[Federal Register Volume 85, Number 106 (Tuesday, June 2, 2020)]
[Rules and Regulations]
[Pages 33796-33911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11342]



[[Page 33795]]

Vol. 85

Tuesday,

No. 106

June 2, 2020

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 417, 422, and 423





Medicare Program; Contract Year 2021 Policy and Technical Changes to 
the Medicare Advantage Program; Final Rule

  Federal Register / Vol. 85, No. 106 / Tuesday, June 2, 2020 / Rules 
and Regulations  

[[Page 33796]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, and 423

[CMS-4190-F]
RIN 0938-AT97


Medicare Program; Contract Year 2021 Policy and Technical Changes 
to the Medicare Advantage Program, Medicare Prescription Drug Benefit 
Program, and Medicare Cost Plan Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule will revise regulations for the Medicare 
Advantage (MA or Part C) program, Medicare Prescription Drug Benefit 
(Part D) program, and Medicare Cost Plan program to implement certain 
sections of the Bipartisan Budget Act of 2018 and the 21st Century 
Cures Act. In addition, it will enhance the Part C and D programs, 
codify several existing CMS policies, and implement other technical 
changes.

DATES: Effective Date: These regulations are effective August 3, 2020.
    Applicability Dates: Except for Sec. Sec.  422.166(a)(2)(i), 
423.186(a)(2)(i), and 422.514(d)(1) and (2), the provisions in this 
rule are applicable beginning January 1, 2021. The changes to 
Sec. Sec.  422.166(a)(2)(i) and 423.186(a)(2)(i) are applicable 
beginning January 1, 2022. The provisions of Sec.  422.514(d)(1), are 
applicable beginning January 1, 2022. The provisions of Sec.  
422.514(d)(2) are applicable beginning January 1, 2023.

FOR FURTHER INFORMATION CONTACT: Theresa Wachter, (410) 786-1157, or 
Cali Diehl, (410) 786-4053--General Questions.
    Kimberlee Levin, (410) 786-2549--Part C Issues.
    Lucia Patrone, (410) 786-8621--Part D Issues.
    Kristy Nishimoto, (206) 615-2367--Beneficiary Enrollment and 
Appeals Issues.
    Stacy Davis, (410) 786-7813--Part C and D Payment Issues.
    Melissa Seeley, (212) 616-2329--D-SNP Issues.

SUPPLEMENTARY INFORMATION: CMS intends to address all of the remaining 
proposals from the February 2020 proposed rule in subsequent 
rulemaking. Therefore, CMS plans to make any provisions adopted in the 
subsequent, second final rule, although effective on or before January 
1, 2021, applicable no earlier than January 1, 2022. Notwithstanding 
the foregoing, for proposals from the February 2020 proposed rule that 
would codify statutory requirements that are already in effect, CMS 
reminds readers and plan sponsors that the statutory provisions apply 
and will continue to be enforced. Similarly, for the proposals from the 
February 2020 proposed rule that would implement the statutory 
requirements in sections 2007 and 2008 of the Substance Use-Disorder 
Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for 
Patients and Communities Act (hereinafter referred to as the SUPPORT 
Act), CMS intends to implement these statutes consistent with their 
effective provisions.

I. Executive Summary and Background

A. Executive Summary

1. Purpose
    The primary purpose of this final rule is to implement certain 
sections of the following federal laws related to the Medicare 
Advantage (MA or Part C) and Prescription Drug Benefit (Part D) 
programs before the contract year 2021 MA plan bids (due by statute on 
the first Monday in June):
     The Bipartisan Budget Act of 2018 (hereinafter referred to 
as the BBA of 2018)
     The 21st Century Cures Act (hereinafter referred to as the 
Cures Act)
    The rule also includes a number of changes to strengthen and 
improve the Part C and D programs, codifies in regulation several CMS 
interpretive policies previously adopted through the annual Call Letter 
and other guidance documents, and implements other technical changes. 
We took a measured approach to review each provision proposed and 
focused finalizing in this first final rule those most helpful for 
bidding, those that address the Coronavirus Disease (COVID-19) pandemic 
and public health emergency, as well as those topics on which issuing a 
final rule now would advance the MA program.
    While we intend to address the remaining proposals from the 
February 18, 2020, proposed rule (85 FR 9002) not included in this 
final rule in subsequent rulemaking, we are focusing in this final rule 
on more immediate regulatory actions. CMS plans to make any provisions 
adopted in the subsequent, second final rule, although effective on or 
before January 1, 2021, applicable no earlier than January 1, 2022. 
Notwithstanding the foregoing, for proposals from the February 2020 
proposed rule that would codify statutory requirements that are already 
in effect,\1\ CMS reminds readers and plan sponsors that the statutory 
provisions apply and will continue to be enforced. Similarly, for the 
proposals from the February 2020 proposed rule that would implement the 
statutory requirements in sections 2007 and 2008 of the SUPPORT Act, 
CMS intends to implement the statute consistent with its effective 
provisions.
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    \1\ These include the following BBA of 2018 provisions: 
Improvements to Care Management Requirements for Special Needs Plans 
(SNPs); Coverage Gap Discount Program Updates; and Part D Income 
Related Monthly Adjustment Amount (IRMAA) Calculation Update for 
Part D Premium Amounts.
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2. Summary of the Major Provisions
a. Medicare Advantage (MA) Plan Options for End-Stage Renal Disease 
(ESRD) Beneficiaries (Sec. Sec.  422.50, 422.52, and 422.110)
    The Cures Act (Pub. L. 114-255) amended sections 1851, 1852, and 
1853 of the Act to expand enrollment options for individuals with end 
stage renal disease (ESRD) and make associated payment and coverage 
changes to the MA and original Medicare programs. Specifically, since 
the beginning of the MA program, individuals with ESRD have not been 
able to enroll in MA plans subject to limited exceptions. Section 
17006(a) of the Cures Act removed this prohibition effective for plan 
years beginning on or after January 1, 2021. We are codifying this 
change with revisions to Sec. Sec.  422.50(a)(2), 422.52, and 422.110.
b. Medicare Fee-for-Service (FFS) Coverage of Costs for Kidney 
Acquisitions for Medicare Advantage (MA) Beneficiaries (Sec.  422.322)
    With this new enrollment option, the Cures Act also made several 
payment changes in the MA and original Medicare FFS programs. Section 
17006(c) of the Cures Act amended section 1852(a)(1)(B)(i) of the Act 
to exclude coverage for organ acquisitions for kidney transplants from 
the Medicare benefits an MA plan is required to cover for an MA 
enrollee, including as covered under section 1881(d) of the Act. 
Effective January 1, 2021, these costs will be covered under the 
original Medicare FFS program. Section 17006(c)(2) of the Cures Act 
also amended section 1851(i) of the Act, providing that CMS may pay an 
entity other than the MA organization that offers the plan in which the 
individual is enrolled for expenses for organ

[[Page 33797]]

acquisitions for kidney transplants described in section 
1852(a)(1)(B)(i) of the Act. We are finalizing changes to our 
regulation at Sec.  422.322 in accordance with these new statutory 
requirements.
c. Exclusion of Kidney Acquisition Costs From Medicare Advantage (MA) 
Benchmarks (Sec. Sec.  422.258 and 422.306)
    Consistent with how the original Medicare FFS program will cover 
costs of organ acquisitions for kidney transplants for individuals in 
an MA plan, section 17006(b) of the Cures Act also amended section 1853 
of the Act to exclude these costs from the MA benchmarks used in 
determining payment to MA plans. Specifically, the Secretary, effective 
January 1, 2021, is required to exclude the estimate of standardized 
costs for payments for organ acquisitions for kidney transplants from 
MA benchmarks and capitation rates. We are finalizing changes to our 
regulations at Sec. Sec.  422.258(d) and 422.306 in accordance with 
these new statutory requirements.
d. Medicare Advantage (MA) and Part D Prescription Drug Program Quality 
Rating System (Sec. Sec.  422.162, 422.166, 423.182, and 423.186)
    In the 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 (CMS-4182-F) (hereinafter referred to as the 
April 2018 final rule), we codified the methodology for the Star 
Ratings system for the MA and Part D programs, respectively, at 
Sec. Sec.  422.160 through 422.166 and Sec. Sec.  423.180 through 
423.186. We have stated we will propose through rulemaking any changes 
to the methodology for calculating the ratings, the addition of new 
measures, and substantive measure changes.
    At this time, we are finalizing the increased weight of patient 
experience/complaints and access measures from 2 to 4. We are also 
finalizing our proposal to directly remove outliers prior to 
calculating the cut points to further increase the predictability and 
stability of the Star Ratings system, but we are delaying the 
application of outlier deletion until the 2022 measurement year which 
coincides with the 2024 Star Ratings produced in October 2023. We are 
also finalizing removal of the Rheumatoid Arthritis Management measure. 
Finally, we are finalizing the update to the Part D Statin Use in 
Persons with Diabetes measure weighting category. Unless otherwise 
stated, data will be collected and performance measured using these 
rules and regulations for the 2021 measurement period and the 2023 Star 
Ratings. The remaining Star Ratings provisions of the proposed rule 
will be addressed later and, therefore, are not being finalized in this 
rule. Those provisions include codifying additional existing rules for 
calculating MA Quality Bonus Payments ratings, implementing updates to 
the Health Outcomes Survey measures, adding new Part C measures, 
clarifying the rules around consolidations when data are missing due to 
data integrity concerns, modifying the extreme and uncontrollable 
circumstance policy for multiple year-affected contracts and to clarify 
rules when data are missing due to data integrity concerns, and 
additional technical clarifications.
e. Medical Loss Ratio (MLR) (Sec. Sec.  422.2420, 422.2440, and 
423.2440)
    We are finalizing our proposal to amend the MA medical loss ratio 
(MLR) regulation at Sec.  422.2420 so that the incurred claims portion 
of the MLR numerator includes all amounts that an MA organization pays 
(including under capitation contracts) for covered services. Currently, 
incurred claims in the MLR numerator include direct claims paid to 
providers (including under capitation contracts with physicians) for 
covered services furnished to all enrollees under an MA contract. This 
amendment will also include in the incurred claims portion of the MLR 
numerator amounts paid for covered services to individuals or entities 
that do not meet the definition of ``provider'' as defined at Sec.  
422.2.
    We are finalizing our proposal to codify in our regulations at 
Sec. Sec.  422.2440 and 423.2440 the definitions of partial, full, and 
non-credibility and the credibility factors that CMS published in the 
May 2013 Medicare Program; Medical Loss Ratio Requirements for the 
Medicare Advantage and the Medicare Prescription Drug Benefit Programs 
Final Rule (78 FR 31284) (hereinafter referred to as the May 2013 
Medicare MLR final rule). It is more consistent with the policy and 
principles articulated in Executive Order 13892 on Promoting the Rule 
of Law Through Transparency and Fairness in Civil Administrative 
Enforcement and Adjudication (October 9, 2019) that we codify these 
definitions and factors in the applicable regulations.
    Additionally, we are finalizing our proposal to amend Sec.  
422.2440 to provide for the application of a deductible factor to the 
MLR calculation for MA medical savings account (MSA) contracts that 
receive a credibility adjustment. The deductible factor serves as a 
multiplier on the applicable credibility adjustment. This additional 
adjustment for MA MSAs is appropriate because the variability of claims 
experience is greater under health insurance policies with higher 
deductibles than under policies with lower deductibles, with high cost 
or outlier claims representing a larger portion of the overall claims 
experience of plans with high deductibles. This is the case because 
high-deductible health plan enrollees' medical expenses must exceed a 
higher threshold before the plan begins to incur claims costs that can 
be included in the MLR numerator. The deductible factor reduces the 
risk that an MSA contract will fail to meet the MLR requirement as a 
result of random variations in claims experience. We are finalizing our 
proposal to adopt the same deductible factors that apply under the 
commercial MLR regulations at 45 CFR part 158.
f. Medicare Advantage (MA) and Cost Plan Network Adequacy (Sec. Sec.  
417.416 and 422.116)
    We are strengthening network adequacy rules for MA plans by 
codifying our existing network adequacy methodology and finalizing 
policies that address maximum time and distance standards in rural 
areas, telehealth, and Certificate of Need (CON) laws. The 
authorization of additional telehealth benefits pursuant to the BBA of 
2018 incentivizes new ways for MA plans to cover beneficiary access to 
health care beginning in 2020. As a result, CMS has been examining its 
network adequacy standards overall to determine how contracted 
telehealth providers should be considered when evaluating the adequacy 
of an MA plan network. In order to expand access to MA plans where 
network development can be challenging, we are reducing the percentage 
of beneficiaries that must reside within the maximum time and distance 
standards in non-urban counties (Micro, Rural, and Counties with 
Extreme Access Considerations (CEAC) county type designations) from 90 
percent to 85 percent in order for an MA plan to comply with network 
adequacy standards. Also, MA plans will be eligible to receive a 10-
percentage point credit towards the percentage of beneficiaries 
residing within published time and distance standards when they 
contract with telehealth providers in the following provider specialty 
types: Dermatology, Psychiatry, Cardiology, Otolaryngology, Neurology, 
Ophthalmology, Allergy and Immunology, Nephrology, Primary Care,

[[Page 33798]]

Gynecology/OB/GYN, Endocrinology, and Infectious Diseases. 
Additionally, MA organizations may also receive a 10-percentage point 
credit towards the percentage of beneficiaries residing within 
published time and distance standards for affected provider and 
facility types in states that have CON laws, or other state imposed 
anti-competitive restrictions, that limit the number of providers or 
facilities in a county or state. We solicited comments from 
stakeholders on various aspects of our proposal, which informed the 
network adequacy methodology adopted in this final rule.
g. Special Election Periods (SEPs) for Exceptional Conditions 
(Sec. Sec.  422.62, 422.68, 423.38, and 423.40)
    Sections 1851(e)(4) and 1860D-1(b)(3) of the Act establish special 
election periods (SEPs) during which, if certain circumstances exist, 
an individual may request enrollment in, or disenrollment from, MA and 
Part D plans. The Secretary also has the authority to create SEPs for 
individuals who meet other exceptional conditions. We are codifying a 
number of SEPs that we have adopted and implemented through 
subregulatory guidance as exceptional circumstances SEPs. Codifying our 
current policy for these SEPs provides transparency and stability to 
the MA and Part D programs by ensuring that these SEPs are known and 
changed only through additional rulemaking. Among the finalized SEPs 
are the SEP for Government Entity-Declared Disaster or Other Emergency, 
the SEP for Employer/Union Group Health Plan (EGHP) elections, and the 
SEP for Individuals Who Disenroll in Connection with a CMS Sanction. We 
are also establishing two additional SEPs for exceptional 
circumstances: The SEP for Individuals Enrolled in a Plan Placed in 
Receivership and the SEP for Individuals Enrolled in a Plan that has 
been identified by CMS as a Consistent Poor Performer.
3. Summary of Costs and Benefits

------------------------------------------------------------------------
          Provision                Description             Impact
------------------------------------------------------------------------
Medicare Advantage (MA) Plan  CMS is codifying      To estimate the
 Options for End-Stage Renal   requirements under    impact, we used a
 Disease (ESRD)                section 17006 of      pre-statute
 Beneficiaries (Sec.  Sec.     the Cures Act.        baseline. The
 422.50, 422.52, and           Effective for the     analysis shows that
 422.110).                     plan year beginning   removing the
                               January 1, 2021,      prohibition for
                               CMS is removing the   ESRD beneficiaries
                               prohibition on        to enroll in MA
                               beneficiaries with    plans results in
                               ESRD enrolling in     net costs to the
                               an MA plan.           Medicare Trust
                                                     Funds ranging from
                                                     $23 million in 2021
                                                     to $440 million in
                                                     2030.
Medicare Fee-for-Service      CMS is codifying      To estimate the
 (FFS) Coverage of Costs for   requirements under    impact, we used a
 Kidney Acquisitions for       section 17006 of      pre-statute
 Medicare Advantage (MA)       the Cures Act.        baseline. This
 Beneficiaries (Sec.           Effective for the     analysis shows that
 422.322).                     plan year beginning   FFS coverage of
                               January 1, 2021,      kidney acquisition
                               CMS is finalizing     costs for MA
                               that MA               beneficiaries
                               organizations will    results in net
                               no longer be          costs to the
                               responsible for       Medicare Trust
                               costs for organ       Funds ranging from
                               acquisitions for      $212 million in
                               kidney transplants    2021 to $981
                               for their             million in 2030.
                               beneficiaries.
                               Instead, Medicare
                               FFS will cover the
                               kidney acquisition
                               costs for MA
                               beneficiaries,
                               effective 2021.
Exclusion of Kidney           CMS is codifying      To estimate the
 Acquisition Costs from        requirements under    impact, we used a
 Medicare Advantage (MA)       section 17006 of      pre-statute
 Benchmarks (Sec.  Sec.        the Cures Act.        baseline. This
 422.258 and 422.306).         Effective for the     analysis shows that
                               plan year beginning   excluding kidney
                               January 1, 2021,      acquisition costs
                               CMS is removing       from MA benchmarks
                               costs for organ       results in net
                               acquisitions for      savings estimated
                               kidney transplants    to range from $594
                               from the              million in 2021 to
                               calculation of MA     $1,346 million in
                               benchmarks and        2030.
                               annual capitation
                               rates.
Medicare Advantage (MA) and   CMS is finalizing an  Updating the patient
 Part D Prescription Drug      increase in the       experience/
 Program Quality Rating        weight of patient     complaints and
 System (Sec.  Sec.            experience/           access measures
 422.162, 422.166, 423.182,    complaints and        weight creates a
 and 423.186).                 access measures.      cost which is
                               CMS is also           offset after the
                               finalizing the use    first year by using
                               of Tukey outlier      the Tukey outlier
                               deletion, which is    deletion. The net
                               a standard            cost to the
                               statistical           Medicare Trust Fund
                               methodology for       from the increased
                               removing outliers,    weight is $345.1
                               to increase the       million in 2024;
                               stability and         the net savings
                               predictability of     from both the
                               the star measure      increased weight
                               cut points.           and Tukey outlier
                               However, the          deletion will grow
                               application of        over time reaching
                               Tukey outlier         $999.4 million by
                               deletion will be      2030. The net
                               delayed until the     reduction in
                               2024 Star Ratings.    spending to the
                                                     Medicare Trust Fund
                                                     through and
                                                     including 2030 is
                                                     $4.1 billion.

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Medical Loss Ratio (MLR)      CMS is finalizing     (1) Our change to
 (Sec.  Sec.   422.2420,       our three proposed    the type of
 422.2440, and 423.2440).      amendments to the     expenditures that
                               Medicare MLR          can be included in
                               regulations. (1) We   ``incurred claims''
                               will allow MA         will have neutral
                               organizations to      dollar impact on
                               include in the MLR    the Medicare Trust
                               numerator as          Fund. These
                               ``incurred claims''   provisions will
                               all amounts paid      result in a
                               for covered           transfer of funds
                               services, including   from the Treasury,
                               amounts paid to       through the
                               individuals or        Medicare Trust
                               entities that do      Fund, to MA
                               not meet the          organizations. This
                               definition of         transfer will take
                               ``provider'' at       the form of a
                               Sec.   422.2. (2)     reduction in the
                               We also are           remittance amounts
                               codifying our         withheld from MA
                               definitions of        capitated payments.
                               partial, full, and    The amount of this
                               non-credibility and   transfer is $35 to
                               credibility factors   $55 million a year,
                               that CMS published    resulting in plans
                               in the May 2013       obtaining $455
                               Medicare MLR final    million over 10
                               rule (78 FR 31296)    years.
                               for MA and Part D    (2) Codifying the
                               MLRs. (3) We are      definitions of
                               finalizing our        partial, full, and
                               proposal to apply a   non-credibility and
                               deductible factor     the credibility
                               to the MLR            factors is unlikely
                               calculation for MA    to have any impact
                               MSA contracts         on the Medicare
                               receiving a           Trust Fund.
                               credibility          (3) The deductible
                               adjustment. The       factor to the MLR
                               deductible factor,    calculation for MA
                               which functions as    MSA contracts is
                               a multiplier on the   estimated to result
                               credibility           in a gradually
                               adjustment factor,    increasing cost to
                               is calibrated so      the Medicare Trust
                               that the              Fund of $1 to $6
                               probability that a    million per year,
                               contract will fail    arising from the
                               to meet the MLR       Trust Fund paying
                               requirement is the    for benefits due to
                               same for all          expected increased
                               contracts that        enrollment, and
                               receive a             will result in a
                               credibility           $40 million cost
                               adjustment,           through, and
                               regardless of the     including, 2030.
                               deductible level.
Medicare Advantage (MA) and   CMS is--(1)           Changes to network
 Cost Plan Network Adequacy    strengthening         standards are
 (Sec.  Sec.   417.416 and     network adequacy      unlikely to have
 422.116).                     rules for MA and      any impact on the
                               cost plans and to     Medicare Trust
                               make them more        Fund.
                               transparent to
                               plans by codifying
                               our existing
                               network adequacy
                               methodology and
                               standards, with
                               some modifications;
                               (2) allowing MA
                               plans to receive a
                               10-percentage point
                               credit towards the
                               percentage of
                               beneficiaries
                               residing within
                               published time and
                               distance standards
                               when they contract
                               with certain
                               telehealth
                               providers; (3)
                               allowing MA
                               organizations to
                               receive a 10-
                               percentage point
                               credit towards the
                               percentage of
                               beneficiaries
                               residing within
                               published time and
                               distance standards
                               for affected
                               provider and
                               facility types in
                               states that have
                               CON laws, or other
                               state imposed anti-
                               competitive
                               restrictions, that
                               limit the number of
                               providers or
                               facilities in a
                               county or state
                               where CMS has not
                               already customized
                               the standards for
                               that area; and (4)
                               reducing the
                               required percentage
                               of beneficiaries
                               residing within
                               maximum time and
                               distance standards
                               in certain county
                               types (Micro,
                               Rural, and CEAC).
Special Election Periods      CMS is codifying a    This provision
 (SEPs) for Exceptional        number of SEPs        codifies existing
 Conditions (Sec.  Sec.        adopted and           practice since MA
 422.62, 422.68, 423.38, and   implemented through   organizations and
 423.40).                      subregulatory         Part D plan
                               guidance as           sponsors are
                               exceptional           currently assessing
                               circumstances SEPs.   applicants'
                               CMS is also           eligibility for
                               establishing two      election periods as
                               new SEPs for          part of existing
                               exceptional           enrollment
                               circumstances: The    processes.
                               SEP for Individuals   Consequently, the
                               Enrolled in a Plan    provision will not
                               Placed in             have added impact.
                               Receivership and
                               the SEP for
                               Individuals
                               Enrolled in a Plan
                               that has been
                               identified by CMS
                               as a Consistent
                               Poor Performer.
------------------------------------------------------------------------

B. Background

    We received approximately 490 timely pieces of correspondence 
containing multiple comments on the provisions implemented within this 
final rule from the proposed rule titled ``Medicare and Medicaid 
Programs; Contract Year 2021 and 2022 Policy and Technical Changes to 
the Medicare Advantage Program, Medicare Prescription Drug Benefit 
Program, Medicaid Program, Medicare Cost Plan Program, and Programs of 
All-Inclusive Care for the Elderly'' which published February 18, 2020, 
in the Federal Register (85 FR 9002). Comments were submitted by MA 
health plans, Part D sponsors, MA and beneficiary advocacy groups, 
trade associations, providers, pharmacies and drug companies, states, 
telehealth and health technology organizations, policy research 
organizations, actuarial and law firms, MACPAC, MedPAC, and other 
vendor and professional associations.
    The proposals we are finalizing in this final rule range from minor 
clarifications to more significant modifications based the comments 
received. As noted previously, we intend to address the proposals from 
the February 2020 proposed rule that are not included in this final 
rule in subsequent rulemaking. Summaries of the public comments 
received and our responses to those public comments are set forth in 
the various sections of this final rule under the appropriate headings. 
We also note that some of the public comments received for the 
provisions implemented in this final rule were outside of the scope of 
the proposed rule. For example, we received comments about how much MA 
organizations pay network providers, and comments that recommend CMS 
adopt completely new Star Ratings measures or change HEDIS

[[Page 33800]]

measures during the COVID-19 pandemic. CMS did not make any proposals 
in the February 2020 proposed rule on these topics, and as such, those 
out-of-scope public comments are not addressed in this final rule. 
However, we note that in this final rule we are not addressing comments 
received with respect to the other provisions of the February 2020 
proposed rule that we are not finalizing at this time. Rather, we will 
address these comments in subsequent rulemaking, as appropriate.

II. Implementation of Certain Provisions of the Bipartisan Budget Act 
of 2018

A. Special Supplemental Benefits for the Chronically Ill (SSBCI) (Sec.  
422.102)

    The BBA of 2018 (Pub. L. 115-123) was signed into law on February 
9, 2018. The law included new authorities concerning supplemental 
benefits that may be offered to chronically ill enrollees in Medicare 
Advantage (MA) plans, specifically amending section 1852(a)(3) of the 
Act to add a new subparagraph (D) authorizing a new category of 
supplemental benefits that may be offered by MA plans. We discussed 
this new authority in the April 2018 final rule (83 FR 16481 through 
16483).\2\ We proposed to codify the existing guidance (April 2019 
Health Plan Management System (HPMS) Memo \3\ and the 2020 Call Letter 
\4\) and parameters for these special supplemental benefits for 
chronically ill enrollees at Sec.  422.102(f) to implement section 
1852(a)(3)(D) of the Act.
---------------------------------------------------------------------------

    \2\ https://www.govinfo.gov/content/pkg/FR-2018-04-16/pdf/2018-07179.pdf.
    \3\ https://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/Supplemental_Benefits_Chronically_Ill_HPMS_042419.pdf.
    \4\ https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2020.pdf.
---------------------------------------------------------------------------

    Specifically, the BBA of 2018 amended section 1852(a)(3) of the Act 
to: (1) Authorize MA plans to provide additional supplemental benefits 
that have a reasonable expectation of improving or maintaining the 
health or overall function of the chronically ill enrollee to 
chronically ill enrollees; (2) permit those additional supplemental 
benefits to be not primarily health related; (3) define ``chronically 
ill enrollee'' to limit eligibility for these additional supplemental 
benefits; and (4) authorize CMS to waive uniformity requirements in 
connection with providing these benefits to eligible chronically ill 
enrollees. We refer to these benefits hereafter as Special Supplemental 
Benefits for the Chronically Ill (SSBCI). The heading for new 
subparagraph (D) of section 1852(a)(3) of the Act, as added by the BBA, 
states, ``Expanding supplemental benefits to meet the needs of 
chronically ill enrollees.'' Consistent with this text, we interpret 
the intent of this new category of supplemental benefits as enabling MA 
plans to better tailor benefit offerings, address gaps in care, and 
improve health outcomes for the chronically ill enrollee population.
    Section 1852(a)(3)(D)(ii) of the Act, as amended, defines a 
chronically ill enrollee as an individual who--
     Has one or more comorbid and medically complex chronic 
conditions that is life threatening or significantly limits the overall 
health or function of the enrollee;
     Has a high risk of hospitalization or other adverse health 
outcomes; and
     Requires intensive care coordination.
    Thus, with respect to SSBCI benefits, at Sec.  422.102(f)(1)(i), we 
proposed to codify this definition of a chronically ill enrollee. 
Section 1859(f)(9) of the Act requires us to convene a panel of 
clinical advisors to establish and update a list of conditions that 
meet the definition of a severe or disabling chronic condition under 
section 1859(b)(6)(B)(iii) of the Act, which provides how having such a 
condition is an eligibility criterion for enrollment in a chronic care 
special needs plan. The standard for severe or disabling chronic 
condition under section 1859(b)(6)(B)(iii) of the Act is substantially 
similar to the criterion used in defining ``chronically ill enrollee'' 
for purposes of SSBCI eligibility. We proposed that MA plans may 
consider any enrollee with a condition identified on this list to meet 
the statutory criterion of having one or more comorbid and medically 
complex chronic conditions that is life threatening or significantly 
limits the overall health or function of the enrollee. Further, an MA 
plan may consider any chronic condition not identified on this list if 
that condition is life threatening or significantly limits the overall 
health or function of the enrollee. We explained that our proposal was 
based on our policy goal of allowing MA plans the flexibility to 
continue to innovate around providing care for their specific plan 
populations. This includes targeted chronic conditions. We stated that 
we recognize that there may be some conditions or a subset of 
conditions in a plan population that may meet the statutory definition 
of a chronic condition (for purposes of the statutory definition of a 
chronically ill enrollee), but may not be present on the list. To 
encourage plans to identify needs within their unique plan population 
and to avoid preventing a plan from addressing a condition or need in 
their population that may not be on the list, we proposed regulation 
text permitting us to publish a non-exhaustive list of medically 
complex chronic conditions as determined by the panel as described in 
section 1859(b)(6)(B)(iii) to be life threatening or significantly 
limit the overall health or function of an individual. This was 
proposed at Sec.  422.102(f)(1)(i)(B).
    As we explained in the proposed rule, we did not propose that MA 
plans be required to submit to CMS the processes used to identify 
chronically ill enrollees that meet the three pronged definition of 
chronically ill enrollee.
    However, plans should describe the chronic conditions for which 
they will offer SSBCI in the notes field in the plan benefit package 
submitted to CMS. We emphasized that all three criteria must be met for 
an enrollee to be eligible for the SSBCI authorized under section 
1852(a)(3)(D) of the Act. In subregulatory guidance (April 2019 HPMS 
Memo and the 2020 Call Letter), CMS noted that we expect MA plans to 
document their determinations about an enrollee's eligibility for SSBCI 
based on the statutory definition. We proposed to codify this as a 
requirement at Sec.  422.102(f)(3)(ii). In addition, we also proposed 
at Sec.  422.102(f)(3)(ii) to require plans to make information and 
documentation (for example, copies of the internal policies used to 
make the determinations, etc.) related to determining enrollee 
eligibility as a chronically ill enrollee available to CMS upon 
request.
    We proposed a definition of SSBCI at paragraph (f)(1)(ii). In 
addition to limiting the class of enrollees who may be eligible to 
receive the new SSBCI benefits to the chronically ill, section 
1852(a)(3)(D) of the Act requires that the specific supplemental 
benefit provided under this authority have a reasonable expectation of 
improving or maintaining the health or overall function of the 
enrollee. We proposed to codify this statutory requirement as part of 
the definition of SSBCI. Because SSBCI are supplemental benefits, they 
must also comply with the criteria for supplemental benefits that we 
proposed to codify at Sec.  422.100(c)(2)(ii), which was discussed in 
detail in section VI.F. of the proposed rule. We are not addressing 
that proposal in this final rule and intend to address it in a future 
final rule. We considered whether the regulation for SSBCI should 
explicitly reference those requirements for supplemental benefits 
(proposed in Sec.  422.100(c)(2)(ii)) to make this clear

[[Page 33801]]

and solicited comment on this point. Traditionally, CMS has required 
supplemental benefits to be benefits that: (1) Are primarily health 
related; (2) require the MA plan to incur a non-zero medical cost; and 
(3) are not covered under Medicare Parts A, B or D. In light of the 
authority in section 1852(a)(3)(D) of the Act for SSBCI, we modified 
some aspects of this longstanding policy to address SSBCI. First, as 
the statute provides that SSBCI may be not primarily health related, we 
proposed specific text on this point in both Sec. Sec.  
422.100(c)(2)(ii) and 422.102(f)(1)(ii). Second, we proposed regulation 
text at Sec.  422.100(c)(2)(ii)(B) that the requirement that the MA 
organization incur a non-zero direct medical cost for all supplemental 
benefits would mean, in the context of SSBCI that are not primarily 
health related, the MA organization must incur a non-zero direct non-
administrative cost for the SSBCI. In all other respects not 
specifically addressed as part of our proposal, SSBCI would be treated 
like and subject to the same standards as other supplemental benefits. 
Although we are not finalizing the requirements for supplemental 
benefits proposed to be codified at Sec.  422.100(c)(2) in this final 
rule, we are clarifying that our final rule for SSBCI at Sec.  
422.102(f) incorporates these concepts.
    Under section 1852(a)(3)(D)(ii)(I) of the Act, SSBCI benefits may 
include items or services that are not primarily health related. As 
discussed in detail in section VI.F. of the proposed rule, a primarily 
health related benefit is an item or service that is used to diagnose, 
compensate for physical impairments, acts to ameliorate the functional/
psychological impact of injuries or health conditions, or reduces 
avoidable emergency and healthcare utilization. Therefore, at Sec.  
422.102(f)(1)(ii), we proposed to codify, as part of the definition, 
that SSBCI benefits may be non-primarily health related SSBCI benefits. 
Our proposed regulation text included a cross-reference to the 
regulation text we proposed at Sec.  422.100(c)(2)(ii) to codify the 
definition of primarily health related. In the proposed rule, we made 
clear that in all cases, an SSBCI must have, with respect to a 
chronically ill enrollee, a reasonable expectation of improving or 
maintaining the health or overall function of the enrollee. By 
including it in the definition, we proposed to implement the statutory 
authority for MA plans to offer both primarily health and non-primarily 
health related SSBCI. We summarized in the proposed rule how the 2019 
HPMS memo provided examples of what could be non-primarily health 
related SSBCI benefits, depending on the needs and health or overall 
function of the chronically ill enrollee. Those examples included: 
Meals (beyond a limited basis), food and produce, transportation for 
non-medical needs, pest control, indoor air quality and equipment and 
services, access to community or plan-sponsored programs and events to 
address enrollee social needs (such as non-fitness club memberships, 
community or social clubs, park passes, etc.), complementary therapies 
(offered alongside traditional medical treatment), services supporting 
self-direction, structural home modifications, and general supports for 
living (for example, plan-sponsored housing consultations and/or 
subsidies for rent or assisted living communities or subsidies for 
utilities such as gas, electric, and water). We stated in the proposed 
rule that the 2019 HPMS memo this guidance was equally applicable to 
our proposed regulation and part of how we intended our proposed 
regulation to be implemented and enforced.
    We explained in the proposed rule another way that the statutory 
authority for SSBCI to be not primarily health related would be part of 
our proposed regulation. Unlike with traditional supplemental benefits, 
MA plans might not incur direct medical costs in furnishing or covering 
SSBCI. In the CY 2020 Call Letter, we issued guidance that so long as 
an MA plan incurs a non-zero non-administrative cost in connection with 
SSBCI, the benefits would be considered to meet this standard. As 
supplemental benefits, SSBCI may also take the same form as traditional 
supplemental benefits. For example, reductions in cost sharing for 
benefits under the original Medicare fee-for-service program are an 
allowable supplemental benefit, as reflected in the definitions of 
mandatory supplemental benefit in Sec.  422.2. Thus, we stated in the 
proposed rule that SSBCI can be in the form of--
     Reduced cost sharing for Medicare covered benefits (such 
as to improve utilization of high-value services that meet the 
definition of SSBCI);
     Reduced cost sharing for primarily health related 
supplemental benefits;
     Additional primarily health related supplemental benefits; 
or
     Additional non-primarily health related supplemental 
benefits.
    Eligibility for SSBCI must be determined based on identifying the 
enrollee as a chronically ill enrollee, using the statutory definition, 
and if the item or service has a reasonable expectation of improving or 
maintaining the health or overall function of the enrollee. In the 
April 2019 HPMS memo CMS clarified that MA plans can provide non-
primarily health related supplemental benefits that address chronically 
ill enrollees' social determinants of health so long as the benefits 
maintain or improve the health or function of that chronically ill 
enrollee. MA plans may consider social determinants when determining 
eligibility for an SSBCI of health as a factor to help identify 
chronically ill enrollees whose health could be improved or maintained 
with SSBCI. However, MA plans may not use social determinants of health 
as the sole basis for determining eligibility for SSBCI. We proposed to 
codify (at Sec.  422.102(f)(2)(iii)) the ability of an MA plan to 
consider social determinants (for example, food and housing insecurity) 
when determining whether an SSBCI benefit is likely to improve or 
maintain the health of a chronically ill enrollee,
    We also explained how our proposal addressed the statutory 
authority to waive uniformity for an MA plan to offer SSBCI. Generally, 
Sec.  422.100(d) and other regulations require all MA plan benefits to 
be offered uniformly to all enrollees residing in the service area of 
the plan. As explained in the April 2018 final rule (83 FR 16480 
through 16485), MA plans may also provide access to services (or 
specific cost sharing or deductibles for specific benefits) that are 
tied to a disease state in a manner that ensures that similarly 
situated individuals are treated uniformly. Section 
1852(a)(3)(D)(ii)(II) of the Act authorizes CMS to waive the uniformity 
requirements generally applicable to benefits covered by MA plans with 
respect to SSBCI, effective in CY 2020. As discussed in the April 2018 
final rule (83 FR 16481 and 16482), this gives CMS the authority to 
allow MA plans to offer chronically ill enrollees supplemental benefits 
that are not uniform across the entire population of chronically ill 
enrollees in the MA plan and may vary SSBCI offered to the chronically 
ill as a specific SSBCI relates to the individual enrollee's specific 
medical condition and needs. We proposed to codify the authority for 
this waiver at Sec.  422.102(f)(2)(ii) such that upon approval by CMS, 
an MA plan may offer non-uniform SSBCI.
    In both the CY 2020 Call Letter and the April 2019 HPMS memo, we 
explained how we expect MA plans to: (i) Have written policies based on 
objective criteria (for example, health risk assessments, review of 
claims data, etc.) for determining SSBCI eligibility to receive a 
particular SSBCI benefit; (ii) document these criteria; and (iii) make

