[Federal Register Volume 85, Number 32 (Tuesday, February 18, 2020)]
[Proposed Rules]
[Pages 8793-8804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03069]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 402

Office of the Secretary

45 CFR Part 102

[CMS-6061-P]
RIN 0938-AT86


Medicare Program; Medicare Secondary Payer and Certain Civil 
Money Penalties

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would specify how and when CMS must 
calculate and impose civil money penalties (CMPs) when group health 
plan (GHP) and non-group health plan (NGHP) responsible reporting 
entities

[[Page 8794]]

(RREs) fail to meet their Medicare Secondary Payer (MSP) reporting 
obligations in any one or more of the following ways: When RREs fail to 
register and report as required by MSP reporting requirements; when 
RREs report as required, but report in a manner that exceeds error 
tolerances established by the Secretary of the Department of Health and 
Human Services (the Secretary); when RREs contradict the information 
the RREs have reported when CMS attempts to recover its payments from 
these RREs. This proposed rule would also establish CMP amounts and 
circumstances under which CMPs would and would not be imposed.

DATES: Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on April 20, 2020.

ADDRESSES: In commenting, please refer to file code CMS-6061-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed).
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-6061-P, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-6061-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Jacqueline Cipa, (410) 786-3259.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://regulations.gov. Follow the search instructions on 
that website to view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Imposition of Civil Money Penalties (CMPs)--Legislative Overview

    In 1981, the Congress added section 1128A to the Social Security 
Act (the Act) (section 2105 of Pub. L. 97-35) to authorize the 
Secretary of Health and Human Services (the Secretary) to impose civil 
money penalties (CMPs) and assessments on certain health care 
facilities, health care practitioners, and other suppliers for 
noncompliance with rules of the Medicare and Medicaid programs. CMPs 
and assessments provide an enforcement tool for agencies to use to 
ensure compliance with statutory and regulatory requirements. These 
administrative penalties may be imposed in addition to potential 
criminal or civil penalties.
    Since 1981, the Congress has increased both the number and the 
types of circumstances under which the Secretary may impose CMPs. Some 
CMP authorities address fraud, misrepresentation, or falsification, 
while others address noncompliance with programmatic or regulatory 
requirements. The Secretary has delegated the authority for certain 
provisions to either the Office of Inspector General (OIG) or Centers 
for Medicare & Medicaid Services (CMS). (See the October 20, 1994 
notice, titled ``Office of Inspector General; Health Care Financing 
Administration; Statement of Organization, Functions, and Delegations 
of Authority,'' (58 FR 52967).) A summary of these CMP changes are 
discussed in this section of this proposed rule.

B. Legislative History

    In 1980, the Congress added section 1862(b) of the Act, which 
defined when Medicare is the secondary payer to certain primary plans. 
These provisions are known as the Medicare Secondary Payer (MSP) 
provisions of the Act.
    Section 1862(b) of the Act prohibits Medicare from making payment 
if payment has been made, or can reasonably be expected to be made by 
any of the following primary plans:
     Group Health Plans (GHPs).
     Workers' compensation plans.
     Liability insurance (including self-insurance).
     No-fault insurance.
    Medicare may make conditional payments, subject to Medicare payment 
rules, in situations where workers' compensation, liability insurance 
(including self-insurance), or no-fault insurance has not made payment 
or cannot be expected to make payment promptly. See section 
1862(b)(2)(A) of the Act. Any conditional payments that Medicare makes 
are subject to reimbursement from the primary plan. See section 
1862(b)(2)(B) of the Act.

C. Legislative Provisions Regarding Mandatory Reporting Requirements

    To enhance enforcement of the MSP provisions, section 111 of the 
Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 
110-173) added paragraphs (7) and (8) to section 1862(b) of the Act. 
These paragraphs established new mandatory reporting requirements 
regarding Medicare beneficiaries who have coverage under GHP 
arrangements as well as for Medicare beneficiaries who receive 
settlements, judgments, awards or other payment from liability 
insurance (including self-insurance), no-fault insurance, or workers' 
compensation (collectively referred to as Non-Group Health Plan, or 
NGHP). Sections 1862(b)(7)(A) and 1862(b)(8)(F) of the Act define those 
parties responsible for this reporting (collectively referred to as 
RREs); they are generally identified as group health insurers or third 
party administrators or both as well as NGHP applicable plans. RREs are 
currently required to submit coverage information for Medicare 
beneficiaries on a quarterly basis through an electronic file 
submission process that may vary depending upon the number of 
beneficiary records being reported or updated. This coverage 
information primarily consists of enough identifying information to 
uniquely identify the Medicare beneficiary and confirm their 
beneficiary status, as well as information about the nature of the 
coverage (such as GHP or NGHP, coverage effective dates, policy limits, 
settlement amounts, and so forth). These section 111 of MMSEA reporting 
provisions do not eliminate any other existing statutory provisions or

[[Page 8795]]

regulations. Further, these reporting provisions include authority for 
Medicare to impose CMPs against entities that fail to comply with the 
section 111 of MMSEA reporting requirements under section 1862(b)(7) or 
(b)(8) of the Act, and required that GHPs and NGHPs that fail to comply 
with these reporting requirements shall be subject to a CMP of up to 
$1,000 for each calendar day of noncompliance.
    In 2013, Congress enacted the Medicare IVIG Access and 
Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART 
Act, at SSA section 1862(b), and codified at 42 U.S.C. 1395(y)(b)(2). 
The SMART Act amended section 1862(b)(8)(E) of the Act, which includes 
the section 111 of MMSEA reporting requirements and describes the 
enforcement provisions for NGHPs that fail to comply with the reporting 
requirements. The SMART Act revised section 1862(b)(8)(E) of the Act to 
state that NGHP applicable plans that fail to comply with the reporting 
requirements may be subject to a civil money penalty of up to $1,000 
for each calendar day of reporting noncompliance required of NGHP 
applicable plans under section 1862(b)(8)(E) of the Act. The SMART Act 
also added section 1862(b)(8)(I) of the Act, which specifically 
required rulemaking actions regarding the enforcement of CMP provisions 
under section 1862(b)(8)(E) of the Act.
    We note that the SMART Act did not amend any CMP provisions for GHP 
arrangements that have reporting obligations under section 1862(b)(7) 
of the Act. Such GHP arrangements remain subject to mandatory CMPs of 
$1,000 per calendar day of noncompliance and per individual for whom 
submission of information was required. In addition, the SMART Act 
directed rulemaking for NGHP applicable plans regarding the imposition 
and non-imposition of CMPs.
    We further note that the statutory language speaks to 
``individuals,'' though there are situations described that are 
specifically applicable to Medicare beneficiaries; we have attempted to 
be consistent with the usage of this statutory terminology but use the 
term ``beneficiary'' where it is more appropriate.

