.  422.2272 and 423.2272 does not eliminate 
the special enrollment period (SEP) that enrollees receive when it is 
later discovered that their agent/broker was not licensed at the time 
of the enrollment as that SEP exists under the authority of Sec.  
422.62(b)(4).
    We received the following comments, and our response follows:
    Comment: We received ten comments supporting the change as 
proposed.
    Response: We appreciate the support from industry of this proposed 
change.
    Upon consideration of the comments, we are finalizing the removal 
of paragraphs (e) from Sec. Sec.  422.2272 and 423.2272 as proposed.
8. Codification of Certain Medicare Premium Adjustments as Initial 
Determinations (Sec.  405.924)
    Current regulations at Sec.  405.924(a) set forth Social Security 
Administration (SSA) actions that constitute initial determinations 
under section 1869(a)(1) of the Act. These actions at Sec.  405.924(a) 
include determinations with respect to entitlement to Medicare hospital 
(Part A) or supplementary medical insurance (Part B); disallowance of 
an application for entitlement; a denial of a request for withdrawal of 
an application for Medicare Part A or Part B, or denial of a request 
for cancellation of a request for withdrawal; and a determination as to 
whether an individual, previously determined as entitled to Part A or 
Part B, is no longer entitled to these benefits, including a 
determination based on nonpayment of premiums.
    In addition to the actions set forth at Sec.  405.924(a), SSA, the 
Office of Medicare Hearings and Appeals (OMHA), and the Departmental 
Appeals Board (DAB) also treat certain Medicare premium adjustments as 
initial determinations under section 1869(a)(1) of the Act. These 
Medicare premium adjustments include Medicare Part A and Part B late 
enrollment and reenrollment premium increases made in accordance with 
sections 1818 and 1839(b) of the Act, Sec. Sec.  406.32(d), 408.20(e), 
and 408.22 of this chapter, and 20 CFR 418.1301. Due to the effect that 
these premium adjustments have on individuals' entitlement to Medicare 
benefits, they constitute initial determinations under section 
1869(a)(1) of the Act.
    Accordingly, we proposed to add a new paragraph (5) to Sec.  
405.924(a) to clarify that these premium adjustments, made in 
accordance with sections 1818 and 1839(b) of the Act, Sec. Sec.  
406.32(d) and 408.22 of this chapter, and 20 CFR 418.1301, constitute 
initial determinations under section 1869(a)(1) of the Act. Because 
this proposed change seeks only to codify existing processes related to 
premium adjustments, and not to alter existing processes or procedures, 
it applies only to Part A and Part B late enrollment and reenrollment 
penalties.
    We received the following comments and our response follows:
    Comment: A few commenters stated that they believed this proposal 
would only minimally impact plans.
    Response: We agree that this change to Sec.  405.924(a) will 
minimally impact plans since these premium adjustments are already 
considered initial determinations.
    After consideration of the public comments, we are finalizing the 
change to Sec.  405.924(a) as proposed.
9. Eliminate Use of the Term ``Nonrenewal'' to Refer to a CMS-Initiated 
Termination (Sec. Sec.  422.506, 422.510, 423.507 and 423.509)
    Section 1857(c)(2) of the Act provides the bases upon which CMS may 
make a decision to terminate a contract with an MA organization. Under 
section 1860D 12(b)(3) of the Act, these same bases are available for a 
CMS termination of a Part D sponsor contract, as section 1860D-12(b)(3) 
of the Act incorporates into the Part D program the Part C bases by 
reference to section 1857(c)(2). Also, sections 1857(h) and 1860D-
12(b)(3)(F) of the Act provide the procedures CMS must follow in 
carrying out MA organization or Part D sponsor contract terminations.
    Although the Act only expressly refers to terminations, through 
rulemaking and subregulatory guidance, we have created two different 
processes relating to severing the contractual agreement between CMS 
and an MA organization or Part D sponsor. In accordance with sections 
1857(h) and 1860D-12(b)(3)(F) of the Act, we have adopted regulations 
providing for distinct bases and procedures for contract termination 
versus those for nonrenewal of contracts. Our regulations at Sec. Sec.  
422.506 and 422.510 provide for the nonrenewal and termination, 
respectively, of CMS contracts with MA organizations. The Part D 
regulations provide for similar procedures with respect to Part D 
sponsor contracts at Sec. Sec.  423.507 and 423.509.
    Each nonrenewal provision is divided into two parts, one governing 
nonrenewals initiated by a sponsoring organization and another 
governing nonrenewals initiated by CMS. Two features of the nonrenewal 
provisions have created multiple meanings for the term ``nonrenewal'' 
in the operation of the Part C and D programs, contributing, in some 
instances, to confusion within CMS and among contracting organizations 
surrounding the use of the term. The first feature is the difference 
between nonrenewals initiated by sponsoring organizations and those 
initiated by CMS with respect to the need to establish cause for such 
an action. The second is the partial overlap between CMS' termination 
authority and nonrenewal authority. We proposed to revise our use of 
terminology such that that the term ``nonrenewal'' only refers to 
timely elections by contracting organizations to discontinue their 
contracts at the end of a given year. We

[[Page 16688]]

proposed to remove the CMS initiated nonrenewal authority codified at 
paragraph (b) from both Sec. Sec.  422.506 and 423.507 and modify the 
existing CMS-initiated termination authority at Sec. Sec.  422.510 and 
423.509 to reflect this change.
    MA organizations and Part D plan sponsors may elect to end the 
automatic renewal provision in Part C or Part D contracts and 
discontinue those contracts with CMS without cause, simply by providing 
notice in the manner and within the timeframes stated at Sec.  
422.506(a) and Sec.  423.507(a). Thus, organizations are free to make a 
business decision to end their Medicare contract at the end of a given 
year and need not provide CMS with a rationale for their decision. By 
contrast, CMS may not end an MA organization or Part D plan sponsor's 
contract through nonrenewal without establishing that the contracting 
organization's performance has met the criteria for at least one of the 
stated bases for a CMS initiated contract nonrenewal in paragraphs (b) 
of those sections.
    Contracting organizations often respond to changes in the Medicare 
markets or changes in their own business objectives by making decisions 
to end or modify their participation in the Part C and D programs. 
Thus, these organizations exercise their nonrenewal rights under Sec.  
422.506(a) and Sec.  423.507(a) much more frequently than CMS conducts 
contract nonrenewals under Sec.  422.506(b) and Sec.  423.507(b). As a 
result, within CMS and among industry stakeholders, the term 
``nonrenewal'' has effectively come to refer almost exclusively to MA 
organization and Part D plan sponsor initiated contract non renewals.
    The termination authority allows us to provide notice of such an 
action at any time and make it effective at least 30 days after 
providing such notice to the contracting organization. By contrast, CMS 
may issue a nonrenewal notice of a contract no later than August 1, and 
the nonrenewal takes effect at the end of the current contract year. 
Yet, the result of both actions taken by CMS is the discontinuation, 
for cause (although the basis of that cause might be different), of an 
MA or Part D contract.
    The similarities between CMS-initiated nonrenewal and termination 
are demonstrated by the extensive but not complete overlap in bases for 
CMS action under both processes. For example, both authorities 
incorporate by reference the bases for CMS initiated terminations 
stated in Sec.  422.510 and Sec.  423.509. The remaining CMS-initiated 
nonrenewal bases (any of the bases that support the imposition of 
intermediate sanctions or civil money penalties (Sec. Sec.  
422.506(b)(iii) and Sec.  423.507(b)(1)(ii)), low enrollment in an 
individual MA plan or PDP (Sec. Sec.  422.506(b)(iv) and 
423.507(b)(1)(iii)), or failure to fully implement or make significant 
progress on quality improvement projects (Sec.  422.506(b)(i))) were 
all promulgated in accordance with our statutory termination authority 
at sections 1857(c)(2) and 1860D-12(b)(3) of the Act. Further, all more 
specific examples of an organization's substantial failure to carry out 
the terms of its MA or Part D contract or its carrying out the contract 
in an inefficient or ineffective manner. Therefore, we proposed 
striking these provisions from the nonrenewal portion of the regulation 
and adding them to the list of bases for CMS-initiated contract 
terminations in Sec. Sec.  422.510 and 423.509.
    Finally, there are aspects of the notice requirements related to 
the CMS-initiated nonrenewal authority that are useful in the 
administration of the Part C and D programs and which we proposed 
preserving in the revised termination provision. Specifically, Sec.  
422.506(b)(2)(ii) requires notice to be provided by mail to a 
contracting organization's enrollees at least 90 days prior to the 
effective date of the nonrenewal, while Sec.  422.510(b)(1)(ii) 
requires affected plan enrollees to be notified within 30 days of the 
effective date of the termination. We see a continuing benefit to the 
administration of the Part C and D programs in retaining the authority 
to ensure that, when possible, enrollees can be made aware of their 
plan's discontinuation at least by October 1 of a given year so that 
they can make the necessary plan choice during the annual election 
period. Therefore, we proposed adding provisions at Sec. Sec.  
422.510(b)(2)(v) and 423.509(b)(2)(v) to require that enrollees receive 
notice no later than 90 days prior to the December 31 effective date of 
a contract termination when we make such determination on or before 
August 1 of the same year.
    We received the following comments and our response follows:
    Comment: CMS received only a few comments on this proposal, all 
expressing general support. The commenters expressed particular 
appreciation for our proposal to preserve the requirement that affected 
beneficiaries receive notice of a CMS-initiated termination at least 90 
days prior to the December 31 effective date when CMS makes such a 
determination on or before August 1. The commenters noted that the 90-
day notice deadline enables affected beneficiaries to make a needed 
plan election during the annual coordinated election period.
    Response: CMS appreciates the expressions of support for the 
proposal. We note that in the event of a CMS-initiated contract 
termination, the contracting organization has administrative appeal 
rights that, if exercised, could prevent affected beneficiaries from 
receiving plan termination notices during the annual coordinated 
election period. When CMS terminates an MA organization or Part D plan 
sponsor contract under Sec. Sec.  422.510 or 423.509, the organization 
may request a review of the decision by a hearing officer under 
Sec. Sec.  422.660 and 423.650. Generally, a request for a hearing 
generally postpones the effective date of the termination (except, for 
example, in instances such as financial insolvency or imminent threats 
to beneficiary health and safety), meaning that beneficiary notices 
would be delayed until after the completion of the hearing process. So, 
while we intended to establish beneficiary notification deadlines that 
align with the annual coordinated plan election period, we recognize 
that in some instances, the exercise of administrative appeal rights by 
terminated organizations may prevent that outcome for beneficiaries.
    Comment: Some commenters asked CMS to clarify whether the proposed 
change would prohibit MAOs from expanding or marketing other plans in 
the service area in which one of its plans was terminated or non-
renewed.
    Response: The proposal would make no changes to rules that govern 
an MA organization's or Part D plan sponsor's ability to offer or 
market other plans in the same service area affected by the CMS-
initiated termination. CMS' decision to terminate an organization's MA 
or Part D contract would have no impact on the status of any other type 
of MA or Part D contract the organization may operate in the same 
service area as the terminated contract. A CMS-initiated termination 
may affect the contacting organization's ability to qualify for a new 
or expanded contract covering the same service area as the terminated 
contract. Under Sec. Sec.  422.502(b)(3) and 423.503(b)(3), CMS may 
deny applications from organizations for which CMS has terminated a 
contract within the 38 months preceding the contract qualification 
application deadline. Our proposal does nothing to change that 
authority. As is currently the case, CMS' application of this authority 
depends on the facts associated with each case, including the type of 
contract (for example, MA coordinated care plan, MA private fee-for-
service) and the

[[Page 16689]]

service areas associated with the terminated contract and the new 
application.
    Comment: Some commenters asked CMS to clarify how the proposed 
change would affect the plan information displayed on Medicare.gov.
    Response: CMS proposed eliminating the category of CMS-initiated 
nonrenewals primarily to reduce confusion among sponsoring 
organizations and different CMS staff concerning the authority under 
which CMS or a contracting organization may end a Medicare contract and 
the instructions that apply to each process (for example, timing of 
contract decision, beneficiary notice requirements). In implementing a 
termination or nonrenewal, it is critical for the party taking the step 
to end the contract to be clearly identified so that the end of the 
contract can be properly implemented. Generally, enrollees need only 
know when their plan will no longer be available, not the party 
responsible for the decision to discontinue the plan. Therefore, we do 
not expect the proposed regulatory change to have an impact on how and 
what plan information is displayed on Medicare.gov, since it is a tool 
designed for use primarily by beneficiaries. Nevertheless, CMS will 
keep this proposed change in mind when considering any updates to the 
Medicare.gov website.
    Based on our consideration of the comments and the expressions of 
support for this primarily technical change to the regulations 
governing the MA and Part D contract termination processes, we are 
finalizing the amendments to Sec. Sec.  422.506(b), 422.510(a), 
422.510(b), 423.507(b), 423.509(a) and 423.509(b) as proposed with two 
minor modifications to Sec. Sec.  422.510(b) and 423.509(b). In 
reviewing the proposed regulation text, we found that the provisions 
directing organizations with contracts terminated prior to August 1 to 
issue beneficiary notices at least 90 days prior to the end of the 
current contract year should have been added to Sec. Sec.  
422.510(b)(1) and 423.509(b)(1), which govern ordinary terminations, 
not Sec. Sec.  422.510(b)(2) and 423.509(b)(2), which govern immediate 
contract terminations. Therefore, we have deleted the references in the 
regulation text to Sec. Sec.  422.510(b)(2)(v) and 423.509(b)(2)(v) and 
placed the relevant language at Sec. Sec.  422.510(b)(1)(iv) and 
423.509(b)(1)(v).
    We also identified a grammatical error in the proposed Sec.  
422.510(b)(2) and an inconsistency with the language of Sec.  
423.509(b)(2)(v) which we are correcting in the finalized text. As a 
result we are making the necessary grammatical correction in the new 
Sec.  422.510(b)(1)(iv) and making it consistent with Sec.  
423.510(b)(1)(v).

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), 
we are required to provide 60-day notice in the Federal Register and 
solicit public comment before a collection of information requirement 
is submitted to the Office of Management and Budget (OMB) for review 
and approval. In order to fairly evaluate whether an information 
collection should be approved by OMB, section 3506(c)(2)(A) of the 
Paperwork Reduction Act of 1995 (PRA) 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.
    In the November 28, 2017 (82 FR 56336) proposed rule, we solicited 
public comment on each of these issues for the following sections of 
the rule containing information collection requirements (ICRs). We 
received comments and we provide a summary of the comments and our 
responses under the respective ICR section.

A. Wage Data

    While we did not receive comments related to any of the private 
sector or individual occupations or wage estimates, we are revising our 
wage estimates for individuals. To derive average costs for individual 
respondents, the proposed rule used the federal minimum wage of $7.27/
hour as set out under the Fair Labor Standards Act (29 U.S.C. 206(a)). 
Based on internal review, we are now adopting a rate of $23.86/hour 
from the U.S. Bureau of Labor Statistics (BLS).
1. Private Sector Wages
    To derive average costs, we used data from BLS' May 2016 National 
Occupational Employment and Wage Estimates for all salary estimates 
(http://www.bls.gov/oes/current/oes_nat.htm). In this regard, Table F1 
presents the mean hourly wage, the cost of fringe benefits and overhead 
(calculated at 100 percent of salary), and the adjusted hourly wage.

                          Table 13--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                    Occupation      Mean hourly    benefits and      Adjusted
              BLS occupation title                     code         wage ($/hr)    overhead ($/   hourly wage ($/
                                                                                        hr)             hr)
----------------------------------------------------------------------------------------------------------------
Business Operations Specialist..................         13-1000          $34.54          $34.54          $69.08
Compliance Officers.............................         13-1041           33.77           33.77           67.54
Computer and Information Systems Managers.......         11-3021           70.07           70.07          140.14
Computer Programmer.............................         15-1131           40.95           40.95           81.90
Health Diagnostic and Treating Practitioners....         29-1199           40.77           40.77           81.54
Insurance Claim and Policy Processing Clerk.....         43-9041           19.61           19.61           39.22
Lawyers.........................................         23-1011           67.25           67.25          134.50
Medical and Health Service Manager..............         11-9111           52.58           52.58          105.16
Medical Secretary...............................         43-6013           16.85           16.85           33.70
Office and Administrative Support Workers, All           43-9199           17.33           17.33           34.66
 Other..........................................
Physicians and Surgeons.........................         29-1060          101.04          101.04          202.08
Physicians and Surgeons, all other..............         29-1069           98.83           98.83          197.66
Software Developers and Programmers.............         15-1130           48.11           48.11           96.22
Word Processors and Typists.....................         43-9022           19.22           19.22           38.44
----------------------------------------------------------------------------------------------------------------


[[Page 16690]]

    As indicated, we are adjusting our employee hourly wage estimates 
by a factor of 100 percent. This is necessarily a rough adjustment, 
both because fringe benefits and overhead costs vary significantly from 
employer to employer, and because methods of estimating these costs 
vary widely from study to study. Nonetheless, there is no practical 
alternative and we believe that doubling the hourly wage to estimate 
total cost is a reasonably accurate estimation method.
2. Wages for Individuals
    To derive average costs for individuals, we used data from the May 
2016 National Occupational Employment and Wage Estimates for our salary 
estimate. We believe that the burden will be addressed under All 
Occupations (occupation code 00-0000) at $23.86/hour since the group of 
individual respondents varies widely from working and nonworking 
individuals and by respondent age, location, years of employment, and 
educational attainment, etc.
    Unlike our private sector adjustment to the respondent hourly wage, 
we are not adjusting this figure for fringe benefits and overhead since 
the individuals' activities would occur outside the scope of their 
employment.

B. Information Collection Requirements (ICRs)

1. ICRs Regarding the Implementation of the Comprehensive Addiction and 
Recovery Act of 2016 (CARA) Provisions (Sec.  423.153(f))
    Excluding beneficiary appeals, the following requirements and 
burden will be submitted to OMB for approval under control number 0938-
0964 (CMS-10141). We did not receive any public comments pertaining to 
our proposed burden estimates, therefore we are finalizing them as 
proposed.
    As discussed in section II.A. of this rule, Sec.  423.153(f) 
implements provisions of section 704 of CARA which allows Part D plan 
sponsors to establish a drug management program that includes ``lock-
in'' as a tool to manage an at-risk beneficiary's access to coverage of 
frequently abused drugs. The rule stipulates that Part D plan sponsors 
are required to notify at-risk beneficiaries about their plan's drug 
management program. Part D plan sponsors are already expected to send a 
notice to some beneficiaries when the sponsor decides to implement a 
beneficiary-specific POS claim edit for opioids (currently approved 
under OMB control number 0938-0964 (CMS-10141). However, the approval 
only accounts for the notice that is currently sent to beneficiaries 
who have a POS edit put in place to monitor opioid access (which will 
count as the initial notice described in the preamble of this final 
rule and defined in Sec.  423.153(f)(4)) and does not capture the 
second notice that at-risk beneficiaries will receive confirming their 
determination as such or the alternate second notice that potentially 
at-risk beneficiaries will receive to inform them that they were not 
determined to be at risk.
    Since 2013, there have been 4,617 POS edits submitted into MARx by 
plan sponsors for 3,961 unique beneficiaries as a result of the drug 
utilization review policy. Given that there has not been a steady 
increase or decrease in edits, we are using an average of 923 edits per 
year (4,617 POS edits/5 years) to assess the burden under Sec.  
423.153(f). If we assume that the number of edits or access to coverage 
limitations will likely double due to the addition of pharmacy and 
prescriber ``lock-in'' to OMS by this rulemaking, to approximately 
1,846 such limitations, we then estimate a total of 3,693 initial and 
second notices (1,846 limitations x 2) corresponding to such edits/
limitations. We estimate it will take an average of 5 minutes (0.083 
hours) at $39.22/hour for an insurance claim and policy processing 
clerk to prepare each notice. We estimate an annual burden of 307 hours 
(3,693 notices x 0.083 hour) at a cost of $12,040.54 (307 hours x 
$39.22/hour) or $3.26 per notice ($12,040.54/3,693 notices).
    Part D plan sponsors are required to upload these new notice 
templates into their internal claims systems. We estimate that 219 Part 
D plan sponsors (31 PDP parent organizations and 188 MA-PD parent 
organizations, based on plan year 2017 plan participation) will be 
subject to this requirement. We estimate that it will take on average 5 
hours at $81.90/hour for a computer programmer to upload all of the 
notices into their claims systems. This results in a total one-time 
burden of 1,095 hours (5 hours per sponsor x 219 sponsors) at a cost of 
$89,680.50 (1,095 hours x $81.90/hour) or $409.50 per sponsor 
($89,680.50/219 sponsors).
    In aggregate, the burden to upload and prepare the additional 
second notice is 1,402 hours (307 hours + 1,095 hours) at a cost of 
$101,722 ($12,041 + $89,681).
    Revisions to Sec.  423.38(c)(4) will limit the SEP for dual- or 
other LIS-eligible individuals who are identified as a potential at-
risk beneficiary subject to the requirements of a drug management 
program, as outlined in Sec.  423.153(f). As codified in Sec.  
423.38(c)(4), this SEP is extended to include ``other subsidy-eligible 
individuals'' so that both full and partial subsidy individuals are 
treated uniformly. As such, the SEP limitation in this final rule will 
also be extended to include both full and partial subsidy individuals. 
Once an individual is identified as a potential at-risk beneficiary, 
that individual will not be permitted to use this election period to 
make a change in enrollment until such identification is terminated in 
accordance with Sec.  423.153(f).
    Contingent with a Part D sponsor opting to implement a drug 
management program, Part D sponsors will identify, and submit to CMS, 
an individual's ``potential'' at-risk status and, if applicable, 
confirmed at-risk status. The Part D sponsor will include notification 
of the limitation of the duals' SEP in the required initial notice to 
the beneficiary that he or she has been identified as a potential at-
risk beneficiary.
    As explained previously, Part D plan sponsors are already expected 
to send a notice to some beneficiaries when the sponsor decides to 
implement a beneficiary-specific POS claim edit to monitor opioid 
access. This notice is covered under currently approved OMB control 
number 0938-0964 (CMS-10141), and will count as the initial notice 
described in the preamble of this final rule and defined in Sec.  
423.153(f)(4)). This initial notice will include language to notify an 
individual of the inability to use the duals' SEP. Therefore, the 
burden associated with the notification of the inability to use the 
duals' SEP is currently approved under OMB control number 0938-0964 
(CMS-10141).
    This final rule also codifies an existing provision whereby an 
individual can make an election within 3 months of a gain, loss, or 
change to Medicaid or LIS eligibility, or notification of such a 
change, whichever is later.
    An individual who is determined to be a potential at-risk or an at-
risk individual will be able to use this SEP to change plans. Also, if 
a potential at-risk or at-risk individual is eligible for another 
election period (for example, AEP, OEP, or other SEP), this SEP 
limitation will not prohibit the individual from making an election. 
Providing a limitation for dually- and other LIS-eligible at-risk 
beneficiaries after the initial notification will decrease sponsor 
burden in processing disenrollment and enrollment requests for dual- 
and LIS-eligible beneficiaries who wish to change plans as outlined 
later in this section.
    We estimate that 1,846 beneficiaries will meet the criteria to be 
identified as an at-risk beneficiary and have a

[[Page 16691]]

limitation implemented. About 76 percent of the 1,846 beneficiaries are 
estimated to be LIS (1,403 = 1,846 beneficiaries x 0.76). Approximately 
10 percent of LIS-eligible enrollees use the duals' SEP to make changes 
annually (140 = 1,403 x 0.10). Thus we estimate, at most, 140 changes 
per year will no longer take place because of the duals' SEP enrollment 
limitation. There are currently 219 Part D sponsors. This amounts to an 
average of 0.6 changes per sponsor per year (140 changes/219 sponsors). 
In 2016, there were more than 3.5888 million Part D plan switches, and 
as such, a difference of 0.6 enrollments or disenrollments per sponsor 
will not impact the administrative processing infrastructure or human 
resources needed to process enrollments and disenrollments. Therefore, 
there is no change in burden for sponsors to implement this component 
of the provision.
    This final rule also provides that the review of at-risk 
determinations made under the processes at Sec.  423.153(f) be 
adjudicated under the existing Part D benefit appeals process and 
timeframes set forth in part 423 subparts M and U. Consistent with 
existing rules for redeterminations, an enrollee who wishes to dispute 
an at-risk determination will have 60 days from the date of the notice 
of the determination to make such request, must affirmatively request 
IRE review of an adverse plan level appeal decision made under a plan 
sponsor's drug management program, and will have rights to an expedited 
redetermination. The filing of an appeal is an information collection 
requirement that is associated with an administrative action pertaining 
to specific individuals or entities (5 CFR 1320.4(a)(2) and (c)). 
Consequently, the burden for preparing and filing the appeal is exempt 
from the requirements of the PRA; however, the burden for appeals is 
included in the regulatory impact analysis of this final rule.
    In aggregate, these components of this provision will result in an 
annual net cost of $101,722 (see Tables F2 and F3).

                               Table 14--Estimated Burden for the CARA Provisions
                                                   [In hours]
----------------------------------------------------------------------------------------------------------------
                                                       2019            2020            2021       3-year average
----------------------------------------------------------------------------------------------------------------
Preparation and Upload Notices..................           1,402               0               0           467.3
SEP Limitation *................................               0               0               0               0
Appeals **......................................             N/A             N/A             N/A             N/A
                                                 ---------------------------------------------------------------
    Total.......................................           1,402               0               0           467.3
----------------------------------------------------------------------------------------------------------------
* This rule does not impose any new or revised information collection requirements/burden.
** Exempt from the PRA.


                               Table 15--Estimated Burden for the CARA Provisions
                                                   [In hours]
----------------------------------------------------------------------------------------------------------------
                                                       2019            2020            2021       3-year average
----------------------------------------------------------------------------------------------------------------
Preparation and Upload Notices..................        $101,722               0               0       $33,907.3
SEP Limitation *................................               0               0               0               0
Appeals **......................................             N/A             N/A             N/A             N/A
                                                 ---------------------------------------------------------------
    Total.......................................         101,722               0               0        33,907.3
----------------------------------------------------------------------------------------------------------------
* This rule does not impose any new or revised information collection requirements/burden.
** Exempt from the PRA.

2. ICRs Regarding Coordination of Enrollment and Disenrollment Through 
MA Organizations and Effective Dates of Coverage and Change of Coverage 
(Sec. Sec.  422.66 and 422.68)
    Enrollment requirements and burden are currently approved by OMB 
under control number 0938-0753 (CMS-R-267). Since this rule will not 
impose any new or revised requirements/burden and we did not receive 
any public comments pertaining to the burden discussion that was set 
out in our proposed rule, we are not making any changes under the 0938-
0753 control number. (Note: While CMS-R-267 has expired, we are 
proposing to reinstate the collection through this final rule.) We 
acknowledge that the establishment, through subregulatory guidance, of 
a new and simplified positive (that is, ``opt in'') election process 
that would be available to all MA organizations for their commercial, 
Medicaid or other non-Medicare plan members, may result in a minimal 
reduction in burden; however, this potential reduction is not 
quantifiable, and therefore, de minimus.
    We note that this enrollment mechanism is optional and that it 
existed prior to this regulation. As outlined in the proposed rule, we 
are codifying an existing process that has been in place for more than 
a decade. In terms of enrollment operations, the default enrollment 
process has elements similar to beneficiary-initiated enrollments 
(determining eligibility, processing the enrollment transaction and 
notifying the beneficiary) and, as such, the overall burden for 
enrollment processing is not changing and is captured in our existing 
PRA package. With regard to the default enrollment notice, we note that 
there is not a standardized notice that previously existed, nor is a 
new standardized notice being created; this enrollment notice serves 
the same purpose as the notice required for beneficiary-initiated 
enrollments, in that it informs the beneficiary of the enrollment start 
date and of other information necessary to access plan benefits and 
services.
    As is the case currently for the seamless conversion enrollment 
process, MA organizations choosing to offer a default enrollment 
process will request approval from CMS and, if approved, implement a 
process with notification and processing elements similar to those 
carried out for beneficiary initiated enrollments, including issuance 
of a plan-developed notice to inform individuals of the

[[Page 16692]]

enrollment and of other important plan information.
    As discussed in section II.A.7. of this rule, we are finalizing our 
proposal to revise Sec. Sec.  422.66 and 422.68 by: Codifying the 
requirements for default enrollment that are currently set out in 
subregulatory guidance,\78\ revising current practice to limit the use 
of this type of enrollment mechanism, and clarifying the effective date 
for ICEP elections. This will provide an MA organization the option to 
enroll its Medicaid managed care enrollees who are newly eligible for 
Medicare into an integrated D-SNP administered by the same MA 
organization that operates the Medicaid managed care plan. While the 
provision restricts its use to individuals in the organization's 
Medicaid managed care plan that can be enrolled into an integrated D-
SNP, the estimated burden for an organization that desires to use 
default enrollment and obtain CMS approval will not change. For those 
MA organizations that want to use this enrollment mechanism and request 
and obtain CMS approval, the administrative requirements will remain 
unchanged from the current practice.
---------------------------------------------------------------------------

    \78\ Chapter 2 of the Medicare Managed Care Manual found at 
https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/index.html?redirect=/MedicareMangCareEligEnrol/.
---------------------------------------------------------------------------

    As indicated in the preamble to this final rule, we are finalizing 
the proposed changes with the following modifications, none of which we 
believe will result in any impact to the Medicare Trust Funds.
     Section 422.66(c)(2)(i) is revised to clarify that we will 
allow default enrollment into a FIDE-SNP administered by an MA 
organization under the same parent organization as the organization 
that operates the Medicaid managed care plan in which the individual 
remains enrolled.
     Section 422.66(c)(2)(i) is revised to clarify that, for an 
organization to be approved for default enrollment, it must have an 
overall quality rating, from the most recently issued ratings, under 
the rating system described in Sec. Sec.  422.160 through 422.166, of 
at least 3 stars or is a low enrollment contract or new MA plan as 
defined in Sec.  422.252. In addition, the MA organization must not be 
under an enrollment suspension.
     Section 422.66(c)(2)(ii) is revised to include an approval 
period not to exceed 5 years, subject to CMS authority to rescind or 
suspend approval if the plan is non-compliant.
     Section 422.66(c)(2)(iv) is revised to state that the 
notice issued by the MA organization will include information on the 
differences in premium, benefits and cost sharing between the 
individual's current Medicaid managed care plan and the dual eligible 
MA special needs plan and the process for accessing care under the MA 
plan; an explanation of the individual's ability to decline the 
enrollment, up to and including the day prior to the enrollment 
effective date, and either enroll in Original Medicare or choose 
another MA plan; and a general description of alternative Medicare 
health and drug coverage options available to an individual in his or 
her Initial Coverage Election Period.
     Section 422.66(c)(2)(iv) is revised to clarify that the 
mandatory notice is in addition to the information and documents 
required to be provided to new enrollees under Sec.  422.111.
3. ICRs Regarding Passive Enrollment Flexibilities To Protect 
Continuity of Integrated Care for Dually Eligible Beneficiaries (Sec.  
422.60(g))
    As discussed in section II.A.7. of this rule, we are finalizing a 
limited expansion of passive enrollment authority under Sec.  
422.60(g). More specifically, the new provisions at Sec.  422.60(g) 
will allow CMS, in consultation with a state Medicaid agency, to 
implement passive enrollment procedures in situations where criteria 
identified in Sec.  422.60(g)(1)(iii) and (g)(2) are met. We are 
finalizing these provisions as proposed, with one exception. 
Specifically, we are modifying Sec.  422.60(g)(4) to require, under new 
Sec.  422.60(g)(4)(i)(B), that plans receiving passive enrollments 
under Sec.  422.60(g)(1)(iii) send two notices to enrollees. We also 
clarify that for passive enrollments under Sec.  422.60(g)(1)(i) and 
(ii), only one notice will continue to be required. Accordingly, we are 
modifying Sec.  422.60(g)(4) to require, under new paragraph 
(g)(4)(i)(B), that plans receiving passive enrollments under Sec.  
422.60(g)(1)(iii) send two notices to enrollees. New Sec.  
422.60(g)(4)(i)(A) will retain the original requirement that one notice 
be provided to passive enrollee under Sec.  422.60(g)(1)(iii). However, 
we note that we are making no changes to the criteria for determining 
plan eligibility for passive enrollment under Sec.  422.60(g)(1)(iii).
    In the proposed rule, we estimated that approximately 1 percent of 
the 373 active D-SNPs would meet the criteria and operate in a market 
where all of the conditions of passive enrollment are met and where 
CMS, in consultation with a state Medicaid agency, implements passive 
enrollment. We therefore estimated that there would be only four 
instances (373 SNPs x 0.01) in which CMS would conduct passive 
enrollment each year. We did not receive any comments related to the 
overall number of respondents or our claim that the provision is exempt 
from the PRA.
    Because we are not changing the eligibility criteria for integrated 
D-SNPs that may receive passive enrollments in this final rule, our 
estimated number of affected entities remains four. Since we estimate 
fewer than 10 respondents, the information collection requirements and 
burden related to the final provisions under Sec.  422.60(g) are exempt 
(5 CFR 1320.3(c)) from the requirements of the PRA.
4. ICRs Regarding the Part D Tiering Exceptions (Sec.  423.578(a) and 
(c))
    While the requirement to send a written denial notice is subject to 
the PRA, the requirement and burden are currently approved by OMB under 
control number 0938-0976 (CMS-10146). We did not receive any PRA-
related public comments and are finalizing the proposed provisions 
without modification. Since this rule will not impose any new or 
revised requirements/burden, we are not making any changes under the 
0938-0976 control number. As discussed in section II.A.9 of this rule, 
we are finalizing the proposed changes to Sec.  423.578(a) and (c) 
without modification. The changes establish a revised framework for 
treatment of tiering exception requests based on whether the requested 
drug is a brand name or generic drug or biological product, and where 
the same type of drug alternatives are located on the plan's formulary. 
The changes also clarify the appropriate cost-sharing assigned to 
approved tiering exception requests when preferred alternative drugs 
are on multiple lower-cost tiers. At the coverage determination level, 
if a plan issues a decision that is partially or fully adverse to the 
enrollee, it is already required to send written notice of that 
decision. The current requirement to send written notice of an adverse 
coverage determination is not changed by this rule. We do not expect 
that any of the changes will significantly impact the overall volume or 
the approval rate of tiering exceptions requests, which represent a 
consistently low percentage of total request volume.
5. ICRs Regarding Establishing Limitations for the Part D Special 
Enrollment Period for Dual Eligible Beneficiaries (Sec.  423.38(c)(4))
    Enrollment processing and notification requirements are codified at

[[Page 16693]]

Sec.  423.32(c) and (d) and are not being revised as part of this 
rulemaking. Therefore, no new or additional information collection 
requirements are being imposed. Moreover, the enrollment processing and 
notification requirements and burden are currently approved by OMB 
under control number 0938-0964 (CMS-10141). Since this rule will not 
impose any new or revised requirements/burden, we are not making any 
changes under the 0938-0964 control number. We did not receive any 
comments pertaining to the burden discussion within our proposed rule.
    As discussed in section II.A.10. of this rule, we are finalizing 
the proposed provision with modifications. The revisions do not affect 
any of our currently approved requirements and burden under OMB control 
number 0938-0964.
    In section II.A.10. of this final rule, we are revising Sec.  
423.38(c) to limit the SEP for dual- and LIS-eligible individuals 
(other than potential at-risk or at-risk beneficiaries) so that it is 
only available onetime-per-calendar-quarter election during the first 
nine months of the year. In addition, we are establishing new SEPs at 
Sec.  423.38(c)(9) and (c)(10) for beneficiaries who have a change in 
their dual or LIS-eligible status or have been assigned into a plan by 
CMS or a State, respectively.
    In instances where an individual is not able to utilize the dual 
SEP because of this rule's limitations, we anticipate that there will 
be no change in burden. Under current requirements, if a beneficiary 
uses the dual SEP to disenroll from their plan, the plan will send a 
notice to the beneficiary to acknowledge the voluntary disenrollment 
request. If the beneficiary is subject to the dual SEP limitation, the 
plan will send a notice to deny their voluntary disenrollment request. 
The requirement to acknowledge the beneficiary request and address the 
resolution will be the same in both scenarios, but the content of the 
notice will be different. As indicated earlier, the requirements and 
burden associated with the provision of both notices are currently 
approved by OMB under control number 0938-0964 (CMS-10141).
6. ICRs Regarding Medicare Advantage and Prescription Drug Plan Quality 
Rating System (Sec. Sec.  422.162, 422.164, 422.166, 422.182, 422.184, 
and 422.186)
    As discussed in section II.A.11. of this rule, we are finalizing 
our proposal to codify the existing measures and methodology for the 
Part C and D Star Ratings program. The provisions will not change any 
respondent requirements or burden pertaining to any of CMS' Star 
Ratings-related PRA packages including: OMB control number 0938-0732 
for CAHPS (CMS-R-246), OMB control number 0938-0701 for HOS (CMS-
10203), OMB control number 0938-1028 for HEDIS (CMS-10219), OMB control 
number 0938-1054 for Part C Reporting Requirements (CMS-10261), and OMB 
control number 0938-0992 for Part D Reporting Requirements (CMS-10185). 
We received no comments on our proposed burden discussion and therefore 
are finalizing this provision without modification. Since this rule 
will not impose any new or revised requirements/burden, we are not 
making changes under any of the aforementioned control numbers.
7. ICRs Related to Expedited Substitutions of Certain Generics and 
Other Midyear Formulary Changes (Sec. Sec.  423.100, 423.120, and 
423.128)
    The general notice requirements and burden are currently approved 
by OMB under control number 0938-0964 (CMS-10141). We are finalizing 
the proposed provision with a modification that has no impact on our 
information collection requirements or associated burden estimates (see 
section II.A.14. of this rule for details). Since this rule would not 
impose any new or revised requirements/burden, we are not making any 
changes under the 0938-0964 control number.
    In section II.A.14. of the proposed rule, we proposed to expedite 
certain generic substitutions and other midyear formulary changes by, 
for instance, permitting Part D sponsors to immediately substitute 
newly approved generic drugs as specified and, for other formulary 
changes, to provide 30 rather than 60 days notice and, as applicable, 
provide a month's supply rather than a 60-day supply. Also, we proposed 
to except applicable generic substitutions from the transition process. 
We are finalizing the provisions as proposed, with the following 
changes. We are specifying that Part D sponsors may substitute during 
the plan year generics that have are released after the date that they 
initially submit their formulary; that substituted generics must be 
offered on the same or lower cost-sharing tier rather than at the same 
or lower cost-sharing; and that Part D sponsors must provide, when 
required, an ``approved'' month's supply--that is, the month's supply 
approved in a plan's bid. Excepting generic substitutions that would 
otherwise require transition fills from the transition process would 
lessen the burden for Part D sponsors because they would no longer need 
to provide such fills. Permitting Part D sponsors to immediately 
substitute certain generic drugs or to make other formulary changes 
sooner than has been required would allow Part D sponsors to take 
action sooner, but would not increase nor decrease paperwork burden.
    While the proposed provisions would additionally require general 
notice that certain generic substitutions could take place immediately, 
this notice would appear in documents that Part D sponsors are already 
providing to their enrollees, such as formularies and EOCs. CMS will 
provide this language in the model documents it distributes as part of 
the yearly revisions to those documents. The marketing and beneficiary 
communications general notice requirements and burden are currently 
approved by OMB under control number 0938-0964 (CMS-10141). Similarly, 
Sec.  423.128(d)(2)(ii) already requires websites to include 
information about drug removals and changes to cost-sharing. In other 
words, the general notice requirement would not require efforts in 
addition to routine updates to beneficiary communications materials and 
websites. In theory, if Part D sponsors that would have been denied 
requests to make generic changes could do so under the proposed 
provision, they would have somewhat more of a burden since the 
provision does require notice including direct notice to affected 
enrollees. However, our practice has been to approve all generic 
substitutions that would meet the requirements of this provision--which 
again means that the provisions will just permit those substitutions to 
take place sooner.
8. ICRs Regarding the Restoration of the MA Open Enrollment Period 
(Sec. Sec.  422.60, 422.62, 422.68, 423.38, and 423.40)
    The following requirements and burden will be submitted to OMB for 
approval under control number 0938-0753 (CMS-R-267). Since we did not 
receive any public comments pertaining to our burden estimates, we are 
finalizing them as proposed, with the exception of our wage and cost 
estimates for beneficiaries. (Note: While CMS-R-267 has expired, we are 
proposing to reinstate the collection through this final rule.)
    As discussed in section II.B.1. of this rule, we are finalizing our 
proposal to codify the requirements for open enrollment and 
disenrollment opportunities at Sec. Sec.  422.60, 422.62, 422.68, 
423.38, and 423.40. This action will eliminate the existing MADP and 
establish an MA Open Enrollment Period (OEP). This new OEP revises a 
previous OEP which will allow MA-

[[Page 16694]]

enrolled individuals the opportunity to make a one-time election during 
the first 3 months of the calendar year to switch MA plans, or 
disenroll from an MA plan and obtain coverage through Original 
Medicare. Although no new data will be collected, the burden associated 
with this requirement will be the time and effort that it takes an MA 
organization to process an increased number of enrollment and 
disenrollment requests by individuals using this OEP, which is first 
available in 2019.
    To estimate the potential increase in the number of enrollments and 
disenrollments from the new OEP, we considered the percentage of MA-
enrollees who used the old OEP that was available from 2007 through 
2010. For 2010, the final year the OEP existed before the MADP took 
effect, we found that approximately 3 percent of individuals used the 
OEP. While the parameters of the old OEP and new OEP differ slightly, 
we believe that this percentage is the best approximation to determine 
the burden associated with this change. In January 2017, there were 
approximately 18,600,000 individuals enrolled in MA plans.\79\ Using 
the 3 percent adjustment, we expect that 558,000 individuals (18.6 
million MA beneficiaries x 0.03), will use the OEP to make an 
enrollment change.
---------------------------------------------------------------------------

    \79\ Medicare Beneficiary Database (MBD), December 29, 2016. 
https://www.cms.gov/.
---------------------------------------------------------------------------

    We estimate it will take a beneficiary approximately 30 minutes 
(0.5 hours) at $23.86/hour to complete an enrollment request. The 
burden for all beneficiaries is estimated at 279,000 hours (558,000 
beneficiaries x 0.5 hour) at a cost of $6,656,940 (279,000 hour x 
$23.86/hour) or $11.93 per beneficiary ($6,656,940/558,000 
beneficiaries).
    There are currently 468 MA organizations in 2017.\80\ Not all MA 
organizations are required to be open for enrollment during the OEP. 
However, for those that are, we estimate that this enrollment period 
will result in approximately 1,192 enrollments per organization 
(558,000 individuals/468 organizations) during the OEP each year.
---------------------------------------------------------------------------

    \80\ Medicare Beneficiary Database (MBD), December 29, 2016. 
https://www.cms.gov/.
---------------------------------------------------------------------------

    We estimate it will take approximately 5 minutes at $69.08/hour for 
a business operations specialist to determine eligibility and 
effectuate the changes for open enrollment. The burden for all 
organizations is estimated at 46,500 hours (558,000 beneficiaries x 5 
min/60) at a cost of $3,212,220 (46,500 hour x $69.08/hour) or $6,864 
per organization ($3,212,220/468 MA organizations).
    Once the enrollment change is completed, we estimate that it will 
take 1 minute at $69.08/hour for a business operations specialist to 
electronically generate and submit a notice to convey the enrollment or 
disenrollment decision for each of the 558,000 beneficiaries. The total 
burden to complete the notices is 9,300 hours (558,000 notices x 1 min/
60) at a cost of $642,444 (9,300 hour x $69.08/hour) or $1.15 per 
notice ($642,444/558,000 notices) or $1,372.74 per organization 
($642,444/468 MA organizations).
    The burden associated with the electronic submission of enrollment 
information to CMS is estimated at 1 minute at $69.08/hour for a 
business operations specialist to submit the enrollment information to 
CMS during the open enrollment period. The total burden is estimated at 
9,300 hours (558,000 notices x 1 min/60) at a cost of $642,444 (9,300 
hour x $69.08/hour) or $1.15 per notice ($642,444/558,000 notices) or 
$1,372.74 per organization ($642,444/468 MA organizations).
    Additionally, MA organizations will have to retain a copy of the 
notice in the beneficiary's records. The burden associated with this 
task is estimated at 5 minutes at $34.66/hour for an office and 
administrative support worker to perform record retention for the open 
enrollment period. In aggregate we estimate an annual burden of 46,500 
hours (558,000 beneficiaries x 5 min/60) at a cost of $1,606,110 
(46,500 hour x $34.66/hour) or $3,431.86 per organization ($1,606,110/
468 MA organizations).
    We estimate a total annual burden for all MA organizations to be 
111,600 hours (46,500 hour + 9,300 hour + 9,300 hour + 46,500 hour) at 
a cost of $6,103,218 ($3,212,220 + $642,444 + $642,444 + $1,606,110). 
Per organization, we estimate an annual burden of 238 hours (111,600 
hour/468 MA organizations) at a cost of $13,041 ($6,103,218/468 
organizations). For beneficiaries we estimate a total annual burden of 
279,000 hours at a cost of $6,656,940 and a per beneficiary burden of 
30 minutes at a cost of $11.93.
9. ICRs Regarding the Medicare Advantage Plan Minimum Enrollment Waiver 
(Sec.  422.514(b))
    The requirements and burden associated with the submission of the 
minimum enrollment waiver in the application are currently approved by 
OMB under control number 0938-0935 (CMS-10237). We received no comments 
on our proposed provisions and are finalizing them without change. 
Consequently, we are not making any changes under the 0938-0935 control 
number.
    Section 422.514(b) provides Medicare Advantage (MA) organizations, 
including provider sponsored organizations, with the opportunity to 
request a waiver of CMS's minimum enrollment requirements at Sec.  
422.514(a) during the first 3 years of the contract. Section 422.514(b) 
also requires that MA organizations reapply for the minimum enrollment 
waiver in the second and third years of their contract. However, since 
CMS has not received or approved any waivers outside of the application 
process, this rule removes the requirement for MA organizations to 
reapply for the minimum enrollment waiver during years 2 and 3 of the 
contract under Sec.  422.514(b)(2) and (3). The revision to Sec.  
422.514(b)(2) now clarifies that CMS will only accept a waiver through 
the application process and that we will allow the minimum enrollment 
waiver, if approved by CMS, to remain effective for the first 3 years 
of the contract.
10. ICRs Regarding Disclosure Requirements (Sec. Sec.  422.111 and 
423.128)
    CMS will submit the following requirements and burden to OMB for 
approval under control number 0938-1051 (CMS-10260). We did not receive 
any comments pertaining to our proposed requirements or burden 
estimates. With the exception of the added language in Sec.  
422.111(h)(2)(iii), we are finalizing them as proposed.
a. Timing of Disclosure (Sec. Sec.  422.111(a)(3) and 423.128(a)(3))
    As discussed in section II.B.4 of this rule, we are finalizing our 
proposal to revise the timing of disclosing the information required 
under Sec.  422.111(a) and (b) and the timing of such disclosures under 
Sec.  423.128(a) and (b) which provide for the disclosure of plan 
content information to beneficiaries. Sections 422.111(a)(3) and 
423.128(a)(3) require that MA plans and Part D sponsors provide the 
information in Sec. Sec.  422.111(b) and 423.128(b) by the first day of 
the annual enrollment period. This is a change from current practice, 
which requires that plans provide the information 15 days before that 
period. Importantly, plans must continue to distribute the ANOC 15 days 
prior to the AEP. In other words, the revised provision provides the 
option of either submitting the EOC with the ANOC or waiting until the 
first day of the AEP, or sooner, for distribution. The provision simply 
gives plans that may need some flexibility the ability to rearrange 
schedules and defer a deadline.