[[Page 33802]]

this information available to CMS upon request. We also proposed to 
codify requirements at Sec.  422.102(f)(3)(iii) and (iv) for MA plans 
that offer SSBCI to have written policies based on objective criteria, 
document those criteria, to document each determination that an 
enrollee is eligible to receive an SSBCI, and to make this information 
available to CMS upon request. We explained in the proposed rule that 
objective criteria are necessary to address potential beneficiary 
appeals, complaints, and/or general oversight activities performed by 
CMS. We also proposed, at Sec.  422.102(f)(3)(i), to require plans to 
have written policies for determining enrollee eligibility and to 
document its determination that an enrollee is a chronically ill 
enrollee based on the statutory definition codified in paragraph 
(f)(1)(i) of this section. We proposed to require plans to make 
information and documentation related to determining enrollee 
eligibility available to CMS upon request at Sec.  422.102(f)(3)(ii). 
We explained in the proposed rule that the determination on the 
benefits an enrollee is entitled to receive under an MA plan's SSBCI is 
an organization determination that is subject to the requirements of 
part 422, subpart M, including the issuance of denial notices to 
enrollees.
    We also explained how the proposal on SSBCI would codify already 
existing guidance and practices and therefore was not expected to have 
additional impact above current operating expenses. We also stated our 
belief that our proposal would not impose any collection of information 
requirements.
    We thank commenters for helping inform CMS' SSBCI policy. We 
received approximately 62 comments on this proposal; we summarize these 
comments and our responses as follows:
    Comment: A number of commenters supported CMS' proposal to allow MA 
plans to consider any chronic condition not identified on chronic 
condition list if that condition is life threatening or significantly 
limits the overall health or function of the enrollee. A commenter 
encouraged CMS to continue requiring MA plans to consider any enrollee 
with a condition identified on list to meet the statutory criterion of 
having one or more comorbid and medically complex chronic conditions 
that is life threatening or significantly limits the overall health or 
function of the enrollee.
    Response: We thank commenters for their feedback. In the April 24, 
2019 HPMS memo and 2020 Call Letter, CMS indicated that it would 
consider any enrollee with a condition identified as a chronic 
condition in section 20.1.2 of Chapter 16b of the Medicare Managed Care 
Manual to meet the statutory criterion of having one or more comorbid 
and medically complex chronic conditions that is life threatening or 
significantly limits the overall health or function of the enrollee. 
This was done in an effort to maintain a consistent standard in CMS 
policy for what is a chronic condition (for purposes of eligibility for 
SSBCI and for special needs plans for individuals with a severe or 
disabling chronic condition).
    In this rule, we proposed that MA plans may consider any enrollee 
with a condition identified on the list of chronic conditions as 
determined by the panel as described in section 1859(b)(6)(B)(iii) to 
meet the statutory criterion of having one or more comorbid and 
medically complex chronic conditions that is life threatening or 
significantly limits the overall health or function of the enrollee in 
an effort to also maintain this consistency. However, we recognize that 
there may be some conditions and/or a subset of conditions in a plan 
population that may meet the statutory definition of a chronic 
condition, but the chronic condition may not be present on the list of 
medically complex chronic conditions. Therefore, we also proposed that 
a plan may identify an enrollee as meeting this first criterion of the 
definition of chronically ill enrollee--that the enrollee have one or 
more comorbid and medically complex chronic conditions that is life 
threatening or significantly limits the overall health or function of 
the enrollee--using a condition that is not on that list so long as the 
statutory (and proposed regulatory) standards are met. As stated in the 
proposed rule, we want to allow plans the flexibility to identify needs 
within their unique plan population and do not want to inadvertently 
prevent a plan from addressing a condition or need in their population 
that may not be on the list. We wish to allow plans the flexibility to 
continue to innovate around providing care for their specific plan 
populations. Thus, we are finalizing this aspect of our proposal, which 
is reflected in how Sec.  422.102(f)(1)(i)(B) provides that the list 
published by CMS is a non-exhaustive list. We reiterate that, as we 
proposed, we intend this list to be the list of severe or disabling 
chronic conditions developed by the panel of technical advisors 
convened in accordance with section 1859(f)(9)(A)(i) of the Act. In 
addition to having one or more comorbid and medically complex 
conditions that is life threatening or significantly limits overall 
health and function, an enrollee must also have a high risk of 
hospitalization and require intensive care coordination to be 
considered chronically ill. Additionally, the covered item or service 
must have a reasonable expectation of improving or maintaining the 
health or overall function of the chronically ill enrollee.
    Comment: Some commenters requested CMS provide additional guidance 
concerning the definition of the phrase ``intensive care coordination'' 
as it is used in the regulation.
    Response: We expect MA plans to develop objective criteria (for 
example, health risk assessments, review of claims data, etc.) in 
determining SSBCI eligibility. We are not adopting a specific 
definition or standard for the statutory requirement that the 
chronically ill enrollee require intensive care coordination as the 
phrase is sufficiently clear for MA organizations to develop reasonable 
approaches in determining when it is met. We believe that objective 
criteria for determining what constitutes intensive care coordination 
are present in the medical community and readily accessible to the 
plan, such as the expertise of the plan medical director and plan 
physicians. We believe MA plans should have flexibility to determine 
what objective criteria to use when determining what meets the 
intensive care coordination criterion in their plan populations. 
However, we will keep this recommendation under advisement as we gain 
experience with SSBCI offerings.
    Comment: A few commenters requested CMS allow plans to use 
functional status, rather than medical diagnoses, to determine whether 
an enrollee is eligible for SSBCI. A commenter stated that individuals 
with the same diagnosis may have different functional limitations and 
therefore different needs.
    Response: We thank commenters for their feedback. We note that for 
the purposes of SSBCI, the statute requires the enrollee to have a 
chronic condition(s) that is life threatening or limits the overall 
health and function of an enrollee; this is in addition to the 
requirements that the enrollee have a high risk of hospitalization or 
other adverse health outcomes and require intensive care coordination 
to be eligible for SSBCI. Two of the required criteria refer to the 
function of the enrollee, so we believe it is sufficiently clear that 
this is something that can be considered when determining if an 
enrollee is a chronically ill enrollee.

[[Page 33803]]

    Once meeting the criteria to be a chronically ill enrollee, and 
therefore eligible for SSBCI, the statute and our implementing 
regulation permit SSBCI that are designed to address the functional 
status of the enrollee. As discussed in the proposed rule, SSBCI must 
have a reasonable expectation of improving or maintaining the health or 
overall function of the enrollee. Thus, a plan may choose to provide an 
SSBCI that improves or maintains overall function of an enrollee who is 
eligible for SSBCI per the three-pronged definition.
    Comment: Some commenters expressed concern that the new SSBCI 
policies could potentially undermine the role of SNPs in the Medicare 
Advantage program.
    Response: SNPs are specifically designed to provide targeted care 
to special needs individuals. SNPs offer a wider array of specific 
interventions regarding their targeted population. Additionally, SNPs 
are required to develop and implement an evidence based model of care 
that provides structure for care management processes and systems that 
enables the plan to provide coordinated care for special needs 
individuals. We do not believe that the availability of SSBCI as 
permissible supplemental benefits undermines the specialized care model 
that SNPs provide. We believe that the MA program and the diverse needs 
of Medicare population have room for MA plans that are designed, as a 
whole, to address special needs populations and for specific benefits 
designed to improve or maintain the health or overall function of a 
specific chronically ill enrollee.
    Comment: Some commenters expressed concern that the new benefit 
flexibilities, including the different eligibility requirements, could 
confuse enrollees.
    Response: MA plans are required to provide enrollees with 
information on covered benefits, including SSBCI if the MA plan offers 
them, each year through the Annual Notice of Change (ANOC) and Evidence 
of Coverage (EOC) documents. In addition, MA organizations must comply 
with the marketing and communications regulations in part 422, subpart 
V, when issuing any information regarding SSBCI to enrollees; these 
include prohibitions on MA organizations misleading beneficiaries, 
providing information that inaccurate, or engaging in activities that 
confuse beneficiaries. Consistent with MCMG requirements, it is our 
expectation that plans communicate information on SSBCI to enrollees in 
a clear manner about the scope of SSBCI that the MA plan covers and who 
is eligible for those benefits.
    Comment: Several commenters requested that CMS ensure that these 
new benefit flexibilities for the chronically ill do not lead to 
discrimination against high-need beneficiaries.
    Response: We thank commenters for sharing their concerns. We note 
that 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 implement these benefit flexibilities for SSBCI, 
they must be mindful of ensuring compliance with non-discrimination 
responsibilities and obligations.\5\ Additionally, CMS reviews 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. Additionally, we believe it is 
important to note that in order to be eligible for SSBCI an enrollee 
must as stated above (1) have one or more comorbid and medically 
complex chronic conditions that is life threatening or significantly 
limits the overall health or function of the enrollee; (2) have a high 
risk of hospitalization or other adverse health outcomes; and (3) 
require intensive care coordination. It is only enrollees with chronic 
conditions, as described by the three pronged definition above, that 
are eligible for these benefits. Thus, it is these individuals who are 
intended to receive these special benefits.
---------------------------------------------------------------------------

    \5\ 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.
---------------------------------------------------------------------------

    Comment: Commenters also requested CMS provide additional 
subregulatory guidance on SSBCI and supplemental benefits in general, 
including updating Managed Care Manuals. Although characterized as 
being in response to the proposal to change the costs that may be 
included in the definition of ``incurred costs'' for MLR purposes 
(addressed in section V.I. of the proposed rule and section IV.D of 
this final rule), other commenters noted how SSBCI are not always 
delivered by medical providers.
    Response: We believe that our discussion in the proposed rule 
explaining the proposal we are finalizing provides extensive guidance 
for MA organizations on this topic. The April 2019 HPMS Memo and CY 
2020 Call Letter address SSBCI and that guidance is still applicable as 
Sec.  422.102(f), as proposed and as finalized, codifies significant 
portions of that guidance. CMS will consider additional subregulatory 
guidance, including manual updates, as the program develops. 
Additionally, as discussed in the 2020 Call Letter, we note that MA 
plans may contract with community-based organizations such as those 
providing other home and community-based services (HCBS) to provide 
supplemental benefits, including SSBCI, that are compliant with the 
statutory and regulatory requirements. For example, an MA plan could 
elect to offer, as a SSBCI, the provision of meals or food/produce and 
pay a community-based organization for furnishing the covered benefit. 
Community-based organizations can also help determine whether an 
individual meets the eligibility requirements for SSBCI. These 
organizations may already be providing services in the community and, 
in some cases, have contractual arrangements with Medicaid managed care 
or MA plans. We note that some community services programs are funded 
by the HHS Administration for Community Living (ACL) and utilizing ACL 
programs would also be permissible in delivering these supplemental 
benefits. This is consistent with the amendment to Sec.  422.2420, 
discussed in section III.D.1 of this final rule, to include amounts 
paid for SSBCI to providers that are not necessarily healthcare 
professionals as incurred claims in the calculation of the MLR.
    Comment: Some commenters requested CMS provide greater detail on 
allowable SSBCI including meals, transportation, and durable medical 
equipment (DME).
    Response: A non-exhaustive list of examples of non-primarily health 
related, which includes meals (beyond a limited basis) and non-medical 
transportation SSBCI can be found in the April 2019 HPMS Memo and this 
preamble. However, we note the requirements around the SSBCI, which 
include the statutory authority for the Secretary to waive uniformity 
requirements and the statutory requirement that SSBCI have a reasonable 
expectation of improving or

[[Page 33804]]

maintaining the health or overall function of the chronically ill 
enrollee, allow significant of flexibility for MA plans to consider the 
needs of enrollees who meet the high standards in the definition of 
chronically ill enrollee and to design benefits to assist enrollees at 
an individualized level. We encourage MA plans to continue to consider 
the unique needs of their plan populations when proposing items or 
services that meet SSBCI conditions in their bid and submitted plan 
benefit package. As explained in the referenced April 2019 HPMS memo, 
MA plans have broad discretion in developing items and services they 
may offer as SSBCI provided that the item or service has a reasonable 
expectation of improving or maintaining the health or overall function 
of the chronically ill enrollee. Under our current guidance and this 
final rule, MA plans also have broad discretion in determining what may 
be considered `a reasonable expectation' when choosing to offer 
specific items and services as SSBCI so long as the statutory standard 
is met.
    Concerning DME, MA plans are required to ``provide coverage of, by 
furnishing, arranging for, or making payment for, all services that are 
covered by Medicare Part A and Part B'' (see 42 CFR 422.101(a)), which 
includes coverage of durable medical equipment, prosthetics and 
supplies. As discussed in the referenced HPMS memo, non-Medicare-
covered safety devices to prevent injuries in the home or bathroom are 
considered primarily health related and may be offered as a 
supplemental benefit to all enrollees for whom the item is medically 
necessary. We remind MA organizations of our long-standing guidance in 
Chapter 4 of the Medicare Managed Care Manual about medical necessity 
in the context of supplemental benefits and how MA plans may develop 
their own medical necessity policies and procedures, so long as access 
to and coverage of Part A and Part B benefits is not more restrictive 
than Original Medicare. Other equipment that is not primarily health 
related may be considered as an SSBCI if it has a reasonable 
expectation of improving or maintaining the health or overall function 
of the chronically ill enrollee.
    Comment: A few commenters suggested CMS allow plans to target some 
services to address social risk factors. A commenter suggested CMS test 
ways to provide more flexibility in targeting supplemental benefits to 
address social risk factors like homelessness.
    Response: The statute does not authorize MA plans to offer and 
cover supplemental benefits, even SSBCI, based solely on social risk 
factors; the statute explicitly provides that eligibility for SSBCI is 
based on whether an enrollee meets the definition to be a chronically 
ill enrollee, which does not include a reference to social risk 
factors. As discussed in this preamble, MA plans can provide non-
primarily health related supplemental benefits that address chronically 
ill enrollees' social determinants of health so long as the benefits 
have a reasonable expectation of maintaining or improving the health or 
function of that chronically ill enrollee. MA plans may consider social 
determinants of health as a factor to help identify chronically ill 
enrollees whose health could be improved or maintained with SSBCI. 
However, they may not use social risk factors as the sole basis for 
determining eligibility for SSBCI. Please note that the current CMS 
Innovation Center Medicare Advantage Value-Based Insurance Design 
(VBID) model allows participants to vary supplemental benefits based on 
chronic condition or socioeconomic status or a combination of the two. 
MA organizations have the option of participating in this model if they 
choose.
    Comment: Some commenters suggested that information and 
documentation concerning SSBCI eligibility determinations should be 
reported more broadly, rather than only made available upon request. A 
commenter stated that this information would be necessary to better 
understand the efficacy of offered benefits.
    Response: We thank commenters for their suggestions. At this time, 
we do not wish to place additional reporting burden on plans. However, 
we will take this comment under advisement as we continue to develop 
and refine SSBCI policy. Concerning the written policy requirements at 
Sec.  422.102(f)(3)(i) and (iii), we clarify that these requirements 
concern the existence of such policies and that we do not intend to 
regularly review the content for compliance with the substantive 
standards of the regulation. We are implementing the statutory 
authority for SSBCI in a way to provide discretion and flexibility for 
MA plans, consistent with our approach to supplemental benefits design, 
within the statutory and regulatory limits. Per Sec.  422.102(f)(3)(i), 
plans are required to have written policies for determining enrollee 
eligibility. As we explained in the CY 2020 Call Letter, maintaining 
detailed internal documentation is, at a minimum, necessary to address 
potential beneficiary appeals and complaints. However, MA organizations 
will have discretion in developing these policies. Additionally, per 
Sec.  422.102(f)(3)(iii), plans are required have written policies 
based on objective criteria for determining a chronically ill 
enrollee's eligibility to receive a particular SSBCI and must document 
the criteria. We do not intend to closely monitor or regularly request 
these documentation and reiterate that MA plans will have discretion in 
designing which items and services to offer as SSBCI and for which 
chronically ill enrollees to cover them, so long as the statutory and 
regulatory standards are met.
    Comment: Some commenters expressed concern that SSBCI are not 
available to individuals enrolled in Original Medicare. Other 
commenters suggested CMS test a model that includes original Medicare 
enrollees.
    Response: The Balanced Budget Act of 1997 (BBA) authorized CMS to 
contract with public or private organizations to offer a variety of 
health plan options for beneficiaries. Under section 1852(a)(3)(D), MA 
plans are authorized to offer supplemental benefits, including SSBCI. 
The MA program has historically authorized MA plans to offer some form 
of additional or supplemental benefits to MA enrollees. Medicare 
beneficiaries choose to elect either original Medicare or an MA health 
plan that may have supplemental benefits. Concerning additional models, 
CMS appreciates this suggestion and will take it under consideration as 
we consider new Innovation Center models.
    Comment: Several commenters suggested CMS study how many 
beneficiaries actually receive these benefits and not just how many are 
eligible for them in order to understand the actual impact of these new 
benefits.
    Response: We appreciate this comment and will take this comment 
under consideration as we monitor how MA plans offer these benefits and 
continue to develop these policies.
    We thank commenters for their feedback.
    As discussed in this preamble, because SSBCI are supplemental 
benefits, they must also comply with our longstanding interpretation of 
the criteria for supplemental benefits; we also proposed to codify 
those criteria at Sec.  422.100(c)(2)(ii), which was discussed in 
detail in section VI.F. of the proposed rule. We considered whether the 
regulation for SSBCI should explicitly reference the requirements in 
Sec.  422.100(c)(2)(ii) to make this clear and solicited comment on 
this point. We received no comments on this specific subject.
    After consideration of the comments received and for the reasons 
outlined in

[[Page 33805]]

the proposed rule and our responses to comments, we are finalizing 
Sec.  422.102(f) largely as proposed. We are finalizing slight 
revisions to the regulation text, to eliminate a reference to Sec.  
422.100(c)(2)(i) in paragraph (f)(1)(ii) which was tied to the proposal 
regarding Sec.  422.100(c)(2) that is not being addressed in this final 
rule. We are also correcting a typographical error in paragraph 
(f)(2)(iii).

B. Contracting Standards for Dual Eligible Special Needs Plan (D-SNP) 
Look-Alikes (Sec.  422.514)

    Special needs plans (SNPs) are MA plans created by the MMA that are 
specifically designed to provide targeted care and limit enrollment to 
individuals with special needs. Under section 1859 of the Act, SNPs are 
able to restrict enrollment to: (1) Institutionalized individuals, who 
are currently defined in Sec.  422.2 as those residing or expecting to 
reside for 90 days or longer in a long term care facility; (2) 
individuals entitled to medical assistance under a State Plan under 
Title XIX; or (3) other individuals with certain severe or disabling 
chronic conditions who would benefit from enrollment in a SNP. As of 
July 2019, there are 321 SNP contracts with 734 SNP plans that have at 
least 11 members, including all of the following:
     480 dual eligible SNPs (D-SNPs).
     125 institutional SNPs (I-SNPs).
     129 chronic or disabling condition SNPs (C-SNPs).\6\
---------------------------------------------------------------------------

    \6\ Centers for Medicare & Medicaid Services. SNP Comprehensive 
Report. (July 2019) Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Special-Needs-Plan-SNP-Data.html.
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    Beneficiaries who are dually eligible for both Medicare and 
Medicaid can 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--(1) missed opportunities to provide appropriate, high-
quality care and improve health outcomes; and (2) undesirable outcomes, 
such as avoidable hospitalizations and poor beneficiary experiences. 
Advancing policies and programs that integrate care for dually eligible 
individuals is one way in which we seek to address such fragmentation. 
Under plans that offer integrated care, dually eligible individuals 
receive the full array of Medicaid and Medicare benefits through a 
single delivery system, thereby improving care coordination, quality of 
care, and beneficiary satisfaction, and reducing administrative burden. 
Some studies have shown that highly integrated managed care programs 
perform well on quality of care indicators and enrollee 
satisfaction.\7\
---------------------------------------------------------------------------

    \7\ See Kim, H., Charlesworth, C.J., McConnell, K.J., Valentine, 
J.B., and Grabowski, D.C. ``Comparing Care for Dual-Eligibles Across 
Coverage Models: Empirical Evidence From Oregon'', Medical Care 
Research and Review, (November 15, 2017) 1-17. Retrieved from http://journals.sagepub.com/doi/abs/10.1177/1077558717740206;
    Anderson, W.L., Feng, Z., & Long, S.K. 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 31, 2016). Retrieved from https://aspe.hhs.gov/report/minnesota-managed-care-longitudinal-data-analysis;
    Health Management Associates. Value Assessment of the Senior 
Care Options (SCO) Program (July 21, 2015). Retrieved from http://www.mahp.com/wp-content/uploads/2017/04/SCO-White-Paper-HMA-2015_07_20-Final.pdf; and
    Medicare Payment Advisory Committee. ``Chapter 2, Care 
coordination programs for dual-eligible beneficiaries.'' In June 
2012 Report to Congress: Medicare and Health Care Delivery System 
(June 16, 2012). Retrieved from http://www.medpac.gov/docs/default-source/reports/jun12_entirereport.pdf?sfvrsn=0.
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    D-SNPs are intended to integrate or coordinate care for this 
population more effectively than standard MA plans or the original 
Medicare fee-for-service program by focusing enrollment and care 
management on dually eligible individuals. As of July 2019, 
approximately 2.6 million dually eligible individuals (1 of every 5 
dually eligible individuals) were enrolled in 480 D-SNPs.
    As summarized in our proposed rule, federal statute and 
implementing regulations have established several requirements for D-
SNPs in addition to those that apply to all MA plans to promote 
coordination of care, including health risk assessment (HRA) 
requirements as described in section 1859(f)(5)(A)(ii)(I) of the Act 
and at Sec.  422.101(f)(1)(i), evidence-based models of care (MOCs) as 
described in section 1859(f)(5)(A)(i) of the Act and at Sec.  
422.101(f), and state Medicaid agency contracts as described in section 
1859(f)(3)(D) of the Act and at Sec.  422.107. The state Medicaid 
agency contracting requirement allows states to require greater 
integration of Medicare and Medicaid benefits from the D-SNPs in their 
markets.
    More recently, section 50311(b) of the BBA of 2018 amended section 
1859 of the Act to add new requirements for D-SNPs, beginning in 2021, 
including minimum integration standards, coordination of the delivery 
of Medicare and Medicaid benefits, and unified appeals and grievance 
procedures for integrated D-SNPs, the last of which we implemented 
through regulation to apply to D-SNPs with exclusively aligned 
enrollment, termed ``applicable integrated plans.'' These requirements, 
along with clarifications to existing regulations, were codified in the 
April 2019 final rule (84 FR 15680 through 15844).
    We discussed in the proposed rule and reiterate here the pattern of 
federal legislation, CMS rulemaking, and state use of D-SNP contracting 
requirements has incrementally created new requirements for D-SNPs that 
have generally promoted additional beneficiary protections, 
coordination of care, and integration of Medicare and Medicaid coverage 
for dually eligible individuals. While many of these requirements 
impose additional burdens for D-SNPs, they have not impeded enrollment 
growth in these plans. Total D-SNP enrollment has more than doubled 
from one million in 2010 to 2.6 million in 2019.\8\ Participation of MA 
organizations is robust, and most markets are stable and competitive.
---------------------------------------------------------------------------

    \8\ Centers for Medicare & Medicaid Services. SNP Comprehensive 
Report (July 2010 & July 2019). Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Special-Needs-Plan-SNP-Data.html.
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    In this final rule, we address the emergence of ``D-SNP look-
alike'' plans that are a hindrance to meaningful implementation of 
statutory requirements for D-SNPs, particularly those connected with 
the BBA of 2018. As the Medicare Payment Advisory Commission (MedPAC) 
described in its June 2018 and 2019 reports to Congress and as 
summarized in the proposed rule, D-SNP look-alikes have levels of dual 
eligible enrollment that are virtually indistinguishable from those of 
D-SNPs and far above those of the typical MA plan.
    As discussed in the proposed rule, we believe the low enrollment of 
non-dually eligible individuals in D-SNP look-alikes results from 
benefits and cost-sharing that, like the benefits and cost-sharing 
offered by D-SNPs, are designed to attract only dually eligible 
individuals. In contrast to non-SNP MA plans, both D-SNPs and D-SNP 
look-alikes allocate a lower percentage of MA rebate dollars received 
under the bidding process at Sec.  422.266 to reducing Medicare cost-
sharing and a higher percentage of rebate dollars to supplemental 
medical benefits such as dental, hearing, and vision services. With 
such a benefit design, many D-SNP look-alikes technically require 
members to pay higher cost sharing for Parts A and B services than most 
MA plans require, which we believe dissuades most non-dually eligible

[[Page 33806]]

Medicare beneficiaries from enrolling. However, because most dually 
eligible individuals are Qualified Medicare Beneficiaries (QMBs) who 
are not required to pay Medicare cost sharing under sections 1848(g)(3) 
and 1866(a)(1)(A) of the Act, we believe they are not dissuaded from 
enrolling in these non-D-SNPs by the relatively higher cost sharing. A 
similar dynamic exists for Part D premiums and high deductibles, both 
of which are covered by the Part D low-income subsidy that dually 
eligible individuals receive. We believe that such benefit designs are 
unattractive for Medicare beneficiaries who are not dually eligible 
individuals because they would need to cover these costs out-of-pocket. 
Despite the similarities with D-SNPs in terms of levels of dual 
eligible enrollment and benefits and cost-sharing design, D-SNP look-
alikes are regulated as non-SNP MA plans and are not subject to the 
federal regulatory and state contracting requirements applicable to D-
SNPs.
    As summarized in the proposed rule, the proliferation and growth of 
D-SNP look-alikes raises concerns related to effective implementation 
of the BBA of 2018 requirements; meaningful integration of Medicare-and 
Medicaid programs via state Medicaid agency contracting; care 
coordination through HRAs; evidence-based MOCs; and beneficiary 
confusion stemming from misleading marketing practices by brokers and 
agents that misrepresent to dually eligible individuals the 
characteristics of D-SNP look-alikes. We direct readers to the proposed 
rule, 85 FR 9018 through 9021, for a more detailed discussion of D-SNP 
look-alikes and their impact on implementation of D-SNP Medicare and 
Medicaid integration.
    Under our authority to adopt standards implementing the Part C 
statute and to add contract terms in sections 1856(b) and 1857(e)(1) of 
the Act, we proposed establishing contracting standards at Sec.  
422.514 for MA organizations based on their projected dually eligible 
enrollment in plan bids or on the proportion of dually eligible 
enrollees actually enrolled in the MA plan. As discussed in the 
proposed rule, a high rate of enrollment by dually eligible individuals 
in a non-D-SNP would allow us to identify non-SNP MA plans that are 
intended to predominantly enroll dually eligible individuals (that is, 
D-SNP look-alikes). To prevent the undermining of the statutory and 
regulatory framework for D-SNPs, we proposed a new regulation 
precluding CMS from entering into or renewing a contract for an MA plan 
that an MA organization offers, or proposes to offer, with enrollment 
of dually eligible individuals that exceeds specific enrollment 
thresholds (85 FR 9021-9025). We also proposed that the regulation 
apply in any state where there is a D-SNP or any other plan authorized 
by CMS to exclusively enroll dually eligible individuals.
    As described in our proposal, we would not enter into or renew MA 
contracts for an MA plan for an upcoming plan year if that MA plan 
exceeds specific enrollment thresholds for dually eligible individuals. 
However, MA organizations with plans exceeding the enrollment threshold 
that also have approved D-SNPs for the following plan year would be 
permitted to transition dually eligible enrollees from D-SNP look-
alikes to D-SNPs for which the individuals are eligible. We proposed 
this transition process to minimize disruptions to beneficiary coverage 
and allow enrollees in these D-SNP look-alikes to benefit from the 
statutory and regulatory care coordination and Medicaid integration 
requirements. We describe the specific proposed changes to Sec.  
422.514 as follows.
    We proposed changing the title of Sec.  422.514 by removing the 
word ``minimum'' because the changes we proposed to Sec.  422.514 
reflect an additional type of enrollment requirement beyond the minimum 
enrollment requirements currently articulated in Sec.  422.514. We also 
proposed changing the title of paragraph (a) from ``Basic rule'' to 
``Minimum enrollment rules'' for clarity due to the proposed change to 
the scope of Sec.  422.514.
    We proposed adding a new paragraph (d) to establish new contract 
requirements related to dual eligible enrollment. The proposed 
requirement at paragraph (d) would apply for an MA plan that is not a 
special needs plan for special needs individuals as defined in Sec.  
422.2. We explained our rationale in depth for this approach in the 
proposed rule.
    We proposed to limit the requirement at paragraph (d) to states 
where there is a D-SNP or any other plan authorized by CMS to 
exclusively enroll dually eligible individuals, such as Medicare-
Medicaid Plans (MMPs). We proposed this limitation because it is only 
in such states that the implementation of D-SNP requirements 
necessitates our proposed new contracting requirements. That is, in a 
state with no D-SNPs or comparable managed care plans like MMPs, the D-
SNP requirements have not had any relevance historically, as there are 
no plans contracted with the state to implement the D-SNP requirements 
or otherwise integrate Medicare and Medicaid services. Therefore, the 
operation of a D-SNP look-alike would not have any material impact on 
the full implementation of federal D-SNP requirements. In such states, 
the existence of D-SNP look-alikes is not impeding state or federal 
implementation of any requirements for enhanced care coordination and 
Medicaid integration by providing a vehicle for MA organizations to 
avoid compliance with those requirements that are imposed on D-SNPs or 
comparable managed care plans like MMPs. We also noted the limited 
number of states--eight, as of July 2019--with no D-SNPs. Therefore, we 
expressed our belief that it is not critical for our proposed 
requirements in paragraph (d) to apply in such states. We solicited 
comment on whether the absence of these data sharing and care 
coordination requirements for D-SNP look-alikes in states where they 
could continue to operate under our final rule disadvantages the dually 
eligible individuals in D-SNP look-alikes and whether we should extend 
the proposed requirement at paragraph (d) to all states.
    We proposed new paragraphs (d)(1) and (2) that would require that 
CMS not enter into or renew a contract, for plan year 2022 or 
subsequent years, for an MA plan that is a non-SNP plan that either:
     Projects in its bid submitted under Sec.  422.254 that 80 
percent or more of the plan's total enrollment are enrollees entitled 
to medical assistance under a state plan under Title XIX, or
     Has actual enrollment, as determined by CMS using the 
January enrollment of the current year, consisting of 80 percent or 
more of enrollees who are entitled to medical assistance under a state 
plan under Title XIX, unless the MA plan has been active for less than 
one year and has enrollment of 200 or fewer individuals at the time of 
such determination.
    We explained that using each enrollment scenario is necessary to 
ensure that both new D-SNP look-alikes are not offered and that 
current, or existing, D-SNP look-alikes are not continued. We proposed 
a threshold for dually eligible enrollment at 80 percent of a non-SNP 
MA plan's enrollment because it far exceeds the share of dually 
eligible individuals in any given market and, therefore, would not be 
the result for any plan that had not intended to achieve high dually 
eligible enrollment. As detailed in the proposed rule, MedPAC data show 
that our proposed threshold would have minimal impact on total dually 
eligible enrollment in non-SNP MA plans.