D. Summary of Public Comments Received on the December 11, 2013 
Advanced Notice of Proposed Rulemaking (ANPRM)

    In accordance with the rulemaking directed by the SMART Act, on 
December 11, 2013 (78 FR 75304), we published an advance notice of 
proposed rulemaking (ANPRM) titled ``Medicare Secondary Payer and 
Certain Civil Money Penalties.'' The December 2013 ANPRM solicited 
public comment on specific practices for which CMPs may or may not be 
imposed for failure to comply with MSP reporting requirements for 
certain GHP and NGHP arrangements.
    We received 34 timely pieces of correspondence in response to the 
December 2013 ANPRM. In this section of the proposed rule, we provide 
an analysis of the public comments received by subject area, with a 
focus on the most common issues raised, and briefly discuss how we 
propose to address the issues raised by commenters in response to the 
2013 ANPRM in this proposed rule.
1. CMPs and ``Good Faith Efforts'' To Obtain Information To Report
    Commenters suggested that CMS refrain from imposing CMPs where 
NGHPs with reporting obligations under section 1862(b)(8) of the Act 
make ``good faith efforts'' to obtain required information from 
individuals who are unwilling or unable to provide it. Some ``good 
faith efforts'' suggested included the following: (1) CMS could accept 
documentation signed by the individual stating that he, or she is 
either not a Medicare beneficiary, or will not provide the NGHP entity 
with his or her Social Security Number (SSN) (full SSN or last 5 
digits); and (2) CMS could accept a judicial order establishing that 
the individual is not required to provide his or her Medicare 
Beneficiary Identifier (MBI) or SSN to the NGHP entity. We note that 
concerns about ``good faith efforts'' were received from the NGHP 
industry and not the GHP industry, which we believe is reflective of 
fundamental differences between the two industries and the 
relationships between those plans and the individuals in question. Our 
understanding is that NGHP applicable plans may be in an adversarial 
relationship at times with the reportable individual, whereas the 
reportable individual is typically the client of a GHP.
    In response to the comments, we are proposing that we would not 
assess CMPs against NGHP entities where those entities make efforts as 
defined in this proposed rule to obtain necessary reporting 
information. NGHP entities would document their records with their 
efforts to obtain this reporting information, as we would retain the 
right to audit such documentation.
2. Determining Noncompliance
    Most commenters suggested that ``noncompliance'' with CMS's 
reporting requirements include failure to--(1) report when an entity is 
required to report; (2) report all Medicare beneficiaries who are/were 
plan participants (GHP) or claimants (NGHP); and (3) report when 
medical care was either claimed or released (as a part of a settlement, 
judgment, award, or other payment). We generally agree with the 
suggested concepts and have incorporated them into section II. of this 
proposed rule involving these reporting requirements.
3. Amounts of CMPs
    A number of commenters recommended developing a ``sliding scale'' 
or ``tiered'' CMP approach, based upon the requirement of the 
responsible reporting entity (RRE) to obtain the necessary reporting 
information from these entities. We considered the possibility of 
incorporating penalty tiers for NGHP entities that have reporting 
obligations under section 1862(b)(8) of the Act. However, we are not 
proposing to rely on the intent of the NGHP entity reporting. Instead, 
we are proposing that we would assign CMP amounts based on the number 
of times, meaning individuals, a particular entity fails to report, or 
fails to report correctly. We solicit comment on this proposal, as 
explained in section II. of this proposed rule.
4. Proposed ``Safe Harbors''
    Many commenters suggested that CMS should establish a series of 
``safe harbors'' that would preclude the assessment of a CMP. We note 
that multiple commenters were concerned about non-compliance due to 
technical issues and wished to define these myriad situations as ``safe 
harbors.'' In section II. of this proposed rule, we are proposing to 
employ tolerances related to submissions that contain certain types of 
errors or mistakes to address these comments, and to only consider 
performance against those tolerances over time so that a few poor 
submissions do not necessarily result in the imposition of a CMP. 
Multiple commenters were also concerned about their ability to obtain 
all of the required information for reporting and requested safe 
harbors for non-compliance due to non-cooperation on the part of the 
reportable individual. This situation has been addressed under ``good 
faith efforts'' in this section.
5. Develop an Appeals Process
    A number of commenters suggested that CMS should develop a formal 
appeals process to provide entities with reporting obligations a formal 
structure in which to appeal any notice of a pending or imposed CMP. We 
would

[[Page 8796]]

expect that this proposed rule, once finalized, would comport with the 
appeals process as prescribed by 42 CFR 402.19 and set forth under 42 
CFR part 1005. In broad terms, parties subject to CMP would receive 
formal written notice at the time penalty is proposed. The recipient 
would have the right to request a hearing with an Administrative Law 
Judge (ALJ) within 60 calendar days of receipt. Any party may appeal 
the initial decision of the ALJ to the Departmental Appeals Board (DAB) 
within 30 calendar days. The DAB's decision becomes binding 60 calendar 
days following service of the DAB's decision, absent petition for 
judicial review
6. Rule is Prospective
    Many commenters suggested that the rule should be enforced 
prospectively only. We agree and would evaluate compliance based only 
upon files submitted by the RRE on or after the effective date of any 
final rule.
7. Statute of Limitations
    Many commenters requested a statute of limitations on the 
imposition of CMPs. We agree and will apply the 5-year statute of 
limitations as required by 28 U.S.C. 2462. Under 28 U.S.C. 2462, we may 
only impose a CMP within 5 years from the date when the non-compliance 
was identified by CMS. An explanation and example of how this proposed 
statute of limitations would work for each of the three proposed types 
of CMPs is provided in this section of this rule.
    For failure to report, the noncompliance occurs on every day of 
non-reporting after the required timeframe for reporting has elapsed:
    If an RRE fails to report any beneficiary record as required 
beginning in 2023, and CMS identifies this non-compliance in 2024 but 
fails to take action until 2030, then no CMP would be imposed.
    For responses to recovery efforts contradicting reporting, the 
noncompliance occurs when the response is received by CMS:
    If in 2023 an RRE reported ongoing primary payment responsibility 
for a given beneficiary and then responded to recovery efforts 1 year 
later, in 2024, with an assertion that coverage for that beneficiary 
was actually terminated prior to the issuance of the recovery demand 
letter. If CMS fails to impose a CMP for this noncompliance within 5 
years (no later than 2029), then no CMP would be imposed for this 
incident of noncompliance.
    For situations where the reporter exceeds the error tolerance 
threshold, the noncompliance occurs at the end of the fourth 
consecutive reporting period over the 20 percent threshold (out of 
eight consecutive reporting periods):
    If an RRE exceeds the error tolerance threshold in all four 
reporting periods of 2023 and then never exceeds the threshold again, 
it would normally be subject to a CMP. But if CMS fails to impose a CMP 
for this noncompliance within 5 years (no later than 2028), then no CMP 
would be imposed for this noncompliance.
    We do appreciate the concerns raised by commenters and wish to 
reiterate that CMPs would only be imposed on a prospective basis.
8. Informal and Formal Notice
    Many commenters requested that CMS explain how it will provide 
notice to entities regarding pending or imposed CMPs and how much 
information will be included.
    We would expect to communicate with the entity informally before 
issuing formal notice regarding a CMP. Informal communications would 
depend upon the nature of the non-compliance. Regarding the potential 
imposition of CMPs on other grounds, CMS anticipates utilizing an 
informal (that is, prior to formal enforcement actions) written ``pre-
notice'' process that would allow the RRE the opportunity to present 
mitigating evidence before the imposition of a CMP. Once we determine 
that a CMP will be imposed, we would provide formal notice to the 
entity in writing in accordance with 42 CFR 402.7, which would contain 
information on the reason for the assessment of a CMP, the amount of 
the CMP, and next steps for the entity, including appeal rights.
    For example, we expect to continue to utilize the current messaging 
procedures around file errors described in the MMSEA Section 111 User 
Guides, which entail indicators on response files, emails, and phone 
calls depending upon the nature and severity of the error. RREs thus 
would remain informed about the performance of their quarterly file 
submissions. Upon the third submission out of seven consecutive 
reporting periods that exceeds error tolerances, the RRE would receive 
an ``informal notice'' that consists of a written warning letter (which 
requires no response, but is intended to warn the RRE that a subsequent 
submission that exceeds tolerances would result in potential CMP 
imposition). Upon the fourth submission out of eight consecutive 
reporting periods that exceeds error tolerances (and any additional 
triggering submissions), the RRE would receive another ``informal'' 
written notice of non-compliance indicating the nature of the non-
compliance and the determination of the potential amount of the CMP, 
with 30 calendar days to respond with any mitigating information prior 
to the issuance of a notice of proposed determination in accordance 
with 42 CFR 402.7.
    In the event that a CMP may be imposed for lack of timely 
reporting, CMS would issue an informal written notice of non-
compliance, identifying the nature of the non-compliance and the 
determination of the potential amount of the CMP. The RRE would again 
have 30 calendar days to respond with mitigating information before the 
issuance of a written notice in accordance with 42 CFR 402.7.
    Recovery demand letters would be revised to include information 
regarding the potential for CMPs should an RRE contradict its own 
reporting in the recovery process. If an RRE submits a dispute or 
redetermination request in response to the recovery process that 
appears to directly contradict its own reporting, an informal written 
notice of non-compliance identifying the nature of the non-compliance 
and the determination of the potential amount of the CMP would be 
issued to the RRE. The RRE would again have 30 calendar days to respond 
with mitigating information before the issuance of a written notice in 
accordance with 42 CFR 402.7.
9. Suspension of CMP Imposition Where Programmatic Changes Are Required
    Commenters suggested that CMS consider suspending the imposition of 
CMPs, where changes to mandatory reporting procedure require RREs to 
make significant revisions to the systems used to prepare the data for 
reporting.
    We would expect to continue to provide at least 6 months' (180 
calendar days) notice regarding any changes in policy or procedure 
associated with section 111 of MMSEA required reporting to allow 
reporting entities adequate time to react. We would not assess any CMPs 
associated with a specific policy or procedural change for a minimum of 
two reporting periods following the implementation of that policy or 
procedural change.
10. Duplicative Reporting and CMPs
    Commenters suggested that CMS should not impose CMPs in situations 
where required information has already been reported to another agency 
or entity, such as the Department of Labor, or in situations where 
multiple entities have obligations to report the same