[[Page 16695]]

Consequently, there is no change in burden.
b. Method of Disclosure (Sec. Sec.  422.111(h)(2) and 423.128(d)(2))
    Sections 422.111(h)(2)(i) and 423.128(d)(2)(i) require that plans 
maintain a website which contains the information listed in Sec. Sec.  
422.111(b) and 423.128(b). Section 422.111(h)(2)(ii) states that the 
posting of the EOC, Summary of Benefits, and provider network 
information on the plan's website ``does not relieve the MA 
organization of its responsibility under Sec.  422.111(a) to provide 
hard copies to enrollees.'' There is no parallel to Sec.  
422.111(h)(2)(ii) in Sec.  423.128 for Part D sponsors. Further, Sec.  
423.128(a) requires the disclosures ``in the manner specified by CMS.''
    In Sec.  422.111(h)(2)(ii), we had proposed to modify the sentence 
stating that the posting of the EOC, Summary of Benefits, and provider 
network information on the plan's website does not relieve the plan of 
its responsibility to provide hard copies of these documents to 
beneficiaries ``upon request.'' In this final rule, we removed the 
``Summary of Benefits'' from that sentence and added ``The summary of 
benefits. Posting does not relieve the MA organization of its 
responsibility under paragraph (a) of this section to provide hard 
copies to enrollees as CMS directs'' to Sec.  422.111(h)(2)(iii) 
excepting the Summary of Benefits from electronic delivery of certain 
required documents. We also added the phrase ``in the manner specified 
by CMS'' in Sec.  422.111(a).
    The changes give MA plans the flexibility to provide the 
information in Sec.  422.111(b) electronically when specified by CMS as 
a permissible delivery option, and better aligns with the provisions 
under Sec.  423.128. We continue to specify hardcopy mailing, as 
opposed to electronic delivery, for most documents that convey the type 
of information described in paragraph (b). CMS intends that provider 
and pharmacy directories, and EOC documents are those for which 
electronic posting and delivery of a hard copy upon request are 
permissible. Electronic delivery reduces plan burden by eliminating 
printing (paper and toner) and mailing costs, when applicable. 
Additionally, the IT systems of the plans are already set up to format 
and print these documents.
    To estimate the cost of printing these documents, we note that the 
CMS Trustee's report, accessible at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/, lists 47.8 million beneficiaries in MA, section 
1876 cost,\81\ and prescription drug contracts for contract year 2019. 
At this time, we have no mechanism for measuring the number of 
beneficiaries who have asked to receive this document electronically by 
opting into a plan's electronic delivery system. However, we expect 
this number to be not significant.
---------------------------------------------------------------------------

    \81\ Per 42 CFR 417.427, cost plans must comply with Sec.  
422.111 and Sec.  423.128.
---------------------------------------------------------------------------

    Based on reports from the internetSociety.org and Pew Research 
Center,\82\ we estimate that 33 percent of these beneficiaries who are 
in MA and Prescription Drug contracts will prefer to opt in to receive 
hard copies instead of electronic copies. Thus, the savings comes from 
the 67 percent of beneficiaries who are in MA and Prescription Drug 
contracts that will not opt in to having printed copies mailed to them, 
namely 32,026,000 beneficiaries (47,800,000 beneficiaries x 0.67).
---------------------------------------------------------------------------

    \82\ Global internet Report, 2017, internet Society, http://www.internetsociety.org/globalinternetreport/2016/?gclid=EAIaIQobChMI-tz1nN_W1QIVgoKzCh1EVggBEAAYASAAEgLpj_D_BwE and 
``Tech Adoption Climbs Among Older Adults,'' Pew Research Center, 
http://www.pewinternet.org/2017/05/17/tech-adoption-climbs-among-older-adults/.
---------------------------------------------------------------------------

    The major expenses in printing an EOC include paper, toner, and 
mailing costs. The typical EOC has 150 pages. Typical wholesale costs 
of paper are between $2.50 and $5.00 for a ream of 500 sheets. We 
assume $2.50 per ream of 500 sheets. Since each EOC has 150 pages, we 
are estimating a cost of $0.75 per EOC [$2.50/(150 pages per EOC/500 
sheets per ream)]. Thus, we estimate that the total savings from paper 
is $24,019,500 (32,026,000 EOCs x $0.75 per EOC).
    Toner costs can range from $50 to $200 and each toner can last 
4,000 to 10,000 pages. We conservatively assume a cost of $50 for 
10,000 pages. Each toner will print 66.67 EOCs (10,000 pages per toner/
150 pages per EOC) at a cost of $0.005 per page ($50/10,000 pages) or 
$0.75 per EOC ($0.005 per page x 150 pages). Thus, we estimate that the 
total savings on toner is $24,019,500 (32,026,000 EOCs x $0.75 per 
EOC).
    Regarding mailing costs, since a ream of paper with 2,000 8.5 
inches by 11 inches pages weighs 20 pounds or 320 ounces it then 
follows that 1 sheet of paper weighs 0.16 ounces (320 ounces/2,000 
pages). Therefore, a typical EOC of 150 pages weighs 24 ounces (0.016 
ounces/page x 150 pages) or 1.5 pounds. Since commercial mailing rates 
are 13.8 cents per pound, the total savings in mailings is $6,629,382 
($0.138/pounds x 1.5 pound x 32,026,000 EOCs).
    In aggregate, we estimate an annual savings of $54,668,382 
($24,019,500 + $24,019,500 + $6,629,382).
11. ICRs Regarding Communication/Marketing Materials and Activities 
(Parts 422 and 423, Subpart V)
    CMS will submit the following requirements and burden to OMB for 
approval under control number 0938-1051 (CMS-10260). As indicated, 
public comments were received and are summarized below along with our 
response. We are not making any changes to the proposed provisions, and 
we are finalizing them as proposed. However, we have made technical 
changes to correct errors identified in the proposed rule's burden 
analysis. To address a mathematical error, we have updated the total 
number of materials submitted from 80,110 to 79,584. We have also 
addressed an additional mathematical error for the material no longer 
submitted under the 6000 code from 1,407 to 1,667. As a result of these 
corrections, the total number of materials that will no longer be 
submitted has changed from 39,824 to 39,298, the total number of hours 
has changed from 19,912 to 19,649, and the cost saved has changed from 
$1,398,372 to $1,357,353. In addition, we removed the PACE and 
Medicare-Medicaid Plans from the chart as they will not be impacted by 
this regulation.
    As discussed in section II.B.5. of this rule, we are finalizing our 
proposal to narrow the definition of ``marketing materials'' under 
Sec. Sec.  422.2260 and 423.2260 to only include materials and 
activities that aim to influence enrollment decisions. We believe the 
revised definition appropriately safeguards potential and current MA/
PDP enrollees from inappropriate steering of beneficiary choice, while 
not including materials that pose little risk to current or potential 
enrollees and are not traditionally considered ``marketing.'' The 
narrowed definition reduces the burden to MA organizations and Part D 
sponsors by reducing the number of materials required to be submitted 
to us for review.
    To estimate the savings, we reviewed the most recent 12-month 
period of marketing material submissions from the Health Plan 
Management System, July 2016 through and including June 2017. 
Consistent with the figures in our currently approved information 
collection request, we continue to estimate that it takes a plan 30 
minutes at $69.08/hour for a business operations specialist to submit 
the marketing materials. To complete the savings

[[Page 16696]]

analysis, we also must estimate the number of marketing materials that 
would have been submitted to us under the current regulatory marketing 
definition.
    Marketing materials are coded using 4- or 5- digit numbers, based 
on marketing material type. The relevant codes and counts are 
summarized in Table 16.
BILLING CODE 4120-01-P

[[Page 16697]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.016

BILLING CODE 4120-01-C
    By reducing the number of marketing materials submitted to CMS by 
39,298 documents (79,584 current-40,286 excluded) we estimate a savings 
of

[[Page 16698]]

19,649 hours (39,298 materials * 0.5 hours per material) at a cost 
savings of $1,357,353 (19,649 hours * 69.08 per hour). Some key points 
in the calculations are as follows:
     There were a total of 79,584 marketing materials submitted 
to CMS during the 12-month period sampled. These materials already 
exclude PACE program marketing materials (30000 Code) which are 
governed by a different authority and not affected by this final rule. 
The 79,584 figure also excludes codes 15000, 16000, and 17000 Medicare-
Medicaid Plan (MMP) materials. The MMP materials are not being counted 
as the decision for review rests with the states and CMS.
     Section 1851(h) of the Act is clear that ``applications,'' 
which CMS also refers to as enrollment or election forms, must be 
reviewed. Thus the 981 materials submitted under marketing code 1070, 
enrollment forms, must be subtracted from the 79,584.
     Marketing code 1100 includes the combined ANOC/EOC as well 
as the D-SNP standalone ANOC. CMS intends to split the ANOC and EOC and 
will still require the ANOC be submitted as a marketing material, 
whereas the EOC will no longer be considered marketing and not require 
submission. To account for the ANOC submission, CMS estimates that 
5,162 ANOCs will still require submission.
     We do not expect any disenrollment or grievance forms (the 
2000 and 3000 codes) to be required submissions under this final rule.
     Marketing code 4000 covers all advertisements which 
constitute 55 percent (43,965) of the 79,584 materials. The majority of 
these advertisements deal with benefits and enrollment. We estimate 25 
percent of the 43,965 code 4000 documents (that is, 10,991 documents) 
will fall outside of the new regulatory definition of marketing and no 
longer require submission. Thus, we must subtract these 32,974 (43,965-
10,991) from the 79,584.
     Marketing code 5000 covers formulary drugs. Although, as 
is currently the case, formularies will continue to be submitted to us 
for review in capacities outside of marketing (currently approved under 
OMB control number 0938-0763 (CMS-R-262)). Formularies, however, will 
no longer fall under the new regulatory definition of marketing and 
hence will not be submitted separately for review as marketing 
materials.
     Marketing code 6000 includes sales scripts which are 
predominantly used to encourage enrollment, and will likely still fall 
under the scope of the new marketing definition. As such, we must 
subtract 1,169 documents (code 6013) from the 79,584 total marketing 
materials.
     Marketing code 8000 includes creditable coverage and late 
enrollment penalty (LEP) notices that will fall outside of the new 
regulatory definition of marketing and no longer require submission. 
Over the 12-month period sampled, this represents 559 material 
submissions.
    We received the following comments. A summary of the comments and 
our response follow:
    Comment: A commenter wanted CMS to include PACE marketing materials 
in the marketing chart.
    Response: PACE marketing materials were intentionally omitted 
because PACE marketing is not impacted by changes to subpart V under 
both parts 422 and 423.
    Comment: A commenter requested that Table 16 (currently Table F4) 
reflect the inclusion of materials that will fall under the purview of 
CMS review based on this final regulation.
    Response: The intent of the chart is to provide an estimate of the 
aggregate savings that will result from the regulatory changes to 
Subpart V, rather than to provide a comprehensive list of the materials 
that will or will not require submission as a result of this final 
rule. As noted in response to comments in section II.B.5. of this rule, 
CMS intends on issuing subregulatory guidance to provide more detailed 
information on material status.
    Comment: A commenter requested that the descriptions in the chart 
include all materials that fall under the general marketing code 
listed.
    Response: In developing the chart, CMS used the marketing code 
descriptions reflected in HPMS. The description is meant to give the 
reader a sense of what materials fall under the code as opposed to an 
all-inclusive list. Listing all material types would not be practical. 
Readers can reference the marketing section of HPMS for a list of all 
codes and material types.
12. ICRs Related to Preclusion List Requirements for Individuals and 
Entities in MA, Cost Plans, and PACE (Sec.  422.222) and Prescribers in 
Part D (Sec.  423.120(c)(6))
a. Preclusion List Requirements for Part C (Sec.  422.222)
    The following requirements and burden will be submitted to OMB for 
approval under control number 0938-0685 (CMS-855A, -855B, and -855I). 
We did not receive any comments pertaining to our proposed 
requirements, therefore we are finalizing them as proposed.
    Consistent with the proposed rule (82 FR 56488), we estimate that 
120,000 MA providers and suppliers have yet to enroll in Medicare via 
the CMS-855 application. Based on internal CMS statistics we estimate 
that 6,000 Part A providers and certain Part B certified suppliers 
would have completed the CMS-855A application, 24,000 Part B 
organizational suppliers would have completed the CMS-855B application, 
and 90,000 physicians and non-physician practitioners would have 
completed the CMS-855I application. We believe that savings will accrue 
for providers and suppliers from the elimination of our MA/Part C 
enrollment requirement under Sec.  422.222. Table 17 summarizes the 
burden associated with the completion of each form.

                                                          Table 17--CMS-855 Application Savings
                                                                    [Time and costs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Number of                                     Hours for an
                                          respondents no     Hours for      Hours for a     authorized
             Submission type                  longer       completion by   physician to     official to      Hours for     Time savings    Cost savings
                                            required to       office        review and      review and     completion *       (hours)           ($)
                                              enroll         personnel         sign            sign
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-855A................................           6,000               5             n/a               1               6          36,000      $1,641,960
CMS-855B................................          24,000               4             n/a               1               5         120,000       5,759,040
CMS-855I................................          90,000             2.5             0.5             n/a               3         270,000      16,676,100
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................         120,000            11.5             0.5               2              14         426,000      24,077,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The per response time estimate is consistent with what is currently approved by OMB.


[[Page 16699]]

    In projecting the savings, we assume that a medical and health 
services manager will serve as the provider's or supplier's 
``authorized official'' and will sign the CMS-855A or CMS-855B 
application on the provider's or supplier's behalf.
    Therefore, we project the following total hour and savings:
     CMS-855A: We estimate a total reduction in hour burden of 
36,000 hours (6,000 applicants x 6 hours). With the cost of each 
application processed by a medical secretary and signed off by a 
medical and health services manager as being $273.66 [($33.70/hour x 5 
hours) + ($105.16/hour x 1 hour)], we estimate a total savings of 
$1,641,960 (6,000 applications x $273.66).
     CMS-855B: We estimate a total reduction in hour burden of 
120,000 hours (24,000 applicants x 5 hours). With the cost of each 
application processed by a medical secretary and signed off by a 
medical and health services manager as being $239.96 [($33.70/hour x 4 
hours) + ($105.16/hour x 1 hour)], we estimate a total savings of 
$5,759,040 (24,000 applications x $239.96).
     CMS-855I: We estimate a total reduction in hour burden of 
270,000 hours (90,000 applicants x 3 hours). With the cost of each 
application processed by a medical secretary and physician as being 
$185.29 [($33.70/hour x 2.5 hours) + ($202.08/hour x 0.5 hours)], we 
estimate a savings of $16,676,100 (90,000 applications x $185.29).
    Given the foregoing, we estimate that providers and suppliers will 
experience a total reduction in hour burden of 426,000 hours (270,000 
hours + 120,000 hours + 36,000 hours) and a total cost savings of 
$24,077,100 ($16,676,100 + $5,759,040 + $1,641,960). We expect these 
reductions and savings to accrue in 2019 and not in 2020 or 2021. 
Nonetheless, when distributed over the course of OMB's 3-year approval 
period (2019 to 2021), we expect an annual savings of 142,000 hours 
(426,000 hours/3 years) at $8,025,700 ($24,077,100/3 years) per year.
b. MA Encounter Data (Sec.  422.310(d)(5))
    The requirements and burden associated with the collection and 
reporting of encounter data is currently approved by OMB under control 
number 0938-1152 (CMS-10340). Encounter data is a source to determine 
providers rendering MA services that should be on the preclusion list. 
Since this rule's provision is consistent with existing policy the 
change will not impose any new or revised requirements/burden. 
Consequently, we are not making any changes under the 0938-1152 control 
number.
    This final rule revises Sec.  422.310 by adding a new paragraph 
(d)(5) which requires that, for the data described in Sec.  
422.310(d)(1) as data equivalent to Medicare fee-for-service data 
(which is also known as MA encounter data), MA organizations must 
submit a National Provider Identifier in a Billing Provider field on 
each MA encounter data record, per CMS guidance. We do not expect any 
additional burden from this provision, since it is consistent with 
existing policy.
c. Preclusion List Requirements for Part D Sponsors
(1) Enrollment in Medicare Part D (Sec.  423.120(c)(6))
    The following requirements and burden will be submitted to OMB for 
approval under control number 0938-1135 (CMS-855O). We did not receive 
any comments pertaining to our proposed requirements, therefore we are 
finalizing them as proposed.
    As discussed in the proposed rule (82 FR 56474), we believe that 
savings will accrue for the prescriber community from this rule's 
elimination of the requirement under Sec.  423.120(c)(6)) that 
prescribers enroll in Medicare in order to prescribe Part D drugs.
    In the proposed rule (82 FR 56474), we estimated that approximately 
420,000 prescribers have yet to enroll in Medicare via the CMS-855O 
application. Based on updated data we are revising this estimate to 
approximately 340,000 un-enrolled prescribers. However, our data shows 
that there are 25,000 providers who overlap leaving 315,000 unenrolled 
prescribers in Part D. We also estimate that it will take 0.5 hours for 
a prescriber to complete a CMS-855O application.
    This is based on the following assumptions:
     A medical secretary will take 0.42 hours at $33.70/hour to 
prepare the application.
     A physician will take 0.08 hours at $202.08/hour to review 
and sign the application.
    This will result in a per application cost of $30.32 [(0.42 hours x 
$33.70/hour) + (0.08 hours x $202.08/hour)] and a total savings of 
$10,308,800 (315,000 applications x $30.32) and 170,000 hours (315,000 
applications x 0.5 hours). We believe that these savings will accrue in 
2019.
(2) Part D Sponsor Requirements
    The following notice preparation and distribution requirements and 
burden will be submitted to OMB for approval under control number 0938-
0964 (CMS-10141). We did not receive any comments pertaining to our 
proposed requirements, therefore we are finalizing them as proposed.
    As discussed in sections II.D.10. and 11. of this rule, we are 
finalizing our proposal under Sec.  423.120(c)(6) to require that Part 
D sponsors provide written notice to the beneficiary of the 
prescriber's presence on the preclusion list and take reasonable 
efforts to furnish written notice to the prescriber. The burden 
associated with these provisions will be the time and effort necessary 
for Part D adjudication systems to be programmed and for model notices 
to be created, generated, and disseminated. However, we are not 
finalizing the provision that required Part D sponsors cover a 
provisional supply of a drug before they reject a claim based on a 
prescriber's inclusion on the preclusion list.
    For 2019, we estimate that it will take all 30 sponsors and PBMs 
with Part D adjudication systems a total of approximately 93,600 hours 
for software developers and programmers to program their systems to 
comply with the requirements of Sec.  423.120(c)(6). In 2020 and 2021, 
we do not anticipate any system costs since all changes were 
implemented in 2019. The sponsors and PBMs will need approximately 6 to 
12 months to perform system changes and testing. The total time figures 
are based on a 6-month preparation and testing period. There are 
roughly 1,040 full-time working hours in a 6-month period. Using an 
estimate of 3 full-time software developers and programmers at $96.22/
hour results in the aforementioned 93,600 hour figure (3 workers x 
1,040 hours x 30 sponsors/PBMs) at a cost of $9,006,192 (93,600 hours x 
$96.22/hour).
    Consistent with the May 6, 2015 IFC, we continue to estimate that 
212 parent organizations will need to create two template notices to 
notify beneficiaries and prescribers that prescriptions will be 
rejected due to the prescriber's inclusion on the Preclusion List. We 
project that it will take each organization 3 hours at $69.08/hour for 
a business operations specialist to create the two template notices. 
For 2019, we estimate a one-time total burden of 636 hours (212 
organizations x 3 hours) at a cost of $43,935 (636 hours x $69.08/hour) 
or $207.24 per organization ($43,935/212 organizations). As mentioned, 
there will be no burden associated with 2020 and 2021 since all changes 
were implemented in 2019.
    We also estimate that it will take an average of 5 minutes (0.083 
hour) at

[[Page 16700]]

$39.22/hour for an insurance claim and policy processing clerk to 
prepare and distribute the notices. We estimate that an average of 800 
prescribers will be on the preclusion list in early 2019 with roughly 
80,000 Part D beneficiaries affected; that is, 80,000 beneficiaries 
will have been receiving prescriptions written by these prescribers and 
will therefore receive the notice referenced in Sec.  423.120(c)(6). In 
2019 we estimate a total burden of 6,640 hours (80,000 responses x 
0.083 hours) at a cost of $260,421 (6,640 hours x $39.22/hour) or 
$1,228.40 per organization ($260,421/212 organizations).
    In 2020 and 2021, we estimate that roughly 150 prescribers each 
year will be added to the preclusion list, though this will be largely 
offset by the same number of prescribers being removed from the list 
(for example, based on reenrollment after the expiration of a 
reenrollment bar or decision to remove them from the preclusion list) 
with 15,000 affected beneficiaries. In aggregate, we estimate an annual 
burden of 1,245 hours (15,000 beneficiaries x 0.083 hours) at a cost of 
$48,829 (1,245 hour x $39.22/hour) or $325.53 per prescriber ($48,829/
150 prescribers).

                     Table 18--Estimated Time for Part D Notice Preparation and Distribution
                                                     [Hours]
----------------------------------------------------------------------------------------------------------------
                                                       2019            2020            2021       3-year average
----------------------------------------------------------------------------------------------------------------
Part D Sponsor--System Programming..............          93,600               0               0          31,200
Part D Sponsor--Template Creation...............             636               0               0             212
Part D Sponsor--Letter Preparation and                     6,640           1,245           1,245           3,043
 Distribution...................................
                                                 ---------------------------------------------------------------
    Total.......................................         100,876           1,245           1,245          34.455
----------------------------------------------------------------------------------------------------------------


                     Table 19--Estimated Cost for Part D Notice Preparation and Distribution
                                                    [Dollars]
----------------------------------------------------------------------------------------------------------------
                                                       2019            2020            2021       3-year average
----------------------------------------------------------------------------------------------------------------
Part D Sponsor--System Programming..............      $9,006,192              $0              $0      $3,002,064
Part D Sponsor--Template Creation...............          43,935               0               0          14,645
Part D Sponsor--Notice Preparation and                   260,421          48,829          48,829         119,360
 Distribution...................................
                                                 ---------------------------------------------------------------
    Total.......................................       9,310,548          48,829          48,829       3,136,069
----------------------------------------------------------------------------------------------------------------

13. ICRs Regarding the Removal of Quality Improvement Project for 
Medicare Advantage Organizations (Sec.  422.152)
    CMS will submit the following requirements and burden to OMB for 
approval under control number 0938-1023 (CMS-10209). We did not receive 
any comments pertaining to our proposed requirements or burden 
estimates. Consequently, we are finalizing them as proposed. (Note: 
While CMS-10209 has inadvertently expired, we are proposing to 
reinstate the collection through this final rule.)
    As discussed in section II.B.11. of this rule, we are finalizing 
our proposal to remove the Quality Improvement Project (QIP) 
requirements (and CMS-direction of QIPs) from the Quality Improvement 
(QI) Program requirements. The driver of the anticipated savings is the 
removal of requirement to attest having a QIP annually.
    To derive our savings, we estimate that it takes 1 MA organization 
15 minutes (0.25 hour) at $67.54/hour for a compliance officer to 
submit a QIP attestation. Currently, there are 750 MA contracts, and 
each contract is required to submit a QIP attestation. Therefore, we 
anticipate that there are 750 QIP attestations annually.
    Using these assumptions, we estimate that the removal of the QIP 
provision will result in a total annual savings of 187.5 hours (750 
contracts x 0.25 hour) at $12,663.75 (187.5 hours x $67.54/hour) or 
$16.89 per contact ($12,663.75/750 contracts).
14. ICRs Regarding Medical Loss Ratio Reporting Requirements 
(Sec. Sec.  422.2460 and 423.2460)
    The following requirements and burden will be submitted to OMB for 
approval under control number 0938-1232 (CMS-10476). We received a 
comment pertaining to our proposed requirements or burden estimates. As 
discussed later, we are finalizing them as proposed. A summary of the 
public comment and our response are set out below.
    Under current Sec. Sec.  422.2460 and 423.2460, for each contract 
year, MA organizations and Part D sponsors must report to CMS the 
information needed to verify the MLR and remittance amount, if any, for 
each contract, such as: Incurred claims, total revenue, expenditures on 
quality improving activities, non-claims costs, taxes, licensing and 
regulatory fees, and any remittance owed to CMS under Sec.  422.2410 or 
Sec.  423.2410. As discussed in section II.C.1. of this final rule, our 
amendments to Sec. Sec.  422.2460 and 423.2460 will reduce the MLR 
reporting burden by requiring that MA organizations and Part D sponsors 
report, for each contract year, only the MLR and the amount of any 
remittance owed to us for each contract with credible or partially 
credible experience. For each non-credible contract, MA organizations 
and Part D sponsors will be required to report only that the contract 
is non-credible.
    Our analysis of the estimated administrative costs related to the 
MLR reporting requirements is based on the average number of MA and 
Part D contracts subject to the reporting requirements for each 
contract year. In the information collection request currently approved 
by OMB under control number 0938-1232 (CMS-10476), we estimate that 616 
MA and Part D contracts will be subject to the MLR data submission 
requirements for each contract year. Our previous estimate of 616 was 
based on the number of MA and Part D contracts that we expected would 
be subject to the

[[Page 16701]]

MLR requirements at the time that we published the May 23, 2013 final 
rule (78 FR 31284). We are revising this estimate to reflect the 
average number of MA and Part D contracts subject to the MLR data 
submission requirements for contract years 2014 to 2018. Based on this 
more recent data, we estimate that 587 MA and Part D contracts will be 
subject to the MLR data submission requirements for each contract year. 
The total number of MA and Part D contracts is relatively stable from 
year to year.
    Our estimate for the amount of time that MA organizations and Part 
D sponsors will spend on administrative tasks related to the amended 
MLR reporting requirements is based on the burden estimates that are 
currently approved by OMB under control number 0938-1232 (CMS-10476), 
but updated to reflect the revised number of contracts discussed 
earlier and also updated for more current wage and cost information. 
This is consistent with the approach used in the proposed rule 
regarding burden estimates. In the approved information collection 
request, we estimate that, on average, MA organizations and Part D 
sponsors will spend 47 hours per contract on administrative work 
related to Medicare MLR reporting, including: Collecting data, 
populating the MLR reporting forms, conducting a final internal review, 
submitting the reports to the Secretary, and conducting internal 
audits. Our currently approved estimate did not specify (or break out) 
the portion of the overall reporting burden that could be attributed 
solely to the tasks of preparing and submitting the MLR report. In our 
proposed rule, we corrected that oversight by estimating that the 
burden for preparing and submitting the MLR report is approximately 
11.5 hours (or 24.4 percent of the estimated 47 total hours spent on 
all administrative work related to the MLR reporting requirements) per 
contract.
    We arrived at the 11.5-hour estimate by considering the amount of 
time it will take an MA organization or Part D sponsor to perform each 
of the following tasks: (1) Review the MLR report filing instructions 
and external materials referenced therein and to input all figures and 
plan-level data in accordance with the instructions; (2) draft 
narrative descriptions of methodologies used to allocate expenses; (3) 
perform an internal review of the MLR report form prior to submission; 
(4) upload and submit the MLR report and attestation; and (5) correct 
or provide explanations for any suspected errors or omissions 
discovered by CMS or our contractor during initial review of the 
submitted MLR report.
    We estimate that this rule's provision to scale back the MLR 
reporting requirements will reduce the amount of time spent on 
administrative work by 11 hours, from 47 hours to 36 hours. We also 
estimate the average cost per hour of MLR reporting using wage data for 
computer and information systems managers, as we believe that the tasks 
associated with MLR reporting generally fall within the fields of data 
processing, computer programming, information systems, and systems 
analysis. Based on computer and information systems managers wage data 
from BLS, we estimate that MA organizations and Part D sponsors will 
incur annual MLR reporting costs of approximately $5,045 per contract 
on average under this final rule as opposed to $6,587 per contract 
under the current regulations. Consequently, the changes will, on 
average, reduce the annual administrative costs by $1,542 per contract. 
Across all MA and Part D contracts, we estimate that this rule's 
amendment will reduce the annual administrative burden related to MLR 
reporting by 6,457 hours along with a savings of $904,884. Table 20 
compares the estimated administrative burden related to current MLR 
reporting requirements, burden with updated contract and cost 
information, and the burden under this final rule.

                          Table 20--Estimated Administrative Burden Related to Medical Loss Ratio (MLR) Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Estimated
                                     Total number of contracts/    Estimated       Estimated     Estimated average cost      Estimated     average cost
           Type of burden                      reports           average hours    total hours           per hour            total cost     per contract/
                                                                  per report                                                                  report
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual burden under currently        616......................              47          28,952  $135.58/hr..............      $3,925,312          $6,372
 approved collection (OMB control
 number 0938-1232) (CMS-10476).
Annual burden (with updated number   587......................              47          27,589  $140.14/hr..............      $3,866,322          $6,587
 of contracts and cost) under
 current regulation.
Annual burden under this final rule  587......................              36          21,132  $140.14/hr..............       2,961,438           5,045
Change in burden under this final    No change................            (11)         (6,457)  No change...............       (904,884)         (1,542)
 rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: The source data has been modified to reflect estimated costs for MA organizations and Part D sponsors. Values may not be exact due to rounding.

    We received the following comment, and our response follows:
    Comment: A commenter expressed support for the reduction in the MLR 
reporting burden, and requested that we continue to produce and make 
available form CMS-10476 as it is useful to assist submitters with 
their MLR calculations.
    Response: We appreciate the support. We intend to continue to make 
available the prior years' MLR Report on our website (CMS.gov) as well 
as in the Health Plan Management System (HPMS). Therefore, the 
commenter can continue to utilize the prior years' more detailed MLR 
Reports to assist with their MLR calculations.
    We are finalizing this provision without modification.

C. Summary of Information Collection Requirements and Burden

[[Page 16702]]



                                                Table 21--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                   Total
 Regulatory section(s) in title  OMB control       Respondents             Responses          Burden per     Total annual burden    Labor cost of   cost
         42 of the CFR               No.*                                                      response            (hours)            reporting     ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
422.60, 422.62, 422.68, 423.38,    0938-0753  468..................  558,000..............           5 min  46,500...............       $69.08/hr  $3,21
 and 423.40 eligibility                                                                                                                            2,220
 determination.
422.60, 422.62, 422.68, 423.38,    0938-0753  468..................  558,000..............           1 min  9,300................       $69.08/hr  642,4
 and 423.40 notification.                                                                                                                           44
422.60, 422.62, 422.68, 423.38,    0938-0753  468..................  558,000..............           1 min  9,300................       $69.08/hr  642,4
 and 423.40 report to CMS.                                                                                                                          44
422.60, 422.62, 422.68, 423.38,    0938-0753  468..................  558,000..............           5 min  46,500...............       $34.66/hr  1,606
 and 423.40 record keeping.                                                                                                                        ,110
422.152 QIP....................    0938-1023  468..................  (750)................        (15 min)  (188)................       $67.54/hr  (12,6
                                                                                                                                                   64)
422.222 enrollment **..........    0938-0685  120,000..............  (120,000)............          varies  (426,000)............          varies  (24,0
                                                                                                                                                   77,10
                                                                                                                                                    0)
422.2260 and 423.2260 marketing    0938-1051  527..................  (39,298).............        (30 min)  (19,649).............       $69.08/hr  (1,35
 materials.                                                                                                                                        7,353
                                                                                                                                                     )
422.2460 and 423.2460 MLR          0938-1232  587..................  (587)................         (11 hr)  (6,457)..............      $140.14/hr  (904,
 reporting.                                                                                                                                        884)
423.120(c)(6 enrollment) **....    0938-1135  340,000..............  (340,000)............          varies  (170,000)............          varies  (10,3
                                                                                                                                                   08,80
                                                                                                                                                    0)
423.120(c)(6) create model         0938-0964  212..................  212..................            3 hr  636..................       $69.08/hr  43,93
 notices.                                                                                                                                            5
423.120(c)(6) Prepare and test     0938-0964  90...................  90...................            1040  93,600...............          $96.22  9,006
 system changes.                                                                                                                                   ,192
423.120(c)(6) 2019 prepare and     0938-0964  212..................  80,000...............        0.083 hr  6,640................       $39.22/hr  260,4
 distribute the notices.                                                                                                                            21
423.120(c)(6) 2020 and 2021        0938-0964  212..................  15,000...............        0.083 hr  1,245................       $39.22/hr  48,82
 prepare and distribute the                                                                                                                          9
 notices.
423.153(f) notice preparation..    0938-0964  219..................  3,693................        0.083 hr  307..................       $39.22/hr  12,04
                                                                                                                                                     1
423.153(f) notice upload.......    0938-0964  219..................  3,693................            5 hr  1,095................       $81.90/hr  89,68
                                                                                                                                                     1
                                ------------------------------------------------------------------------------------------------------------------------
    Subtotal: Private Sector                  varies...............  varies...............          varies  (407,171)............          varies  (21,0
     Burden.                                                                                                                                       96,48
                                                                                                                                                    4)
422.62, 423.38, and 423.40         0938-0753  18,600,000...........  558,000..............          30 min  279,000..............          $23.86  6,656
 complete enrollment.                                                                                                                              ,940
                                ------------------------------------------------------------------------------------------------------------------------
    Subtotal: Burden on                       18,600,000...........  558,000..............          30 min  279,000..............          $23.86  6,656
     Beneficaries.                                                                                                                                 ,940
422.111(a)(3) and (h)(2)(ii)       0938-1051  n/a..................  (32,026,000).........             n/a  n/a..................             n/a  (24,0
 and 423.128(a)(3) EOC paper.                                                                                                                      19,50
                                                                                                                                                    0)
422.111(a)(3) and (h)(2)(ii)       0938-1051  n/a..................  (32,026,000).........             n/a  n/a..................             n/a  (24,0
 and 423.128(a)(3) EOC toner.                                                                                                                      19,50
                                                                                                                                                    0)
422.111(a)(3) and (h)(2)(ii)       0938-1051  n/a..................  (32,026,000).........             n/a  n/a..................             n/a  (6,62
 and 423.128(a)(3) EOC mailing.                                                                                                                    9,382
                                                                                                                                                     )
                                ------------------------------------------------------------------------------------------------------------------------
    Subtotal: Non-Labor Burden.               n/a..................  (32,026,000).........             n/a  n/a..................             n/a  (54,6
                                                                                                                                                   68,38
                                                                                                                                                    2)
                                ------------------------------------------------------------------------------------------------------------------------
        Total..................               varies...............  varies...............          varies  (128,171)............          varies  (69,1
                                                                                                                                                   07,92
                                                                                                                                                    6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* OMB control numbers and corresponding CMS ID numbers: 0938-0753 (CMS-R-267), 0938-1023 (CMS-10209), 0938-0685 (CMS-855A, -855B, and -855I), 0938-1051
  (CMS-10260), 0938-1232 (CMS-10476), 0938-1135 (CMS-855O, and 0938-0964 (CMS-10141).
** The requirements and burden were set out in the NPRM text, but the figures were inadvertently excluded from the burden summary table.
This table reflects the following changes from the proposed rule:
 The marketing provision (section II.B.5. of this rule) has changes due to numerical errors and more accurate estimates as documented in the
  marketing provision.
 The minimum wage was changed from $7.25 an hour to $23.86 an hour. This is explained earlier in the opening section.
 Two rows were deleted from the Table 21 for the CARA provision (section II.B.14. of this rule) since they are properly addressed in the section
  IV. of this rule (Regulatory Impact Analysis) and do not belong in the this section (Collection of Information).
 One row was added to the preclusion provision (section III.B.12. of this rule) to reflect an omitted row on the burden to programmers to
  implement changes. The totals and subtotals were updated accordingly.
 Added enrollment figures under Sec.  Sec.   422.222 and 423.120(c)(6).

IV. Regulatory Impact Analysis

A. Statement of Need

    This final rule approaches to improve the quality, accessibility 
and affordability of the Medicare Part C and Part D programs and to 
improve the CMS customer experience. While satisfaction with these 
programs remain high, these proposals are responsive to input we 
received from stakeholders while administering the program, as well as 
through a Request for Information process earlier this year. 
Additionally, this regulation includes a number of provisions that will 
help address the opioid epidemic and mitigate the impact of increasing 
drug prices in the Part D program.

B. Overall Impact

    We examined the impact of this final rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), Section 1102(b) of the Social Security Act, 
Section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive 
Order 13771 on Reducing Regulation and Controlling Regulatory Costs 
(January 30, 2017).
    The Regulatory Flexibility Analysis (RFA), as amended, requires 
agencies to analyze options for regulatory relief of small businesses, 
if a rule has a significant impact on a substantial number of small 
entities. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and small governmental 
jurisdictions.
    This final rule affects Medicare Advantage plans and Part D 
sponsors (NAICS category 524114 with a minimum threshold for small 
business size of $38.5 million (http://www.sba.gov/content/small-business-size-standards). This final rule additionally effects 
hospitals (NAICS subsector 622), and a variety of provider categories 
including physicians, specialists, and laboratories (subsector 621).

[[Page 16703]]

    To clarify the flow of payments between these entities and the 
Federal government, note that Medicare Advantage Organizations (MAO) 
submit proposed plan designs, called bids, in June 2018 for operation 
in contract year 2019. These bids project payments to hospitals, 
providers and staff as well as the cost of administration and profits. 
These bids in turn determine the payments of the Medicare Trust Fund to 
the MAOs who reimburse providers and other stakeholders for their 
services. Consequently, our analysis will focus on MAOs.
    There are various types of health plans including, HMOs (Part D 
sponsors and MA plans), Demonstrations, Cost Plans, Prescription Drug 
Plans (PDP) and PACE plans. 42% of all Medicare health plan 
organizations are not-for-profit and 32% of all Part D sponsors and MA 
plans are not for profit (These figures were determined by examining 
records from the most recent year for which we have complete data, 
2016).
    There are a variety of ways to assess whether MAOs meet the $38.5 
million threshold for small businesses. The assessment can be done by 
examining net worth, net income, cash flow from operations and 
projected claims as indicated in their bids. Using projected monetary 
requirements and projected enrollment for 2018 from submitted bids, 32 
percent of the MAOs fell below the $38.5 million threshold for small 
businesses. Additionally, an analysis of 2016 data, the most recent 
year for which we have actual data on MAO net worth, also shows that 32 
percent of all MAO falls below the minimum threshold for small 
businesses.
    If a final rule has a substantial impact on a substantial number of 
small entities, the final rule must discuss steps taken, including 
alternatives, to minimize burden on small entities. While a significant 
number (more than 5 percent) of not-for-profit organizations and small 
businesses are affected by this final rule, the impact is not 
significant. To assess impact we use the data in Table G10 of this 
section which shows that the raw (not discounted) net effect of this 
final rule over five years is 1.5 billion dollars. Comparing this 
number to the total monetary amounts projected to be needed just for 
2019, based on plan submitted bids, we find that the impact of this 
rule is significantly below the 3 percent-5 percent threshold for 
significant impact. Had we compared the 2019 impact of the final rule 
to projected 2019 monetary need, the impact would be still less.
    In considering the requirements of the RFA certain other aspects of 
this rule have bearing. The impact of this rule is positive, that is, 
the rule has a net savings and in fact almost all provisions reduce 
burden.
    We also note that economic burden, when it exists, is not a 
significant problem for MAOs (whether small or big) since the MAOs pass 
all burden on to the Trust Fund through the bid and therefore a further 
alternative to relieve burden is not needed.
    Consequently, the Secretary has determined that this final rule 
will not have a significant economic impact on a substantial number of 
small entities and the requirements of the RFA have been met.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory analysis for any final rule under Title XVIII, Title XIX, or 
Part B of the Act that may have significant impact on the operations of 
a substantial number of small rural hospitals. We are not preparing an 
analysis for section 1102(b) of the Act because the Secretary certifies 
that this final rule will not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2017, that 
threshold is approximately $148 million. This final rule is not 
anticipated to have an effect on State, local, or tribal governments, 
in the aggregate, or on the private sector of $148 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has federalism implications. Since 
this final rule does not impose any substantial costs on state or local 
governments, the requirements of Executive Order 13132 are not 
applicable.
    If regulations impose administrative costs on MA Plans and Part D 
Sponsors, such as the time needed to read and interpret this final 
rule, we should estimate the cost associated with regulatory review. 
There are currently 468 MA plans and Part D Sponsors.
    We assume each plan will have one designated staff member who will 
read the entire rule.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $105.16 per hour, including overhead and fringe benefits 
(https://www.bls.gov/oes/2016/may/naics4_621100.htm). Assuming an 
average reading speed, we estimate that it will take approximately 15.6 
hours for each person to review this final rule. For each MA plan that 
reviews the rule, the estimated cost is therefore, $1,640 (15.6 hours x 
$105.16). Therefore, we estimate that the total cost of reviewing this 
regulation is $767,520 ($1,640 x 468 reviewers).
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

C. Anticipated Effects

1. Comprehensive Addiction and Recovery Act of 2016 (CARA) Provisions
    Section 423.153(f) will implement provisions of section 704 of 
CARA, which allows Part D plan sponsors to establish a drug management 
program that includes ``lock-in'' as a tool to manage an at-risk 
beneficiary's access to coverage of frequently abused drugs.
    Under CARA, potentially at-risk beneficiaries are to be identified 
under guidelines developed by CMS with stakeholder input. Also, the 
Secretary must ensure that the population of at-risk beneficiaries can 
be effectively managed by Part D plans. CMS considered a variety of 
options as to how to define the clinical guidelines. In the NPRM for 
this rule, we provided the estimated population of potential at-risk 
beneficiaries under different guidelines that take into account that 
the beneficiaries may be overutilizing opioids, coupled with use of 
multiple prescribers and/or pharmacies to obtain them, based on 
retrospective review, which makes the population appropriate to 
consider for ``lock-in'' and a description of the various options. We 
note that the measurement year for the estimates included in the NPRM 
was 2015. We note that the measurement year for the revised estimates 
included in Table G22 is 2017.

[[Page 16704]]



                                                 Table 22--Guidelines to Identify At-Risk Beneficiaries
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Option                    Average MME...................  Number of opioid prescribers AND opioid dispensing  Estimated number of   Estimated number of
                                                                               pharmacies                      potentially at-risk   potentially at-risk
                                                                                                               Part D                Part D
                                                                                                               beneficiaries.        beneficiaries
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Original estimates..    Revised estimates
                                                                                                              (2015)..............  (2017) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................  >=90..........................  4+......................  4+......................  33,053..............  11,753.
                          >=90..........................  6+......................  1+......................  Minimum Criteria....
2.......................  >=90..........................  4+......................  4+......................  52,998..............  22,569.
                          >=90..........................  5+......................  1+......................
3.......................  >=90..........................  3+......................  3+......................  103,832.............  44,332 Minimum
                          >=90..........................  5+......................  1+......................                         Criteria.
4.......................  >=90..........................  3+......................  3+......................  152,652.............  72,246.
                          >=90..........................  4+......................  1+......................
5.......................  >=90..........................  3+......................  3+......................  319,133.............  152,438.
                          >=90..........................  3+......................  1+......................
--------------------------------------------------------------------------------------------------------------------------------------------------------


 
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Average MME...................   Number of opioid prescribers OR opioid dispensing  Estimated number of   Estimated number of
                                                                               pharmacies                      potentially at-risk   potentially at-risk
                                                                                                               Part D                Part D
                                                                                                               beneficiaries.        beneficiaries
--------------------------------------------------------------------------------------------------------------------------------------------------------
6.......................  Any MME level.................  7+......................  7+......................  47,427 (add'l above   22,841 (add'l above
                                                                                                               Option 1)             Option 3)
                                                                                                               Supplemental          Supplemental
                                                                                                               Criteria.             Criteria.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Revised estimates use more recent 2017 PDE data (as of January 6, 2018), updated cancer exclusion specifications, and latest opioid drug list and CDC
  MME conversion factors. Also, buprenorphine products included in prescriber and pharmacy counts.

    Under Option 1, CMS proposed to integrate the CARA lock-in 
provisions with our current Part D Opioid Overutilization Policy/
Overutilization Monitoring System (OMS). We proposed to initially 
define frequently abused drugs as all and only opioids for the 
treatment of pain. The guidelines to identify at-risk beneficiaries 
will be the current Part D OMS criteria finalized for 2018 after 
stakeholder input. Plans that adopt a drug management program will have 
to engage in case management of the opioid use of all enrollees who 
meet these criteria, which will be reported through OMS and plans must 
provide a response for each case. The integration of CARA lock-in 
provisions with our current policy will allow plans to use pharmacy/
prescriber lock in as an additional tool to address the opioid 
overutilization of identified at-risk beneficiaries.
    In the proposed rule, we estimated that the CARA provisions would 
result in a net savings of $10 million (the estimated savings of $13 
million [rounded up from $12.6 million] less the total estimated costs 
of $2,836,651 = $10,163,349) in 2019. However, as noted in the 
preamble, we are finalizing modifications to our proposed policy on 
implementation of drug management. These modifications will have 
implications on the projected savings for the CARA provisions. First, 
we are expanding the definition of frequently abused drugs to include 
opioids and benzodiazepines for purposes of Part D drug management 
programs beginning 2019. Second, with respect to clinical guidelines, 
we are finalizing the criteria we proposed in Option 3 above as a 
``floor'' that Part D plan sponsors must adopt, consistent with the 
current policy as well as allowing sponsors to continue to report 
additional beneficiaries to OMS--and will adopt the following 
supplemental criteria, which will serve as a ``ceiling'': Use of 
opioids (regardless of average daily MME) during the most recent 6 
months with 7 or more opioid prescribers OR 7 or more opioid dispensing 
pharmacies. These ceiling criteria were included in the additional 
criteria options that we set forth in the chart above in the proposed 
rule; specifically, in Row 2 of option 6. We are finalizing as the 
clinical guidelines floor and ceiling criteria that include a program 
size of approximately 67,000 beneficiaries--44,000 of whom Part D 
sponsors with drug management programs must review and 23,000 of whom 
such sponsors may review.
    Therefore, we estimate that the finalized CARA provisions, in 2019, 
will result in a net cost of $2,836,652 to industry (plan sponsors) 
with a benefit of reduction in opioid prescriptions which will reduce 
Trust Fund spending by $19 million dollars. The following are details 
on each of these estimates.
    There are an additional ~23,000 at-risk beneficiaries that we 
estimate would be added to the drug management programs as a result of 
the ceiling criteria. We assume, based on past experience with OMS, 
that about 61 percent of at-risk beneficiaries may reduce prescriptions 
for frequently abused drugs and will no longer meet the clinical 
criteria. This means that prescriber and pharmacy lock-in will impact 
the remaining 39 percent of at-risk beneficiaries. CMS anticipates 
between 10 and 30 percent reduction in prescriptions for frequently 
abused drugs will be possible through drug management programs and 
picked the average, 20 percent. Therefore, in the proposed rule, we 
stated that we believe there could be a 20 percent reduction in the 
prescriptions for frequently abused drugs for at-risk beneficiaries. 
Similar to the ~44,000 at-risk beneficiaries identified by the floor 
criteria, we assumed that 39 percent of the additional 23,000 will 
reduce their opioid usage by 20 percent under the program.
    We used a proxy to identify costs for these additional 23,000 at-
risk beneficiaries, which is to pull the beneficiaries with opioid 
scripts with 7 or more pharmacies in the most recent 6 months who 
weren't part of the 44,000 under the floor criteria. However, we got 
only about 20,000 count. Since we couldn't pull those with 7 or more 
prescribers easily, we assumed the remaining 3,000 were those with 7 or 
more prescribers. For those 20,000, their opioid cost was only $31 
million and their benzodiazepines cost was $1 million. Similar to the 
other 44,000, we assumed that 39 percent of the 20,000 will reduce 
their opioid usage by 20 percent under the program. For those 39 
percent, the opioid cost for the additional at-risk beneficiaries that 
would be identified by the ceiling criteria was only $10 million and 
their benzodiazepine cost was less than $0.4 million. In fact, the 39 
percent of those

[[Page 16705]]

44,000 at-risk beneficiaries identified by the floor criteria only 
incurred $1 million of benzodiazepine costs. As a result, because the 
benzodiazepine spending among at-risk beneficiaries was so small and 
the potential savings from this program should be much smaller than 
that for opioids, CMS did not include the potential savings for 
benzodiazepines to this savings estimate.
    Because we used a proxy to identify costs for the additional 23,000 
at-risk beneficiaries and the opioid spend was not that significant, we 
assumed the cost distribution is similar to those 20,000. Since CMS 
scored the opioid savings for $2 million on the 20,000, we scaled it up 
by 23,000/20,000 to get $2.3 million savings in opioid for the ceiling 
criteria.
    Therefore, the combined projected dollar savings to the Medicare 
Trust Fund for opioids for at-risk beneficiaries identified by both the 
ceiling criteria ($2.3 million) and floor criteria ($16.3 million) is 
about $19 million (rounded up from $18.6 million) in 2019. Since the 
$19 million is an effect of the rule, it is classified as a benefit.