[[Page 33807]]

    As discussed in the proposed rule, we considered an alternative 
discussed by MedPAC in its June 2019 report to Congress for identifying 
traditional MA plans with predominantly dually eligible enrollment: 
Setting the bar at the higher of 50 percent dually eligible enrollment 
or the proportion of dually eligible MA-eligible individuals in the 
plan service area plus 15 percentage points. We also considered setting 
a lower threshold for dually eligible enrollment at a point between 50 
percent and our 80 percent threshold. However, as explained in the 
proposed rule, we proposed an enrollment threshold of 80 percent or 
higher as an indicator that the plan is designed to attract 
disproportionate dually eligible enrollment because it aligns with 
MedPAC's 2019 research findings, provides a threshold that would be 
easier for MA organizations to determine prospectively, and would be 
operationally easier for CMS to implement. We solicited comment on 
these alternative enrollment thresholds.
    Under our proposal for paragraph (d)(2), we proposed making the 
annual determination whether an MA organization has a non-SNP MA plan 
with actual enrollment exceeding the established threshold using the 
plan's enrollment in January of the current year in order to make such 
evaluations and issue the necessary information to affected MA 
organizations sufficiently early in the year for MA organizations to 
have time to take the necessary steps to adjust other plan offerings 
before the point at which CMS would decline to renew the contract for 
an MA plan--which effectively (and as described later in this section) 
would result in the non-renewal (that is, termination) of the D-SNP 
look-alike plan benefit package. Proposed paragraph (d)(2) would also 
limit the prohibition to MA plans that have been active for one or more 
years and with enrollment greater than 200 individuals at the time of 
CMS' determination under proposed paragraph (d)(2).
    In paragraph (e), we proposed processes and procedures for 
transitioning individuals who are enrolled in a D-SNP look-alike to 
another MA-PD plan (or plans) offered by the MA organization to 
minimize disruption as a result of the prohibition on contract renewal 
for existing D-SNP look-alikes. Under our proposal, an MA organization 
with a non-SNP MA plan determined to meet the enrollment threshold in 
proposed paragraph (d)(2) could transition enrollees into another MA-PD 
plan (or plans) offered by the same MA organization, as long as any 
such MA-PD plan meets certain proposed criteria. This proposed 
transition process would allow MA enrollees to be transitioned from one 
MA plan offered by an MA organization to another MA-PD plan (or plans) 
without having to fill out an election form or otherwise indicate their 
enrollment choice as typically required, but it would also permit the 
enrollee to make an affirmative choice for another MA plan of his or 
her choosing.
    In proposed paragraph (e)(1), we specified that, for coverage 
effective January 1 of the next year, the MA organization could only 
transition individuals from the D-SNP look-alike that is not being 
renewed into one or more MA plans (including a D-SNP) if such 
individuals are eligible to enroll in the receiving plan(s) in 
accordance with Sec. Sec.  422.50 through 422.53. Thus, the individual 
would have to reside in the service area of the new plan and otherwise 
meet eligibility requirements for it. The proposed transition process 
would allow, but not require, the MA organization to transition dually 
eligible enrollees from a D-SNP look-alike into one or more D-SNPs 
offered under the MA organization, or another MA organization that 
shares the same parent organization as the MA organization, and 
therefore allow enrollees to benefit not only from continued coverage 
under the same parent organization but also from the care coordination 
and Medicaid benefit integration offered by a D-SNP.
    We also proposed at paragraphs (e)(1)(i) through (iii) specific 
criteria for any MA plan to receive enrollment through this transition 
process to ensure that enrollees receive coverage under their new MA 
plan that is similarly affordable as the plan that would not be 
permitted for the next year:
     Under proposed paragraph (e)(1)(i), we would allow a non-
renewing D-SNP look-alike to transition enrollment to another non-SNP 
plan (or plans) only if the resulting total enrollment in each of the 
MA plans receiving enrollment consists of less than 80 percent dually 
eligible individuals. SNPs receiving transitioned enrollment would not 
be subject to this proposed limit on dual eligible enrollment. As 
described in the proposed rule, the percent of dually eligible 
individuals in the resulting total enrollment would have to be 
determined prospectively in order for us to make a timely decision on 
whether to allow for an MA organization to transition enrollment into a 
non-SNP MA plan or plans. Under proposed paragraph (e)(3), we would 
make such determination by adding the cohort of enrollees that the MA 
organization proposes to enroll into a different non-SNP plan to the 
April enrollment of the receiving plan and calculating the resulting 
percent of dually eligible enrollment. As discussed in the proposed 
rule, we would make this calculation for each non-SNP plan into which 
the MA organization proposes to transition enrollment in order to 
ensure that the enrollment transitions do not result in another non-SNP 
MA plan being treated as a D-SNP look-alike.
     Under proposed paragraph (e)(1)(ii), we would require that 
any plan receiving transitioned enrollment be an MA-PD plan as defined 
in Sec.  422.2.
     Under proposed paragraph (e)(1)(iii), any MA plan 
receiving transitioned enrollment from a D-SNP look-alike would be 
required to have a combined Part C and D beneficiary premium of $0 
after application of the premium subsidy for full subsidy eligible 
individuals described at Sec.  423.780(a).
    As proposed in paragraph (e)(2)(ii), the MA organization would be 
required to describe changes to MA-PD benefits and provide information 
about the MA-PD plan into which the individual is enrolled in the 
Annual Notice of Change (ANOC) that the MA organization must send, 
consistent with Sec.  422.111(a), (d), and (e) and proposed Sec.  
422.2267(e)(3). Consistent with Sec.  422.111(d)(2), enrollees would 
receive this ANOC describing the change in plan enrollment and any 
differences in plan enrollment at least 15 days prior to the first day 
of the annual election period (AEP).
    As proposed in paragraph (e)(4), in cases where an MA organization 
does not transition some or all current enrollees from a D-SNP look-
alike plan to one or more of the MA organization's other plans as 
provided in proposed paragraph (e)(1), it would be required to send 
affected enrollees a written notice consistent with the non-renewal 
notice requirements at Sec.  422.506(a)(2).
    As discussed in more detail in the proposed rule preamble, this 
proposed transition process is conceptually similar to ``crosswalk 
exception'' procedures historically allowed by CMS and proposed at 
Sec.  422.530 in the notice of proposed rulemaking. However, in 
contrast to the proposed crosswalk exceptions, our proposal would allow 
the transition process to apply across legal entities offered by MA 
organizations under the same parent organization, as well as between 
non-SNP plans and SNPs. Because this transition process is not the same 
as the crosswalk process, we proposed to codify it as part of Sec.  
422.514.
    In the proposed rule, we explained how we also considered an 
alternative

[[Page 33808]]

that would require transitioning any dually eligible individuals into a 
D-SNP for which they were eligible if such a plan is offered by the MA 
organization. In addition, we solicited comment on whether additional 
criteria for the receiving plan are necessary to protect beneficiaries 
who are affected by this proposed prohibition on renewing MA plans that 
meet the criteria in proposed Sec.  422.514(d).
    We described in the proposed rule our intent for the transition 
process to take effect in time for D-SNP look-alikes operating in 2020 
to utilize the transition process for enrollments to be effective 
January 1, 2021. This will allow current MA-PD plans that expect to 
meet the enrollment threshold in proposed paragraph (d)(2) to retain 
some or all of their current enrollment by transitioning these 
individuals to other MA-PD plans offered by the same MA organization a 
year before CMS implements any contracting limitations under this 
proposal.
    Overall, our proposed rule focused on dually eligible individuals 
as a percentage of an MA plan's total enrollment. We considered using 
alternative criteria instead of, or in addition to, the percentage of 
projected or actual dually eligible enrollment, to identify non-SNP MA 
plans designed to exclusively or predominantly enroll dually eligible 
individuals. In particular, we considered identifying D-SNP look-alikes 
by the benefit design these plans typically offer--relatively high 
Parts A and B cost sharing and a high Part D deductible that make the 
plans unattractive to Medicare-only beneficiaries, supplemental 
benefits like dental and hearing services and over-the-counter drugs 
that mimic typical D-SNP offerings, and a premium for Part D coverage 
that is fully covered by the Part D low-income subsidy. We also 
considered using the percentage of MA rebate dollars allocated to buy 
down Parts A and B cost sharing compared to other supplemental 
benefits--D-SNP look-alikes typically allocate a greater percentage to 
the latter--as a way to identify D-SNP look-alikes. We explained in the 
proposed rule why we did not propose those alternatives but solicited 
comment on whether these alternative criteria should be used instead 
of, or in addition to, the criteria for identifying D-SNP look-alikes 
and applying contracting prohibition.
    We received the following comments on these proposed contract 
requirements and respond to them below:
    Comment: Many commenters expressed strong support for our proposal 
to preclude CMS from entering into or renewing a contract for an MA 
plan that an MA organization offers, or proposes to offer, with 
enrollment of dually eligible individuals that exceeds a specific 
threshold. Several commenters agreed with CMS that D-SNP look-alikes 
are an impediment to Medicare-Medicaid integration and meaningful 
implementation of federal and state requirements, including the new 
statutory requirements for D-SNPs under the BBA of 2018. A commenter 
appreciated that the proposal would, in most states, ensure that any 
entity whose enrollment consists mainly of dually eligible individuals 
follows the standards Congress established for MA plans serving dually 
eligible individuals. Several commenters agreed with MedPAC's 2018 and 
2019 analyses, cited by CMS in the proposed rule preamble, that the 
proliferation of D-SNP look-alikes negatively impacts integrated care 
programs for dually eligible individuals. Some commenters believed the 
proposal would ultimately improve access to integrated care for dually 
eligible individuals. Several commenters also believed that D-SNPs were 
in the best position to serve the dually eligible population because of 
the D-SNP MOC, including care coordination and case management, which 
is not required of D-SNP look-alikes.
    Several commenters also supported the proposed regulation because 
of their concern about how D-SNP look-alikes operate. A number of 
commenters expressed concern about D-SNP look-alikes marketing to 
dually eligible individuals in ways that misrepresent the plans' 
ability to integrate Medicare and Medicaid services. Several commenters 
noted that while D-SNP look-alikes advertise that they integrate care, 
they are not designed to serve the needs of dually eligible individuals 
nor required to do so. For these reasons, many commenters believed 
look-alikes confuse dually eligible individuals about their coverage 
options and lead to beneficiary harm.
    Response: We appreciate the widespread support we received for our 
proposal. Many of the commenters' concerns about D-SNP look-alikes 
mirror the comments discussed in the 2020 Final Call Letter \9\ and 
summarized in the proposed rule preamble. We believe that the 
contracting requirement we are finalizing in this rule will address 
these concerns and ensure the meaningful implementation of the new 
Medicare-Medicaid integration requirements under the BBA of 2018, along 
with other state and federal requirements. As discussed in the proposed 
rule and our responses to other comments, the prohibition will not 
apply to D-SNP look-alikes in states where there is a D-SNP or plan 
authorized by CMS to exclusively enroll dually eligible individuals.
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    \9\ Available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
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    Comment: A few commenters expressed support for CMS' efforts to 
integrate care but had concerns about the proposed contracting 
standard. Some commenters noted that the proposed rule may disrupt 
services and benefits for beneficiaries enrolled in D-SNP look-alikes. 
These commenters cautioned CMS to attend to continuity of care, the 
nuances of state requirements, and market dynamics as this final rule 
is implemented.
    Response: We thank these commenters for their comments. We believe 
that the requirements we are finalizing in this rule, described in more 
detail later in this section, strike a balance between allowing for 
continuity of care for beneficiaries and promoting integrated care. In 
particular, as discussed later in this section, we are delaying 
implementation of D-SNP look-alike contract limitations for one 
additional year to provide sufficient time for MA organizations to 
develop and seek approval for new plans, coordinate with state 
integrated care efforts, and facilitate a transparent and smooth 
transition of beneficiaries. With a technical clarification described 
later in this section, we are finalizing our proposed transition 
approach for D-SNP look-alikes to transition enrollees into an MA plan 
or plans meeting certain criteria within the same parent organization 
to promote continuity of care.
    Comment: Several commenters opposed our proposal to limit 
enrollment of dually eligible individuals in non-SNP MA plans. Some 
commenters noted that D-SNP look-alikes were created in response to 
states' contracting policies like those of California that restricted 
D-SNPs. A commenter questioned the need to regulate D-SNP look-alikes, 
citing the June 2019 MedPAC finding that only a small portion of 
traditional MA plans have dual eligible enrollment that comprises 80 
percent or more of total plan membership.\10\
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    \10\ See June 2019 MedPAC Report to Congress, Chapter 12 at 
http://www.medpac.gov/docs/default-source/reports/jun19_ch12_medpac_reporttocongress_sec.pdf?sfvrsn=0.
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    Some commenters believed that our proposal limited competition 
between MA plans that could lead to higher

[[Page 33809]]

quality, innovative care, additional supplemental benefits, and 
improved provider network access for dually eligible individuals. A 
commenter stated that competition from D-SNP look-alikes targeted by 
our proposal has not hurt D-SNPs, noting that total D-SNP enrollment 
has more than doubled from one million in 2010 to 2.6 million in 2019.
    A few commenters believed that D-SNP look-alikes fill critical gaps 
in markets where D-SNPs and MMPs are not available. Some commenters 
also believed that D-SNP look-alikes provide access to supplemental 
benefits and increased levels of care management, particularly for 
partial-benefit dually eligible individuals. These commenters were 
concerned that if the proposed contracting standard was implemented, D-
SNP look-alike enrollees would lose access to these benefits and may 
return to the original Medicare fee-for-service program, which does not 
coordinate with Medicaid. A few commenters requested that, prior to 
finalizing any rule on D-SNP look-alikes, CMS perform a more detailed 
analysis of available options and impacts of the proposal on enrollees, 
both full- and partial-benefit dually eligible individuals, such as 
loss of benefits.
    Several commenters expressed concern that CMS' proposed contracting 
standard would unnecessarily limit beneficiary choice. A few commenters 
requested that CMS explain how the value of choice was taken into 
account for this proposal. Other commenters encouraged CMS to continue 
to promote consumer choice and provide dually eligible beneficiaries 
with an array of plan options that allow individuals to choose how to 
best meet their health care needs. A commenter noted that the need for 
beneficiary choice was supported by the June 2018 MedPAC finding that 
64 percent of partial-benefit dually eligible MA enrollees were 
enrolled in traditional MA plans in 2016,\11\ and that a large 
percentage of full-benefit dually eligible individuals passively 
enrolled in MMPs also have indicated a preference for choice by opting 
out of MMP enrollment.
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    \11\ See June 2018 MedPAC Report to Congress, Chapter 9 at 
http://medpac.gov/docs/default-source/reports/jun18_ch9_medpacreport_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    Response: We thank the commenters for the feedback on our proposal. 
We maintain that MA plans with enrollment exclusively, or 
predominantly, consisting of dually eligible individuals--the principal 
criterion that distinguishes D-SNPs from other MA plans in statute--
should be subject to the federal regulatory and state contracting 
requirements that are applicable to D-SNPs. We note that, despite D-SNP 
regulations promulgated since 2006, MA organization participation in 
the D-SNP program is robust. Most D-SNP enrollment is in markets that 
feature numerous other plan choices for beneficiaries, and enrollment 
in D-SNPs has continued to increase. We also note that while state 
contracting policies may have been the impetus for some sponsors to 
create D-SNP look-alikes, states are authorized to play a role in 
coordinating Medicaid benefits with MA plans that exclusively enroll 
dually eligible individuals, as described in section 164 of MIPPA, 
which amended section 1859(f) of the Act. Therefore, if our proposal 
leads to any change in the degree of beneficiary choice, such impact 
would be marginal, and we believe the benefits from our proposal--
described here and in the proposed rule--outweigh any such impact.
    We agree with the commenter that D-SNP look-alikes are currently a 
small number of all MA plans; however, D-SNP look-alikes' growth--both 
in terms of the number of plans offered and their total enrollment--is 
concerning, especially given Congress' requirements in the BBA of 2018 
to further integrate Medicare and Medicaid benefits through D-SNPs. As 
noted in our proposed rule preamble, MedPAC found that D-SNP look-alike 
enrollment in California markets grew from around 5,000 in 2013 to over 
95,000 in 2017.\12\ MedPAC also explored enrollment trends more 
broadly, identifying 31 non-SNP plans \13\ operating in 2017 in which 
dually eligible individuals comprised 80 percent or more of total plan 
enrollment. These 31 plans, which operated in 10 states, included 
approximately 151,000 enrollees. MedPAC estimated that in 2019 
enrollment would increase to 193,000 beneficiaries in 54 D-SNP look-
alikes across 13 states.\14\
---------------------------------------------------------------------------

    \12\ See June 2018 MedPAC Report to Congress, Chapter 9 at 
http://medpac.gov/docs/default-source/reports/jun18_ch9_medpacreport_sec.pdf?sfvrsn=0.
    \13\ MedPAC also excluded employer group waiver plans (EGWPs) 
and a select group of medical savings account (MSA) plans.
    \14\ See June 2018 MedPAC Report to Congress, Chapter 9 at 
http://medpac.gov/docs/default-source/reports/jun18_ch9_medpacreport_sec.pdf?sfvrsn=0 and June 2019 MedPAC Report 
to Congress, Chapter 12 at http://www.medpac.gov/docs/default-source/reports/jun19_ch12_medpac_reporttocongress_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    We acknowledge the commenters' concerns about reducing access to 
supplemental benefits for D-SNP look-alike members and beneficiary 
choice, particularly for partial-benefit dually eligible individuals. 
However, as we stated in the proposed rule, we chose not to propose 
regulating benefit design to avoid inadvertently diminishing benefit 
flexibility that genuinely improves competition and beneficiary choice. 
We also note that most D-SNP look-alike enrollment is in markets that 
feature numerous other plan choices for beneficiaries, including D-SNPs 
that offer similar benefits; therefore, D-SNP look-alikes are not 
generally filling gaps in most of their markets nor significantly 
contributing to beneficiary choice. The majority of D-SNP look-alikes 
will be able to transition enrollees into another MA plan under the 
process described at Sec.  422.514(e) of this final rule; therefore, we 
project that few D-SNP look-alike enrollees will be enrolled by default 
in the original Medicare fee-for-service program when this regulation 
limits the continued offering of a D-SNP look-alike.
    We also note the contracting standard that we proposed and are 
finalizing does not apply to MA plans in states without D-SNPs or other 
plans authorized by CMS to exclusively enroll dually eligible 
individuals, further limiting the impact of this provision on access to 
supplemental benefits or beneficiary choice. Of the seven states that 
do not contract with D-SNPs or other plans authorized to exclusively 
enroll dually eligible individuals, only two have D-SNP look-alikes. As 
discussed in response to other comments on this topic, we will continue 
to engage with stakeholders to identify issues related to choice and 
access to supplemental benefits.
    Comment: A commenter suggested that CMS work with states to provide 
multiple integrated care options for dually eligible individuals as an 
alternative to limiting D-SNP look-alikes. Another commenter requested 
that if CMS decides to implement the proposal, we should also require 
states to contract with D-SNPs.
    Response: We note that section 164(c)(4) of MIPPA does not in any 
way obligate states to contract with a D-SNP; therefore, CMS does not 
have the authority to mandate states to contract with D-SNPs, and 
states have significant control over the availability of D-SNPs. We 
generally agree that increasing the number of integrated care options 
for dually eligible individuals is desirable, and CMS will continue to 
work with states to identify ways to integrate Medicare and Medicaid 
benefits in a way that best serves the states' dually eligible 
population. We also provide technical assistance to states on 
integration issues, including

[[Page 33810]]

through the Integrated Care Resource Center (see https://www.integratedcareresourcecenter.com/).
    Comment: Several commenters supported our proposed approach in 
paragraph (d) to limit the availability of D-SNP look-alikes only in 
those states where there is a D-SNP or any other plan authorized by CMS 
to exclusively enroll dually eligible individuals. These commenters 
stated that look-alikes provide valuable supplemental benefits to 
dually eligible individuals that would not be available in a 
traditional MA benefit design in those states without D-SNP or MMP 
options. Some commenters further agreed with our rationale in the 
proposed rule that, in states without D-SNPs or comparable managed care 
plans (like MMPs), the existence of D-SNP look-alikes is not impeding 
full implementation of D-SNP integration requirements. A number of 
commenters recommended that our proposal to limit availability of D-SNP 
look-alikes apply only in counties where there are no D-SNPs or other 
plans authorized to exclusively enroll dually eligible individuals. A 
commenter agreed with CMS' observation that operating MA plans in rural 
areas presents a challenge to MA plan operations, including for D-SNPs. 
This commenter stated that, in those rural areas without D-SNPs or 
other plans authorized by CMS to exclusively enroll dually eligible 
individuals, eliminating MA plan options can harm rather than benefit 
dually eligible individuals, and in the absence of integrated plan 
options, access to D-SNP look-alikes should be preserved.
    Response: We appreciate these commenters' support of the proposed 
limit on this policy to states where there is a D-SNP or any other plan 
authorized by CMS to exclusively enroll dually eligible individuals, 
such as an MMP. In our proposed rule we noted that, as of July 2019, 
seven states did not have D-SNPs or other plans authorized by CMS to 
exclusively enroll dually eligible individuals. In these states, there 
are no plans contracted with the state to implement the D-SNP 
requirements or otherwise integrate Medicare and Medicaid services, and 
therefore the operation of a D-SNP look-alike would not have any 
immediate material impact on the full implementation of federal D-SNP 
requirements. In such states, the existence of D-SNP look-alikes is not 
impeding federal or state implementation of any requirements for 
enhanced care coordination and Medicaid integration by providing a 
vehicle for MA organizations to avoid compliance with those 
requirements that are imposed on D-SNPs or comparable managed care 
plans like MMPs.
    We disagree with the recommendation to further limit the proposed 
D-SNP look-alike policy to those counties where a D-SNP or comparable 
managed care plan like an MMP currently exists. From our work with 
states on Medicare-Medicaid integration, we recognize that states often 
proceed incrementally, contracting first for integrated managed care 
plans in certain counties before incorporating more areas or going 
statewide. We believe that allowing D-SNP look-alikes to precede D-SNPs 
or other more integrated plans in these markets would hinder expansion 
of state efforts to expand integrated managed care. In addition, we 
believe it would be more complicated for CMS to administer, MA 
organizations to comply with, and consumers to understand, if there was 
a county-by-county limitation on D-SNP look-alike availability.
    With respect to the comments about contracting in rural areas, we 
understand that operating MA plans, including D-SNPs, can be a 
challenge in areas where the Medicare population is sparse and 
establishing networks is difficult. As discussed in section V.A. of 
this preamble, we are taking steps to improve access to managed care in 
rural areas through changes in network adequacy assessments. We will 
continue to monitor the volume of MA plans, including D-SNPs, offered 
in rural areas.
    Comment: A commenter requested that CMS exempt from our proposed 
dual eligible enrollment rules in paragraph (d) D-SNP look-alikes in 
states that require the parent organization of the D-SNP to have a 
Medicaid contract with the state. The commenter expressed concern that 
implementing the rule as proposed would have an anticompetitive effect 
of locking out new plan entrants in such states.
    Response: We disagree with the commenter that implementing 
paragraph (d) as proposed would reduce competition by not allowing new 
plan entrants in those states that limit D-SNP approval to parent 
organizations that have existing Medicaid contracts. As discussed in 
our April 2019 final rule in implementing the BBA of 2018, we sought to 
maintain existing state flexibility to promote integrated care for 
dually eligible individuals. As discussed earlier in this section, 
section 164 of MIPPA, which amended section 1859(f)(3)(D) of the Act, 
does not mandate that states contract with D-SNPs. The ability of 
states to determine the entities with which they enter into D-SNP 
contracts has been a core tenet for coordinating care between Medicare 
and Medicaid. We support efforts by states to further the integration 
of care coordination continuum and believe that the benefit from such 
coordination, in fact, increases competition to develop and win 
integrated products (that is, Medicaid contracts).
    Comment: Many commenters stated that the dual eligible enrollment 
requirement should apply in all states to discourage the proliferation 
of plans that are not truly integrated and that offer limited or no 
care coordination. Several commenters noted that D-SNP look-alikes may 
detract from state efforts to coordinate care for dually eligible 
individuals, such as managed fee-for-service models. These commenters 
believed that states that do not contract with D-SNPs or MMPs should be 
able to exercise oversight and have freedom to set a broader strategy 
to coordinate care for their dually eligible population without 
worrying about the proliferation of D-SNP look-alike products. A 
commenter stated that proliferation of D-SNP look-alikes may discourage 
states from future contracting with D-SNPs and gives plans no incentive 
to introduce D-SNPs. This commenter noted that CMS and states need to 
work together to improve the way they serve dually eligible individuals 
because such individuals include the highest need, highest cost 
Medicare and Medicaid beneficiaries, and limiting D-SNP look-alike 
regulation to only some states impedes progress toward that end.
    Response: We appreciate the commenters' perspective on this issue. 
We believe that our proposal as finalized strikes a balance between 
prohibiting look-alikes and allowing them to continue in states without 
D-SNPs or any other plan authorized by CMS to exclusively enroll 
individuals entitled to medical assistance under a state plan under 
Title XIX. We do not believe that in such states, the existence of 
look-alikes is materially impeding state or federal implementation of 
any requirements for enhanced care coordination and Medicaid 
integration or providing a vehicle for MA organizations to avoid 
compliance with those requirements that are imposed on D-SNPs or 
comparable managed care plans like MMPs. We recognize that substantial 
enrollment in D-SNP look-alikes in these states can alter the landscape 
if any of these states decides to begin contracting with D-SNPs. 
However, we believe state policy can accommodate these changes, for 
example, by contracting with MA organizations offering look-alikes to 
offer D-SNPs, enabling the transition of

[[Page 33811]]

look-alike enrollees into more integrated plans. We continue to 
collaborate and work with all states to strengthen integrated care, and 
we will monitor the penetration of MA plans as we continue to promote 
integrated care. As discussed in our proposed rule, we believe the 
limitation on the states where the dual eligible enrollment requirement 
applies will continue to protect states' ability to contract with 
plans--including for Medicaid behavioral health services and long-term 
supports and services (LTSS)--in a manner that promotes integration and 
coordination of benefits and a more seamless experience for dually 
eligible individuals in such plans. Therefore, in this final rule, we 
decline to expand our dual eligible enrollment requirements to plans 
operating in such states. However, we will continue to monitor D-SNP 
look-alikes in these states and consult with state officials about 
their impact on dually eligible individuals and state policy 
objectives.
    Comment: Many commenters requested that CMS clarify whether the 
proposed 80 percent threshold for dual eligible enrollment in a non-SNP 
plan included both individuals entitled to full Medicaid benefits and 
individuals entitled to partial Medicaid benefits, such as state 
payment of Medicare Part B premiums or payment of Medicare premiums and 
cost sharing.
    Response: Our proposed regulatory language in paragraph (d) 
regarding ``enrollees who are entitled to medical assistance under a 
state plan under title XIX'' is the same language used in section 
1859(b)(6)(B)(ii) of the Act and in Sec.  422.2 to define the 
population of special needs individuals D-SNPs may exclusively enroll. 
This language includes both full- and partial-benefit dually eligible 
individuals. Therefore, we clarify here that our proposed threshold for 
dual eligible enrollment--which we are finalizing in this rule--
included both full- and partial-benefit dually eligible individuals.
    Comment: A commenter recommended that our regulatory language in 
paragraph (d) be modified to refer to individuals who are ``entitled to 
and enrolled in medical assistance,'' since plans only know which 
enrollees actually receive Medicaid benefits, not those whose income 
levels might qualify them for such benefits.
    Response: While we appreciate the commenter's concern, we believe 
that the language in Sec.  422.514(d)(1) (individuals ``entitled to 
medical assistance'' under a state plan under Title XIX) sufficiently 
refers to individuals who have been determined to be entitled to 
medical assistance by virtue of having been enrolled in medical 
assistance under a state plan under Title XIX. That is our intent and 
interpretation of this language in Sec.  422.514(d).
    Comment: Some commenters recommended that the final rule not count 
any partial-benefit dually eligible individuals toward the threshold, 
while maintaining the threshold at 80 percent, in order to minimize the 
potential disruption caused by the non-renewal of D-SNP look-alikes, 
including D-SNP look-alikes in contracts with high Star Ratings. Other 
commenters supported setting the threshold at 80 percent if it applied 
only to full-benefit dually eligible individuals. Some commenters 
recommended that the threshold consist only of the categories of dually 
eligible individuals who were allowed to enroll in a D-SNP in any given 
market, defined at either the state or county level.
    In contrast, other commenters supported counting enrollment of 
partial-benefit dually eligible individuals toward the 80 percent 
threshold. A commenter wrote that exclusion of partial-benefit dually 
eligible individuals while maintaining the threshold at 80 percent 
would drastically reduce the number of D-SNP look-alikes captured by 
the proposed regulation and potentially render the entire proposal 
``meaningless.''
    Response: We disagree with the recommendation to exclude partial-
benefit dually eligible individuals from the enrollment threshold and 
agree with those commenters who believed such an exclusion would render 
the proposal less effective. Such an exclusion would allow 32 of the 64 
non-SNP MA plans with more than 80 percent enrollment by both full- and 
partial-benefit dually eligible individuals to continue to operate. 
These include nine D-SNP look-alikes in states that have D-SNPs or MMPs 
that only enroll full-benefit dual eligible individuals. Those nine 
plans would continue to operate if, as suggested by a commenter, we did 
not count partial-benefit dually eligible individuals towards the 
threshold only in states that exclude these individuals from D-SNPs and 
other integrated plans. While partial-benefit dually eligible 
individuals are not currently eligible to enroll in D-SNPs or MMPs in 
those states, they have access to other MA plans that are not D-SNP 
look-alikes. As discussed in the proposed rule, over 98 percent of 
dually eligible individuals who are enrolled in non-SNP MA plans are in 
plans that are not D-SNP look-alikes.
    The data show that the exclusion of partial-benefit dually eligible 
individuals would render the proposed regulation ineffective in 
achieving its primary goal: Preserving the ability of CMS and states to 
meaningfully implement the BBA of 2018 requirements and to use D-SNPs 
and other integrated care plans to integrate Medicare and Medicaid for 
dually eligible individuals.
    In addition, exclusion of partial-benefit dually eligible 
individuals from the threshold would allow any MA organization to 
design a benefit package and target enrollment for an MA plan that 
exclusively enrolled partial-benefit dually eligible individuals. 
Section 1859(b)(6)(B)(ii) of the Act, however, only allows D-SNPs to 
exclusively enroll dually eligible individuals.
    Comment: Some commenters recommended excluding partial-benefit 
dually eligible individuals from the threshold and put forward a number 
of rationales for their recommendation. Some commenters stated that 
partial-benefit dually eligible individuals did not benefit from the 
coordination of Medicaid benefits provided by D-SNPs or other 
integrated plans because they were not entitled to receive such 
benefits. A few commenters also noted that many states exclude partial-
benefit dually eligible individuals from D-SNPs or other integrated 
plans, and therefore excluding partial-benefit dually eligible 
individuals from the enrollment threshold would ensure the availability 
of another meaningful plan option to such individuals. A few commenters 
noted that partial-benefit dually eligible individuals have greater 
social, functional, and health needs than the broader Medicare 
population and could benefit from the enhanced care coordination 
provided by MA plans, including the D-SNP look-alike in which they 
enrolled. Another commenter requested that CMS provide an analysis of 
how the proposed regulation would impact areas where partial-benefit 
dually eligible individuals are not allowed to enroll in D-SNPs or 
other integrated care options. A commenter that supported inclusion of 
partial-benefit dually eligible individuals in the 80 percent threshold 
stated that any CMS decision to exclude such individuals should be 
accompanied by a reduction in the threshold to capture roughly the same 
number of D-SNP look-alikes.
    Response: We do not find these commenters' arguments persuasive. 
First, partial-benefit dually eligible individuals benefit from the 
requirements that SNPs, including D-SNPs, have a MOC that addresses 
enrollees' needs and perform periodic HRAs precisely because these

[[Page 33812]]

individuals have greater social, functional, and health needs. States, 
through their contracts with D-SNPs, can enhance these care 
coordination requirements, including for partial-benefit dually 
eligible individuals. Second, QMBs without full Medicaid benefits, who 
constitute roughly half of partial-benefit dually eligible individuals 
nationally, can benefit when D-SNPs, or the Medicaid managed care plans 
offered under the same parent company in which these individuals are 
enrolled, pay providers for Medicare cost sharing under a capitation 
agreement with the state. Such direct and seamless payment of cost 
sharing can result in an improved experience for providers serving 
these individuals, which itself may improve access to care for 
beneficiaries.
    Of course, partial-benefit dually eligible individuals cannot 
benefit from these features of the D-SNP program if the state D-SNP 
contract excludes these individuals from enrollment, and we recognize 
that some states using managed care as a platform for integration 
exclude partial-benefit dually eligible individuals from D-SNPs and 
other managed care plans. While some states that are using the D-SNP 
platform for integration only allow full-benefit dually eligible 
individuals to enroll in D-SNPs, others allow partial-benefit dually 
eligible individuals to enroll in separate D-SNP plan benefit packages, 
facilitating integrated care and seamless provision of benefits for 
both categories of dually eligible individuals. We think that allowing 
D-SNP look-alikes to continue to enroll partial-benefit dually eligible 
individuals with no limit would discourage states from taking this 
approach.
    Comment: A number of commenters recommended that we set a lower 
threshold for the percentage of dually eligible enrollees a non-SNP MA 
plan could have, either in actual or projected enrollment. These 
commenters expressed concern that a threshold of 80 percent could be 
``gamed'' by MA organizations to keep their dual eligible enrollment 
just under the ceiling. Some commenters recommended that CMS set the 
ceiling for dual eligible enrollment at 50 percent, with a commenter 
citing MACPAC analysis showing faster growth in projected enrollment 
among MA plans with dual eligible enrollment greater than 50 percent 
than among those greater than 80 percent. Another commenter recommended 
a threshold of 60 percent.
    Response: We appreciate the concern that CMS establish a threshold 
that is effective at curtailing D-SNP look-alikes, which we believe 
threaten to undermine our ability and that of our state partners to 
implement the higher integration standards under the BBA of 2018. 
However, as described in the proposed rule, we believe our proposed 80 
percent threshold is reasonable because it far exceeds the share of 
dually eligible individuals in any given market--no market has more 
than 50 percent dually eligible beneficiaries \15\--and, therefore, 
would not be the result for any plan that had not intended to achieve 
high dually eligible enrollment. The 80 percent threshold also captures 
almost three-quarters of enrollment in non-SNP plans with more than 50 
percent dually eligible enrollees. We will monitor for potential gaming 
after implementation of this final rule by reviewing plan enrollment 
data, including the Monthly Membership Report, and consider future 
rulemaking as needed.
---------------------------------------------------------------------------

    \15\ June 2019 MedPAC Report to Congress, Chapter 12 at http://www.medpac.gov/docs/default-source/reports/jun19_ch12_medpac_reporttocongress_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    Comment: A range of commenters, including MACPAC and MedPAC, 
supported the proposed 80 percent threshold for projected and actual 
enrollment. Along with several other commenters, MACPAC and MedPAC 
urged CMS to monitor levels of MA dual eligible enrollment after 
implementation to verify that the final rule's requirements remain 
effective against the proliferation of D-SNP look-alikes.
    Response: We thank the commenters for their support and agree that 
post-implementation monitoring will be important to determine the 
effectiveness of the rule. We are finalizing the proposed regulatory 
language regarding the dual eligible enrollment threshold at paragraphs 
(d)(1)(ii) and (d)(2)(ii) of this final rule and reiterating here that 
the threshold includes enrollment of all categories of dually eligible 
individuals, including partial-benefit and full-benefit dually eligible 
individuals who are actually enrolled in medical assistance under a 
state plan under Title XIX.
    Comment: A commenter requested that we clarify that the 80 percent 
threshold applies at the plan level (that is, the PBP level) and not at 
the contract, or ``H number,'' level.
    Response: We reiterate here that the 80 percent threshold in 
paragraphs (d)(1)(ii) and (d)(2)(ii) applies at the plan level and not 
at the contract, or ``H number,'' level.
    Comment: A commenter requested that we specify the data source used 
to determine the percentage of dually eligible enrollees in a plan 
subject to the proposed regulation.
    Response: We intend to use data and reports on January enrollment 
and dual eligible status, such as the January Monthly Membership 
Report, generated by the MARx system (or a similar or successor report) 
to determine the percentage of dually eligible enrollees.
    Comment: Several commenters stated that our proposed regulatory 
language at Sec.  422.514(d), ``CMS does not enter into or renew a 
contract under this subpart for an MA plan,'' was confusing since the 
language references both contracts and plans. These commenters 
suggested that CMS clarify that it will not approve or renew a specific 
plan benefit package (PBP), rather than the entire contract, when D-SNP 
look-alike MA plans meet the 80 percent threshold.
    Response: We appreciate the commenters' request for clarification. 
When an MA organization enters into a contract with CMS to offer MA 
products, the MA organization can establish multiple PBPs within that 
one contract, so long as those products are the same type (for example, 
all HMO or all PPO). We proposed the language at paragraph (d) to 
accommodate this reality. When an MA organization has multiple plans 
under one contract, Sec.  422.514(d), read in combination with contract 
severability rules at Sec.  422.503(e), allows CMS to sever the D-SNP 
look-alike from the rest of the contract, in effect allowing CMS to 
renew only the portion of the contract that does not include the D-SNP 
look-alike. We believe the language at paragraph (d) accurately 
describes our intent. Therefore, we are finalizing this regulatory 
language as proposed. In addition, for those circumstances where the D-
SNP look-alike is the only PBP offered in the contract, we are 
finalizing a new paragraph (f) to clarify that we would consider 
actions taken consistent with paragraph (d) to warrant special 
consideration to exempt affected MA organizations from the denial of an 
application for a new contract or service area expansion pursuant to 
Sec. Sec.  422.502(b)(3) and (4), 422.503(b)(6) and (7), 422.506(a)(3) 
and (4), 422.508(c) and (d), and 422.512(e)(1) and (2). In other words, 
when CMS declines to enter into or renew a contract consistent with 
paragraph (d), that action does not preclude the impacted MA 
organizations from applying for a new MA contract or a service area 
expansion or its board members or trustees from serving another MA 
organization.
    Comment: A commenter recommended that CMS consider defining D-SNP 
look-alikes as MA organizations that offer a D-SNP and an MA-PD plan 
under the same contract, with the majority (that is, 50 percent or

[[Page 33813]]

more) of dually eligible beneficiaries enrolled in the MA-PD plan 
rather than the D-SNP.
    Response: While we appreciate the comment, we do not understand the 
rationale for defining D-SNP look-alikes as MA organizations that have 
a majority of dually eligible individuals enrolled in an MA-PD plan as 
compared to a D-SNP offered by the same MA organization. We would be 
concerned that any such policy would undermine our proposal in two 
ways. First, it would permit certain organizations to maintain D-SNP 
look-alikes whenever such plans were coupled with D-SNPs with a larger 
number of dually eligible individuals, even if the D-SNP is in a 
different geographic area. Second, it would allow D-SNP look-alikes to 
continue operating as long as the MA organization did not also offer a 
D-SNP under the same contract. Therefore, we decline to accept this 
recommendation.
    Comment: A commenter supported CMS' proposal at Sec.  422.514(d)(2) 
to exempt from the prohibition on D-SNP look-alikes those MA plans that 
are active for less than one year and with enrollment less than or 
equal to 200 enrollees at the time of CMS' determination. A few 
commenters suggested that CMS consider alternative criteria for which 
new MA plans are exempted from our proposed requirements. A commenter 
recommended that CMS expand the exemption to plans that had been active 
three or more years. The commenter believed this change would allow 
plans to appropriately respond to any unexpected enrollment patterns. 
Another commenter encouraged CMS to raise the enrollment minimum from 
200 enrollees to 500 enrollees to better align with enrollment levels 
already required for plan viability for Medicare Part D Prescription 
Drug Plans (PDPs) and reduce administrative burden.
    Response: We appreciate the comments, but we do not find the 
recommended changes to be persuasive. While the minimum enrollment 
threshold for low enrollment PDPs is higher at 1,000 beneficiaries, we 
do not believe PDPs are an apt comparison. We believe a better 
comparison for D-SNP look-alikes is the minimum enrollment threshold 
for low enrollment SNPs, which is 100 enrollees for plans in existence 
for three or more years, as outlined in the 2020 Final Call Letter.\16\ 
We proposed a minimum enrollment standard of 200 to allow some 
additional flexibility for initial enrollment patterns that may not be 
representative of the longer term enrollment pattern for the plan. Once 
the initial enrollment period has passed or the number of enrollees 
during that first year of operation exceeds 200 enrollees, we believe 
the enrollment profile accurately reflects whether or not the plan was 
designed to exclusively enroll dually eligible individuals. Therefore, 
we are finalizing the D-SNP look-alike exemption criteria in this final 
rule at paragraph (d)(2)(ii) to exempt those D-SNP look-alikes active 
for less than one year and with enrollment less than or equal to 200 
enrollees at the time of CMS' determination using January enrollment of 
the current year.
---------------------------------------------------------------------------

    \16\ https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2020.pdf.
---------------------------------------------------------------------------