[[Page 8797]]

information to CMS and one entity has already reported.
    The reporting requirements established under sections 1862(b)(7) 
and (b)(8) of the Act imposed certain unique requirements on specific 
entities to report data to CMS for the purposes of identifying those 
situations where another party has primary payment responsibility. 
These reporting requirements were imposed under the Act, regardless of 
whether another agency or entity requires the same or similar data (and 
such data must also be reported to CMS in the manner and form specified 
by the Secretary). The current OMB control number assigned to this 
information collection effort, as required under the Paperwork 
Reduction Act, is 0938-1074.
11. Correct Coordination of Benefits and Recovery
    Commenters suggested that CMS not impose CMPs when CMS has been 
able to coordinate benefits correctly or CMS has otherwise been able to 
recover.
    The obligations to report under section 1862(b)(7) and (b)(8) of 
the Act are separate and distinct from any other obligation with 
respect to MSP. The fact that we may be able to correctly coordinate 
benefits and pursue recovery does not negate the obligations 
established under section 1862(b)(7) and (b)(8) of the Act.

II. Provisions of Proposed Regulations

    We have reviewed the public comments in response to our December 
11, 2013 ANPRM (78 FR 75304), and other policy considerations as 
discussed in section I.D. of this proposed rule. Accordingly, we are 
proposing specific criteria for when CMPs would be imposed and 
proposing specific criteria for when CMPs would not be imposed, in 
circumstances when a GHP or an NGHP entity fails to comply (either on 
its own or through a reporting agent) with MSP reporting requirements 
specified under section 1862(b)(7) and (b)(8) of the Act. We note that 
the proposed CMPs would be levied in addition to any MSP reimbursement 
obligations.
    Further, we proposed to amend the amount of these CMPs, as set 
forth under 45 CFR 102.3 (Penalty adjustment and table).

A. CMP Bases and Scope

    Section 402.1 describes the basis for imposition CMPs against 
parties who violate the provisions of the Act. We propose to add 
regulatory language under Sec.  402.1(c), which would identify 
situations in which GHP entities and NGHP entities with RREs would be 
subject to CMPs under sections 1862(b)(7) and (b)(8) of the Act. To 
accomplish this regulatory addition, we are proposing the following 
regulatory revisions in Sec.  402.1:
     Removing paragraph (c)(20).
     Redesignating paragraph (c)(21) as paragraph (c)(20).
     Redesignating paragraphs (c)(22) through (34) as 
paragraphs (c)(23) through (35).
     Adding new paragraphs (c)(21) and (22).
    Section 402.105(b) establishes the amount of penalties assessed 
against parties who violate the provisions of the Act. The proposed 
regulation at Sec.  402.105(b)(2) would establish the amount of 
penalties imposed against GHPs, and the proposed regulation at Sec.  
402.105(b)(3) would establish the amount of penalties imposed against 
NGHPs. The regulatory provisions proposed would amend Sec.  402.105(b) 
by revising paragraph (b)(2) and adding a new paragraph (b)(3). The 
proposed regulatory changes would establish the amount of CMPs imposed 
in these situations.
    In addition, we have revised the regulations at 45 CFR 102.3 to 
establish the updated amounts for all CMPs at issue in these and the 
impacted proposed regulations. The table in this section sets forth the 
changes described for these amounts.

B. CMP Imposition and Amounts

    The proposed regulations at Sec.  402.1(c) would identify 
circumstances where GHP entities and NGHP entities with RREs would be 
subject to CMPs for violation of sections 1862(b)(7) and (b)(8) of the 
Act. We may become aware of these violations through various means. 
Currently self-referral is the most common means by which RREs that 
have failed to properly register and report are identified, which we 
expect to continue. Following publication of the final rule, we will 
enhance monitoring of recovery process disputes and appeals that 
contradict reported data, as well as monitoring of the reported data 
and performance over time to identify reporting that exceeds error 
tolerances. The proposed regulations at Sec.  402.105(b) would clarify 
how we would calculate CMP amounts for GHP and NGHP entities that have 
reporting obligations under sections 1862(b)(7) and (b)(8) of the Act. 
Furthermore, the proposed Sec.  402.1(c) would identify situations 
where GHP and NGHP RREs would not be subject to CMPs for violation of 
section 1862(b)(7) and (b)(8) of the Act.
    Under section 1862(b)(7) of the Act, a GHP RRE shall be subject to 
a CMP of $1,000 as adjusted annually under 45 CFR part 102 (currently 
$1,569 as of January 17, 2020; please see 85 FR 2869) for each calendar 
day of noncompliance for each individual for which the required 
information should have been submitted. Under section 1862(b)(8) of the 
Act, an NGHP RRE may be subject to a CMP of up to $1,000 (as adjusted 
annually under 45 CFR part 102) for each calendar day of noncompliance 
for each individual for which the required information should have been 
submitted. These CMPs would be in addition to any other penalties 
prescribed by law, and in addition to any MSP claim under section 
1862(b) of the Act with respect to an individual.
1. Imposition of a CMP
    We would impose a CMP in the following situations:
     If an RRE fails to report any GHP beneficiary record 
within the required timeframe (no more than 1 calendar year after GHP 
coverage effective date or the Medicare beneficiary's entitlement date, 
whichever is later). The penalty would be calculated on a daily basis, 
based on the actual number of individual beneficiaries' records that 
the entity submitted untimely (that is, beyond the required timeframe 
after the GHP MSP effective date). The penalty would be $1,000 (as 
adjusted annually under 45 CFR part 102) for each calendar day of 
noncompliance for each individual for which the required information 
should have been submitted, as counted from the day after the last day 
of the RRE's assigned reporting window where the information should 
have been submitted through the day that CMS received the information, 
up to a maximum penalty of $365,000 (as adjusted annually under 45 CFR 
part 102, currently $572,685) per individual per year.
     If an RRE fails to report any NGHP beneficiary record 
within the required timeframe (no more than 1 year of the date of the 
settlement, judgment, award, or other payment (also referred to as the 
Total Payment Obligation to Claimant (TPOC)). The penalty would be 
calculated on a daily basis, based on the actual number of individual 
beneficiaries' records that the entity submitted untimely (that is, in 
excess of the required timeframe after the TPOC date). The penalty 
would be up to $1,000 (as adjusted annually under 45 CFR part 102) for 
each calendar day of noncompliance for each individual for which the 
required information should have been submitted, as counted from the 
day after the last day of the RRE's assigned reporting window where the 
information should have been submitted through the day that CMS 
received the