    Table 23--Estimated Benefits to the Trust Fund of the CARA Provision for Calendar Years 2019 Through 2023
----------------------------------------------------------------------------------------------------------------
                                                            Calendar year ($ in millions)         Total CYs 2019-
           Provision                 Regulation     ---------------------------------------------   2023 ($ in
                                     section(s)        2019     2020     2021     2022     2023      millions)
----------------------------------------------------------------------------------------------------------------
                                      Federal Government (Medicare) Impacts
----------------------------------------------------------------------------------------------------------------
Implementation of the           Various............       19       19       19       20       20             $97
 Comprehensive Addiction and
 Recovery Act of 2016 (CARA)
 Provisions.
----------------------------------------------------------------------------------------------------------------

    Part D plan sponsors will also be required to send at-risk 
beneficiaries multiple notices to notify them of about their plan's 
drug management program. Part D plan sponsors are already expected to 
send a notice to some beneficiaries when the Part D plan sponsors 
decides to implement a beneficiary-specific POS claim edit for opioids. 
Therefore, we anticipate limited additional burden for Part D plan 
sponsors to send certain at-risk beneficiaries an additional notice to 
indicate their lock-in status.
    Since 2013, there have been 4,617 POS edits submitted into MARx by 
plan sponsors for 3,961 unique beneficiaries as a result of the drug 
utilization review policy. That results in approximately 923 edits 
annually. If we assume that the number of edits or access to coverage 
limitations will double due to the addition of pharmacy and prescriber 
``lock-in'' to OMS, to approximately 1,846 such limitations, we 
estimate 3,692 initial and second notices (number of limitations 
(1,846) multiplied by the number of notices (2)) total corresponding to 
such edits/limitations. For purposes of this estimate, we assume that 
all beneficiaries who receive initial notices will be placed on an 
access limitation. We estimate it will take an average of 5 minutes 
(0.083 hours) at $39.22/hour for an insurance claim and policy 
processing clerk to prepare each notice. The burden of 307 hours (3,692 
notices x 0.083 hour) at a cost of $12,040.54 (307 hour x $39.22/hr) in 
2019 was estimated in section III of this rule.
    Part D plan sponsors are required to upload these new notice 
templates into their internal claims systems. We estimate that 219 Part 
D plan sponsors (31 PDP parent organizations and 188 MA-PD parent 
organizations) will be subject to this requirement. We estimate that it 
will take on average 5 hours at $81.90/hour for a computer programmer 
to upload the notices into their claims systems. This will result in a 
total burden of 1,095 hours (5 hours x 219 sponsors) at a cost of 
$89,680.50 (1,095 hour x $81.90/hr). In aggregate, the burden to 
prepare and upload these additional notices was estimated as 1,402 
hours (307 hours + 1,095 hours) at a cost of $101,722 ($12,041 + 
$89,681) in 2019 in section III of this final rule.
    Part D plan sponsors may also renegotiate the contracts with 
network pharmacies and network prescribers in the case of MA-PDs. For 
Part D plan sponsors that contract with pharmacies only, we estimate it 
will take 10 hours at $134.50/hour for lawyers to conduct the PDP 
contract negotiations with network pharmacies. Considering 31 sponsors 
we estimate a total burden of 310 hours at a cost of $41,695 (310 hour 
x $134.50/hour). For MA-PDs who also contract with prescribers, we 
estimate that the annual burden for negotiating a contract with network 
providers who can prescribe controlled substances to be 3,760 hours 
(188 MA-PDs x 20 hours per sponsor) at a cost of $505,720 (3,760 hour x 
$134.50/hour). The total estimated burden associated with the contract 
negotiations from both PDP and MA-PD sources in 2019 was estimated as 
4,070 hours (310 hours + 3,760 hours) at a cost of $547,415 ($41,695 + 
$505,720).
    We estimate that, in order to implement pharmacy or prescriber 
lock-in, Part D plan sponsors will have to program edits into their 
pharmacy claims systems so that once they restrict an at-risk 
beneficiaries' access to coverage for frequently abused drugs through 
applying pharmacy or prescriber lock-in, claims at a non-selected 
pharmacies or associated with prescriptions for frequently abused drugs 
from non-selected prescribers will be rejected. We believe that most 
Part D plan sponsors with Medicaid or private lines of business will 
have existing lock-in programs in those lines of business to pull 
efficiencies from. We estimate it will take a total number of 26,280 
labor hours across all 219 Part D plan sponsors (31 PDP parent 
organizations and 188 MA-PD parent organizations) at a wage of $81.90 
an hour for computer programmers to program these edits into their 
existing systems. Thus, the total cost to program these edits is 26,280 
hours x $81.90 = $2,152,332.
    The right of an enrollee to appeal an at-risk determination will 
also have an associated cost. As explained, we estimate a total hourly 
burden of 178 hours at an annual estimated cost of $35,183 in 2019. As 
previously discussed, we estimate that 1,846 beneficiaries will meet 
the criteria for being identified as an at-risk beneficiary. Based on 
validated program data for 2015, 24 percent of all adverse coverage 
determinations were appealed to level 1. Given the nature of drug 
management programs, the extensive level of case management conducted 
by plans prior to making the at-risk determination, and the opportunity 
for an at-risk beneficiary to submit preferences to the plan prior to 
lock-in implementation, we believe it is

[[Page 16706]]

reasonable to assume that this rate of appeal will be reduced by at 
least 50 percent for at-risk determinations made under a drug 
management program. Therefore, this estimate is based on an assumption 
that about 12 percent of the beneficiaries estimated to be subject to 
an at-risk determination (1,846) will appeal the determination. Hence, 
we estimate that there will be 222 level 1 appeals (1,846 x 12 
percent). We estimate it takes 48 minutes (0.8 hours) to process a 
level 1 appeal. There is a statutory requirement that a physician with 
appropriate expertise make the determination for an appeal of an 
adverse initial determination based on medical necessity. Thus, we 
estimate an hourly burden of 178 hours (222 appeals x 0.8) at a cost of 
$197.66 per hour for physicians to perform these appeals. Thus the 
total cost in 2019 is estimated as $35,183 = 178 hours x $197.66.
    In aggregate, this provision will result, in 2019, in a net cost of 
$2,836,652 ($101,722 + $547,415 + $2,152,332 + $35,183). Additionally, 
an effect of the regulatory lock-in is a benefit of reduced opioid 
scripts resulting in a reduction of $19 million in payments by the 
Trust Fund.
    We received the following comments and our response follows:
    Comment: A commenter agreed with CMS's estimate that the proposed 
Medicare lock-in program could prevent or reduce the human toll of 
opioid abuse and overuse and generate a savings in 2019 of $13 million 
to the Trust Fund because of reduced scripts, and that our estimate of 
savings are consistent with recent research that found that lock-in 
programs have reduced spending on opioid prescriptions and decreased 
the number of prescriptions and pharmacies used by at-risk individuals 
in state Medicaid programs.
    Response: We thank the commenter for their agreement. We do note 
that modifications to the CARA provisions have been finalized, which 
has changed the regulatory impact. We now anticipate a projected 
savings of $17 million in 2019.
2. Reducing the Burden of the Compliance Program Training Requirements 
(Sec. Sec.  422.503 and 423.504)
    The final provision will amend the regulation so that first-tier, 
downstream and related entities (FDR) no longer are required to take 
the CMS compliance training, which lasts 1 hour, and so that MA 
organizations and Part D sponsors no longer have a requirement to 
ensure that FDRs have compliance training. However, it is still the 
sponsoring organization's responsibility to manage relationships with 
its FDRs and ensure compliance with all applicable laws, rules and 
regulations. Furthermore, we will continue to hold sponsoring 
organizations accountable for the failures of its FDRs to comply with 
Medicare program requirements.
    We believe that by deleting this provision we will reduce burden 
for sponsoring organizations and their FDRs. We estimate that the 
burden reduction will be roughly 1 hour for each FDR employee who will 
be required to complete the CMS training on an annual basis, under the 
current regulation at Sec. Sec.  422.503(b)(4)(vi)(C) and 
423.504(b)(4)(vi)(C).
    We do not know how many employees were required to take the CMS 
training, nor do we know the exact numbers of FDRs that were subject to 
the requirement. Sponsoring organizations have discretion in not only 
which of their contracted organizations meet the definition of an FDR, 
but also discretion in which employees of that FDR are subject to the 
training. But we know from public comments that PBMs, hospitals, 
pharmacies, labs, physician practice groups and even some billing 
offices were routinely subjected to the training.
    Unfortunately, the Medicare Learning Network (MLN) Matters[supreg] 
website is not able to track the number of people that took CMS' 
training, so we cannot use that as a data source.
    CMS has reviewed the Organization for Economic Co-operation and 
Development's (OECD) 2015 statistics which show a total of 20,076,000 
people employed in the health and social services fields in the United 
States, although certainly not all of them were subject to CMS' 
training requirement (See http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT). Hospitals are one sector of the 
health industry that has been particularly vocal about the burden the 
current training requirement has placed on them and their staff. If we 
use hospitals as an example to estimate potential burden reduction, the 
OECD website states that there are 5,627 hospitals in the United 
States, employing 6,210,602 people. That is an average of 1,103 people 
per hospital. There are approximately 4,800 hospitals registered with 
Original Medicare. If we assume that each one of those hospitals holds 
at least one contract with a MA health plan and all of their employees 
were subjected to the training (4,800 x 1,103 x 1 hour) that is 
5,294,400 hours of burden that will be eliminated by this proposal. If 
we add pharmacists, pharmacy technicians, billing offices, physician 
practice groups, we will expect further burden reduction. OECD has data 
for a few more sectors of the industry, including 295,620 pharmacists, 
3,626,060 nurses and 820,251 physicians in the United States. Many of 
the physicians and nurses are likely represented in the 6 million 
employed by hospitals. Unfortunately we don't have data sources for all 
sectors of the industry. However, using hospital staff as a starting 
point and OECD's total figure of 20 million working in the health and 
social service fields, we estimate the burden reduction is likely 6 to 
8 million hours each year. Again, we have no way to determine exactly 
how many FDRs there are or exactly how many staff will be expected to 
take the training under the current regulation, but we hope this 
example demonstrates the reduction in burden this proposal will mean 
for the industry.
    We requested comment in order to develop a more complete 
monetization of cost savings. However, we received no comments on this 
burden estimate in the proposed rule.
    We did receive numerous comments on the corresponding regulatory 
proposal, with overwhelming support for finalizing the provision as 
proposed. Most commenters who expressed their support for the proposal 
commented on the tremendous burden the current CMS compliance training 
requirements imposed, and agreed with CMS that the proposal would 
greatly reduce burden on FDRs and sponsoring organizations.
    Therefore we are finalizing this provision as proposed without a 
quantitative estimate of impact.
3. Meaningful Differences in Medicare Advantage Bid Submissions and Bid 
Review (Sec. Sec.  422.254 and 422.256)
    For CY 2018 bids, 2,743 non-D-SNP non-employer plans (that is, HMO, 
HMO-POS, Local PPO, PFFS, and RPPO) used in house and/or consulting 
actuaries to address the meaningful difference requirement based on CY 
2018 bid information. The most recent Bureau of Labor Statistics report 
states that actuaries made an average of $54.87 an hour in 2016, and we 
estimate that 2 hours per plan are required to fully address the 
meaningful difference requirement. The estimated hours are based on 
assumptions developed in consultation with our Office of the Actuary. 
We additionally allow 100 percent for benefits and overhead costs of 
actuaries, resulting in an hourly wage of $54.87 x 2 = $109.74. 
Therefore, we estimate a savings of 2 hours per plan x 2,743 plans = 
5,486 hours reduction in hourly burden with a savings in cost of 5,486 
hours x $109.74 = $602,033.64, rounded down to $0.6 million to be

[[Page 16707]]

saved annually under this proposal. The $0.6 million reflects a savings 
to industry from reduced use of actuarial resources.
    The number of plan bids received by CMS may increase because of a 
variety of factors that are not related to the elimination of the 
meaningful difference requirement, such as payments, bidding and 
service area strategies, serving unique populations, and in response to 
other program constraints or flexibilities. Business decisions made by 
MA organizations or potential MA program new entrants that are not 
related to the elimination of the meaningful difference requirement are 
not included in this impact analysis. As noted in the preamble 
discussion, several commenters expressed concerns about the ability of 
Medicare beneficiaries to make the nuanced comparisons among various 
plan types and benefit packages, limited resources to assist 
beneficiaries with complicated decisions, and older people and people 
with disabilities not using technology to the same extent as non-
Medicare beneficiary populations in making plan comparisons (for 
example, MPF). CMS expects that eliminating the meaningful difference 
requirement will improve plan choice for beneficiaries by driving 
provider network and benefit package innovation and affordable health 
care coverage. Several commenters, as discussed in the preamble, noted 
that eliminating the current meaningful difference requirement that 
established arbitrary differences between plans will allow MA 
organizations to put the beneficiary at the center of benefit design as 
MA organizations will not be pressured to make benefit changes to 
comply with an arbitrary requirement that may ultimately result in 
higher premiums and/or cost sharing for beneficiaries. This will result 
in MA organizations being able to offer a portfolio of plan options 
with clear differences between benefits, providers, and premiums that 
are more easily understood by beneficiaries. CMS expects that 
eliminating the meaningful difference requirement will improve the plan 
options available for beneficiaries, but does not believe the number of 
similar plan options offered by the same MA organization in each county 
will necessarily increase significantly or create more confusion in 
beneficiary decision-making related specifically to the number of plan 
options. As it is unknown how many organizations will choose to add 
plan options as a result of this provision, we are unable to estimate 
the impact to beneficiaries should this lead to more competition. CMS 
expects increased competition will lead to potentially lower premiums 
and/or cost-sharing for Medicare beneficiaries. CMS does not anticipate 
beneficiaries will need additional time to compare differences between 
plans related to the elimination of the meaningful difference 
requirement. This particular change is expected to help MA 
organizations differentiate plan offerings more effectively so that 
beneficiaries can make decisions more efficiently. We believe that the 
tools and information CMS provides for beneficiaries to make decisions 
(for example. Medicare Plan Finder, Medicare and You Handbook, 1-800-
MEDICARE), in addition to our enforcement of communication and 
marketing requirements, aim to mitigate any potential choice overload.
    CMS does not believe this change will have a significant impact on 
health care providers. The number of plans offered by organizations in 
each county are not expected to increase significantly as a result of 
this change and health care provider contracts with MA organizations 
typically include all of the organization's plans. In addition, CMS 
does not expect a significant increase in time spent on bid review as a 
result of eliminating meaningful difference requirement nor does CMS 
expect this change will increase provider burden.
    We received the following comments, and our response follows:
    Comment: A few commenters supported this proposal and referenced 
the potential savings in a positive manner.
    Response: We thank the commenters for their support.
    Comment: Some commenters had concern that eliminating the 
meaningful difference requirement would result in a large number of 
plan options and believe this potential outcome may challenge or 
complicate beneficiary decision-making; these commenters questioned if 
elimination of the requirement provides enough benefits to outweigh the 
risks. A commenter did not support this proposal but noted that the 
estimated savings from eliminating the meaningful difference 
requirement was significant. This commenter stated concern that this 
proposal would result in beneficiary choice anxiety from the potential 
increase in plan options. Another commenter did not find the estimated 
savings significant enough to warrant finalizing this proposal.
    Response: The intention of this proposal is to improve competition, 
innovation, available benefit offerings, and provide beneficiaries with 
affordable plans that are tailored for their unique health care needs 
and financial situation. The primary motivation for our proposal is the 
improvement of plan innovation for a growing MA beneficiary population; 
reduction of resources and plan expenses was not a major factor in this 
particular proposal. The number of plan bids may increase because of a 
variety of factors that are not related the elimination of the 
meaningful difference requirement, such as new MA entrants, payments, 
bidding and service area strategies, serving unique populations, and in 
response to other program constraints or flexibilities. MA 
organizations are expected to continue designing PBPs that, within a 
service area, are different from one another with respect to key 
benefit design characteristics. MA organizations also consider 
beneficiary choice anxiety when developing their own portfolio of plan 
offerings, so that sales and broker personnel and marketing materials 
can highlight key differences between their plan offerings and support 
informed choice. CMS will continue to provide beneficiaries with tools, 
such as MPF, to evaluate plan options and assist in choosing the best 
option. Beneficiaries may continue to limit their choices based on 
characteristics, such as plan type, Part D coverage, differences in 
provider network, Part B and plan premiums, and unique populations 
served (for example, special needs plans). As stated in Meaningful 
Differences in Medicare Advantage Bid Submissions and Bid Review 
(Sec. Sec.  422.254 and 422.256), we are going to use our existing 
authority at Sec.  422.2268, and CMS will monitor to ensure 
organizations are not engaging in activities that are discriminatory or 
potentially misleading or confusing to Medicare beneficiaries. CMS will 
communicate and work with organizations that appear to offer a large 
number of similar plans in the same county and discuss any concerns. 
For example, from a beneficiary's perspective, CMS would expect plans 
within the same contract, plan type and county be distinguishable by 
beneficiaries using such factors as the inclusion or exclusion of Part 
D coverage, provider network, plan premium, Part B premium buy-down, 
estimated out-of-pocket costs, and benefit design. CMS intends to issue 
guidance through the annual Call Letter process and HPMS memoranda to 
help organizations avoid potential beneficiary confusion; we expect a 
minimal number of contacts with MA organizations regarding these 
concerns.
    We received less than 10 comments on this proposal that 
specifically

[[Page 16708]]

referenced the estimated savings of eliminating the meaningful 
difference requirement and the only concern noted about the estimated 
savings was that it was not significant. Therefore, we are finalizing 
this provision without modification.
4. Physician Incentive Plans--Update Stop-Loss Protection Requirements 
(Sec.  422.208)
    As we discussed in the proposed rule, some physician contracts with 
MA organizations provide that the MA organization pay the physician a 
capitated amount to assume financial responsibility for services (for 
example, hospital costs) that they do not personally render. CMS refers 
to capitations to physicians that include services the physicians do 
not render as ``global capitation.'' When physicians are globally 
capitated to the extent that they can lose more than 25 percent of 
their income, they are required to be covered by stop-loss insurance. 
With this final rule we are replacing the current insurance schedule in 
the regulation with updated stop-loss insurance requirements that will 
allow insurance with higher deductibles. This updated schedule will 
result in a significant reduction to the cost of obtaining stop-loss 
insurance. The higher deductibles are consistent with the increase in 
medical costs due to inflation.
    To determine the cost of different stop-loss insurance policies, we 
used claim distributions from original Medicare enrollees. Then, we 
assumed an average loading for administrative and profit of 20 percent. 
Using these assumptions, we estimate that plans and physicians would 
save an average of $100 per globally capitated member per year in total 
costs. The derivation of this $100 figure is described below.
    Under the current regulation at Sec.  422.208(f)(2)(iii), stop-loss 
insurance for the provider (at the MA organization's expense) is needed 
only if the number of members in the physician's group at global risk 
under the MA plan is less than 25,000. The average number of members in 
the under-25,000 group estimated under the current regulation is 6,000 
members. Ideally, to obtain an average, we should weight the panel 
sizes in the chart at Sec.  422.208(f)(2)(iii) by the number of 
physician practices and the number of capitated patients per practice 
per plan.
    However, this information is not available. Therefore, we used the 
median of the panel sizes listed in the chart at Sec.  
422.208(f)(2)(iii), which is about 8,000. Since the per member per year 
(PMPY) stop-loss premiums are greater for a smaller number of patients, 
we lowered this 8,000 to 6,000 to reflect the fact that the 
distribution of capitated patients is skewed to the left. We use this 
rough estimate of 6,000 for its estimates.
BILLING CODE 4120-01-P

[[Page 16709]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.017

BILLING CODE 4120-01-C
    For these 6,000 members, the current regulation at Sec.  
422.208(f)(2)(iii) (the chart) shows the physician needs stop-loss 
insurance for $37,000 in a combined attachment point (deductible). The 
$37,000 is obtained by using linear interpolation on the chart at Sec.  
422.208(f)(2)(iii), replacing panel sizes with midpoints of ranges and 
rounding to the nearest 1,000. To find the premium for a stop-loss 
insurance with a deductible of $37,000, we use Table 24, which reflects 
current insurance rates, that is, what would be charged

[[Page 16710]]

today. By using linear interpolations on the columns with $30,000 and 
$40,000 and rounding to the nearest $1,000, we see that the PMPY 
premium for insurance with $37,000 combined attachment points is $2,000 
PMPY. This $2,000 premium reflects the baseline charge today for a 
combined deductible of $37,000.
    Next, we compute the premium under the finalized rule. We still 
assume an average of 6,000 capitated members. However, the finalized 
rule allows higher deductibles corresponding to medical inflation. The 
new deductibles may be found in Table 26. By using linear interpolation 
on the columns headed with 50,000 and 60,000 combined attachment points 
and rounding, we see that a deductible (combined attachment point) of 
$57,000 corresponds to 6,000 capitated members and a premium of $1,500 
PMPY.
    The difference in premium between using (i) Sec.  422.208(f)(iii) 
to calculate deductibles (combined attachment point) and (ii) using 
Table 26 to calculate deductibles results in a savings of $2,000-$1,500 
= $500 PMPY. We assume that the average loading for profit and 
administrative costs is roughly 20 percent. So our PMPY savings is 20 
percent x 500 = $100 PMPY.
    The $500 PMPY savings is not true savings since the plans and 
physicians are simply trading claims for premiums to the insurance 
company. Since the net impact is $0, the $500 is not listed as either a 
savings or transfer. However, the reduced $100 PMPY for profit and 
admin reflects a reduction in reinsurance service resources and hence 
is classified as a savings. However, not all of the $100 PMPY results 
in reductions in dollars spent by the Trust Fund. The details are as 
follows.
    In 2007, we estimated that 7 percent of enrollees were receiving 
services under capitated arrangements. Although we do not have more 
current data, based on CMS observation of managed care industry trends, 
we believe that the percentage is now higher, and we assume that 11 
percent of enrollees are now paid under global capitation. There are 
currently 18.6 million MA beneficiaries. We estimate that about 18.6 
million x 11 percent = 2,046,000 MA members are paid under some degree 
of global capitation. Accordingly, using our revised stop loss 
insurance requirement in this final rule, we estimate the total 
aggregate projected annual savings, reflecting a reduction in 
reinsurance services will be roughly $100 PMPY x 2,046,000 million 
beneficiaries paid under global capitation = $204.6 million.
    The $204.6 million savings is removed from the plan bid, but not 
the CMS benchmark. If the benchmark exceeds the bid, Medicare pays the 
MA organization the bid (capitation rate and risk adjustment) plus a 
percentage of the difference between the benchmark and the bid, called 
the rebate. The rebate is based on quality ratings and allows Medicare 
to share in the savings to the plans; our experience with rebates shows 
that the average rebate is on the order of \2/3\. We therefore assumed 
that of the $204.6 million in annual savings, the Medicare Trust fund 
will reduce payments by 35 percent x $204.6 million = $71,610,000; the 
remaining 65 percent x $204.6 million = $132,990,000 will be returned 
to the plans as rebates. These rebates will fund extra benefits or 
possibly reduce cost sharing for plan members.
    The figures for 2019 were updated for 2020 to 2023 using enrollment 
and inflation factors found in the CMS trustees report, accessible at: 
https://www.cms.gov/reportstrustfunds.
    We received no comments on our impact analysis. However, we did 
receive comments on the methodology CMS is using to calculate stop loss 
insurance requirements. We respond to those comments in the preamble 
and the section for the Physician Incentive Plan regulation update to 
42 CFR 422.208.
    We are finalizing the update to the physician incentive regulation 
stop-loss table as proposed.
5. Changes to the Agent/Broker Requirements (Sec. Sec.  422.2272(e) and 
423.2272(e))
    We proposed to delete the limitation placed on MA organizations and 
Part D sponsors as to how they can respond to an agent/broker who has 
become unlicensed. We proposed to delete a requirement that the MA plan 
or Part D plan terminate an unlicensed agent or broker and contact 
beneficiaries to notify them if they had been enrolled by the 
unlicensed agent or broker. We already require MA organizations and 
Part D sponsors to use only licensed agents/brokers. We have 
established the requirement to have a licensed agent or broker in a 
2008 final rule (73 FR 54219). That burden assessment is not changing 
due to the proposal to remove paragraph (e) from these sections. The 
impact analysis for the specific provision at paragraph (e) of 
Sec. Sec.  422.2272 and 423.2272 was established in rule-making in 
April 2011 (76 FR 21534). As for the impact of review and compliance 
activities that remain to plans after removing the narrow scope of 
compliance actions available to MA organizations and Part D sponsors, 
we do not believe this change will have a significant increase in 
burden or financial impact. Removing this requirement allows state 
Department of Insurance (DOI) requirements to take precedence in this 
situation. While some MA organizations and Part D sponsors may choose 
to make operational changes to ensure compliance, these changes are not 
based on this rule, but are required to meet existing requirements.
    We received no comments on this proposal and therefore are 
finalizing this provision without modification.
6. Coordination of Enrollment and Disenrollment Through MA 
Organizations and Effective Dates of Coverage and Change of Coverage
    We proposed to revise our regulations at Sec.  422.66 to permit 
default enrollment of Medicaid managed care plan members into an MA 
special needs plan for dual eligible beneficiaries. Upon a Medicaid 
managed care plan member becoming eligible for Medicare, qualification 
for enrollment into the MA special needs plan for dual eligibles is 
contingent on the following:
     State support for the default enrollment process, and
     The organization's ability to identify such individuals 
and issue written notification of the enrollment a minimum of 60 days 
in advance of their Medicare eligibility.
    Our proposal represented the partial codification of existing 
policy on seamless conversion enrollment that has been specified in 
subregulatory guidance since 2006, but with additional parameters and 
limits. Under the new requirements, seamless conversion default 
enrollments can only occur from the organization's Medicaid managed 
care plan into an integrated D-SNP with facilitation from the state (in 
the form of a contract term and provision of data). This will result in 
the discontinuation of the use of the current seamless conversion 
enrollment mechanism by some of the approved MA organizations. However, 
as this enrollment mechanism is voluntary and not required for 
participation in the MA program, we do not believe the changes will 
have any impact to the Medicare Trust Funds.
    We did not receive comments on the burden estimates associated with 
this proposal. We did receive comments on the substantive proposal, 
which we address in this final rule. As indicated in the preamble to 
this final rule, we are finalizing the proposed changes with the 
following modifications, none of which we believe will result in any 
impact to the Medicare Trust Funds.

[[Page 16711]]

     Section 422.66(c)(2)(i) is revised to clarify that we will 
allow default enrollment into a FIDE-SNP administered by an MA 
organization under the same parent organization as the organization 
that operates the Medicaid managed care plan in which the individual 
remains enrolled.
     Section 422.66(c)(2)(i) is revised to clarify that, for an 
organization to be approved for default enrollment, it must have an 
overall quality rating, from the most recently issued ratings, under 
the rating system described in Sec. Sec.  422.160 through 422.166, of 
at least 3 stars or is a low enrollment contract or new MA plan as 
defined in Sec.  422.252. In addition, the MA organization must not be 
under an enrollment suspension.
     Section 422.66(c)(2)(ii) is revised to include an approval 
period not to exceed 5 years, subject to CMS authority to rescind or 
suspend approval if the plan is non-compliant.
     Section 422.66(c)(2)(iv) is revised to state that the 
notice issued by the MA organization will include information on the 
differences in premium, benefits and cost sharing between the 
individual's current Medicaid managed care plan and the dual eligible 
MA special needs plan and the process for accessing care under the MA 
plan; an explanation of the individual's ability to decline the 
enrollment, up to and including the day prior to the enrollment 
effective date, and either enroll in Original Medicare or choose 
another MA plan; and a general description of alternative Medicare 
health and drug coverage options available to an individual in his or 
her Initial Coverage Election Period.
     Section 422.66(c)(2)(iv) is revised to clarify that the 
mandatory notice is in addition to the information and documents 
required to be provided to new enrollees under Sec.  422.111.
7. Restoration of the MA Open Enrollment Period (Sec. Sec.  422.60, 
422.62, 422.68, 423.38 & 423.40)
    We expect that increasing the amount of time that MA-enrolled 
individuals are given to switch plans will result in slightly more 
beneficiaries selecting plans that receive Quality-Bonus Payments 
(QBP). This assessment reflects our observation that beneficiaries tend 
to choose plans with higher quality ratings when given the opportunity. 
The projected costs to the Government by extending the open enrollment 
period for the first 3 months of the calendar year are $9 million for 
CY 2019, $10 million in 2020, $10 million in 2021, $11 million in 2022, 
and $12 million in 2023.
    In estimating the additional costs for the projection window 2019-
2023, we assumed that approximately 24,600 MA-enrolled individuals 
would switch health plans from one without a QBP to one with a QBP 
during the extended open enrollment period. The 24,600 enrollee 
assumption was determined by using a combination of published research 
and by observing historical enrollment information. Published research 
\1\ shows that 10 percent of MA enrollees voluntarily switch MA plans 
and that MA enrollees who voluntarily switch plans change to plans with 
slightly higher star ratings than their original plan, with a modest 
improvement of 0.11 stars, on average. The Office of the Actuary 
confirmed these findings by analyzing CMS enrollment data and provided 
further detail. We estimate that of the 10 percent of MA plan enrollees 
who switch plans, 15 percent move to a higher rated plan. Of those who 
go to a higher rated plan, we estimate 40 percent move from a non-QBP 
plan to a QBP plan. We also estimate that one-fifth of these enrollees 
will take advantage of the new open enrollment period.
    We applied these assumptions to the estimated MA enrollment for 
2019, 20,512,000, which can be obtained from the CMS Trustee's Report 
available at https://www.cms.gov/reportstrustfunds/. We figured that 
24,600 (20,512,000 x 10 percent x 15 percent x 40 percent x 20 percent) 
people are expected to enroll in the open enrollment period.
    The $9 million in additional costs for 2019 was calculated by 
multiplying the 24,600 impacted enrollment by the expected 2019 bonus 
amount ($637.20). The Office of the Actuary experiences an average 
rebate percentage of 66 percent and an 86 percent backing out of the 
projected Part B premium. Hence, the net costs to the trust funds is 
estimated as $9 million = 24,600 enrollees x $637.20 (Bonus payment) x 
66 percent (rebate percentage) x 86 percent (Reduction in Part B 
premium), rounding to $9 million.
    Then, we applied trends from the Trustees Report to the 2019 
estimate in order to project the costs for years 2020 to 2023. The data 
from the Medicare Payments to Private Health Plans, by Trust Fund 
(Table IV.C.2. of the 2017 Medicare Trustees Report) was used as the 
basis for the trends. The trend estimates are presented in the Table 25 
that demonstrates the calculations and displays the cost estimates for 
each year 2019-2023. These costs are classified as transfers since 
there is no increase in resources. The costs reflect switching from 
health plans without bonuses to health plans with bonuses. Thus the 
healthcare services to the enrollees that switch remain the same (no 
increase in resources) albeit at a higher cost.

                 Table 25--Calculation of Increased Dollar Spending by the Medicare Trust Funds for the Extended Open Enrollment Period
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Net costs
                                                          2019 base year   Trend factor    Trend factor    Trend factor    Trend factor     (rounded to
                          Year                               (million)         2020            2021            2022            2023           nearest
                                                                                                                                             million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019....................................................               9  ..............  ..............  ..............  ..............               9
2020....................................................               9           1.078  ..............  ..............  ..............              10
2021....................................................               9           1.078           1.084  ..............  ..............              10
2022....................................................               9           1.078           1.084           1.089  ..............              11
2023....................................................               9           1.078           1.084           1.089           1.086              12
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To the impact on the Trust Fund, must be added the impact on Part C 
plans and Part D sponsors from enrollment. This impact was estimated in 
the Collection of Information section as $6.1 million ($3.2 million for 
determining eligibility + $0.64 million for notification of enrollees + 
$0.64 million for submission of enrollment information to CMS + $1.6 
million for storage of enrollment forms). Determination of eligibility, 
notification of enrollees, and submission to CMS use added resources 
and therefore are classified as a cost to the plan. However, the cost 
of storage is classified as a transfer since the costs of storage of 
enrollment by the plan elected during

[[Page 16712]]

the open enrollment period are offset by the savings of cost of storage 
of enrollment by the former plan from which enrollment is taking place. 
Thus, $1.6 million of the $6.1 million is a transfer between plans and 
sponsors while the remaining $6.1-$1.6 = $4.5 million is an actual 
cost.
    Hence, the total cost of this open enrollment provision for 2019 is 
$4.5 million with a transfer of $10.6 million ($9 million to the Trust 
fund + $1.6 million in enrollment actions).
    We received no comments on the reduction in burden estimates 
associated with this proposal. We received comments on the substantive 
proposal, which we address in this final rule. As indicated in the 
preamble to this final rule, we are finalizing this provision as 
proposed.
8. Lengthening Adjudication Timeframes for Part D Payment 
Redeterminations and IRE Reconsiderations
    We believe the changes will result in a reduction of burden to Part 
D plan sponsors since they will have additional time to adjudicate 
requests for payment. We also expect a reduction in burden for the 
independent review entity (IRE) since the additional time for Part D 
plan sponsors to process these requests will result in fewer untimely 
payment redeterminations that must be auto-forwarded to the IRE. Based 
on recent program data, about 2,000 retrospective payment 
redetermination cases are auto-forwarded to the Part D IRE each plan 
year. We estimate that about 75 percent of the payment redetermination 
cases that are currently auto-forwarded to the Part D IRE due to the 
plan not being able to meet the adjudication timeframe will not be 
auto-forwarded under the 14 day timeframe; the longer timeframe will 
afford Part D plan sponsors an additional 7 days to process a payment 
request, including obtaining necessary supporting documentation, and to 
notify the enrollee of its decision. As a result, overall plan sponsor 
burden will be reduced by not having to auto-forward about 1,500 
payment redetermination cases to the Part D IRE in a given plan year 
and the Part D IRE's workload will be reduced by the same number of 
cases.
    We estimate that it takes Part D plan sponsors an average of 15 
minutes (0.25 hours) to assemble and forward a case file to the IRE, 
for an estimated savings of 375 hours (1500 cases x 0.25 hours). Using 
an adjusted hourly wage of $34.66 based on the Bureau of Labor 
Statistics May 2016 website for occupation code 43-9199, ``All other 
office and administrative support workers,'' (based on a mean hourly 
salary of $17.33, which when multiplied by a factor of two to include 
overhead, and fringe benefits, resulting in $34.66 an hour) the total 
estimated savings to plans is $12,998 (375 hours x $34.66). Since the 
changes involve requests for payment where the enrollee has already 
received the drug, we do not believe the changes will impose undue 
burden on enrollees.
    We did not receive comments on the reduction in burden estimates 
associated with this proposal. We did receive comments on the 
substantive proposal, which we address in this final rule. As indicated 
in the preamble to this final rule, we are finalizing this provision as 
proposed.
9. Elimination of Medicare Advantage Plan Notice for Cases Sent to the 
IRE
    The changes at Sec.  422.590(f) will result in a slight reduction 
of burden to Part C plans by no longer requiring a Notice of Appeal 
Status for each case file forwarded to the IRE. The estimated savings 
of this change is based on reduced plan administration costs. Using the 
number of partially and fully adverse cases, we estimate Part C plans 
forwarded 47,108 cases to the IRE in 2015. We estimate it will take 5 
minutes (0.083 hours) to complete this notice. We used an adjusted 
hourly wage of $34.66 based on the Bureau of Labor Statistics May 2016 
website for occupation code 43-9199, ``All other office and 
administrative support workers,'' which gives a mean hourly salary of 
$17.33, which when multiplied by a factor of two to include overhead, 
and fringe benefits, result in $34.66 an hour. Thus, the reduction in 
administrative time spent will be 0.083 hours x 47,108 cases = 3,910 
hours with a consequent savings of 3,910 hours x $34.66 per hour = 
$135,520. This is a savings to industry since it reduces the computer 
and staff resources needed to produce and send out notices.
    We do not believe the change will adversely impact health plan 
enrollees. The notice requirement we are eliminating is duplicative and 
enrollees will be notified by the IRE that their case was received by 
the IRE for review.
    We did not receive comments on the burden estimates outlined in the 
proposed rule, therefore we are finalizing this provision as proposed.
10. Revisions to Parts 422 and 423, Subpart V, Communication/Marketing 
Materials and Activities
    CMS proposed to narrow the definition of ``marketing materials'' 
under Sec. Sec.  422.2260 and 423.2260 to only include materials and 
activities that aim to influence enrollment decisions. CMS believes the 
proposed definitions appropriately safeguard potential and current MA/
PDP enrollees from inappropriate steering of beneficiary choice, while 
not including materials that pose little risk to current or potential 
enrollees and are not traditionally considered ``marketing.'' The 
proposed change will add text to Sec. Sec.  422.2260 and 423.2260 and 
provide a narrower definition than is currently provided for 
``marketing materials.'' Consequently, this definition decreases the 
number of marketing materials that must be reviewed by CMS before use. 
Additionally, the proposal will more specifically outline the materials 
that are and are not considered marketing materials.
    We believe the net effects of the proposed changes will reduce the 
burden to MA organizations and Part D Sponsors by reducing the number 
of materials required to be submitted to CMS for review.
    In section IV.F. of this final rule, we estimated the reduced 
burden to industry at $1.4 million. There is also a reduced burden to 
the federal government since CMS staff are no longer obligated to 
review these materials. Although all marketing materials are submitted 
for potential review by the MA plans to CMS, not all materials are 
reviewed, since some MA plans, because of a history of compliance, have 
a ``file and use'' status which exempts their materials from routine 
reviews. We estimate that only 10 percent of submitted marketing 
materials are reviewed by CMS staff. Consequently, the savings to the 
federal government is 10 percent x $1.4 million = $0.14 million.
    We received no comments on our proposal and therefore we are 
finalizing this provision without modification.
11. Medicare Advantage and Part D Prescription Drug Plan Quality Rating 
System
    There has been a recent trend in the number of enrollees that have 
moved from lower Star Ratings contracts that do not receive a Quality 
Bonus Payment (QBP) to higher rated contracts that do receive a QBP as 
part of contract consolidations. The proposal is to modify the 
methodology of the Star Ratings assigned to consolidating contracts and 
to codify that methodology. The methodology and measures are generally 
from recent practice and policies finalized under the section 1853(b) 
of the Act Rate Announcement. With regard to consolidations, the Star 
Ratings assigned will be based on the enrollment weighted average of 
the

[[Page 16713]]

measure scores of the surviving and consumed contract(s) so that the 
ratings reflect the performance of all contracts (surviving and 
consumed) involved in the consolidation. We believe that the proposal 
will dissuade many plans from consolidating contracts since it will be 
possible for some plans to lose QBPs under certain scenarios. If less 
contracts consolidate to higher Star Ratings, less QBPs will be paid to 
plans and this will result in Trust Fund transfers. Plans receiving 
smaller or no bonuses may reduce benefits, thus transferring the costs 
of benefits to the beneficiary, but we do not believe this will be 
widespread since plans would lose enrollees if they excessively 
curtailed benefits.
    In order to estimate the savings amounts for the projection window 
2019-2023, we first observed the number of enrollees that have been 
impacted by contract consolidations for the prior 3 contract years 
(2016 through 2018) using a combination of bid and CMS enrollment/
crosswalk data. The number of enrollees observed are those that have 
moved from a non-QBP contract to a QBP contract and were found to be 
approximately 830,000 in 2016, 530,000 in 2017, and 160,000 in 2018. We 
assumed that the number of enrollees moving from a non-QBP contract to 
a QBP contract will be 200,000 starting in 2019 and increasing by 3 
percent per year throughout the projection period. The 200,000 starting 
figure was chosen by observing the decreasing trend in the historical 
data as well as placing the greatest weight on the most recent data 
point. The 3 percent growth rate is approximately the projected growth 
in the MA eligible population during the 2019-2023 period.
    Similarly, we calculated the net per member per month (PMPM) dollar 
impact of the QBP for those enrollees in contracts that consolidated to 
be $44.73 in 2018. Again, the PMPM impact was projected for the 2019-
2023 period using the projected annual trend of 5 percent per year 
which is similar to the projected growth rate for MA expenditures and 
can be found in the 2017 Trustees Report. We also made an assumption 
that even under the Star Rating methodology changes, there will still 
be 50 percent of the projected impacted enrollees that will consolidate 
or individually move from a non-QBP contract to a QBP contract when 
advantageous to the health plan (lessening the overall savings impact). 
Combining the assumptions previously described, as well as accounting 
for the average rebate percentage of 66 percent and backing out the 
projected Part B premium, the net savings to the trust funds were 
calculated to be $32 million for 2019, $35 million in 2020, $37 million 
in 2021, $40 million in 2022, and $44 million in 2023. The calculations 
for the five annual estimates are presented in Table 26. These savings 
are classified as transfers because there is no reduction of resources. 
The savings result from enrollee transfers between health plans with 
and without QBP. Thus the healthcare services remain the same (no 
reduction), albeit at a cheaper price.

                               Table 26--Calculations of Net Savings per Year to the Medicare Trust Fund for Star Ratings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Percent not                   Backing out of
           Year             Enrollment (3% annual   PMPM cost (5% annual   Number months   consolidating  Average rebate  Part B premium    Net savings
                                   trend)                  trend)            per year           (%)       percentage (%)        (%)       (in $millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019.....................  200,000...............  44.73 x 1.05.........              12              50              66              86              32
2020.....................  200,000 x 1.03........  44.73 x 1.05 \2\.....              12              50              66              86              35
2021.....................  200,000 x 1.03 \2\....  44.73 x 1.05 \3\.....              12              50              66              86              37
2022.....................  200,000 x 1.03 \3\....  44.73 x 1.05 \4\.....              12              50              66              86              40
2023.....................  200,000 x 1.03 \4\....  44.73 x 1.05 \5\.....              12              50              66              86              44
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We received the following comments and our response follows:
    Comment: A commenter urged CMS to provide additional detail 
underlying its estimate in the regulatory impact analysis of the 
proposed rule.
    Response: CMS compared the Star Ratings for those plans that were 
cross-walked from one contract to a different contract. The enrollment 
estimate of 160,000 in 2018 was calculated by estimating the number of 
enrollees that were cross-walked from a non-Quality Bonus Payment plan 
in 2017 to a Quality Bonus Payment plan in 2018. An updated estimate 
would be significantly higher if CMS were to have compared the 
enrollment from the non-Quality Bonus Payment plans in the 2018 star 
ratings before cross-walks to the enrollment from Quality Bonus Payment 
plans in the 2018 star ratings after cross-walks. Since the preliminary 
Star Ratings are published in the fall of the prior year, the plans are 
given time to complete the cross-walk procedures before the Medicare 
Advantage bids are submitted in the spring of the following year.
Summary of Regulatory Changes
    For the reasons set forth in the proposed rule and our responses to 
the related comments summarized earlier, we are finalizing the 
provisions as proposed at Sec. Sec.  422.162(b)(3) and 423.182(b)(3) 
without modification.
12. Any Willing Pharmacy Standard Terms and Conditions and Better 
Define Pharmacy Types
a. Anticipated Effects
    In considering the cost implications of this proposal, we received 
varied perspectives from stakeholders, as discussed in the following 
sentences. Part D plan sponsors, PBMs, and manufacturers contend 
limited dispensing networks with accreditation requirements generate 
cost savings and add value. Specialty pharmacies contend the added 
value avoids additional costs. Independent community pharmacies, and 
beneficiaries contend broader competition and transparency will 
generate savings.
    Because this provision clarifies existing any willing pharmacy 
requirements, consistent with CMS estimates, we do not anticipate 
additional government or beneficiary cost impacts from this provision.

[[Page 16714]]



Table 27--Estimated Aggregate Costs and Savings to the Health Care Sector for the Any Willing Pharmacy Provision
                                      for Calendar Years 2019 Through 2023
----------------------------------------------------------------------------------------------------------------
                                                            Calendar year ($ in millions)         Total CYs 2019-
           Provision                 Regulation     ---------------------------------------------   2023 ($ in
                                     section(s)        2019     2020     2021     2022     2023      millions)
----------------------------------------------------------------------------------------------------------------
                                      Federal Government (Medicare) Impacts
----------------------------------------------------------------------------------------------------------------
Any Willing Pharmacy Standard   Various............        0        0        0        0        0               0
 Terms and Conditions and
 Better Define Pharmacy Types.
----------------------------------------------------------------------------------------------------------------

b. Benefits
    Final clarification of Any Willing Pharmacy rules, and 
clarification of the definition of retail pharmacy will account for 
recent changes in the pharmacy practice landscape and ensure that 
existing statutorily-required Any Willing Pharmacy provisions are 
extended to innovative pharmacy business and care delivery models.
    Rural areas are predominantly served by independent community 
pharmacies. The National Community Pharmacist's Association (NCPA) 
estimates that ``independent pharmacies represent 52 percent of all 
rural retail pharmacies and there are over 1800 independent community 
pharmacies operating as the only retail pharmacy within their rural 
communities.'' \83\ \84\ Additionally, these pharmacies are 
increasingly interested to diversify their business models to dispense 
specialty drugs. Consequently, we believe this proposal may support 
small businesses in rural areas and may help maintain beneficiary 
access to specialty drugs from community pharmacies.
---------------------------------------------------------------------------

    \83\ National Community Pharmacist's Association letter to CMS 
Administrator, Seema Verma, June 7, 2017. Available at http://www.ncpa.co/pdf/ncpa-medicaid-recommend-cms-june-2017.pdf.
    \84\ National Community Pharmacist's Association comment letter 
to CMS-4159-P, March 2014. Available at http://www.ncpa.co/pdf/NCPA-Comments-to-CMS-Proposed-Rule-2015FINAL-3.7.14.pdf.
---------------------------------------------------------------------------

    We received the following comments and our response follows:
    Comment: A commenter suggested that by eliminating preferred 
pharmacy networks, the proposed any willing pharmacy policy would cost 
the government in excess of $175 million for even a moderate decrease 
in the number of preferred pharmacies. This same commenter, along with 
others, urged us to clarify that we are not rolling back Part D plan 
sponsors' ability to create and maintain preferred pharmacy networks.
    Response: We thank the commenters, however, their concern was 
predicated on the idea that we proposed to eliminate Part D plan 
sponsors' ability to create and maintain preferred pharmacy networks. 
As we explicitly stated and elaborated elsewhere in this final rule, 
this policy in no way changes existing policy regarding Part D plan 
sponsors' ability to create and maintain preferred pharmacy networks.
    We are finalizing as proposed our timing of contracting 
requirements at Sec.  423.505. We are finalizing, as modified, our 
definition of retail pharmacy at Sec.  423.100, having removed the 
mention of retail cost sharing. We are not finalizing our proposed 
definition of mail order pharmacy.
13. Eliminating the Requirement To Provide PDP Enhanced Alternative 
(EA) to EA Plan Offerings With Meaningful Differences (Sec.  423.265)
    The revision of 423.265 eliminates the requirement for two enhanced 
benefit plans offered by a PDP organization in a service area to be 
``substantially different''. When finalized this will result in 
increased plan flexibilities and a potential increase in beneficiary 
plan choice. We expect this provision to reduce plan burden and could 
provide a very modest savings to plans sponsors of approximately 
$60,000. The savings represent an estimate of the time not spent by 
certifying actuaries to ensure that a meaningful difference threshold 
is met between two PDP EA offerings. Based on the preliminary CY 2018 
landscape, if all PDP organizations that submitted an EA benefit design 
had also submitted the maximum of two EA plans, the result will be 
approximately 275 EA to EA plan pairings that will be required actuary 
time spent in evaluation of the meaningful difference requirement. We 
further estimate that it will take an actuary 2 hours to write a 
meaningful difference requirement. Based on the Bureau of Labor 
Statistics (BLS) latest wage estimates, https://www.bls.gov/oes/current/oes152011.htm, the mean hourly wage for actuaries, occupation 
code 15-2011 is $54.87 which when multiplied by 2 to allow 100 percent 
for overhead and fringe benefits is $109.74 an hour. Thus our total 
estimated burden is 275 EAs x 2 Hours per EA = 550 hours at a cost of 
550 x $109.74 = $60,357. While there is potential savings for PDP plan 
sponsors under this proposal, these savings could be offset for 
organizations who make the business decision to prepare and submit 
additional bids if this proposal is finalized. If the EA to EA 
threshold was the sole barrier to a PDP sponsor offering a second EA 
plan, (that is, the sponsor currently only offers one enhanced plan), 
based on the CY2018 PDP landscape, we could anticipate a modest 
increase of approximately 125 additional enhanced plans (15 percent 
increase). As it is unknown how many organizations will choose to add a 
second EA plan as a result of this provision, we are unable to estimate 
the impact to beneficiaries should this lead to more competition. 
Presumably, increased competition could lead to potentially lower 
premiums and/or cost-sharing for Medicare beneficiaries.
    We did not receive comments, specific to the regulatory impact 
analysis, on this proposal.
14. List Requirements for Prescribers in Part D and Individuals and 
Entities in MA, Cost Plans, and PACE
    The costs and savings, as reflected in the total net savings, 
associated with our preclusion list provisions will be those identified 
in the collection of information section of this final rule: 
Specifically, (1) the system costs associated with the Part D 
preclusion list; (2) costs associated with the preparation and sending 
of written notices to affected Part D prescribers and beneficiaries; 
and (3) the savings that will accrue from individuals and entities no 
longer required to enroll in or opt-out of Medicare to prescribe Part D 
drugs or furnish Part C services and items. The savings and cost by 
year are summarized in Table 28. As explained in the Collection of 
Information section of this final rule, the savings and cost of this 
analysis reflect increased and reduced use of resources respectively: 
Providers and suppliers save $10.3 and $24.1 million from the removal 
of the requirement to enroll in Medicare as a prerequisite to 
furnishing health care items and services to Medicare Advantage 
enrollees; this reduces

[[Page 16715]]

resources needed for such enrollment. Part D sponsors or their PBMs 
spend $9.3 million in additional resources to program edits into plan 
systems as well as produce and send required notifications to 
enrollees. The net savings, is $25.1 million as shown.