    Comment: A commenter noted that certain C-SNPs, including ESRD C-
SNPs, may enroll a large number of dually eligible individuals and 
appreciated that we were clear in the proposed preamble that the 
proposed enrollment threshold for D-SNP look-alikes only applies to 
non-SNP MA plans.
    Response: We welcome the comment's perspective. As we stated in the 
proposed rule preamble, we proposed applying this requirement only to 
non-SNP plans to allow for the predominant dually eligible enrollment 
that characterizes D-SNPs, I-SNPs, and some C-SNPs by virtue of the 
populations that the statute expressly permits each type of SNP to 
exclusively enroll. We are finalizing as proposed at paragraph (d) that 
the prohibition on D-SNP look-alike contracting does not apply to any 
specialized MA plan for special needs individuals as defined in Sec.  
422.2.
    Comment: A commenter supported our proposed implementation timing 
at paragraphs (d)(1) and (2) to allow D-SNP look-alikes operating in 
2020 to transition enrollees to other MA plans offered by the D-SNP 
look-alikes' parent organizations for an effective date of January 1, 
2021, and to no longer enter into or renew contracts with D-SNP look-
alikes for plan year 2022 and subsequent years. A few commenters 
suggested that CMS finalize any policy on D-SNP look-alikes in time for 
plan year 2021 bid preparation, preferably by April 2020, and to ensure 
a smooth transition for enrollees. Some commenters requested that CMS 
delay implementation of the proposed changes by requesting a one-year 
delay, a two-year delay, or by specifically requesting that D-SNP look-
alikes be permitted to operate until 2023 or later. A commenter 
recommended CMS employ an incremental phased-in approach so that plans 
above the 80 percent enrollment threshold are permitted to continue 
operating for a longer period of time. Another commenter suggested 
that, if CMS will not allow at least an additional year for 
implementation, CMS allow for continuation of certain plans for the 
2022 plan year where the MA organization can demonstrate a good faith 
effort to apply for and implement a compliant D-SNP product. Commenters 
cited various reasons for delaying implementation, including allowing 
MA organizations additional time to file applications, gain approval of 
compliant D-SNP products, facilitate a smooth transition of enrollees, 
and consider continuity of care, nuances of state requirements, and 
market dynamics that might conflict with the proposed rule.
    A commenter noted that the need for a delay is particularly 
important in states where plans' ability to create D-SNPs is limited, 
and several commenters emphasized the need for sufficient time to 
develop new products, especially to meet state requirements for 
integrated plans. A few commenters indicated that CMS' proposed 
timeline did not align with the California Advancing and Innovating 
Medi-Cal (CalAIM) initiative to integrate Medicare and Medicaid through 
D-SNPs and Medicaid MLTSS plans. These commenters expressed concern 
that, under the proposed timeline, D-SNP look-alike enrollees in 
California could face multiple Medicare plan transitions in a short 
period of time, which would potentially disrupt care and confuse 
beneficiaries. These commenters believed that a later implementation 
timeframe would allow D-SNP look-alikes extra time to implement a 
transparent process by which beneficiaries can select plans and 
transition with minimal disruption.
    A commenter noted the additional time necessary for approval of new 
D-SNPs and a coordinated transition process is especially important 
given the COVID-19 pandemic. Another commenter requested that CMS allow 
at least two years for dually eligible individuals, MA plans, states, 
and other stakeholders to review policy options and devise and 
implement viable alternatives to CMS' proposal to achieve compliance.
    Response: We appreciate the comments supporting the proposed 
implementation timeline, and we agree with many of the comments 
recommending that we consider delaying the contract limitation for 
existing D-SNP look-alikes by one year. While we believe the proposed

[[Page 33814]]

implementation timeframe remains feasible, we understand that providing 
an additional year before CMS declines to renew existing D-SNP look-
alike plans would give all states and MA organizations more time to 
consider and collaborate on a more integrated approach and an 
appropriate transition for enrollees. However, we disagree with the 
request to delay the proposed dual eligible enrollment thresholds for 
at least two years. We believe that delaying our implementation of D-
SNP non-renewals for one additional year prior will provide sufficient 
time for MA organizations to develop and seek approval for new plans, 
coordinate with state integrated care efforts, and facilitate a 
transparent and smooth transition of beneficiaries.
    Therefore, we are finalizing paragraph (d)(2) to provide that CMS 
will not renew a contract for a D-SNP look-alike starting for plan year 
2023 (rather than plan year 2022 as proposed). For plan year 2023, our 
determination that plans meet the criteria in paragraph (d)(2) would be 
based on our assessment of the plan's enrollment in January 2022. This 
will extend by one year the timeline for CMS to non-renew a contract 
for any non-SNP plan with actual enrollment consisting of 80 percent or 
more dually eligible enrollees (with the exception of an MA plan active 
less than one year and with enrollment of 200 or fewer individuals at 
the time of the determination). Additionally, we are finalizing 
paragraph (d)(2) with a slight restructuring of using new paragraphs 
(d)(2)(i) and (ii) for better organization and clarity.
    Comments recommending a delay in implementation were based on MA 
organizations seeking more time to establish new D-SNPs, ensure smooth 
beneficiary transitions for existing D-SNP look-alike enrollees, and 
coordinate transitions with state integrated care approaches. Since 
these expressed reasons for an implementation delay apply to existing 
D-SNP look-alikes but not to potential new D-SNP look-alikes that are 
either in contract application or annual bidding stages, we do not 
believe there is a need to delay the effective date for the prohibition 
on CMS not entering into contracts for new D-SNP look-alikes. 
Implementing the timeline for the prohibition on new D-SNP look-alikes 
as proposed also avoids the need for additional beneficiary 
transitions.
    We are therefore finalizing our proposal in paragraph (d)(1) that 
CMS does not enter into a contract--beginning with plan year 2022--for 
a new MA plan that projects in its bid submitted under Sec.  422.254 
that 80 percent or more of its total enrollment are enrollees entitled 
to medical assistance under a state plan under Title XIX. We are 
finalizing paragraph (d)(1) with a slight restructuring of using new 
paragraphs (d)(1)(i) and (ii) for better organization and clarity. We 
are retaining the proposed date in paragraph (d)(1), despite changing 
the date in paragraph (d)(2), to prevent the creation of new D-SNP 
look-alikes in 2022 that CMS would subsequently non-renew one year 
later. We are also finalizing as proposed the timeline on which MA 
organizations will be authorized to transition enrollees from a D-SNP 
look-alike to another plan, proposed at paragraph (e).
    The changes to our proposed policy give MA organizations with 
existing D-SNP look-alikes more time to coordinate with state 
integrated care approaches and transition enrollees in a thoughtful, 
transparent manner that minimizes the number of beneficiary 
transitions. This finalized approach also allows D-SNP look-alikes that 
are ready to transition their enrollees the ability to do so as soon as 
2021 and eliminates the proliferation of new D-SNP look-alikes, 
beginning in 2022. We are available to provide guidance to any MA 
organization regarding transition to a new or existing D-SNP and 
encourage MA organizations to monitor their Monthly Membership Reports 
to determine if they are approaching or above the allowable threshold 
for dually eligible enrollees in a non-SNP plan in any state where the 
contracting limitations under this regulation will apply.
    Comment: A commenter noted that if an MA organization has not 
submitted an application for a D-SNP for contract year 2021, it would 
not be able to transition D-SNP look-alike enrollees in 2021, as the 
commenter believed was required under CMS' proposal. This commenter 
added that some states have not yet clarified which plans will be 
allowed to offer D-SNPs in specific markets for 2021.
    Response: We agree with the commenter that the D-SNPs that will 
operate in specific markets in plan year 2021 are not yet known and 
will not be public information until fall 2020. However, we believe 
this commenter may have misunderstood the timing of our proposal. We 
proposed to allow, but not require, D-SNP look-alikes operating in 2020 
to transition enrollees for an effective date of January 1, 2021, and 
we proposed that CMS not enter into or renew contracts with D-SNP look-
alikes beginning January 1, 2022. As explained earlier in this section, 
we are finalizing paragraph (d)(2) to allow an additional year--until 
plan year 2023--before CMS will decline to renew a contract for an 
existing MA plan that meets our dual eligible enrollment threshold. 
Under our original proposal, existing D-SNP look-alikes could, but were 
not required to, transition their enrollees for a January 1, 2021, or a 
January 1, 2022 effective date before the contract limitation in 
paragraph (d)(2) requires action by CMS. With our revisions for the 
final rule, we are also permitting an option for existing D-SNP look-
alikes to transition enrollees for a January 1, 2023 effective date. 
Under the final provisions of Sec.  422.514(d), CMS will permit any new 
D-SNP look-alike that begins to operate on January 1, 2021 to continue 
operating until December 31, 2022. However, an MA organization offering 
such a new D-SNP look-alike could choose to transition its enrollees as 
early as January 1, 2022. Further, the transition is not required to be 
only to a D-SNP, so the MA organization operating an existing D-SNP 
look-alike does not need to apply to offer a D-SNP.
    Comment: A number of commenters preferred an alternative discussed 
in the proposed rule that would require an MA organization to 
transition any dually eligible individuals enrolled in a non-renewing 
D-SNP look-alike into a D-SNP for which they were eligible if such a 
plan is offered by the MA organization. Some of these commenters 
believed D-SNP look-alikes should not be able to transition dually 
eligible individuals into other MA plans when a more integrated option 
exists. A commenter supported this alternative since it viewed a 
requirement to transition dually eligible individuals into D-SNPs as 
continuing federal efforts to strengthen integration of care for dually 
eligible individuals. A commenter specifically suggested that CMS 
prioritize transition of full-benefit dually eligible individuals to D-
SNP products and other integrated plans.
    Response: We appreciate the commenters' support for the proposed 
alternative, and we share the commenters' preference for integrated 
care. Although we considered an alternative in the proposed rule that 
would require transitioning any dually eligible individuals into a D-
SNP for which they were eligible if such a plan is offered by the MA 
organization, we opted for proposing a less prescriptive set of 
transition rules, recognizing a potentially wide array of transition 
scenarios. We believe that transitioning D-SNP look-alike enrollees to 
D-SNPs or other plans authorized by CMS to exclusively enroll dually 
eligible individuals, when one is offered by the

[[Page 33815]]

same MA organization or another MA organization that shares the same 
parent organization as the MA organization, furthers federal goals to 
integrate care for dually eligible individuals. However, we also expect 
that some MA organizations may be unable to transition all D-SNP look-
alike enrollees into the same MA plan, since the D-SNP look-alike 
enrollees may not all meet the eligibility criteria for a particular 
special needs plan offered by the MA organization or another MA 
organization that shares the same parent organization as the MA 
organization.
    Our proposal included language at paragraph (e)(1) to allow MA 
organizations to transition D-SNP look-alike enrollees into one or more 
MA plans that meet the criteria proposed at paragraphs (e)(1)(i)-(iii). 
While we expect and encourage dually eligible enrollee transitions to 
D-SNPs or other integrated plans to occur in many cases, even in the 
absence of a specific federal requirement, we believe that the 
complexities associated with a regulation that prioritizes or restricts 
transitions to D-SNPs or other integrated plans that way would outweigh 
the potential benefits. Thus, we are finalizing paragraph (e) that an 
MA organization with a non-SNP MA plan determined to meet the 
enrollment threshold finalized at paragraph (d)(2)(ii) may transition 
enrollees into another MA-PD plan (or plans), including a D-SNP, if 
offered by the same MA organization, as long as any such MA-PD plan 
meets certain proposed criteria finalized at paragraph (e) and, if such 
transition is to a D-SNP, enrollees meet the D-SNP eligibility 
criteria.
    Paragraph (e) allows MA organizations multiple options. First, an 
MA organization can choose not to participate in any transition process 
under paragraph (e), in which case the enrollees in a D-SNP look-alike 
would be enrolled by default in the original Medicare fee-for-service 
program, unless the enrollee made an active choice otherwise. Second, 
an MA organization can choose to transition all enrollees from a D-SNP 
look-alike to a different plan that meets the criteria in paragraph 
(e)(1). Third, recognizing that D-SNP look-alike enrollees may not all 
qualify for the same new plan, paragraph (e) allows an MA organization 
to transition look-alike enrollees to multiple plans. For example, an 
MA organization could transition from its D-SNP look-alike: (1) Dually 
eligible enrollees into a D-SNP for which they were eligible and (2) 
non-dually eligible enrollees into a non-SNP plan, provided both plans 
meet the criteria in paragraph (e)(1).
    MA organizations must abide by the anti-discrimination provision 
(based on health status) in section 1852 of the Act and Sec.  422.110 
and other applicable law (for example, civil rights law) when 
exercising the transition authority. These provisions are applicable to 
the enrollment transitions authorized under Sec.  422.514(e) and would 
be especially important to consider where an MA organization chooses to 
transition enrollees into more than one MA plan. With the exception of 
transitioning an individual into a C-SNP, an MA organization must not 
choose a particular plan for an enrollee to transition into based on 
health status, if the enrollee were eligible for more than one plan 
offered by the MA organization or its parent organization to receive 
transitioned enrollees. For example, it would be a violation of the 
anti-discrimination provision if an MA organization transitioned most 
dually eligible members from a D-SNP look-alike to a D-SNP but 
transitioned dually eligible members with diabetes to a different 
qualifying non-SNP MA plan. As necessary, we will monitor use of the 
transition authority under this rule to ensure compliance with the 
applicable anti-discrimination provisions and may take other action as 
warranted to protect beneficiaries.
    Finally, we note that we intend to inform state Medicaid agencies 
of transitions of enrollees from D-SNP look-alikes into D-SNPs in their 
state so the states are aware for purposes of their own integrated care 
efforts and communications with stakeholders.
    Comment: A commenter requested that CMS add language that 
specifically includes MMPs as a plan type eligible to receive 
beneficiaries who transition from D-SNP look-alikes. Another commenter 
requested that states be given the flexibility to transition dually 
eligible look-alike enrollees into a D-SNP or other plan authorized by 
CMS to exclusively enroll dually eligible individuals, such as an MMP.
    Response: We appreciate these comments. The proposed language did 
not explicitly name MMPs as a type of MA plan into which D-SNP look-
alike enrollees could transition because MMPs are not defined in 
regulation, and CMS can facilitate enrollments from D-SNP look-alikes 
into MMPs under separate authority. We clarify that MMPs are a type of 
plan authorized to exclusively enroll individuals entitled to medical 
assistance under a state plan under Title XIX. CMS is testing the 
Financial Alignment Initiative under section 1115A of the Act. Some of 
the demonstration states in the Financial Alignment Initiative are 
transitioning individuals from an MA plan, including a D-SNP look-
alike, to an MMP through passive enrollment. If an MA organization also 
sponsors an MMP and desires to transition D-SNP look-alike enrollees to 
the MMP, we would partner with the state Medicaid agency and use our 
existing authority and processes to execute the transition. Outside of 
the context of a demonstration or model test under section 1115A of the 
Act, however, we do not agree with the commenter's request that states 
be given the flexibility to transition D-SNP look-alike enrollees. CMS 
will work directly with D-SNP look-alikes to operationalize the 
transitions, consistent with other Medicare plan transitions, and 
ensure states are aware of them.
    Comment: A commenter requested that CMS ensure dually eligible 
individuals who previously received care through a managed care plan do 
not default into the original Medicare fee-for-service program. The 
commenter stated that these individuals should have the opportunity and 
support necessary to choose a plan that meets their needs and does not 
disrupt their care.
    Response: We appreciate the commenter's request and agree with the 
concern. However, we expect the number of D-SNP look-alike enrollees 
who enroll in the original Medicare fee-for-service program as a result 
of this rulemaking to be very small. In our proposed Collection of 
Information (COI) burden estimates, we estimated that only one percent, 
or 1,808, D-SNP look-alike enrollees would make a Medicare choice other 
than the MA plan into which they are transitioned by the MA 
organization. Our estimate was based on our experience with the rate of 
dually eligible enrollees opting-out of passive enrollment from an MA 
plan to an MMP offered by the same parent organization as part of the 
Medicare-Medicaid Financial Alignment Initiative.
    Comment: A commenter requested that CMS clarify whether the 
proposed transition approach allows transition of D-SNP look-alike 
enrollees to MA plans of a different plan type, such as from an HMO to 
a PPO.
    Response: We appreciate the commenter's request for clarification. 
In the proposed rule, we stated that our proposed transition process 
was conceptually similar to ``crosswalk exception'' procedures 
historically allowed by CMS and proposed at Sec.  422.530 in the 
proposed rule. We also clarified that, in contrast to the proposed 
crosswalk exceptions, our proposal would allow the transition process 
to apply across legal entities

[[Page 33816]]

offered by MA organizations under the same parent organization, as well 
as between SNPs and non-SNP plans. However, it was not our intent to 
allow for the transition process to apply across product types--for 
example, HMO to PPO, and vice versa. We are therefore modifying the 
regulation text to add a new paragraph (e)(1)(iv) to stipulate that an 
MA plan or plans receiving enrollees under the transition process we 
are finalizing in paragraph (e) must be of the same plan type (for 
example, HMO or PPO) as the D-SNP look-alike. An MA organization will 
not be permitted to transition an individual from a D-SNP look-alike 
PPO to an MA-PD plan that is an HMO, or vice versa.
    Comment: A commenter appreciated that our proposed transition gives 
D-SNP look-alikes the ability to transition non-D-SNP members into a D-
SNP across legal entities. This commenter requested that CMS allow 
transitions across legal entities in other situations where it would be 
in the beneficiary's best interest, such as transitioning a beneficiary 
with a chronic condition into a C-SNP under a different legal entity.
    Response: The commenter's understanding of our proposed transition 
approach in Sec.  422.514 in connection with transitioning enrollees 
out of a D-SNP look-alike is accurate. Our approach, which we are 
finalizing as proposed at paragraph (e), allows MA organizations to 
transition D-SNP look-alike enrollees into an MA plan or plans which 
meet the criteria in paragraph (e)(1) and are offered by the same MA 
organization or another MA organization that shares the same parent 
organization as the MA organization. Under our approach, D-SNP look-
alike enrollees who are eligible for a C-SNP could be transitioned into 
a C-SNP that meets the criteria in paragraph (e)(1). With regard to 
crosswalks or enrollment changes in other contexts, the recommendation 
is outside of the scope of our proposal for Sec.  422.514; we will take 
the comment under consideration in connection with the crosswalk 
proposal (proposed to be codified at Sec.  422.530) in section VI.C. of 
the proposed rule, which we intend to address in a future final rule.
    Comment: Some commenters encouraged CMS to finalize the proposed 
policy on D-SNP look-alikes with sufficient advance timing, preferably 
in advance of the 2021 bid deadline, to allow for enrollee transitions.
    Response: We agree it is important, where possible, to finalize the 
policy in advance of bid deadlines so that MA organizations can have 
sufficient time to make decisions for 2021 plan offerings. At paragraph 
(d), we are finalizing the timing of when we would implement the 
prohibition on contracting for D-SNP look-alikes with the modifications 
discussed earlier. D-SNP look-alikes operating in 2020 may choose to 
transition their enrollees effective January 1, 2021, January 1, 2022, 
or January 1, 2023, and D-SNP look-alikes operating in 2021 may choose 
to transition their enrollees effective January 1, 2022 or January 1, 
2023. For plan year 2022 and subsequent years, CMS will not enter into 
a contract with a new MA plan that meets criteria outlined in paragraph 
(d)(1), and for plan year 2023 and subsequent years, CMS will not renew 
a contract with a MA plan that meets criteria outlined in paragraph 
(d)(2). We note that MA organizations will be able, under Sec.  
422.514(e) as finalized here, to transition enrollees in D-SNP look-
alikes to other plans in advance of CMS non-renewing the D-SNP look-
alike PBPs effective January 1, 2023 and January 1 of subsequent plan 
years.
    Comment: A commenter noted that D-SNPs currently must have executed 
state Medicaid agency contracts with applicable states and requested 
that CMS also allow plans to meet this requirement with subcontracts 
through a directly contracted entity in order to ease transitions for 
beneficiaries into the most integrated plan possible.
    Response: Consistent with the revised SMAC requirements and the new 
definition of a D-SNP codified in the April 2019 final rule, a plan 
must have a direct contract with the state Medicaid agency to meet the 
definition of a D-SNP at Sec.  422.2. CMS does not consider 
subcontracting arrangements with Medicaid managed care plans in lieu of 
SMACs to approve a plan as a D-SNP.
    Comment: A commenter recommended that CMS allow an opt-out process 
for D-SNP look-alike enrollees being transitioned to a new plan. The 
commenter indicated that such an opt-out process would preserve 
beneficiary choice.
    Response: We appreciate the comment and agree that the ability of 
an enrollee to opt out is important to ensure beneficiary choice. As we 
discussed in the preamble of the proposed rule, an MA organization with 
a non-SNP MA plan determined to meet the enrollment threshold in 
proposed paragraph (d)(2) could transition enrollees into another MA-PD 
plan (or plans) offered by the same MA organization, as long as any 
such MA-PD plan meets certain criteria described in the proposed rule 
and finalized here. Under the transition authority we are finalizing, 
an MA enrollee could be transitioned from one MA plan offered by an MA 
organization to another MA-PD plan (or plans) without the enrollee 
having completed an election form or otherwise indicate their 
enrollment choice as typically required. However, the timing of these 
transitions permits the enrollee to make an affirmative choice for 
another MA plan of his or her choosing during the annual election 
period (AEP) from October 15 through December 7. Section 422.514(e) 
ensures this right because the description of the MA plan to which the 
enrollee would be transitioned must be provided in the ANOC that must 
be sent consistent with requirements in Sec.  422.111(a), (d), and (e). 
The ANOC must be sent at least 15 days before the beginning of the AEP. 
Enrollees would still have the opportunity to choose their own plan 
during this transition process because of how the proposed transition 
process would overlap with the annual coordinated election period. If a 
transitioned enrollee elects to enroll in a different plan during the 
AEP, enrollment in the plan the enrollee selected would take precedence 
over the plan into which the MA organization transitioned the enrollee. 
Transitioned enrollees would also have additional opportunities to 
select another plan through the Medicare Advantage Open Enrollment 
Period described in Sec.  422.62(a)(3) from January 1 through March 31. 
Affected individuals may also qualify for a Special Election Period 
(SEP), such as the SEP for plan non-renewals at Sec.  422.62(b) or the 
SEP for dually eligible individuals or Part D low-income subsidy 
eligible beneficiaries at Sec.  423.38(c)(4). For D-SNP look-alike 
enrollees who are not transitioned by an MA organization per proposed 
paragraph (e)(1), the MA organization must send a written notice 
consistent with Sec.  422.506(a)(2). This requirement will ensure that 
the content of that notice includes the content sent when a plan is 
non-renewing (including information about other enrollment options) and 
that the notice is sent by October 2 (90 days before the end of the 
year). We believe that the transition process we proposed and are 
finalizing provides sufficient opportunity for affected enrollees to 
opt out of their new plan and make a different election. Therefore, as 
described earlier in this section, we are finalizing the transition 
process at paragraph (e) largely as proposed with some minor 
modifications and technical changes described elsewhere in this 
section.
    Comment: A few commenters expressed concern about the disruption

[[Page 33817]]

of aligned Medicare and Medicaid coverage at the point of transition, 
especially when an individual is enrolled in a Medicaid plan under the 
same parent organization as the D-SNP look-alike. These commenters 
recommended that affected beneficiaries be permitted to stay with the 
MA plan or MA organization to ensure continued integration of Medicare 
and Medicaid benefits. The commenters believed that such a disruption 
in ongoing care plans and care teams at the individual level would 
likely outweigh any additional benefit from the D-SNP integration 
requirements at the plan level.
    Response: We appreciate the commenters' concerns about potential 
disruption of aligned coverage. The transition approach proposed and 
finalized at paragraph (e) permits MA organizations to transition D-SNP 
look-alike enrollees into another MA plan or plans (including into a D-
SNP for enrollees who are eligible for such a plan) offered by that MA 
organization or by another MA organization that shares the same parent 
organization. We expect the vast majority of D-SNP look-alike enrollees 
to be transitioned into a plan offered by the same parent organization 
as the D-SNP look-alike, which would facilitate the sharing of any 
enrollee care plans and, in some cases, continued access to the same 
care teams. Also, as explained earlier in this section, we estimate 
that only one percent of D-SNP look-alike enrollees will move to the 
original Medicare fee-for-service program or to another MA plan outside 
of the same parent organization. To the extent that any enrollees in a 
D-SNP look-alike are enrolled in a Medicaid managed care plan under the 
same parent organization as the D-SNP look-alike, the transition 
authority finalized in paragraph (e) allows similar enrollment in plans 
offered by the same entity or parent organization.
    Comment: Some commenters requested that CMS consider state-specific 
integrated care initiatives as it finalizes its transition policy. In 
particular, a few commenters encouraged CMS to coordinate transition of 
D-SNP look-alikes with states where integrated care plan initiatives 
are proposed or underway to avoid unintended confusion or enrollment 
barriers for dually eligible individuals. A commenter suggested that 
CMS issue guidance to states about enrollee transitions initiated by D-
SNP look-alikes so that transitions of dually eligible individuals are 
coordinated with any changes that states are proposing in Medicaid 
enrollment, which would help minimize the number of transitions an 
individual experiences over a short period of time. A few commenters 
requested that CMS consider the impacts of any state-imposed moratorium 
on contracting with D-SNPs in counties where MMPs are offered, citing 
such a policy in California. A commenter stated that any such 
moratorium could affect the ability of individuals who have opted out 
of MMPs or do not meet MMP eligibility criteria to enroll in other 
integrated plan options. Another commenter noted that D-SNPs are best 
positioned to meet the unique needs of dually eligible individuals, and 
the California restrictions on D-SNP enrollment are harmful when dually 
eligible individuals do not have the flexibility to enroll in a D-SNP. 
This commenter expressed concern that if CMS moved forward with the 
proposed policy and D-SNPs remained closed to enrollment, beneficiaries 
in areas like those in certain California counties would likely enroll 
in non-SNP MA plans that not only would not offer the care coordination 
required by D-SNPs, but may impose higher premiums and out-of-pocket 
expenses.
    Response: We thank the commenters for sharing these concerns. As we 
stated in our proposed rule preamble, section 164(c)(4) of MIPPA does 
not obligate states to contract with D-SNPs, which therefore provides 
states with significant control over the availability of D-SNPs. As 
discussed earlier, we are finalizing language to delay CMS non-renewal 
of D-SNP look-alikes to January 1, 2023 and subsequent years, to allow 
more time for MA organizations and states to coordinate transitions. 
This delay will also better align the timing of any enrollee 
transitions from D-SNP look-alikes in California with the current 
CalAIM implementation timing of January 1, 2023. We do not expect D-SNP 
look-alike enrollees to experience higher premiums since the transition 
approach proposed and finalized at paragraph (e) only permits MA 
organizations to transition D-SNP look-alike enrollees into MA plans 
that meet certain criteria, including having a combined Part C and Part 
D premium of $0 for individuals eligible for the premium subsidy for 
full subsidy eligible individuals described in Sec.  423.780(a).
    Comment: A commenter appreciated CMS giving MA plans the ability to 
transition enrollees in non-D-SNP look-alikes into D-SNPs across legal 
entities but expressed concern that there could be disproportionate and 
unintended impacts to the Members Choosing to Leave the Plan Star 
Rating measure for contracts with the D-SNP look-alikes where the 
transition authority is used. This commenter requested that CMS ensure 
that all proposed D-SNP look-alike transitions are excluded from the 
Members Choosing to Leave the Plan Star Rating measure because the 
commenter did not believe this measure, which is representative of 
enrollee satisfaction, would accurately reflect performance if 
transitioned members were included in the measure.
    Response: We thank the commenter for raising this issue. The 
specifications for the Members Choosing to Leave the Plan Star Rating 
measure allow beneficiaries transitioned as a result of a PBP 
termination to be excluded from the calculation of this Star Rating 
measure. The vast majority of D-SNP look-alike enrollees transitioned 
into another MA plan or plans will be identified in MARx as 
disenrollment reason code 09, termination of a contract (CMS-
initiated), or disenrollment reason code 72, disenrollment due to a 
plan-submitted rollover. Neither disenrollment reason code 72 nor 09 
will be counted toward the calculation of the Members Choosing to Leave 
the Plan Star Rating measure. As discussed earlier, we estimated one 
percent of, or 1,808, D-SNP look-alike enrollees would make a Medicare 
choice other than the MA plan into which they are transitioned. MARx 
will identify these transitions as disenrollment code 13, disenrollment 
because of enrollment in another plan, and these transactions will be 
counted toward calculation of the Members Choosing to Leave the Plan 
Star Rating measure. Since such a small number of transitioning D-SNP 
look-alike enrollees would be counted, we do not believe a change to 
the Star Rating measure specifications is needed.
    Comment: Some commenters requested that CMS only permit D-SNP look-
alikes to transition members into other MA plans for which provider 
networks have at least a 90 percent overlap with the provider network 
of the D-SNP look-alike. These commenters requested that, if this 
standard is not met, enrollees should not be transitioned to another 
plan and instead default to coverage under the original Medicare fee-
for-service program. One of these commenters noted that because any 
plan receiving D-SNP look-alike enrollees would be part of the same 
parent organization as the D-SNP look-alike, that parent organization 
could adjust the MA plan networks to meet this 90 percent standard.
    Response: We appreciate the commenters' concern that dually 
eligible individuals maintain their providers from the network of the 
D-

[[Page 33818]]

SNP look-alike. As we discussed in response to other comments, MA 
organizations may transition enrollees from a D-SNP look-alike into 
another MA plan offered by the same parent organization, including a D-
SNP. Many provider participation agreements used by MA organizations 
include provisions that the providers contract for all product types 
the MA organization offers. In fact, CMS assesses network adequacy at 
the contract level rather than at the plan level (see section V.A. of 
this preamble). In similar instances where CMS transitioned enrollees 
from MMPs to D-SNPs under the same parent organization, there was a 
high degree of overlap in the provider network, as assessed at the 
contract level. Based on our understanding of common contracting 
processes and past experience with MMPs and MA organizations that offer 
D-SNPs, we believe a high degree of overlap will exist between the 
contracted provider networks in a D-SNP look-alike and a MA plan 
offered by the same parent organization, making it unnecessary for CMS 
to impose a standard that requires a specific percentage of provider 
overlap. Additionally, and as we noted earlier in this section, in 
those instances where a dually eligible individual receives notice that 
they are being transitioned to a MA plan that does not include their 
providers, they retain the ability to choose a different MA plan or the 
original Medicare fee-for-service program. Finally, in any instances in 
which there would be meaningful network differences between the D-SNP 
look-alike and the MA plan to which a member is transitioned, we 
strongly encourage plans to communicate with members about the 
potential impacts of such changes.
    Comment: A commenter explained that there were many lessons learned 
during the implementation of Cal MediConnect, a capitated model 
demonstration under the Financial Alignment Initiative, that 
highlighted the importance of consumer protections such as continuity 
of care and network parity. The commenter noted that during the 
transition to Cal MediConnect, the Department of Health Care Services, 
California's state Medicaid agency, implemented continuity of care 
standards and provided guidance allowing the receiving Cal MediConnect 
plan, which was an MMP, to use the HRA completed by a D-SNP. To 
minimize disruptions in care, the commenter requested that CMS consider 
beneficiary protections similar to those included in the state's 
proposed CalAIM D-SNP transition plan and establish requirements for 
transferring a D-SNP look-alike enrollee's HRA and care plan, as well 
as requirements for continuity of care and network parity, and a 
prohibition on receiving plans' imposition of additional cost-sharing 
requirements.
    Response: We appreciate the commenter's perspective and support a 
smooth transition between D-SNP look-alikes and another MA plan, but we 
do not believe establishing additional requirements as suggested is 
necessary. As discussed in the preamble of our proposed rule, D-SNP 
look-alikes are not subject to federal D-SNP requirements, including 
the requirements to develop HRAs and individualized care plans. Thus, 
we do not expect D-SNP look-alikes necessarily will have any HRAs or 
care plans to transfer to another MA plan in connection with the 
transition of a beneficiary's enrollment. As discussed earlier in this 
section, to the extent that a D-SNP look-alike has developed HRAs or 
individualized care plans, we expect the vast majority of D-SNP look-
alike enrollees to be transitioned into a plan offered by the same 
parent organization as the D-SNP look-alike. We believe that 
transitions under paragraph (e) will facilitate the sharing of any HRAs 
and care plans and promote continuity of care because the new plan will 
be operated by an entity with the same parent organization, if not the 
same MA organization, which likely means overlapping or the same 
personnel and policies. Additionally, all transitioning beneficiaries 
will have Medicare's standard Part D continuity of care protections for 
prescription drugs (including temporary fills of non-formulary drugs 
during a transition period as provided under Sec.  423.120(b)(3)). 
Plans receiving transitioned enrollees must also provide other 
continuity of care requirements for MA plans, including those outlined 
in Sec.  422.112(b). As we describe earlier in this section, we believe 
that there will be a high degree of provider network overlap across 
plans that are offered by the same MA organization or share a parent 
organization, making it unnecessary for CMS to impose a standard that 
requires a specific percentage of provider overlap. Finally, we do not 
expect D-SNP look-alike enrollees to experience higher premiums since 
the transition approach proposed and finalized at paragraph (e) only 
permits MA organizations to transition enrollees in a D-SNP look-alike 
into MA plans that meet certain criteria, including having a combined 
Part C and Part D premium of $0 for individuals eligible for the 
premium subsidy for full subsidy eligible individuals described in 
Sec.  423.780(a). We also note that, pursuant to Sec.  422.504(g)(1), 
MA organizations cannot impose cost sharing requirements for Medicare 
Parts A and B services on full-benefit dually eligible individuals that 
would exceed the amounts permitted under the state Medicaid plan if the 
individual were not enrolled in the MA plan.
    Comment: Several commenters encouraged CMS to require that the ANOC 
notifying a beneficiary being transitioned to a new plan identify D-SNP 
look-alike providers known to not be in the receiving plan's network, 
focusing specifically on primary care providers and specialists who the 
beneficiary has seen twice or more in the past year. One of these 
commenters explained that this information would help beneficiaries 
make informed choice about whether to participate in the transition and 
prevent surprise access-to-care issues in the early months of 
enrollment. A commenter expressed a similar view but suggested the ANOC 
identify any providers seen in last year. Another commenter noted the 
importance of a plan's provider network to beneficiaries with 
disabilities. We also received one comment recommending that the ANOC 
contain information about other plan options.
    Response: We appreciate the commenters' perspectives and support 
transparency on MA provider networks, but we do not agree that the ANOC 
is an appropriate means of communicating beneficiary-specific provider 
information since it is not a beneficiary-specific notice. Standardized 
language in the ANOC model already provides general information about 
changes to an MA plan's network and directs enrollees to the plan's 
updated provider network directory to help with decision-making during 
the AEP. As we discussed earlier in this section, we believe the vast 
majority of D-SNP look-alike enrollees will be transitioned into an MA 
plan within the same parent organization as the D-SNP look-alike and 
there will be a high degree of provider network overlap across plans 
that are offered by the same MA organization or share a parent 
organization, lessening the need to provide beneficiary-specific 
provider information. Additionally, and as we noted earlier in this 
section, in those instances where a dually eligible individual is 
transitioned to a MA plan that does not include their providers, they 
retain the ability to choose a different MA plan or the original 
Medicare fee-for-service program.