[[Page 8798]]

information, up to a maximum penalty of $365,000 (as adjusted annually 
under 45 CFR part 102) per individual per year.
     If a GHP's or NGHP's response to CMS recovery efforts 
contradicts the entity's section 111 of MMSEA reporting. For example, 
if an RRE reported and repeatedly affirmed ongoing primary payment 
responsibility for a given beneficiary, then responded to recovery 
efforts with the assertion that coverage for that beneficiary actually 
terminated 2 years prior to the issuance of the recovery demand letter. 
The penalty would be calculated based on the number of calendar days 
that the entity failed to appropriately report updates to beneficiary 
records, as required for accurate and timely reporting under section 
111 of MMSEA. For a GHP, the penalty would be $1,000 (as adjusted 
annually under 45 CFR part 102) for each calendar day of noncompliance 
for each individual for which the required information should have been 
submitted. For an NGHP, the penalty would be up to $1,000 (as adjusted 
annually under 45 CFR part 102) per calendar day of noncompliance for 
each individual, for a maximum annual penalty of $365,000 (as adjusted 
annually under 45 CFR part 102) for each individual for which the 
required information should have been submitted.
     If a GHP or NGHP entity has reported, and exceeds any 
error tolerance(s) threshold established by the Secretary in any 4 out 
of 8 consecutive reporting periods. We propose that the initial and 
maximum error tolerance threshold would be 20 percent (representing 
errors that prevent 20 percent or more of the beneficiary records from 
being processed), with any reduction in that tolerance to be published 
for notice and comment in advance of implementation. We intend for this 
tolerance to be applied as an absolute percentage of the records 
submitted in a given reporting cycle; we welcome feedback on this 
proposed methodology and threshold. The errors that would be used to 
determine whether the error tolerance is met must also be defined in 
advance of implementation of the final rule; we are only considering 
those significant errors which prevent a file or individual beneficiary 
record from processing. These errors are defined in the Section 111 
User Guides, but we welcome the public's feedback. We would maintain 
the current notification process in place where RREs receive notice via 
response file and direct outreach (email and, in more serious cases, 
telephone call) when there are errors with their file submissions.
    Although the Act indicates that CMPs are calculated based on the 
number of days of RRE noncompliance, RREs do not report on a daily 
basis and so non-conformance in this situation cannot be defined on a 
daily basis. Therefore under this proposed rule, an RRE is considered 
to be out of compliance for the entire reporting period when the RRE 
exceeds the error tolerance threshold. A reporting period is defined as 
one quarter (defined as 90 calendar days for the purposes of 
standardizing quarters). For a GHP entity, the penalty would be imposed 
if the GHP entity was determined to have exceeded the error 
tolerances(s) in the entity's fourth above-tolerance submission out of 
any eight consecutive reporting periods. The penalty would be $1,000 
(as adjusted annually under 45 CFR part 102) for each calendar day of 
noncompliance for each individual for which the required information 
should have been submitted. An RRE is considered to be out of 
compliance for the entire reporting period when the error tolerance is 
exceeded; as previously noted, a reporting period is currently defined 
as one quarter (standardized to 90 calendar days). Therefore, the 
penalty for a non-compliant GHP would be $90,000 (as adjusted, 
currently $141,210) for each individual for which the required 
information should have been submitted, per reporting period where a 
CMP may be imposed.
    For an NGHP entity, a CMP would be imposed on a tiered approach if 
the NGHP entity exceeded the error tolerance(s) in the entity's fourth 
above-tolerance submission. As with GHP entities, an NGHP entity is 
considered to be out of compliance for the entire reporting period when 
the error tolerance is exceeded; a reporting period is defined as one 
quarter, standardized to 90 calendar days. For the first level of this 
penalty (reflecting the fourth submission exceeding error tolerances in 
any of the previous eight consecutive reporting periods), we would 
impose a penalty of one quarter, or 25 percent, of the maximum penalty 
per individual record per calendar day of non-compliance (this maximum 
penalty is currently defined as $1,000, as adjusted annually under 45 
CFR part 102) after the required date of submission (last calendar day 
of the NGHP's reporting period), based upon the number of beneficiaries 
whose records exceeded any error tolerance(s) established by the 
Secretary. In effect, $250 (as adjusted, currently $392) per calendar 
day, over the 90 calendar days of non-compliance for the full reporting 
period, per individual record. If the NGHP entity fails to comply again 
in the next consecutive reporting period, the amount of the penalty 
would increase to one half, or 50 percent, of the maximum penalty 
(currently defined as $1000, as adjusted annually under 45 CFR part 
102) per beneficiary per calendar day of non-compliance. In effect, 
$500 (as adjusted, currently $785) per calendar day, over the 90 
calendar days of non-compliance for the full reporting period, per 
individual record. If the NGHP entity fails to comply again in the next 
consecutive reporting period, the amount would increase again to three-
quarters, or 75 percent, of the maximum penalty (currently defined as 
$1,000, as adjusted annually under 45 CFR part 102), and so on, up to 
the maximum penalty of $1,000 (as adjusted annually under 45 CFR part 
102) per beneficiary per calendar day of non-compliance (in effect, 
$90,000 as adjusted, over the 90 calendar days of non-compliance for 
the full reporting period, per individual record). However, the 
potential penalty amount for the next penalty-eligible file would be 
reduced by one quarter (25 percent) of the maximum penalty of $1,000 
(as adjusted annually under 45 CFR part 102) per individual record per 
calendar day of non-compliance for each immediately consecutive 
subsequent quarter of compliance where an NGHP entity reports after the 
assessment of a penalty and the entity remains below any error 
tolerances. Such reductions may accumulate for each subsequent 
reporting period where the entity remains below the error tolerance 
until the entity is once again at the minimum penalty of one quarter, 
or 25 percent, of the maximum penalty per individual record per 
calendar day of non-compliance.
    The following chart depicts how the concept of ``any 4 out of the 
most recent 8 consecutive reporting periods'' would work. CMP amounts 
are used for illustration purposes only; all amounts should be assumed 
to be adjusted annually.

[[Page 8799]]



------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Year 1                          Year 2                          Year 3
                  Example                  ------------------------------------------------------------------------------------------------                      CMP Imposed
                                              Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
1.........................................      E       E       G       E       G       G       G       E       G       G       E       G   Q4 of Year 2.
2.........................................      E       E       G       G       G       G       E       G       G       G       E       E   No.
3.........................................      *       *       *       *       E       G       E       G       G       G       G       E   No.
4.........................................      *       *       *       E       E       G       G       E       G       G       E       E   Q3 and Q4 of Year 3.
5.........................................      *       E       G       E       G       E       G       E       G       E       G       G   Q4 of Year 2 and Q2 of Year 3.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Key: * = No File; E = Error Tolerance Exceeded; G = Good File.