           Table 28--Savings and Cost to Industry and Providers Arising From the Preclusion Provision
----------------------------------------------------------------------------------------------------------------
            Item/year                  2019            2020            2021            2022            2023
----------------------------------------------------------------------------------------------------------------
Part D Cost.....................     -$9,310,548         -48,829         -48,829         -48,829         -48,829
Part D Savings..................      10,308,800  ..............  ..............  ..............  ..............
Part C Savings..................      24,077,100  ..............  ..............  ..............  ..............
Net Savings.....................      25,075,352         -48,829         -48,829         -48,829         -48,829
----------------------------------------------------------------------------------------------------------------

    Costs associated with an alternative approach are found in the 
Alternatives Considered portion of this section.
    We will be responsible for the development and monitoring of the 
preclusion list using our own resources. We do not anticipate a change 
in the number of individuals or entities billing for service, for we 
will only be denying payment to those parties that meet the conditions 
of the preclusion list. Costs associated with an alternative approach 
are found in the Alternatives Considered section of this rule.
    We welcomed public comment on these estimates, for we believed that 
stakeholder feedback could assist us in developing more concrete 
projections. We received no comments on this proposal and therefore are 
finalizing this provision without modification.
15. Removal of Quality Improvement Project for Medicare Advantage 
Organizations (Sec.  422.152)
    This provision will result in a total savings of $19,305 to the 
federal government. The driver of the savings is the removal of burden 
for federal employees to review Quality Improvement Project (QIP) 
attestations. MA organizations are required to annually attest that 
they have an ongoing QIP in progress, and the government reviews these 
attestation submissions. To estimate amounts, we considered how many 
QIP attestations are performed annually.
    We estimated that--
     This review requires one person reviewing for 0.25 hours 
for a single QIP attestation. We assumed a GS grade 13, step 5, with a 
mean wage of $51.48, which with an allowance of 100 percent for 
overhead and fringe benefits becomes $102.96. This is based on the 2017 
publicly available wages found on the Office of Personnel Management 
website at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2017/general-schedule/.
     We calculated the savings to the federal government by 
multiplying the number of anticipated QIP attestation submissions (750) 
times the number of CMS staff it takes to complete a review--(1) times 
the adjusted wage for that staff ($102.96) (750 x 1 x $102.96 x 0.25 
hour), which equals $19,305.
    Thus, the total savings of this provision are $31,968, of which 
$12,663.75 are savings to the industry, as indicated in section III of 
this final rule, and $19,305 are savings to the federal government.
    We received no comments on the RIA for this proposal, and 
therefore, we are finalizing the RIA without modification.
16. Reducing the Burden of the Medical Loss Ratio Reporting 
Requirements
    Our proposal to significantly reduce the amount of MLR data 
submitted to CMS would eliminate the need for CMS to continue to pay a 
contractor approximately $390,000 a year to perform initial analyses or 
desk reviews of the detailed MLR reports submitted by MA organizations 
and Part D sponsors. These initial analyses or desk reviews are done by 
our contractors in order to identify omissions and suspected 
inaccuracies and to communicate their findings to MA organizations and 
Part D sponsors in order to resolve potential compliance issues.
    In addition, because we will be receiving only the minimum amount 
of data from MAOs and Part D sponsors, we expect that we will reduce 
the amount we pay to contractors for software development, data 
management, and technical support related to MLR reporting. We 
currently pay a contractor $300,000 each year for these services. 
Although we expect that MAOs and Part D sponsors will continue to use 
the HPMS or a similar system to submit and attest to their simplified 
MLR submissions, we will no longer need to maintain and update MLR 
reporting software with validation features, to receive certain data 
extract files, or to provide support for desk review functionality. We 
estimate that, by eliminating these services, we will reduce our 
payments to contractors by approximately $100,000 a year.
    In total, we estimate that the changes to the MLR reporting 
requirements will save the government $490,000 a year. As noted in the 
Collection of Information section of this final rule, the changes to 
the MLR reporting requirement will save MA organizations and Part D 
sponsors $904,884 a year. Thus, the total annual savings of this 
proposal are $1,446,417: $490,000 to the government and $904,884 to MA 
organizations and Part D sponsors.
    We do not anticipate that our proposal to modify the regulations at 
Sec. Sec.  422.2430 and 423.2430 to specify that Medication Therapy 
Management (MTM) programs that comply with Sec.  423.153(d) are quality 
improvement activities (QIA) will significantly reduce stakeholder 
burden. As explained in section II.C.1.b.(2). of this final rule, we 
stated in the May 23, 2013 final rule (78 FR 31294) that MTM activities 
qualify as QIA, provided they meet the requirements set forth in 
Sec. Sec.  422.2430 and 423.2430. We expect that most if not all MTM 
programs that comply with Sec.  423.153(d) will already satisfy the QIA 
requirements set forth in current Sec. Sec.  422.2430 and 423.2430. 
Therefore, we do not anticipate that the proposal to explicitly include 
MTM programs in QIA will have a significant impact on burden.
    We received no comments on our regulatory impact analysis and are 
finalizing this provision.
17. Expedited Substitutions of Certain Generics and Other Midyear 
Formulary Changes (Sec. Sec.  423.100, 423.120, and 423.128)
    The provisions will specifically permit Part D sponsors that meet 
our requirements to remove brand name drugs (or change their cost-
sharing status) when replacing them with (or adding) generics released 
after their initial formulary submission date without providing advance 
notice or submitting formulary change requests. We would also permit 
Part D sponsors to make such changes at any time of the year rather 
than waiting for them to take effect two months after the start of the

[[Page 16716]]

plan year. A related proposal would except from our transition policy 
applicable generic substitutions and additions with cost-sharing 
changes. Lastly, we proposed to decrease the days of enrollee notice 
and refill required in cases in which (aside from generic substitutions 
and drugs deemed unsafe or removed from the market) drug removal or 
changes in cost-sharing will affect enrollees.
    The FDA has noted that generics are typically sold at substantial 
discounts from the branded price. (``Generic Drugs: Questions and 
Answers,'' see FDA website, https://www.fda.gov/drugs/resourcesforyou/consumers/questionsanswers/ucm100100.htm, accessed June 22, 2017.) 
However, we do not believe that significant savings will necessarily 
result from these provisions, because historically Part D sponsors have 
been able to anticipate the generic launches well and migrate the brand 
scripts to generics smoothly once the generic drugs become available. 
The proposal could provide some administrative relief for Part D 
sponsors, although the savings won't be very significant.
    In addition regardless of any first year effect, we do not believe 
there could be any significant effect for subsequent years. Our 
proposed changes will permit immediate specified generic substitutions 
throughout the plan year or a 30 rather than a 60 day notice period for 
certain substitutions. Part D sponsors submit for review each year an 
entirely new formulary and presumably the timing of substitutions will 
overlap across plan years a minimal amount of times. We received no 
comments on our regulatory impact analysis and are finalizing this 
provision with modifications discussed in II.A.14.
18. Similar Treatment of Biosimilar and Interchangeable Biological 
Products and Generic Drugs for Purposes of LIS Cost Sharing
a. Savings
    Codification of lower cost sharing for biosimilar and 
interchangeable biological products for LIS enrollees will reduce 
marketplace confusion about what level of cost-sharing Part D enrollees 
should be charged for biosimilar and interchangeable biological 
products. By establishing cost sharing at the lower level for LIS 
enrollees, this provision will also improve LIS enrollee incentives to 
use biosimilar and interchangeable biological products instead of 
reference biological products. As discussed in the proposed rule, this 
will reduce costs for Part D enrollees and generate savings for the 
Part D program.
    In addition, we believe that reducing confusion in the marketplace 
surrounding this issue will improve enrollee protections while also 
improving enrollee incentives to choose biosimilar and interchangeable 
biological products over reference biological products. Improved 
incentives to choose lower-cost alternatives will reduce costs to Part 
D enrollees and the Part D program. CMS estimates this proposal will 
provide a modest savings of $10 million in 2019, with savings 
increasing by approximately $1 million each year through 2028. These 
savings are classified as transfers since there is no reduction in 
services; drugs are still being sold, albeit at a cheaper price because 
of the use of biosimilar biological products.
    CMS anticipates some natural shift from reference biological 
products to biosimilar and interchangeable biological products, but 
biosimilar biological products' price differential and market share are 
lower than that observed for small molecule generic drugs. Currently, 
Zarxio[supreg] data provide the only meaningful comparison available to 
date, as very limited data exist on the other nine approved (as of 
March 7, 2018) biosimilar biological products. The market dynamic 
between Neupogen[supreg] and Zarxio[supreg] has behaved consistent with 
CMS' anticipation and CMS expects other biosimilar biological products 
to follow the similar pattern. Based on 2017 year-to-date data on the 
per script price difference between Neupogen[supreg] and 
Zarxio[supreg], CMS estimated biosimilar biological products to be 16 
percent less expensive than their reference biological product. CMS 
estimates this proposal will result in a minor shift of an additional 5 
percent of prescriptions to biosimilar biological products by LIS 
enrollees under this proposal. Consequently, savings are not estimated 
to be significant at this time.

     Table 29--Estimated Savings to the Medicare Trust Fund for Calendar Years 2019 Through 2023 for Similar
   Treatment of Biosimilar and Interchangeable Biological Products and Generic Drugs for Purposes of LIS Cost
                                                     Sharing
----------------------------------------------------------------------------------------------------------------
                                                            Calendar year ($ in millions)         Total CYs 2019-
           Provision                 Regulation     ---------------------------------------------   2023 ($ in
                                     section(s)        2019     2020     2021     2022     2023      millions)
----------------------------------------------------------------------------------------------------------------
                                      Federal Government (Medicare) Impacts
----------------------------------------------------------------------------------------------------------------
Similar Treatment of            Sec.   423.4.......       10       11       12       13       14              60
 Biosimilar and
 Interchangeable Biological
 Products and Generic Drugs
 for Purposes of LIS Cost
 Sharing.
----------------------------------------------------------------------------------------------------------------

b. Benefits of Similar Treatment of Biosimilar and Interchangeable 
Biological Products and Generic Drugs for Purposes of LIS Cost Sharing
    Final codification of lower cost sharing for biosimilar and 
interchangeable biological products for LIS enrollees will reduce 
marketplace confusion about what level of cost-sharing LIS enrollees 
should be charged for biosimilar and interchangeable biological 
products. By establishing cost sharing at the lower level, this 
provision will also improve Part D enrollee incentives to use 
biosimilar and interchangeable biological products instead of reference 
biological products. As discussed previously, this will reduce costs to 
Part D enrollees and generate savings for the Part D program.
    We received the following comments, and our response follows:
    Comment: A couple of commenters noted that our proposed change 
generates administrative burden for Part D plan sponsors due to 
programming changes.
    Response: We appreciate the commenters' perspective, however we 
believe that the benefit to LIS Part D enrollees outweigh the concerns 
regarding Part D plan sponsor's administrative burden. Given the low 
number of biosimilar biological products on the market, it is not 
apparent to us that this would require significant administrative 
burden on

[[Page 16717]]

Part D plans to identify such products and implement this change.
    We are finalizing our proposal as modified, amending Sec.  
423.782(a)(2)(iii)(A) and Sec.  423.782(b)(3) instead of Sec.  423.4.
19. Changes to the Days' Supply Required by the Part D Transition 
Process (Sec.  423.120)
    We do not believe that finalizing this section would impose any new 
burden on any stakeholder. Since Part D sponsors and their PBMs already 
have prescription drug pharmacy claims systems programmed to provide 
transition supplies to plan enrollees in the LTC and outpatient 
settings, they will only have to make a technical change to these 
systems that consists of changing the required number of days' supply 
to the approved month's supply in their plan benefit package. In 
addition, Part D sponsors and their PBMs would have to cease treating 
these enrollees in the LTC setting separately from enrollees in the 
outpatient setting for purposes of transition.
    We also do not believe this provision would impose any new burden 
on LTC facilities and the pharmacies that serve them. We believe this 
regulation will eliminate the additional time that LTC facilities and 
pharmacies have to transition Part D patients--time we now believe they 
do not need to effectuate the transition.
    In the context of requesting that we not reduce the transition 
supply from 90 days to a month, commenters generally indicated that 
preparing for transitions created an administrative burden. We 
acknowledge and appreciate the efforts undertaken to smooth 
transitions, but do not believe our provision in and of itself would 
create any new burden. While they would have a smaller time frame in 
which to take actions, LTC facilities and pharmacies would need to make 
the same outreach calls to health care providers as has previously been 
the case--albeit within a shorter period of time. And while we are 
recommending that LTC pharmacies try to anticipate and plan for 
somewhat predicable events such yearly changes to benchmark status 
necessitating beneficiary moves, it is not inconceivable that to the 
extent required, these entities might undertake contingency planning 
that could ultimately lessen the administrative burdens over the long 
run.
    We believe this provision would produce cost-savings to the 
Medicare Part D program because it requires fewer drugs to be dispensed 
under transition, particularly in the LTC setting. However, we are 
unable to estimate the cost-savings, because it largely depends upon 
which and how many drugs are dispensed as transition drugs to Part D 
beneficiaries in the LTC setting in the future. Also, we are unable to 
determine which PDEs involve transition supplies in LTC in order to 
provide an estimate of future savings based on past experience with 
transition supplies in LTC in the Part D program.
D. Alternatives Considered
1. Any Willing Pharmacy Standard Terms and Conditions and Better Define 
Pharmacy Types
    The critical policy decision was how to strike the right balance to 
clarify confusion in the marketplace, afford Part D plan sponsor 
flexibility, and incorporate recent innovations in pharmacy business 
and care delivery models without prematurely and inappropriately 
interfering with highly volatile market forces.
2. Similar Treatment of Biosimilar and Interchangeable Biological 
Products and Generic Drugs for Purposes of LIS Cost Sharing
    The critical policy question was how to provide lower cost sharing 
for biosimilar and interchangeable biological products for LIS 
enrollees. Classifying biosimilar and interchangeable biological 
products as generic drugs only for cost-sharing purposes for LIS 
enrollees risked confusion in the marketplace which could lead to 
inappropriate utilization of biosimilar and interchangeable biological 
products and in turn, increased costs to the Part D program. Adding 
biosimilar and interchangeable biological products to regulatory cost-
sharing provisions for LIS enrollees can appropriately resolve 
marketplace confusion while also improving Part D enrollee incentives 
to choose lower cost alternatives.
3. Preclusion List
    We considered a preclusion list that will include providers and 
suppliers who are prescribing Part D drugs and who are providing 
services to Medicare beneficiaries who are receiving their Medicare 
benefit from a MA plan. The savings and cost estimates associated with 
that alternative are based on the following: Encounter data and 
Prescription drug event (PDE) which identifies providers who furnish 
Part C services and items and prescribe Part D drugs to Medicare 
beneficiaries. Given the frequency with which MA organizations and Part 
D sponsors typically submit data to CMS, we estimate a delay of 
approximately 1 month in obtaining this data. Delays in the 
availability of this data and the screening and evaluation of the 
providers and prescribers will result in delays in the identification 
and inclusion of providers or prescribers on the preclusion list, which 
will occur after the service, item or drug was provided to the Medicare 
beneficiary. We estimate that it will cost the Trust Fund approximately 
$42.8 million if we do not proactively screen providers and prescribers 
and delay screening until after the PDE and encounter data is 
available. We estimate an additional 1.4 million providers or 
prescribers will not be screened if we only rely on PDE and encounter 
data. The current Medicare provider population consists of 
approximately 2 million providers and historically we have revoked 0.4 
percent of its existing Medicare enrolled providers. However this 
percentage could be higher or lower for the population of prescribers 
solely enrolled for prescribing. There are approximately 460,000 part C 
and D unenrolled providers and prescribers, 120,000 of which are 
billing Part C. Using the percentage of historical revocations, we 
estimate approximately 1,840 new revocations. Based on the approximate 
1-month delay in the availability of the PDE and encounter data, 3 
months for screening, and an additional 3 months to evaluate the 
offenses, we anticipate approximately a 7-month delay in the provider 
or prescriber's inclusion on the preclusion list following the service, 
item, or drug being provided to the beneficiary if we do not perform 
proactive screening. The 7-month timeframe is dependent on whether the 
PDE and encounter data is timely. Using a cost avoidance of $3,324 per 
month average per provider and applying it to the estimated 1,840 new 
revocations, a delay in screening will cost the Trust Fund 
approximately $42.8 million (3,324 x 7 x 1,840). The $3,324 estimate is 
based on Medicare fee-for-service revocation data and may be higher or 
lower depending on whether the provider is an individual or 
organization and their provider type.

E. Accounting Statement

    As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Table 30 we 
have prepared an accounting statement showing the savings and transfers 
associated with the provisions of this final rule for CYs 2019 through 
2023. Table 30 is based on Table 31 which lists savings, costs, and 
transfers by provision.

[[Page 16718]]



 Table 30--Accounting Statement: Classifications of Estimated Savings, Costs, and Transfers From Calendar Years
                                                  2019 to 2023
                                                 [$in millions]
----------------------------------------------------------------------------------------------------------------
                                                            Savings
                                   --------------------------------------------------------
                                          Discount rate                                         Whom to whom
                                   --------------------------        Period covered
                                         7%           3%
----------------------------------------------------------------------------------------------------------------
Net Annualized Monetized Savings..       295.23       296.29  CYs 2019-2023...............  MA Organizations and
                                                                                             Part D Sponsors,
                                                                                             Industry, Govt.
Annualized Monetized Savings......       302.53       303.59  CYs 2019-2023...............  MA Organizations and
                                                                                             Part D Sponsors,
                                                                                             Industry, Govt.
Annualized Monetized Cost.........       (7.30)       (7.30)  CYs 2019-2023...............  MA Organizations and
                                                                                             Part D Sponsors,
                                                                                             Industry, Govt.
Transfers.........................        37.17        37.41  CYs 2019-2023...............  Federal Government,
                                                                                             MA plans and Part D
                                                                                             Sponsors, Providers
                                                                                             and Re-insurers.
----------------------------------------------------------------------------------------------------------------
Note: Monetized figures in 2018 dollars. Positive numbers indicate aggregate level annualized savings at the
  giving percentage. Transfers are a separate line item. Table 30 is based on Table 31. Minor (cent) errors are
  due to rounding.

    The following Table 31 summarizes savings, costs, and transfers by 
provision and formed a basis for the accounting table.
BILLING CODE 4120-01-P

[[Page 16719]]

[GRAPHIC] [TIFF OMITTED] TR16AP18.018

BILLING CODE 4120-01-C

F. Conclusion

    This final rule has a net savings of between $280 to $335 million 
for each of the next 5 years. The savings are equivalent to a level 
annualized amount of about $295 million per year for both 7 percent and 
3 percent interest rates. These net savings are to Part D sponsors, 
Part C plans, pharma, providers, industry, as well as the federal 
government. Transfers between the federal government, Part C plans, 
Part D sponsors, re-insurers, and providers are between $30 and $45 
million and are equivalent to a monetized level amount of about $37 
million per year at the 3-percent and 7-percent levels. Both industry 
and the federal government save from program efficiencies and reduced 
work.
    As a result of benefits, savings, and transfers of this final rule, 
the Medicare Trust Fund, in 2019, will reduce in aggregate its cost for 
paying for plan benefits by $123.6 million dollars ($19 million from 
the CARA provision + $71.6 million from the physician incentive plans 
provision + $10 million from the provision to treat biosimilar and 
interchangeable biological products as generic drugs for purposes of 
LIS cost sharing + $32 million from the star ratings provision -9 
million from the open enrollment provision). This reduction in Medicare 
Trust Fund costs will gradually increase; in 2028, the Trust Fund is 
expected to reduce costs by $241.7 million dollars. These savings to 
the Medicare Trust Fund are actuarially equivalent to a level amount of 
about $170 million per year in 2018 dollars ($171.69 million discounted 
at the 3% level, and $167.75 million per

[[Page 16720]]

year discounted at the 7% level). These savings do not include the MLR 
provision savings of $490,000 savings a year due to not paying a 
contractor nor the marketing material provision savings of $140,000 a 
year due to reduced time spent by Federal employees reviewing marketing 
materials.
    Additionally, this final rule is beneficial to beneficiaries. The 
impact of this final rule on beneficiaries is complicated with some 
provisions beneficial, one provision burdensome, and the rest neutral. 
Although quantitative formulations of the impacts can sometimes be 
provided, because of the variability of many factors, in many cases, 
impact can only be measured qualitatively.
    The following provisions are beneficial for beneficiaries for the 
reasons indicated:
     CARA: Enrollees will--(1) have fewer enrollment forms to 
fill out (because they are locked in); (2) there will be fewer enrollee 
opioid addictions; (3) the illnesses arising from opioid addiction will 
be reduced; we estimate that the Trust Fund, in 2019, will spend $19 
million less because of reduced opioid prescriptions; enrollees are 
therefore saving coinsurance on these payments;
     Passive enrollment flexibilities: Enrollees are 
relieved of the burden of filling out enrollment forms; plans are 
relieved of the burden of verifying eligibility and storage of these 
forms. There is a cost to enrollees of the ability to actively choose a 
new plan; this cost is minimized by the special election period 
afforded to enrollees and described in the two passive enrollment 
notifications. Additionally, if enrollees remain in the plan they are 
passively enrolled into, they will continue receiving services from an 
integrated D-SNP similar to the plan they previously chose.
     Disclosure: Plans have the option to deliver 
required documents using alternate methods including electronic 
delivery. Enrollees of these plans may receive disclosure documents 
electronically and have enhanced electronic search capabilities 
available; furthermore, enrollees have greater access to their 
documents at any location with a browser. Plans that opt to use 
alternative methods of delivery (including electronic delivery) must 
provide the documents in hard copy upon request.
     Expedited generic substitutions and midyear 
formulary changes: Part D sponsors have the option to provide enrollees 
with access to generics sooner than currently permitted. While we will 
require Part D sponsors to provide all enrollees with general advance 
notice that immediate generic substitutions can take place, under this 
revision Part D sponsors no longer have to provide advance notice of 
the generic substitution to enrollees who are currently taking the 
brand name drug. This means that enrollees who would might have so 
chosen may not have the chance to consult with their prescribers before 
they receive the generic drug. We believe these consequences are 
mitigated by the fact that beneficiaries have general familiarity with 
generic drug substitutions as part of the larger pharmacy market and 
that additionally they may still avail themselves of the strong 
Medicare beneficiary protections, including the exceptions process.
     Preclusion: The removal of the Part D and Medicare 
Advantage enrollment requirements for prescribers and providers as a 
prerequisite for prescribing drugs and furnishing health care items and 
services will result in greater ease for enrollees in obtaining needed 
drugs and health care items and services;
     PDP EA to EA meaningful difference: Enrollees may 
experience lower Part D supplemental premiums if enrolled in an EA 
plan, as sponsors will not be pressured to make benefit changes to 
comply with a requirement that ultimately results in higher 
supplemental premiums for beneficiaries. We believe that the tools CMS 
provides for beneficiaries to make decisions (for example. Medicare 
Plan Finder, Medicare and You Handbook, 1-800-MEDICARE), in addition to 
our enforcement of communication and marketing requirements, aim to 
mitigate any potential choice overload should this provision result in 
additional PDP plan offerings;
     Similar Treatment of Biosimilar and Interchangeable 
Biological Products as Generic Drugs: This provision will reduce 
confusion in the marketplace surrounding this issue, will improve 
enrollee protections while also improving enrollee incentives to choose 
biosimilar and interchangeable biological products over reference 
biological products. Improved incentives to choose lower-cost 
alternatives will reduce costs to Part D enrollees. Note, the co-
insurance portion of the estimated reductions in dollars spent by the 
Trust Fund, $10 million in 2019, reflects quantitative estimates of 
savings to Part D plan sponsors and reduced costs of enrollees;
     Part C Meaningful Difference: As discussed earlier in this 
section, CMS expects the elimination of the Part C meaningful 
difference evaluation, in conjunction with the expansion of benefit 
flexibilities, will allow organizations to provide benefit offerings 
that satisfy the unique needs of beneficiaries, increase enrollee 
satisfaction, reduce overall plan expenditures, and result in more 
affordable plans. Beneficiaries will continue to compare plans as they 
have in the past, that is, limit their choices based on 
characteristics, such as plan type, Part D coverage, differences in 
provider network, Part B and plan premiums, unique populations served, 
and benefits. CMS and MA organizations will continue to provide 
beneficiaries with tools, such as MPF and communication materials, to 
evaluate plan options and assist in choosing the best plan option. In 
addition, the elimination of the meaningful difference provision is not 
necessarily encouraging ``new'' plans, but rather allowing plans to use 
existing capabilities and expanded flexibilities discussed in the 
proposed rule to improve innovation within existing and new plans. It 
is unknown how many organizations will choose to add plan options, 
decrease premiums and/or cost sharing and by what degree. CMS expects 
that increased competition will provide value to beneficiaries through 
more innovative health plans that meet their needs, and affordability 
through benefits and premiums. These factors are difficult to 
accurately measure quantitatively and as such, we consider the benefits 
qualitative. CMS also believes that the tools and information CMS 
provides for beneficiaries to make decisions (for example, Medicare 
Plan Finder, Medicare and You Handbook, 1-800-MEDICARE), in addition to 
our enforcement of communication and marketing requirements, aim to 
mitigate any potential choice overload.
    Only one provision, OEP, is burdensome to beneficiaries. Enrollees 
will have the burden of filling out enrollment forms and plans will 
have the burden of verifying eligibility, sending notifications to 
enrollees and CMS, and storing enrollment forms. This burden has been 
assessed quantitatively in the Collection of Information section as 
costing $6.1 million to plans and $6.7 million to beneficiaries.
    The remaining provisions are neutral because either the provision 
codified or clarified existing practice (coordination of enrollment/
disenrollment, any willing pharmacy), the provision had no new or 
revised information requirements (limitations on SEP for Part D duals, 
Part D tiering, changes to transition supply), the provision did not 
change practice and therefore had no

[[Page 16721]]

impact (minimum enrollment waiver), the provision removed duplicative 
efforts (removal of quality improvement projects, lengthening 
adjudication timeframes), or the provisions reduced burden on other 
stakeholders without impacting enrollees (removal of quality 
improvement projects reduced the burden on CMS review staff, marketing 
materials reduced the burden on CMS review staff, elimination of 
notices for IRE reduced plan burden, Medical Loss Ratio reduced plan 
burden, compliance training reduction affected staff training, 
physician incentive plans reduced costs of insurance for MA 
organizations, agent-broker gives plans more flexibility in dealing 
with unlicensed brokers).

G. Reducing Regulation and Controlling Regulatory Costs

    This rule, as finalized, will be an Executive Order (E.O.) 13771 
regulatory action. Details on the estimated costs and cost savings can 
be found in the preceding analysis. Executive Order 13771 requires that 
the costs associated with significant new regulations ``shall, to the 
extent permitted by law, be offset by the elimination of existing costs 
associated with at least two prior regulations.'' We believe that this 
final rule is a significant regulatory action as defined by Executive 
Order 12866. This final rule is considered an E.O. 13771 deregulatory 
action. We estimate that this rule generates annualized cost savings of 
$365.55 discounted relative to year 2016 at 7 percent over a perpetual 
time horizon.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

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, and 
Reporting and recordkeeping requirements.

42 CFR Part 423

    Administrative practice and procedure, Emergency medical services, 
Health facilities, Health maintenance organizations (HMO), Health 
professionals, Incorporation by reference, Medicare, Penalties, 
Privacy, and Reporting and recordkeeping requirements.

42 CFR Part 460

    Aged, Health care, Health records, Medicaid, Medicare, and 
Reporting and recordkeeping requirements.

42 CFR Part 498

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare, and Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
 1. The authority citation for part 405 continues to read as follows:

    Authority:  Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).


0
2. Section 405.924 is amended by adding paragraph (a)(5) to read as 
follows:


Sec.  405.924   Actions that are initial determinations.

    (a) * * *
    (5) An adjustment of premium for hospital or supplementary medical 
insurance as outlined in Sec. Sec.  406.32(d), 408.20(e), and 408.22 of 
this chapter, and 20 CFR 418.1301.
* * * * *

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL 
PLANS, AND HEALTH CARE PREPAYMENT PLANS

0
 3. The authority citation for part 417 continues to read as follows:

    Authority:  Secs. 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.


0
 4. Section 417.430 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  417.430   Application procedures.

    (a) * * *
    (1) The application form must comply with CMS instructions 
regarding content and format and be approved by CMS as described in 
Sec.  422.2262 of this chapter. The application must be completed by an 
HMO or CMP eligible (or soon to become eligible) individual and include 
authorization for disclosure between HHS and its designees and the HMO 
or CMP.
* * * * *

0
 5. Section 417.472 is amended by adding paragraph (k) to read as 
follows:


Sec.  417.472   Basic contract requirements.

* * * * *
    (k) All cost contracts under section 1876 of the Act must agree to 
be rated under the quality rating system specified at subpart D of part 
422, and for cost plans that provide the Part D prescription benefit, 
under the quality rating system specified at part 423 subpart D, of 
this chapter. Cost contacts are not required to submit data on or be 
rated on specific measures determined by CMS to be inapplicable to 
their contract or for which data are not available, including hospital 
readmission and call center measures.

0
6. Section 417.478 is amended by revising paragraph (e) to read as 
follows:


Sec.  417.478   Requirements of other laws and regulations.

* * * * *
    (e)(1) The prohibitions, procedures and requirements relating to 
payment to individuals and entities on the preclusion list, defined in 
Sec.  422.2 of this chapter, apply to HMOs and CMPs that contract with 
CMS under section 1876 of the Act.
    (2) In applying the provisions of Sec. Sec.  422.2, 422.222, and 
422.224 of this chapter under paragraph (e)(1) of this section, 
references to part 422 of this chapter must be read as references to 
this part, and references to MA organizations as references to HMOs and 
CMPs.

0
 7. Section 417.484 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  417.484   Requirement applicable to related entities.

* * * * *
    (b) * * *
    (3) That payments must not be made to individuals and entities 
included on the preclusion list, defined in Sec.  422.2 of this 
chapter.

PART 422--MEDICARE ADVANTAGE PROGRAM

0
 8. The authority citation for part 422 continues to read as follows:


[[Page 16722]]


     Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).


0
9. Section 422.2 is amended by adding the definition of ``Preclusion 
list'' in alphabetical order to read as follows:


Sec.  422.2   Definitions.

* * * * *
    Preclusion list means a CMS-compiled list of individuals and 
entities that--
    (1) Meet all of the following requirements:
    (i) The individual or entity is currently revoked from Medicare 
under Sec.  424.535.
    (ii) The individual or entity is currently under a reenrollment bar 
under Sec.  424.535(c).
    (iii) CMS determines that the underlying conduct that led to the 
revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph (1)(iii), 
CMS considers the following factors:
    (A) The seriousness of the conduct underlying the individual's or 
entity's revocation.
    (B) The degree to which the individual's or entity's conduct could 
affect the integrity of the Medicare program.
    (C) Any other evidence that CMS deems relevant to its 
determination; or
    (2) Meet both of the following requirements:
    (i) The individual or entity has engaged in behavior for which CMS 
could have revoked the individual or entity to the extent applicable 
had they been enrolled in Medicare.
    (ii) CMS determines that the underlying conduct that would have led 
to the revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph (2)(ii), CMS 
considers the following factors:
    (A) The seriousness of the conduct involved.
    (B) The degree to which the individual's or entity's conduct could 
affect the integrity of the Medicare program; and
    (C) Any other evidence that CMS deems relevant to its 
determination.
* * * * *

0
10. Section 422.54 is amended by revising paragraphs (c)(1)(i) and 
(d)(4)(ii) to read as follows:


Sec.  422.54   Continuation of enrollment for MA local plans.

* * * * *
    (c) * * *
    (1) * * *
    (i) Obtain CMS's approval of the continuation area, the 
communication materials that describe the option, and the MA 
organization's assurances of access to services.
* * * * *
    (d) * * *
    (4) * * *
    (ii) Organizations that require enrollees to give advance notice of 
intent to use the continuation of enrollment option, must stipulate the 
notification process in the communication materials.
* * * * *

0
11. Section 422.60 is amended--
0
a. In paragraph (a)(2) by removing the reference ``Sec.  422.62(a)(3), 
(a)(4), and (a)(5) if'' and adding in its place the reference ``Sec.  
422.62(a)(3) and (4) if''; and
0
b. Revising paragraph (g).
    The revision reads as follows:


Sec.  422.60   Election process.

* * * * *
    (g) Passive enrollment by CMS--(1) Circumstances in which CMS may 
implement passive enrollment. CMS may implement passive enrollment 
procedures in any of the following situations:
    (i) Immediate terminations as provided in Sec.  
422.510(b)(2)(i)(B).
    (ii) CMS determines that remaining enrolled in a plan poses 
potential harm to the members.
    (iii) CMS determines, after consulting with the State Medicaid 
agency that contracts with the dual eligible special needs plan that is 
described in paragraph (g)(2)(i) of this section and meets the 
requirements of paragraph (g)(2) of this section, that the passive 
enrollment will promote integrated care and continuity of care for a 
full-benefit dual eligible beneficiary (as defined in Sec.  423.772 of 
this chapter and entitled to Medicare Part A and enrolled in Part B 
under title XVIII) who is currently enrolled in an integrated dual 
eligible special needs plan.
    (2) MA plans that may receive passive enrollments. CMS may 
implement passive enrollment described in paragraph (g)(1)(iii) of this 
section only into MA-PD plans that meet all the following requirements:
    (i) Operate as a fully integrated dual eligible special needs plan 
as defined in Sec.  422.2, or a specialized MA plan for special needs 
individuals that meets a high standard of integration, as described in 
Sec.  422.102(e).
    (ii) Have substantially similar provider and facility networks and 
Medicare- and Medicaid-covered benefits as the plan (or plans) from 
which the beneficiaries are passively enrolled.
    (iii) Have an overall quality rating from the most recently issued 
ratings, under the rating system described in Sec. Sec.  422.160 
through 422.166, of at least 3 stars or is a low enrollment contract or 
new MA plan as defined in Sec.  422.252.
    (iv) Not have any prohibition on new enrollment imposed by CMS.
    (v) Have limits on premiums and cost-sharing appropriate to full-
benefit dual eligible beneficiaries.
    (vi) Have the operational capacity to passively enroll 
beneficiaries and agree to receive the enrollments.
    (3) Passive enrollment procedures. Individuals will be considered 
to have elected the plan selected by CMS unless they--
    (i) Decline the plan selected by CMS, in a form and manner 
determined by CMS, or
    (ii) Request enrollment in another plan.
    (4) Beneficiary notification. The MA organization that receives the 
passive enrollment must provide to the enrollee:
    (i) In the case of a passive enrollment described in paragraphs 
(g)(1)(i) and (ii) of this section, a notice that describes the costs 
and benefits of the plan and the process for accessing care under the 
plan and clearly explains the beneficiary's ability to decline the 
enrollment or choose another plan. This notice must be provided to all 
potential passively-enrolled enrollees, in a form and manner determined 
by CMS, prior to the enrollment effective date (or as soon as possible 
after the effective date if prior notice is not practical).
    (ii) In the case of a passive enrollment described in paragraph 
(g)(1)(iii) of this section, two notices that describe the costs and 
benefits of the plan and the process for accessing care under the plan 
and clearly explain the beneficiary's ability to decline the enrollment 
or choose another plan.
    (A) The first notice described in paragraph (g)(4)(ii) of this 
section must be provided, in a form and manner determined by CMS, no 
fewer than 60 calendar days prior to the enrollment effective date.
    (B) The second notice described in paragraph (g)(4)(ii) of this 
section must be provided, in a form and manner determined by CMS, no 
fewer than 30 days prior to the enrollment effective date.
    (5) Special election period. In the case of a passive enrollment 
described in this paragraph, individuals will be provided with a 
special enrollment period described in at Sec.  423.38(c)(10) of this 
chapter.

0
12. Section Sec.  422.62 is amended by--
0
a. Revising paragraphs (a)(3) through (5);
0
b. Removing paragraphs (a)(6) and (7); and

[[Page 16723]]

0
c. Revising paragraph (b)(3)(ii).
    The revisions read as follows:


Sec.  422.62   Election of coverage under an MA plan.

    (a) * * *
    (3) Open enrollment period for individuals enrolled in MA--(i) For 
2019 and subsequent years. Except as provided in paragraphs (a)(3)(ii) 
and (iii) and (a)(4) of this section, an individual who is enrolled in 
an MA plan may make an election once during the first 3 months of the 
year to enroll in another MA plan or disenroll to obtain Original 
Medicare. An individual who chooses to exercise this election may also 
make a coordinating election to enroll in or disenroll from Part D, as 
specified in Sec.  423.38(e) of this chapter.
    (ii) Newly eligible MA individual. For 2019 and subsequent years, a 
newly MA eligible individual who is enrolled in a MA plan may change 
his or her election once during the period that begins the month the 
individual is entitled to both Part A and Part B and ends on the last 
day of the third month of the entitlement. An individual who chooses to 
exercise this election may also make a coordinating election to enroll 
in or disenroll from Part D, as specified in Sec.  423.38(e) of this 
chapter.
    (iii) Single election limitation. The limitation to one election or 
change in paragraphs (a)(3)(i) and (ii) of this section does not apply 
to elections or changes made during the annual coordinated election 
period specified in paragraph (a)(2) of this section, or during a 
special election period specified in paragraph (b) of this section.
    (4) Open enrollment period for institutionalized individuals. After 
2005, an individual who is eligible to elect an MA plan and who is 
institutionalized, as defined in Sec.  422.2, is not limited (except as 
provided for in paragraph (d) of this section for MA MSA plans) in the 
number of elections or changes he or she may make. Subject to the MA 
plan being open to enrollees as provided under Sec.  422.60(a)(2), an 
MA eligible institutionalized individual may at any time elect an MA 
plan or change his or her election from an MA plan to Original 
Medicare, to a different MA plan, or from Original Medicare to an MA 
plan.
    (5) Annual 45-day period for disenrollment from MA plans to 
Original Medicare. Through 2018, at any time from January 1 through 
February 14, an individual who is enrolled in an MA plan may elect 
Original Medicare once during this 45-day period. An individual who 
chooses to exercise this election may also make a coordinating election 
to enroll in a PDP as specified in Sec.  423.38(d) of this chapter.
    (b) * * *
    (3) * * *
    (ii) The organization (or its agent, representative, or plan 
provider) materially misrepresented the plan's provisions in 
communications as outlined in subpart V of this part.
* * * * *

0
 13. Section 422.66 is amended by revising paragraphs (c) and (d)(1) 
and (5) to read as follows:


Sec.  422.66   Coordination of enrollment and disenrollment through MA 
organizations.

* * * * *
    (c) Election by default: Initial coverage election period--(1) 
Basic rule. Subject to paragraph (c)(2) of this section, an individual 
who fails to make an election during the initial coverage election 
period is deemed to have elected original Medicare.
    (2) Default enrollment into MA dual eligible special needs plan--
(i) Conditions for default enrollment. During an individual's initial 
coverage election period, an individual may be deemed to have elected a 
MA special needs plan for individuals entitled to medical assistance 
under a State plan under Title XIX (including a fully integrated dual 
eligible special needs plan as defined in Sec.  422.2) offered by the 
organization provided all the following conditions are met:
    (A) At the time of the deemed election, the individual remains 
enrolled in an affiliated Medicaid managed care plan. For purposes of 
this section, an affiliated Medicaid managed care plan is one that is 
offered by the MA organization that offers the dual eligible MA special 
needs plan or is offered by an entity that shares a parent organization 
with such MA organization;
    (B) The state has approved the use of the default enrollment 
process in the contract described in Sec.  422.107 and provides the 
information that is necessary for the MA organization to identify 
individuals who are in their initial coverage election period;
    (C) The MA organization offering the MA special needs plan has 
issued the notice described in paragraph (c)(2)(iv) of this section to 
the individual;
    (D) Prior to the effective date described in paragraph (c)(2)(iii) 
of this section, the individual does not decline the default enrollment 
and does not elect to receive coverage other than through the MA 
organization;
    (E) CMS has approved the MA organization to use default enrollment 
under paragraph (c)(2)(ii) of this section;
    (F) The MA organization has a minimum overall quality rating from 
the most recently issued ratings, under the rating system described in 
Sec. Sec.  422.160 through 422.166, of at least 3 stars or is a low 
enrollment contract or new MA plan as defined in Sec.  422.252; and
    (G) The MA organization does not have any prohibition on new 
enrollment imposed by CMS.
    (ii) CMS approval of default enrollment. An MA organization must 
obtain approval from CMS before implementing any default enrollment as 
described in this section. CMS approval will be for a period not to 
exceed five years, although CMS may suspend or rescind approval prior 
to the expiration of this period if CMS determines the MA organization 
is not in compliance with the requirements of this section.
    (iii) Effective date of default enrollment. Default enrollment in 
the dual eligible MA special needs plan is effective the month in which 
the individual is first entitled to both Part A and Part B.
    (iv) Notice requirement for default enrollments. In addition to the 
information described in Sec.  422.111 and no fewer than 60 calendar 
days prior to the enrollment effective date described in paragraph 
(c)(2)(iii) of this section, the MA organization must provide to each 
individual who qualifies for deemed enrollment under paragraph (c)(2) 
of this section a notice that includes the following:
    (A) Information on the differences in premium, benefits and cost 
sharing between the individual's current Medicaid managed care plan and 
the dual eligible MA special needs plan and the process for accessing 
care under the MA plan;
    (B) The individual's ability to decline the enrollment, up to and 
including the day prior to the enrollment effective date, and either 
enroll in Original Medicare or choose another MA plan; and
    (C) A general description of alternative Medicare health and drug 
coverage options available to an individual in his or her Initial 
Coverage Election Period.
    (d) * * *
    (1) Basic rule. An MA plan offered by an MA organization must 
accept any individual (regardless of whether the individual has end-
stage renal disease) who requests enrollment during his or her Initial 
Coverage Election Period while enrolled in a health plan offered by the 
MA organization during the month immediately preceding the MA plan 
enrollment effective date, and who

[[Page 16724]]

meets the eligibility requirements at Sec.  422.50.
* * * * *
    (5) Election. An individual who requests seamless continuation of 
coverage as described in paragraph (d)(1) of this section may complete 
a simplified election, in a form and manner approved by CMS that meets 
the requirements in Sec.  422.60(c)(1).
* * * * *

0
 14. Section 422.68 is amended by revising paragraphs (a), (c), and (f) 
to read as follows:


Sec.  422.68   Effective dates of coverage and change of coverage.

* * * * *
    (a) Initial coverage election period. An election made during an 
initial coverage election period as described in Sec.  422.62(a)(1) is 
effective as follows:
    (1) If made prior to the month of entitlement to both Part A and 
Part B, it is effective as of the first day of the month of entitlement 
to both Part A and Part B.
    (2) If made during or after the month of entitlement to both Part A 
and Part B, it is effective the first day of the calendar month 
following the month in which the election is made.
* * * * *
    (c) Open enrollment periods. For an election, or change in 
election, made during an open enrollment period, as described in Sec.  
422.62(a)(3) through (5), coverage is effective as of the first day of 
the first calendar month following the month in which the election is 
made.
* * * * *
    (f) Annual 45-day period for disenrollment from MA plans to 
Original Medicare. Through 2018, an election made from January 1 
through February 14 to disenroll from an MA plan to Original Medicare, 
as described in Sec.  422.62(a)(5), is effective the first day of the 
first month following the month in which the election is made.

0
15. Section 422.100 is amended--
0
a. In paragraph (f)(2), by removing the phrase ``to services. and'' and 
adding in its place the phrase ``to services.''; and
0
b. By revising paragraphs (f)(4), (f)(5) introductory text, (f)(5)(ii), 
and (f)(6).
    The revisions read as follows:


Sec.  422.100   General requirements.

* * * * *
    (f) * * *
    (4) Except as provided in paragraph (f)(5) of this section, MA 
local plans (as defined in Sec.  422.2) must have an out-of-pocket 
maximum for Medicare Parts A and B services that is no greater than the 
annual limit set by CMS using Medicare Fee-for-Service data. Beginning 
no earlier than January 1, 2020, CMS will set the annual limit to 
strike a balance between limiting maximum beneficiary out of pocket 
costs and potential changes in premium, benefits, and cost sharing, 
with the goal of ensuring beneficiary access to affordable and 
sustainable benefit packages.
    (5) With respect to a local PPO plan, the limit specified under 
paragraph (f)(4) of this section applies only to use of network 
providers. Such local PPO plans must include a total catastrophic limit 
on beneficiary out-of-pocket expenditures for both in-network and out-
of-network Parts A and B services that is--
* * * * *
    (ii) Not greater than the annual limit set by CMS using Medicare 
Fee-for-Service data to establish appropriate beneficiary out-of-pocket 
expenditures. Beginning no earlier than January 1, 2020, CMS will set 
the annual limit to strike a balance between limiting maximum 
beneficiary out of pocket costs and potential changes in premium, 
benefits, and cost sharing, with the goal of ensuring beneficiary 
access to affordable and sustainable benefit packages.
    (6) Cost sharing for Medicare Part A and B services specified by 
CMS does not exceed levels annually determined by CMS to be 
discriminatory for such services. CMS may use Medicare Fee-for-Service 
data to evaluate the possibility of discrimination and to establish 
non-discriminatory out-of-pocket limits; beginning no earlier than 
January 1, 2020, CMS may also use MA encounter data to inform patient 
utilization scenarios used to help identify MA plan cost sharing 
standards and thresholds that are not discriminatory.
* * * * *

0
 16. Section 422.101 is amended by revising paragraphs (d)(2) and (3) 
to read as follows:


Sec.  422.101  Requirements relating to basic benefits.

* * * * *
    (d) * * *
    (2) Catastrophic limit. MA regional plans are required to establish 
a catastrophic limit on beneficiary out-of-pocket expenditures for in-
network benefits under the Medicare Fee-for-Service program (Part A and 
Part B benefits) that is no greater than the annual limit set by CMS 
using Medicare Fee-for-Service data to establish appropriate out-of-
pocket limits. Beginning no earlier than January 1, 2020, CMS will set 
the annual limit to strike a balance between limiting maximum 
beneficiary out of pocket costs and potential changes in premium, 
benefits, and cost sharing, with the goal of ensuring beneficiary 
access to affordable and sustainable benefit packages.
    (3) Total catastrophic limit. MA regional plans are required to 
establish a total catastrophic limit on beneficiary out-of-pocket 
expenditures for in-network and out-of-network benefits under the 
Medicare Fee-for-Service program (Part A and Part B benefits).
    (i) This total out-of-pocket catastrophic limit, which would apply 
to both in-network and out-of-network benefits under Medicare Fee-for-
Service, may be higher than the in-network catastrophic limit in 
paragraph (d)(2) of this section, but may not increase the limit 
described in paragraph (d)(2) of this section and may be no greater 
than the annual limit set by CMS using Medicare Fee-for-Service data.
    (ii) CMS sets the annual limit to strike a balance between limiting 
maximum beneficiary out of pocket costs and potential changes in 
premium, benefits, and cost sharing, with the goal of ensuring 
beneficiary access to affordable and sustainable benefit packages.
* * * * *

0
 17. Section 422.102 is amended by revising paragraph (d) to read as 
follows:


Sec.  422.102   Supplemental benefits.

* * * * *
    (d) Supplemental benefits packaging. MA organizations may offer 
enrollees a group of services as one optional supplemental benefit, 
offer services individually, or offer a combination of groups and 
individual services.
* * * * *

0
18. Section 422.111 is amended by revising paragraphs (a) introductory 
text, (a)(3), and (h)(2)(ii) and adding paragraph (h)(2)(iii) to read 
as follows:


Sec.  422.111  Disclosure requirements.

    (a) Detailed description. An MA organization must disclose the 
information specified in paragraph (b) of this section in the manner 
specified by CMS--
* * * * *
    (3) At the time of enrollment and at least annually thereafter, by 
the first day of the annual coordinated election period.
* * * * *
    (h) * * *
    (2) * * *
    (ii) Copies of its evidence of coverage and information (names, 
addresses, phone numbers, and specialty) on the network of contracted 
providers. Posting

[[Page 16725]]

does not relieve the MA organization of its responsibility under 
paragraph (a) of this section to provide hard copies to enrollees upon 
request.
    (iii) Posting does not relieve the MA organization of its 
responsibility under paragraph (a) of this section to provide hard 
copies of the Summary of Benefits to enrollees when CMS determines hard 
copy delivery of the Summary of Benefits is in the best interest of the 
beneficiary.
* * * * *


Sec.  422.152  [Amended]

0
19. Section 422.152 is amended by removing and reserving paragraphs 
(a)(3) and (d).