[[Page 33819]]

    While we support beneficiary education and choice about plan 
options, we also do not believe the ANOC is the appropriate vehicle for 
communicating information about other plan options. As described 
earlier, the transition process of D-SNP look-alike enrollees into 
another MA plan or plans will overlap with the AEP. Enrollees who are 
subject to being transitioned under Sec.  422.514(d) have multiple ways 
of identifying other plan choices, such as through reviewing the 
Medicare & You Handbook, consulting Medicare Plan Finder, and 
contacting 1-800-Medicare and the State Health Insurance Assistance 
Program in their state.
    Comment: A commenter requested that CMS provide guidance for 
providers and beneficiaries explaining why the transition from D-SNP 
look-alikes to another MA plan or plans is occurring.
    Response: We appreciate the comment and the desire for providers 
and beneficiaries to be informed about the transition. However, we 
believe it is the responsibility of MA organizations that are 
transitioning enrollees to other MA plans to educate providers and 
enrollees about the transition and the benefits of the new (receiving) 
plans. As discussed earlier in this section, the MA organization 
receiving D-SNP look-alike enrollees is required to send these 
enrollees an ANOC consistent with Sec.  422.111(a), (d), and (e) that 
includes information on benefits and provider network changes. We are, 
however, finalizing paragraph (e)(2)(ii) with minor modifications to 
clarify that the responsibility of providing information to 
transitioned enrollees in the ANOC rests with the MA-PD plan into which 
individuals are transitioned, and that the ANOC describes changes to 
the MA-PD plan's benefits and provides information about the MA-PD 
plan.
    Comment: A commenter expressed support for the proposed D-SNP look-
alike contracting standards, while noting potential negative impacts, 
including reduced plan competition and consumer choice. The commenter 
recommended that states be required to contract with all MA-PD plans 
that have an approved MOC and suggested three different contracting 
options: (1) States enter into a care coordination contract with plans; 
(2) states pay plans to coordinate Medicare and Medicaid services, 
assuring alignment with the state's strategy to deliver LTSS or managed 
LTSS (MLTSS); and (3) states pay plans to coordinate Medicare and 
Medicaid services and deliver LTSS. Another commenter suggested that 
plans meeting certain CMS criteria for integrated care could earn a 
``Standard of Excellence for Dually-Eligible Individuals'' seal of 
approval that could be used for marketing purposes and posting on 
Medicare Plan Finder.
    Response: We appreciate the commenters' input on strategies that 
could improve plan competition and support consumer choice. We note 
that some of the commenters' recommendations, such as requiring states 
to contract with all MA-PD plans that have an approved MOC, are beyond 
CMS's existing authority. As we gain experience with implementing the 
requirements in this final rule, we will take into consideration those 
recommendations that are within CMS's authority.
    Comment: A commenter recommended CMS consider requiring that any 
entity that meets the 80 percent dual enrollment threshold meet minimum 
standards of integrated care coordination and data sharing for its 
full-benefit dually eligible members, including in the eight states 
that do not currently have any D-SNPs (as of July 2019). This commenter 
supported requiring that MA organizations in these eight states 
transition members to an MMP if one exists or, if one does not, submit 
a MOC, complete HRAs, and provide integrated care coordination and 
information sharing for all of its full-benefit dually eligible 
members.
    Response: We appreciate the commenter's alternative approach. We 
clarify that proposed paragraphs (d)(1) and (2) would, in fact, limit 
new and existing D-SNP look-alikes from operating in states where a D-
SNP or any other plan authorized by CMS to exclusively enroll 
individuals entitled to medical assistance under a state plan under 
Title XIX, including MMPs, exists. The limit on new D-SNP look-alikes 
precludes CMS from entering into a new contract for a D-SNP look-alike 
for 2022 and subsequent years. The limit on existing D-SNP look-alikes 
precludes CMS from renewing a contract for an existing D-SNP look-alike 
for 2023 and subsequent years. However, under current law, CMS does not 
have the authority to require D-SNP look-alikes in the eight states 
without D-SNPs to submit MOCs, conduct HRAs, or provide integrated care 
coordination and information for all of its full-benefit dually 
eligible members. Section 1859(f) of the Act requires that each D-SNP 
have a contract with the state Medicaid agency; this requirement is in 
addition to other D-SNP requirements this commenter references. 
Allowing D-SNP look-alikes to operate without such state contracts 
would allow such plans to circumvent an important D-SNP requirement.
    Comment: A few commenters proposed the application of new federal 
measures nationwide that would require D-SNP look-alikes to make 
progress on a pathway toward greater care integration. Rather than not 
approving or renewing contracts for certain D-SNP look-alikes, a 
commenter suggested that this alternative approach would assure 
continued beneficiary choice, as certain integrated care plans receive 
lower Star Ratings than other plans that do not provide integrated 
care. Another commenter suggested that D-SNP look-alikes could provide 
more integrated care if CMS required them to notify the state Medicaid 
agency or appropriate Medicaid managed care plan when full-benefit 
dually eligible individuals are admitted to a hospital or skilled 
nursing facility (that is, the requirement recently codified at Sec.  
422.107(d) as one of three integration options available to D-SNPs 
beginning in 2021).
    Response: We appreciate the support for increased opportunities to 
integrate care for individuals who are dually eligible and the 
importance of beneficiary choice. Though we intend, through this final 
rule, to discourage the rapid proliferation of D-SNP look-alikes that 
undermine the statutory and regulatory framework for D-SNPs, we will 
continue to consider other ways to further promote integrated care for 
individuals who are dually eligible.
    Comment: A few commenters proposed that CMS conduct additional 
research on the market dynamics of D-SNP look-alikes, noting factors 
such as incentives for brokers who steer enrollees toward or away from 
certain service delivery models. These commenters suggested that, 
rather than implementing broad restrictions on D-SNP look-alikes, CMS 
could address those market distortions directly. For example, if D-SNP 
look-alikes result from inappropriate steering of beneficiaries, these 
commenters noted that CMS could institute measures reinforcing 
referrals to products best suited to the beneficiary's needs. A few 
commenters noted that if misleading marketing practices were found to 
be a root cause, CMS has regulations and program rules to stop them. 
Another commenter supported the strong enforcement of existing 
marketing and broker requirements to prevent the targeting of dually 
eligible individuals for marketing MA plans that do not offer 
integrated care. The commenter noted that if CMS believes it lacks the 
authority required to discontinue this behavior, Congress should grant 
the agency the authority it needs.
    Response: We appreciate the commenters' perspectives on the need

[[Page 33820]]

to avoid beneficiary confusion and take steps against misleading 
marketing practices. Our proposed rule included various proposed 
provisions codifying previous subregulatory guidance from the Medicare 
Communications and Marketing Guidelines prohibiting non-D-SNP plans 
from marketing their plan as if it were a D-SNP; those proposals will 
be addressed in a future final rule. We note, however, that MA 
organizations remain responsible for ensuring that their agents and 
brokers comply with part 422, subpart V. Current requirements (such as 
Sec.  422.2268(a)(1) and (2)) include prohibitions on misleading or 
confusing marketing and communications; MA organizations must ensure 
downstream entities--such as their agents and brokers--that perform 
marketing or enrollment on behalf of the MA organization also comply 
with these requirements. We will also continue to monitor plans' 
compliance with CMS marketing rules prohibiting misleading marketing 
practices, including activities of agents and brokers, to ensure that 
dually eligible individuals can make informed choices. This includes 
review of complaints about inappropriate marketing practices CMS 
receives through the Complaint Tracking Module described in Sec.  
422.504(a)(15). As we gain experience with implementing the 
requirements in this final rule, we will evaluate whether additional 
rulemaking on marketing practices is necessary.
    Comment: A few commenters suggested improving and increasing 
education for dually eligible individuals and providers about the 
benefits of integrated care and the availability of plans that offer 
such care. A few commenters suggested that brokers should be required 
to educate dually eligible individuals on the integrated care options 
within their service area to assure that they can make informed 
choices. A commenter recommended that CMS require any low-premium MA 
plan that attracts dually eligible individuals to educate them about 
the availability of D-SNP options within their service area.
    Response: We appreciate recommendations for improved provider and 
beneficiary education on the availability and benefits of integrated 
products, and we will take into consideration ways to strengthen agent 
and broker training requirements and marketing rules within our current 
authority.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed provisions at Sec.  422.514(d) and (e) with the 
following modifications:
     We are reorganizing the regulation text by adding new 
paragraphs (d)(1)(i) and (ii) and (d)(2)(i) and (ii) for better 
organization and clarity of the final requirements, as well as to 
establish different effective dates for the provisions of paragraphs 
(d)(1) and (2). Accordingly, we are also updating the reference in 
paragraph (e)(1)(i) from paragraph (d)(2) to paragraph (d)(2)(ii).
     We are finalizing the provision at paragraph (d)(2) with 
the date 2023 instead of 2022 to extend by one year the timeline on 
which the contract limitation will apply to an existing non-SNP plan 
with actual enrollment consisting of 80 percent or more dually eligible 
enrollees (with the exception of an MA plan active less than one year 
and with enrollment of 200 or fewer individuals at the time of the 
determination).
     We are modifying paragraph (e)(1)(iv) to stipulate that an 
MA plan (or plans) receiving enrollees under the transition process in 
paragraph (e) must be of the same plan type (for example, HMO or PPO) 
as the D-SNP look-alike.
     We are making a minor modification to paragraph (e)(2)(ii) 
to eliminate the reference to Sec.  422.2267(e)(3), as that proposed 
provision is not being finalized in this rule. We are also modifying 
paragraph (e)(2)(ii) to clarify that the responsibility of providing 
information to transitioned enrollees in the ANOC rests with the MA-PD 
plan into which individuals are transitioned, and that the ANOC 
describes changes to the MA-PD plan's benefits and provides information 
about the MA-PD plan.
     We are finalizing paragraph (e)(4) with a technical change 
to clarify that the content as well as the mechanism and timing 
requirements in Sec.  422.506(a)(2) apply to the notice an MA 
organization must provide to any enrollees in a D-SNP look-alike that 
the MA organization is not transitioning to a new plan.
     We are adding a new paragraph (f) to clarify that we would 
consider actions taken consistent with paragraph (d) to warrant special 
consideration to exempt affected MA organizations from the denial of an 
application for a new contract or service area expansion pursuant to 
Sec. Sec.  422.502(b)(3) and (4), 422.503(b)(6) and (7), 422.506(a)(3) 
and (4), 422.508(c) and (d), and 422.512(e)(1) and (2).
[GRAPHIC] [TIFF OMITTED] TR02JN20.000


[[Page 33821]]



III. Implementation of Certain Provisions of the 21st Century Cures Act

A. Medicare Advantage (MA) Plan Options for End-Stage Renal Disease 
(ESRD) Beneficiaries (Sec. Sec.  422.50, 422.52, and 422.110)

    Section 4001 of the Balanced Budget Act of 1997 (hereinafter 
referred to as the BBA of 1997) added sections 1851 through 1859 to the 
Act establishing Part C of the Medicare program known originally as 
``Medicare + Choice'' and later as ``Medicare Advantage (MA).'' As 
enacted, section 1851 of the Act provided that every individual 
entitled to Medicare Part A and enrolled under Part B, except for 
individuals with end stage renal disease (ESRD), could elect to receive 
benefits through an MA plan. The statute further permitted that, in the 
event that an individual developed ESRD while enrolled in an MA plan or 
in a health plan offered by the MA organization, he or she could remain 
in that MA plan or could elect to enroll in another health plan offered 
by that organization. These requirements were codified at Sec.  
422.50(a)(2) in the initial implementing regulations for the Part C 
program published in 1998 (63 FR 35071).
    Section 1851 of the Act was subsequently amended several times to 
expand coverage of ESRD beneficiaries in MA plans.
     Section 620 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (hereinafter referred to as 
BIPA), established a one-time opportunity for individuals, medically 
determined to have ESRD, whose enrollment in an MA plan was terminated 
or discontinued after December 31, 1998, to enroll in another MA plan.
     Section 231 of the MMA gave the Secretary authority to 
waive section 1851(a)(3)(B) of the Act, which precludes beneficiaries 
with ESRD from enrolling in MA plans. Under this authority, CMS 
undertook rulemaking to allow individuals with ESRD to join an MA 
special needs plan.
    In 2016, paragraph (a) of section 17006 of the Cures Act further 
amended section 1851 of the Act to remove the prohibition for 
beneficiaries with ESRD from enrolling in an MA plan. This change is 
effective for plan years beginning on or after January 1, 2021. (Please 
see sections III.B. and III.C. of this final rule for further changes 
established by section 17006 of the Cures Act.) To implement these 
changes in eligibility for MA plan enrollment made by the Cures Act, we 
proposed the following amendments:
     Section 422.50(a)(2) would be revised to specify that the 
prohibition of beneficiaries with ESRD from enrolling in MA plans (and 
associated exemptions) is only applicable for coverage prior to January 
1, 2021.
     Section 422.52(c) would be revised to specify that CMS 
authority to waive the enrollment prohibition in Sec.  422.50(a)(2) to 
permit ESRD beneficiaries to enroll in a special needs plan would also 
only be applicable for plan years prior to 2021.
     Section 422.110(b) would be revised to specify that the 
exception to the anti-discrimination requirement, which was adopted to 
account for the prohibition on MA enrollment by beneficiaries who have 
ESRD, is only applicable for plan years prior to 2021.
    As noted earlier, the changes mandated by the Cures Act do not take 
effect until the 2021 plan year. As such, individuals entitled to 
Medicare Part A and enrolled under Part B, and medically determined to 
have ESRD, are not eligible to choose to receive their coverage and 
benefits through an MA plan prior to plan year 2021, subject to the 
limited exceptions reflected in the current regulation text.
    We received a large number of comments related to this proposal. 
The discussion below pertains specifically to comments related to 
eligibility and the removal of the prohibition on beneficiaries with 
ESRD enrolling in an MA plan as proposed in Sec. Sec.  422.50(a)(2), 
422.52(c), and 422.110(b).
    Comment: Generally, all commenters supported the statutory change 
removing the prohibition for ESRD beneficiaries to enroll in an MA 
plan. Many commenters noted that allowing these beneficiaries to enroll 
in MA plans will provide care coordination and, thus, improved clinical 
outcomes for this vulnerable population. A commenter also noted that MA 
beneficiaries have a relatively low rate of switching among plans and 
tend to stay with the selected plan long term, and this could 
contribute to better outcomes through longer coordination of care. Many 
commenters stated that this change will provide options for obtaining 
supplemental benefits and access to health and wellness programs not 
available in Original Medicare.
    Several commenters stated that MA plans provide a maximum out-of-
pocket (MOOP) cost sharing for all enrollees, which makes MA an 
attractive option for these beneficiaries with high annual medical 
costs. Commenters noted that this MOOP may significantly decrease 
patients' out-of-pocket costs. A commenter noted that the MOOP is 
especially important for those ESRD beneficiaries who are under age 65, 
and may not be eligible to purchase a Medigap policy to supplement 
their Original Medicare expenses. Several commenters noted that this 
provision will help improve the lives of, and empower, ESRD 
beneficiaries consistent with the President's Executive Order on 
Advancing American Kidney Health.
    Response: We agree with the commenters and appreciate their support 
of the proposal.
    Comment: Several commenters requested that CMS clarify if the 
current optional employer/union group waiver for enrollment of ESRD 
members will be eliminated and, if so, questioned when guidance would 
be updated to reflect the change.
    Response: Under Section 1857(i) of the Act, CMS has the statutory 
authority to waive or modify requirements that hinder the design of, 
the offering of, or the enrollment in, employer/union-sponsored MA 
plans. As noted in the Medicare Managed Care Manual Chapter 9, section 
30.3, CMS used this authority to grant a waiver to allow MA plans 
offered by MA organizations under contract with an employer or union, 
or offered directly by an employer or union, to choose to accept 
enrollees with ESRD under certain circumstances, provided that all 
otherwise eligible individuals with ESRD are permitted to enroll. With 
the enactment of the Cures Act, effective plan years on or after 
January 1, 2021, the prohibition on MA enrollment for ESRD 
beneficiaries is removed. Therefore, the waiver will no longer be 
effective and MA plans, including MA EGWPs, must accept enrollments of 
ESRD beneficiaries. We plan to update guidance as soon as possible.
    Comment: A commenter questioned if the 30-month coordination of 
benefits period for those entitled to Medicare based on ESRD status 
will be eliminated based on the removal of the prohibition.
    Response: The regulation codifies that those individuals with ESRD 
cannot be restricted from enrolling in an MA plan. However, nothing in 
the language of the regulation eliminates or is to be construed as 
eliminating the 30-month coordination of benefits period that section 
1862(b)(1) of the Act imposes with regard to Medicare coverage of 
beneficiaries whose entitlement is based on ESRD. In other words, any 
Group Health Plan coverage effective at the time a beneficiary with 
ESRD enrolls in an MA plan will remain the primary payer during the 30-
month coordination of benefits period.
    Comment: A commenter questioned how removing the prohibition on 
individuals with ESRD from enrolling in

[[Page 33822]]

MA plans will impact the way ESRD information must be obtained and 
reconciled in order to ensure appropriate payment. The commenter also 
questioned if CMS is considering increasing resources for the 
QualityNet helpdesk, as ESRD enrollments in MA plans are likely to 
increase, which may prompt higher volumes of cases where ESRD statuses 
and payments need to be reconciled and corrected in the future.
    Response: Completion of the CMS-2728-U3 form (End Stage Renal 
Disease Medical Disease Evidence Report--Medicare Entitlement and/or 
Patient Registration, OMB control number 0938-0046) by a dialysis 
center, (including physician attestation and patient signature) is 
required for an individual to be medically determined to have ESRD for 
purposes of filing for Medicare benefits. However, collection of these 
data on the CMS-2728-U3 are also used to establish and maintain a 
nationwide kidney disease registry for dialysis, transplant, and 
prospective transplant patients, and will store pertinent medical facts 
on each registrant, regardless of Medicare status. CMS enrollment 
systems ultimately receive this information resulting in MA plans 
receiving payment based on ESRD capitation rates and risk adjustment. 
Further information on this process can be found in section 6.2.2 of 
the Plan Communication User Guide for Medicare Advantage Prescription 
Drug Plans.
    At this time, we have no plans to add additional resources to the 
QualityNet Help Desk but we will monitor call volumes to see if we need 
to increase the number of agents fielding ESRD Quality Reporting System 
calls.
    Comment: A commenter requested clarification on whether MA plans 
will be allowed to include the question regarding ESRD status on the MA 
enrollment form. The commenter also questioned if this change will 
impact the required Data Elements to consider an enrollment request 
complete.
    Response: CMS has proposed changes to the standard (``long'') model 
form used for MA and Prescription Drug Plan (PDP) enrollment (currently 
approved under OMB control number 0938-0753 CMS-R-267), to reduce data 
collection and simplify the enrollment process. When adopted, the new, 
``shortened'' enrollment form will limit data collection to what is 
lawfully required to process the enrollment and other limited 
information that the sponsor is required, or chooses to, provide to the 
beneficiary. The new ``shortened'' form used for enrollment into MA and 
PDP plans will not contain the ESRD status question. We expect MA plans 
to use the new shortened form, (once OMB has approved its use) for the 
2020 AEP, which begins on October 15, 2020, for January 1, 2021 
effective dates. This timeframe aligns with the effective date of the 
removal of the prohibition of MA enrollment for ESRD beneficiaries. As 
the ESRD status question will not be on the form, it is not a data 
element which will be required to consider the enrollment complete. MA 
plans do not need to know the ESRD status of an enrollee to process an 
enrollment in light of the changes made by the Cures Act, and are 
prohibited from discriminating against potential enrollees on the basis 
of a health status factor. Data element requirements will be updated in 
future guidance.
    Comment: A commenter questioned how CMS plans to work with state 
Medicaid agencies regarding implementation of ESRD enrollment in D-
SNPs. Specifically, the commenter stated that some states do not permit 
enrollment into a D-SNP plan when a beneficiary has been diagnosed with 
ESRD and questioned how CMS plans to address the discrepancy between 
current state enrollment restrictions prohibiting patients with ESRD 
from enrolling in a state's D-SNP plans and the removal of the 
prohibition. The commenter also questioned if CMS will require states 
to adopt policies or align with CMS' enrollment changes.
    Response: States already have the ability in their state Medicaid 
agency contract with each D-SNP to restrict which dually-eligible 
individuals may enroll in the D-SNP. If the state's contract with a D-
SNP excludes those with ESRD, the D-SNP may retain that exclusion in 
order to comply with the state contract required under Sec.  422.107.
    Comment: A commenter questioned how the enrollment change will 
affect MMPs. They specifically questioned if CMS and state Medicaid 
agencies will revise the three-way-contracts and if MMP plan rates 
would be affected.
    Response: We note that currently, most states that are testing a 
capitated model of integrated care in demonstrations under the 
Financial Alignment Initiative (FAI) authorized under section 1115A of 
the Act permit those beneficiaries with ESRD to enroll in MMPs. Only 
South Carolina and six counties in California exclude those with ESRD 
from enrolling in an MMP. We are consulting with those two states to 
determine if, starting CY2021, they want to continue that exclusion 
under the model of integrated care being tested under the FAI 
demonstration authority. If they decide they do want to include the 
ESRD population, CMS would work with those states to update the 
applicable Medicaid MMP rates, as needed. The MMP Medicare rate 
structure already includes rates specific for individuals with ESRD and 
these rates would apply for any MMP enrollees with ESRD; specifically, 
the ESRD dialysis state rate applies for individuals in the dialysis 
and transplant status phases, and the Medicare Advantage 3.5 percent 
bonus county rate applies for individuals in the functioning graft 
status phase, with all of these rates risk adjusted using the 
Hierarchical Condition Category -ESRD risk adjustment model for the 
applicable year.
    Comment: A commenter stated that a disproportionate share of 
beneficiaries with ESRD could be enrolling in D-SNPs and requested that 
CMS monitor enrollment of beneficiaries with ESRD into D-SNPs and 
ensure that payments are adequate.
    Response: We appreciate the feedback provided by the commenter. We 
will continue to analyze these issues as additional data emerges. We 
will consider whether, consistent with the statutory requirements for 
setting ESRD rates in section 1853(a)(1)(H) of the Act, any refinements 
to the ESRD rate setting methodology may be warranted in future years.
    Comment: A commenter stated that there should be oversight and 
penalties for companies who use aggressive marketing campaigns to 
recruit ESRD patients and ``bait and switch'' with services the 
beneficiary was promised and not delivered.
    Response: We appreciate the commenters' concerns. MA plans must 
comply with the marketing and communications requirements in 42 CFR 
part 422, subpart V, and specifically, Sec.  422.2268(a)(1) and (2), 
which include prohibitions on providing information that is inaccurate 
or misleading, and engaging in activities that could mislead or confuse 
Medicare beneficiaries. As part of ensuring their compliance with these 
requirements, MA organizations must monitor and oversee the activities 
of their subcontractors, downstream entities, and/or delegated entities 
as well. If CMS finds that MA plans have failed to comply with 
applicable rules and guidance, CMS may take compliance or enforcement 
actions, including, but not limited to, intermediate sanctions or civil 
money penalties.
    Comment: Some commenters raised concerns with implementing new 
rules given the ongoing COVID-19 pandemic and the strain it is putting 
on the entire United States health care system. A few commenters urged 
CMS to consider delaying implementation of this change

[[Page 33823]]

and continue to prohibit beneficiaries with ESRD from enrolling in MA 
plans until at least 2022. A commenter requested that CMS consider 
making all new 2021 requirements voluntary rather than mandatory.
    Response: The statutory change provides beneficiaries with the 
right to make an election for an MA plan if they meet the otherwise 
applicable requirements beginning January 1, 2021. CMS lacks authority 
to delay implementation of this statutory change. We are sympathetic to 
the commenters' concerns that additional changes during the on-going 
pandemic may increase burdens and make compliance more difficult. 
However, the pandemic has further indicated that it is important to 
break down the barrier that has prohibited beneficiaries with ESRD from 
the enrolling in MA and having access to benefits such as care 
coordination and limitations to out-of-pocket costs. We also note that 
these changes are required by law (the Cures Act), effective for plans 
years on or after 2021. We appreciate that the COVID-19 pandemic has 
interrupted timing for implementing new requirements, but we are also 
mindful of the fact that the Cures Act was enacted in 2016 and, as a 
result, plans have been aware of the change and are likely planning for 
these enrollments.
    Comment: Several commenters suggested that CMS develop educational 
materials that will provide accurate and objective information about MA 
plan availability and options, services provided, and potential out-of-
pocket costs. A commenter requested that CMS provide clear and easy to 
understand rules that prohibit discriminatory behavior so that patients 
that are entitled to Medicare Part A and enrolled in Part B know how 
they can exercise their right to select an MA plan.
    Response: Thank you for the comments. We agree, and as we implement 
this new and important policy, we will continue to provide educational 
and outreach materials and other clear guidance to those beneficiaries 
that are entitled to Medicare Part A and enrolled in Part B. CMS has 
reviewed, and will continue to review beneficiary publications to 
identify potential areas for improvement, and update public facing 
documents as needed so that Medicare beneficiaries are able make an 
informed coverage choice.
    Comment: A commenter stated that it is important for individuals 
with ESRD to have access to MA plan options through special election 
periods (SEPs) for exceptional conditions. A commenter stated that an 
ESRD beneficiary should understand his or her option to change back to 
Original Medicare. Another commenter noted that if people sign up for 
MA and they realize it is not the option for them, they should have the 
ability to modify their enrollment, switch plans, or to cancel and 
return to Original Medicare.
    Response: We agree that beneficiary choice is important and 
beneficiaries with ESRD--like all other beneficiaries--should carefully 
consider their enrollment options when they become eligible for 
Medicare and during subsequent AEPs. All beneficiaries who join an MA 
plan have opportunities to change plans or return to the original 
Medicare fee-for-service program during the AEP (October 15 through 
December 7) or the Medicare Advantage Open Enrollment Period (January 1 
through March 31, and during the first three months of Medicare Part A 
entitlement and Part B enrollment). In some cases, such as when a 
beneficiary moves out of the service area or is in a plan that does not 
renew its contract, a SEP is available. Of particular note is the 
``SEP65,'' wherein an MA eligible individual who elects an MA plan 
during his or her initial enrollment period for Part B surrounding his 
or her 65th birthday may disenroll from this MA plan and elect coverage 
through the original Medicare fee-for-service program any time during 
the 12-month period that begins on the effective date of coverage in 
the MA plan. Beneficiaries may also use SEPs for exceptional conditions 
newly codified in Sec.  422.62(b)(4) through (25) and described in 
section 30.4.4 of Chapter 2, Medicare Managed Care Manual, as 
appropriate, including the SEP for Individuals with ESRD Whose 
Entitlement Determination Made Retroactively to enroll in an MA plan. 
Further, to the extent that there is an exceptional situation for an 
individual that is not addressed by our existing SEPs, codified in this 
final rule, we will have the ability to respond to the exceptional 
situation pursuant to Sec.  422.62(b)(26). Finally, there are SEPs 
available, under Sec.  422.62(b)(3), in situations where the MA plan 
fails to provide medically necessary services or the plan (or its 
agents) materially misrepresented the plan's provisions in marketing 
materials.
    Comment: A commenter suggests the establishment of an ESRD 
ombudsman to address any issues with implementation of this expansion 
of MA eligibility that may arise for beneficiaries, MA organizations, 
or their contracted providers.
    Response: The Medicare Beneficiary Ombudsman is dedicated to 
resolving complaints, grievances and requests for information submitted 
by Medicare-eligible individuals and their advocates concerning any 
aspect of the Medicare program. Other entities and resources, including 
the CMS Regional Offices, State Health Insurance Assistance Programs, 
and 1-800-MEDICARE are also available to assist beneficiaries with 
issues or questions.
    Comment: A commenter proposed that CMS update the enrollment 
guidance to remove ESRD enrollment restrictions and to release the 
updated guidance in April. The commenter further states that the 
technology and process updates necessary for plans to implement the 
changes and the increase in MA membership has led to an increase in the 
number of materials that plans need to produce, straining production 
timelines.
    Response: Thank you for the comment. We understand the commenter's 
concern and plan to issue guidance as soon as possible. We are also 
mindful of the fact that the Cures Act was enacted in 2016 and, as a 
result, MA organizations have been aware of this change for some time.
    Comment: A commenter suggested that dialysis cost sharing be 
included in the standard services/items reflected on individual plan 
searches in the Medicare Plan Finder (MPF) tool, and added that this 
information is not currently reflected.
    Response: We appreciate and agree that this additional data will 
help Medicare beneficiaries with ESRD find and choose an MA plan. We 
plan to add this information for plans offering coverage in 2021.
    Comment: A couple of commenters agreed with our decision not to 
amend Sec.  422.66(d)(1) (requiring MA organizations to accept newly 
eligible Medicare beneficiaries who are seamlessly converting from 
health plan coverage offered by the MA organization) because the 
provision already applied to all beneficiaries regardless of their ESRD 
status. A commenter suggested that CMS slightly modify Sec.  
422.66(d)(1) to remove the language, ``(regardless of whether the 
individual has end-stage renal disease)'' to eliminate any confusion 
about the prohibition no longer being in effect.
    Response: We thank the commenters for their feedback. We believe 
that the regulation does not require further amendment.
    Comment: Commenters also provided a wide range of feedback 
regarding other downstream issues related to this change in enrollment 
criteria for the MA program including assurance of adequate payment for 
plans, quality of

[[Page 33824]]

care, HEDIS measure changes, beneficiary MOOP and cost-sharing 
policies, and network adequacy. A commenter suggested that 
beneficiaries are likely to have improved outcomes if enrolled in a 
plan that uses an established care delivery model, and several other 
commenters requested that CMS allow MA plans to participate in the 
Center for Medicare & Medicaid Innovation kidney models to improve the 
dissemination of best practices in kidney care. Another commenter 
requested that CMS develop and submit SSBCI benefits for these 
beneficiaries.
    Response: We appreciate commenters for their feedback. Since those 
comments are outside the scope of the changes proposed in Sec. Sec.  
422.50(a)(2), 422.52(c), and 422.110(b), they will not be addressed in 
this section. To the extent that the comment is about other proposals 
in the notice of proposed rulemaking, it is, or will be, addressed in 
connection with that proposal elsewhere in this final rule or a future 
final rule.
    After review and consideration of all comments on the proposal to 
remove the prohibition on ESRD beneficiaries enrolling in an MA plan 
and for the reasons in the proposed rule and these comments and 
responses, we are finalizing the revisions to Sec. Sec.  422.50(a)(2), 
422.52(c), and 422.110(b) as proposed.

B. Medicare Fee-for-Service (FFS) Coverage of Costs for Kidney 
Acquisitions for Medicare Advantage (MA) Beneficiaries (Sec.  422.322)

    The MA organization is generally responsible for furnishing or 
providing coverage of all Medicare Part A and Part B benefits, 
excluding hospice, for its enrollees. The Medicare FFS program does not 
pay health care providers for furnishing these benefits to such 
enrollees. Section 1851(i) of the Act generally provides that, subject 
to specific exceptions, CMS pays only the MA organization for the 
provision of Medicare-covered benefits to a Medicare beneficiary who 
has elected to enroll in an MA plan. There are specific, statutory 
exceptions to this general rule in the statute, such as authority in 
section 1853(h) of the Act for FFS Medicare payment for Medicare-
covered hospice services that an MA plan is prohibited by statute from 
covering. Section 17006(c) of the Cures Act amended section 
1852(a)(1)(B)(i) of the Act to exclude from the list of items or 
services an MA plan is required to cover for an MA enrollee coverage 
for organ acquisitions for kidney transplants, including as covered 
under section 1881(d) of the Act. Effective January 1, 2021, these 
costs will be covered under the original Medicare FFS program, pursuant 
to an amendment by section 17006(c)(2) of the Cures Act to section 
1851(i) of the Act. As amended, section 1851(i)(3) of the Act 
authorizes FFS Medicare payment for the expenses for organ acquisitions 
for kidney transplants described in section 1852(a)(1)(B)(i) of the 
Act. We proposed conforming regulatory changes to reflect the revision 
to the statute.
    Specifically, we proposed to revise Sec.  422.322, which describes 
the source of payment and effect of MA plan election on payment for 
Medicare-covered benefits. Paragraphs (b) and (c) of Sec.  422.322 
generally track the statutory requirements that, subject to specific 
exceptions, CMS payment to MA organizations is in lieu of the amounts 
that would otherwise be payable under the original Medicare FFS program 
for Medicare-covered benefits furnished to an MA enrollee and are the 
only payment by the government for those Medicare-covered services. 
Consistent with the amendments to sections 1851(i) and 1852(a)(1)(B)(i) 
of the Act, we proposed to amend Sec.  422.322 to add a new paragraph 
(d) to reflect that expenses for organ acquisitions for kidney 
transplants are an exception to the terms outlined in paragraphs (b) 
and (c), and will be covered by original Medicare. Our new paragraph 
(d) generally tracks how section 17006(c) of the Cures Act amends 
section 1851(i)(3) of the Act.
    The Cures Act does not provide for Medicare FFS coverage of organ 
acquisition costs for kidney transplants incurred by PACE participants. 
Therefore, PACE organizations must continue to cover organ acquisition 
costs for kidney transplants, consistent with the requirement described 
in section 1894(b)(1)(A)(i) of the Act that PACE organizations provide 
all Medicare-covered items and services. Accordingly, CMS will continue 
to include the costs for kidney acquisitions in PACE payment rates.
    The following is a summary of the comments we received and our 
responses:
    Comment: Several commenters expressed support for the 
implementation of this Cures Act requirement.
    Response: We appreciate the commenters' support of our approach to 
implementing this change.
    Comment: A commenter encouraged CMS to monitor the effects of the 
proposal's approach to organ acquisition costs.
    Response: While we will continue to monitor and analyze the impact 
of this change, we must comply with the statutory requirement for FFS 
Medicare to cover kidney acquisition costs for MA beneficiaries.
    Comment: A commenter noted that neither the proposed rule nor the 
calendar year 2021 Advance Notice, which was published on February 5, 
2020, provided clear guidance on billing and reimbursement for organ 
acquisition costs. This commenter urged CMS to clarify whether these 
services are to be billed directly to Medicare Administrative 
Contractors (MACs) and paid directly to the providers involved, rather 
than being paid to MA plans for pass-through to providers. The 
commenter also requested that CMS clarify which organ acquisition costs 
will be payable by FFS Medicare.
    Response: We appreciate the commenter's request for further 
clarification. We want to emphasize that the payment changes for organ 
acquisition costs apply only to kidneys. Effective January 1, 2021, FFS 
Medicare will cover kidney acquisition costs for MA beneficiaries in 
accordance with the processes and guidance outlined in the Claims 
Processing Manual,\17\ CMS Pub. 100-04, chapter 3 and the Provider 
Reimbursement Manual,\18\ CMS Pub. 15-1, chapter 31. Hospitals 
currently bill MA claims to their respective MACs for processing as no-
pay bills so that the MA inpatient days can be accumulated on the 
Provider Statistics & Reimbursement Report (PS&R) (report type 118). 
These no-pay bills must identify kidney acquisition costs using revenue 
code 081X and the hospital must track each MA kidney transplant. For 
instructions on billing for kidney acquisition costs, please refer to 
chapter 3, sections 90.1 through 90.1.3, of the Claims Processing 
Manual. For details on services included as kidney acquisition costs, 
please refer to chapter 31, section 3101, of the Provider Reimbursement 
Manual. The MA kidney transplants will be used in the numerator and 
denominator on the Medicare cost report to determine Medicare's share 
of kidney acquisition costs. Final payment will be made to the hospital 
through the Medicare cost report.
---------------------------------------------------------------------------

    \17\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/internet-Only-Manuals-IOMs-Items/CMS018912.
    \18\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.
---------------------------------------------------------------------------

    Comment: A commenter questioned how CMS addresses the difference 
between cadaveric organ acquisition and living donor organ donation in 
assessing kidney acquisition.

[[Page 33825]]

    Response: We appreciate the commenter's question. Please refer to 
the Provider Reimbursement Manual, CMS Pub. 15-1, chapter 31,\18\ for 
more information on provider reimbursement for the costs related to 
acquiring living donor organs and cadaveric donor organs.
    After careful consideration of all comments received and for the 
reasons outlined in the proposed rule and our responses to comments, we 
are finalizing the regulatory changes to Sec.  422.322 to conform with 
the statutory amendments requiring FFS Medicare coverage of kidney 
acquisition costs for MA beneficiaries, effective January 1, 2021.