    The following explanations correlate to the examples depicted in 
this chart.
    Example 1. CMP Imposed: Error tolerances exceeded in 4 out of 8 
quarters as of year 2, quarter 4. As of year 3, quarter 3, there are 
only three out of eight quarters where submissions exceeded error 
tolerances, so no additional CMP would be imposed.
    Example 2. No CMP Imposed: In no 8 sequential quarters were error 
tolerances exceeded 4 or more times.
    Example 3. No CMP Imposed: In no 8 sequential quarters were error 
tolerances exceeded 4 or more times.
    Example 4. CMP Imposed: Error tolerances were exceeded in 4 out of 
8 quarters as of year 3, quarter 3. The subsequent submission (year 3, 
quarter 4) also exceeded error tolerances. According to the assessments 
proposed for GHP reporting entities, a GHP RRE would be assessed a CMP 
of $1,000 per calendar day for each individual for whom information 
should have been submitted. According to the tiered approach proposed 
for NGHP reporting entities discussed later, an NGHP RRE would be 
assessed a CMP of $250 per calendar day per for quarter 3 and $500 per 
beneficiary above the tolerance per calendar day for quarter 4.
    Example 5. CMP Imposed: Error tolerances were exceeded in 4 out of 
7 quarters by year 2, quarter 4. According to the assessments proposed 
for GHP reporting entities, a GHP RRE would be assessed a CMP of $1,000 
per calendar day for each individual for whom information should have 
been submitted. According to the tiered approach proposed for NGHP 
reporting entities discussed later, an NGHP RRE would be assessed a CMP 
of $250 per calendar day per individual for whom information should 
have been submitted. Error tolerances were again exceeded in year 3, 
quarter 2. Because error tolerances were not exceeded in year 3, 
quarter 1, an NGHP RRE would only be assessed a CMP of $250 per 
calendar day per individual for whom information should have been 
submitted for year 3, quarter 2 instead of $500.
    The following examples demonstrate how the concept of exceeding 
error tolerances in ``any 4 out of 8 consecutive reporting periods'' 
would work:
    Example 1: The RRE, ABC Insurer, submitted a file for each quarter 
in Year 1 of its required submissions. For Year 1, quarters 1 and 2, 
ABC Insurer submitted files where the file submissions entirely failed 
processing (100 percent error rate), and thus the quarterly submissions 
exceeded the error rate tolerance. In quarter 3 of Year 1, ABC Insurer 
submitted a file with no serious errors that prevented the files from 
being processed. However, severe file errors again occurred in quarter 
4 and 25 percent of its records failed. These errors were corrected by 
the RRE for the first quarter of Year 2. ABC Insurer continued to 
submit error-free files for quarter 2 and quarter 3 of Year 2. However, 
in quarter 4 of Year 2, 50 percent of the submitted records failed. CMS 
would impose a CMP because the error tolerances exceeded four out of 
the eight quarterly reporting periods as of quarter 4 of Year 2.
    Example 2: In the first two quarters of Year 1, Acme Insurance 
submitted files with errors that prevented 30 percent of the records 
from processing (exceeding error tolerances for quarter 1 and quarter 
2). The file submissions for the last two quarters of Year 1 and 
quarters 1 through 3 of Year 2 did not have any significant errors and 
did not exceed tolerances. However, quarter 4 of Year 2 saw a 
recurrence of serious errors and Acme Insurance again exceeded the 
error tolerance with 25 percent of its records failing to process. 
Quarters 1 and 2 of Year 3 did not exceed tolerances, but the third and 
fourth quarters of Year 3 again saw Acme Insurance exceed the error 
tolerance with 30 percent and 20 percent of its records failing to 
process, respectively. CMS would not impose a CMP as in no continuous 
eight reporting periods did Acme Insurance exceed error tolerance four 
or more times.
    We are proposing a maximum 20 percent per file submission error 
tolerance. Any future modification to this error tolerance threshold 
will be subject to notice and comment. We would not consider submission 
errors that fall below this tolerance in determining the imposition of 
a potential CMP; we would continue to provide the response file that 
allows submitters to be aware of their performance. We have evaluated 
the historical error rates from RRE submissions and have determined 
that the vast majority of submitters are able to meet or exceed this 
initial minimum acceptable performance level. The 20 percent per file 
tolerance for errors would only include those errors and condition 
flags that are within the entities' direct control and cause CMS to be 
unable to process the individual beneficiary records or entire file 
submissions. The errors that would be used to determine whether the 
error tolerance is met shall also be defined a minimum of 6 months in 
advance of imposition of any CMP (after publication of the final rule) 
in the reporting User Guides and will be subject to notice and comment. 
We would only consider those significant errors which prevent a file or 
individual beneficiary record from processing, such as failure to 
provide an individual's last name or valid date of birth, or failure to 
provide a matching Tax Identification Number. Less serious errors, such 
as internal CMS processing errors, will continue to be noted on the 
response files, but will not be considered in determining compliance. 
We currently interact with RREs to inform them of errors with file 
submissions, between response files to email notifications to, in more 
severe situations, direct telephone outreach. Following publication of 
the final rule, we would implement a monitoring system but would 
continue to review submissions each reporting period to determine 
whether the entity has continued to exceed error tolerance(s) and 
preserve the notification apparatus currently in place. GHP and NGHP 
entities will continue to have penalties assessed for each reporting 
period, until the entity submits a file that does not exceed any error 
tolerance(s).
2. No CMP Imposed
    We would not impose a CMP in the following situations, where all of 
the applicable conditions are met:

[[Page 8800]]

     If a RRE reports any GHP beneficiary record that is 
reported on a quarterly submission timeframe within the required 
timeframe (not to exceed 1 year after the GHP effective date), or any 
NGHP beneficiary record that is submitted within the required timeframe 
(not to exceed 1 year after the TPOC date).
     If an RRE complies with any TPOC reporting thresholds or 
any other reporting exclusions published in CMS's MMSEA Section 111 
User Guides or otherwise granted by CMS. Note that these thresholds are 
not defined in the regulatory text as TPOC reporting thresholds are 
currently subject to change on an annual basis per 42 U.S.C. 
1395(y)(b)(9)(i). CMS also elects to impose operational thresholds for 
reporting, such as the current $5,000 threshold for Health 
Reimbursement Arrangements.
     If a GHP entity or NGHP entity does not exceed any error 
tolerance(s) in any four out of eight consecutive reporting periods.
     If an NGHP entity fails to report required information 
because the NGHP entity was unable to obtain information necessary for 
reporting from the reportable individual, including an individual's 
last name, first name, date of birth, gender, MBI, or SSN (or the last 
5 digits of the SSN), and the responsible applicable plan has made and 
maintained records of its good faith effort to obtain this information 
by taking all of the following steps:
    ++ The NGHP has communicated the need for this information to the 
individual and his or her attorney or other representative and 
requested the information from the individual and his or her attorney 
or other representative at least twice by mail and at least once by 
phone or other means of contact such as electronic mail in the absence 
of a response to the mailings.
    ++ The NGHP certifies that it has not received a response in 
writing, or has received a response in writing that the individual will 
not provide his or her MBI or SSN (or last 5 digits of his or her SSN).
    ++ The NGHP has documented its records to reflect its efforts to 
obtain the MBI or SSN (or the last 5 digits of the SSN) and the reason 
for the failure to collect this information.
    The NGHP entity should maintain records of these good faith efforts 
(such as dates and types of communications with the individual) in 
order to be produced as mitigating evidence should CMS contemplate the 
imposition of a CMP. Such records must be maintained for a period of 5 
years. The current OMB control number assigned to this information 
collection effort, as required under the Paperwork Reduction Act, is 
0938-1074.
    We solicit comments on our proposed approaches to imposing and not 
imposing CMPs, including our proposed methods of calculating CMP 
amounts, and our proposed error tolerance rates. Our proposed approach 
to imposing CMPs was developed to give entities meaningful 
opportunities to resolve most reporting issues, without the immediate 
risk that a CMP would be imposed.