0
20. Sections 422.160, 422.162, 422.164 and 422.166 are added to Subpart 
D to read as follows:

Subpart D--Quality Improvement

* * * * *
Sec.
422.160 Basis and scope of the Medicare Advantage Quality Rating 
System.
422.162 Medicare Advantage Quality Rating System.
422.164 Adding, updating, and removing measures.
422.166 Calculation of Star Ratings.


Sec.  422.160   Basis and scope of the Medicare Advantage Quality 
Rating System.

    (a) Basis. This subpart is based on sections 1851(d), 1852(e), 
1853(o) and 1854(b)(3)(iii), (v), and (vi) of the Act and the general 
authority under section 1856(b) of the Act requiring the establishment 
of standards consistent with and to carry out Part C.
    (b) Purpose. Ratings calculated and assigned under this subpart 
will be used by CMS for the following purposes:
    (1) To provide comparative information on plan quality and 
performance to beneficiaries for their use in making knowledgeable 
enrollment and coverage decisions in the Medicare program.
    (2) To provide quality ratings on a 5-star rating system to be used 
in determining quality bonus payment (QBP) status and in determining 
rebate retention allowances.
    (3) To provide a means to evaluate and oversee overall and specific 
compliance with certain regulatory and contract requirements by MA 
plans, where appropriate and possible to use data of the type described 
in Sec.  422.162(c).
    (c) Applicability. Except for Sec.  422.162(b)(3), the regulations 
in this subpart will be applicable beginning with the 2019 measurement 
period and the associated 2021 Star Ratings that are released prior to 
the annual coordinated election period for the 2021 contract year and 
used to assign QBP ratings for the 2022 payment year.


Sec.  422.162   Medicare Advantage Quality Rating System.

    (a) Definitions. In this subpart the following terms have the 
meanings:
    CAHPS refers to a comprehensive and evolving family of surveys that 
ask consumers and patients to evaluate the interpersonal aspects of 
health care. CAHPS surveys probe those aspects of care for which 
consumers and patients are the best or only source of information, as 
well as those that consumers and patients have identified as being 
important. CAHPS initially stood for the Consumer Assessment of Health 
Plans Study, but as the products have evolved beyond health plans the 
acronym now stands for Consumer Assessment of Healthcare Providers and 
Systems.
    Case-mix adjustment means an adjustment to the measure score made 
prior to the score being converted into a Star Rating to take into 
account certain enrollee characteristics that are not under the control 
of the plan. For example age, education, chronic medical conditions, 
and functional health status that may be related to the enrollee's 
survey responses.
    Categorical Adjustment Index (CAI) means the factor that is added 
to or subtracted from an overall or summary Star Rating (or both) to 
adjust for the average within-contract (or within-plan as applicable) 
disparity in performance associated with the percentages of 
beneficiaries who are dually eligible for Medicare and enrolled in 
Medicaid, beneficiaries who receive a Low Income Subsidy, or have 
disability status in that contract (or plan as applicable).
    Clustering refers to a variety of techniques used to partition data 
into distinct groups such that the observations within a group are as 
similar as possible to each other, and as dissimilar as possible to 
observations in any other group. Clustering of the measure-specific 
scores means that gaps that exist within the distribution of the scores 
are identified to create groups (clusters) that are then used to 
identify the four cut points resulting in the creation of five levels 
(one for each Star Rating), such that the scores in the same Star 
Rating level are as similar as possible and the scores in different 
Star Rating levels are as different as possible. Technically, the 
variance in measure scores is separated into within-cluster and 
between-cluster sum of squares components. The clusters reflect the 
groupings of numeric value scores that minimize the variance of scores 
within the clusters. The Star Ratings levels are assigned to the 
clusters that minimize the within-cluster sum of squares. The cut 
points for star assignments are derived from the range of measure 
scores per cluster, and the star levels associated with each cluster 
are determined by ordering the means of the clusters.
    Consolidation means when an MA organization that has at least two 
contracts for health and/or drug services of the same plan type under 
the same parent organization in a year combines multiple contracts into 
a single contract for the start of the subsequent contract year.
    Consumed contract means a contract that will no longer exist after 
a contract year's end as a result of a consolidation.
    Display page means the CMS website on which certain measures and 
scores are publicly available for informational purposes; the measures 
that are presented on the display page are not used in assigning Part C 
and D Star Ratings.
    Domain rating means the rating that groups measures together by 
dimensions of care.
    Dual-eligible (DE) means a beneficiary who is enrolled in both 
Medicare and Medicaid.
    HEDIS is the Healthcare Effectiveness Data and Information Set 
which is a widely used set of performance measures in the managed care 
industry, developed and maintained by the National Committee for 
Quality Assurance (NCQA). HEDIS data include clinical measures 
assessing the effectiveness of care, access/availability measures, and 
service use measures.
    Highest rating means the overall rating for MA-PDs, the Part C 
summary rating for MA-only contracts, and the Part D summary rating for 
PDPs.
    Highly-rated contract means a contract that has 4 or more stars for 
its highest rating when calculated without the improvement measures and 
with all applicable adjustments (CAI and the reward factor).
    HOS means the Medicare Health Outcomes Survey which is the first 
patient reported outcomes measure that was used in Medicare managed 
care. The goal of the Medicare HOS program is to gather valid, 
reliable, and clinically meaningful health status data in the Medicare 
Advantage (MA) program for use in quality improvement activities, pay 
for performance, program oversight, public reporting, and improving 
health. All managed care organizations with MA contracts must 
participate.
    Low income subsidy (LIS) means the subsidy that a beneficiary 
receives to help pay for prescription drug coverage

[[Page 16726]]

(see Sec.  423.34 of this chapter for definition of a low-income 
subsidy eligible individual).
    Measurement period means the period for which data are collected 
for a measure or the performance period that a measures covers.
    Measure score means the numeric value of the measure or an assigned 
`missing data' message.
    Measure star means the measure's numeric value is converted to a 
Star Rating. It is displayed to the nearest whole star, using a 1-5 
star scale.
    Overall rating means a global rating that summarizes the quality 
and performance for the types of services offered across all unique 
Part C and Part D measures.
    Part C summary rating means a global rating that summarizes the 
health plan quality and performance on Part C measures.
    Part D summary rating means a global rating that summarizes 
prescription drug plan quality and performance on Part D measures.
    Plan benefit package (PBP) means a set of benefits for a defined MA 
or PDP service area. The PBP is submitted by Part D plan sponsors and 
MA organizations to CMS for benefit analysis, bidding, marketing, and 
beneficiary communication purposes.
    Reliability means a measure of the fraction of the variation among 
the observed measure values that is due to real differences in quality 
(``signal'') rather than random variation (``noise''); it is reflected 
on a scale from 0 (all differences in plan performance measure scores 
are due to measurement error) to 1 (the difference in plan performance 
scores is attributable to real differences in performance).
    Reward factor means a rating-specific factor added to the 
contract's summary or overall ratings (or both) if a contract has both 
high and stable relative performance.
    Statistical significance assesses how likely differences observed 
in performance are due to random chance alone under the assumption that 
plans are actually performing the same.
    Surviving contract means the contact that will still exist under a 
consolidation, and all of the beneficiaries enrolled in the consumed 
contract(s) are moved to the surviving contracts.
    Traditional rounding rules mean that the last digit in a value will 
be rounded. If rounding to a whole number, look at the digit in the 
first decimal place. If the digit in the first decimal place is 0, 1, 
2, 3, or 4, then the value should be rounded down by deleting the digit 
in the first decimal place. If the digit in the first decimal place is 
5 or greater, then the value should be rounded up by 1 and the digit in 
the first decimal place deleted.
    (b) Contract ratings--(1) General. CMS calculates an overall Star 
Rating, Part C summary rating, and Part D summary rating for each MA-PD 
contract, and a Part C summary rating for each MA-only contract using 
the 5-star rating system described in this subpart. Measures are 
assigned stars at the contract level and weighted in accordance with 
Sec.  422.166(a). Domain ratings are the unweighted mean of the 
individual measure ratings under the topic area in accordance with 
Sec.  422.166(b). Summary ratings are the weighted mean of the 
individual measure ratings for Part C or Part D in accordance with 
Sec.  422.166(c), with both the reward factor and CAI applied as 
applicable, as described in Sec.  422.166(f). Overall Star Ratings are 
calculated by using the weighted mean of the individual measure ratings 
in accordance with Sec.  422.166(d) with both the reward factor and CAI 
applied as applicable, as described in Sec.  422.166(f).
    (2) Plan benefit packages. All plan benefit packages (PBPs) offered 
under an MA contract have the same overall and/or summary Star Ratings 
as the contract under which the PBP is offered by the MA organization. 
Data from all the PBPs offered under a contract are used to calculate 
the measure and domain ratings for the contract except for Special 
Needs Plan (SNP)-specific measures collected at the PBP level; a 
contract level score for such measures is calculated using an 
enrollment-weighted mean of the PBP scores and enrollment reported as 
part of the measure specification in each PBP.
    (3) Contract consolidations. (i) In the case of contract 
consolidations involving two or more contracts for health or drug 
services of the same plan type under the same parent organization, CMS 
assigns Star Ratings for the first and second years following the 
consolidation based on the enrollment-weighted mean of the measure 
scores of the surviving and consumed contract(s) as provided in 
paragraph (b)(3)(iv) of this section. Paragraph (b)(3)(iii) of this 
section is applied to subsequent years that are not addressed in 
paragraph (b)(3)(ii) of this section for assigning the QBP rating.
    (ii) For the first year after a consolidation, CMS will determine 
the QBP status of a contract using the enrollment-weighted means (using 
traditional rounding rules) of what would have been the QBP Ratings of 
the surviving and consumed contracts based on the contract enrollment 
in November of the year the preliminary QBP ratings were released in 
the Health Plan Management System (HPMS).
    (iii) In subsequent years following the first year after the 
consolidation, CMS will determine QBP status based on the consolidated 
entity's Star Ratings displayed on Medicare Plan Finder.
    (iv) The Star Ratings posted on Medicare Plan Finder for contracts 
that consolidate are as follows:
    (A) For the first year after consolidation, CMS will use 
enrollment-weighted measure scores using the July enrollment of the 
measurement period of the consumed and surviving contracts for all 
measures, except the survey-based and call center measures. The survey-
based measures would use enrollment of the surviving and consumed 
contracts at the time the sample is pulled for the rating year. The 
call center measures would use average enrollment during the study 
period.
    (B) For the second year after consolidation, CMS will use the 
enrollment-weighted measure scores using the July enrollment of the 
measurement year of the consumed and surviving contracts for all 
measures except those from the following data sources: HEDIS, CAHPS, 
and HOS. HEDIS and HOS measure data will be scored as reported. CMS 
will ensure that the CAHPS survey sample will include enrollees in the 
sample frame from both the surviving and consumed contracts.
    (v) This provision governing the Star Ratings of surviving 
contracts is applicable to contract consolidations that are approved on 
or after January 1, 2019.
    (c) Data sources. (1) CMS bases Part C Star Ratings on the type of 
data specified in section 1852(e) of the Act and on CMS administrative 
data. Part C Star Ratings measures reflect structure, process, and 
outcome indices of quality. This includes information of the following 
types: Clinical data, beneficiary experiences, changes in physical and 
mental health, benefit administration information and CMS 
administrative data. Data underlying Star Ratings measures may include 
survey data, data separately collected and used in oversight of MA 
plans' compliance with MA requirements, data submitted by plans, and 
CMS administrative data.
    (2) MA organizations are required to collect, analyze, and report 
data that permit measurement of health outcomes and other indices of 
quality. MA organizations must provide unbiased, accurate, and complete 
quality data described in paragraph (c)(1) of this section to CMS on a 
timely basis as requested by CMS.

[[Page 16727]]

Sec.  422.164   Adding, updating, and removing measures.

    (a) General. CMS adds, updates, and removes measures used to 
calculate the Star Ratings as provided in this section. CMS lists the 
measures used for a particular Star Rating each year in the Technical 
Notes or similar guidance document with publication of the Star 
Ratings.
    (b) Review of data quality. CMS reviews the quality of the data on 
which performance, scoring and rating of a measure is based before 
using the data to score and rate performance or in calculating a Star 
Rating. This includes review of variation in scores among MA 
organizations and Part D plan sponsors, and the accuracy, reliability, 
and validity of measures and performance data before making a final 
determination about inclusion of measures in each year's Star Ratings.
    (c) Adding measures. (1) CMS will continue to review measures that 
are nationally endorsed and in alignment with the private sector, such 
as measures developed by National Committee for Quality Assurance 
(NCQA) and the Pharmacy Quality Alliance (PQA), or endorsed by the 
National Quality Forum for adoption and use in the Part C and Part D 
Quality Ratings System. CMS may develop its own measures as well when 
appropriate to measure and reflect performance specific to the Medicare 
program.
    (2) In advance of the measurement period, CMS will announce 
potential new measures and solicit feedback through the process 
described for changes in and adoption of payment and risk adjustment 
policies in section 1853(b) of the Act and then subsequently will 
propose and finalize new measures through rulemaking.
    (3) New measures added to the Part C Star Ratings program will be 
on the display page on www.cms.gov for a minimum of 2 years prior to 
becoming a Star Ratings measure.
    (4) A measure will remain on the display page for longer than 2 
years if CMS finds reliability or validity issues with the measure 
specification.
    (d) Updating measures--(1) Non-substantive updates. For measures 
that are already used for Star Ratings, CMS will update measures so 
long as the changes in a measure are not substantive. CMS will announce 
non-substantive updates to measures that occur (or are announced by the 
measure steward) during or in advance of the measurement period through 
the process described for changes in and adoption of payment and risk 
adjustment policies in section 1853(b) of the Act. Non-substantive 
measure specification updates include those that--
    (i) Narrow the denominator or population covered by the measure;
    (ii) Do not meaningfully impact the numerator or denominator of the 
measure;
    (iii) Update the clinical codes with no change in the target 
population or the intent of the measure;
    (iv) Provide additional clarifications:
    (A) Adding additional tests that would meet the numerator 
requirements;
    (B) Clarifying documentation requirements;
    (C) Adding additional instructions to identify services or 
procedures; or
    (v) Add alternative data sources.
    (2) Substantive updates. For measures that are already used for 
Star Ratings, in the case of measure specification updates that are 
substantive updates not subject to paragraph (d)(1) of this section, 
CMS will propose and finalize these measures through rulemaking similar 
to the process for adding new measures. CMS will initially solicit 
feedback on whether to make substantive measure updates through the 
process described for changes in and adoption of payment and risk 
adjustment policies in section 1853(b) of the Act. Once the update has 
been made to the measure specification by the measure steward, CMS may 
continue collection of performance data for the legacy measure and 
include it in Star Ratings until the updated measure has been on 
display for 2 years. CMS will place the updated measure on the display 
page for at least 2 years prior to using the updated measure to 
calculate and assign Star Ratings as specified in paragraph (c) of this 
section.
    (e) Removing measures. (1) CMS will remove a measure from the Star 
Ratings program as follows:
    (i) When the clinical guidelines associated with the specifications 
of the measure change such that the specifications are no longer 
believed to align with positive health outcomes; or
    (ii) A measure shows low statistical reliability.
    (2) CMS will announce in advance of the measurement period the 
removal of a measure based upon its application of this paragraph (e) 
through the process described for changes in and adoption of payment 
and risk adjustment policies in section 1853(b) of the Act in advance 
of the measurement period.
    (f) Improvement measure. CMS will calculate improvement measure 
scores based on a comparison of the measure scores for the current year 
to the immediately preceding year as provided in this paragraph (f); 
the improvement measure score would be calculated for Parts C and D 
separately by taking a weighted sum of net improvement divided by the 
weighted sum of the number of eligible measures.
    (1) Identifying eligible measures. Annually, the subset of measures 
to be included in the Part C and Part D improvement measures will be 
announced through the process described for changes in and adoption of 
payment and risk adjustment policies in section 1853(b) of the Act. CMS 
identifies measures to be used in the improvement measures if the 
measures meet all of the following:
    (i) CMS will include only measures available for the current and 
previous year in the improvement measures and that have numeric value 
scores in both the current and prior year.
    (ii) CMS will exclude any measure for which there was a substantive 
specification change from the previous year.
    (iii) CMS will exclude any measures that are already focused on 
improvement in MA organization performance from year to year.
    (iv) The Part C improvement measure will include only Part C 
measure scores; the Part D improvement measure will include only Part D 
measure scores.
    (2) Determining eligible contracts. CMS will calculate an 
improvement score only for contracts that have numeric measure scores 
for both years in at least half of the measures identified for use 
applying the standards in paragraphs (f)(1)(i) through (iv) of this 
section.
    (3) Special rules for calculation of the improvement score. For any 
measure used for the improvement measure for which a contract received 
5 stars in each of the years examined, but for which the measure score 
demonstrates a statistically significant decline based on the results 
of the significance testing (at a level of significance of 0.05) on the 
change score, the measure will be categorized as having no significant 
change and included in the count of measures used to determine 
eligibility for the measure (that is, for the denominator of the 
improvement measure score).
    (4) Calculation of the improvement score. The improvement measure 
will be calculated as follows:
    (i) The improvement change score (the difference in the measure 
scores in the 2-year period) will be determined for each measure that 
has been designated an improvement measure and for which a contract has 
a numeric score for each of the 2 years examined.
    (ii) Each contract's improvement change score per measure will be

[[Page 16728]]

categorized as a significant change or not a significant change by 
employing a two-tailed t-test with a level of significance of 0.05.
    (iii) The net improvement per measure category (outcome, access, 
patient experience, process) would be calculated by finding the 
difference between the weighted number of significantly improved 
measures and significantly declined measures, using the measure weights 
associated with each measure category.
    (iv) The improvement measure score will then be determined by 
calculating the weighted sum of the net improvement per measure 
category divided by the weighted sum of the number of eligible 
measures.
    (v) The improvement measure scores will be converted to measure-
level Star Ratings by determining the cut points using hierarchical 
clustering algorithms in accordance with Sec.  422.166(a)(2)(i) through 
(iii).
    (vi) The Part D improvement measure cut points for MA-PDs and PDPs 
will be determined using separate clustering algorithms in accordance 
with Sec. Sec.  422.166(a)(2)(iii) and 423.186(a)(2)(iii) of this 
chapter.
    (g) Data integrity. (1) CMS will reduce a contract's measure rating 
when CMS determines that a contract's measure data are inaccurate, 
incomplete, or biased; such determinations may be based on a number of 
reasons, including mishandling of data, inappropriate processing, or 
implementation of incorrect practices that have an impact on the 
accuracy, impartiality, or completeness of the data used for one or 
more specific measure(s).
    (i) CMS will reduce HEDIS measures to 1 star when audited data are 
submitted to NCQA with a designation of ``biased rate'' or BR based on 
an auditor's review of the data or a designation of ``nonreport'' or 
NR.
    (ii) CMS will reduce measures based on data that an MA organization 
must submit to CMS under Sec.  422.516 to 1 star when a contract did 
not score at least 95 percent on data validation for the applicable 
reporting section or was not compliant with CMS data validation 
standards/substandards for data directly used to calculate the 
associated measure.
    (iii) For the appeals measures, CMS will use statistical criteria 
to estimate the percentage of missing data for each contract (using 
data from multiple sources such as a timeliness monitoring study or 
audit information) to scale the star reductions to determine whether 
the data at the independent review entity (IRE) are complete. CMS will 
use scaled reductions for the Star Ratings for the applicable appeals 
measures to account for the degree to which the IRE data are missing.
    (A) The data submitted for the Timeliness Monitoring Project (TMP) 
or audit that aligns with the Star Ratings year measurement period is 
used to determine the scaled reduction.
    (B) The determination of the Part C appeals measure IRE data 
reduction is done independently of the Part D appeals measure IRE data 
reduction.
    (C) The reductions range from a one-star reduction to a four-star 
reduction; the most severe reduction for the degree of missing IRE data 
is a four-star reduction.
    (D) The thresholds used for determining the reduction and the 
associated appeals measure reduction are as follows:
    (1) 20 percent, 1 star reduction.
    (2) 40 percent, 2 star reduction.
    (3) 60 percent, 3 star reduction.
    (4) 80 percent, 4 star reduction.
    (E) If a contract receives a reduction due to missing Part C IRE 
data, the reduction is applied to both of the contract's Part C appeals 
measures.
    (F) If a contract receives a reduction due to missing Part D IRE 
data, the reduction is applied to both of the contract's Part D appeals 
measures.
    (G) The scaled reduction is applied after the calculation for the 
appeals measure-level Star Ratings. If the application of the scaled 
reduction results in a measure-level star rating less than 1 star, the 
contract will be assigned 1 star for the appeals measure.
    (H) The Part C Calculated Error is determined using the quotient of 
number of cases not forwarded to the IRE and the total number of cases 
that should have been forwarded to the IRE. (The number of cases that 
should have been forwarded to the IRE is the sum of the number of cases 
in the IRE during the data collection or data sample period and the 
number of cases not forwarded to the IRE during the same period.)
    (I) The Part D Calculated Error is determined by the quotient of 
the number of untimely cases not auto-forwarded to the IRE and the 
total number of untimely cases.
    (J) The projected number of cases not forwarded to the IRE in a 3-
month period is calculated by multiplying the number of cases found not 
to be forwarded to the IRE based on the TMP or audit data by a constant 
determined by the data collection or data sample time period. The value 
of the constant will be 1.0 for contracts that submitted 3 months of 
data; 1.5 for contracts that submitted 2 months of data; and 3.0 for 
contracts that submitted 1 month of data.
    (K) Contracts are subject to a possible reduction due to lack of 
IRE data completeness if both of the following conditions are met:
    (1) The calculated error rate is 20 percent or more.
    (2) The projected number of cases not forwarded to the IRE is at 
least 10 in a 3-month period.
    (L) A confidence interval estimate for the true error rate for the 
contract is calculated using a Score Interval (Wilson Score Interval) 
at a confidence level of 95 percent and an associated z of 1.959964 for 
a contract that is subject to a possible reduction.
    (M) A contract's lower bound is compared to the thresholds of the 
scaled reductions to determine the IRE data completeness reduction.
    (N) The reduction is identified by the highest threshold that a 
contract's lower bound exceeds.
    (2) CMS will reduce a measure rating to 1 star for additional 
concerns that data inaccuracy, incompleteness, or bias have an impact 
on measure scores and are not specified in paragraphs (g)(1)(i) through 
(iii) of this section, including a contract's failure to adhere to 
HEDIS, HOS, or CAHPS reporting requirements.


Sec.  422.166   Calculation of Star Ratings.

    (a) Measure Star Ratings--(1) Cut points. CMS will determine cut 
points for the assignment of a Star Rating for each numeric measure 
score by applying either a clustering or a relative distribution and 
significance testing methodology. For the Part D measures, CMS will 
determine MA-PD and PDP cut points separately.
    (2) Clustering algorithm for all measures except CAHPS measures. 
(i) The method minimizes differences within star categories and 
maximizes differences across star categories using the hierarchical 
clustering method.
    (ii) In cases where multiple clusters have the same measure score 
value range, those clusters would be combined, leading to fewer than 5 
clusters.
    (iii) The clustering algorithm for the improvement measure scores 
is done in two steps to determine the cut points for the measure-level 
Star Ratings. Clustering is conducted separately for improvement 
measure scores greater than or equal to zero and those with improvement 
measure scores less than zero.
    (A) Improvement scores of zero or greater would be assigned at 
least 3 stars for the improvement Star Rating.
    (B) Improvement scores less than zero would be assigned either 1 or 
2 stars for the improvement Star Rating.

[[Page 16729]]

    (3) Relative distribution and significance testing for CAHPS 
measures. The method combines evaluating the relative percentile 
distribution with significance testing and accounts for the reliability 
of scores produced from survey data; no measure Star Rating is produced 
if the reliability of a CAHPS measure is less than 0.60. Low 
reliability scores are defined as those with at least 11 respondents, 
reliability greater than or equal to 0.60 but less than 0.75, and also 
in the lowest 12 percent of contracts ordered by reliability. The 
following rules apply:
    (i) A contract is assigned 1 star if both of the criteria in 
paragraphs (a)(3)(i)(A) and (B) of this section are met plus at least 
one of the criteria in paragraphs (a)(3)(i)(C) or (D) of this section 
is met:
    (A) Its average CAHPS measure score is lower than the 15th 
percentile; and
    (B) Its average CAHPS measure score is statistically significantly 
lower than the national average CAHPS measure score;
    (C) The reliability is not low; or
    (D) Its average CAHPS measure score is more than one standard error 
below the 15th percentile.
    (ii) A contract is assigned 2 stars if it does not meet the 1-star 
criteria and meets at least one of these three criteria:
    (A) Its average CAHPS measure score is lower than the 30th 
percentile and the measure does not have low reliability; or
    (B) Its average CAHPS measure score is lower than the 15th 
percentile and the measure has low reliability; or
    (C) Its average CAHPS measure score is statistically significantly 
lower than the national average CAHPS measure score and below the 60th 
percentile.
    (iii) A contract is assigned 3 stars if it meets at least one of 
these three criteria:
    (A) Its average CAHPS measure score is at or above the 30th 
percentile and lower than the 60th percentile, and it is not 
statistically significantly different from the national average CAHPS 
measure score; or
    (B) Its average CAHPS measure score is at or above the 15th 
percentile and lower than the 30th percentile, the reliability is low, 
and the score is not statistically significantly lower than the 
national average CAHPS measure score; or
    (C) Its average CAHPS measure score is at or above the 60th 
percentile and lower than the 80th percentile, the reliability is low, 
and the score is not statistically significantly higher than the 
national average CAHPS measure score.
    (iv) A contract is assigned 4 stars if it does not meet the 5-star 
criteria and meets at least one of these three criteria:
    (A) Its average CAHPS measure score is at or above the 60th 
percentile and the measure does not have low reliability; or
    (B) Its average CAHPS measure score is at or above the 80th 
percentile and the measure has low reliability; or
    (C) Its average CAHPS measure score is statistically significantly 
higher than the national average CAHPS measure score and above the 30th 
percentile.
    (v) A contract is assigned 5 stars if both of the following 
criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met 
plus at least one of the criteria in paragraphs (a)(3)(v)(C) or (D) of 
this section is met:
    (A) Its average CAHPS measure score is at or above the 80th 
percentile; and
    (B) Its average CAHPS measure score is statistically significantly 
higher than the national average CAHPS measure score;
    (C) The reliability is not low; or
    (D) Its average CAHPS measure score is more than one standard error 
above the 80th percentile.
    (4) 5-Star Scale. Measure scores are converted to a 5-star scale 
ranging from 1 (worst rating) to 5 (best rating), with whole star 
increments for the cut points.
    (b) Domain Star Ratings. (1)(i) CMS groups measures by domains 
solely for purposes of public reporting the data on Medicare Plan 
Finder. They are not used in the calculation of the summary or overall 
ratings. Domains are used to group measures by dimensions of care that 
together represent a unique and important aspect of quality and 
performance.
    (ii) The 5 domains for the MA Star Ratings are: Staying Healthy: 
Screenings, Tests and Vaccines; Managing Chronic (Long Term) 
Conditions; Member Experience with Health Plan; Member Complaints and 
Changes in the Health Plan's Performance; and Health Plan Customer 
Service. The 4 domains for the Part D Star Ratings are: Drug Plan 
Customer Service; Member Complaints and Changes in the Drug Plan's 
Performance; Member Experience with the Drug Plan; and Drug Safety and 
Accuracy of Drug Pricing.
    (2) CMS calculates the domain ratings as the unweighted mean of the 
Star Ratings of the included measures.
    (i) A contract must have scores for at least 50 percent of the 
measures required to be reported for that contract type for that domain 
to have a domain rating calculated.
    (ii) The domain ratings are on a 1- to 5-star scale ranging from 1 
(worst rating) to 5 (best rating) in whole star increments using 
traditional rounding rules.
    (c) Part C summary ratings. (1) CMS will calculate the Part C 
summary ratings using the weighted mean of the measure-level Star 
Ratings for Part C, weighted in accordance with paragraph (e) of this 
section with an adjustment to reward consistently high performance and 
the application of the CAI under paragraph (f) of this section.
    (2)(i) A contract must have scores for at least 50 percent of the 
measures required to be reported for the contract type to have the 
summary rating calculated.
    (ii) The Part C improvement measure is not included in the count of 
the minimum number of rated measures.
    (3) The summary ratings are on a 1- to 5-star scale ranging from 1 
(worst rating) to 5 (best rating) in half-star increments using 
traditional rounding rules.
    (d) Overall MA-PD rating. (1) The overall rating for a MA-PD 
contract will be calculated using a weighted mean of the Part C and 
Part D measure-level Star Ratings, weighted in accordance with 
paragraph (e) of this section and with an adjustment to reward 
consistently high performance and the application of the CAI, under 
paragraph (f) of this section.
    (2)(i) An MA-PD must have both Part C and Part D summary ratings 
and scores for at least 50 percent of the measures required to be 
reported for the contract type to have the overall rating calculated.
    (ii) The Part C and D improvement measures are not included in the 
count of measures needed for the overall rating.
    (iii) Any measures that share the same data and are included in 
both the Part C and Part D summary ratings will be included only once 
in the calculation for the overall rating.
    (iv) The overall rating is on a 1- to 5-star scale ranging from 1 
(worst rating) to 5 (best rating) in half-increments using traditional 
rounding rules.
    (v) Low enrollment contracts (as defined in Sec.  422.252) and new 
MA plans (as defined in Sec.  422.252) do not receive an overall and/or 
summary rating. They are treated as qualifying plans for the purposes 
of QBPs as described in Sec.  422.258(d)(7) and as announced through 
the process described for changes in and adoption of payment and risk 
adjustment policies in section 1853(b) of the Act.
    (e) Measure weights--(1) General rules. Subject to paragraphs 
(e)(2) and (3) of this section, CMS will assign weights to measures 
based on their categorization as follows.
    (i) Improvement measures receive the highest weight of 5.

[[Page 16730]]

    (ii) Outcome and Intermediate outcome measures receive a weight of 
3.
    (iii) Patient experience and complaint measures receive a weight of 
2.
    (iv) Access measures receive a weight of 2.
    (v) Process measures receive a weight of 1.
    (2) Rules for new measures. New measures to the Star Ratings 
program will receive a weight of 1 for their first year in the Star 
Ratings program. In subsequent years, the measure will be assigned the 
weight associated with its category.
    (3) Special rule for Puerto Rico. Contracts that have service areas 
that are wholly located in Puerto Rico will receive a weight of zero 
for the Part D adherence measures for the summary and overall rating 
calculations and will have a weight of 3 for the adherence measures for 
the improvement measure calculations.
    (f) Completing the Part C summary and overall rating calculations. 
CMS will adjust the summary and overall rating calculations to take 
into account the reward factor (if applicable) and the categorical 
adjustment index (CAI) as provided in this paragraph (f).
    (1) Reward factor. This rating-specific factor is added to both the 
summary and overall ratings of contracts that qualify for the reward 
factor based on both high and stable relative performance for the 
rating level.
    (i) The contract's performance will be assessed using its weighted 
mean and its ranking relative to all rated contracts in the rating 
level (overall for MA-PDs; Part C summary for MA-PDs and MA-only; and 
Part D summary for MA-PDs and PDPs) for the same Star Ratings year. The 
contract's stability of performance will be assessed using the weighted 
variance and its ranking relative to all rated contracts in the rating 
type (overall for MA-PDs; Part C summary for MA-PDs and MA-only; and 
Part D summary for MA-PDs and PDPs). The weighted mean and weighted 
variance are compared separately for MA-PD and standalone Part D 
contracts (PDPs). The measure weights are specified in paragraph (e) of 
this section. Since highly-rated contracts may have the improvement 
measure(s) excluded in the determination of their final highest rating, 
each contract's weighted variance and weighted mean are calculated both 
with and without the improvement measures. For an MA-PD's Part C and D 
summary ratings, its ranking is relative to all other contracts' 
weighted variance and weighted mean for the rating type (Part C 
summary, Part D summary) with the improvement measure.
    (ii) Relative performance of the weighted variance (or weighted 
variance ranking) will be categorized as being high (at or above 70th 
percentile), medium (between the 30th and 69th percentile) or low 
(below the 30th percentile). Relative performance of the weighted mean 
(or weighted mean ranking) will be categorized as being high (at or 
above the 85th percentile), relatively high (between the 65th and 84th 
percentiles), or other (below the 65th percentile).
    (iii) The combination of the relative variance and relative mean is 
used to determine the value of the reward factor to be added to the 
contract's summary and overall ratings as follows:
    (A) A contract with low variance and a high mean will have a reward 
factor equal to 0.4.
    (B) A contract with medium variance and a high mean will have a 
reward factor equal to 0.3.
    (C) A contract with low variance and a relatively high mean will 
have a reward factor equal to 0.2.
    (D) A contract with medium variance and a relatively high mean will 
have a reward factor equal to 0.1.
    (E) A contract with all other combinations of variance and relative 
mean will have a reward factor equal to 0.0.
    (iv) The reward factor is determined and applied before application 
of the CAI adjustment under paragraph (f)(2) of this section; the 
reward factor is based on unadjusted scores.
    (2) Categorical Adjustment Index. CMS applies the categorical 
adjustment index (CAI) as provided in this paragraph (f)(2) to adjust 
for the average within-contract disparity in performance associated 
with the percentages of beneficiaries who receive a low income subsidy 
or are dual eligible (LIS/DE) or have disability status. The factor is 
calculated as the mean difference in the adjusted and unadjusted 
ratings (overall, Part C, Part D for MA-PDs, Part D for PDPs) of the 
contracts that lie within each final adjustment category for each 
rating type.
    (i) The CAI is added to or subtracted from the contract's overall 
and summary ratings and is applied after the reward factor adjustment 
(if applicable).
    (A) The adjustment factor is monotonic (that is, as the proportion 
of LIS/DE and disabled increases in a contract, the adjustment factor 
increases in at least one of the dimensions) and varies by a contract's 
categorization into a final adjustment category that is determined by a 
contract's proportion of LIS/DE and disabled beneficiaries.
    (B) To determine a contract's final adjustment category, contract 
enrollment is determined using enrollment data for the month of 
December for the measurement period of the Star Ratings year. The count 
of beneficiaries for a contract is restricted to beneficiaries that are 
alive for part or all of the month of December of the applicable 
measurement year. A beneficiary is categorized as LIS/DE if the 
beneficiary was designated as full or partially dually eligible or 
receiving a LIS at any time during the applicable measurement period. 
Disability status is determined using the variable original reason for 
entitlement (OREC) for Medicare using the information from the Social 
Security Administration and Railroad Retirement Board record systems.
    (C) MA-PD contracts may be adjusted up to three times with the CAI; 
one for the overall Star Rating and one for each of the summary ratings 
(Part C and Part D).
    (D) An MA-only contract may be adjusted only once for the CAI for 
the Part C summary rating.
    (E) The CAI values are rounded and displayed with 6 decimal places.
    (ii) In determining the CAI values, a measure will be excluded from 
adjustment if the measure meets any of the following:
    (A) The measure is already case-mix adjusted for socioeconomic 
status.
    (B) The focus of the measurement is not a beneficiary-level issue 
but rather a plan or provider-level issue.
    (C) The measure is scheduled to be retired or revised.
    (D) The measure is applicable only to SNPs.
    (iii) The Star Ratings measures that remain after the exclusion 
criteria, paragraph (f)(2)(ii) of this section, have been applied will 
be adjusted for the determination of the CAI. CMS will announce the 
measures identified for adjustment in the calculations of the CAI under 
this paragraph (f)(2) through the process described for changes in and 
adoption of payment and risk adjustment policies in section 1853(b) of 
the Act.
    (iv) The adjusted measures scores for the selected measures are 
determined using the results from regression models of beneficiary-
level measure scores that adjust for the average within-contract 
difference in measure scores for MA or PDP contracts.
    (A) A logistic regression model with contract fixed effects and 
beneficiary level indicators of LIS/DE and disability status is used 
for the adjustment.
    (B) The adjusted measure scores are converted to a measure-level 
Star Rating

[[Page 16731]]

using the measure thresholds for the Star Ratings year that corresponds 
to the measurement period of the data employed for the CAI 
determination.
    (v) The rating-specific CAI values will be determined using the 
mean differences between the adjusted and unadjusted Star Ratings 
(overall, Part C summary, Part D summary for MA-PDs and Part D summary 
for PDPs) in each final adjustment category.
    (A) For the annual development of the CAI, the distribution of the 
percentages for LIS/DE and disabled using the enrollment data that 
parallels the previous Star Ratings year's data would be examined to 
determine the number of equal-sized initial groups for each attribute 
(LIS/DE and disabled).
    (B) The initial categories are created using all groups formed by 
the initial LIS/DE and disabled groups.
    (C) The mean difference between the adjusted and unadjusted summary 
or overall ratings per initial category would be calculated and 
examined. The initial categories would then be collapsed to form the 
final adjustment categories. The collapsing of the initial categories 
to form the final adjustment categories would be done to enforce 
monotonicity in at least one dimension (LIS/DE or disabled).
    (D) The mean difference within each final adjustment category by 
rating-type (overall, Part C, Part D for MA-PD, and Part D for PDPs) 
would be the CAI values for the next Star Ratings year.
    (vi) CMS develops the model for the modified contract-level LIS/DE 
percentage for Puerto Rico using the following sources of information:
    (A) The most recent data available at the time of the development 
of the model of both 1-year American Community Survey (ACS) estimates 
for the percentage of people living below the Federal Poverty Level 
(FPL) and the ACS 5-year estimates for the percentage of people living 
below 150 percent of the FPL. The data to develop the model will be 
limited to the 10 states, drawn from the 50 states plus the District of 
Columbia with the highest proportion of people living below the FPL, as 
identified by the 1-year ACS estimates.
    (B) The Medicare enrollment data from the same measurement period 
as the Star Ratings' year. The Medicare enrollment data would be 
aggregated from MA contracts that had at least 90 percent of their 
enrolled beneficiaries with mailing addresses in the 10 highest poverty 
states.
    (vii) A linear regression model is developed to estimate the 
percentage of LIS/DE for a contacts that solely serve the population of 
beneficiaries in Puerto Rico.
    (A) The maximum value for the modified LIS/DE indicator value per 
contract would be capped at 100 percent.
    (B) All estimated modified LIS/DE values for Puerto Rico would be 
rounded to 6 decimal places when expressed as a percentage.
    (C) The model's coefficient and intercept are updated annually and 
published in the Technical Notes.
    (g) Applying the improvement measure scores. (1) CMS runs the 
calculations twice for the highest level rating for each contract-type 
(overall rating for MA-PD contracts and Part C summary rating for MA-
only contracts), with all applicable adjustments (CAI and the reward 
factor), once including the improvement measure(s) and once without 
including the improvement measure(s). In deciding whether to include 
the improvement measures in a contract's final highest rating, CMS 
applies the following rules:
    (i) If the highest rating for each contract-type is 4 stars or more 
without the use of the improvement measure(s) and with all applicable 
adjustments (CAI and the reward factor), a comparison of the highest 
rating with and without the improvement measure(s) is done. The higher 
rating is used for the rating.
    (ii) If the highest rating is less than 4 stars without the use of 
the improvement measure(s) and with all applicable adjustments (CAI and 
the reward factor), the rating will be calculated with the improvement 
measure(s).
    (2) The Part C summary rating for MA-PDs will include the Part C 
improvement measure and the Part D summary rating for MA-PDs will 
include the Part D improvement measure.
    (h) Posting and display of ratings. For all ratings at the measure, 
domain, summary and overall level, posting and display of the ratings 
is based on there being sufficient data to calculate and assign 
ratings. If a contract does not have sufficient data to calculate a 
rating, the posting and display would be the flag ``Not enough data 
available.'' If the measurement period is prior to one year past the 
contract's effective date, the posting and display would be the flag 
``Plan too new to be measured''.
    (1) Medicare Plan Finder Performance icons. Icons are displayed on 
Medicare Plan Finder to note performance as provided in this paragraph 
(h)(1):
    (i) High-performing icon. The high performing icon is assigned to 
an MA-only contract for achieving a 5-star Part C summary rating and an 
MA-PD contract for a 5-star overall rating.
    (ii) Low-performing icon. (A) A contract receives a low performing 
icon as a result of its performance on the Part C or Part D summary 
ratings. The low performing icon is calculated by evaluating the Part C 
and Part D summary ratings for the current year and the past 2 years. 
If the contract had any combination of Part C or Part D summary ratings 
of 2.5 or lower in all 3 years of data, it is marked with a low 
performing icon. A contract must have a rating in either Part C or Part 
D for all 3 years to be considered for this icon.
    (B) CMS may disable the Medicare Plan Finder online enrollment 
function (in Medicare Plan Finder) for Medicare health and prescription 
drug plans with the low performing icon; beneficiaries will be directed 
to contact the plan directly to enroll in the low-performing plan.
    (2) Plan preview of the Star Ratings. CMS will have plan preview 
periods before each Star Ratings release during which MA organizations 
can preview their Star Ratings data in HPMS prior to display on the 
Medicare Plan Finder.

0
21. Section 422.204 is amended by removing paragraph (b)(5) and adding 
paragraph (c) to read as follows:


Sec.  422.204   Provider selection and credentialing.

* * * * *
    (c) An MA organization must follow a documented process that 
ensures compliance with the preclusion list provisions in Sec.  
422.222.

0
 22. Amend Sec.  422.206 by revising paragraph (b)(2)(i) to read as 
follows:


Sec.  422.206   Interference with health care professionals' advice to 
enrollees prohibited.

* * * * *
    (b) * * *
    (2) * * *
    (i) To CMS, with its application for a Medicare contract, within 10 
days of submitting its bid proposal or, for policy changes, in 
accordance with all applicable requirements under subpart V of this 
part.
* * * * *

0
23. Section 422.208 is amended:
0
a. In paragraph (a) by adding the definitions of ``Combined Stop-Loss 
Insurance Deductible Table (Table PIP-11)'', ``Global capitation'', 
``Net benefit premium'', ``Non-Risk Patient Equivalents (NPE)'', and 
``Separate Stop-Loss Insurance Deductible Table (Table PIP-2)'' in 
alphabetical order;
0
b. By revising paragraph (f)(2)(iii); and
0
c. By adding paragraphs (f)(2)(iv) through (vi) and (f)(3).
    The additions and revisions read as follows:

[[Page 16732]]

Sec.  422.208   Physician incentive plans: requirements and 
limitations.

    (a) * * *
    Combined Stop-Loss Insurance Deductible Table (Table PIP-11) means 
the table described and developed using the methodology in paragraph 
(f)(2)(iv) of this section.
    Global capitation means a specific type of ``capitation'' that 
includes both professional and institutional services. Services covered 
by global capitation may also include prescription drug benefits and 
supplemental benefits as well as basic benefits (as those terms are 
defined in Sec.  422.100(c)). For purposes of Tables PIP-11 and PIP-12 
global capitation includes all Parts A and B services except hospice.
    Net benefit premium means the total amount of stop-loss claims (90 
percent of claims above the deductible) for that panel size divided by 
the panel size. It is determined for each panel size and shown in Table 
PIP-11, described in paragraph (f)(2)(iv) of this section. It is then 
used in Table PIP-12, described in paragraph (f)(2)(vi) of this 
section, to identify all separate institutional and separate 
professional deductible combinations that meet the stop-loss 
requirements for multi-specialty physician groups participating in 
PIPs.
    Non-Risk Patient Equivalents (NPE) means the estimate of annual 
claims for physician rendered services for non-risk patients served by 
the physician or physician group divided by what the PMPY capitation 
for physician rendered services would be if the beneficiary were part 
of the risk arrangement. Both Medicare and non-Medicare patients are 
included in this calculation.
* * * * *
    Separate Stop-Loss Insurance Deductible Table (Table PIP-2) means 
the table described and developed using the methodology in paragraph 
(f)(2)(vi) of this section.
* * * * *
    (f) * * *
    (2) * * *
    (iii)(A) Stop-loss protection must cover at least 90 percent of 
costs of referral services above the deductible or an actuarial 
equivalent amount of the costs of referral services that exceed the 
per-patient deductible limit. The single combined deductible for the 
required stop-loss protection for the various panel sizes for contract 
years beginning on or after January 1, 2019 is determined using the 
Combined Stop-Loss Insurance Deductible Table (Table PIP-11). For panel 
sizes not shown on Table PIP-11 and for values not shown on Table PIP-
12, linear interpolation (between the table values) may be used to 
identify the maximum deductible(s) for the required stop-loss coverage. 
Tables PIP-11 and PIP-12 apply to only multi-specialty physician groups 
in global capitation arrangements with per-patient stop-loss insurance. 
For all other physician incentive plan arrangements, the MA 
organization must assure that the physician or physician group entering 
into the physician incentive plan arrangement is covered by actuarially 
equivalent stop-loss protection that meets the requirements of this 
regulation.
    (B) Using Table PIP-11, the deductible is identified for the panel 
size that is the number of risk patients plus non-risk patient 
equivalents. Non-risk patient equivalents may add a maximum of $100,000 
to the deductible. The deductible for the stop-loss insurance required 
to be provided for the physician or physician group is then based on 
the lesser of:
    (1) The deductible for the risk patient panel size plus $100,000; 
and
    (2) The deductible for the panel size that is the total of the 
number of risk patients plus non-risk patient equivalents.
    (iv) Table 1 is developed and updated by CMS using the methodology 
in this paragraph. CMS publishes Table PIP-11 in guidance (such as an 
attachment to the Rate Announcement issued under section 1853(b) of the 
Act) in advance of the bid due date for the upcoming year if CMS 
determines that an update would be prudent for that year.
    (A) The stop-loss tables are calculated using claims data for a 
statistically valid sample of beneficiaries enrolled in Fee-for-Service 
Medicare Parts A and B from the most available recent year. The sample 
includes only claims for beneficiaries eligible for both Part A and 
Part B for whom Medicare is the primary insurer and excludes hospice 
claims. The estimate of medical group income is derived from payments 
for all Part A and Part B services (excluding hospice) in the sampled 
claims data (to emulate a multi-specialty practice). The central limit 
theorem is used to obtain the distribution of claim means for a multi-
specialty group of any given panel size. The distribution of claim 
means is used to obtain, with 98 percent confidence, the point at which 
a multi-specialty group of a given panel size would, through referral 
services, lose no more than 25 percent of potential payments. This 
point is the deductible in Table PIP-11 for the given panel size.
    (B) The `net benefit premium' (NBP) column in Table PIP-11 is not 
used for computation of combined insurance but is used to determine the 
separate deductibles for professional services and institutional 
services in the Separate Stop-Loss Insurance Deductible Table (Table 
PIP-12).
    (C) The NBP is computed by dividing the total amount of stop loss 
claims (90 percent of claims above the deductible) for that panel size 
by the panel size.
    (v)(A) Insurance using separate deductibles for professional and 
institutional claims is permissible so long as the separate deductibles 
for institutional services and professional services are determined 
using Table 2 as described in paragraph (f)(2)(vi)(B) of this section. 
Table PIP-2 is developed and updated by CMS using the methodology in 
paragraph (f)(2)(vi). CMS publishes Table PIP-2 in guidance (such as an 
attachment to the Rate Announcement issued under section 1853(b) of the 
Act) in advance of the bid due date for the upcoming year if CMS 
determines that an update would be prudent for that year.
    (B) The maximum deductibles for each category of services 
(institutional and professional claims) are identified by using the net 
benefit premium (NBP) determined in Table PIP-11 as the starting point 
in Table PIP-12. Any combination of institutional and professional 
attachment points for which the NBP in Table PIP-12 is greater than the 
NBP determined in Table PIP-11 is permissible. Interpolation may be 
used to find the NBP values in Table PIP-12 that are closest to the NBP 
identified in Table PIP-11.
    (vi) Table PIP-12 is developed using a methodology similar to that 
for Table PIP-11.
    (A) Claims data are obtained as described in paragraph 
(f)(2)(iv)(A).
    (B) Professional and institutional claims are defined and 
categorized based on industry standards and based on payments for Part 
A and Part B services.
    (C) The central limit theorem is used to obtain the distribution of 
claim means and deductibles are obtained at the 98 percent confidence 
level.
    (3) Special insurance. If there is a different type of stop-loss 
policy obtained by the physician group, it must be actuarially 
equivalent to the coverage shown in Tables PIP-11 and PIP-12. 
Actuarially equivalent deductibles are acceptable if the insurance is 
actuarially certified by an attesting actuary who fulfills all of the 
following requirements:
    (i) Develops the deductibles to be actuarially equivalent to those 
coverages in the Tables.
    (ii) Makes the computations in accordance with generally accepted 
actuarial principles and practices.

[[Page 16733]]

    (iii) Meets the qualification standards established by the American 
Academy of Actuaries and follow the practice standards established by 
the Actuarial Standards Board.
* * * * *

0
 24. Section 422.222 is revised to read as follows:


Sec.  422.222   Preclusion list.