C. Exclusion of Kidney Acquisition Costs From Medicare Advantage (MA) 
Benchmarks (Sec. Sec.  422.258 and 422.306)

    Section 17006(b) of the Cures Act amended section 1853 of the Act 
to require that the Secretary's estimate of standardized costs for 
payments for organ acquisitions for kidney transplants be excluded from 
Medicare Advantage (MA) benchmarks and capitation rates, effective 
January 1, 2021. As amended, section 1853(k)(5) of the Act provides for 
the exclusion from the applicable amount and section 1853(n)(2) 
provides for the exclusion from the specified amount of the Secretary's 
estimate of the standardized costs for payments for organ acquisitions 
for kidney transplants covered under the Medicare statute (including 
expenses covered under section 1881(d) of the Act). As discussed in 
greater detail in the Medicare Program; Changes to the Medicare 
Advantage and the Medicare Prescription Drug Benefit Programs for 
Contract Year 2012 and Other Changes Final Rule (hereinafter referred 
to as the April 2011 final rule) (76 FR 21431, 21484 through 21485) and 
the annual Advance Notices and Rate Announcements starting with Payment 
Year 2012,\19\ the applicable amount and the specified amount are used 
in the calculation of the MA benchmarks and capitation rates. We 
proposed to revise the relevant regulations to reflect these 
amendments.
---------------------------------------------------------------------------

    \19\ The Advance Notice and Rate Announcement for each year are 
available online at: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html.
---------------------------------------------------------------------------

    Specifically, we proposed to revise Sec.  422.258, which describes 
the calculation of MA benchmarks. Under section 1853(n)(1)(B) of the 
Act and Sec.  422.258(d) of the regulations, for 2012 and subsequent 
years, the MA benchmark for a payment area for a year is equal to the 
amount specified in section 1853(n)(2) of the Act (that is, the 
``specified amount''), but, as described in section 1853(n)(4) of the 
Act and Sec.  422.258(d)(2)(iii), cannot exceed the applicable amount 
specified in section 1853(k)(1) of the Act and Sec.  422.258(d)(2). 
Prior to enactment of the Cures Act, section 1853(n)(2)(A) of the Act 
described the specified amount as the product of the base payment 
amount for an area for a year (adjusted to take into account the phase-
out in the indirect costs of medical education from capitation rates) 
and the applicable percentage for the area and year. The base payment 
amount is, for years after 2012, the average FFS expenditure amount 
specified in Sec.  422.306(b)(2). Section 17006(b)(2)(A) of the Cures 
Act amended section 1853(n)(2)(A)(i) of the Act to require that, for 
2021 and subsequent years, the base payment amount used to calculate 
the specified amount must also be adjusted to take into account the 
exclusion of payments for organ acquisitions for kidney transplants 
from the capitation rate. We proposed to make conforming amendments to 
paragraphs (d)(3), (5), and (6) of Sec.  422.258. As amended, paragraph 
(d)(3) would specify that for 2021 and subsequent years, the base 
payment amount used to calculate the specified amount is required to be 
adjusted to take into account the exclusion of payments for organ 
acquisitions for kidney transplants. Also, as amended, paragraphs 
(d)(5) and (6) would specify that the average FFS expenditure amount 
used to determine the applicable percentage is adjusted to take into 
account the exclusion of payments for organ acquisitions for kidney 
transplants. To make these amendments, we proposed to insert references 
to the adjustment made under Sec.  422.306(d) to modify the various 
references to the base payment amount in paragraphs (d)(3), (d)(5), 
(d)(5)(i) and (ii), and (d)(6).
    We proposed to amend Sec.  422.306 by revising the introductory 
text and adding a new paragraph (d). Proposed paragraph (d) described 
the required adjustment, beginning for 2021, to exclude the Secretary's 
estimate of the standardized costs for payments for organ acquisitions 
for kidney transplants covered under this title (including expenses 
covered under section 1881(d) of the Act) in the area for the year. By 
operation of Sec.  422.258(d)(2), the applicable amount is established 
by reference to Sec.  422.306 and the rules there for calculation of MA 
annual capitation rates. By adding Sec.  422.306(d), we would implement 
the new language in section 1853(k)(5) of the Act (added by section 
17006(b)(1)(B) of the Cures Act) to require the adjustment to exclude 
payments for organ acquisitions for kidney transplants. We requested 
comment on whether these proposed revisions to Sec. Sec.  422.258(d) 
and 422.306 adequately implement the statutory changes made by section 
17006 of the Cures Act to require exclusion of the costs of kidney 
acquisition from the applicable amount and the specified amount for 
purposes of setting MA benchmarks and capitation rates.
    Per section 1853(a)(1)(H) of the Act, CMS is required to establish 
separate rates of payment to an MA organization for individuals with 
end stage renal disease (ESRD) who are enrolled in a plan offered by 
that organization. This special rule for ESRD payment rates is codified 
in the regulations at 42 CFR 422.304(c). Since the Cures Act requires 
FFS Medicare payment for kidney acquisition costs for all MA enrollees, 
including MA enrollees with ESRD, we proposed to apply the exclusion of 
kidney acquisition costs to the ESRD payment rates. As Sec.  422.304(c) 
does not prescribe the specific methodology CMS must use to determine 
the separate rates of payment for ESRD enrollees described in section 
1853(a)(1)(H) of the Act, the exclusion of kidney acquisition costs 
from ESRD rates does not require regulatory amendment. CMS addressed 
the methodology for excluding kidney acquisition costs from MA 
benchmarks (including the MA ESRD state rates) in the 2021 Advance 
Notice and Rate Announcement.
    Section 1894(d)(2) of the Act requires that PACE capitation amounts 
be based upon MA payment rates established under section 1853 of the 
Act and adjusted to take into account the comparative frailty of PACE 
enrollees and such other factors as the Secretary determines to be 
appropriate. While capitated payments made to PACE organizations are 
based on the applicable amount under section 1853(k)(1) of the Act, we 
will include the costs for kidney acquisitions in PACE rates. Because 
PACE organizations are required to cover all Medicare-covered items and 
services under section 1894(b)(1)(A)(i) of the Act, including organ 
acquisition costs for kidney transplants, we will include kidney 
acquisition costs in PACE payment rates, including PACE ESRD rates. 
This approach is consistent with how PACE organizations have 
historically been paid for kidney acquisition costs for PACE enrollees. 
We did not propose any regulatory amendments to address this.

[[Page 33826]]

    We appreciate commenters' feedback on our approach to implementing 
this Cures Act requirement. We received the following comments on our 
proposed regulatory changes, to which we provide responses below:
    Comment: Numerous commenters expressed concerns about the 
methodologies for excluding kidney acquisition costs from MA benchmarks 
and for developing MA ESRD state rates. Several commenters requested 
additional transparency and data regarding the carve-out methodology, 
voiced concerns about the magnitude of the carve-out, and provided 
suggestions for alternative ways to calculate and apply the kidney 
acquisition adjustment. A commenter specifically noted that if the 
kidney acquisition carve-out amounts were to be artificially high, 
excluding these costs from MA benchmarks would exacerbate the perceived 
issues of underpayment in MA for ESRD beneficiaries.
    Response: Section 1853(b) provides for CMS to use the annual 
Advance Notice to provide notice of proposed changes to be made in the 
methodology for the MA capitation rates and risk adjustment factors 
from the methodology and assumptions used in the previous announcement. 
As discussed, the kidney acquisition carve-out is part of the 
methodology for developing the MA capitation rates. Pursuant to the 
statute, CMS proposed the methodology for calculating the kidney 
acquisition costs to be excluded from the MA benchmarks in the 2021 
Advance Notice by providing a step-by-step description of the 
calculations to be used to adjust the rates. CMS also detailed in the 
calendar year 2021 Advance Notice the methodology used to develop ESRD 
state rates. After considering all public comments received and 
consistent with the statutory requirement to exclude the cost of kidney 
acquisitions for organ transplants from the primary components of the 
MA capitation rates, CMS finalized the kidney acquisition carve-out 
methodology, as well as the ESRD rate methodology, in the calendar year 
2021 Rate Announcement. Similar comments regarding the need for 
transparency and accuracy in calculating the kidney acquisition cost, 
the methodology used by CMS, and the amount of payment to MA plans were 
raised in that context and addressed by CMS in the calendar year 2021 
Rate Announcement. We direct readers to that document for a more 
detailed discussion of these issues.
    Comment: A commenter requested that CMS explain whether the 
exclusion of kidney acquisition costs from MA benchmarks has an impact 
on Medicare-Medicaid Plans (MMPs).
    Response: CMS develops annual Medicare capitation rates used for 
MMP payment. The MMP capitation rates are based on an estimate of what 
would have been spent in the payment year had the demonstration not 
existed. Beneficiaries enroll in the MMP demonstrations from both MA 
and Medicare FFS, and therefore the MMP Medicare capitation rates are 
developed with a weighted average of these populations' spending 
assumptions, proportional to the combination of enrolled dually 
eligible beneficiaries. Therefore, the MMP Medicare capitation rates 
are developed using both the published Medicare standardized FFS county 
rates (which are part of the MA ratebook calculation files that are 
released with the annual Rate Announcement) and an MA component that is 
based on MA plans' bids and rebates.
    As discussed in the calendar year 2021 Rate Announcement, kidney 
acquisition costs will be carved out of the contract year 2021 Medicare 
standardized FFS county rates. MA plans will bid against benchmarks 
that exclude kidney acquisition costs, in accordance with the statutory 
amendments to sections 1853(k) and (n); this is also consistent with 
how MA plans are no longer responsible for the costs of kidney 
acquisitions. Therefore, both components of the MMP Medicare capitation 
rate (the Medicare standardized FFS county rates and the MA component 
of the MMP rate) will exclude kidney acquisition costs. MMPs (like MA 
plans) will no longer be responsible for organ acquisition costs for 
kidney transplants; such costs will be excluded from the MMP rates and 
instead covered under Medicare FFS.
    Comment: A commenter noted that plans will need to re-contract for 
transplant services to remove the cost of kidney acquisitions. This 
commenter explained that it is unlikely that the new contracts will 
carve out costs that are comparable to (or lower than) the costs being 
removed from the MA benchmarks. This commenter also requested the 
precise amounts CMS has paid on behalf on MA enrollees to each 
provider.
    Response: We appreciate the commenter's concerns regarding this 
issue but must comply with the statutory requirement to exclude kidney 
acquisition costs from MA benchmarks. To date, CMS has paid for kidney 
acquisition costs for MA beneficiaries through the county and ESRD 
state rates in the MA ratebooks.
    Comment: Numerous commenters noted concerns about the adequacy and 
accuracy of the ESRD rates as well as the perceived underfunding of the 
underlying ESRD PPS. A few commenters also requested that CMS consider 
various options related to payment for dialysis services, including the 
establishment of a fee schedule cap for dialysis centers, 
implementation of zero cost sharing for dialysis services, and 
provision of an incentive payment for MA plans to offer home dialysis.
    Response: As these comments did not address the impact, 
implementation, or consequences of the kidney acquisition carve-out 
required by the Cures Act, they are out of the scope of this 
rulemaking.
    After careful consideration of all comments received and for the 
reasons outlined in the proposed rule and out responses to the 
comments, we are finalizing the proposed changes to Sec.  
422.258(d)(3), (d)(5) introductory text, (d)(5)(i) introductory text, 
(d)(5)(ii), and (d)(6)(i) and the introductory text of Sec.  422.306 
and paragraph (d).

IV. Enhancements to the Part C and D Programs

A. Reinsurance Exceptions (Sec.  422.3)

    Section 1855(b) of the Act requires MA organizations to assume full 
financial risk on a prospective basis for the provision of basic 
benefits (and, for plan years before 2006, additional benefits required 
under section 1854 of the Act) furnished to MA plan enrollees, subject 
to the exceptions listed in the statute at section 1855(b)(1)-(4) of 
the Act. The exception at section 1855(b)(1) of the Act states that an 
MA organization may obtain insurance or make arrangements for the cost 
of providing to any enrolled member such services the aggregate value 
of which exceeds a per-enrollee aggregate level established by the 
Secretary. Section 1855(b)(1) of the Act describes stop loss insurance 
arrangements but we explained in the proposed rule that our proposal 
did not use those terms in order to be specific in describing the form 
of the arrangement. Section 1855(b)(1) of the Act permits an MA 
organization to obtain insurance or make other arrangements under which 
the MA organization bears less than full financial risk for the costs 
of providing basic benefits for an individual enrollee that exceed a 
certain threshold. In the proposed rule, we proposed to adopt a new 
Sec.  [thinsp]422.3 to implement the exception at section 1855(b)(1) of 
the Act and establish in regulation options for MA organizations to use 
insurance for costs beyond a specified threshold. We

[[Page 33827]]

proposed that an MA organization may obtain insurance (that is, 
reinsurance) or make other arrangements for the cost of providing basic 
benefits to an individual enrollee the aggregate value of which exceeds 
$10,000 during a contract year or, alternatively, such costs may be 
shared proportionately on a first dollar basis, the value of which is 
calculated on an actuarially equivalent basis to the value of the 
insurance for costs that exceed $10,000 in a contract year. We also 
proposed that if the MA organization chooses to purchase pro rata 
coverage that provides first dollar coverage, the value of that 
coverage cannot exceed the value of the option of purchasing stop loss 
insurance for enrollee health care costs that exceed a threshold of 
$10,000 in a contract year. We noted in the proposed rule that the 
statutory exceptions at section 1855(b)(2) through (b)(4) of the Act 
still apply and that our proposal would serve to establish in 
regulation the threshold described in section 1855(b)(1) of the Act.
    Because we interpret section 1855(b) of the Act as requiring an MA 
organization to remain at full financial risk for basic benefits, 
subject to the exceptions listed in subsections (b)(1) through (b)(4), 
we proposed that the limits in Sec.  [thinsp]422.3 apply for purposes 
of insuring (or making other arrangements) for costs of providing basic 
benefits in excess of the established threshold and that those limits 
would not apply to supplemental benefits offered by MA organizations. 
We proposed to implement the exception at section 1855(b)(1) of the Act 
because of concerns raised to CMS that absent the implementation of 
specific standards by CMS under section 1855(b)(1) of the Act, there 
was ambiguity about the legal basis of MA organizations sharing risk 
through reinsurance. We noted in our proposed rule that a number of MA 
organizations expressed concern to CMS about this legal uncertainty as 
they have utilized reinsurance within the MA program. To resolve this 
uncertainty, we proposed to formally establish reinsurance standards 
implementing section 1855(b)(1) of the Act. Our proposal was generally 
not about subsections (b)(2) through (b)(4) of section 1855 of the Act.
    Under our proposed implementation of the exception at section 
1855(b)(1) of the Act, MA organizations that voluntarily choose to 
purchase insurance to limit their exposure to losses in furnishing 
basic benefits to individual enrollees would have two options. In the 
first option, an MA organization could purchase insurance (or make 
other arrangements) that would stop losses for the MA organization for 
individual plan enrollees when an individual enrollee's covered costs 
for basic benefits exceed $10,000 during a contract year. Stated 
another way, the MA organization could have insurance for costs that 
exceed $10,000 for covering or furnishing basic benefits to an 
individual plan enrollee in the contract year. In the second option, an 
MA organization could purchase pro rata insurance coverage that would 
provide first dollar coverage provided that the value of the insured 
risk is actuarially equivalent to costs that exceed $10,000 and the 
insurance coverage is priced at an actuarial value not to exceed the 
value of the stop loss insurance for medical expenses exceeding $10,000 
per member per year. Specifically, the value of first dollar pro rata 
insurance could not exceed the value of $10,000 per member per year 
stop loss insurance.
    In the proposed rule, we noted that in discussions with the 
National Association of Insurance Commissioners (NAIC) and in 2018 Call 
Letter comments we previously received, CMS was advised that the use of 
insurance by health care insurers is a common and long standing market 
practice for both commercial health insurers and MA organizations and 
that the practice has the purpose of reducing financial exposure to 
changes in health care costs, helps manage capital requirements, and 
allows health care insurers to grow enrollment. As we explained in our 
proposed rule, discussions with the NAIC and earlier information we 
received from the industry indicated that MA organizations located in 
areas with fewer beneficiary choices (for example, rural, underserved 
areas) particularly benefit from access to reinsurance because of how 
it provides financial stability for the MA organization, which in turn 
can lead to enhanced competition and consumer choice, especially in 
small and mid-sized market areas. Insuring part of the risk assumed 
under an MA plan is important for smaller MA organizations to compete 
with larger organizations that can independently finance their 
operations.
    We also noted that excessive reinsurance can be viewed as a hazard 
to the extent that the direct health insurer (here, the MA 
organization) might pass such a large share of their risk and premium 
through insurance and that the MA organization could then be viewed as 
no longer possessing the primary responsibility for furnishing the 
health care services. We further explained in our proposed rule that 
while the statute identifies the category of risk for which an MA 
organization may seek insurance or other arrangements (such as, in 
section 1855(b)(1) of the Act, the cost of providing to any enrolled 
member such services the aggregate value of which exceeds an 
established threshold), it is in the context of a mandate that MA 
organizations assume full financial risk on a prospective basis for 
providing basic benefits to enrollees. We stated that we are cognizant 
of the need to ensure that MA organizations are not transferring all 
the risk of providing services to enrollees to a third party that is 
not under contract with CMS. We also stated that we seek to balance 
these different interests in setting the threshold for the individual 
stop loss insurance coverage authorized by the statute.
    We also explained that the $10,000 threshold we proposed has its 
roots in our review of the Conference Report for the BBA of 1997 (H.R. 
Conf. Rep. 105-217) and the difference between the House bill and the 
Senate amendment on the threshold at which a Part C plan could reinsure 
per-enrollee costs. The Conference Report indicates that the House bill 
tracked existing language in section 1876(b)(2)(D)(i) of the Act in 
using a $5,000 per year threshold while the Senate amendment provided 
for an amount established by the agency with an annual adjustment using 
the Consumer Price Index-Urban (CPI-U) for the 12-month period ending 
with June of the previous year. The conference agreement was to adopt 
the language in section 1855(b)(1) of the Act that remains today: A 
threshold established by the agency from time to time. To develop the 
$10,000 threshold we are proposing, we started with the amount of 
$5,000 identified in the Conference Report and used the following 
methodology: We multiplied the amount identified in the Conference 
Report ($5,000) by the increase in the CPI-U. Our policy choice was 
heavily influenced by the description in the Conference Report of the 
Senate amendment: ``the applicable amount of insurance for 1998 is the 
amount established by the Secretary and for 1999 and any succeeding 
year, is the amount in effect for the previous year increased by the 
percentage change in the CPI-urban for the 12-month period ending with 
June of the previous year.'' In updating the threshold this way, we 
rounded the amount for each year to the nearest whole dollar. Actual 
CPI-U values through June 2019 were used to perform these calculations. 
After 2019, the CPI-U values are estimated using the Congressional 
Budget Office's

[[Page 33828]]

August 2019 report: An Update to the Economic Outlook: 2019 to 2029.
    In our discussion, we stated that based on a scan of the market and 
current practices of commercial health insurers, we believed that the 
$10,000 threshold for stop loss insurance that we proposed reflected a 
level of risk transfer that was reasonable and consistent with 
supporting robust competition in Medicare Advantage. We also explained 
our positon that the proposed level of risk transfer would be 
acceptable given that CMS closely monitors MA organizations in terms of 
their administration of their MA plans, specifically their timely 
provision of medically necessary health care services to enrollees and 
their overall financial solvency. We further clarified that CMS has a 
direct contract with each MA organization and despite any insurance 
arrangements, the MA organization remains responsible and liable to 
each individual enrollee for furnishing the covered benefits. In 
addition, we explained that CMS through its regional offices, plan 
audits, review of enrollee appeals and stakeholder letters closely 
monitors the performance of MA organizations and intervenes whenever it 
has evidence an MA organization is not meeting its contractual 
obligations. We also noted that any insurance arrangement used by MA 
organizations is subject to state insurance regulation and oversight 
regarding solvency because section 1856(b)(3) of the Act does not 
preempt those solvency laws or provide that CMS regulation supersedes 
them. We noted our understanding that the NAIC model laws (Model 785); 
NAIC Credit for Reinsurance Regulation (Model 786); and the NAIC Life 
and Health Reinsurance Agreements Model Regulation (Model 791) have 
been substantially adopted by all states. We believe the wide adoption 
of the NAIC reinsurance model laws by states ensures reasonable 
consistency for MA organizations subject to reinsurance review as part 
of the state's financial solvency determination. Finally, we stated 
that CMS oversight along with the states' oversight of financial 
solvency substantially would ensure that CMS would be able to intervene 
on a timely basis when an MA organization is experiencing solvency 
problems or is not meeting its obligation to appropriately furnish its 
enrollees with benefits covered under the MA plan.
    We also acknowledged that the reinsurance marketplace is complex 
and evolving. Therefore, we asked for comments regarding our proposed 
reinsurance regulation generally and the specific threshold proposed. 
We stated that we were particularly interested in comments whether the 
$10,000 threshold is a reasonable level and if the flexibility we 
proposed for MA organizations in permitting insurance or other 
arrangements that are actuarially equivalent to the $10,000 threshold 
for individual medical costs is sufficient to remove the uncertainty 
about the use of reinsurance by MA organizations. We also solicited 
comments that would provide additional information about insurance or 
other arrangements for addressing the risk of costs that exceed 
specific thresholds on an individual enrollee basis.
    In our proposed rule, we also explained that we would consider an 
MA organization to include its parent organization when evaluating 
compliance with the proposed standard for reinsurance and compliance 
with the statute. The result of that would be to evaluate compliance 
with section 1855(b) of the Act (not just subsection (b)(1)) and 
proposed Sec.  [thinsp]422.3 at the parent organization level, such 
that risk sharing or allocations of losses and costs among wholly-owned 
subsidiaries would not be evaluated. We requested comments on this 
approach and whether CMS should consider a parent organization to be 
part of an MA organization for purposes of section 1855(b) of the Act 
or whether CMS should consider a parent organization to be a separate 
entity from an MA organization.
    We thank commenters. We received 13 comments on this proposal; we 
summarize these comments and our responses follow:
    Comment: Several commenters were generally supportive of Sec.  
[thinsp]422.3(a)(1) affirming the ability of MA organizations to 
purchase stop loss insurance for basic Medicare covered medical 
expenses for an individual enrollee that exceed with an aggregate value 
of $10,000 or more per member per year in any year. However, several 
commenters expressed concerns about the proposed pro rata insurance 
requirement at Sec.  [thinsp]422.3(a)(2), requiring that this option 
not exceed the actuarial cost of purchasing stop loss insurance for 
enrollee health care costs that exceed a threshold of $10,000 in a 
contract year. A commenter stated that they read the proposed 
regulation as requiring that the value of the insured risk does not 
exceed a value which is actuarially equivalent to the aggregate value 
of the costs of providing basic benefits to an individual enrollee 
which exceeds an aggregate level that is greater than or equal to 
$10,000 during a contract year. The commenter said that they found this 
language difficult to follow. This commenter also said that, further 
complicating the matter, excess of loss insurance (that is, stop loss) 
and first dollar proportional (that is, pro rata) insurance are very 
different forms of reinsurance. Other commenters were also concerned 
that because of the differences in these types of insurance it would be 
difficult calculating an actuarial value for the cost of purchasing 
annual pro rata insurance, which shares costs with an insurer on a 
first dollar proportional basis. The commenters also said that their 
uncertainly about how to calculate this actuarial equivalency would 
make it difficult for them to ensure they would be in compliance with 
the proposed regulatory requirement. Several commenters recommended 
that instead of an actuarial equivalence that we set a limit on the 
amount of risk that an MA organization would be allowed to transfer to 
a reinsurer. Several commenters specifically proposed that CMS adopt a 
10 percent standard under which an MA organization would be required to 
maintain a minimum of 10 percent of the financial risk in any 
reinsurance arrangement involving the sharing of costs proportionately 
with an insurer on a pro rata first dollar basis.
    Response: We agree that the reinsurance options under proposed 
Sec.  422.3(a)(1) and (2) are different and acknowledge this 
potentially creates uncertainty and difficulties in determining 
actuarial equivalency, as pointed out by the commenters. As we noted 
above the statute permits an MA organization to use insurance or make 
other arrangements for the cost of providing basic benefits to an 
individual enrollee that exceed a certain threshold. In order to 
provide an option for using insurance or other arrangements for some of 
the cost of providing basic benefits to an individual enrollee before 
the threshold is exceeded, we sought to establish a way to equate the 
$10,000 stop loss threshold to sharing the risk proportionally on a 
first dollar basis (that is, pro rata insurance) to provide additional 
flexibility to MA organizations while ensuring compliance with the 
statute.
    In considering these comments we appreciate that there could be 
difficulty for some organizations in determining whether and when the 
two reinsurance options were actuarially equivalent or in determining 
an actuarially equivalent dollar amount for the two reinsurance 
options. We also recognize that it would be administratively simpler if 
we were to adopt a single standard for the amount of risk an MA 
organization can transfer to an insurer under this regulation. As we 
discuss below we are finalizing regulation text to clarify how

[[Page 33829]]

MA organizations can make an actuarial equivalency determination 
between the $10,000 stop loss insurance option and the option to 
purchase first dollar proportional (that is, pro rata) insurance. In 
addition, we have determined that the ability to purchase pro rata 
insurance affords the MA organizations the necessary flexibility to 
purchase different types of reinsurance. We are specifically finalizing 
this regulation to allow an MA organization to have insurance or make 
another arrangement for the cost of providing basic benefit to an 
enrollee, the aggregate value of which exceed an aggregate value that 
is equal to or greater than $10,000. In effect, an MA organization can 
have stop-loss insurance per enrollee with a $10,000 attachment point. 
In addition, the MA organization may use insurance to share costs 
proportionately on a per member per year first dollar basis as long as 
the amount of risk retained by the MA organization is actuarially 
equivalent to the risk retained in purchasing $10,000 per member per 
year first dollar stop loss insurance. To specifically address the 
concerns about actuarial equivalence valuations we have determined that 
actuarial equivalence may be calculated as the expected percentage of 
the MA organization's claim cost of providing basic benefits to an 
individual enrollee that is greater than or equal to $10,000 during a 
contract year. The MA organization may share its costs proportionately 
on a first dollar basis up to the expected percentage. For example, 
assume that the actuarially supported expected percentage is 66 
percent. In this example, the MA organization may reinsure (cede) up to 
66 percent of such costs proportionately on a first dollar basis. 
However, we recognize that there are other reasonable actuarial 
approaches that could be used to determine the actuarial equivalence 
cost when purchasing pro rata insurance. We will accept approaches that 
are based on a reasonable actuarial methodology. An MA organization may 
also value its pro rata insurance by establishing a specific percentage 
level of risk that it can reinsure that is not more than the actuarial 
value of $10,000 individual stop loss insurance. Appreciating that some 
commenters indicated that the proposed regulation text describing the 
permissible stop-loss arrangement was confusing, we are clarifying this 
in the final regulation text. The regulation now states the permissible 
insurance or other arrangement by describing the permissible 
reinsurance or other arrangement in terms of how much and which 
financial risk the MA organization must retain: The MA organization 
must retain the risk for at least the first $10,000 in costs of 
providing basic benefits per individual enrollee during the contract 
year.
    To specifically address the concerns about actuarial equivalence 
valuations, we are finalizing regulation text to clarify that MA 
organization may make a determination of actuarial equivalence based on 
reasonable actuarial methods. We are finalizing that an MA organization 
may share the costs of providing basic benefits on a per member per 
year first dollar basis when: (i) The actuarial value of the risk 
retained by the MA organization is actuarially equivalent to the value 
of the risk that must be retained using the permissible stop-loss 
arrangement that is described in paragraph (a)(1) and (ii) the 
determination of actuarial equivalence is based on reasonable actuarial 
methods. For example, actuarial equivalence may be reasonably 
calculated using the expected percentage of the MA organization's claim 
cost of providing basic benefits to an individual enrollee that is 
greater than or equal to $10,000 during a contract year. The MA 
organization may share its costs proportionately on a first dollar 
basis up to that expected percentage. For example, assume that the 
actuarially supported expected percentage is 66 percent. In this 
example, the MA organization may reinsure (cede) up to 66 percent of 
such costs proportionately on a first dollar basis. However, we 
recognize that there are other reasonable actuarial approaches that 
could be used to determine the actuarial equivalence cost when 
purchasing pro rata insurance. We will accept approaches that are based 
on a reasonable actuarial methodology. An MA organization may also 
value its pro rata insurance by establishing a specific percentage 
level of risk that it can reinsure that is not more than the actuarial 
value of $10,000 individual stop loss insurance.
    Comment: Several commenters asked for clarification about the 
applicability of the proposed reinsurance rule, asking if it would 
apply to quota share reinsurance arrangements under section 1855(b)(1) 
of the Act alone, or will it also apply to quota share reinsurance 
arrangements under subsections (b)(2), (b)(3) and (b)(4) of section 
1855 of the Act as well. The commenters wanted to know if quota share 
arrangements would be permissible only in the specific circumstances 
described in our proposed rule to implement section 1855(b)(1) of the 
Act.
    Response: Our proposal and this final rule at Sec.  422.3(a) are 
specifically about implementing section 1855(b)(1) of the Act. Section 
1855(b)(1) permits MA organizations to insure or make other 
arrangements for the cost of providing to any enrolled member basic 
benefits the aggregate value of which exceed a threshold set by the 
agency. We proposed that threshold ($10,000) and a way that MA 
organizations could share that particular risk proportionately by tying 
the parameters for the proportionate-risk arrangement to the actuarial 
value of the financial risk where the stop loss threshold is over 
$10,000.
    MA organizations are only permitted to share risk proportionally so 
long as the risk (the type and amount) is in the statutory exceptions 
at section 1855(b) of the Act. Section 1855(b) of the Act describes 
types of risk for which an MA organization may use insurance or make 
other arrangements. For example, section 1855(b)(2) permits an MA 
organization to obtain insurance or make other arrangements for the 
cost of basic benefits provided to its enrollees other than through the 
organization because medical necessity required the provision of those 
basic benefits before that organization could furnish them; an MA 
organization could use insurance to cover all of the costs described in 
subsection (b)(2), use a quota share arrangement for those costs, or 
use some other reinsurance arrangement for those costs. However, 
section 1855(b)(2) only permits the use of reinsurance or risk sharing 
arrangements for those specifically described costs. Our proposal and 
this final rule at Sec.  422.3(a) do not address the other statutory 
exceptions at section 1855(b) of the Act.
    Comment: Several comments asked that CMS acknowledge that CMS 
policy has, in the past, permitted MA organizations to utilize quota 
share reinsurance arrangements with captive insurance companies and 
risk bearing entities including provider-affiliated captive insurance 
companies, or other risk-bearing entities under the authority of 
section 1855(b)(4) of the Act, and that CMS will continue to allow 
this. Commenters also asked that CMS further clarify whether the 
provider-affiliated entity must be wholly-owned by the provider, or 
whether a lower percentage of ownership is required.
    Response: Section 1855(b)(4) of the Act permits an MA organization 
to make arrangements with physicians or other health care 
professionals, health care institutions, or any combination of such 
individuals or institutions to assume all or part of the financial risk 
on a prospective basis for basic benefits

[[Page 33830]]

furnished by such physicians, by such other health professionals or 
through such institutions. The type of payment arrangement used between 
the MA organization and contracting physicians, other health 
professionals or institutions for this specified financial risk is not 
limited by Sec.  422.3(a). To be clear on this point, we are finalizing 
Sec.  422.3(c) to state that the type of payment arrangement between an 
MA organization and contracting physicians, other health professionals 
or institutions for the financial risk on a prospective basis for the 
provision of basic benefit by those physicians or other health 
professionals or through those institutions) is not limited by Sec.  
422.3(a).
    Comment: Two commenters asked if reinsurance options under Sec.  
422.3(a)(1) and (2) can also include MA supplemental benefits. A 
commenter stated that it is operationally very challenging to separate 
the revenues and expenses associated with supplemental benefits from 
the revenues and expenses associated with basic benefits.
    Response: As we stated in the proposed rule, we interpret section 
1855(b) of the Act as requiring an MA organization to remain at full 
financial risk for basic benefits, subject to the exceptions listed in 
subsections (b)(1) through (b)(4). The limits in proposed Sec.  
422.3(a) and finalized in this rule apply for purposes of insuring (or 
making other arrangements) for costs of providing basic benefits and 
therefore do not apply to supplemental benefits offered by MA 
organizations. MA organizations are not prohibited from obtaining 
reinsurance for supplemental benefits and this final rule does not 
limit either the form or amount of reinsurance for supplemental 
benefits.
    Comment: Commenters were supportive of our proposal with respect to 
section 1855(b) to broaden our interpretation of MA organization to 
include the parent organization. This would mean that CMS would 
evaluate compliance with 1855(b) of the Act and proposed Sec.  422.3 at 
the parent organization level, such that risk sharing or allocations 
MAO of losses and costs among wholly-owned subsidiaries would not be 
evaluated. Commenters also asked if CMS will accommodate situations 
where an MA organization obtains reinsurance from captive insurance 
companies, an affiliate and/or a joint venture or alliance partner. A 
commenter noted that reinsurance is a useful means by which to share 
profits/losses in joint ventures and alliances, an entity may choose to 
allocate its risk to a reinsurer that is an affiliate of the MA 
organization and to another joint venture or alliance partner. The 
comment states that these arrangements serve as a mechanism to 
facilitate the allocation of profits/losses under a joint venture or 
alliance.
    Response: In this final rule we are affirming that for purposes of 
1855(b) of the Act and for Sec.  422.3, we will evaluate compliance at 
the parent organization level, such that risk sharing or allocations of 
losses and costs among wholly-owned subsidiaries will not be evaluated. 
These internal arrangements would be treated as the MA organization 
retaining full financial risk for the losses or risks that are covered 
through the internal arrangement. We are adding language to the final 
regulation at Sec.  422.3(b) confirming this position. Reinsurance 
arrangements facilitated for purposes of joint venture and alliance 
partner must comply with 1855(b) of the Act, CMS regulations and 
requirements, other federal laws and regulations, and state laws and 
requirements.
    We thank the commenters for sharing their concerns and 
recommendations regarding our proposed implementation of Section 
1855(b)(1) in the MA regulations at Sec.  422.3. After careful 
examination of all comments received and for the reasons set forth in 
the proposed rule and our responses to comments, we are finalizing 
Sec.  422.3 with modifications from the proposal. As finalized, 
paragraph (a) provides that an MAO may obtain insurance or make other 
arrangements for the cost of providing basic benefits to an individual 
enrollee during the contract year in one of two ways. We are finalizing 
Sec.  422.3(a)(1) to permit an MA organization to use insurance or make 
other arrangements for the cost of providing basic benefits to an 
individual enrollee during the contract year so long as the MA 
organization retains risk for at least the first $10,000 of that cost. 
We are finalizing Sec.  422.3(a)(2)(i) permitting reinsurance on a per 
member per year first dollar basis so long as the MA organization 
retains at least an amount of risk that is actuarially equivalent to 
the value of risk retained in paragraph (a)(1). We also clarify in the 
final regulation at Sec.  422.3(a)(2)(ii) that MA organizations 
obtaining such reinsurance under the option described at Sec.  
422.3(a)(2)(i) may utilize any reasonable actuarial methodology to 
determine actuarial equivalence.
    We are also adding Sec.  422.3(b) clarifying that CMS will consider 
a parent organization to be part of an MA organization for purposes of 
section 1855(b) of the Act. Finally, we are adding regulation text at 
Sec.  422.3(c) to clarify the type of payment arrangement used between 
an MA organization and contracting physicians, other health 
professionals or institutions for the financial risk specified in 
section 1855(b)(4) of the Act is not limited by paragraph (a).

B. Medicare Advantage (MA) and Part D Prescription Drug Program Quality 
Rating System (Sec. Sec.  422.162, 422.166, 423.182, and 423.186)

1. Introduction
    In the April 2018 final rule, CMS codified at Sec. Sec.  422.160, 
422.162, 422.164, and 422.166 (83 FR 16725 through 83 FR 16731) and 
Sec. Sec.  423.180, 423.182, 423.184, and 423.186 (83 FR 16743 through 
83 FR 16749) the methodology for the Star Ratings system for the MA and 
Part D programs, respectively. This was part of the Administration's 
effort to increase transparency and give advance notice regarding 
enhancements to the Part C and D Star Ratings program. CMS must propose 
through rulemaking any future changes to the methodology for 
calculating the ratings, addition of new measures, and substantive 
changes to the measures. Sections 422.164(e) and 423.184(e) provide 
authority and a mechanism for the removal of measures for specific 
reasons (low statistical reliability and when the clinical guidelines 
associated with the measure change such that the specifications are no 
longer believed to align with positive health outcomes). In the April 
2019 final rule, CMS amended Sec. Sec.  422.166(a)(2)(i) and 
423.186(a)(2)(i) to update the methodology for calculating cut points 
for non-Consumer Assessment of Healthcare Providers and Systems (non-
CAHPS) measures by adding mean resampling and guardrails, codified a 
policy to adjust Star Ratings for disasters, and finalized some measure 
updates. In the Medicare and Medicaid Programs; Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency Interim 
Final Rule (85 FR 19230; CMS-1744-IFC) published in the Federal 
Register website on April 6, 2020, CMS adopted a series of changes to 
the 2021 and 2022 Star Ratings to accommodate the disruption to data 
collection posed by the COVID-19 pandemic. Specifically, the IFC:
     Eliminates the requirement to collect and submit 
Healthcare Effectiveness Data and Information Set (HEDIS) and Medicare 
Consumer Assessment of Healthcare Providers and Systems (CAHPS) data 
otherwise collected in 2020 and replaces the 2021 Star Ratings measures 
calculated based on those HEDIS and CAHPS data collections with earlier 
values from the 2020 Star Ratings (which are not

[[Page 33831]]

affected by the public health threats posed by COVID-19);
     Establishes how we will calculate or assign Star Ratings 
for 2021 in the event that CMS's functions become focused on only 
continued performance of essential agency functions and the agency and/
or its contractors do not have the ability to calculate the 2021 Star 
Ratings;
     Modifies the current rules for the 2021 Star Ratings to 
replace any measure that has a systemic data quality issue for all 
plans due to the COVID-19 outbreak with the measure-level Star Ratings 
and scores from the 2020 Star Ratings;
     In the event that we are unable to complete Health 
Outcomes Survey (HOS) data collection in 2020 (for the 2022 Star 
Ratings), replaces the measures calculated based on HOS data 
collections with earlier values that are not affected by the public 
health threats posed by COVID-19 for the 2022 Star Ratings;
     Removes guardrails for the 2022 Star Ratings by delaying 
their application to the 2023 Star Ratings;
     Expands the existing hold harmless provision for the Part 
C and D Improvement measures to include all contracts for the 2022 Star 
Ratings; and
     Revises the definition of ``new MA plan'' so that for 
purposes of 2022 quality bonus payments based on 2021 Star Ratings 
only, new MA plan means an MA contract offered by a parent organization 
that has not had another MA contract in the previous 4 years, in order 
to address how the 2021 Star Ratings will be based in part on data for 
the 2018 performance period.