III. Collection of Information Requirements

    This document does not impose any new information collection and 
recordkeeping requirements that have not already been reviewed by the 
Office of Management and Budget under the authority of the Paperwork 
Reduction Act of 1995.

IV. Responses to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the ``DATES'' section of this 
preamble, and, when we proceed with a subsequent document, we will 
respond to the comments in the preamble to that document.

V. Regulatory Impact Statement

    We have examined the impact of this 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 (CRA) (5 U.S.C. 804(2)), and 
Executive Order 13771 on Reducing Regulation and Controlling Regulatory 
Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
detailed regulatory impact analysis (RIA) must be prepared for major 
rules with economically significant effects ($100 million or more in 
any 1 year). Estimating the economic effects of this rule presents a 
significant challenge under current circumstances. At this point in 
time, the reporting program has not yet reached a level of maturity 
where we have definitively identified any additional RREs that have 
failed to register and report as required. We have purposely selected 
an error tolerance threshold (20 percent) that is achievable for all 
current RREs based on recent performance, and thus would not impose any 
CMPs based on current performance. However, we do not yet have eight 
consecutive reporting periods of data, and, as such, we are not able to 
currently model the potential imposition of CMPs on this basis at this 
time. We also do not have the systems in place at this time to monitor 
when entities contradict their reported data in response to CMS MSP 
recovery efforts. At this point in time, we do not expect to collect 
CMPs totaling $100 million or more in any given year, nor do we expect 
this rule to have any other economic effects that meet or exceed that 
threshold. Therefore, this rule is not considered a major rule under 
the CRA. We note that we are currently implementing monitoring systems 
that will allow us to better model future reporting violations and CMP 
imposition. Therefore, when we are ready to develop the final rule we 
expect to have available a significantly increased array of relevant 
data. As a result, we commit to providing a detailed analysis of the 
costs and benefits of this rule at that time. We also invite feedback 
from the public that would assist us in determining the quantifiable 
costs and benefits of this proposed rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$7.0 million to $35.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We consider a rule to 
have a significant impact on a substantial number of small entities if 
it has at least a 3-percent impact of revenue on at least 5 percent of 
small entities. Affected entities with reporting responsibilities have 
been required to comply with sections 1862(b)(7) and (b)(8) of the Act 
since these provisions were added to the Act in 2007. This proposed 
rule is intended to define how CMPs would be

[[Page 8801]]

imposed as a consequence of non-compliance with these statutory 
obligations, and thus does not present any additional burden beyond the 
review of the rule. As discussed later in this section, the total cost 
impact of reviewing this rule by all 20,855 currently registered RREs, 
regardless of size, is estimated to be $6,842,437, or $328 per entity. 
This falls below the standard definition of ``significance'' of 3 or 
more of small entity revenue. As a result, we have determined, and the 
Secretary certifies, that this proposed rule would not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 603 for the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this proposed rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2019, that 
threshold is approximately $154 million. This proposed rule has no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017 It has been determined 
that this proposed rule is not a ``significant regulatory action'' and 
thus does not trigger the previously discussed requirements of 
Executive Order 13771.
    We used the current number of GHP RREs (1,039) and NGHP RREs 
(19,816) to determine the total number of impacted entities (20,855). 
We recognize that this is a slight overestimate, as a single corporate 
parent may have multiple associated RREs. We welcome any comments on 
the approach in estimating the number of entities which will review 
this proposed rule.
    Using the May 2018 wage information from the U.S. Department of 
Labor Bureau of Labor Statistics for medical and health service 
managers (Code 11-9111), we estimate that the cost of reviewing this 
rule is $109.36 per hour, based on doubling the mean hourly wage of 
$54.68 to include overhead and fringe benefits (see https://www.bls.gov/oes/current/oes119111.htm). We assume that one individual 
associated with each of the 20,855 impacted entities will read the 
rule. Assuming an average reading speed, we estimate that it would take 
approximately 3 hours for the staff to review this proposed rule. For 
each entity that reviews the rule, the estimated cost is $328.08 (3 
hours x $109.36). Therefore, we estimate that the total cost of 
reviewing this proposed rule is $6,842,437 ($328.08 x 20,855).
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 402

    Assessments, Civil money penalties, Exclusions.

45 CFR Part 102

    Administrative practice and procedure, Penalties.

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

PART 402--CIVIL MONEY PENALTIES, ASSESSMENTS, AND EXCLUSIONS

0
1. The authority citation for part 402 is revised to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.

0
2. Section 402.1 is amended--
0
a. In paragraph (c) introductory text by removing the reference 
``(c)(34) of this section'' and adding in its place the reference 
``(c)(35) of this section'';
0
b. By removing paragraph (c)(20);
0
 c. By redesignating paragraph (c)(21) as paragraph (c)(20);
0
d. By redesignating paragraphs (c)(22) through (34) as paragraphs 
(c)(23) through (35); and
0
e. By adding new paragraphs (c)(21) and (22).
    The additions read as follows:


Sec.  402.1   Basis and scope.

* * * * *
    (c) * * *
    (21) Section 1862(b)(7)(B)--Except for the situation described in 
paragraphs (c)(21)(iv)(A) and (B) of this section, any entity that has 
a reporting obligation under section 1862(b)(7) of the Act (``reporting 
entity'') reports, but fails to comply with the reporting instructions 
in the following situations:
    (i) Fails to report any beneficiary record within 1 year from the 
group health plan (GHP) coverage effective date or the Medicare 
beneficiary's entitlement date.
    (ii) Contradicts its reporting under section 1862(b)(7) of the Act 
in response to CMS recovery efforts.
    (iii) Has reported and exceeds any error tolerance(s) threshold 
established by the Secretary in any 4 out of 8 consecutive reporting 
periods.
    (iv) A civil money penalty (CMP) is not imposed if--
    (A) It is associated with a specific policy or procedural change is 
not imposed for a minimum of two reporting periods following the 
implementation of that policy or procedural change; or
    (B) The entity complies with any reporting thresholds or any other 
reporting exclusions.
    (22) Section 1862(b)(8)(E)--An applicable plan has a reporting 
obligation under section 1862(b)(8) of the Act (``applicable plan''), 
but fails to comply with the reporting instructions in the following 
situations:
    (i) Except for the situations described in paragraphs 
(c)(22)(iv)(A) through (C) of this section, fails to report any 
beneficiary record within 1 year from the date of the settlement, 
judgment, award, or other payment.
    (ii) Contradicts its reporting under section 1862(b)(8) of the Act 
in response to CMS recovery efforts.
    (iii) Has reported, and exceeds any error tolerance(s) threshold 
established by the Secretary (not to exceed 20 percent) in any 4 out of 
8 (or less) consecutive reporting periods.
    (iv) A CMP is not imposed in the following situations:
    (A) If a non-group health plan (NGHP) applicable plan fails to 
report required information as a result of the applicable plan's 
inability to obtain an individual's last name, first name, date of 
birth, gender, Medicare Beneficiary Identifier (MBI), Social Security 
Number (SSN), or the last 5 digits of the SSN, and the applicable plan 
has made a good faith effort to obtain this information by meeting all 
of the following:

[[Page 8802]]

    (1) Communicating the need for this information to the individual 
and his or her attorney or other representative.
    (2) Requesting the information from the individual and his or her 
attorney or other representative at least twice by mail and at least 
once by phone or other means of contact.
    (3) Has not received a response or has received a response in 
writing that the individual refuses to provide his or her MBI or SSN or 
a truncated form of the MBI or SSN.
    (4) Has documented its efforts to obtain the MBI or SSN (or the 
last 5 digits of the SSN).
    (B) A CMP is not imposed if an NGHP applicable plan complies with 
any reporting thresholds or any other reporting exclusions.
    (C) A CMP associated with a specific policy or procedural change is 
not imposed for a minimum of two reporting periods following the 
implementation of that policy or procedural change.
* * * * *
0
3. Section 402.105 is amended by revising paragraphs (b)(2) and adding 
paragraph (b)(3) to read as follows:


Sec.  402.105   Amount of penalty.