    (a)(1) An MA organization must not make payment for a health care 
item or service furnished by an individual or entity that is included 
on the preclusion list, defined in Sec.  422.2.
    (2) CMS sends written notice to the individual or entity via letter 
of their inclusion on the preclusion list. The notice must contain the 
reason for the inclusion and inform the individual or entity of their 
appeal rights. An individual or entity may appeal their inclusion on 
the preclusion list, defined in Sec.  422.2, in accordance with 42 CFR 
part 498.
    (b) An MA organization that does not comply with paragraph (a) of 
this section may be subject to sanctions under Sec.  422.750 and 
termination under Sec.  422.510.

0
25. Section 422.224 is revised to read as follows:


Sec.  422.224   Payment to individuals and entities excluded by the OIG 
or included on the preclusion list.

    (a) An MA organization may not pay, directly or indirectly, on any 
basis, for items or services furnished to a Medicare enrollee by any 
individual or entity that is excluded by the Office of the Inspector 
General (OIG) or is included on the preclusion list, defined in Sec.  
422.2.
    (b) If an MA organization receives a request for payment by, or on 
behalf of, an individual or entity that is excluded by the OIG or an 
individual or entity that is included on the preclusion list, defined 
in Sec.  422.2, the MA organization must notify the enrollee and the 
excluded individual or entity or the individual or entity included on 
the preclusion list in writing, as directed by contract or other 
direction provided by CMS, that payments will not be made. Payment may 
not be made to, or on behalf of, an individual or entity that is 
excluded by the OIG or is included on the preclusion list.


Sec.  422.254   [Amended]

0
26. Section 422.254 is amended by removing paragraph (a)(4) and 
redesignating paragraph (a)(5) as paragraph (a)(4).


Sec.  422.256   [Amended]

0
27. Section 422.256 is amended by removing paragraph (b)(4).


Sec.  422.258   [Amended]

0
28. Section 422.258 is amended in paragraph (d)(7) introductory text by 
removing the phrase ``section 1852(e) of the Act)'' and adding in its 
place the phrase ``section 1852(e) of the Act) specified in subpart D 
of this part 422''.

0
29. Section 422.260 is amended by revising paragraph (a) and revising 
the definition of ``Quality bonus payment (QBP) determination 
methodology'' in paragraph (b) to read as follows:


Sec.  422.260   Appeals of quality bonus payment determinations

    (a) Scope. The provisions of this section pertain to the 
administrative review process to appeal quality bonus payment status 
determinations based on section 1853(o) of the Act. Such determinations 
are made based on the overall rating for MA-PDs and Part C summary 
rating for MA-only contracts for the contract assigned under subpart D 
of this part.
    (b) * * *
    Quality bonus payment (QBP) determination methodology means the 
quality ratings system specified in subpart D of this part 422 for 
assigning quality ratings to provide comparative information about MA 
plans and evaluating whether MA organizations qualify for a QBP. (Low 
enrollment contracts and new MA plans are defined in Sec.  422.252.)
* * * * *

0
30. Section 422.310 is amended by adding paragraph (d)(5) to read as 
follows:


Sec.  422.310   Risk adjustment data.

* * * * *
    (d) * * *
    (5) For data described in paragraph (d)(1) of this section as data 
equivalent to Medicare fee-for-service data, which is also known as MA 
encounter data, MA organizations must submit a NPI in a billing 
provider field on each MA encounter data record, per CMS guidance.
* * * * *

0
31. Section 422.501 is amended by revising paragraphs (c)(1)(iv) and 
(2) to read as follows:


Sec.  422.501   Application requirements.

* * * * *
    (c) * * *
    (1) * * *
    (iv) Documentation that payment for health care services or items 
is not being and will not be made to individuals and entities included 
on the preclusion list, defined in Sec.  422.2.
    (2) The authorized individual must thoroughly describe how the 
entity and MA plan meet, or will meet, all the requirements described 
in this part, including providing documentation that payment for health 
care services or items is not being and will not be made to individuals 
and entities included on the preclusion list, defined in Sec.  422.2.
* * * * *


Sec.  422.502   [Amended]

0
32. Section 422.502 is amended in paragraphs (b)(1) and (2) by removing 
the phrase ``14 months'' and adding in its place ``12 months'' each 
time it appears.

0
 33. Section 422.503 is amended--
0
 a. In paragraph (b)(4)(ii), by removing the phrase ``financial and 
marketing activities'' and adding in its place ``financial and 
communication activities''; and
0
b. Revising paragraph (b)(4)(vi)(C).
    The revision reads as follows:


Sec.  422.503   General provisions.

* * * * *
    (b) * * *
    (4) * * *
    (vi) * * *
    (C)(1) Each MA organization must establish and implement effective 
training and education for its compliance officer and organization 
employees, the MA organization's chief executive and other senior 
administrators, managers and governing body members.
    (2) Such training and education must occur at a minimum annually 
and must be made a part of the orientation for a new employee and new 
appointment to a chief executive, manager, or governing body member.
* * * * *

0
34. Section 422.504 is amended by--
0
 a. Revising paragraphs (a) introductory text and (a)(6).
0
 b. Removing paragraph (a)(16).
0
c. Redesignating paragraphs (a)(17) and (18) as paragraphs (a)(16) and 
(17), respectively.
0
d. Revising newly redesignated paragraph (a)(17).
0
e. Revising paragraph (i)(2)(v).
    The revisions read as follows:


Sec.  422.504   Contract provisions.

* * * * *
    (a) Agreement to comply with regulations and instructions. The MA 
organization agrees to comply with all the applicable requirements and 
conditions set forth in this part and in general instructions. 
Compliance with

[[Page 16734]]

the terms of this paragraph (a) is material to the performance of the 
MA contract. The MA organization agrees--
* * * * *
    (6) To comply with all applicable provider and supplier 
requirements in subpart E of this part, including provider 
certification requirements, anti-discrimination requirements, provider 
participation and consultation requirements, the prohibition on 
interference with provider advice, limits on provider indemnification, 
rules governing payments to providers, limits on physician incentive 
plans, and the preclusion list requirements in Sec. Sec.  422.222 and 
422.224.
* * * * *
    (17) To maintain a Part C summary plan rating score of at least 3 
stars under the 5-star rating system specified in subpart D of this 
part. A Part C summary plan rating is calculated as provided in Sec.  
422.166.
* * * * *
    (i) * * *
    (2) * * *
    (v) They will ensure that payments are not made to individuals and 
entities included on the preclusion list, defined in Sec.  422.2.
* * * * *


Sec.  422.506  [Amended]

0
35. Section 422.506 is amended--
0
 a. By removing paragraph (a)(3);
0
 b. By redesignating paragraphs (a)(4) and (5) as paragraphs (a)(3) and 
(4);
0
 c. In newly redesignated paragraph (a)(4) introductory text by 
removing the reference ``paragraph (a)(4)'' and adding in its place the 
reference ``paragraph (a)(3)''.
0
d. By removing and reserving paragraph (b).

0
 36. Section 422.508 is amended by adding paragraph (a)(3) to read as 
follows:


Sec.  422.508   Modification or termination of contract by mutual 
consent.

    (a) * * *
    (3) If the organization submits a request to end the term of its 
contract after the deadline provided in Sec.  422.506(a)(2)(i), the 
contract may be terminated by mutual consent in accordance with 
paragraphs (a) through (d) of this section. CMS may mutually consent to 
the contract termination if the contract termination does not 
negatively affect the administration of the Medicare program.
* * * * *

0
 37. Section 422.510 is amended by revising paragraphs (a)(4)(viii) and 
(xiii) and adding paragraphs (a)(4)(xiv) and (xv) and (b)(1)(iv) to 
read as follows:


Sec.  422.510   Termination of contract by CMS.

    (a) * * *
    (4) * * *
    (viii) Substantially fails to comply with the requirements in 
subpart V of this part.
* * * * *
    (xiii) Fails to meet the preclusion list requirements in accordance 
with Sec.  422.222 and 422.224.
    (xiv) The MA organization has committed any of the acts in Sec.  
422.752(a) that support the imposition of intermediate sanctions or 
civil money penalties under subpart O of this part.
    (xv) Following the issuance of a notice to the MA organization no 
later than August 1, CMS must terminate, effective December 31 of the 
same year, an individual MA plan if that plan does not have a 
sufficient number of enrollees to establish that it is a viable 
independent plan option.
    (b) * * *
    (1) * * *
    (iv) In the event that CMS issues a termination notice to an MA 
organization on or before August 1 with an effective date of the 
following December 31, the MA organization must issue notification to 
its Medicare enrollees at least 90 days prior to the effective date of 
the termination.
* * * * *

0
 38. Section 422.514 is amended by revising paragraph (b) to read as 
follows:


Sec.  422.514   Minimum enrollment requirements.

* * * * *
    (b) Minimum enrollment waiver. For a contract applicant that does 
not meet the applicable requirement of paragraph (a) of this section at 
application for an MA contract, CMS may waive the minimum enrollment 
requirement for the first 3 years of the contract. To receive a waiver, 
a contract applicant must demonstrate to CMS's satisfaction that it is 
capable of administering and managing an MA contract and is able to 
manage the level of risk required under the contract during the first 3 
years of the contract. Factors that CMS takes into consideration in 
making this evaluation include the extent to which--
    (1) The contract applicant management and providers have previous 
experience in managing and providing health care services under a risk-
based payment arrangement to at least as many individuals as the 
applicable minimum enrollment for the entity as described in paragraph 
(a) of this section; or
    (2) The contract applicant has the financial ability to bear 
financial risk under an MA contract. In determining whether an 
organization is capable of bearing risk, CMS considers factors such as 
the organization's management experience as described in paragraph 
(b)(1) of this section and stop-loss insurance that is adequate and 
acceptable to CMS; and
    (3) The contract applicant is able to establish a marketing and 
enrollment process that allows it to meet the applicable enrollment 
requirement specified in paragraph (a) of this section before 
completion of the third contract year.
* * * * *


Sec.  422.590  [Amended]

0
39. Section 422.590 is amended by removing paragraph (f) and 
redesignating paragraphs (g) and (h) as paragraphs (f) and (g), 
respectively.


Sec.  422.664  [Amended]

0
 40. Section 422.664 is amended in paragraph (b)(1) by removing the 
phrase ``July 15'' and adding in its place ``September 1''.

0
41. Section 422.750 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  422.750   Types of intermediate sanctions and civil money 
penalties.

    (a) * * *
    (3) Suspension of communication activities to Medicare 
beneficiaries by an MA organization, as defined by CMS.
* * * * *

0
 42. Section 422.752 is amended by revising paragraphs (a)(11) and (13) 
and (b) to read as follows:


Sec.  422.752   Basis for imposing intermediate sanctions and civil 
money penalties.

    (a) * * *
    (11) Fails to comply with communication restrictions described in 
subpart V of this part or applicable implementing guidance.
* * * * *
    (13) Fails to comply with Sec. Sec.  422.222 and 422.224, that 
requires the MA organization not to make payment to excluded 
individuals and entities, nor to individuals and entities on the 
preclusion list, defined in Sec.  422.2.
    (b) Suspension of enrollment and communications. If CMS makes a 
determination that could lead to a contract termination under Sec.  
422.510(a), CMS may impose the intermediate sanctions at Sec.  
422.750(a)(1) and (3).
* * * * *

Subpart V--Medicare Advantage Communication Requirements

0
43. The subpart heading for Subpart V is revised to read as set forth 
above.

[[Page 16735]]


0
44. Section 422.2260 is revised to read as follows:


Sec.  422.2260  Definitions.

    As used in this subpart--
    Communications means activities and use of materials to provide 
information to current and prospective enrollees.
    Communication materials means all information provided to current 
and prospective enrollees. Marketing materials are a subset of 
communication material.
    Marketing means activities and use of materials that meet the 
following:
    (1) Conducted by the MA organization or downstream entities.
    (2) Intended to draw a beneficiary's attention to a MA plan or 
plans.
    (3) Intended to influence a beneficiary's decision-making process 
when selecting an MA plan for enrollment or deciding to stay enrolled 
in a plan (that is, retention-based marketing).
    Marketing materials include, but are not limited to the following:
    (1) Materials such as brochures; posters; advertisements in media 
such as newspapers, magazines, television, radio, billboards, or the 
internet; and social media content.
    (2) Materials used by marketing representatives such as scripts or 
outlines for telemarketing or other presentations.
    (3) Presentation materials such as slides and charts.
    Materials that do not include the following are not considered 
marketing materials:--
    (1) Information about the plan's benefit structure or cost sharing;
    (2) Information about measuring or ranking standards (for example, 
star ratings);
    (3) Mention benefits or cost sharing, but do not meet the 
definition of marketing in this section;
    (4) Unless otherwise specified by CMS based on their use or 
purpose, materials that are required under Sec.  422.111; or
    (5) Any materials specifically designated by CMS as not meeting the 
definition of the proposed marketing definition based on their use or 
purpose.

0
45. Section 422.2262 is amended by revising paragraph (d) to read as 
follows:


Sec.  422.2262  Review and distribution of marketing materials.

* * * * *
    (d) Enrollee communication materials. Enrollee communication 
materials may be reviewed by CMS and CMS may determine, upon review of 
such materials, that the materials must be modified, or may no longer 
be used.

0
46. Section 422.2264 is revised to read as follows:


Sec.  422.2264  Guidelines for CMS review.

    In reviewing marketing material or election forms under Sec.  
422.2262, CMS determines that the materials--
    (a) Provide, in a format (and, where appropriate, print size), and 
using standard terminology that may be specified by CMS, the following 
information to Medicare beneficiaries interested in enrolling:
    (1) Adequate written description of rules (including any 
limitations on the providers from whom services can be obtained), 
procedures, basic benefits and services, and fees and other charges.
    (2) Adequate written description of any supplemental benefits and 
services.
    (b) Notify the general public of its enrollment period in an 
appropriate manner, through appropriate media, throughout its service 
area and if applicable, continuation areas.
    (c) Include in written materials notice that the MA organization is 
authorized by law to refuse to renew its contract with CMS, that CMS 
also may refuse to renew the contract, and that termination or non-
renewal may result in termination of the beneficiary's enrollment in 
the plan.
    (d) Ensure that materials are not materially inaccurate or 
misleading or otherwise make material misrepresentations.

0
47. Section 422.2268 is amended by--
0
a. Revising the section heading;
0
b. Removing the introductory text; and
0
c. Revising paragraphs (a) and (b).
    The revisions read as follows:


Sec.  422.2268  Standards for MA organization communications and 
marketing.

    (a) In conducting communication activities, MA organizations may 
not do any of the following:
    (1) Provide information that is inaccurate or misleading.
    (2) Engage in activities that could mislead or confuse Medicare 
beneficiaries, or misrepresent the MA organization.
    (3) Claim the MA organization is recommended or endorsed by CMS or 
Medicare or that CMS or Medicare recommends that the beneficiary enroll 
in the MA plan. It may explain that the organization is approved for 
participation in Medicare.
    (4) Employ MA plan names that suggest that a plan is not available 
to all Medicare beneficiaries. This prohibition does not apply to MA 
plan names in effect on July 31, 2000.
    (5) Display the names and/or logos of co-branded network providers 
on the organization's member identification card, unless the provider 
names, and/or logos are related to the member selection of specific 
provider organizations (for example, physicians, hospitals).
    (6) Use a plan name that does not include the plan type. The plan 
type should be included at the end of the plan name.
    (7) For markets with a significant non-English speaking population, 
provide vital materials unless in the language of these individuals. 
Specifically, MA organizations must translate materials into any non-
English language that is the primary language of at least 5 percent of 
the individuals in a plan benefit package (PBP) service area.
    (b) In marketing, MA organizations may not do any of the following:
    (1) Provide cash or other monetary rebates as an inducement for 
enrollment or otherwise.
    (2) Offer gifts to potential enrollees, unless the gifts are of 
nominal (as defined in the CMS Marketing Guidelines) value, are offered 
to all potential enrollees without regard to whether or not the 
beneficiary enrolls, and are not in the form of cash or other monetary 
rebates.
    (3) Market non-health care related products to prospective 
enrollees during any MA or Part D sales activity or presentation. This 
is considered cross-selling and is prohibited.
    (4) 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.
    (5) 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.
    (6) Distribute marketing materials for which, before expiration of 
the 45-day period, the MA organization receives from CMS written notice 
of disapproval because it is inaccurate or misleading, or misrepresents 
the MA organization, its marketing representatives, or CMS.
    (7) Conduct sales presentations or distribute and accept MA plan 
enrollment forms in provider offices or other areas where health care 
is delivered to individuals, except in the case where such activities 
are conducted in common areas in health care settings.
    (8) Conduct sales presentations or distribute and accept plan 
applications at educational events.
    (9) Display the names and/or logos of provider co-branding partners 
on

[[Page 16736]]

marketing materials, unless the materials clearly indicate that other 
providers are available in the network.
    (10) Knowingly target or send unsolicited marketing materials to 
any MA enrollee during the Open Enrollment Period.
    (11) Engage in any other marketing activity prohibited by CMS in 
its marketing guidance.
    (12) Engage in any discriminatory activity such as attempting to 
recruit Medicare beneficiaries from higher income areas without making 
comparable efforts to enroll Medicare beneficiaries from lower income 
areas.
    (13) Solicit door-to-door for Medicare beneficiaries or through 
other unsolicited means of direct contact, including calling a 
beneficiary without the beneficiary initiating the contact.
    (14) Use providers or provider groups to distribute printed 
information comparing the benefits of different health plans unless the 
providers, provider groups, or pharmacies accept and display materials 
from all health plans with which the providers, provider groups, or 
pharmacies contract. The use of publicly available comparison 
information is permitted if approved by CMS in accordance with the 
Medicare marketing guidance.
    (15) Provide meals to potential enrollees, which is prohibited, 
regardless of value.
* * * * *


Sec.  422.2272  [Amended]

0
 48. Section Sec.  422.2272 is amended by removing paragraph (e).


Sec.  422.2274  [Amended]

0
 49. Section 422.2274 is amended by--
0
 a. Redesignating paragraph (b)(1)(iii) as paragraph (b)(1)(iv).
0
 b. Redesignating paragraph (b)(2)(iii) as paragraph (b)(1)(iii).
0
c. Removing paragraph (b)(2);
0
d. Redesignating paragraph (b)(3) as paragraph (b)(2); and
0
e. In newly redesignated paragraph (b)(2)(ii)(A) by removing the 
reference ``paragraph (b)(3)(iii)'' and adding in its place the 
reference ``paragraph (b)(2)(iii)''.


Sec.  422.2410  [Amended]

0
50. Section 422.2410 is amended in paragraph (a) by removing the phrase 
``an MLR'' and adding in its place the phrase ``the information 
required under Sec.  422.2460''.


Sec.  422.2420  [Amended]

0
51. Section 422.2420 is amended--
0
a. By removing and reserving paragraph (b)(2)(ix); and
0
b. In paragraph (d)(2)(i), removing the phrase ``in Sec.  422.2420(b) 
or (c)'' and adding in its place the phrase ``in paragraph (b) or (c) 
of this section''.

0
52. Section 422.2430 is amended--
0
 a. By redesignating paragraph (a) introductory text and paragraphs 
(a)(1) and (2) as paragraphs (a)(1), (2), and (3), respectively;
0
 b. By adding a new paragraph (a) subject heading and revising newly 
redesignated paragraph (a)(1);
0
c. By adding paragraph (a)(4);
0
d. In paragraph (b)(1), by removing the word ``costs'' and adding in 
its place the phrase ``costs other than those that are related to fraud 
reduction'';
0
e. In paragraph (b)(5), by adding the phrase ``(and that are not 
related to fraud reduction activities under paragraph (a)(4)(ii) of 
this section)'' after ``capabilities''; and
0
f. By removing and reserving paragraph (b)(8).
    The revision and addition read as follows:


Sec.  422.2430  Activities that improve health care quality.

    (a) Activity requirements. (1) Activities conducted by an MA 
organization to improve quality must either--
    (i) Fall into one of the categories in paragraph (a)(2) of this 
section and meet all of the requirements in paragraph (a)(3) of this 
section; or
    (ii) Be listed in paragraph (a)(4) of this section.
* * * * *
    (4)(i) For an MA contract that includes MA-PD plans (described in 
Sec.  422.2420(a)(2)), Medication Therapy Management Programs meeting 
the requirements of Sec.  423.153(d) of this chapter.
    (ii) Fraud reduction activities, including fraud prevention, fraud 
detection, and fraud recovery.
* * * * *

0
53. Section 422.2460 is revised to read as follows:


Sec.  422.2460  Reporting requirements.

    (a) For each contract year, from 2014 through 2017, each MA 
organization must submit to CMS, in a timeframe and manner specified by 
CMS, a report that includes but is not limited to the data needed by 
the MA organization to calculate and verify the MLR and remittance 
amount, if any, for each contract, under this part, such as incurred 
claims, total revenue, expenditures on quality improving activities, 
non-claims costs, taxes, licensing and regulatory fees, and any 
remittance owed to CMS under Sec.  422.2410.
    (b) For contract year 2018 and for each subsequent contract year, 
each MA organization must submit to CMS, in a timeframe and manner 
specified by CMS, the following information:
    (1) Fully credible and partially credible contracts. For each 
contract under this part that has fully credible or partially credible 
experience, as determined in accordance with Sec.  422.2440(d), the MA 
organization must report to CMS the MLR for the contract and the amount 
of any remittance owed to CMS under Sec.  422.2410.
    (2) Non-credible contracts. For each contract under this part that 
has non-credible experience, as determined in accordance with Sec.  
422.2440(d), the MA organization must report to CMS that the contract 
is non-credible.
    (c) Total revenue included as part of the MLR calculation must be 
net of all projected reconciliations.
    (d) The MLR is reported once, and is not reopened as a result of 
any payment reconciliation processes.


Sec.  422.2480  [Amended]

0
54. Section 422.2480 is amended--
0
a. In the introductory text, by removing the phrase ``reviews of 
reports submitted'' and adding in its place ``review of data 
submitted''; and
0
b. In paragraph (d) introductory text by removing the phrase ``Reports 
submitted'' and adding in its place the phrase ``Data submitted''.


Sec.  422.2490  [Amended]

0
55. Section 422.2490 is amended in paragraph (a) by removing the phrase 
``information contained in reports submitted'' and adding in its place 
the phrase ``information submitted''.

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

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

     Authority: Secs. 1102, 1106, 1860D-1 through 1860D-42, and 1871 
of the Social Security Act (42 U.S.C. 1302, 1306, 1395w-101 through 
1395w-152, and 1395hh).


0
 58. Section 423.32 is amended by:
0
a. Revising paragraph (b) introductory text; and
0
b. Redesignating paragraphs (b)(i) and (ii) as (b)(1) and (2).
    The revision reads as follows:


Sec.  423.32  Enrollment process.

* * * * *
    (b) Enrollment form or CMS-approved enrollment mechanism. The 
enrollment form or CMS-approved enrollment mechanism must comply with 
CMS instructions regarding content and

[[Page 16737]]

format and must have been approved by CMS as described in Sec.  
423.2262.
* * * * *

0
59. Section 423.38 is amended by--
0
a. Revising paragraphs (c) introductory text, (c)(4), and (c)(8)(i)(C);
0
b. Adding paragraphs (c)(9) and (10);
0
c. Revising paragraph (d); and
0
d. Adding paragraph (e).
    The revisions and additions read as follows:


Sec.  423.38  Enrollment periods.

* * * * *
    (c) Special enrollment periods. A Part D eligible individual may 
enroll in a PDP or disenroll from a PDP and enroll in another PDP or 
MA-PD plan (as provided at Sec.  422.62(b) of this chapter), as 
applicable, under any of the following circumstances:
* * * * *
    (4)(i) Except as provided in paragraph (ii), the individual is a 
full-subsidy eligible individual or other subsidy-eligible individual 
as defined in Sec.  423.772, who is making an allowable onetime-per-
calendar-quarter election between January through September.
    (ii) An individual described in paragraph (i) is not eligible for 
this special enrollment period if he or she has been notified that he 
or she has been identified as a ``potential at-risk beneficiary'' or 
``at-risk beneficiary'' as defined in Sec.  423.100 and such 
identification has not been terminated in accordance with Sec.  
423.153(f)).
* * * * *
    (8) * * *
    (i) * * *
    (C) The PDP (or its agent, representative, or plan provider) 
materially misrepresented the plan's provisions in communications as 
outlined in subpart V of this part.
* * * * *
    (9) The individual is making an election within 3 months after a 
gain, loss, or change to Medicaid or LIS eligibility, or notification 
of such a change, whichever is later.
    (10) The individual is making an election within 3 months after 
notification of a CMS or State-initiated enrollment action or that 
enrollment action's effective date, whichever is later.
    (d) Enrollment period to coordinate with MA annual 45-day 
disenrollment period. Through 2018, an individual enrolled in an MA 
plan who elects Original Medicare from January 1 through February 14, 
as described in Sec.  422.62(a)(5) of this chapter, may also elect a 
PDP during this time.
    (e) Enrollment period to coordinate with MA open enrollment period. 
For 2019 and subsequent years, an individual who makes an election as 
described in Sec.  422.62(a)(3) of this chapter, may make an election 
to enroll in or disenroll from Part D coverage. An individual who 
elects Original Medicare during the MA open enrollment period may elect 
to enroll in a PDP during this time.

0
60. Section 423.40 is amended by revising paragraph (d) and adding 
paragraph (e) to read as follows:


Sec.  423.40  Effective dates.

* * * * *
    (d) PDP enrollment period to coordinate with the MA annual 
disenrollment period. Through 2018, an enrollment made from January 1 
through February 14 by an individual who has disenrolled from an MA 
plan as described in Sec.  422.62(a)(5) of this chapter will be 
effective the first day of the month following the month in which the 
enrollment in the PDP is made.
    (e) PDP enrollment period to coordinate with the MA open enrollment 
period. For 2019 and subsequent years, an enrollment made by an 
individual who elects Original Medicare during the MA open enrollment 
period as described in Sec.  422.62(a)(3) of this chapter, will be 
effective the first day of the month following the month in which the 
election is made.

0
61. Section Sec.  423.100 is amended--
0
a. By revising the definition of ``Affected enrollee'';
0
b. By adding in alphabetical order definitions for ``At risk 
beneficiary'', ``Clinical guidelines'', ``Exempted beneficiary'', and 
``Frequently abused drug'';
0
c. By removing the definition of ``Other authorized prescriber'';
0
d. By adding in alphabetical order definitions for ``Potential at-risk 
beneficiary'', ``Preclusion list'', and ``Program size''; and
0
e. By revising the definition of ``Retail pharmacy''.
    The revisions and additions read as follows:


Sec.  423.100  Definitions.

* * * * *
    Affected enrollee means a Part D enrollee who is currently taking a 
covered Part D drug that is either being removed from a Part D plan's 
formulary, or whose preferred or tiered cost-sharing status is changing 
and such drug removal or cost-sharing change affects the Part D 
enrollee's access to the drug during the current plan year.
* * * * *
    At-risk beneficiary means a Part D eligible individual--
    (1) Who is--
    (i) Identified using clinical guidelines (as defined in this 
section);
    (ii) Not an exempted beneficiary; and
    (iii) Determined to be at-risk for misuse or abuse of such 
frequently abused drugs by a Part D plan sponsor under its drug 
management program in accordance with the requirements of Sec.  
423.153(f); or
    (2) With respect to whom a Part D plan sponsor receives a notice 
upon the beneficiary's enrollment in such sponsor's plan that the 
beneficiary was identified as an at-risk beneficiary (as defined in the 
paragraph (1) of this definition) under the prescription drug plan in 
which the beneficiary was most recently enrolled and such 
identification had not been terminated upon disenrollment.
* * * * *
    Clinical guidelines, for the purposes of a drug management program 
under Sec.  423.153(f), are criteria--
    (1) To identify potential at-risk beneficiaries who may be 
determined to be at-risk beneficiaries under such programs; and
    (2) That are developed in accordance with the standards in Sec.  
423.153(f)(16) and, beginning with contract year 2020, will be 
published in guidance annually.
* * * * *
    Exempted beneficiary means with respect to a drug management 
program, an enrollee who--
    (1) Has elected to receive hospice care or is receiving palliative 
or end-of-life care;
    (2) Is a resident of a long-term care facility, of a facility 
described in section 1905(d) of the Act, or of another facility for 
which frequently abused drugs are dispensed for residents through a 
contract with a single pharmacy; or
    (3) Is being treated for active cancer-related pain.
    Frequently abused drug means a controlled substance under the 
Federal Controlled Substances Act that the Secretary determines is 
frequently abused or diverted, taking into account all of the following 
factors:
    (1) The drug's schedule designation by the Drug Enforcement 
Administration.
    (2) Government or professional guidelines that address that a drug 
is frequently abused or misused.
    (3) An analysis of Medicare or other drug utilization or scientific 
data.
* * * * *
    Potential at-risk beneficiary means a Part D eligible individual--

[[Page 16738]]

    (1) Who is identified using clinical guidelines (as defined in this 
section); or
    (2) With respect to whom a Part D plan sponsor receives a notice 
upon the beneficiary's enrollment in such sponsor's plan that the 
beneficiary was identified as a potential at-risk beneficiary (as 
defined in paragraph (1) of this definition) under the prescription 
drug plan in which the beneficiary was most recently enrolled and such 
identification had not been terminated upon disenrollment.
    Preclusion list means a CMS compiled list of prescribers who--
    (1) Meet all of the following requirements:
    (i) The prescriber is currently revoked from the Medicare program 
under Sec.  424.535 of this chapter.
    (ii) The prescriber is currently under a reenrollment bar under 
Sec.  424.535(c) of this chapter.
    (iii) CMS determines that the underlying conduct that led to the 
revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph (1)(iii), 
CMS considers the following factors:
    (A) The seriousness of the conduct underlying the prescriber's 
revocation;
    (B) The degree to which the prescriber's conduct could affect the 
integrity of the Part D program; and
    (C) Any other evidence that CMS deems relevant to its 
determination; or
    (2) Meet both of the following requirements:
    (i) The prescriber has engaged in behavior for which CMS could have 
revoked the prescriber to the extent applicable if he or she had been 
enrolled in Medicare.
    (ii) CMS determines that the underlying conduct that would have led 
to the revocation is detrimental to the best interests of the Medicare 
program. In making this determination under this paragraph, CMS 
considers all of the following factors:
    (A) The seriousness of the conduct involved.
    (B) The degree to which the prescriber's conduct could affect the 
integrity of the Part D program.
    (C) Any other evidence that CMS deems relevant to its 
determination.
* * * * *
    Program size means the estimated population of potential at-risk 
beneficiaries in drug management programs (described in Sec.  
423.153(f)) operated by Part D plan sponsors that the Secretary 
determines can be effectively managed by such sponsors as part of the 
process to develop clinical guidelines.
* * * * *
    Retail pharmacy means any licensed pharmacy that is open to 
dispense prescription drugs to the walk-in general public from which 
Part D enrollees could purchase a covered Part D drug without being 
required to receive medical services from a provider or institution 
affiliated with that pharmacy.
* * * * *

0
62. Section 423.120 is amended by--
0
a. Redesignating paragraph (b)(3)(i) introductory text and paragraphs 
(b)(3)(i)(A) through (D) as paragraphs (b)(3)(i)(A) introductory text 
and (b)(3)(i)(A)(1) through (4);
0
b. Adding a new paragraph (b)(3)(i)(B);
0
c. Revising paragraph (b)(3)(iii);
0
d. In paragraph (b)(5)(i) introductory text, by removing the figure 
``60'' and adding in its place the figure ``30'' and by adding the 
phrase ``(for purposes of this paragraph (b)(5) these entities are 
referred to as ``CMS and other specified entities'') after the word 
``pharmacists'';
0
e. In paragraph (b)(5)(i)(A), by removing the phrase ``60 days'' and 
adding in its place the phrase ``30 days'';
0
f. In paragraph (b)(5)(i)(B), by removing the phrase ``60 day supply'' 
and adding in its place the phrase ``an approved month's supply'';
0
g. In paragraph (b)(5)(iii), by removing the phrase ``, CMS, State 
Pharmaceutical Assistance Programs (as defined in Sec.  423.454), 
entities providing other prescription drug coverage (as described in 
Sec.  423.464(f)(1)), authorized prescribers, network pharmacies, and 
pharmacists'' and adding in its place the phrase ``and CMS and other 
specified entities'';
0
h. Adding paragraph (b)(5)(iv);
0
i. In paragraph (b)(6), by removing the phrase ``under paragraph 
(b)(5)(iii) of this section'' and adding in its place the phrase 
``under paragraphs (b)(5)(iii) and (iv) of this section''; and
0
j. Revising paragraphs (c)(5) and (6).
    The additions and revisions read as follows:


Sec.  423.120  Access to covered Part D drugs.

* * * * *
    (b) * * *
    (3) * * *
    (i) * * *
    (B) Not apply in cases in which a Part D sponsor substitutes a 
generic drug for a brand name drug as permitted under paragraph 
(b)(5)(iv) of this section.
* * * * *
    (iii) Ensure the provision of a temporary fill when an enrollee 
requests a fill of a non-formulary drug during the time period 
specified in paragraph (b)(3)(ii) of this section (including Part D 
drugs that are on a plan's formulary but require prior authorization or 
step therapy under a plan's utilization management rules) by providing 
a one-time, temporary supply of at least an approved month's supply of 
medication, unless the prescription is written by a prescriber for less 
than an approved month's supply and requires the Part D sponsor to 
allow multiple fills to provide up to a total of an approved month's 
supply of medication.
* * * * *
    (5) * * *
    (iv) A Part D sponsor may immediately remove a brand name drug (as 
defined in Sec.  423.4) from its Part D formulary or change the brand 
name drug's preferred or tiered cost-sharing without meeting the 
deadlines and refill requirements of paragraph (b)(5)(i) of this 
section provided that the Part D sponsor does all of the following:
    (A) At the same time that it removes such brand name drug or 
changes its preferred or tiered cost-sharing, it adds a therapeutically 
equivalent (as defined in Sec.  423.100) generic drug (as defined in 
Sec.  423.4) to its formulary on the same or lower cost-sharing tier 
and with the same or less restrictive utilization management criteria.
    (B) The Part D sponsor previously could not have included such 
therapeutically equivalent generic drug on its formulary when it 
submitted its initial formulary for CMS approval consistent with 
paragraph (b)(2) of this section because such generic drug was not yet 
available on the market.
    (C) Before making any permitted generic substitutions, the Part D 
sponsor provides general notice to all current and prospective 
enrollees in its formulary and other applicable beneficiary 
communication materials advising them that--
    (1) Such changes may be made at any time when a new generic is 
added in place of a brand name drug, and there may be no advance direct 
notice to the affected enrollees;
    (2) If such a substitution should occur, affected enrollees will 
receive direct notice including information on the specific drugs 
involved and steps they may take to request coverage determinations and 
exceptions under Sec. Sec.  423.566 and 423.578; and
    (D) Before making any permitted generic substitutions, the Part D 
sponsor provides advance general notice to CMS and other specified 
entities.
    (E) The Part D sponsor provides notice of any such formulary 
changes to

[[Page 16739]]

affected enrollees and CMS and other specified entities consistent with 
the requirements of paragraphs (b)(5)(i) (as applicable) and (ii) of 
this section. This would include direct notice to the affected 
enrollees.
* * * * *
    (c) * * *
    (5)(i) A Part D plan sponsor must reject, or must require its 
pharmacy benefit manager (PBM) to reject, a pharmacy claim for a Part D 
drug unless the claim contains the active and valid National Provider 
Identifier (NPI) of the prescriber who prescribed the drug.
    (ii) The sponsor must communicate at point-of sale whether or not a 
submitted NPI is active and valid in accordance with this paragraph 
(c)(5)(ii).
    (A) If the sponsor communicates that the NPI is not active and 
valid, the sponsor must permit the pharmacy to--
    (1) Confirm that the NPI is active and valid; or
    (2) Correct the NPI.
    (B) If the pharmacy confirms that the NPI is active and valid or 
corrects the NPI, the sponsor must pay the claim if it is otherwise 
payable.
    (iii) A Part D sponsor must not later recoup payment from a network 
pharmacy for a claim that does not contain an active and valid 
individual prescriber NPI on the basis that it does not contain one, 
unless the sponsor--
    (A) Has complied with paragraph (c)(5)(ii) of this section;
    (B) Has verified that a submitted NPI was not in fact active and 
valid; and
    (C) The agreement between the parties explicitly permits such 
recoupment.
    (iv) With respect to requests for reimbursement submitted by 
Medicare beneficiaries, a Part D sponsor may not make payment to a 
beneficiary dependent upon the sponsor's acquisition of an active and 
valid individual prescriber NPI, unless there is an indication of 
fraud. If the sponsor is unable to retrospectively acquire an active 
and valid individual prescriber NPI, the sponsor may not seek recovery 
of any payment to the beneficiary solely on that basis.
    (6)(i) Except as provided in paragraph (c)(6)(iv) of this section, 
a Part D sponsor must reject, or must require its PBM to reject, a 
pharmacy claim for a Part D drug if the individual who prescribed the 
drug is included on the preclusion list, defined in Sec.  423.100.
    (ii) Except as provided in paragraph (c)(6)(iv) of this section, a 
Part D sponsor must deny, or must require its PBM to deny, a request 
for reimbursement from a Medicare beneficiary if the request pertains 
to a Part D drug that was prescribed by an individual who is identified 
by name in the request and who is included on the preclusion list, 
defined in Sec.  423.100.
    (iii) A Part D plan sponsor may not submit a prescription drug 
event (PDE) record to CMS unless it includes on the PDE record the 
active and valid individual NPI of the prescriber of the drug, and the 
prescriber is not included on the preclusion list, defined in Sec.  
423.100, for the date of service.
    (iv)(A) A Part D sponsor or its PBM must not reject a pharmacy 
claim for a Part D drug under paragraph (c)(6)(i) of this section or 
deny a request for reimbursement under paragraph (c)(6)(ii) of this 
section unless the sponsor has provided the written notice to the 
beneficiary required by paragraph (c)(6)(iv)(B) of this section.
    (B) Upon receipt of a pharmacy claim or beneficiary request for 
reimbursement for a Part D drug that a Part D sponsor would otherwise 
be required to reject or deny in accordance with paragraph (c)(6)(i) or 
(ii) of this section, a Part D sponsor or its PBM must do the 
following:
    (1) Subject to all other Part D rules and plan coverage 
requirements, provide an advance written notice to any beneficiary who 
has received a prescription from a prescriber on the preclusion list as 
soon as possible but to ensure that the beneficiary receives the notice 
no later than 30 days after publication of the most recent preclusion 
list.
    (2) Ensure that reasonable efforts are made to notify the 
prescriber of a beneficiary who was sent a notice under paragraph 
(c)(6)(iv)(B)(1) of this section.
    (v)(A) CMS sends written notice to the prescriber via letter of his 
or her inclusion on the preclusion list. The notice must contain the 
reason for the inclusion on the preclusion list and inform the 
prescriber of his or her appeal rights.
    (B) A prescriber may appeal his or her inclusion on the preclusion 
list under this section in accordance with 42 CFR part 498.
    (vi) CMS has the discretion not to include a particular individual 
on (or if warranted, remove the individual from) the preclusion list 
should it determine that exceptional circumstances exist regarding 
beneficiary access to prescriptions. In making a determination as to 
whether such circumstances exist, CMS takes into account--
    (A) The degree to which beneficiary access to Part D drugs would be 
impaired; and
    (B) Any other evidence that CMS deems relevant to its 
determination.
* * * * *

0
 63. Section 423.128 is amended by revising paragraphs (a)(3) and 
(d)(2)(iii) to read as follows:


Sec.  423.128  Dissemination of Part D plan information.

    (a) * * *
    (3) At the time of enrollment and at least annually thereafter, by 
the first day of the annual coordinated election period.
* * * * *
    (d) * * *
    (2) * * *
    (iii) Provides current and prospective Part D enrollees with notice 
that is timely under Sec.  423.120(b)(5) regarding any removal or 
change in the preferred or tiered cost-sharing status of a Part D drug 
on its Part D plan's formulary.
* * * * *

0
 64. Section 423.153 is amended by adding a sentence at the end of 
paragraph (a) and adding paragraph (f) to read as follows:


Sec.  423.153  Drug utilization management, quality assurance, and 
medication therapy management programs (MTMPs).

    (a) * * * A Part D plan sponsor may establish a drug management 
program for at-risk beneficiaries enrolled in their prescription drug 
benefit plans to address overutilization of frequently abused drugs, as 
described in paragraph (f) of this section.
* * * * *
    (f) Drug management programs. A drug management program must meet 
all the following requirements:
    (1) Written policies and procedures. A sponsor must document its 
drug management program in written policies and procedures that are 
approved by the applicable P&T committee and reviewed and updated as 
appropriate. These policies and procedures must address all aspects of 
the sponsor's drug management program, including but not limited to the 
following:
    (i) The appropriate credentials of the clinical staff conducting 
case management required under paragraph (f)(2) of this section, 
including that the staff must have a current and unrestricted license 
to practice within the scope of his or her profession in a State, 
Territory, Commonwealth of the United Stated (that is, Puerto Rico), or 
the District of Columbia.
    (ii) The necessary and appropriate contents of files for case 
management required under paragraph (f)(2) of this section, which must 
include documentation of the substance of prescriber and beneficiary 
contacts.
    (iii) Monitoring reports and notifications about incoming enrollees 
who meet the definition of an at-risk

[[Page 16740]]

beneficiary or a potential at-risk beneficiary in Sec.  423.100 and 
responding to requests from other sponsors for information about at-
risk beneficiaries and potential at-risk beneficiaries who recently 
disenrolled from the sponsor's prescription drug benefit plan.
    (2) Case management/clinical contact/prescriber verification--(i) 
General rule. The sponsor's clinical staff must conduct case management 
for each potential at-risk beneficiary for the purpose of engaging in 
clinical contact with the prescribers of frequently abused drugs and 
verifying whether a potential at-risk beneficiary is an at-risk 
beneficiary. Except as provided in paragraph (f)(2)(ii) of this 
section, the sponsor must do all of the following:
    (A) Send written information to the beneficiary's prescribers that 
the beneficiary met the clinical guidelines and is a potential at risk 
beneficiary.
    (B) Elicit information from the prescribers about any factors in 
the beneficiary's treatment that are relevant to a determination that 
the beneficiary is an at-risk beneficiary, including whether prescribed 
medications are appropriate for the beneficiary's medical conditions or 
the beneficiary is an exempted beneficiary.
    (C) In cases where prescribers have not responded to the inquiry 
described in paragraph (f)(2)(i)(B) of this section, make reasonable 
attempts to communicate with the prescribers telephonically and/or by 
another effective communication method designed to elicit a response 
from the prescribers within a reasonable period after sending the 
written information.
    (ii) Exception for identification by prior plan. If a beneficiary 
was identified as a potential at-risk or an at-risk beneficiary by his 
or her most recent prior plan and such identification has not been 
terminated in accordance with paragraph (f)(14) of this section, the 
sponsor meets the requirements in paragraph (f)(2)(i) of this section, 
so long as the sponsor obtains case management information from the 
previous sponsor and such information is still clinically adequate and 
up to date.
    (3) Limitation on access to coverage for frequently abused drugs. 
Subject to the requirements of paragraph (f)(4) of this section, a Part 
D plan sponsor may do any or all of the following:
    (i) Implement a point-of-sale claim edit for frequently abused 
drugs that is specific to an at-risk beneficiary.
    (ii) In accordance with paragraphs (f)(10) and (11) of this 
section, limit an at-risk beneficiary's access to coverage for 
frequently abused drugs to those that are--
    (A) Prescribed for the beneficiary by one or more prescribers;
    (B) Dispensed to the beneficiary by one or more network pharmacies; 
or
    (C) Both.
    (iii)(A) If the sponsor implements an edit as specified in 
paragraph (f)(3)(i) of this section, the sponsor must not cover 
frequently abused drugs for the beneficiary in excess of the edit, 
unless the edit is terminated or revised based on a subsequent 
determination, including a successful appeal.
    (B) If the sponsor limits the at-risk beneficiary's access to 
coverage as specified in paragraph (f)(3)(ii) of this section, the 
sponsor must cover frequently abused drugs for the beneficiary only 
when they are obtained from the selected pharmacy(ies) or prescriber(s) 
or both, as applicable--
    (1) In accordance with all other coverage requirements of the 
beneficiary's prescription drug benefit plan, unless the limit is 
terminated or revised based on a subsequent determination, including a 
successful appeal; and
    (2) Except as necessary to provide reasonable access in accordance 
with paragraph (f)(12) of this section.
    (4) Requirements for limiting access to coverage for frequently 
abused drugs. (i) A sponsor may not limit the access of an at-risk 
beneficiary to coverage for frequently abused drugs under paragraph 
(f)(3) of this section, unless the sponsor has done all of the 
following:
    (A) Conducted case management as required by paragraph (f)(2) of 
this section and updated it, if necessary.
    (B) Except in the case of a pharmacy limitation imposed pursuant to 
paragraph (f)(3)(ii)(B) of this section, obtained the agreement of at 
least one prescriber of frequently abused drugs for the beneficiary 
that the specific limitation is appropriate.
    (C) Provided the notices to the beneficiary in compliance with 
paragraphs (f)(5) and (6) of this section.
    (ii)(A) Except as provided in paragraph (f)(2)(ii)(B) of this 
section regarding a prescriber limitation, if the sponsor has complied 
with the requirement of paragraph (f)(2)(i)(C) of this section about 
attempts to reach prescribers, and the prescribers were not responsive 
after 3 attempts by the sponsor to contact them within 10 business 
days, then the sponsor has met the requirement of paragraph 
(f)(4)(i)(B) of this section for eliciting information from the 
prescribers.
    (B) The sponsor may not implement a prescriber limitation pursuant 
to paragraph (f)(3)(ii)(A) of this section if no prescriber was 
responsive.
    (5) Initial notice to a beneficiary. (i) After conducting the case 
management required by paragraph (f)(2) of this section, a Part D 
sponsor that intends to limit the access of a potential at-risk 
beneficiary, or subject to the exception in paragraph (f)(8)(ii) of 
this section, of an at-risk beneficiary (as defined in subparagraph (2) 
of the definition in Sec.  423.100), to coverage for frequently abused 
drugs under paragraph (f)(3) of this section must provide an initial 
written notice to the beneficiary.
    (ii) The notice must do all of the following:
    (A) Use language approved by the Secretary.
    (B) Be in a readable and understandable form.
    (C) Provide all of the following information:
    (1) An explanation that the beneficiary's current or immediately 
prior Part D plan sponsor has identified the beneficiary as a potential 
at-risk beneficiary.
    (2) A description, of all State and Federal public health resources 
that are designed to address prescription drug abuse to which the 
beneficiary has access, including mental health and other counseling 
services and information on how to access such services, including any 
such services covered by the plan under its Medicare benefits, 
supplemental benefits, or Medicaid benefits (if the plan integrates 
coverage of Medicare and Medicaid benefits).
    (3) An explanation of the beneficiary's right to a redetermination 
if the sponsor issues a determination that the beneficiary is an at-
risk beneficiary and the standard and expedited redetermination 
processes described at Sec.  423.582 and Sec.  423.584.
    (4) A request that the beneficiary submit to the sponsor within 30 
days of the date of this initial notice any information that the 
beneficiary believes is relevant to the sponsor's determination, 
including which prescribers and pharmacies the beneficiary would prefer 
the sponsor to select if the sponsor implements a limitation under 
paragraph (f)(3)(ii) of this section.
    (5) An explanation of the meaning and consequences of being 
identified as an at-risk beneficiary, including the following:
    (i) An explanation of the sponsor's drug management program, the 
specific limitation the sponsor intends to place on the beneficiary's 
access to coverage for frequently abused drugs under the program.
    (ii) The timeframe for the sponsor's decision.