Please see the IFC for further information on these changes for the 
2021 and 2022 Star Ratings.
    In the February 2020 proposed rule, we proposed enhancements to 
further increase the stability of cut points by modifying the cut point 
methodology for non-CAHPS measures through direct removal of outliers. 
We also proposed to increase the weight of patient experience/
complaints measures and access measures and remove the Rheumatoid 
Arthritis Management (Part C) measure from the Star Ratings because the 
measure steward is retiring the measure from the HEDIS measurement set. 
We proposed to modify the classification of the Statin Use in Persons 
with Diabetes (SUPD) measure from an intermediate outcome measure to a 
process measure, starting with the 2023 Star Ratings, due to feedback 
in response to the Draft 2020 Call Letter and to align with the measure 
steward's clarification regarding the measure's classification. In 
addition, we proposed other policies to amend the Part C and Part D 
Star Ratings but are not addressing those proposals in this final rule; 
those other proposals will be addressed in a future final rule.
    Our proposal was for the changes we address here--the removal of 
outliers, increasing the weight of certain classes of measures, 
removing the Rheumatoid Arthritis Management measure, and reclassifying 
the SUPD measure--to be effective for the 2021 performance period and 
the 2023 Star Ratings. As discussed in this section, we are finalizing 
the proposed changes with some modifications. As finalized, the change 
to the weight of the patient experience/complaints measures and access 
measures, the removal of the Rheumatoid Arthritis Management measure, 
and the reclassification of the SUPD measure are applicable (that is, 
data would be collected and performance measured) for the 2021 
measurement period and the 2023 Star Ratings. Under this final rule the 
direct removal of outliers will apply for the 2022 measurement period 
and the 2024 Star Ratings.
    CMS appreciates the feedback we received on our proposals. In the 
sections that follow, which are arranged by topic area, we summarize 
the comments we received on each proposal and provide our responses. 
Below we summarize some general comments we received about the 
potential impact of the COVID-19 public health emergency on our Star 
Ratings proposals.
    Comment: Numerous commenters requested that CMS refrain from making 
any changes to the Star Ratings system until the COVID-19 pandemic's 
impact on the healthcare system is better understood. They suggested we 
delay any changes to the quality rating system until after the public 
health emergency resulting from COVID-19 subsides due to the 
significant uncertainties around the duration and impact of COVID-19 on 
the healthcare system.
    Response: CMS agrees that there is a lot of uncertainty about how 
COVID-19 will impact the healthcare system. However, we still believe 
that it is important to move forward with some limited Star Ratings 
changes to further emphasize the importance of patient experience/
complaints measures and access measures and to help stabilize the 
movement in the cut points from year to year. The changes to the 
weighting of patient experience/complaints measures and access measures 
apply to the 2021 measurement year, not the 2020 measurement year when 
the pandemic first started. The implementation of Tukey outlier 
deletion has been delayed an additional year. Although there is some 
uncertainty how COVID-19 will impact the healthcare system and quality 
measurement, plans will have until the 2021 measurement year to adjust 
their processes to account for the impact of COVID-19 on Star Ratings 
measures.
    Comment: Commenters raised concerns that additional Star Ratings 
changes may be needed to account for COVID-19 in future years. For 
example, several commenters noted data collection challenges could 
impact 2021, 2022, 2023, and 2024 Star Ratings for some measures. A 
commenter noted COVID-19 may overwhelm our healthcare systems leading 
to significant impacts on many measures. A few commenters specifically 
noted concerns about supply chain disruptions and prescription drug 
shortages. A commenter noted that plan activities in response to 
emergency situations can create unintended consequences in the years 
following, including for Star Ratings. Another commenter suggested CMS 
revisit the capacity and capability expectations defined in specific 
measures and meet with provider and plan stakeholders when the crisis 
has abated; they suggest some measures may need to be re-tooled so that 
scarce resources are devoted to building capacity and functionality of 
the health and social delivery systems.
    Response: CMS is continuing to monitor the situation to see if 
additional Star Ratings changes are necessary and appropriate. As noted 
above, the IFC includes a series of changes for the 2021 and 2022 Star 
Ratings to accommodate challenges arising from the COVID-19 pandemic. 
Please see the IFC for further information on these changes for the 
2021 and 2022 Star Ratings. CMS recognizes that there may be impacts 
from COVID-19 on measure scores and is delaying the implementation of 
Tukey outlier deletion for an additional year to allow these impacts to 
play out before adding an additional methodological change for the cut 
point calculations.
    Comment: A commenter asked that CMS remain cautious on pursuing 
changes that could weaken the ability of plans to make quality 
improvements in the aftermath of COVID-19.
    Response: CMS recognizes the challenges that COVID-19 has placed on 
the healthcare system and Part C and Part D plans that are subject to 
the Quality Star Rating System. CMS continues to monitor whether 
additional Star Ratings adjustments are necessary and appropriate.

[[Page 33832]]

    Comment: A commenter requested that CMS ensure that policy changes 
that allow pharmacies to meet prescription drug therapy needs during 
the COVID-19 outbreak are not used to penalize pharmacies in their 
performance ratings.
    Response: CMS will continue to monitor the impact of COVID-19 on 
the healthcare system. The Part C and D Star Ratings are for rating the 
Medicare health and drug plans not pharmacies.
    Comment: Several commenters noted that different areas of the 
country may experience the pandemic differently, and there may also be 
differences by health plan populations, such as those with high dual 
eligible or low-income populations. A commenter noted that CDC's 
recommendation for social distancing, especially for more vulnerable 
populations, may result in Medicare beneficiaries not pursuing 
preventive screenings, and that this may be more impactful for 
beneficiaries in geographies more heavily impacted by COVID-19 and for 
beneficiaries in rural areas with less access to care.
    Response: CMS will continue to monitor the impact of COVID-19 on 
the healthcare system and Part C and D plans. The IFC addressed the 
immediate impact of the pandemic on the Part C and D Star Ratings 
program and made additional modifications for the 2022 Star Ratings, in 
recognition that the COVID-19 pandemic may impact performance on the 
Star Ratings measures during the 2020 measurement period. CMS delayed 
the implementation of guardrails to allow cut points to adjust to 
changes in industry performance for the 2020 measurement period. 
Additionally, CMS expanded the hold harmless provisions for the Part C 
and D improvement measures that are based on the 2020 measurement 
period so that those measures where there is a significant decrease in 
performance will not bring down a contract's overall or summary ratings 
for the 2022 Star Ratings. CMS continues to monitor to what extent our 
current policy for extreme and uncontrollable circumstances codified at 
Sec. Sec.  422.166(i) and 423.186(i) will help address the issue of 
some geographic areas being more impacted than others and whether 
additional Star Ratings adjustments are necessary and appropriate.
    Comment: A commenter asked that CMS consider the longer-term 
economic ramifications that COVID-19 is causing to highly impacted 
areas when considering Star Ratings policies.
    Response: CMS will continue to monitor the impact of COVID-19 on 
the healthcare system and Part C and Part D plans that are subject to 
the Quality Star Rating System. CMS continues to monitor whether 
additional Star Ratings adjustments are necessary and appropriate.
    Comment: A commenter suggested that given the strain COVID-19 is 
placing on the healthcare system, CMS should suspend Effectiveness of 
Care measures based on 2020 data. Another asked whether the Part D 
appeals measures would still be removed for 2021.
    Response: Generally, these comments are out of the scope of the 
proposed rule and the policies we are addressing in this final rule. 
The IFC addressed the immediate implications of the pandemic on the 
Part C and D Star Ratings program. Specifically, for the 2020 
measurement year, it delays the implementation of guardrails so cut 
points will adjust downward if industry performance broadly declines as 
a result of the pandemic. CMS is proceeding to remove the Part D 
appeals measures for the 2020 measurement year and the associated 2022 
Star Ratings, as outlined in the 2020 final Call Letter, under Sec.  
423.184(e)(1) and based on our determination that the measure is no 
longer reliable.
    Comment: Several commenters gave specific feedback related to the 
IFC and the 2021 and 2022 Star Ratings.
    Response: We thank commenters for this feedback, but these comments 
are out of scope for this rule. We will discuss comments to the IFC 
policies in a future final rule.
2. Measure-Level Star Ratings (Sec. Sec.  422.166(a), 423.186(a))
    Over the past 2 years, we have codified and refined the methodology 
for calculating the Star Ratings from the performance scores for non-
CAHPS measures. At Sec. Sec.  422.166(a) and 423.186(a), we initially 
codified the historical methodology for calculating Star Ratings at the 
measure level in the April 2018 final rule. The methodology for non-
CAHPS measures employs a hierarchical clustering algorithm to identify 
the gaps that exist within the distribution of the measure-specific 
scores to create groups (clusters) that are then used to identify the 
cut points. The Star Ratings categories are designed such that the 
scores in the same Star Ratings category are as similar as possible and 
the scores in different Star Ratings categories are as different as 
possible. The current methodology uses only data from the most recent 
Star Ratings year; therefore, the cut points are sensitive to changes 
in performance from 1 year to the next.
    The primary goal of any cut point methodology is to disaggregate 
the distribution of scores into discrete categories or groups such that 
each grouping accurately reflects true performance. The current MA Star 
Ratings methodology converts measure-specific scores to measure-level 
Star Ratings so as to categorize the most similar scores within the 
same measure-level Star Rating while maximizing the differences across 
measure-level Star Ratings. We solicited comments in the 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 
Proposed Rule (hereinafter referred to as the November 2017 proposed 
rule) regarding the approach to convert non-CAHPS measure scores to 
measure-level Star Ratings (82 FR 56397 through 56399). We requested 
input on the desirable attributes of cut points and recommendations to 
achieve the suggested characteristics in the Medicare and Medicaid 
Programs; Policy and Technical Changes to the Medicare Advantage, 
Medicare Prescription Benefit, Programs for All-inclusive Care for the 
Elderly (PACE), Medicaid Fee-for-Service, and Medicaid Managed Care 
Programs for Years 2020 and 2021 Proposed Rule (hereinafter referred to 
as the November 2018 proposed rule). In addition, we requested that 
commenters either suggest alternative cut point methodologies or 
provide feedback on several options detailed in the November 2018 
proposed rule, such as setting the cut points by using a moving 
average, using the mean of the 2 or 3 most recent years of data, or 
restricting the size of the change in the cut points from 1 year to the 
next.
    The commenters identified several desirable attributes for cut 
points that included stability, predictability, and attenuation of the 
influence of outliers; commenters also suggested restricting movement 
of cut points from one year to the next and recommended that CMS either 
pre-announce cut points before the plan preview period or pre-determine 
cut points before the start of the measurement period. In the April 
2018 final rule (83 FR 16567), we expressed appreciation for our 
stakeholders' feedback and stated our intent to use it to guide the 
development of an enhanced methodology while maintaining the intent of 
the cut point methodology to accurately reflect true performance.
    Using the feedback from the comments we received in response to

[[Page 33833]]

the November 2018 proposed rule, we considered enhancements to the 
methodology that would increase the stability and predictability of the 
cut points and finalized in the April 2019 final rule two enhancements 
to the historical methodology. In the April 2019 final rule, we amended 
Sec. Sec.  422.166(a)(2)(i) and 423.186(a)(2)(i) to add mean resampling 
of the current year's data to the current clustering algorithm to 
attenuate the effect of outliers; we also added measure-specific caps 
in both directions to provide guardrails so that the measure-threshold-
specific cut points do not increase or decrease more than the cap from 
one year to the next. The IFC (CMS-1744-IFC) delays the implementation 
of guardrails for an additional year; thus, it will be implemented for 
the 2021 measurement year and the 2023 Star Ratings.
    Some commenters to the November 2018 proposed rule believed mean 
resampling would not be sufficient to address outliers and expressed 
support for directly removing outliers before clustering. We did not 
finalize an approach for directly removing outliers in the April 2019 
final rule in order to provide the public prior notice of a proposal 
for incorporating removal of outliers and an opportunity to comment on 
a specific approach and so that we could continue to evaluate the 
methodologies for outlier removal (84 FR 15761).
    As we stated in the April 2019 final rule in response to public 
comments on this topic, we evaluated two options to address direct 
removal of outliers--trimming and Tukey outer fence outlier deletion. 
Under trimming, all contracts with scores below the 1st percentile or 
above the 99th percentile are removed prior to clustering. Although 
trimming is a simple way to remove extreme values, it removes scores 
below the 1st percentile or above the 99th percentile regardless of 
whether such scores are true outliers. This means in cases when true 
outliers are between the 1st and 99th percentile, they would not be 
removed by trimming, and in cases when the distribution of scores is 
skewed, scores that are not true outliers would be trimmed.
    In the February 2020 proposed rule, we proposed to use Tukey outer 
fence outlier deletion as the method to identify and delete outliers 
before applying the already-applicable mean resampling and hierarchical 
clustering processes. With mean resampling, measure-specific scores for 
the current year's Star Ratings are randomly separated into 10 equal-
sized groups. The hierarchical clustering algorithm is done 10 times, 
each time leaving one of the 10 groups out. The method results in 10 
sets of measure-specific cut points. The mean cut point for each 
threshold per measure is calculated using the 10 values. Tukey outer 
fence outlier deletion is a standard statistical method. Tukey outer 
fence outliers are sometimes called Whisker outliers. Under this 
methodology, outliers are defined as measure scores below a certain 
point or above a certain point. We proposed that the lower point or the 
``lower outer fence'' would be identified with this formula: (first 
quartile-3.0 x (third quartile-first quartile)); and the higher point 
or the ``upper outer fence'' would be identified with this formula: 
(third quartile + 3.0 x (third quartile-first quartile)). The Tukey 
outer fence outlier deletion will remove all outliers based on the 
previous definition for the two points (that is, the lower and upper 
outer fences) and does not remove any cases that are not identified as 
outliers. Values identified as outside the Tukey outer fences would 
then be removed immediately prior to clustering.
    We explained in the proposed rule that if Tukey outer fence outlier 
deletion and a 5 percent guardrail had been implemented for the 2018 
Star Ratings, 2 percent of MA-PD contracts would have seen their Star 
Rating increase by half a star, 16 percent would have decreased by half 
a star, and one contract would have decreased by 1 star. For PDP 
contracts, 2 percent would have increased by half a star, and 18 
percent would have decreased by half a star. This simulation of the 
impact of Tukey outlier deletion also takes into account the removal of 
the two Part D appeals measures (Appeals Auto-Forward and Appeals 
Upheld) and the Part C measure Adult BMI Assessment, because these 
measures will be removed starting with the 2022 Star Ratings. In 
general, there tends to be more outliers on the lower end of measure 
scores. As a result, the 1 to 2 star thresholds often increased in the 
simulations when outliers were removed compared to the other thresholds 
which were not as impacted.
    We requested comments on our proposal to use Tukey outer fence 
outlier deletion as an additional step prior to hierarchal clustering. 
We explained that under our proposal in the first year of implementing 
this process, the prior year's thresholds would be rerun, including 
mean resampling and Tukey outer fence deletion so that the guardrails 
would be applied such that there is consistency between the years. We 
proposed to amend Sec. Sec.  422.162 and 423.182 to add a definition of 
the outlier methodology (``Tukey outer fence outliers'') and to amend 
Sec. Sec.  422.166(a)(2)(i) and 423.186(a)(2)(i) to apply the outlier 
deletion using that methodology prior to applying mean resampling with 
hierarchal clustering.
    We received the following comments related to our proposal, and our 
responses follow:
    Comment: Most commenters opposed moving forward with the Tukey 
outlier deletion at this time, citing a variety of different reasons. A 
handful of commenters raised general concerns about the Tukey outlier 
deletion method, mentioning criticism in academic communities about 
applying Tukey fences to skewed data, given what the commenters 
characterized as the Tukey approach's assumption of a normal 
distribution. Other commenters suggested additional research is needed 
on alternatives for removing outliers. Some commenters did not support 
the use of Tukey outlier deletion without more information about how 
the Tukey outlier fence models will be applied and more detail on CMS 
analyses. A couple of commenters did not support adding Tukey outlier 
deletion given the fluctuation it may cause in the ratings.
    Response: CMS is concerned about extreme outliers influencing cut 
point determinations and has selected an approach to identify and 
remove outliers prior to clustering contract scores to determine cut 
points for assigning measure stars. The main objective of removing 
outliers is to stabilize cut points and prevent large year-to-year 
fluctuations in cut points caused by the scores of a few contracts. CMS 
selected the conservative outer-fence form of the Tukey outlier 
deletion method because it is transparent (easily understood and can be 
implemented by stakeholders with widely-available software) and robust 
to distributional shape (it performs as intended for this purpose 
across the range of score distributions seen in Star Ratings data).
    CMS disagrees that the Tukey outer fence outlier approach is 
inappropriate for identifying the outliers to be removed from the 
performance score data. Even when the data are not normally distributed 
(for example, in a skewed distribution), the Tukey approach performs as 
intended. The Tukey outer fence outlier deletion approach is a standard 
statistical method that is non-parametric, that is, it is not dependent 
on distributional assumptions. We plan to adopt a more conservative 
definition, based on Tukey outer fences, that only removes scores that 
are extreme outliers. This approach removes fewer outliers at both 
extremes of the score distribution than the inner

[[Page 33834]]

fence approach. We plan to identify and remove extreme outliers 
immediately prior to applying the clustering algorithm to set cut 
points. The Tukey outer fences would be calculated from the set of 
measure scores after removing contracts that are to be excluded from 
clustering (such as because the measure is voluntary for that 
contract).
    The first step in applying the Tukey outlier deletion method is 
calculating the first quartile (Q1) and third quartile (Q3) of the 
score distribution: 25 percent of scores fall below Q1, another 25 
percent of scores fall above Q3, and the remaining 50 percent of scores 
fall between Q1 and Q3. Next, we calculate the interquartile range 
(IQR), the difference between the third and first quartiles (IQR = Q3 - 
Q1), which refers to the range of the middle 50 percent of all scores. 
The Tukey outer fence method identifies extreme outlier as those that 
are below (Q1 -3 x IQR) or above (Q3 + 3 x IQR).
    We examined the use of trimming as an alternative outlier removal 
approach and found very similar results as those described in the 
proposed rule from using the Tukey approach. We performed simulations 
that trimmed any scores that were above the 99th percentile or below 
the 1st percentile, trimming values at the tail ends of the 
distribution prior to clustering. The method had effects on Star 
Ratings similar to those of the Tukey method. An important strength of 
the Tukey outer fence outlier deletion method over the trimming method 
is that trimming removes a fixed proportion of plan scores for each 
measure, regardless of whether those scores are distant from the center 
of the score distribution. In contrast, the Tukey outer fence method 
removes only true outliers that are the most distant from the center of 
scores.
    Comment: Some commenters suggested alternatives to outlier deletion 
to help improve the stability of cut points. A commenter suggested that 
CMS might consider cut points using plans in similar geographic areas 
with similar characteristics. Another suggested CMS explore other 
classification methods such as Isolation Forest, DBSCAN, or k-means 
clustering. A couple of commenters recommended a guardrail cap less 
than 5 percent.
    Response: CMS agrees that stability is a goal for the cut points, 
but we disagree with the recommendations of the commenters to achieve 
that stability. Setting regional or geographic benchmarks (cut points) 
would lead to a 5-star contract in one area differing in terms of 
performance from a 5-star contract in another area. The Medicare 
program does not set regional standards, but rather applies a single 
national standard to evaluate plan performance. As required under 
section 1851(d), CMS disseminates information to Medicare beneficiaries 
(and prospective Medicare beneficiaries) on the different coverage 
options to promote an active, informed selection among such options. 
This includes plan quality and performance indicators to compare plan 
options. In order to compare in a consistent way, CMS uses a single 
national standard since different regional cut points could hide 
deficiencies in different areas. Additionally, many measures are based 
on compliance with Medicare rules and requirements (for example, call 
center measures and appeals measures) and reflect compliance with 
Medicare program requirements, not comparative compliance. Using 
regional cut points would warp the results and complicate our use of 
Star Ratings under Sec. Sec.  422.504(a)(17), 422.510(a)(4)(ix), 
423.505(a)(26), and 423.509(a)(4)(x).
    Regarding the choice of clustering method, hierarchical clustering 
is one of the most commonly used methods for clustering observations 
into groups. There are pros and cons of all methods for clustering, 
including those identified by the commenters. We have considered other 
methods and believe hierarchical clustering is the best option for the 
Part C and D Star Ratings program because it is well understood, easily 
implemented, and performs well for a variety of different data 
distributions. The other very commonly used clustering algorithm is k-
means, however one key weakness of that approach is that the final set 
of clusters depends on the initial random assignment of points to 
clusters and it is highly sensitive to the initial placement of cluster 
centers. Specifically, when the algorithm is repeated on the same 
dataset it may result in different cluster assignments. Additionally, 
the k-means method is sensitive to outliers (for example, Gan and Ng 
(2017),\20\ Govender and Sivakumar (2020) \21\), and therefore it would 
not resolve the issue that outliers can influence estimated thresholds. 
The commenter also noted other clustering algorithms that are less 
commonly used. For example, weaknesses of DBSCAN include sensitivity to 
parameters and inability to handle clusters of points of varying 
densities, which makes DBSCAN less attractive for clustering measure 
scores. Isolation Forest is an outlier or anomaly detection technique 
on the basis of decision trees that is not directly related to 
clustering measure scores into 5 groups.
---------------------------------------------------------------------------

    \20\ Gan, G., & Ng, M.K. (2017). K-means Clustering with Outlier 
Removal. Pattern Recognit. Lett., 90, 8-14.
    \21\ Govender, P. & Sivakumar, V. (2020). Application of k-means 
and hierarchical clustering techniques for analysis of air 
pollution: A review (1980-2019). Atmospheric Pollution Research. 
11(1), 40-56.
---------------------------------------------------------------------------

    Comment: A couple of commenters opposed Tukey outlier deletion 
since they were concerned it would make it harder for plans with more 
complex populations to perform well, including SNP plans. A commenter 
noted the current national emergency emphasizes the need for the cut 
point methodology to separate out plans with high proportions of 
dually-eligible, disabled, and low-income individuals.
    Response: The issues of whether it is harder for plans with complex 
populations to perform well in Star Ratings and the method by which we 
stabilize thresholds for cut points are unrelated. The strategy of 
removing outliers for stability of cut points does not affect how 
performance is compared across plans with and without complex 
populations.
    In simulations of Star Ratings calculated using the Tukey outer 
fence outlier approach, we found that the effect of outlier removal on 
SNP versus non-SNP contracts was not very different. When outlier 
measure scores were removed as a part of our simulation using the data 
for the 2018 Star Ratings, overall summary ratings shifted from 4 to 
3.5 stars for approximately 4 percent of contracts without a SNP, and 
for about 5 percent of contracts with a SNP for the contracts with 
overall ratings. The removal of outliers will not necessarily have 
consistent year-to-year impacts, and is dependent on where contracts 
fall in the measure score distributions, with contracts near the bottom 
of a score range being the most likely affected.
    CMS adopted the categorical adjustment index (CAI) to address the 
concern that plans with more complex populations have lower ratings 
based on the population served under the contract. The CAI advances 
more equitable plan comparisons because it generates Star Ratings that 
contracts would have received if they had all served the same patient 
population. That is, the CAI adjusts for within-contract disparities 
based on measures that are not otherwise adjusted for patient 
characteristics. CAI coefficients are estimated each year so if there 
is a differential impact of COVID-19 on the measures of performance for 
contracts with a higher percentage of dual eligible and disabled 
beneficiaries versus contracts with a lower percentage of enrollees 
with those social risk factors, the CAI values would reflect these

[[Page 33835]]

differences. The CAI will continue to adjust for the percentage of LIS/
DE and disabled beneficiaries within the contract in accordance with 
Sec. Sec.  422.166(f)(2) and 423.186(f)(2), and therefore will adjust 
for these differences for contracts with and without a SNP.
    Comment: A commenter suggested that CMS retire measures from the 
program when there are one percentage point differences in the same 
direction between cut points year over year.
    Response: CMS does not consider the size of changes in performance 
from year-to-year to be a criterion for retirement of a measure, 
particularly when there is still room for improvement on the measure. 
CMS retires or removes measures from Star Ratings when there is a 
change in clinical guidelines that mean that the measure specification 
is no longer believed to align with or promote positive health outcomes 
and when measures show low statistical reliability. These standards are 
in Sec. Sec.  422.164(e)(1) and 423.184(e)(1), and we explained how we 
interpret and apply the standards in the April 2018 final rule. When 
measure scores are ``topped out'' (that is, show high performance 
across all contracts), this decreases the variability across contracts 
and makes the measure unreliable. On average, measures improve year-to-
year in the 1 to 3 percentage point range, with the exception of new 
measures where the performance generally has more substantial room for 
improvement or in situations where a structural change occurs (for 
example, implementation of EHR tools) that significantly alter 
performance on the measure.
    Comment: A couple of commenters suggested convening a Technical 
Expert Panel (TEP) to provide input into the Tukey outlier deletion.
    Response: A TEP comprised of representatives across various 
stakeholder groups convened on May 31, 2018 to provide feedback to the 
RAND Corporation, the current CMS contractor for the Part C and D Star 
Ratings program to obtain input on a number of issues, including 
increasing the stability of cut points (https://www.rand.org/pubs/conf_proceedings/CF391.html). This TEP focused on different ways to 
increase stability of cut points, including outlier deletion, but did 
not focus on the different methods for deleting outliers. We do not 
believe another TEP is necessary to specifically address this topic 
given the RAND TEP already expressed strong support for directly 
addressing outliers and this methodology for removing outliers is a 
widely accepted methodology for removing outliers.
    Comment: A handful of commenters wanted to see the impact on their 
individual plans to be able to fully understand the effect of Tukey 
outlier deletion.
    Response: CMS plans to display simulations of Tukey outlier 
deletion with mean resampling and guardrails for contracts to view in 
HPMS for the 2021, 2022, and 2023 Star Ratings prior to implementing 
the Tukey outlier change effective with the 2024 Star Ratings. These 
simulations will use the actual data that will be populating the 2021, 
2022 and 2023 Star Ratings and will include all of the changes 
finalized related to cut point calculations. As noted in the NPRM, for 
the first year (2024 Star Ratings), we will rerun the prior year's 
thresholds, using mean resampling and Tukey outer fence deletion so 
that the guardrails would be applied such that there is consistency 
between the years. This, therefore, will be done for the simulations 
using the 2021 Star Ratings. This will provide information for multiple 
years for plans to see how the cumulative impact of the changes will 
impact the cut points going forward. Please note that currently mean 
resampling will be implemented with the 2022 Star Ratings, guardrails 
will be added with the 2023 Star Ratings, and Tukey outlier deletion 
will be implemented with the 2024 Star Ratings. Our planned simulations 
will illustrate the cumulative effect of all of these policies.
    Comment: A commenter said CMS could further address outliers by 
removing contracts that are not eligible for Quality Bonus Payments 
such as 1876 cost plans and Medicare-Medicaid Plans.
    Response: CMS does not include Medicare-Medicaid Plans in the 
calculation of cut points for the Part C and D Star Ratings since they 
currently do not receive Star Ratings on Medicare Plan Finder; however, 
although not eligible for bonuses, 1876 cost plans are part of the Part 
C and D Star Ratings program (see Sec.  417.472(k)) and have 
historically received Star Ratings on Medicare Plan Finder so these 
contracts are included in the cut point calculations. Otherwise, the 
ratings for public reporting would not be comparable for beneficiaries 
to use in evaluating their coverage choices.
    Comment: A commenter asked for clarification about whether measures 
in the program for three or fewer years would be included in the Tukey 
outlier deletion.
    Response: We are finalizing the proposed amendment to apply Tukey 
outlier deletion to all non-CAHPS measures, beginning with the 2024 
Star Ratings. This application will be for all such measures regardless 
of the number of years the specific measure has been used in the Star 
Ratings program.
    Comment: A number of commenters suggested publishing cut points in 
advance of the measurement year by relying on the data from earlier 
time periods, reinstituting pre-determined 4-star thresholds, or 
designing cut points that establish clear national standards of care. 
Some of the commenters noted that announcing cut points prior to the 
measurement period would help plans and providers engage in value-based 
contracts that incentivize higher quality.
    Response: CMS understands the interest in setting pre-determined 
cut points prior to the measurement year, but as stated previously in 
the April 2019 final rule (84 FR 15752-15754) there are numerous 
challenges in setting pre-determined cut points, including older data 
not being reflective of current performance, average performance not 
always increasing in a linear manner, external factors resulting in 
significant changes in performance from year to year, larger gains in 
performance generally seen for newer measures, and the rate of change 
differing for low performing contracts compared to higher performing 
ones. Additionally, the measures included in the Star Ratings program 
do not have national standards of care that plans or providers should 
meet; thus, it would be challenging to come to consensus on national 
standards to rate plans in the Star Ratings program. If using older 
data to predict or establish cut points, we risk causing unintended 
consequences such as disincentivizing quality improvement or setting 
cut points that are not aligned to significant changes in industry 
performance. For example, no one could have predicted the significant 
impacts the COVID-19 pandemic would have on industry performance for 
various Star Ratings measures. The current methodology of hierarchal 
clustering using the current year's data will adjust cut points for the 
unforeseen impact on plan performance across the program. Since the 
clustering methodology compares relative performance, it protects plans 
from unanticipated impacts on industry performance. If there were pre-
determined thresholds based on historical data or an independent 
standard, plans could end up all with uniformly low ratings when 
unanticipated situations such as the COVID-19 pandemic occur.
    Comment: A number of commenters recommended including outliers in 
the

[[Page 33836]]

cut point calculations since they represent the true performance of 
contracts on the measures. Commenters stated that without including 
these outliers, CMS would not fully be representing industry 
performance. Other commenters noted that with the current data 
integrity polices in place for the Star Ratings program, these outliers 
are legitimate measure-level contract scores.
    Response: CMS agrees that an outlier may be a legitimate score for 
a particular contract, but we also know that extreme outliers for a 
measure in a given year can impact statistical analyses such as 
clustering. In the April 2019 final rule (84 FR 15755-15758) we 
received stakeholder feedback that in addition to guardrails and mean 
resampling we should directly address the impact of outliers. Although 
mean resampling does not directly address outliers, it helps mitigate 
the effect of outliers because when establishing the thresholds each 
data point (including outliers) is omitted from 10 percent of the cut 
points that are estimated (cut points are repeatedly estimated on ten 
subsets each containing 90 percent of the measure scores) and then 
averaged across the ten 90 percent samples following resampling. 
However, based on feedback from the industry to further increase the 
stability of the cut points and to prevent large fluctuations in cut 
points from one year to the next caused by the scores of a few 
contracts, we proposed in the February 2020 proposed rule to more 
directly remove extreme outliers and are finalizing that policy.
    Comment: A handful of commenters supported the addition of Tukey 
outlier deletion to the cut point methodology, while some suggested 
delaying implementation or viewing Tukey outlier deletion as an interim 
solution to improving the stability of the cut points. A commenter 
suggested phasing in outlier deletion over a multi-year period by 
putting the cut points with Tukey outlier deletion on display for two 
years.
    Response: We appreciate the support for the addition of Tukey 
outlier deletion to the cut point methodology and have decided to delay 
the implementation for an additional year recognizing that there may be 
fluctuations in measure-level scores as a result of the COVID-19 
pandemic. We will also display simulations for the 2021, 2022, and 2023 
Star Ratings in HPMS for contracts to see the impact of removing 
outliers on their stars.
Summary of Regulatory Changes
    After consideration of the comments and for the reasons indicated 
in the proposed rule and our responses to the related comments, we are 
finalizing as proposed the definition ``Tukey outer fence outliers'' 
and the specific formulae used. We are finalizing revisions to 
Sec. Sec.  422.166(a)(2)(i) and 423.186(a)(2)(i) to apply the Tukey 
outlier deletion methodology prior to applying mean resampling with 
hierarchal clustering as proposed with one modification. To allow for 
potential fluctuations in measure-level scores as a result of the 
COVID-19 pandemic during the 2021 measurement year, we are delaying the 
addition of Tukey outer fence outlier deletion to the clustering 
methodology for non-CAHPS measures until the 2022 measurement year and 
the corresponding 2024 Star Ratings. Moving the effective date will 
provide an opportunity for MA and Part D contracts to view simulated 
results using Tukey outlier deletion for the 2021, 2022, and 2023 Star 
Ratings in HPMS. We note that the regulation text in this final rule 
incorporates the changes made by the IFC to Sec. Sec.  422.166(a)(2)(i) 
and 423.186(a)(2)(i) during the period between the proposed rule and 
this final rule. The effect of Tukey outlier deletion would create a 
savings of $935 million for 2025, increasing to $1,449.2 million by 
2030.
3. Removing Measures (Sec. Sec.  422.164, 423.184)
    The regulations at Sec. Sec.  422.164 and 423.184 specify the 
criteria and procedure for adding, updating, and removing measures for 
the Star Ratings program. Due to the regular updates and revisions made 
to measures, CMS does not codify a list in regulation text of the 
measures (and specifications) adopted through rulemaking for the MA and 
Part D Star Ratings Program (83 FR 16537). CMS lists the measures used 
for the Star Ratings each year in the Technical Notes or similar 
guidance document with publication of the Star Ratings. In the February 
2020 proposed rule, CMS proposed the removal of the Rheumatoid 
Arthritis Management measure from the Star Ratings program for 
performance periods beginning on or after January 1, 2021.
    CMS proposed to remove the Rheumatoid Arthritis Management measure 
from the Part C Star Ratings for the 2021 measurement year and the 2023 
Star Ratings. The measure steward, NCQA, is retiring this measure from 
the HEDIS measurement set for the 2021 measurement year due to multiple 
concerns. For example, there are concerns that the performance on the 
measure may not reflect the rate at which members get anti-rheumatic 
drug therapy because sometimes these medications are covered by Patient 
Assistance Programs, which do not generate claims. In terms of the 
measure construction, the measure assesses only if members received a 
disease-modifying anti-rheumatic drug once during the measurement year, 
rather than assessing if members remain adherent to the medication. 
Additionally, it is unclear, based on the evidence, whether patients in 
remission should remain on these medications. Since NCQA plans to 
retire this measure from the HEDIS measurement set, CMS proposed to 
remove it starting with the 2023 Star Ratings.
    Below we summarize the comments we received and provide our 
responses and final decisions.
    Comment: Most commenters supported the retirement of the Rheumatoid 
Arthritis Management measure and offered a number of reasons for their 
support. Approximately half of the commenters who supported removal 
believed current measure specifications erroneously include certain 
patients in the measure denominator: Those receiving medication through 
clinical trials, patient assistance programs, or other ways of paying; 
patients in remission or managing their illness with other drugs; and 
patients who have side effects or cannot tolerate disease-modifying 
anti-rheumatics drugs (DMARDS). A couple of commenters noted that the 
rate of medication adherence would be a better measure of patient 
outcomes than the current focus on DMARD dispensing. Individual 
commenters raised a number of additional issues with the measure: The 
role of the rheumatologist is not captured by the current measure; the 
measure has low reliability; there is no clinical consensus on whether 
patients in remission should remain on DMARD medications or should stop 
taking them at some point; removal of the measure will streamline 
ratings systems since NCQA has retired the measure from HEDIS; and 
continued use of the measure would promote unnecessary use of DMARDS.
    Response: CMS will pass along to the measure developer suggestions 
made by commenters for additional research and new directions. NCQA has 
retired this measure and therefore there will be no data for CMS to use 
in the Star Ratings program for the 2023 Star Ratings and beyond, so 
CMS will remove the measure from the Parts C and D Star Ratings.
    Comment: A couple of commenters disagreed with CMS's proposal and 
offered similar explanations and recommended actions for CMS to take

[[Page 33837]]

instead of removing the measure. The commenters note that there is room 
for improvement in the measure in some populations and in some regions. 
They also note that research is only beginning into the long-term 
outcomes of patients recovering without use of DMARDS. For these 
reasons, they suggest it is premature to update the specifications of 
the measure or to retire the measure. Instead, they suggest additional 
research into the long-term outcomes and functional status of patients 
recovering without use of DMARDS.
    Response: CMS will pass along the suggestions for future research 
to the measure developer, NCQA. NCQA has retired this measure starting 
with the 2021 measurement year, so starting in 2021 this measure will 
no longer be submitted by plans and audited as part of the HEDIS 
measurement set. Thus, there will be no data for CMS to use in the Star 
Ratings program for the 2023 Star Ratings and beyond. Additionally, CMS 
agrees with NCQA's assessment of the need to retire this measure at 
this time.
Summary of Regulatory Changes
    After consideration of the comments and for the reasons set forth 
in the proposed rule and our responses to the related comments 
summarized earlier, we are finalizing the removal of the Rheumatoid 
Arthritis Management measure.
4. Measure Weights (Sec. Sec.  422.166(e), 423.186(e))
    As finalized in the April 2018 final rule, beginning with the 2021 
Star Ratings, Sec. Sec.  422.166(e)(1)(iii) and (iv) and 
423.186(e)(1)(iii) and (iv) provide that the weight for patient 
experience/complaints measures and access measures will increase to 2. 
We stated in the April 2018 final rule (83 FR 16575-16576) that given 
the importance of hearing the voice of patients when evaluating the 
quality of care provided, CMS intends to further increase the weight of 
patient experience/complaints measures and access measures in the 
future. The measures include the patient experience of care measures 
collected through the CAHPS survey, Members Choosing to Leave the Plan, 
Appeals, Call Center, and Complaints measures. We stated the majority 
of the measures impacted by the proposed weight change are the CAHPS 
measures that focus on critical aspects of care from the perspective of 
patients such as access and care coordination issues. The experience of 
care measures focus on matters that patients themselves say are 
important to them and for which they are the best or only source of 
information.
    We explained the proposed increase in the weight would not impact 
the assignment of stars at the measure level, just the calculation of 
the overall and summary ratings, and would not impact the distribution 
of stars which varies for each of these measures. The statistical 
reliability of the CAHPS measures is high, exceeding standards for 
quality measurement so that higher star categories correspond to 
meaningfully better performance (generally, reliabilities of 0.7 or 
more are considered high for a quality measure \22\). The inter-unit 
reliability of the CAHPS measures range from 0.7638 for Customer 
Service to 0.9215 for Rating of Health Plan measure. The reliability 
for the other measures is as follows: Care Coordination is 0.8155, 
Getting Appointments and Care Quickly is 0.9059, Getting Needed Care is 
0.8543, Getting Needed Prescription Drugs is 0.7895, Rating of Drug 
Plan is 0.8937, and Rating of Health Care Quality is 0.8263.
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    \22\ https://www.rand.org/content/dam/rand/pubs/technical_reports/2009/RAND_TR653.pdf.
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    CMS has pledged to put patients first and to empower patients to 
work with their providers to make health care decisions that are best 
for them. To best meet the needs of beneficiaries, CMS believes we must 
listen to their perceptions of care, as well as ensure that they have 
access to needed care. Thus, CMS proposed to modify Sec. Sec.  
422.166(e) and 423.186(e) at paragraphs (e)(1)(iii) and (iv) to 
increase the weight of patient experience/complaints measures and 
access measures to 4 to further emphasize the importance of patient 
experience/complaints and access issues.
    We received the following comments related to our proposal, and our 
responses follow:
    Comment: The majority of commenters opposed the weight increase of 
patient experience/complaints and access measures from 2 to 4. Most of 
these commenters argued that CMS should not value patient experience 
over clinical outcomes (currently weighted as 3) as they believe 
clinical outcome measures are the most important. Because some plans 
may not have enough enrollees to report all of the outcome measures 
included in the Star Ratings program, some commenters argue the 
proposed weighting changes would create an even greater imbalance 
between the total weight given to patient experience measures versus 
clinical outcome measures for these plans. A commenter stated that 
since the intended purpose of the Star Ratings program is to compare 
plan performance on measures related to beneficiary health outcomes and 
experience, the increase has the potential to erode the integrity of 
the Star Ratings program by basing the majority of the Star Rating 
score on patient experience and complaints measures instead of clinical 
outcomes.
    Response: CMS appreciates the value commenters place on outcome 
measures and will continue to advance work in the area of developing 
new outcome measures. That being said, it is important to make sure the 
voice of patients is heard and that patient experience is a key 
component of the overall and summary Star Ratings. Part of putting 
patients first and promoting patient-centered care is focusing on 
patients' perspectives. Additionally, for those plans that may not have 
enough enrollees to report all of the outcome measures included in the 
Star Ratings program, we believe that this increased weighting of 
experience measures would provide such plans an opportunity to focus on 
improving patient experience and differentiate themselves in the market 
as a plan that anticipates members' needs and works with enrollees in a 
customized way. Consequently, we are emphasizing CMS's goal of 
listening to the voice of the patient to identify opportunities to 
improve care delivery. Under 1851(d) of the Act, CMS must provide 
information to promote an active, informed selection among plans, and 
hearing the perspective of beneficiaries is critical to understanding 
the differences among options. Weighting these measures higher will 
accomplish this goal.
    Comment: A number of commenters argued that by increasing the 
patient experience/complaints measures and access measures from a 
weight of 2 to 4, CMS will be downplaying the importance of the 
provision of high quality clinical care. Some commenters also noted 
that this would not align with other CMS quality measurement programs, 
such as the Health Insurance Exchanges Quality Rating System (QRS), the 
underlying goals of the Part C and D Star Ratings program and non-
Medicare quality improvement efforts, or with CMS's guiding principles 
for the Star Ratings program. A commenter noted that this contradicts 
the U.S. Department of Health and Human Services' (HHS') efforts as 
part of the Quality Summit to align federal healthcare quality rating 
programs. A commenter noted that the proposal also runs counter to the 
quality measurement principles of MedPAC, which establish the 
importance of outcome measures.