* * * * *
    (b) * * *
    (2) For entities with reporting obligations under section 
1862(b)(7) of the Act (``reporting entity'') as follows:
    (i) A reporting entity fails to report any beneficiary record 
within the specified period from the latter of the GHP coverage 
effective date or the Medicare beneficiary's entitlement date. The 
penalty is--
    (A) Calculated on a daily basis, based on the actual number of 
beneficiary records that the entity submitted more than 1 year after 
the GHP Medicare Secondary Payer (MSP) effective date; and
    (B) $1,000 as adjusted annually under 45 CFR part 102 for each 
calendar day of noncompliance for each individual for which the 
required information should have been submitted, up to a maximum 
penalty of $365,000 as adjusted annually under 45 CFR part 102 per 
individual per year.
    (ii) A reporting entity's response to CMS recovery efforts 
contradicts the entity's reporting under section 1862(b)(7) of the Act. 
The penalty is--
    (A) Calculated based on the number of calendar days that the entity 
failed to appropriately report updates to beneficiary records, as 
required for accurate and timely reporting; and
    (B) $1,000 as adjusted annually under 45 CFR part 102 for each 
calendar day of noncompliance for each individual for which the 
required information should have been submitted.
    (iii) A reporting entity has reported, and exceeds any error 
tolerance(s) threshold established by the Secretary (not to exceed 20 
percent) in any 4 out of 8 (or less) consecutive reporting periods. The 
penalty is--
    (A) Based upon the number of beneficiary records on the fourth 
submission that exceed any such error tolerance(s); and
    (B) $1,000 as adjusted annually under 45 CFR part 102 for each 
calendar day of noncompliance for each individual for which the 
required information should have been submitted.
    (3) For entities with reporting obligations under section 
1862(b)(8) (``applicable plan'') of the Act as follows:
    (i) An applicable plan fails to report any NGHP beneficiary record 
within the specified period from the date of the settlement, judgment, 
award, or other payment. The penalty is--
    (A) Calculated on a daily basis, based on the actual number of 
beneficiary records that the entity submitted more than 1 year after 
the Total Payment Obligation to Claimant (TPOC) date; and
    (B) Up to $1,000 as adjusted annually under 45 CFR part 102 for 
each calendar day of noncompliance for each individual for which the 
required information should have been submitted, up to a maximum 
penalty of $365,000 as adjusted annually under 45 CFR part 102 per 
individual per year.
    (ii) An applicable plan's response to CMS recovery efforts 
contradicts the entity's reporting under section 1862(b)(8) of the Act. 
The penalty is--
    (A) Calculated based on the number of calendar days that the entity 
failed to appropriately report updates to beneficiary records, as 
required for accurate and timely reporting; and
    (B) Up to $1,000 as adjusted annually under 45 CFR part 102 per 
calendar day of noncompliance, for a maximum penalty of $365,000 as 
adjusted annually under 45 CFR part 102.
    (iii) An applicable plan has reported, and exceeds any error 
tolerance(s) threshold established by the Secretary (not to exceed 20 
percent) in any 4 out of 8 consecutive reporting periods. The penalty 
is calculated using the following tiered approach, based on the number 
of calendar days that the applicable plan exceeded the error 
tolerance(s) in the entity's fourth above-tolerance submission.
    (A) Initial penalty amount. For the first penalty, CMS imposes a 
penalty of one-quarter (25 percent) of the maximum penalty per 
beneficiary per calendar day of non-compliance after the required date 
of submission (last calendar day of the applicable plan's reporting 
period), based upon the number of beneficiaries whose records exceeded 
any error tolerance(s) established by the Secretary.
    (B) Subsequent penalty amounts. For the second and subsequent 
penalties, CMS increases the penalty specified in paragraph 
(b)(3)(iii)(A) of this section in increments of one-quarter (25 
percent) of the maximum penalty for applicable plans that fail to 
comply in consecutive reporting periods to a maximum of $1,000 as 
adjusted annually under 45 CFR part 102 per beneficiary per calendar 
day of non-compliance.
    (C) Reduction in penalty amount. If the applicable plan reports 
after the assessment of a penalty and the entity remains below any 
error tolerances, the penalty amount for the next penalty eligible file 
is reduced by increments of one-quarter (25 percent) of the maximum 
penalty per beneficiary per calendar day of non-compliance per 
consecutive subsequent quarter of compliance, to the minimum penalty of 
one-quarter (25 percent) of the maximum penalty per beneficiary per 
calendar day of non-compliance.
* * * * *
    For the reasons specified in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR part 102 as specified 
below:

PART 102--ADJUSTMENT OF CIVIL MONETARY PENALTIES FOR INFLATION

0
4. The authority for part 102 continues to read as follows:

    Authority:  Public Law 101-410, Sec. 701 of Public Law 114-74, 
31 U.S.C. 3801-3812.

0
5. Section 102.3 is amended in the table by:
0
a. Revising the entries ``1395m(k)(6),'' ``1395m(l)(6),'' 
``1395y(b)(6)(B),'' and ``1395y(b)(7)(B)(i);''
0
b. Adding an entry for ``1395y(b)(8)(E)(i)'' in alphanumeric order; and
0
c. Revising the entries for ``1395pp(h),'' ``1395ss(a)(2),'' 
``1395ss(p)(8),'' ``1395ss(p)(9)(C),'' ``1395ss(q)(5)(C),'' 
``1395ss(r)(6)(A),'' ``1395ss(s)(4),'' and ``1395ss(t)(2).''
    The revisions and addition read as follows:


Sec.  102.3   Penalty adjustment and table.

* * * * *

[[Page 8803]]



                      Table 1 to Sec.   102.3--Civil Monetary Penalty Authorities Administered by HHS Agencies and Penalty Amounts
                                                                   [January 17, 2020]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Date of last
                                                                                                            statutorily    2019 maximum    2020 maximum
                                            CFR \1\            HHS agency           Description \2\         established      adjusted        adjusted
                                                                                                          penalty figure    penalty ($)     penalty ($)
                                                                                                                \3\                             \4\
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                      * * * * * * *
42 U.S.C:
 
                                                                      * * * * * * *
    1395m(k)(6) \5\................  42 CFR 402.1(c)(32),   CMS               Penalty for any person or             2019          15,975          16,257
                                      402.105(d)(3).                           entity who knowingly and
                                                                               willfully bills or
                                                                               collects for any
                                                                               outpatient therapy
                                                                               services or comprehensive
                                                                               outpatient rehabilitation
                                                                               services on other than an
                                                                               assignment-related basis.
                                                                               (Penalties are assessed
                                                                               in the same manner as 42
                                                                               U.S.C. 1395m(k)(6) and
                                                                               1395u(j)(2)(B), which is
                                                                               assessed according to
                                                                               1320a-7a(a)).
    1395m(l)(6) \5\................  42 CFR 402.1(c)(33),   CMS               Penalty for any supplier              2019       15,15,975          16,257
                                      402.105(d)(4).                           of ambulance services who
                                                                               knowingly and willfully
                                                                               fills or collects for any
                                                                               services on other than an
                                                                               assignment-related basis.
                                                                               (Penalties are assessed
                                                                               in the same manner as 42
                                                                               U.S.C. 1395u(b)(18)(B),
                                                                               which is assessed
                                                                               according to 1320a-7a(a)).
 