[[Page 16741]]

    (iii) If applicable, any limitation on the availability of the 
special enrollment period described in Sec.  423.38.
    (6) Clear instructions that explain how the beneficiary can contact 
the sponsor, including how the beneficiary may submit information to 
the sponsor in response to the request described in paragraph 
(f)(5)(ii)(C)(4) of this section.
    (7) Contact information for other organizations that can provide 
the beneficiary with assistance regarding the sponsor's drug management 
program.
    (8) Other content that CMS determines is necessary for the 
beneficiary to understand the information required in this notice.
    (iii) The Part D plan sponsor must make reasonable efforts to 
provide the beneficiary's prescriber(s) of frequently abused drugs with 
a copy of the notice required under paragraph (f)(5)(i) of this 
section.
    (iv) If the Part D plan sponsor subsequently intends to make a 
change to the terms of an ongoing limitation(s) established under 
paragraph (f)(3) of this section, including the intention to impose an 
additional limitation on the at-risk beneficiary, the sponsor must 
comply with the requirements of paragraph (f)(3) of this section, as 
well as all applicable requirements for beneficiary notices described 
in paragraphs (f)(5) through (8) of this section.
    (6) Second notice. (i) Upon making a determination that a 
beneficiary is an at-risk beneficiary and to limit the beneficiary's 
access to coverage for frequently abused drugs under paragraph (f)(3) 
of this section, a Part D sponsor must provide a second written notice 
to the beneficiary.
    (ii) The second notice must do all of the following:
    (A) Use language approved by the Secretary.
    (B) Be in a readable and understandable form.
    (C) Provide all of the following information:
    (1) An explanation that the beneficiary's current or immediately 
prior Part D plan sponsor has identified the beneficiary as an at-risk 
beneficiary.
    (2) An explanation that the beneficiary is subject to the 
requirements of the sponsor's drug management program, including--
    (i) The limitation the sponsor is placing on the beneficiary's 
access to coverage for frequently abused drugs and the effective and 
end date of the limitation; and
    (ii) If applicable, any limitation on the availability of the 
special enrollment period described in Sec.  423.38.
    (3) The prescriber(s) or pharmacy(ies) or both, if and as 
applicable, from which the beneficiary must obtain frequently abused 
drugs in order for them to be covered by the sponsor.
    (4) An explanation of the beneficiary's right to a redetermination 
under Sec.  423.580, including--
    (i) A description of both the standard and expedited 
redetermination processes; and
    (ii) The beneficiary's right to, and conditions for, obtaining an 
expedited redetermination.
    (5) An explanation that the beneficiary may submit to the sponsor, 
if the beneficiary has not already done so, the prescriber(s) and 
pharmacy(ies), as applicable, from which the beneficiary would prefer 
to obtain frequently abused drugs.
    (6) Clear instructions that explain how the beneficiary may contact 
the sponsor, including how the beneficiary may submit information to 
the sponsor in response to the request described in paragraph 
(f)(6)(ii)(C)(5) of this section.
    (7) Other content that CMS determines is necessary for the 
beneficiary to understand the information required in this notice.
    (iii) The Part D plan sponsor must make reasonable efforts to 
provide the beneficiary's prescriber(s) of frequently abused drugs with 
a copy of the notice required by paragraph (f)(6)(i) of this section.
    (7) Alternate second notice. (i) If, after providing an initial 
notice to a potential at-risk beneficiary under paragraph (f)(4) of 
this section, a Part D sponsor determines that the potential at-risk 
beneficiary is not an at-risk beneficiary, the sponsor must provide an 
alternate second written notice to the beneficiary.
    (ii) The alternate second notice must do all of the following:
    (A) Use language approved by the Secretary.
    (B) Be in a readable and understandable form.
    (C) Provide all of the following information:
    (1) The sponsor has determined that the beneficiary is not an at-
risk beneficiary.
    (2) The sponsor will not limit the beneficiary's access to coverage 
for frequently abused drugs.
    (3) If applicable, the SEP limitation no longer applies.
    (4) Clear instructions that explain how the beneficiary may contact 
the sponsor.
    (5) Other content that CMS determines is necessary for the 
beneficiary to understand the information required in this notice.
    (iii) The Part D sponsor must make reasonable efforts to provide 
the beneficiary's prescriber(s) of frequently abused drugs with a copy 
of the notice required in accordance with paragraph (f)(7)(i) of this 
section.
    (8) Notices: Timing and exceptions. (i) Subject to paragraph 
(f)(8)(ii) of this section, a Part D sponsor must provide the second 
notice described in paragraph (f)(6) of this section or the alternate 
second notice described in paragraph (f)(7) of this section, as 
applicable, on a date that is not less than 30 days and not more than 
the earlier of the date the sponsor makes the relevant determination or 
60 days after the date of the initial notice described in paragraph 
(f)(5) of this section.
    (ii) A gaining plan sponsor may forgo providing the initial notice 
and may immediately provide a second notice described in paragraph 
(f)(6) of this section to an at-risk beneficiary as defined in 
subparagraph (2) of the definition in Sec.  423.100), if the sponsor is 
implementing either of the following:
    (A) A beneficiary-specific point-of-sale claim edit as described in 
paragraph (f)(3)(i) of this section, if the edit is the same as the one 
that was implemented in the immediately prior plan.
    (B) A limitation on access to coverage as described in paragraph 
(f)(3(ii) of this section, if such limitation would require the 
beneficiary to obtain frequently abused drugs from the same location of 
pharmacy and/or the same prescriber, as applicable, that was selected 
under the immediately prior plan under paragraph (f)(9) of this 
section.
    (9) Beneficiary preferences. Except as described in paragraph 
(f)(10) of this section, if a beneficiary submits preferences for 
prescribers or pharmacies or both from which the beneficiary prefers to 
obtain frequently abused drugs, the sponsor must do the following:
    (i) Review such preferences.
    (ii) If the beneficiary is--
    (A) Enrolled in a stand-alone prescription drug benefit plan and 
specifies a prescriber(s) or network pharmacy(ies) or both, select or 
change the selection of prescriber(s) or network pharmacy(ies) or both 
for the beneficiary based on beneficiary's preference(s).
    (B) Enrolled in a Medicare Advantage prescription drug benefit plan 
and specifies a network prescriber(s) or network pharmacy(ies) or both, 
select or change the selection of prescriber(s) or pharmacy(ies) or 
both for the beneficiary based on the beneficiary's preference(s).
    (iii) The sponsor must inform the beneficiary of the selection or 
change in--

[[Page 16742]]

    (A) The second notice; or
    (B) If the second notice is not feasible due to the timing of the 
beneficiary's submission, in a subsequent written notice, issued no 
later than 14 days after receipt of the submission.
    (10) Exception to beneficiary preferences. (i) If the Part D 
sponsor determines that the selection or change of a prescriber or 
pharmacy under paragraph (f)(9) of this section would contribute to 
prescription drug abuse or drug diversion by the at-risk beneficiary, 
the sponsor may change the selection without regard to the 
beneficiary's preferences if there is strong evidence of inappropriate 
action by the prescriber, pharmacy, or beneficiary.
    (ii) If the sponsor changes the selection, the sponsor must provide 
the beneficiary with--
    (A) At least 30 days advance written notice of the change; and
    (B) A rationale for the change.
    (11) Reasonable access. In making the selections under paragraph 
(f)(12) of this section, a Part D plan sponsor must ensure that the 
beneficiary continues to have reasonable access to frequently abused 
drugs, taking into account all relevant factors, including but not 
limited to--
    (i) Geographic location;
    (ii) Beneficiary preference;
    (iii) The beneficiary's predominant usage of a prescriber or 
pharmacy or both;
    (iv) The impact on cost-sharing;
    (v) Reasonable travel time;
    (vi) Whether the beneficiary has multiple residences;
    (vii) Natural disasters and similar situations; and
    (viii) The provision of emergency services.
    (12) Selection of prescribers and pharmacies. (i) A Part D plan 
sponsor must select, as applicable--
    (A) One, or, if the sponsor reasonably determines it necessary to 
provide the beneficiary with reasonable access, more than one, network 
prescriber who is authorized to prescribe frequently abused drugs for 
the beneficiary, unless the plan is a stand-alone PDP, or the selection 
of an out-of-network provider is necessary; and
    (B) One, or, if the sponsor reasonably determines it necessary to 
provide the beneficiary with reasonable access, more than one, network 
pharmacy that may dispense such drugs to such beneficiary, unless the 
selection of an out-of-network pharmacy is necessary.
    (ii)(A) For purposes of this paragraph (f)(12) of this section, in 
the case of a pharmacy that has multiple locations that share real-time 
electronic data, all such locations of the pharmacy must collectively 
be treated as one pharmacy.
    (B) For purposes of this paragraph (f)(12) of this section, in the 
case of a group practice, all prescribers of the group practice must be 
treated as one prescriber.
    (13) Confirmation of selections(s). (i) Before selecting a 
prescriber or pharmacy under this paragraph, a Part D plan sponsor must 
notify the prescriber or pharmacy, as applicable, that the beneficiary 
has been identified for inclusion in the drug management program for 
at-risk beneficiaries and that the prescriber or pharmacy or both 
is(are) being selected as the beneficiary's designated prescriber or 
pharmacy or both for frequently abused drugs. For prescribers, this 
notification occurs during case management as described in paragraph 
(f)(2) or when the prescriber provides agreement pursuant to paragraph 
(f)(4)(i)(B) of this section.
    (ii) The sponsor must receive confirmation from the prescriber(s) 
or pharmacy(ies) or both, as applicable, that the selection is accepted 
before conveying this information to the at-risk beneficiary, unless 
the pharmacy has agreed in advance in a network agreement with the 
sponsor to accept all such selections and the agreement specifies how 
the pharmacy will be notified by the sponsor of its selection.
    (14) Termination of identification as an at-risk beneficiary. The 
identification of an at-risk beneficiary as such must terminate as of 
the earlier of the following:
    (i) The date the beneficiary demonstrates through a subsequent 
determination, including but not limited to, a successful appeal, that 
the beneficiary is no longer likely, in the absence of the limitation 
under this paragraph, to be an at-risk beneficiary; or
    (ii)(A) The end of a one year period calculated from the effective 
date of the limitation, as specified in the notice provided under 
paragraph (f)(6) of this section, unless the limitation was extended 
pursuant to paragraph (f)(14)(ii)(B) of this section.
    (B) The end of a two year period calculated from the effective date 
of the limitation, as specified in a notice provided under paragraph 
(f)(6) of this section, subject to the following requirements:
    (1) The plan sponsor determines at the end of the one year period 
that there is a clinical basis to extend the limitation;
    (2) Except in the case of a pharmacy limitation imposed pursuant to 
paragraph (f)(3)(ii)(B) of this section, the plan sponsor has obtained 
the agreement of a prescriber of frequently abused drugs for the 
beneficiary that the limitation should be extended.
    (3) The plan sponsor has provided another notice to the beneficiary 
in compliance with paragraph (f)(6) of this section.
    (4) If the prescribers were not responsive after 3 attempts by the 
sponsor to contact them within 10 business days, then the sponsor has 
met the requirement of paragraph (f)(14)((ii)(B)(2) of this section.
    (5) The sponsor may not extend a prescriber limitation implemented 
pursuant to paragraph (f)(3)(ii)(A) of this section if no prescriber 
was responsive.
    (15) Data disclosure. (i) CMS identifies potential at-risk 
beneficiaries to the sponsor of the prescription drug plan in which the 
beneficiary is enrolled.
    (ii) A Part D sponsor that operates a drug management program must 
disclose any data and information to CMS and other Part D sponsors that 
CMS deems necessary to oversee Part D drug management programs at a 
time, and in a form and manner specified by CMS. The data and 
information disclosures must do all of the following:
    (A) Provide information to CMS within 30 days of receiving a report 
about a potential at-risk beneficiary from CMS.
    (B) Provide information to CMS about any potential at-risk 
beneficiary that meets paragraph (1) of the definition in Sec.  423.100 
that a sponsor identifies within 30 days from the date of the most 
recent CMS report identifying potential at-risk beneficiaries;
    (C) Provide information to CMS about any potential at-risk 
beneficiary that meets paragraph (2) of the definition in Sec.  423.100 
that a sponsor identifies within 30 days from the date of the most 
recent CMS report identifying potential at-risk beneficiaries.
    (D) Provide information to CMS as soon as possible but no later 
than 7 days of the date of the initial notice or second notice that the 
sponsor provided to a beneficiary, or as soon as possible but no later 
than 7 days of a termination date, as applicable, about a beneficiary-
specific opioid claim edit or a limitation on access to coverage for 
frequently abused drugs.
    (E) Transfer case management information upon request of a gaining 
sponsor as soon as possible but not later than 2 weeks from the gaining 
sponsor's request when--
    (1) An at-risk beneficiary or potential at-risk beneficiary 
disenrolls from the sponsor's plan and enrolls in another prescription 
drug plan offered by the gaining sponsor; and

[[Page 16743]]

    (2) The edit or limitation that the sponsor had implemented for the 
beneficiary had not terminated before disenrollment.
    (16) Clinical guidelines. Potential at-risk beneficiaries and at-
risk beneficiaries are identified by CMS or a Part D sponsor using 
clinical guidelines that --
    (i) Are developed with stakeholder consultation;
    (ii) Are based on the acquisition of frequently abused drugs from 
multiple prescribers, multiple pharmacies, the level of frequently 
abused drugs used, or any combination of this factors;
    (iii) Are derived from expert opinion and an analysis of Medicare 
data; and
    (iv) Include a program size estimate.

0
 65. Section 423.160 is amended by--
0
a. Revising paragraph (b)(1)(iv);
0
b. Adding paragraph (b)(1)(v);
0
c. Adding paragraph (b)(2)(iv);
0
d. Revising paragraph (b)(4); and
0
e. Adding paragraph (c)(1)(vii).
    The revisions and additions read as follows:


Sec.  423.160   Standards for electronic prescribing.

* * * * *
    (b) * * *
    (1) * * *
    (iv) From March 1, 2015 until October 31, 2019, the standards 
specified in paragraphs (b)(2)(iii), (b)(3), (b)(4)(i), (b)(5)(iii), 
and (b)(6).
    (v) On or after January 1, 2020, the standards specified in 
paragraphs (b)(2)(iv) and (b)(3), (b)(4)(ii), (b)(5)(iii), and (b)(6) 
of this section.
    (2) * * *
    (iv) The National Council for Prescription Drug Programs SCRIPT 
standard, Implementation Guide Version 2017071 approved July 28, 2017 
(incorporated by reference in paragraph (c)(1)(vii) of this section), 
to provide for the communication of a prescription or related 
prescription-related information between prescribers and dispensers for 
the following:
    (A) GetMessage.
    (B) Status.
    (C) Error.
    (D) NewRxRequest.
    (E) NewRx.
    (F) RxChangeRequest.
    (G) RxChangeResponse.
    (H) RxRenewal Request.
    (I) Resupply.
    (J) RxRenewalResponse.
    (K) Verify.
    (L) CancelRx.
    (M) CancelRxResponse.
    (N) RxFill.
    (O) DrugAdministration.
    (P) NewRxRequest.
    (Q) NewRxResponseDenied.
    (R) RxTransferRequest.
    (S) RxTransferResponse.
    (T) RxTransferConfirm.
    (U) RxFillIndicatorChange.
    (V) Recertification.
    (W) REMSIinitiationRequest.
    (X) REMSIinitiationResponse.
    (Y) REMSRequest.
    (Z) REMSResponse.
* * * * *
    (4) Medication history. Medication history to provide for the 
communication of Medicare Part D medication history information among 
Medicare Part D sponsors, prescribers and dispensers:
    (i) Until January 1, 2020, Either the National Council for 
Prescription Drug Programs Prescriber/Pharmacist Interface SCRIPT 
Standard, Implementation Guide Version 8, Release 1 (Version 8.1), 
October 2005 (incorporated by reference in paragraph (c)(1)(i) of this 
section, or the National Council for Prescription Drug Programs SCRIPT 
Standard, Implementation Guide Version 10.6, approved November 12, 2008 
(incorporated by reference in paragraph (c)(1)(v) of this section.
    (ii) On or after January 1, 2020, the National Council for 
Prescription Drug Programs SCRIPT Standard, Implementation Guide 
Version 2017071, approved July 28, 2017 (incorporated by reference in 
paragraph (c)(1)(vii) of this section).
* * * * *
    (c) * * *
    (1) * * *
    (vii) National Council for Prescription Drug Programs SCRIPT 
Standard, Implementation Guide Version 2017071, approved July 28, 2017.
* * * * *

0
66. Sections 423.180, 423.182, 423.184 and 423.186 are added to subpart 
D to read as follows:

Subpart D--Cost Control and Quality Improvement Requirements

* * * * *
Sec
423.180 Basis and scope of the Part D Prescription Drug Plan Quality 
Rating System.
423.182 Part D Prescription Drug Plan Quality Rating System.
423.184 Adding, updating, and removing measures.
423.186 Calculation of Star Ratings.


Sec.  423.180  Basis and scope of the Part D Prescription Drug Plan 
Quality Rating System.

    (a) Basis. This subpart is based on sections 1851(d), 1852(e), 
1853(o) and 1854(b)(3)(iii), (v), and (vi) of the Act and the general 
authority under section 1856(b) of the Act requiring the establishment 
of standards consistent with and to carry out Part D.
    (b) Purpose. Ratings calculated and assigned under this subpart 
will be used by CMS for the following purposes:
    (1) To provide comparative information on plan quality and 
performance to beneficiaries for their use in making knowledgeable 
enrollment and coverage decisions in the Medicare program.
    (2) To provide quality ratings on a 5-star rating system.
    (3) To provide a means to evaluate and oversee overall and specific 
compliance with certain regulatory and contract requirements by Part D 
plans, where appropriate and possible to use data of the type described 
in Sec.  423.182(c).
    (c) Applicability. Except for Sec.  423.182(b)(3), the regulations 
in this subpart will be applicable beginning with the 2019 measurement 
period and the associated 2021 Star Ratings that are released prior to 
the annual coordinated election period for the 2021 contract year.


Sec.  423.182   Part D Prescription Drug Plan Quality Rating System.

    (a) Definitions. In this subpart the following terms have the 
meanings:
    CAHPS refers to a comprehensive and evolving family of surveys that 
ask consumers and patients to evaluate the interpersonal aspects of 
health care. CAHPS surveys probe those aspects of care for which 
consumers and patients are the best or only source of information, as 
well as those that consumers and patients have identified as being 
important. CAHPS initially stood for the Consumer Assessment of Health 
Plans Study, but as the products have evolved beyond health plans the 
acronym now stands for Consumer Assessment of Healthcare Providers and 
Systems.
    Case-mix adjustment means an adjustment to the measure score made 
prior to the score being converted into a Star Rating to take into 
account certain enrollee characteristics that are not under the control 
of the plan. For example age, education, chronic medical conditions, 
and functional health status that may be related to the enrollee's 
survey responses.
    Categorical Adjustment Index (CAI) means the factor that is added 
to or subtracted from an overall or summary Star Rating (or both) to 
adjust for the average within-contract (or within-plan as applicable) 
disparity in performance associated with the percentages of 
beneficiaries who are dually eligible for Medicare and enrolled in 
Medicaid,

[[Page 16744]]

beneficiaries who receive a Low Income Subsidy, or have disability 
status in that contract (or plan as applicable).
    Clustering refers to a variety of techniques used to partition data 
into distinct groups such that the observations within a group are as 
similar as possible to each other, and as dissimilar as possible to 
observations in any other group. Clustering of the measure-specific 
scores means that gaps that exist within the distribution of the scores 
are identified to create groups (clusters) that are then used to 
identify the four cut points resulting in the creation of five levels 
(one for each Star Rating), such that the scores in the same Star 
Rating level are as similar as possible and the scores in different 
Star Rating levels are as different as possible. Technically, the 
variance in measure scores is separated into within-cluster and 
between-cluster sum of squares components. The clusters reflect the 
groupings of numeric value scores that minimize the variance of scores 
within the clusters. The Star Ratings levels are assigned to the 
clusters that minimize the within-cluster sum of squares. The cut 
points for star assignments are derived from the range of measure 
scores per cluster, and the star levels associated with each cluster 
are determined by ordering the means of the clusters.
    Consolidation means when an MA organization that has at least two 
contracts for health and/or drug services of the same plan type under 
the same parent organization in a year combines multiple contracts into 
a single contract for the start of the subsequent contract year.
    Consumed contract means a contract that will no longer exist after 
a contract year's end as a result of a consolidation.
    Display page means the CMS website on which certain measures and 
scores are publicly available for informational purposes; the measures 
that are presented on the display page are not used in assigning Part C 
and D Star Ratings.
    Domain rating means the rating that groups measures together by 
dimensions of care.
    Dual-eligible (DE) means a beneficiary who is enrolled in both 
Medicare and Medicaid.
    Highest rating means the overall rating for MA-PDs, the Part C 
summary rating for MA-only contracts, and the Part D summary rating for 
PDPs.
    Highly-rated contract means a contract that has 4 or more stars for 
its highest rating when calculated without the improvement measures and 
with all applicable adjustments (CAI and the reward factor).
    Low-income subsidy (LIS) means the subsidy that a beneficiary 
receives to help pay for prescription drug coverage (see Sec.  423.34 
for definition of a low-income subsidy eligible individual).
    Measurement period means the period for which data are collected 
for a measure or the performance period that a measures covers.
    Measure score means the numeric value of the measure or an assigned 
`missing data' message.
    Measure star means the measure's numeric value is converted to a 
Star Rating. It is displayed to the nearest whole star, using a 1-5 
star scale.
    Overall rating means a global rating that summarizes the quality 
and performance for the types of services offered across all unique 
Part C and Part D measures.
    Part C summary rating means a global rating that summarizes the 
health plan quality and performance on Part C measures.
    Part D summary rating means a global rating that summarizes 
prescription drug plan quality and performance on Part D measures.
    Plan benefit package (PBP) means a set of benefits for a defined MA 
or PDP service area. The PBP is submitted by Part D plan sponsors and 
MA organizations to CMS for benefit analysis, bidding, marketing, and 
beneficiary communication purposes.
    Reliability means a measure of the fraction of the variation among 
the observed measure values that is due to real differences in quality 
(``signal'') rather than random variation (``noise''); it is reflected 
on a scale from 0 (all differences in plan performance measure scores 
are due to measurement error) to 1 (the difference in plan performance 
scores is attributable to real differences in performance).
    Reward factor means a rating-specific factor added to the 
contract's summary or overall ratings (or both) if a contract has both 
high and stable relative performance.
    Statistical significance assesses how likely differences observed 
in performance are due to random chance alone under the assumption that 
plans are actually performing the same.
    Surviving contract means the contact that will still exist under a 
consolidation, and all of the beneficiaries enrolled in the consumed 
contract(s) are moved to the surviving contracts.
    Traditional rounding rules mean that the last digit in a value will 
be rounded. If rounding to a whole number, look at the digit in the 
first decimal place. If the digit in the first decimal place is 0, 1, 
2, 3 or 4, then the value should be rounded down by deleting the digit 
in the first decimal place. If the digit in the first decimal place is 
5 or greater, then the value should be rounded up by 1 and the digit in 
the first decimal place deleted.
    (b) Contract ratings--(1) General. CMS calculates an overall Star 
Rating, Part C summary rating, and Part D summary rating for each MA-PD 
contract and a Part D summary rating for each PDP contract using the 5-
star rating system described in this subpart. For PDP contracts, the 
Part D summary rating is the highest rating. Measures are assigned 
stars at the contract level and weighted in accordance with Sec.  
423.186(a). Domain ratings are the unweighted mean of the individual 
measure ratings under the topic area in accordance with Sec.  
423.186(b). Summary ratings are the weighted mean of the individual 
measure ratings for Part C or Part D in accordance with Sec.  
423.186(c), with both the reward factor and CAI applied as applicable, 
as described in Sec.  423.186(f). Overall Star Ratings are calculated 
by using the weighted mean of the individual measure ratings in 
accordance with Sec.  423.186(d) with both the reward factor and CAI 
applied as applicable, as described in Sec.  423.186(f).
    (2) Plan benefit packages. All plan benefit packages (PBPs) offered 
under an MA contract or PDP plan sponsor have the same overall and/or 
summary Star Ratings as the contract under which the PBP is offered by 
the MA organization or PDP plan sponsor. Data from all the PBPs offered 
under a contract are used to calculate the measure and domain ratings 
for the contract.
    (3) Contract consolidations. (i) In the case of contract 
consolidations involving two or more contracts for health and/or drug 
services of the same plan type under the same parent organization, CMS 
assigns Star Ratings for the first and second years following the 
consolidation based on the enrollment-weighted mean of the measure 
scores of the surviving and consumed contract(s) as provided in 
paragraph (b)(3)(ii) of this section.
    (ii) The Star Ratings posted on Medicare Plan Finder for contracts 
that consolidate are as follows:
    (A) For the first year after consolidation, CMS will use 
enrollment-weighted measure scores using the July enrollment of the 
measurement period of the consumed and surviving contracts for all 
measures, except the survey-based and call center measures. The survey-
based measures would use enrollment of the surviving and consumed 
contracts at the time the sample is pulled for the rating year. The

[[Page 16745]]

call center measures would use average enrollment during the study 
period.
    (B) For the second year after consolidation, CMS will use the 
enrollment-weighted measure scores using the July enrollment of the 
measurement year of the consumed and surviving contracts for all 
measures except those from CAHPS. CMS will ensure that the CAHPS survey 
sample will include enrollees in the sample frame from both the 
surviving and consumed contracts.
    (iii) This provision governing the Star Ratings of surviving 
contracts is applicable to contract consolidations that are approved on 
or after January 1, 2019.
    (c) Data sources. (1) Part D Star Ratings measures reflect 
structure, process, and outcome indices of quality. This includes 
information of the following types: Beneficiary experiences, benefit 
administration information, clinical data, and CMS administrative data. 
Data underlying Star Ratings measures may include survey data, data 
separately collected and used in oversight of Part D plans' compliance 
with contract requirements, data submitted by plans, and CMS 
administrative data.
    (2) Part D sponsors are required to collect, analyze, and report 
data that permit measurements of health outcomes and other indices of 
quality. Part D sponsors must provide unbiased, accurate, and complete 
quality data described in paragraph (c)(1) of this section to CMS on a 
timely basis as requested by CMS.


Sec.  423.184  Adding, updating, and removing measures.

    (a) General. CMS adds, updates, and removes measures used to 
calculate the Star Ratings as provided in this section. CMS lists the 
measures used for a particular Star Rating each year in the Technical 
Notes or similar guidance document with publication of the Star 
Ratings.
    (b) Review of data quality. CMS reviews the quality of the data on 
which performance, scoring and rating of a measure is based before 
using the data to score and rate performance or in calculating a Star 
Rating. This includes review of variation in scores among MA 
organizations and Part D plan sponsors, and the accuracy, reliability, 
and validity of measures and performance data before making a final 
determination about inclusion of measures in each year's Star Ratings.
    (c) Adding measures. (1) CMS will continue to review measures that 
are nationally endorsed and in alignment with the private sector, such 
as measures developed by National Committee for Quality Assurance 
(NCQA) and the Pharmacy Quality Alliance (PQA) or endorsed by the 
National Quality Forum for adoption and use in the Part D Quality 
Ratings System. CMS may develop its own measures as well when 
appropriate to measure and reflect performance specific to the Medicare 
program.
    (2) In advance of the measurement period, CMS will announce 
potential new measures and solicit feedback through the process 
described for changes in and adoption of payment and risk adjustment 
policies in section 1853(b) of the Act and then subsequently will 
propose and finalize new measures through rulemaking.
    (3) New measures added to the Part D Star Ratings program will be 
on the display page on www.cms.gov for a minimum of 2 years prior to 
becoming a Star Ratings measure.
    (4) A measure will remain on the display page for longer than 2 
years if CMS finds reliability or validity issues with the measure 
specification.
    (d) Updating measures--(1) Non-substantive updates. For measures 
that are already used for Star Ratings, CMS will update measures so 
long as the changes in a measure are not substantive. CMS will announce 
non-substantive updates to measures that occur (or are announced by the 
measure steward) during or in advance of the measurement period through 
the process described for changes in and adoption of payment and risk 
adjustment policies in section 1853(b) of the Act. Non-substantive 
measure specification updates include those that--
    (i) Narrow the denominator or population covered by the measure;
    (ii) Do not meaningfully impact the numerator or denominator of the 
measure;
    (iii) Update the clinical codes with no change in the target 
population or the intent of the measure;
    (iv) Provide additional clarifications:
    (A) Adding additional qualifiers that would meet the numerator 
requirements;
    (B) Clarifying documentation requirements;
    (C) Adding additional instructions; or
    (v) Add alternative data sources.
    (2) Substantive updates. For measures that are already used for 
Star Ratings, in the case of measure specification updates that are 
substantive updates not subject to paragraph (d)(1) of this section, 
CMS will propose and finalize these measures through rulemaking similar 
to the process for adding new measures. CMS will initially solicit 
feedback on whether to make substantive measure updates through the 
process described for changes in and adoption of payment and risk 
adjustment policies in section 1853(b) of the Act. Once the update has 
been made to the measure specification by the measure steward, CMS may 
continue collection of the performance data for the legacy measure and 
include it in Star Ratings until the updated measure has been on 
display for 2 years. CMS will place the updated measure on the display 
page for at least 2 years prior to using the updated measure to 
calculate and assign Star Ratings as specified in paragraph (c) of this 
section.
    (e) Removing measures. (1) CMS will remove a measure from the Star 
Ratings program as follows:
    (i) When the clinical guidelines associated with the specifications 
of the measure change such that the specifications are no longer 
believed to align with positive health outcomes, or
    (ii) A measure shows low statistical reliability.
    (2) CMS will announce in advance of the measurement period the 
removal of a measure based upon its application of this paragraph (e) 
through the process described for changes in and adoption of payment 
and risk adjustment policies in section 1853(b) of the Act in advance 
of the measurement period.
    (f) Improvement measure. CMS will calculate improvement measure 
scores based on a comparison of the measure scores for the current year 
to the immediately preceding year as provided in this paragraph (f); 
the improvement measure score would be calculated for Parts C and D 
separately by taking a weighted sum of net improvement divided by the 
weighted sum of the number of eligible measures.
    (1) Identifying eligible measures. Annually, the subset of measures 
to be included in the Part D improvement measure will be announced 
through the process described for changes in and adoption of payment 
and risk adjustment policies in section 1853(b) of the Act. CMS 
identifies measures to be used in the improvement measure if the 
measures meet all the following:
    (i) CMS will include only measures available for the current and 
previous year in the improvement measures and that have numeric value 
scores in both the current and prior year.
    (ii) CMS will exclude any measure for which there was a substantive 
specification change from the previous year.
    (iii) The Part D improvement measure will include only Part D 
measure scores.
    (2) Determining eligible contracts. CMS will calculate an 
improvement

[[Page 16746]]

score only for contracts that have numeric measure scores for both 
years in at least half of the measures identified for use applying the 
standards in paragraphs (f)(1)(i) through (iii) of this section.
    (3) Special rules for calculation of the improvement score. For any 
measure used for the improvement measure for which a contract received 
5 stars in each of the years examined, but for which the measure score 
demonstrates a statistically significant decline based on the results 
of the significance testing (at a level of significance of 0.05) on the 
change score, the measure will be categorized as having no significant 
change and included in the count of measures used to determine 
eligibility for the measure (that is, for the denominator of the 
improvement measure score).
    (4) Calculation of the improvement score. The improvement measure 
will be calculated as follows:
    (i) The improvement change score (the difference in the measure 
scores in the 2-year period) will be determined for each measure that 
has been designated an improvement measure and for which a contract has 
a numeric score for each of the 2 years examined.
    (ii) Each contract's improvement change score per measure will be 
categorized as a significant change or not a significant change by 
employing a two-tailed t-test with a level of significance of 0.05.
    (iii) The net improvement per measure category (outcome, access, 
patient experience, process) would be calculated by finding the 
difference between the weighted number of significantly improved 
measures and significantly declined measures, using the measure weights 
associated with each measure category.
    (iv) The improvement measure score will then be determined by 
calculating the weighted sum of the net improvement per measure 
category divided by the weighted sum of the number of eligible 
measures.
    (v) The improvement measure scores will be converted to measure-
level Star Ratings by determining the cut points using hierarchical 
clustering algorithms in accordance with Sec.  423.186(a)(2)(i) through 
(iii).
    (vi) The Part D improvement measure cut points for MA-PDs and PDPs 
will be determined using separate clustering algorithms in accordance 
with Sec. Sec.  422.166(a)(2)(iii) and 423.186(a)(2)(iii).
    (g) Data integrity. (1) CMS will reduce a contract's measure rating 
when CMS determines that a contract's measure data are inaccurate, 
incomplete, or biased; such determinations may be based on a number of 
reasons, including mishandling of data, inappropriate processing, or 
implementation of incorrect practices that have an impact on the 
accuracy, impartiality, or completeness of the data used for one or 
more specific measure(s).
    (i) CMS will reduce measures based on data that a Part D 
organization must submit to CMS under Sec.  423.514 to 1 star when a 
contract did not score at least 95 percent on data validation for the 
applicable reporting section or was not compliant with CMS data 
validation standards/sub-standards for data directly used to calculate 
the associated measure.
    (ii) For the appeals measures, CMS will use statistical criteria to 
estimate the percentage of missing data for each contract (using data 
from multiple sources such as a timeliness monitoring study or audit 
information) to scale the star reductions to determine whether the data 
at the independent review entity (IRE) are complete. CMS will use 
scaled reductions for the Star Ratings for the applicable appeals 
measures to account for the degree to which the IRE data are missing.
    (A) The data submitted for the timeliness monitoring project (TMP) 
or audit that aligns with the Star Ratings year measurement period is 
used to determine the scaled reduction.
    (B) The determination of the Part C appeals measure IRE data 
reduction is done independently of the Part D appeals measure IRE data 
reduction.
    (C) The reductions range from a one-star reduction to a four-star 
reduction; the most severe reduction for the degree of missing IRE data 
is a four-star reduction.
    (D) The thresholds used for determining the reduction and the 
associated appeals measure reduction are as follows:
    (1) 20 percent, 1 star reduction.
    (2) 40 percent, 2 star reduction.
    (3) 60 percent, 3 star reduction.
    (4) 80 percent, 4 star reduction.
    (E) If a contract receives a reduction due to missing Part D IRE 
data, the reduction is applied to both of the contract's Part D appeals 
measures.
    (F) The scaled reduction is applied after the calculation for the 
appeals measure-level Star Ratings. If the application of the scaled 
reduction results in a measure-level star rating less than 1 star, the 
contract will be assigned 1 star for the appeals measure.
    (G) The Part D Calculated Error is determined by the quotient of 
the number of untimely cases not auto-forwarded to the IRE and the 
total number of untimely cases.
    (H) The projected number of cases not forwarded to the IRE in a 3-
month period is calculated by multiplying the number of cases found not 
to be forwarded to the IRE based on the TMP or audit data by a constant 
determined by the data collection or data sample time period. The value 
of the constant will be 1.0 for contracts that submitted 3 months of 
data; 1.5 for contracts that submitted 2 months of data; and 3.0 for 
contracts that submitted 1 month of data.
    (I) Contracts are subject to a possible reduction due to lack of 
IRE data completeness if both of the following conditions are met:
    (1) The calculated error rate is 20 percent or more; and
    (2) The projected number of cases not forwarded to the IRE is at 
least 10 in a 3-month period.
    (J) A confidence interval estimate for the true error rate for the 
contract is calculated using a Score Interval (Wilson Score Interval) 
at a confidence level of 95 percent and an associated z of 1.959964 for 
a contract that is subject to a possible reduction.
    (K) A contract's lower bound is compared to the thresholds of the 
scaled reductions to determine the IRE data completeness reduction.
    (L) The reduction is identified by the highest threshold that a 
contract's lower bound exceeds.
    (2) CMS will reduce a measure rating to 1 star for additional 
concerns that data inaccuracy, incompleteness, or bias have an impact 
on measure scores and are not specified in paragraphs (g)(1)(i) and 
(ii) of this section, including a contract's failure to adhere to CAHPS 
reporting requirements.


Sec.  423.186  Calculation of Star Ratings.

    (a) Measure Star Ratings--(1) Cut points. CMS will determine cut 
points for the assignment of a Star Rating for each numeric measure 
score by applying either a clustering or a relative distribution and 
significance testing methodology. For the Part D measures, CMS will 
determine MA-PD and PDP cut points separately.
    (2) Clustering algorithm for all measures except CAHPS measures.
    (i) The method minimizes differences within star categories and 
maximizes differences across star categories using the hierarchical 
clustering method.
    (ii) In cases where multiple clusters have the same measure score 
value range, those clusters would be combined, leading to fewer than 5 
clusters.
    (iii) The clustering algorithm for the improvement measure scores 
is done in two steps to determine the cut points for

[[Page 16747]]

the measure-level Star Ratings. Clustering is conducted separately for 
improvement measure scores greater than or equal to zero and those with 
improvement measure scores less than zero.
    (A) Improvement scores of zero or greater would be assigned at 
least 3 stars for the improvement Star Rating.
    (B) Improvement scores less than zero would be assigned either 1 or 
2 stars for the improvement Star Rating.
    (3) Relative distribution and significance testing for CAHPS 
measures. The method combines evaluating the relative percentile 
distribution with significance testing and accounts for the reliability 
of scores produced from survey data; no measure Star Rating is produced 
if the reliability of a CAHPS measure is less than 0.60. Low 
reliability scores are defined as those with at least 11 respondents, 
reliability greater than or equal to 0.60 but less than 0.75, and also 
in the lowest 12 percent of contracts ordered by reliability. The 
following rules apply:
    (i) A contract is assigned 1 star if both of the criteria in 
paragraphs (a)(3)(i)(A) and (B) of this section are met plus at least 
one of the criteria in paragraphs (a)(3)(i)(C) or (D) of this section 
is met:
    (A) Its average CAHPS measure score is lower than the 15th 
percentile; and
    (B) Its average CAHPS measure score is statistically significantly 
lower than the national average CAHPS measure score;
    (C) The reliability is not low; or
    (D) Its average CAHPS measure score is more than one standard error 
below the 15th percentile.
    (ii) A contract is assigned 2 stars if it does not meet the 1-star 
criteria and meets at least one of these three criteria:
    (A) Its average CAHPS measure score is lower than the 30th 
percentile and the measure does not have low reliability; or
    (B) Its average CAHPS measure score is lower than the 15th 
percentile and the measure has low reliability; or
    (C) Its average CAHPS measure score is statistically significantly 
lower than the national average CAHPS measure score and below the 60th 
percentile.
    (iii) A contract is assigned 3 stars if it meets at least one of 
these three criteria:
    (A) Its average CAHPS measure score is at or above the 30th 
percentile and lower than the 60th percentile, and it is not 
statistically significantly different from the national average CAHPS 
measure score; or
    (B) Its average CAHPS measure score is at or above the 15th 
percentile and lower than the 30th percentile, the reliability is low, 
and the score is not statistically significantly lower than the 
national average CAHPS measure score; or
    (C) Its average CAHPS measure score is at or above the 60th 
percentile and lower than the 80th percentile, the reliability is low, 
and the score is not statistically significantly higher than the 
national average CAHPS measure score.
    (iv) A contract is assigned 4 stars if it does not meet the 5-star 
criteria and meets at least one of these three criteria:
    (A) Its average CAHPS measure score is at or above the 60th 
percentile and the measure does not have low reliability; or
    (B) Its average CAHPS measure score is at or above the 80th 
percentile and the measure has low reliability; or
    (C) Its average CAHPS measure score is statistically significantly 
higher than the national average CAHPS measure score and above the 30th 
percentile.
    (v) A contract is assigned 5 stars if both of the following 
criteria in paragraphs (a)(3)(v)(A) and (B) of this section are met 
plus at least one of the criteria in paragraphs (a)(3)(v)(C) or (D) of 
this section is met:
    (A) Its average CAHPS measure score is at or above the 80th 
percentile; and
    (B) Its average CAHPS measure score is statistically significantly 
higher than the national average CAHPS measure score;
    (C) The reliability is not low; or
    (D) Its average CAHPS measure score is more than one standard error 
above the 80th percentile.
    (4) 5-Star Scale. Measure scores are converted to a 5-star scale 
ranging from 1 (worst rating) to 5 (best rating), with whole star 
increments for the cut points.
    (b) Domain Star Ratings. (1)(i) CMS groups measures by domains 
solely for purposes of public reporting the data on Medicare Plan 
Finder. They are not used in the calculation of the summary or overall 
ratings. Domains are used to group measures by dimensions of care that 
together represent a unique and important aspect of quality and 
performance.
    (ii) The 4 domains for the Part D Star Ratings are: Drug Plan 
Customer Service; Member Complaints and Changes in the Drug Plan's 
Performance; Member Experience with the Drug Plan; and Drug Safety and 
Accuracy of Drug Pricing.
    (2) CMS calculates the domain ratings as the unweighted mean of the 
Star Ratings of the included measures.
    (i) A contract must have scores for at least 50 percent of the 
measures required to be reported for that contract type for that domain 
to have a domain rating calculated.
    (ii) The domain ratings are on a 1 to 5 star scale ranging from 1 
(worst rating) to 5 (best rating) in whole star increments using 
traditional rounding rules.
    (c) Part D summary ratings. (1) CMS will calculate the Part D 
summary ratings using the weighted mean of the measure-level Star 
Ratings for Part D, weighted in accordance with paragraph (e) with an 
adjustment to reward consistently high performance described and the 
application of the CAI, under paragraph (f) of this section.
    (2)(i) A contract must have scores for at least 50 percent of the 
measures required to be reported for the contract type to have a 
summary rating calculated.
    (ii) The Part D improvement measure is not included in the count of 
the minimum number of rated measures.
    (3) The summary ratings are on a 1 to 5 star scale ranging from 1 
(worst rating) to 5 (best rating) in half-star increments using 
traditional rounding rules.
    (d) Overall MA-PD rating. (1) The overall rating for a MA-PD 
contract will be calculated using a weighted mean of the Part C and 
Part D measure-level Star Ratings, weighted in accordance with 
paragraph (e) of this section and with an adjustment to reward 
consistently high performance described and the application of the CAI, 
under paragraph (f) of this section.
    (2)(i) An MA-PD must have both Part C and Part D summary ratings 
and scores for at least 50 percent of the measures required to be 
reported for the contract type to have the overall rating calculated.
    (ii) The Part C and D improvement measures are not included in the 
count of measures needed for the overall rating.
    (iii) Any measures that share the same data and are included in 
both the Part C and Part D summary ratings will be included only once 
in the calculation for the overall rating.
    (iv) The overall rating is on a 1 to 5 star scale ranging from 1 
(worst rating) to 5 (best rating) in half-increments using traditional 
rounding rules.
    (e) Measure weights--(1) General rules. Subject to paragraphs 
(e)(2) and (3) of this section, CMS will assign weights to measures 
based on their categorization as follows.
    (i) Improvement measures receive the highest weight of 5.
    (ii) Outcome and Intermediate outcome measures receive a weight of 
3.
    (iii) Patient experience and complaint measures receive a weight of 
2.
    (iv) Access measures receive a weight of 2.
    (v) Process measures receive a weight of 1.
    (2) Rules for new measures. New measures to the Star Ratings 
program

[[Page 16748]]

will receive a weight of 1 for their first year in the Star Ratings 
program. In subsequent years, the measure will be assigned the weight 
associated with its category.
    (3) Special rule for Puerto Rico. Contracts that have service areas 
that are wholly located in Puerto Rico will receive a weight of zero 
for the Part D adherence measures for the summary and overall rating 
calculations and will have a weight of 3 for the adherence measures for 
the improvement measure calculations.
    (f) Completing the Part D summary and overall rating calculations. 
CMS will adjust the summary and overall rating calculations to take 
into account the reward factor (if applicable) and the categorical 
adjustment index (CAI) as provided in this paragraph (f).
    (1) Reward factor. This rating-specific factor is added to both the 
summary and overall ratings of contracts that qualify for the reward 
factor based on both high and stable relative performance for the 
rating level.
    (i) The contract's performance will be assessed using its weighted 
mean and its ranking relative to all rated contracts in the rating 
level (overall for MA-PDs and Part D summary for MA-PDs and PDPs) for 
the same Star Ratings year. The contract's stability of performance 
will be assessed using the weighted variance and its ranking relative 
to all rated contracts in the rating type (overall for MA-PDs and Part 
D summary for MA-PDs and PDPs). The weighted mean and weighted variance 
are compared separately for MA-PD and standalone Part D contracts 
(PDPs). The measure weights are specified in paragraph (e) of this 
section. Since highly-rated contracts may have the improvement 
measure(s) excluded in the determination of their final highest rating, 
each contract's weighted variance and weighted mean will be calculated 
both with and without the improvement measures. For an MA-PD's Part C 
and D summary ratings, its ranking is relative to all other contracts' 
weighted variance and weighted mean for the rating type (Part C 
summary, Part D summary) with the improvement measure.
    (ii) Relative performance of the weighted variance (or weighted 
variance ranking) will be categorized as being high (at or above 70th 
percentile), medium (between the 30th and 69th percentile) or low 
(below the 30th percentile). Relative performance of the weighted mean 
(or weighted mean ranking) will be categorized as being high (at or 
above the 85th percentile), relatively high (between the 65th and 84th 
percentiles), or other (below the 65th percentile).
    (iii) The combination of the relative variance and relative mean is 
used to determine the reward factor to be added to the contract's 
summary and overall ratings as follows:
    (A) A contract with low variance and a high mean will have a reward 
factor equal to 0.4.
    (B) A contract with medium variance and a high mean will have a 
reward factor equal to 0.3.
    (C) A contract with low variance and a relatively high mean will 
have a reward factor equal to 0.2.
    (D) A contract with medium variance and a relatively high mean will 
have a reward factor equal to 0.1.
    (E) A contract with all other combinations of variance and relative 
mean will have a reward factor equal to 0.0.
    (iv) The reward factor is determined and applied before application 
of the CAI adjustment under paragraph (f)(2) of this section; the 
reward factor is based on unadjusted scores.
    (2) Categorical adjustment index. CMS applies the categorical 
adjustment index (CAI) as provided in this paragraph(f)(2) to adjust 
for the average within-contract disparity in performance associated 
with the percentages of beneficiaries who receive a low income subsidy 
or are dual eligible (LIS/DE) or have disability status. The factor is 
calculated as the mean difference in the adjusted and unadjusted 
ratings (overall, Part D for MA-PDs, Part D for PDPs) of the contracts 
that lie within each final adjustment category for each rating type.
    (i) The CAI is added to or subtracted from the contract's overall 
and summary ratings and is applied after the reward factor adjustment 
(if applicable).
    (A) The adjustment factor is monotonic (that is, as the proportion 
of LIS/DE and disabled increases in a contract, the adjustment factor 
increases in at least one of the dimensions) and varies by a contract's 
categorization into a final adjustment category that is determined by a 
contract's proportion of LIS/DE and disabled beneficiaries.
    (B) To determine a contract's final adjustment category, contract 
enrollment is determined using enrollment data for the month of 
December for the measurement period of the Star Ratings year. The count 
of beneficiaries for a contract is restricted to beneficiaries that are 
alive for part or all of the month of December of the applicable 
measurement year. A beneficiary is categorized as LIS/DE if the 
beneficiary was designated as full or partially dually eligible or 
receiving a LIS at any time during the applicable measurement period. 
Disability status is determined using the variable original reason for 
entitlement (OREC) for Medicare using the information from the Social 
Security Administration and Railroad Retirement Board record systems.
    (C) A MA-PD contract may be adjusted up to three times with the 
CAI: One for the overall Star Rating and one for each of the summary 
ratings (Part C and Part D).
    (D) A PDP contract may be adjusted only once for the CAI for the 
Part D summary rating.
    (E) The CAI values are rounded and displayed with 6 decimal places.
    (ii) In determining the CAI values, a measure will be excluded from 
adjustment if the measure meets any of the following:
    (A) The measure is already case-mix adjusted for socioeconomic 
status.
    (B) The focus of the measurement is not a beneficiary-level issue 
but rather a plan or provider-level issue.
    (C) The measure is scheduled to be retired or revised.
    (D) The measure is applicable only to SNPs.
    (iii) The Star Ratings measures that remain after the exclusion 
criteria, paragraph (f)(2)(ii) of this section, have been applied will 
be adjusted for the determination of the CAI. CMS will announce the 
measures identified for adjustment in the calculations of the CAI under 
this paragraph (f)(2) through the process described for changes in and 
adoption of payment and risk adjustment policies in section 1853(b) of 
the Act.
    (iv) The adjusted measures scores for the selected measures are 
determined using the results from regression models of beneficiary 
level measure scores that adjust for the average within-contract 
difference in measure scores for MA or PDP contracts.
    (A) A logistic regression model with contract fixed effects and 
beneficiary level indicators of LIS/DE and disability status is used 
for the adjustment.
    (B) The adjusted measure scores are converted to a measure-level 
Star Rating using the measure thresholds for the Star Ratings year that 
corresponds to the measurement period of the data employed for the CAI 
determination.
    (v) The rating-specific CAI values will be determined using the 
mean differences between the adjusted and unadjusted Star Ratings 
(overall, Part D summary for MA-PDs and Part D summary for PDPs) in 
each final adjustment category.
    (A) For the annual development of the CAI, the distribution of the 
percentages

[[Page 16749]]

for LIS/DE and disabled (using the enrollment data that parallels the 
previous Star Ratings year's data) would be examined to determine the 
number of equal-sized initial groups for each attribute (LIS/DE and 
disabled).
    (B) The initial categories are created using all groups formed by 
the initial LIS/DE and disabled groups.
    (C) The mean difference between the adjusted and unadjusted summary 
or overall ratings per initial category would be calculated and 
examined. The initial categories would then be collapsed to form the 
final adjustment categories. The collapsing of the initial categories 
to form the final adjustment categories would be done to enforce 
monotonicity in at least one dimension (LIS/DE or disabled).
    (D) The mean difference within each final adjustment category by 
rating-type (overall, Part D for MA-PD, and Part D for PDPs) would be 
the CAI values for the next Star Ratings year.
    (vi) CMS develops the model for the modified contract-level LIS/DE 
percentage for Puerto Rico using the following sources of information:
    (A) The most recent data available at the time of the development 
of the model of both 1-year American Community Survey (ACS) estimates 
for the percentage of people living below the Federal Poverty Level 
(FPL) and the ACS 5-year estimates for the percentage of people living 
below 150 percent of the FPL. The data to develop the model will be 
limited to the 10 states, drawn from the 50 states plus the District of 
Columbia with the highest proportion of people living below the FPL, as 
identified by the 1-year ACS estimates.
    (B) The Medicare enrollment data from the same measurement period 
as the Star Rating's year. The Medicare enrollment data would be 
aggregated from MA contracts that had at least 90 percent of their 
enrolled beneficiaries with mailing addresses in the 10 highest poverty 
states.
    (vii) A linear regression model is developed to estimate the 
percentage of LIS/DE for a contacts that solely serve the population of 
beneficiaries in Puerto Rico.
    (A) The maximum value for the modified LIS/DE indicator value per 
contract would be capped at 100 percent.
    (B) All estimated modified LIS/DE values for Puerto Rico would be 
rounded to 6 decimal places when expressed as a percentage.
    (C) The model's coefficient and intercept are updated annually and 
published in the Technical Notes.
    (g) Applying the improvement measure scores. (1) CMS runs the 
calculations twice for the highest rating for each contract-type 
(overall rating for MA-PD contracts and Part D summary rating for 
PDPs), with all applicable adjustments (CAI and the reward factor), 
once including the improvement measure(s) and once without including 
the improvement measure(s). In deciding whether to include the 
improvement measures in a contract's highest rating, CMS applies the 
following rules:
    (i) If the highest rating for each contract-type is 4 stars or more 
without the use of the improvement measure(s) and with all applicable 
adjustments (CAI and the reward factor), a comparison of the highest 
rating with and without the improvement measure(s) is done. The higher 
rating is used for the rating.
    (ii) If the highest rating is less than 4 stars without the use of 
the improvement measure(s) and with all applicable adjustments (CAI and 
the reward factor), the rating will be calculated with the improvement 
measure(s).
    (2) The Part D summary rating for MA-PDs will include the Part D 
improvement measure.
    (h) Posting and display of ratings. For all ratings at the measure, 
domain, summary and overall level, posting and display of the ratings 
is based on there being sufficient data to calculate and assign 
ratings. If a contract does not have sufficient data to calculate a 
rating, the posting and display would be the flag ``Not enough data 
available.'' If the measurement period is prior to one year past the 
contract's effective date, the posting and display would be the flag 
``Plan too new to be measured''.
    (1) Medicare Plan Finder performance icons. Icons are displayed on 
Medicare Plan Finder to note performance as provided in this paragraph 
(h)(1):
    (i) High-performing icon. The high performing icon is assigned to a 
Part D plan sponsor for achieving a 5-star Part D summary rating and an 
MA-PD contract for a 5-star overall rating.
    (ii) Low-performing icon. (A) A contract receives a low performing 
icon as a result of its performance on the Part C or Part D summary 
ratings. The low performing icon is calculated by evaluating the Part C 
and Part D summary ratings for the current year and the past 2 years. 
If the contract had any combination of Part C or Part D summary ratings 
of 2.5 or lower in all 3 years of data, it is marked with a low 
performing icon. A contract must have a rating in either Part C or Part 
D for all 3 years to be considered for this icon.
    (B) CMS may disable the Medicare Plan Finder online enrollment 
function (in Medicare Plan Finder) for Medicare health and prescription 
drug plans with the low performing icon; beneficiaries will be directed 
to contact the plan directly to enroll in the low-performing plan.
    (2) Plan preview of the Star Ratings. CMS will have plan preview 
periods before each Star Ratings release during which Part D plan 
sponsors can preview their Star Ratings data in HPMS prior to display 
on the Medicare Plan Finder.