                                                                      * * * * * * *
    1395y(b)(6)(B).................  42 CFR 402.1(c)(20),   CMS               Penalty for any entity                2019           3,383           3,443
                                      402.105(a).                              that knowingly,
                                                                               willfully, and repeatedly
                                                                               fails to complete a claim
                                                                               form relating to the
                                                                               availability of other
                                                                               health benefits in
                                                                               accordance with statute
                                                                               or provides inaccurate
                                                                               information relating to
                                                                               such on the claim form.
    1395y(b)(7)(B)(i)..............  42 CFR 402.1(c)(21),   CMS               Penalty for any entity                2019           1,211           1,232
                                      402.105(a).                              serving as insurer, third
                                                                               party administrator, or
                                                                               fiduciary for a group
                                                                               health plan that fails to
                                                                               provide information that
                                                                               identifies situations
                                                                               where the group health
                                                                               plan is or was a primary
                                                                               plan to Medicare to the
                                                                               HHS Secretary.
 
                                                                      * * * * * * *
    1395y(b)(8)(E)(i)..............  42 CFR 402.1(c)(22),   CMS               Penalty for any entity                2019           1,211           1,232
                                      402.105(a)(E).                           serving as insurer, third
                                                                               party administrator, or
                                                                               fiduciary for a non-group
                                                                               health plan that fails to
                                                                               provide information that
                                                                               identifies situations
                                                                               where the group health
                                                                               plan is or was a primary
                                                                               plan to Medicare to the
                                                                               HHS Secretary.
 
                                                                      * * * * * * *
    1395pp(h) \5\..................  42 CFR 402.1(c)(24),   CMS               Penalty for any durable               2019          15,975          16,257
                                      402.105(d)(2)(xv).                       medical equipment
                                                                               supplier, including a
                                                                               supplier of prosthetic
                                                                               devices, prosthetics,
                                                                               orthotics, or supplies,
                                                                               that knowingly and
                                                                               willfully fails to make
                                                                               refunds in a timely
                                                                               manner to Medicare
                                                                               beneficiaries under
                                                                               certain conditions. (42
                                                                               U.S.C. 1395(m)(18)
                                                                               sanctions apply here in
                                                                               the same manner, which is
                                                                               under 1395u(j)(2) and
                                                                               1320a-7a(a)).
    1395ss(a)(2)...................  42 CFR 402.1(c)(25),   CMS               Penalty for any person                2019          54,832          55,799
                                      405.105(f)(1).                           that issues a Medicare
                                                                               supplemental policy that
                                                                               has not been approved by
                                                                               the State regulatory
                                                                               program or does not meet
                                                                               Federal standards after a
                                                                               statutorily defined
                                                                               effective date.
 
                                                                      * * * * * * *
    1395ss(p)(8)...................  42 CFR 402.1(c)(26),   CMS               Penalty for any person                2019          28,413          28,914
                                      402.105(e).                              that sells or issues
                                                                               Medicare supplemental
                                                                               polices after a given
                                                                               date that fail to conform
                                                                               to the NAIC or Federal
                                                                               standards established by
                                                                               statute.
                                     42 CFR 402.1(c)(26),   CMS               Penalty for any person                2019          47,357          48,192
                                      405.105(f)(2).                           that sells or issues
                                                                               Medicare supplemental
                                                                               polices after a given
                                                                               date that fail to conform
                                                                               to the NAIC or Federal
                                                                               standards established by
                                                                               statute.
    1395ss(p)(9)(C)................  42 CFR 402.1(c)(27),   CMS               Penalty for any person                2019          28,413          28,914
                                      402.105(e).                              that sells a Medicare
                                                                               supplemental policy and
                                                                               fails to make available
                                                                               for sale the core group
                                                                               of basic benefits when
                                                                               selling other Medicare
                                                                               supplemental policies
                                                                               with additional benefits
                                                                               or fails to provide the
                                                                               individual, before
                                                                               selling the policy, an
                                                                               outline of coverage
                                                                               describing benefits.

[[Page 8804]]

 
                                     42 CFR 402.1(c)(27),   ................  Penalty for any person                2019          47,357          48,192
                                      405.105(f)(3), (4).                      that sells a Medicare
                                                                               supplemental policy and
                                                                               fails to make available
                                                                               for sale the core group
                                                                               of basic benefits when
                                                                               selling other Medicare
                                                                               supplemental policies
                                                                               with additional benefits
                                                                               or fails to provide the
                                                                               individual, before
                                                                               selling the policy, an
                                                                               outline of coverage
                                                                               describing benefits.
    1395ss(q)(5)(C)................  42 CFR 402.1(c)(28),   CMS               Penalty for any person                2019          47,357          48,192
                                      405.105(f)(5).                           that fails to suspend the
                                                                               policy of a policyholder
                                                                               made eligible for medical
                                                                               assistance or
                                                                               automatically reinstates
                                                                               the policy of a
                                                                               policyholder who has lost
                                                                               eligibility for medical
                                                                               assistance, under certain
                                                                               circumstances.
    1395ss(r)(6)(A)................  42 CFR 402.1(c)(29),   CMS               Penalty for any person                2019          47,357          48,192
                                      405.105(f)(6).                           that fails to provide
                                                                               refunds or credits as
                                                                               required by section
                                                                               1882(r)(1)(B).
    1395ss(s)(4)...................  42 CFR 402.1(c)(30),   CMS               Penalty for any issuer of             2019          20,104          20,459
                                      405.105(c).                              a Medicare supplemental
                                                                               policy that does not
                                                                               waive listed time periods
                                                                               if they were already
                                                                               satisfied under a
                                                                               proceeding Medicare
                                                                               supplemental policy, or
                                                                               denies a policy, or
                                                                               conditions the issuances
                                                                               or effectiveness of the
                                                                               policy, or discriminates
                                                                               in the pricing of the
                                                                               policy base on health
                                                                               status or other specified
                                                                               criteria.
    1395ss(t)(2)...................  42 CFR 402.1(c)(31),   CMS               Penalty for any issuer of             2019          47,357          48,192
                                      405.105(f)(7).                           a Medicare supplemental
                                                                               policy that fails to
                                                                               fulfill listed
                                                                               responsibilities.
 
                                                                      * * * * * * *
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\1\ Some HHS components have not promulgated regulations regarding their civil monetary penalty-specific statutory authorities.
\2\ The description is not intended to be a comprehensive explanation of the underlying violation; the statute and corresponding regulation, if
  applicable, should be consulted.
\3\ Statutory or Inflation Act Adjustment.
\4\ The cost of living multiplier for 2018, based on the CPI-U for the month of October 2017, not seasonally adjusted, is 1.02041, as indicated in OMB
  Memorandum M-18-03, ``Implementation of Penalty Inflation Adjustments for 2018, Pursuant to the Federal Civil Penalties Adjustment Act Improvements
  Act of 2015'' (December 15, 2017).
\5\ The cost of living multiplier for 2020, based on the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October 2019, not
  seasonally adjusted, is 1.01764, as indicated in OMB Memorandum M-20-05, ``Implementation of Penalty Inflation Adjustments for 2019, Pursuant to the
  Federal Civil Penalties Adjustment Act Improvements Act of 2015'' (December 16, 2019).


    Dated: August 12, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: December 12, 2019.
Alex Azar,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-03069 Filed 2-13-20; 11:15 am]
 BILLING CODE 4120-01-P