0
67. Section 423.265 is amended by revising paragraph (b)(2) to read as 
follows.


Sec.  423.265   Submission of bids and related information.

* * * * *
    (b) * * *
    (2) Substantial differences between bids--(i) General rule. Except 
as provided in paragraph (b)(2)(ii) of this section, potential Part D 
sponsors' bid submissions must reflect differences in benefit packages 
or plan costs that CMS determines to represent substantial differences 
relative to a sponsor's other bid submissions. In order to be 
considered ``substantially different,'' each bid must be significantly 
different from the sponsor's other bids with respect to beneficiary 
out-of-pocket costs or formulary structures.
    (ii) Exception. A potential Part D sponsor's enhanced bid 
submission does not have to reflect the substantial differences as 
required in paragraph (b)(2)(i) of this section relative to any of its 
other enhanced bid submissions.
* * * * *

0
68. Section 423.272 is amended by revising paragraph (b)(3)(ii) to read 
as follows:


Sec.  423.272   Review and negotiation of bid and approval of plans 
submitted by potential Part D sponsors.

* * * * *
    (b) * * *
    (3) * * *
    (ii) Transition period for PDP sponsors with new acquisitions. 
After a 2-year transition period, as determined by CMS, CMS approves a 
bid offered by a PDP sponsor (or by a parent organization to that PDP 
sponsor) that recently purchased (or otherwise acquired or merged with) 
another Part D sponsor if it finds that the benefit package or plan 
costs represented by that bid are substantially different from benefit 
packages or plan costs represented by another bid submitted by the same 
Part D sponsor (or parent organization to that Part D sponsor), as 
provided under Sec.  423.265(b)(2).
* * * * *

[[Page 16750]]

Sec.  423.503   [Amended]

0
 69. Section 423.503 is amended in paragraphs (b)(1) and (2) by 
removing the phrase ``14 months'' and adding in its place ``12 months'' 
each time it appears.

0
70. Section 423.504 is amended by revising paragraphs (b)(4)(ii) and 
(b)(4)(vi)(C) to read as follows.


Sec.  423.504   General provisions.

* * * * *
    (b) * * *
    (4) * * *
    (ii) Personnel and systems sufficient for the Part D plan sponsor 
to organize, implement, control, and evaluate financial and 
communication activities, the furnishing of prescription drug services, 
the quality assurance, medical therapy management, and drug and or 
utilization management programs, and the administrative and management 
aspects of the organization.
* * * * *
    (vi) * * *
    (C)(1) Each Part D plan sponsor must establish and implement 
effective training and education for its compliance officer and 
organization employees, the Part D sponsor's chief executive and other 
senior administrators, managers and governing body members.
    (2) Such training and education must occur at a minimum annually 
and must be made a part of the orientation for a new employee, and new 
appointment to a chief executive, manager, or governing body member.
* * * * *

0
 71. Section 423.505 is amended--
0
a. By revising paragraph (b)(18);
0
b. In paragraph (b)(25), by removing the word ``marketing'' and adding 
in its place the word ``communication''; and
0
c. By revising paragraph (b)(26).
    The revisions read as follows:


Sec.  423.505   Contract provisions.

* * * * *
    (b) * * *
    (18) To agree to have a standard contract with reasonable and 
relevant terms and conditions of participation whereby any willing 
pharmacy may access the standard contract and participate as a network 
pharmacy including all of the following:
    (i) Making standard contracts available upon request from 
interested pharmacies no later than September 15 of each year for 
contracts effective January 1 of the following year.
    (ii) Providing a copy of a standard contract to a requesting 
pharmacy within 7 business days after receiving such a request from the 
pharmacy.
* * * * *
    (26) Maintain a Part D summary plan rating score of at least 3 
stars under the 5-star rating system specified in subpart 186 of this 
part 423. A Part D summary plan rating is calculated as provided in 
Sec.  423.186.
* * * * *


Sec.  423.507   [Amended]

0
 72. Section 423.507 is amended by removing and reserving paragraph 
(b).

0
73. Section 423.508 is amended by revising paragraph (a) to read as 
follows:


Sec.  423.508   Modification or termination of contract by mutual 
consent.

    (a) General rule. A contract may be modified or terminated at any 
time by written mutual consent. If the PDP sponsor submits a request to 
end the term of its contract after the deadline provided in Sec.  
423.507(a)(2)(i), the contract may be terminated by mutual consent in 
accordance with paragraphs (b) through (f) of this section. CMS may 
mutually consent to the contract termination if the contract 
termination does not negatively affect the administration of the 
Medicare Part D program.
* * * * *

0
74. Section 423.509 is amended by revising paragraph (a)(4)(v)(A) and 
adding paragraphs (a)(4)(xiii) and (xiv) and (b)(1)(v) to read as 
follows:


Sec.  423.509   Termination of contract by CMS.

    (a) * * *
    (4) * * *
    (v) * * *
    (A) Requirements in subpart V of this part.
* * * * *
    (xiii) The Part D plan sponsor has committed any of the acts in 
Sec.  423.752 that support the imposition of intermediate sanctions or 
civil money penalties under Sec.  423.750.
    (xiv) Following the issuance of a notice to the sponsor no later 
than August 1, CMS must terminate, effective December 31 of the same 
year, an individual PDP if that plan does not have a sufficient number 
of enrollees to establish that it is a viable independent plan option.
    (b) * * *
    (1) * * *
    (v) In the event that CMS issues a termination notice to a Part D 
plan sponsor on or before August 1 with an effective date of the 
following December 31, the Part D plan sponsor must issue notification 
to its Medicare enrollees at least 90 days prior to the effective date 
of the termination.
* * * * *

0
 75. Section 423.558 is amended by adding paragraph (a)(4) to read as 
follows:


Sec.  423.558   Scope.

    (a) * * *
    (4) Review of at-risk determinations made under a drug management 
program in accordance with Sec.  423.153(f).
* * * * *

0
 76. Section 423.560 is amended by--
0
a. Revising the definition of ``Appeal'';
0
b. Adding the definition of ``At-risk determination'' in alphabetical 
order;
0
c. Revising the definitions of ``Grievance'', ``Reconsideration'', and 
``Redetermination''; and
0
d. Adding the definition of ``Specialty tier'' in alphabetical order.
    The revisions and additions read as follows:


Sec.  423.560   Definitions.

* * * * *
    Appeal means any of the procedures that deal with the review of 
adverse coverage determinations made by the Part D plan sponsor on the 
benefits under a Part D plan the enrollee believes he or she is 
entitled to receive, including delay in providing or approving the drug 
coverage (when a delay would adversely affect the health of the 
enrollee), or on any amounts the enrollee must pay for the drug 
coverage, as defined in Sec.  423.566(b). Appeal also includes the 
review of at-risk determinations made under a drug management program 
in accordance with Sec.  423.153(f). These procedures include 
redeterminations by the Part D plan sponsor, reconsiderations by the 
independent review entity, ALJ hearings, reviews by the Medicare 
Appeals Council (Council), and judicial reviews.
    At-risk determination means a decision made under a plan sponsor's 
drug management program in accordance with Sec.  423.153(f) that 
involves the identification of an individual as an at-risk beneficiary 
for prescription drug abuse; a limitation, or the continuation of a 
limitation, on an at-risk beneficiary's access to coverage for 
frequently abused drugs (that is, a beneficiary specific point-of-sale 
edit or the selection of a prescriber and/or pharmacy and 
implementation of lock-in, or); and information sharing for subsequent 
plan enrollments.
* * * * *
    Grievance means any complaint or dispute, other than one that 
involves a coverage determination or at-risk determination, expressing 
dissatisfaction with any aspect of the

[[Page 16751]]

operations, activities, or behavior of a Part D plan sponsor, 
regardless of whether remedial action is requested.
* * * * *
    Reconsideration means a review of an adverse coverage determination 
or at-risk determination by an independent review entity (IRE), the 
evidence and findings upon which it was based, and any other evidence 
the enrollee submits or the IRE obtains.
    Redetermination means a review of an adverse coverage determination 
or at-risk determination by a Part D plan sponsor, the evidence and 
findings upon which it is based, and any other evidence the enrollee 
submits or the Part D plan sponsor obtains.
    Specialty tier means a formulary cost-sharing tier dedicated to 
very high cost Part D drugs and biological products that exceed a cost 
threshold established by the Secretary.

0
77. Section 423.562 is amended by revising paragraph (a)(1)(ii), adding 
paragraph (a)(1)(v), and revising paragraph (b)(4) to read as follows:


Sec.  423.562   General provisions.

    (a) * * *
    (1) * * *
    (ii) Use a single, uniform exceptions and appeals process which 
includes procedures for accepting oral and written requests for 
coverage determinations and redeterminations that are in accordance 
with Sec.  423.128(b)(7) and (d)(1)(iv).
* * * * *
    (v) If the Part D plan sponsor has established a drug management 
program under Sec.  423.153(f), appeal procedures that meet the 
requirements of this subpart for issues that involve at-risk 
determinations.). Determinations made in accordance with the processes 
at Sec.  423.153(f) are collectively referred to as an at-risk 
determination, defined at Sec.  423.560, made under a drug management 
program.
* * * * *
    (b) * * *
    (4) If dissatisfied with any part of a coverage determination or an 
at-risk determination under a drug management program in accordance 
with Sec.  423.153(f), all of the following appeal rights:
    (i) The right to a redetermination of the adverse coverage 
determination or at-risk determination by the Part D plan sponsor, as 
specified in Sec.  423.580.
    (ii) The right to request an expedited redetermination, as provided 
under Sec.  423.584.
    (iii) If, as a result of the redetermination, a Part D plan sponsor 
affirms, in whole or in part, its adverse coverage determination or at-
risk determination, the right to a reconsideration or expedited 
reconsideration by an independent review entity (IRE) contracted by 
CMS, as specified in Sec.  423.600.
    (iv) If the IRE affirms the plan's adverse coverage determination 
or at-risk determination, in whole or in part, the right to an ALJ 
hearing if the amount in controversy meets the requirements in Sec.  
423.1970.
    (v) If the ALJ or attorney adjudicator affirms the IRE's adverse 
coverage determination or at-risk determination, in whole or in part, 
the right to request Council review of the ALJ's or attorney 
adjudicator's decision, as specified in Sec.  423.1974.
    (vi) If the Council affirms the ALJ's or attorney adjudicator's 
adverse coverage determination or at-risk determination, in whole or in 
part, the right to judicial review of the decision if the amount in 
controversy meets the requirements in Sec.  423.1976.
* * * * *

0
78. Section 423.564 is amended by revising paragraph (b) to read as 
follows:


Sec.  423.564   Grievance procedures.

* * * * *
    (b) Distinguished from appeals. Grievance procedures are separate 
and distinct from appeal procedures, which address coverage 
determinations as defined in Sec.  423.566(b) and at-risk 
determinations made under a drug management program in accordance with 
Sec.  423.153(f). Upon receiving a complaint, a Part D plan sponsor 
must promptly determine and inform the enrollee whether the complaint 
is subject to its grievance procedures or its appeal procedures.
* * * * *

0
 79. Section 423.578 is amended by--
0
 a. Revising paragraphs (a) introductory text, (a)(1), (2), (4) 
introductory text, (5) and (6);
0
b. Removing paragraph (a)(7); and
0
c. Revising paragraph (c)(3).
    The revisions read as follows:


Sec.  423.578   Exceptions process.

    (a) Requests for exceptions to a plan's tiered cost-sharing 
structure. Each Part D plan sponsor that provides prescription drug 
benefits for Part D drugs and manages this benefit through the use of a 
tiered formulary must establish and maintain reasonable and complete 
exceptions procedures subject to CMS' approval for this type of 
coverage determination. The Part D plan sponsor grants an exception 
whenever it determines that the requested non-preferred drug for 
treatment of the enrollee's condition is medically necessary, 
consistent with the physician's or other prescriber's statement under 
paragraph (a)(4) of this section.
    (1) The tiering exceptions procedures must address situations where 
a formulary's tiering structure changes during the year and an enrollee 
is using a drug affected by the change.
    (2) Part D plan sponsors must establish criteria that provide for a 
tiering exception, consistent with paragraphs (a)(3) through (6) of 
this section.
* * * * *
    (4) A prescribing physician or other prescriber must provide an 
oral or written supporting statement that the preferred drug(s) for the 
treatment of the enrollee's condition--
* * * * *
    (5) If the physician or other prescriber provides an oral 
supporting statement, the Part D plan sponsor may require the physician 
or other prescriber to subsequently provide a written supporting 
statement. The Part D plan sponsor may require the prescribing 
physician or other prescriber to provide additional supporting medical 
documentation as part of the written follow-up.
    (6) Limitations on tiering exceptions: A Part D plan sponsor is 
permitted to design its tiering exceptions procedures such that an 
exception is not approvable in the following circumstances:
    (i) To cover a brand name drug, as defined in Sec.  423.4, at a 
preferred cost-sharing level that applies only to alternative drugs 
that are--
    (A) Generic drugs, for which an application is approved under 
section 505(j) of the Federal Food, Drug, and Cosmetic Act; or
    (B) Authorized generic drugs as defined in section 505(t)(3) of the 
Federal Food, Drug, and Cosmetic Act.
    (ii) To cover a biological product licensed under section 351 of 
the Public Health Service Act at a preferred cost-sharing level that 
does not contain any alternative drug(s) that are biological products.
    (iii) If a Part D plan sponsor maintains a specialty tier, as 
defined in Sec.  423.560, the sponsor may design its exception process 
so that Part D drugs and biological products on the specialty tier are 
not eligible for a tiering exception.
* * * * *
    (c) * * *
    (3) When a tiering exceptions request is approved. Whenever an 
exceptions request made under paragraph (a) of this section is 
approved--
    (i) The Part D plan sponsor may not require the enrollee to request 
approval

[[Page 16752]]

for a refill, or a new prescription to continue using the Part D 
prescription drug after the refills for the initial prescription are 
exhausted, as long as--
    (A) The enrollee's prescribing physician or other prescriber 
continues to prescribe the drug;
    (B) The drug continues to be considered safe for treating the 
enrollee's disease or medical condition; and
    (C) The enrollment period has not expired. If an enrollee renews 
his or her membership after the plan year, the plan may choose to 
continue coverage into the subsequent plan year.
    (ii) The Part D plan sponsor must provide coverage for the approved 
prescription drug at the cost-sharing level that applies to preferred 
alternative drugs. If the plan's formulary contains alternative drugs 
on multiple tiers, cost-sharing must be assigned at the lowest 
applicable tier, under the requirements in paragraph (a) of this 
section.
* * * * *

0
 80. Section 423.580 is revised to read as follows:


Sec.  423.580   Right to a redetermination.

    An enrollee who has received a coverage determination (including 
one that is reopened and revised as described in Sec.  423.1978) or an 
at-risk determination under a drug management program in accordance 
with Sec.  423.153(f) may request that it be redetermined under the 
procedures described in Sec.  423.582, which address requests for a 
standard redetermination. The prescribing physician or other prescriber 
(acting on behalf of an enrollee), upon providing notice to the 
enrollee, may request a standard redetermination under the procedures 
described in Sec.  423.582. An enrollee or an enrollee's prescribing 
physician or other prescriber (acting on behalf of an enrollee) may 
request an expedited redetermination as specified in Sec.  423.584.

0
 81. Section 423.582 is amended by revising paragraphs (a) and (b) to 
read as follows:


Sec.  423.582   Request for a standard redetermination.

    (a) Method and place for filing a request. An enrollee or an 
enrollee's prescribing physician or other prescriber (acting on behalf 
of the enrollee) must ask for a redetermination by making a written 
request with the Part D plan sponsor that made the coverage 
determination or the at-risk determination under a drug management 
program in accordance with Sec.  423.153(f). The Part D plan sponsor 
may adopt a policy for accepting oral requests.
    (b) Timeframe for filing a request. Except as provided in paragraph 
(c) of this section, a request for a redetermination must be filed 
within 60 calendar days from the date of the notice of the coverage 
determination or the at-risk determination under a drug management 
program in accordance with Sec.  423.153(f).
* * * * *

0
82. Section 423.584 is amended by revising paragraph (a) to read as 
follows:


Sec.  423.584   Expediting certain redeterminations.

    (a) Who may request an expedited redetermination. An enrollee or an 
enrollee's prescribing physician or other prescriber may request that a 
Part D plan sponsor expedite a redetermination that involves the issues 
specified in Sec.  423.566(b) or an at-risk determination made under a 
drug management program in accordance with Sec.  423.153(f). (This does 
not include requests for payment of drugs already furnished.)
* * * * *

0
83. Section 423.590 is amended by revising paragraphs (a), (b)(1) and 
(2), the paragraph (f) subject heading, and paragraphs (f)(1) and 
(g)(3)(i) to read as follows:


Sec.  423.590   Timeframes and responsibility for making 
redeterminations.

    (a) Standard redetermination--request for covered drug benefits or 
review of an at-risk determination. (1) If the Part D plan sponsor 
makes a redetermination that is completely favorable to the enrollee, 
the Part D plan sponsor must notify the enrollee in writing of its 
redetermination (and effectuate it in accordance with Sec.  
423.636(a)(1) or (3) as expeditiously as the enrollee's health 
condition requires, but no later than 7 calendar days from the date it 
receives the request for a standard redetermination.
    (2) If the Part D plan sponsor makes a redetermination that 
affirms, in whole or in part, its adverse coverage determination or at-
risk determination, it must notify the enrollee in writing of its 
redetermination as expeditiously as the enrollee's health condition 
requires, but no later than 7 calendar days from the date it receives 
the request for a standard redetermination.
    (b) * * *
    (1) If the Part D plan sponsor makes a redetermination that is 
completely favorable to the enrollee, the Part D plan sponsor must 
issue its redetermination (and effectuate it in accordance with Sec.  
423.636(a)(2)) no later than 14 calendar days from the date it receives 
the request for redetermination.
    (2) If the Part D plan sponsor affirms, in whole or in part, its 
adverse coverage determination, it must notify the enrollee in writing 
of its redetermination no later than 14 calendar days from the date it 
receives the request for redetermination.
* * * * *
    (f) Who must conduct the review of an adverse coverage 
determination or at-risk determination. (1) A person or persons who 
were not involved in making the coverage determination or an at-risk 
determination under a drug management program in accordance with Sec.  
423.153(f) must conduct the redetermination.
* * * * *
    (g) * * *
    (3) * * *
    (i) For adverse drug coverage redeterminations, or redeterminations 
related to a drug management program in accordance with Sec.  
423.153(f), describe both the standard and expedited reconsideration 
processes, including the enrollee's right to, and conditions for, 
obtaining an expedited reconsideration and the rest of the appeals 
process;
* * * * *

0
84. Section 423.602 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  423.602   Notice of reconsideration determination by the 
independent review entity.

* * * * *
    (b) * * *
    (2) If the reconsideration determination is adverse (that is, does 
not completely reverse the adverse coverage determination or 
redetermination by the Part D plan sponsor), inform the enrollee of his 
or her right to an ALJ hearing if the amount in controversy meets the 
threshold requirement under Sec.  423.1970;
* * * * *

0
 85. Section 423.636 is amended by revising paragraph (a)(2) and adding 
paragraphs (a)(3) and (b)(3) to read as follows:


Sec.  423.636   How a Part D plan sponsor must effectuate standard 
redeterminations, reconsiderations, or decisions.

    (a) * * *
    (2) Requests for payment. If, on redetermination of a request for 
payment, the Part D plan sponsor reverses its coverage determination, 
the Part D plan sponsor must authorize payment for the benefit within 
14

[[Page 16753]]

calendar days from the date it receives the request for 
redetermination, and make payment no later than 30 calendar days after 
the date the plan sponsor receives the request for redetermination.
    (3) Review of an at-risk determination. If, on redetermination of 
an at-risk determination made under a drug management program in 
accordance with Sec.  423.153(f), the Part D plan sponsor reverses its 
at-risk determination, the Part D plan sponsor must implement the 
change to the at-risk determination as expeditiously as the enrollee's 
health condition requires, but no later than 7 calendar days from the 
date it receives the request for redetermination.
    (b) * * *
    (3) Review of an at-risk determination. If, on appeal of an at-risk 
determination made under a drug management program in accordance with 
Sec.  423.153(f), the determination by the Part D plan sponsor is 
reversed in whole or in part by the independent review entity, or at a 
higher level of appeal, the Part D plan sponsor must implement the 
change to the at-risk determination within 72 hours from the date it 
receives notice reversing the determination. The Part D plan sponsor 
must inform the independent review entity that the Part D plan sponsor 
has effectuated the decision.

0
 86. Section 423.638 is revised to read as follows:


Sec.  423.638   How a Part D plan sponsor must effectuate expedited 
redeterminations or reconsiderations.

    (a) Reversals by the Part D plan sponsor--(1) Requests for 
benefits. If, on an expedited redetermination of a request for 
benefits, the Part D plan sponsor reverses its coverage determination, 
the Part D plan sponsor must authorize or provide the benefit under 
dispute as expeditiously as the enrollee's health condition requires, 
but no later than 72 hours after the date the Part D plan sponsor 
receives the request for redetermination.
    (2) Review of an at-risk determination. If, on an expedited 
redetermination of an at-risk determination made under a drug 
management program in accordance with Sec.  423.153(f), the Part D plan 
sponsor reverses its at-risk determination, the Part D plan sponsor 
must implement the change to the at-risk determination as expeditiously 
as the enrollee's health condition requires, but no later than 72 hours 
after the date the Part D plan sponsor receives the request for 
redetermination.
    (b) Reversals other than by the Part D plan sponsor--(1) Requests 
for benefits. If the expedited determination or expedited 
redetermination for benefits by the Part D plan sponsor is reversed in 
whole or in part by the independent review entity, or at a higher level 
of appeal, the Part D plan sponsor must authorize or provide the 
benefit under dispute as expeditiously as the enrollee's health 
condition requires but no later than 24 hours from the date it receives 
notice reversing the determination. The Part D plan sponsor must inform 
the independent review entity that the Part D plan sponsor has 
effectuated the decision.
    (2) Review of an at-risk determination. If the expedited 
redetermination of an at-risk determination made under a drug 
management program in accordance with Sec.  423.153(f) by the Part D 
plan sponsor is reversed in whole or in part by the independent review 
entity, or at a higher level of appeal, the Part D plan sponsor must 
implement the change to the at-risk determination as expeditiously as 
the enrollee's health condition requires but no later than 24 hours 
from the date it receives notice reversing the determination. The Part 
D plan sponsor must inform the independent review entity that the Part 
D plan sponsor has effectuated the decision.


Sec.  423.652   [Amended]

0
 87. Section 423.652 is amended in paragraph (b)(1) by removing the 
phrase ``July 15'' and adding in its place ``September 1''.

0
88. Section 423.750 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  423.750   Types of intermediate sanctions and civil money 
penalties.

    (a) * * *
    (3) Suspension of communication activities to Medicare 
beneficiaries by a Part D plan sponsor, as defined by CMS.
* * * * *

0
89. Section 423.752 is amended by revising paragraphs (a)(9) and (b) to 
read as follows:


Sec.  423.752   Basis for imposing intermediate sanctions and civil 
money penalties.

    (a) * * *
    (9) Fails to comply with communication restrictions described in 
subpart V of this part or applicable implementing guidance.
* * * * *
    (b) Suspension of enrollment and communications. If CMS makes a 
determination that could lead to a contract termination under Sec.  
423.509(a), CMS may impose the intermediate sanctions at Sec.  
423.750(a)(1) and (3).
* * * * *

0
90. Section Sec.  423.756 is amended by revising paragraph (c)(3)(ii) 
introductory text to read as follows:


Sec.  423.756   Procedures for imposing intermediate sanctions and 
civil money penalties.

* * * * *
    (c) * * *
    (3) * * *
    (ii) In instances where intermediate sanctions have been imposed, 
CMS may require a Part D plan sponsor to market or to accept 
enrollments or both for a limited period of time in order to assist CMS 
in making a determination as to whether the deficiencies that are the 
bases for the intermediate sanctions have been corrected and are not 
likely to recur.
* * * * *

0
91. Section 423.782 is amended by revising paragraphs (a)(2)(iii)(A) 
and (b)(3) to read as follows:


Sec.  423.782   Cost-sharing subsidy.

    (a) * * *
    (2) * * *
    (iii) * * *
    (A) A copayment amount of not more than $1 for a generic drug, 
biological product for which an application under section 351(k) of the 
Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred 
drugs that are multiple source (as defined under section 
1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for 
years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A) 
for the percentage increase in the Consumer Price Index, rounded to the 
nearest multiple of 5 cents or 10 cents, respectively; or
* * * * *
    (b) * * *
    (3) For covered Part D drugs above the out-of-pocket limit (under 
Sec.  423.104(d)(5)(iii)) in 2006, copayments not to exceed $2 for a 
generic drug, biological product for which an application under section 
351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, 
or preferred drugs that are multiple source drugs (as defined under 
section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug. For 
years beginning in 2007, the amounts specified in this paragraph (b)(3) 
for the previous years increased by the annual percentage increase in 
average per capita aggregate expenditures for covered Part D drugs, 
rounded to the nearest multiple of 5 cents.
* * * * *

0
92. Section 423.1970 is amended by revising paragraph (b) to read as 
follows:

[[Page 16754]]

Sec.  423.1970   Right to an ALJ hearing.

* * * * *
    (b) Calculating the amount in controversy in specific 
circumstances. (1) If the basis for the appeal is the refusal by the 
Part D plan sponsor to provide drug benefits, CMS uses the projected 
value of those benefits to compute the amount remaining in controversy. 
The projected value of a Part D drug or drugs must include any costs 
the enrollee could incur based on the number of refills prescribed for 
the drug(s) in dispute during the plan year.
    (2) If the basis for the appeal is an at-risk determination made 
under a drug management program in accordance with Sec.  423.153(f), 
CMS uses the projected value of the drugs subject to the drug 
management program to compute the amount remaining in controversy. The 
projected value of the drugs subject to the drug management program 
shall include the value of any refills prescribed for the drug(s) in 
dispute during the plan year.
* * * * *


Sec.  423.2018   [Amended]

0
 93. Section 423.2018 is amended--
0
 a. In paragraph (a)(1), by removing the phrase ``appealed coverage 
determination was made'' and adding in its place the phrase ``appealed 
coverage determination or at-risk determination was made''; and
0
 b. In paragraph (a)(2), by removing the phrase ``after the coverage 
determination to be considered'' and adding in its place the phrase 
``after the coverage determination or at-risk determination to be 
considered''.


Sec.  423.2020   [Amended]

0
 94. Section 423.2020 is amended in paragraph (c)(1) by removing the 
phrase ``the coverage determination, and'' and adding in its place the 
phrase ``the coverage determination or at-risk determination, and''.


Sec.  423.2022   [Amended]

0
 95. Section 423.2022 is amended by--
0
 a. Removing the first appearance of the paragraph (b) subject heading 
and paragraph (b)(1) introductory text; and
0
 b. In paragraph (b)(1)(i) by removing the phrase ``the coverage 
determination, redetermination,'' and adding in its place the phrase 
``the coverage determination or at-risk determination, 
redetermination,''.


Sec.  423.2032   [Amended]

0
96. Section 423.2032 is amended in paragraph (a) by removing the phrase 
``the coverage determination, redetermination,'' and adding in its 
place the phrase ``the coverage determination or at-risk determination, 
redetermination,''.


Sec.  423.2036   [Amended]

0
 97. Section 423.2036 is amended in paragraph (e) by removing the 
phrase ``a coverage determination'' and adding in its place the phrase 
``a coverage determination or at-risk determination''.


Sec.  423.2038   [Amended]

0
 98. Section 423.2038 is amended in paragraph (c) by removing the 
phrase ``may be made, and'' and adding in its place the phrase ``may be 
made, or an enrollee's at-risk determination should be reversed, and''.


Sec.  423.2046   [Amended]

0
99. Section 423.2046 is amended in paragraph (a)(1)(iii) by removing 
the phrase ``the coverage determination'' and adding in its place the 
phrase ``the coverage determination or at-risk determination''.


Sec.  423.2056   [Amended]

0
100. Section 423.2056 is amended--
0
 a. In paragraph (a)(1) by removing the phrase ``appealed coverage 
determination'' and adding in its place the phrase ``appealed coverage 
determination or at-risk determination'', and
0
 b. In paragraph (e) by removing the phrase ``the coverage 
determination to be considered in the appeal'' and adding in its place 
``the coverage determination or at-risk determination to be considered 
in the appeal''.


Sec.  423.2062   [Amended]

0
 101. Section 423.2062 is amended in paragraph (b) by removing the 
phrase ``coverage determination being considered and does not have 
precedential effect'' and adding in its place the phrase ``coverage 
determination or at-risk determination being considered and does not 
have precedential effect''.


Sec.  423.2122   [Amended]

0
102. Section 423.2122 is amended--
0
a. In paragraph (a)(1) by removing the phrase ``the coverage 
determination.'' and adding in its place the phrase ``the coverage 
determination or at-risk determination'';
0
 b. In paragraph (a)(3) by removing the phrase ``a coverage 
determination is made'' and adding in its place ``a coverage 
determination or at-risk determination is made'' and by removing the 
phrase ``after the coverage determination considered'' and adding in 
its place ``after the coverage determination or at-risk determination 
considered''.


Sec.  423.2126   [Amended]

0
 103. Section 423.2126 is amended in paragraph (b) by removing the 
phrase ``coverage determination to be considered in the appeal'' and 
adding in its place the phrase ``coverage determination or at-risk 
determination to be considered in the appeal''.

Subpart V--Part D Communication Requirements

0
104. The subpart V heading is revised to read as set forth above.

0
 105. Section 423.2260 is revised to read as follows:


Sec.  423.2260  Definitions.

    As used in this subpart--
    Communications means activities and use of materials to provide 
information to current and prospective enrollees.
    Communication materials means all information provided to current 
and prospective enrollees. Marketing materials are a subset of 
communication materials.
    Marketing means activities and use of materials that meet the 
following:
    (1) Conducted by the Part D sponsor or downstream entities.
    (2) Intended to draw a beneficiary's attention to a Part D plan or 
plans.
    (3) Intended to influence a beneficiary's decision-making process 
when selecting a Part D plan for enrollment or deciding to stay 
enrolled in a plan (that is, retention-based marketing).
    Marketing materials--(1) Include, but are not limited to following:
    (i) Materials such as brochures; posters; advertisements in media 
such as newspapers, magazines, television, radio, billboards, or the 
internet; and social media content.
    (ii) Materials used by marketing representatives such as scripts or 
outlines for telemarketing or other presentations.
    (iii) Presentation materials such as slides and charts.
    (2) Materials that do not include the following are not considered 
marketing materials:--
    (i) Information about the plan's benefit structure or cost sharing;
    (ii) Information about measuring or ranking standards (for example, 
star ratings);
    (iii) Mention benefits or cost sharing, but do not meet the 
definition of marketing in this section
    (iv) Unless otherwise specified by CMS based on their use or 
purpose, materials that are required under Sec.  423.128; or

[[Page 16755]]

    (v) Any materials specifically designated by CMS as not meeting the 
definition of the proposed marketing definition based on their use or 
purpose.

0
106. Section 423.2262 is amended by revising paragraph (d) to read as 
follows:


Sec.  423.2262   Review and distribution of marketing materials.

    (d) Enrollee communication materials. Enrollee communication 
materials may be reviewed by CMS and CMS may determine, upon review of 
such materials, that the materials must be modified, or may no longer 
be used.

0
107. Section 423.2264 is revised to read as follows:


Sec.  423.2264   Guidelines for CMS review.

    In reviewing marketing material or election forms under Sec.  
423.2262, CMS determines that the materials--
    (a) Provide to Medicare beneficiaries interested in enrolling, 
adequate written description of rules (including any limitations on the 
providers from whom services can be obtained), procedures, basic 
benefits and services, and fees and other charges in a format (and, 
where appropriate, print size) and using standard terminology that may 
be specified by CMS.
    (b) Notify the general public of its enrollment period in an 
appropriate manner, through appropriate media, throughout its service 
area.
    (c) Include in written materials notice that the Part D sponsor is 
authorized by law to refuse to renew its contract with CMS, that CMS 
also may refuse to renew the contract, and that termination or non-
renewal may result in termination of the beneficiary's enrollment in 
the Part D plan. In addition, the Part D plan may reduce its service 
area and no longer be offered in the area where a beneficiary resides.
    (d) Ensure that materials are not materially inaccurate or 
misleading or otherwise make material misrepresentations.

0
108. Section 423.2268 is revised to read as follows:


Sec.  423.2268  Standards for Part D Sponsor communications and 
marketing.

    (a) In conducting communication activities, Part D sponsors may not 
do any of the following:
    (1) Provide information that is inaccurate or misleading.
    (2) Engage in activities that could mislead or confuse Medicare 
beneficiaries, or misrepresent the Part D sponsor.
    (3) Claim the Part D sponsor is recommended or endorsed by CMS or 
Medicare or that CMS or Medicare recommends that the beneficiary enroll 
in the Part D plan. It may explain that the organization is approved 
for participation in Medicare.
    (4) Employ Part D plan names that suggest that a plan is not 
available to all Medicare beneficiaries.
    (5) Display the names and/or logos of co-branded network providers 
or pharmacies on the sponsor's member identification card, unless the 
names, and/or logos are related to the member selection of specific 
provider organizations (for example, physicians, hospitals).
    (6) Use a plan name that does not include the plan type. The plan 
type should be included at the end of the plan name.
    (7) For markets with a significant non-English speaking population, 
provide vital materials, unless in the language of these individuals. 
Specifically, Part D sponsors must translate materials into any non-
English language that is the primary language of at least 5 percent of 
the individuals in a plan benefit package (PBP) service area.
    (b) In marketing, Part D sponsors may not do any of the following:
    (1) Provide cash or other monetary rebates as an inducement for 
enrollment or otherwise.
    (2) Offer gifts to potential enrollees, unless the gifts are of 
nominal (as defined in the CMS Marketing Guidelines) value, are offered 
to all potential enrollees without regard to whether or not the 
beneficiary enrolls, and are not in the form of cash or other monetary 
rebates.
    (3) Market non-health care/non-prescription drug plan related 
products to prospective enrollees during any Part D sales activity or 
presentation. This is considered cross-selling and is prohibited.
    (4) 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.
    (5) 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.
    (6) Distribute marketing materials for which, before expiration of 
the 45-day period, the Part D sponsor receives from CMS written notice 
of disapproval because it is inaccurate or misleading, or misrepresents 
the Part D sponsor, its marketing representatives, or CMS.
    (7) Conduct sales presentations or distribute and accept Part D 
plan enrollment forms in provider offices or other areas where health 
care is delivered to individuals, except in the case where such 
activities are conducted in common areas in health care settings.
    (8) Conduct sales presentations or distribute and accept plan 
applications at educational events.
    (9) Display the names and/or logos of provider co-branding partners 
on marketing materials, unless the materials clearly indicate that 
other providers are available in the network.
    (10) Knowingly target or send unsolicited marketing materials to 
any Part D enrollee, whose prior year enrollment was in an MA plan, 
during the Open Enrollment Period.
    (11) Engage in any other marketing activity prohibited by CMS in 
its marketing guidance.
    (12) Engage in any discriminatory activity such as attempting to 
recruit Medicare beneficiaries from higher income areas without making 
comparable efforts to enroll Medicare beneficiaries from lower income 
areas.
    (13) Solicit door-to-door for Medicare beneficiaries or through 
other unsolicited means of direct contact, including calling a 
beneficiary without the beneficiary initiating the contact.
    (14) Use providers or provider groups to distribute printed 
information comparing the benefits of different health plans unless the 
providers, provider groups, or pharmacies accept and display materials 
from all health plans with which the providers, provider groups, or 
pharmacies contract. The use of publicly available comparison 
information is permitted if approved by CMS in accordance with the 
Medicare marketing guidance.
    (15) Provide meals to potential enrollees, which is prohibited, 
regardless of value.


Sec.  423.2272   [Amended]

0
 109. Section 423.2272 is amended by removing paragraph (e).


Sec.  423.2274   [Amended]

0
 110. Section 423.2274 is amended--
0
a. By redesignating paragraph (b)(1)(iii) as paragraph (b)(1)(iv);
0
 b. By redesignating paragraph (b)(2)(iii) as paragraph (b)(1)(iii);
0
c. By removing paragraph (b)(2);
0
d. By redesignating paragraphs (b)(3) and (4) as paragraphs (b)(2) and 
(3);
0
e. In newly redesignated paragraph (b)(2)(ii)(A) by removing the 
reference ``paragraph (b)(3)(iii)'' and adding in its place the 
reference :paragraph (b)(2)(iii)''; and
0
f. In newly redesignated paragraph (b)(2)(iii), by removing the phrase 
``from an MA plan,'' and adding the phrase ``from a Part D sponsor,'' 
in its place.

[[Page 16756]]

Sec.  423.2410   [Amended]

0
111. Section 423.2410 is amended in paragraph (a) by removing the 
phrase ``an MLR'' and adding in its place the phrase ``the information 
required under Sec.  423.2460''.


Sec.  423.2420  [Amended]

0
112. Section 423.2420 is amended--
0
a. By removing and reserving paragraph (b)(2)(viii);
0
b. By revising paragraph (d)(2)(i); and
0
c. By removing the first paragraph designated as (d)(2)(ii).
    The revision reads as follows:


Sec.  423.2420  Calculation of medical loss ratio.

* * * * *
    (d) * * *
    (2)
    (i) Allocation to each category must be based on a generally 
accepted accounting method that is expected to yield the most accurate 
results. Specific identification of an expense with an activity that is 
represented by one of the categories in paragraph (b) or (c) of this 
section will generally be the most accurate method.
* * * * *

0
113. Section 423.2430 is amended--
0
a. By redesignating paragraphs (a) introductory text and paragraphs 
(a)(1) and (2) as paragraphs (a)(1), (2), and (3), respectively;
0
b. By republishing the paragraph (a) subject heading and revising newly 
redesignated paragraph (a)(1);
0
c. By adding paragraph (a)(4);
0
d. In paragraph (b)(1), by removing the word ``costs'' and adding in 
its place the phrase ``costs other than those that are related to fraud 
reduction'';
0
e. In paragraph (b)(5), by adding the phrase ``(and that are not 
related to fraud reduction activities under paragraph (a)(4)(ii) of 
this section)'' after ``capabilities''; and
0
f. By removing and reserving paragraph (b)(8).
    The revisions and additions read as follows:


Sec.  423.2430  Activities that improve health care quality.

    (a) Activity requirements. (1) Activities conducted by a Part D 
sponsor to improve quality must either--
    (i) Fall into one of the categories in paragraph (a)(2) of this 
section and meet all of the requirements in paragraph (a)(3) of this 
section; or
    (ii) Be listed in paragraph (a)(4) of this section.
* * * * *
    (4)(i) Medication Therapy Management Programs meeting the 
requirements of Sec.  423.153(d).
    (ii) Fraud reduction activities, including fraud prevention, fraud 
detection, and fraud recovery.
* * * * *

0
114. Section 423.2460 is revised to read as follows:


Sec.  423.2460   Reporting requirements.

    (a) For each contract year, from 2014 through 2017, each Part D 
sponsor must submit to CMS, in a timeframe and manner specified by CMS, 
a report that includes but is not limited to the data needed by the 
Part D sponsor to calculate and verify the MLR and remittance amount, 
if any, for each contract, under this part, such as incurred claims, 
total revenue, expenditures on quality improving activities, non-claims 
costs, taxes, licensing and regulatory fees, and any remittance owed to 
CMS under Sec.  423.2410.
    (b) For contract year 2018 and for each subsequent contract year, 
each Part D sponsor must submit to CMS, in a timeframe and manner 
specified by CMS, the following information:
    (1) Fully credible and partially credible contracts. For each 
contract under this part that has fully credible or partially credible 
experience, as determined in accordance with Sec.  423.2440(d), the 
Part D sponsor must report to CMS the MLR for the contract and the 
amount of any remittance owed to CMS under Sec.  423.2410.
    (2) Non-credible contracts. For each contract under this part that 
has non-credible experience, as determined in accordance with Sec.  
423.2440(d), the Part D sponsor must report to CMS that the contract is 
non-credible.
    (c) Total revenue included as part of the MLR calculation must be 
net of all projected reconciliations.
    (d) The MLR is reported once, and is not reopened as a result of 
any payment reconciliation processes.


Sec.  423.2480  [Amended]

0
115. Section 423.2480 is amended--
0
a. In the introductory text, by removing the phrase ``reviews of 
reports submitted'' and adding in its place ``review of data 
submitted''; and
0
b. In paragraph (d) introductory text, by removing the phrase ``Reports 
submitted under'' and adding in its place the phrase ``Data submitted 
under''.


Sec.  423.2490  [Amended]

0
116. Section 423.2490 is amended in paragraph (a) by removing the 
phrase ``information contained in reports submitted'' and adding in its 
place the phrase ``information submitted''.

PART 460--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

0
117. The authority citation for part 460 continues to read as follows:

     Authority:  Secs. 1102, 1871, 1894(f), and 1934(f) of the 
Social Security Act (42 U.S.C. 1302, 1395, 1395eee(f), and 1396u-
4(f)).

0
 118. Section 460.40 is amended by revising paragraph (j) to read as 
follows:


Sec.  460.40   Violations for which CMS may impose sanctions.

* * * * *
    (j) Makes payment to any individual or entity that is included on 
the preclusion list, defined in Sec.  422.2 of this chapter.

0
 119. Section 460.50 is amended by revising paragraph (b)(1)(ii) to 
read as follows:


Sec.  460.50   Termination of PACE program agreement.

* * * * *
    (b) * * *
    (1) * * *
    (ii) The PACE organization failed to comply substantially with 
conditions for a PACE program or PACE organization under this part, or 
with terms of its PACE program agreement, including making payment to 
an individual or entity that is included on the preclusion list, 
defined in Sec.  422.2 of this chapter.
* * * * *


Sec.  460.68   [Amended]

0
 120. Section 460.68 is amended by removing paragraph (a)(4).


Sec.  460.70   [Amended]

0
121. Section 460.70 is amended by removing paragraph (b)(1)(iv).


Sec.  460.71   [Amended]

0
 122. Section 460.71 is amended by removing paragraph (b)(7).

0
 123. Section 460.86 is revised to read as follows:


Sec.  460.86   Payment to individuals and entities excluded by the OIG 
or included on the preclusion list.

    (a) A PACE organization may not pay, directly or indirectly, on any 
basis, for items or services (other than emergency or urgently needed 
services as defined in Sec.  460.100) furnished to a Medicare enrollee 
by any individual or entity that is excluded by the OIG or is included 
on the preclusion list, defined in Sec.  422.2 of this chapter.
    (b) If a PACE organization receives a request for payment by, or on 
behalf of, an individual or entity that is excluded by the OIG or is 
included on the

[[Page 16757]]

preclusion list, defined in Sec.  422.2 of this chapter, the PACE 
organization must notify the enrollee and the excluded individual or 
entity or the individual or entity that is included on the preclusion 
list in writing, as directed by contract or other direction provided by 
CMS, that payments will not be made. Payment may not be made to, or on 
behalf of, an individual or entity that is excluded by the OIG or is 
included on the preclusion list.

PART 498--APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF ICFs/IID AND CERTAIN NFs IN THE 
MEDICAID PROGRAM

0
124. The authority citation for part 498 continues to read as follows:

    Authority: Secs. 1102, 1128I and 1871 of the Social Security Act 
(42 U.S.C. 1302, 1320a-7j, and 1395hh).

0
125. Section 498.3 is amended by adding paragraph (b)(20) to read as 
follows:


Sec.  498.3   Scope and applicability.

* * * * *
    (b) * * *
    (20) An individual or entity is to be included on the preclusion 
list as defined in Sec.  422.2 or Sec.  423.100 of this chapter.
* * * * *

0
126. Section 498.5 is amended by adding paragraph (n) to read as 
follows:


Sec.  498.5   Appeal rights.

* * * * *
    (n) Appeal rights of individuals and entities on preclusion list. 
(1) Any individual or entity that is dissatisfied with an initial 
determination or revised initial determination that they are to be 
included on the preclusion list (as defined in Sec.  422.2 or Sec.  
423.100 of this chapter) may request a reconsideration in accordance 
with Sec.  498.22(a).
    (2) If CMS or the individual or entity under paragraph (n)(1) of 
this section is dissatisfied with a reconsidered determination under 
paragraph (n)(1) of this section, or a revised reconsidered 
determination under Sec.  498.30, CMS or the individual or entity is 
entitled to a hearing before an ALJ.
    (3) If CMS or the individual or entity under paragraph (n)(2) of 
this section is dissatisfied with a hearing decision as described in 
paragraph (n)(2) of this section, CMS or the individual or entity may 
request Board review and the individual or entity has a right to seek 
judicial review of the Board's decision.

    Dated: March 29, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 2, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-07179 Filed 4-6-18; 4:15 pm]
 BILLING CODE 4120-01-P