[[Page 33838]]

    Response: The proposed increase in weight for patient experience/
complaints measures and access measures is a new direction for the Part 
C and D Star Ratings program to advance the agency's goal of putting 
patients first and listening to their voice. While this direction 
differs from current policies in other quality programs, it is part of 
the agency's effort to strive to ensure we are meeting the needs of our 
beneficiaries by listening to their feedback through the CAHPS survey 
measures, disenrollment rates, and complaints measures. A primary 
function of Medicare health and drug plans is the provision of health 
care and drug services to beneficiaries. Measuring, and highly 
weighting, the importance of access to these services greatly encourage 
the industry to focus on their fundamental functions. Without access to 
care and needed prescription medications, optimal clinical outcomes are 
not probable. CMS believes access to services, care coordination, and 
patient engagement are intrinsic to positive clinical outcomes. A 
beneficiary's confidence in the health and drug plan helps facilitate 
continuation of care which could lead to better clinical outcomes. We 
agree with MedPAC's recommendation that population-based outcome and 
patient experience measures are critical in evaluating MA quality.
    Comment: Commenters also raised concerns that this would take focus 
away from physician care and the clinical measures collected through 
HEDIS. Other commenters noted that the overwhelming emphasis on patient 
experience could have the unintended consequence of MA plans and 
providers not focusing on preventive screenings, such as colorectal 
cancer screening, which can save lives.
    Response: Plans and providers should continue to focus on 
preventive care, screenings, and physician care. This weight change 
puts more emphasis on the voice of the beneficiary and access issues. 
We disagree with the characterization that this emphasis is 
overwhelming, and it in no way suggests that plans and providers should 
not be continuing to provide important preventive care and screenings. 
All MA and Part D sponsors are still required to have quality 
improvement (QI) programs described at Sec. Sec.  422.152 and 
423.153(c), respectively, in place. The primary goal of the MA 
organization's QI program is to effect sustained improvement in patient 
health outcomes. Additionally, by not continuing to focus on preventive 
screenings and primary care, this will have a detrimental effect on 
health outcomes and would have an impact on patient experience measure 
scores, disenrollment rates, and complaint rates, all measures included 
in the weight increase. Therefore, the risk of this particular negative 
outcome from the change in weighting the patient experience/complaints 
measures and access measures is minimized.
    Comment: A number of commenters expressed concerns about what they 
perceive to be a fundamental, unprecedented shift away from the 
objective data-driven clinical Star Ratings measures to more subjective 
patient experience measures and encouraged a more thoughtful approach 
to ensure that the weight increase would not result in unintended 
consequences. Commenters raised issues regarding CMS creating 
incentives for plans and providers to provide care that would lead to 
increased CAHPS scores, and they argued this may not be in the best 
interest of Medicare beneficiaries and better health outcomes.
    Response: Plans and providers should always be providing 
professional, appropriate clinical care to Medicare beneficiaries, 
thereby focusing broadly on quality, rather than on narrowly targeted 
metrics represented by individual Star Ratings measures. Patient 
experience is a fundamentally important aspect of healthcare quality. 
Most of the 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 (Anhang Price et al., 2014; Anhang Price et al., 2015 
\23\). The Anhang Price et al., 2014 article which consisted of a 
review of relevant literature related to CAHPS surveys and their 
relationship to health care quality found that all but one out of 
almost three dozen studies reviewed showed a positive correlation 
between patient experiences and clinical care quality or were neutral. 
The empirical evidence in the studies highlights that health care 
providers and plans can concurrently provide better patient experiences 
and better clinical quality. As discussed in the article, patient 
experience of care surveys such as the CAHPS surveys evaluate a 
critical component of care and focus on whether the care is patient-
centered. This is an important goal as we continue to emphasize the 
importance of putting patients first.
---------------------------------------------------------------------------

    \23\ Anhang Price, R., Elliott, M.N., Zaslavsky, A.M., Hays, 
R.D., Lehrman, W.G., Rybowski, L., Edgman-Levitan, S. & 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.
    Anhang Price, R., 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. https://doi.org/10.1007/s11606-014-3111-7.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concerns that this change would 
encourage plans to abandon efforts to drive clinically appropriate care 
in lieu of catering to popular opinion that may be biased by 
advertisements and media. Such behavior, it was noted, could result in 
degraded health outcomes long-term for Medicare beneficiaries. They 
argue programs that promote member health and safety, such as drug 
management and utilization programs, could be damaged or abandoned. A 
number of commenters stated that the improvement of health outcomes is 
one of the largest drivers of the long-term goal of reducing American 
health care costs and that shifting emphasis from clinical outcomes to 
member experience could lead to increased medical and pharmaceutical 
spending.
    Response: Plans and providers should continue to focus on improving 
health outcomes, while also ensuring that Medicare beneficiaries have 
access to clinically appropriate and needed care, for example as 
measured through the CAHPS surveys, Appeals, Members Choosing to Leave 
the Plan, and Complaints measures. Outcome measures are still heavily 
weighted in the Star Ratings program with a weight of 3. We believe 
high quality care is meaningless unless the enrollee has access to that 
care. All MA and Part D sponsors are required to have quality 
improvement (QI) programs described at Sec. Sec.  422.152 and 
423.153(c), respectively, in place. The primary goal of the MA 
organization's QI program is to effect sustained improvement in patient 
health outcomes and providing health care using evidence-based clinical 
protocols. The QI program must also include a health information system 
to collect, analyze, and report Medicare Parts C and D quality 
performance data, including HEDIS, HOS, and CAHPS data. Additionally, 
as described at Sec.  422.152(c), an MA organization's QI program must 
include a chronic care improvement program. Part D sponsors must also 
have established quality assurance measures and systems in place to 
reduce medication errors and adverse drug interactions and improve 
medication use. In addition to the requirements to focus on clinical-
based care, MA and Part D plans, given their payment structures should 
have

[[Page 33839]]

incentives to decrease inappropriate medical and pharmaceutical 
spending.
    Comment: Some commenters argued that if physicians do not proceed 
thoughtfully, patient experience measures could easily result in 
adverse consequences that are potentially dangerous to the patient. A 
commenter noted that if a person who is addicted to opioids seeks a 
prescription and the physician does not provide one, the patient could 
retaliate by leaving a negative review. It was suggested that in some 
cases physicians who overprescribe opioids may have very high reviews 
from patients, despite putting patients in real danger and contributing 
to the nation's opioid epidemic.
    Response: The CAHPS survey questions are based on statistically 
valid samples of Medicare enrollees in each contract and should not be 
influenced by a particular physician providing opioids or not. They are 
not like crowd-sourced reviews. Most of the CAHPS survey questions 
focus on enrollees' experiences of care such as whether they got an 
appointment to see a specialist as soon as they needed, whether they 
got care as soon as they needed, whether the health plan's customer 
service gave them the information or help needed, and whether the 
doctor's office followed up on test results.\24\ There are also global 
ratings of the health care quality, health plan, and drug plan. The 
change in measure weights does not suggest that any physicians behave 
in a manner that puts patients in danger, nor does it provide an excuse 
for a physician who does so.
---------------------------------------------------------------------------

    \24\ CAHPS composite items included in the Part C & D Star 
Ratings are: Getting Needed Care, Getting Appointments and Care 
Quickly, Customer Service, Care Coordination, and Getting Needed 
Prescription Drugs. All of these measures are considered patient 
experience of care measures.
---------------------------------------------------------------------------

    Comment: A few commenters supported the increased weight of patient 
experience/complaints measures and access measures but only if the 
increase is gradual by moving it to a weight of 2.5 or 3 first to 
promote stabilization of the Star Ratings. It was noted that this 
proposal is a radical increase considering that CMS had maintained for 
eight consecutive Star Ratings cycles (2012-2019) the original weight 
of these measures (at a weight of 1.5). Commenters argued that when 
changes are made to an organization's culture, it can take years to see 
the improvements in patient experience scores since many beneficiaries 
interact with the health care system only a few times a year.
    Response: We disagree that this is an unexpected and sudden change. 
The April 2018 final rule adopted an increase from 1.5 to 2 in the 
weight of patient experience and complaints measures and access 
measures. CMS signaled in that final rule that, given the importance of 
hearing the voice of patients when evaluating the quality of care 
provided, we intended to further increase the weight of these measures 
in the future. While we appreciate that organizations are being 
incentivized to quickly adjust to this weighting change, we believe it 
is important to proceed at this time, in particular, in light of the 
COVID-19 pandemic. The uncertainty from the pandemic is a critical time 
for plans to be focused on patient experience. Plans need to enhance 
patient experience to deal with the challenges of COVID-19 pandemic, to 
work with beneficiaries in customized ways, and be as supportive as 
possible. This is also an opportunity for them to distinguish 
themselves and be innovative in maintaining access to care. A goal of 
the Star Ratings program is to foster continuous improvement.
    Comment: A handful of commenters opposed the weight increase for 
measures from the CAHPS survey. These commenters argued that the CAHPS 
survey measurement tool and methodology are outdated and need to be 
updated to accurately capture beneficiaries' perspectives of care since 
the private insurance market has significantly changed over time. Some 
commenters opposed the survey due to a variety of other reasons, 
including what they perceive as a lack of statistical reliability, 
small sample sizes, compression of cut points, differences in 
methodologies across CAHPS surveys and with the NCQA rating system, cut 
point variability, contract-level rating volatility, and lack of 
clinical relevance. A commenter stated that the measures are based on a 
limited sample that may yield inaccurate, unreliable, or biased data. A 
commenter stated that younger patients, those with disabilities, and 
members enrolled in a D-SNP are underrepresented in the survey. A 
couple of commenters stated that the CAHPS survey has no mechanism for 
health plans to identify and address negative experiences for a 
particular enrollee; therefore, these commenters encouraged CMS to 
release secure beneficiary-level CAHPS response data. A commenter said 
survey data should receive third-party validation.
    Response: CAHPS measures focus on critical aspects of care from the 
perspective of patients such as access and care coordination issues. 
The experience of care measures focus on matters that patients 
themselves say are important to them and for which they are the best or 
only source of information. As a result of more than twenty years of 
research that is ongoing and leading to continuous improvement, CAHPS 
surveys are very good measures of patient experience. The CAHPS 
program, initiated in 1995, which includes the Medicare CAHPS Health 
Plan Surveys, seeks to advance the scientific understanding of patient 
experience with healthcare. Since then, CAHPS surveys have become 
recognized as the most widely validated, reliable, and applied patient 
experience surveys in the United States (Holt et al. 2019). Many 
articles documenting the reliability and face, content, and construct 
validity of the CAHPS surveys have been published (for example, 
Crofton, Lubalin, & Darby, 1999; Darby, Hays, & Kletke, 2005; Hays et 
al., 2014; Martino et al., 2009). In addition, many studies establish 
the validity of CAHPS measures by assessing their association with 
measures of structures, processes, and outcomes. For example, the 2014 
review article (Anhang Price et al., 2014), in reviewing 34 studies, 
found that evidence indicated positive associations between patient 
experiences and other aspects or indicators of health care quality, 
including patient behavior (adherence), best practice clinical 
processes, better patient safety culture, and lower unnecessary 
utilization.\25\
---------------------------------------------------------------------------

    \25\ Anhang Price, R., Elliott, M.N., Zaslavsky, A.M., Hays, 
R.D., Lehrman, W.G., Rybowski, L., Edgman-Levitan, S. & 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.
    Crofton, C., Lubalin, J.S., & Darby, C. (1999). Consumer 
Assessment of Health Plans Study (CAHPS). Foreword [Review]. Medical 
Care, 37(3 Suppl.), MS1-MS9.
    Darby, C., Hays, R.D., & Kletke, P. (2005). Development and 
evaluation of the CAHPS hospital survey. Health Services Research, 
40(6 Pt 2), 1973-1976.
    Hays, R.D., Martino, S., Brown, J.A., Cui, M., Cleary, P., 
Gaillot, S., & Elliott, M. (2014). Evaluation of a care coordination 
measure for the Consumer Assessment of Healthcare Providers and 
Systems (CAHPS) Medicare survey. Medical Care Research and Review, 
71, 192-202.
    Holt, J.M. (2019). Patient experience in primary care: A 
systematic review of CG-CAHPS surveys. Journal of Patient 
Experience, 6(2), 93-102.
    Martino, S.C., Elliott, M.N., Cleary, P.D., Kanouse, D.E., 
Brown, J.A., Spritzer, K.L., Hays, R.D. (2009). Psychometric 
properties of an instrument to assess Medicare beneficiaries' 
prescription drug plan experiences. Health Care Financing Review, 
30(3), 41-53.
---------------------------------------------------------------------------

    The Medicare CAHPS survey is designed to capture changes in the 
insurance market that may adversely affect patient experience. The 
survey measures patient experience with care and captures whether 
enrollees in MA

[[Page 33840]]

plans with narrow networks or closed panels or providers who are not 
accepting new patients have less positive experiences or receive lower 
quality care in the responses to existing questions on the survey. If 
care is worse in some MA contracts because of these aspects of how care 
is provided, the survey functions as intended by identifying and 
reporting these differences to beneficiaries, contracts, and CMS.
    The statistical reliability of the CAHPS measures is high, so that 
higher star categories correspond to meaningfully better performance. 
Generally, reliabilities of 0.7 or more are considered high for a 
quality measure (Price, Elliott, Zaslavsky, et al., 2014). The 
reliability of Medicare CAHPS measures ranges from 0.76 to 0.92. 
Contracts may further increase the reliability of their own scores by 
requesting sample sizes greater than the required minimum.
    While the star category bands may appear to be narrow, the 
reliability of CAHPS measures meet or exceed standards for quality 
measurement (Adams 2009 \26\), so that higher star categories 
correspond to meaningfully better performance. While the CAHPS scoring 
using linear means may make between-plan differences appear to be 
compressed, the high contract-level reliability establishes excellent 
ability to differentiate plan performance. Based on the peer-reviewed 
measurement and quality-measurement literature, experts in measurement 
generally agree that reliability greater than 0.70 indicates acceptable 
reliability; reliabilities of 0.80 or greater are preferable for 
higher-stakes applications (Adams et al. 2010, Elliott et al. 2010; 
Nunnally & Bernstein, 1994; Roland et al. 2009; Safran et al., 
2006).\27\
---------------------------------------------------------------------------

    \26\ https://www.rand.org/pubs/technical_reports/TR653.html.
    \27\ Adams, J.L., Mehrotra, A., Thomas, J.W., & McGlynn, E.A. 
(2010). Physician cost profiling--reliability and risk of 
misclassification. New England Journal of Medicine, 362(11), 1014-
1021.
    Elliott, M.N., Lehrman, W.G., Goldstein, E., Hambarsoomian, K., 
Beckett, M.K., & Giordano, L.A. (2010). Do hospitals rank 
differently on HCAHPS for different patient subgroups? Medical Care 
Research and Review, 67(1), 56-73.
    Nunnally, J.C., & Bernstein, I.H. (1994). Psychometric theory 
(3rd ed.). New York: McGraw-Hill.
    Roland, M., Elliott, M., Lyratzopoulos, G., Barbiere, J., 
Parker, R.A., Smith, P., . . . & Campbell, J. (2009). Reliability of 
patient responses in pay for performance schemes: Analysis of 
national General Practitioner Patient Survey data in England. 
British Medical Journal, 339, b3851.
    Safran, D.G., Karp, M., Coltin, K., Chang, H., Li, A., Ogren, 
J., et al. (2006). Measuring patients' experiences with individual 
primary care physicians: Results of a statewide demonstration 
project. Journal of General Internal Medicine, 21, 13-21.
---------------------------------------------------------------------------

    The differences between CMS's Medicare CAHPS implementation and 
others largely reflect CMS's use of additional survey items, case-mix 
adjustment, and reliability and statistical significance criteria to 
improve the validity, reliability, and accuracy of Medicare CAHPS 
scores and stars (https://www.ma-pdpcahps.org/globalassets/ma-pdp/scoring-and-star-ratings/2019-analysis-of-reported-measures.pdf); 
several of these beneficial features are not included in other CAHPS 
implementations. For example, the CMS Medicare CAHPS Getting 
Appointments and Care Quickly composite includes a highly-reliable item 
that is not present in alternate versions. The use of percentile 
cutoffs, combined with reliability and statistical significance 
testing, reduces the effects of chance and results in reliable, valid 
star assignment for CAHPS measures. This methodology, combined with 
highly-reliable underlying scores, ensures that changes in cut points 
reflect changes in contract performance rather than chance. These 
changes in cut points ensure that CAHPS Star Ratings continue to 
accurately differentiate contract performance.
    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 
(Anhang Price et al., 2014; Anhang Price et al., 2015).
    Medicare CAHPS case-mix adjustment, which is informed by 20 years 
of research, accounts for factors such as age, health status, and dual 
eligibility and ensures that contract scores are not influenced by 
patient-level factors beyond their control. This adjustment ensures 
that contract-level scores fairly represent all contracts. Analyses of 
nonresponse in CAHPS data (Elliott et al. 2005; Elliott et al. 2009) 
have shown little or no evidence of nonresponse bias in the presence of 
CAHPS case-mix adjustment.
    Medicare CAHPS survey vendors have access to beneficiary-level data 
and are permitted to conduct analyses with these data that do not risk 
disclosing the identity of respondents to plan sponsors, including 
restrictions on reporting cell sizes smaller than 11. These 
restrictions are necessary to ensure the confidentiality and validity 
of beneficiary responses to the Medicare CAHPS survey.
    The collection and processing of CAHPS data undergo a rigorous 
quality assurance process that includes dual program coding, use of 
test data sets, team review of products, investigation of outliers, and 
comparisons to historic results. This quality assurance process is as 
rigorous as that followed for the production of other quality measures.
    Comment: A couple of commenters suggested different updates to the 
content of the CAHPS survey. A commenter recommended that the Agency 
for Healthcare Research and Quality (AHRQ) and CMS consider expanding 
the survey to include questions on accuracy of provider directories and 
ease of accessing the information. Another commenter noted that 
questions on the CAHPS survey are not consistent across different lines 
of business.
    Response: The Medicare CAHPS Survey was updated in 2016 to 
incorporate AHRQ's 5.0 updates to the CAHPS Health Plan Survey. CMS 
uses the most current version of the CAHPS Health Plan Survey as it is 
the national standard for measuring and reporting on the experiences of 
consumers with their health plan, and the only assessment of patient 
experiences with health plans endorsed by the National Quality Forum. 
In May 2019, AHRQ published a request for information inviting public 
comment to inform potential revisions to the Health Plan Survey (84 FR 
21340). CMS will give careful consideration to any updates to the CAHPS 
Health Plan Survey that AHRQ may provide in the future. Additional 
testing and development to refine CAHPS items in areas such as care 
coordination is ongoing. With regard to adding questions around 
provider directories and ease of accessing plan information, specific 
measures of information seeking, such as experience with written health 
plan materials, have been explored in the context of CAHPS but have not 
resulted in reliable measures due to too few plan members reporting 
experience in the survey samples. CMS is exploring alternate ways of 
improving the accuracy of plan directories. Differences in CAHPS 
composite items across lines of business, such as in the Getting 
Appointments and Care Quickly composite, in some cases reflect 
additional items that Medicare CAHPS includes to maximize the 
reliability and validity of the CAHPS measures.
    Comment: A commenter supported the increase in the weight for 
administrative access measures but

[[Page 33841]]

suggested keeping the CAHPS measures at their current weight because 
the administrative measures already take into account member 
experience. Another commenter said they would support an increase in 
access measures because plans have a direct impact on the outcome of 
these measures and can analyze, pinpoint root causes, and take action 
to avoid adverse outcomes.
    Response: We appreciate these comments. CMS wants to ensure that 
the experiences of beneficiaries getting needed care, getting 
appointments and care quickly, care coordination, and ratings of health 
care quality, for example, are also emphasized with this weight change. 
MA plans are responsible for providing all of the Part A and B benefits 
and providing a managed care alternative to the traditional FFS 
Medicare program. In some cases, the MA plans provide additional 
(supplemental) benefits. One of the advantages of MA is the MA plan is 
responsible for coordinating the care among the enrollee's health care 
providers. Since the primary purpose of the health plan is to ensure 
their enrollees get needed health care services, patient experience and 
access measures that focus on whether the enrollee is getting needed 
care are critical in evaluating whether a plan is fulfilling its 
fundamental requirements.
    Comment: A couple of commenters opposed the weight increase for 
access measures but also asked for clarification and requested a 
methodology change to the Call Center measures. A commenter requested 
CMS consider publishing Call Center results in HPMS on the same 
frequency as the Part C and Part D Timeliness Study (quarterly) to 
allow plan sponsors to better align internal testing/monitoring against 
CMS third-party testing. A commenter asked for clarification on the 
definition of the ``Call Center,'' noting it is unclear if this 
encompasses the Star Ratings measure for prospective members or if this 
is in reference to the member customer service call center.
    Response: While we appreciate feedback on the usefulness of the 
Accuracy and Accessibility Study results and the request for 
publication of those results quarterly, we cannot do this because of 
the timing of the study. The Timeliness Study is conducted quarterly, 
and CMS publishes the results quarterly; conversely the Accuracy and 
Accessibility Study is conducted once a year, between February and May, 
and CMS publishes the results once a year, as soon as they are 
available in August. For purposes of the Star Ratings measure, the 
prospective customer service call center results are included in the 
measure calculation. The measure specification has not changed from 
prior years.
    Comment: A few commenters opposed the current appeals measures and, 
consequently, did not believe the higher weight was prudent. One noted 
that these measures are distorted because beneficiaries may be unaware 
of the extent to which they are or are not receiving the proper 
benefits. The commenter recommended CMS conduct a survey of providers 
on how efficiently and accurately MA plans make organizational 
determinations and appeals. A commenter expressed concern regarding 
increasing the weight for appeals measures citing what they believe are 
fundamental flaws in these measures. They stated both the plan and 
Independent Review Entity (IRE) have difficulty reaching sound 
decisions in the 72 hour timeframe and argued the IRE demonstrates the 
same lack of medical expertise or misunderstanding of coverage 
guidelines as the MA plan; the commenter recommended providing more 
meaningful measures such as independent audits of the MA plans' initial 
determinations, the frequency with which physicians appeal MA plans 
initial determinations, the timeliness of initial determinations (using 
a much shorter standard than 72 hours), and other measures they say 
capture the patient and provider experience more accurately. A 
commenter stated health plans should be held accountable for their 
administrative responsibilities and insurance functions through 
compliance standards and plan monitoring, not Star Ratings.
    Response: CMS clarifies that both Part C appeals measures assess 
the timeliness of appeals sent to the IRE and how often the IRE agrees 
with the plan's decisions. The purpose of these measures is not to 
directly assess the enrollees' comprehension of all of their plan 
benefits. CMS acknowledges the comments for new measurement suggestions 
for the Part C appeals process and is actively evaluating these 
suggestions for future measure development. However, CMS does not agree 
that there are fundamental flaws in the current Part C Appeals 
measures. The purpose of the appeals measures is to ensure appeals that 
are denied are processed in a timely manner and to assess if the denial 
by the health plan was consistent with the benefit or coverage 
requirements. CMS reminds plans that they can access timeliness and 
compliance data in real time at www.medicareappeal.com and bring to the 
attention of the IRE any data discrepancies. CMS disagrees that both 
the plan and IRE have difficulty making sound decisions in the 72-hour 
time frame and both lack the medical expertise or misunderstand the 
coverage guidelines. CMS notes only expedited reconsiderations must be 
sent to the IRE within 72 hours for Part C appeals (see Sec.  422.590). 
In these cases this timeframe is required to avoid endangering the life 
or health of the enrollee or the enrollee's ability to regain or 
maintain maximum function; thus, a de novo review of an adverse 
organization determination must be processed quickly. Examples of cases 
that should be expedited include pre-service skilled nursing facility 
cases, pre-service acute inpatient care cases and cases in which a 
physician indicates that applying the standard timeframe for making a 
determination could seriously affect the life or health of the enrollee 
or the enrollee's ability to regain maximum function. Medicare health 
plans have an obligation to determine if an appeal should be expedited, 
including responding to an enrollee or provider request for expedited 
determination. We also remind plans that in expedited and standard 
service appeals, IRE may extend the decision timeframe by up to 14 
calendar days if it is in the enrollee's interest.
    Please remember if a 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. Plans and 
sponsors must continue to 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 and the IRE must issue a decision within the 
same appeals timeframe as the plan. Please refer to 42 CFR 426.600(d). 
Therefore, the timeframes for the plan and the IRE are aligned.
    In response to the recommendation that plans be held accountable 
for their administrative responsibilities and insurance functions 
through compliance standards and plan monitoring instead of Star 
Ratings, we assure commenters that this also happens. The Star Ratings 
measures only focus on two aspects of the appeals processes. Program 
audits provide a more comprehensive review of a sponsoring 
organization's compliance with the terms of its contract with CMS, 
including access to medical services and other enrollee protections 
required by Medicare. For more information about the program audit 
process, please see https://www.cms.gov/files/document/2020-

[[Page 33842]]

program-audit-process-overview.pdf. The purpose of the Star Ratings 
system is to measure quality of a health and drug plan and to provide 
information to help beneficiaries make more informed choices. The 
appeals measures are such indices of quality.
    Comment: A few commenters focused their comments on the Complaints 
about the Health and Drug Plan measures. A commenter said they support 
a modest increase in weight for these measures because plans are 
generally able to analyze the root cause of the complaint and implement 
strategies to address beneficiary concerns. A few commenters noted that 
complaints not within the plans' control and complaints resulting from 
CMS policy decisions should be excluded.
    Response: CMS thanks the commenter for their support of a modest 
increase in the weight of the complaints measure. Although a few 
commenters noted that complaints not within the plans' control and 
complaints resulting from CMS policy decisions should be excluded, CMS 
expects plans to be integral in assisting beneficiaries and ensuring 
their access to care is not disrupted, regardless if they directly 
created the issue at question, or not. CMS expects health plans and 
Part D sponsors will assist their enrollees in situations such as 
these, and help them understand how to correct issues, even if the 
underlying cause of complaints is not the sponsors' fault. Sponsors 
have an important responsibility for providing continued access to 
services. The fact that CMS received a complaint indicates the sponsor 
has not helped service their enrollee, as Medicare instructs 
beneficiaries to seek resolution first through their sponsors. If 
sponsors take the opportunity to assist their enrollees proactively, 
they will avoid having complaints recorded in the Complaints Tracking 
Module (CTM). CMS issued guidance in the HPMS memo dated May 10, 2019, 
Complaints Tracking Module (CTM) File Layout and Updated Standard 
Operating Procedures, which describes the Plan Request process for 
plans to submit requests to change incorrect contract assignments, 
change issue designation (that is, from Plan Issue level to CMS Issue), 
and change category/subcategory. The memo states that, for matters that 
are delegated to CMS for handling and/or final resolution, plans are to 
submit a CMS Issue Change Request and it lists examples of applicable 
situations. In the SOP Appendix A, CMS lists the subcategories and 
notes which subcategories are excluded from plan performance metrics.
    Comment: A few commenters focused their comments on the 
disenrollment measure, Members Choosing to Leave the Plan, stating that 
the measure is flawed and misrepresents some changes in enrollment as 
dissatisfaction. They suggest CMS consider excluding members who switch 
plans but stay with the same parent organization, as it may actually 
suggest a high level of satisfaction with the parent organization. A 
commenter stated the measure is extremely volatile and can be impacted 
by many factors beyond a member's experience with their health plan, 
including job loss/movement, changes in individual finances, provider 
changing plans, relocations and changes in member needs.
    Response: CMS appreciates these comments, but disagrees that the 
current specification for this measure is flawed. This measure reflects 
voluntary movements from one contract to another. For example, if a 
change in the provider network results in a beneficiary changing 
contracts, this reflects a decision by the beneficiary that the current 
contract is no longer providing the care or access to services that 
they want. Similarly, if the health status of the enrollee changes, and 
the current plan is not meeting the enrollee's changing health needs, 
this may result in a voluntary disenrollment and should be reflected in 
this measure.
    This measure is a contract-level measure focused on quality at that 
level; therefore, disenrollments are considered voluntary even when a 
member enrolls into a different contract under the same parent 
organization. The member is changing from one contract to another for a 
reason and this should be reflected in this measure. If we were to 
change the measure specification to consider disenrollments as no 
longer voluntary when a member enrolls into another contract under the 
same parent organization, this change would be advantageous to larger 
parent organizations that have multiple contracts.
    There are only 4 disenrollment codes used in this measure (11--
Voluntary Disenrollment through plan, 13--Disenrollment because of 
enrollment in another Plan, 14--Retroactive and 99--Other (not supplied 
by beneficiary)). We agree that there are reasons for disenrollment 
that should not be counted against the plan. For example, enrollment 
changes because of a contract service area reduction, a PBP 
termination, LIS reassignments, passive enrollment of the enrollee into 
a Demonstration (MMP), and changes in residence out of the service area 
are not counted in the measure.
    Comment: Some commenters supported the weight increase, indicating 
they appreciate CMS adding further emphasis on the voice of the 
patient. Some argued that better patient experience has been shown to 
improve patient compliance with medical advice.
    Response: CMS appreciates the commenters' support of our proposal.
    Comment: Several commenters expressed concern about implementing a 
weighting change during the COVID-19 pandemic because of the current 
uncertainty how the public health emergency will impact care delivery 
and patient experiences going forward. One noted this weight change 
would not give health plans adequate time to adjust for the volatility 
and inconsistency of CAHPS responses and difficulties in measurement 
during this time. A couple of commenters noted that depending on the 
state of the pandemic, additional weight afforded to the current 
patient experience and complaints measures will not accurately capture 
plan performance during this public health emergency and crisis. 
Another commenter noted patient experience data during this period may 
not be particularly accurate or useful as a measure of overall 
performance of Medicare Advantage or individual plans due to how the 
pandemic may impact how beneficiaries may respond to these types of 
surveys.
    Response: The changes to the weighting of patient experience/
complaints and access measures apply to the 2021 measurement year, not 
the 2020 measurement year when the pandemic first started. CMS agrees 
that there is a lot of uncertainty about how COVID-19 will impact the 
healthcare system and quality measurement and recognizes the challenges 
placed on the healthcare system and Part C and D plans; however, plans 
have until the 2021 measurement year to adjust their processes to 
account for the impact of COVID-19 on Star Ratings measures. One thing 
that is certain for plans is how much they focus on addressing their 
members' needs during the time of a pandemic. We believe that given the 
uncertainty during such times, it is even more important that plans be 
proactive, anticipate enrollees' needs, and work with them in a 
customized way to mitigate any challenges that enrollees might face in 
a pandemic environment. Therefore, it is important to move forward with 
these Star Ratings changes to further emphasize the importance of 
patient experience/complaints and access measures at this time. We 
reiterate that patient experience is an inherently important dimension 
of

[[Page 33843]]

healthcare quality and associated with better health outcomes and 
improved care delivery. This is critical information to help 
beneficiaries make more informed choices.
    Comment: Some commenters noted that different areas of the country 
are experiencing different limitations of health care resources related 
to COVID-19, some of which may require redeployment of resources, so 
differences in CAHPS and HOS survey scores may be neither meaningful 
nor appropriate to compare plan performance. They request that CMS re-
evaluate these measures after the COVID-19 crisis is resolved. Several 
commenters noted their concern about the long-term impact of the public 
health crisis on respondents' physical and mental health, and their 
perception of the health care system and health plans.
    Response: CMS recognizes the challenges that COVID-19 has placed on 
the healthcare system and quality measurement. We understand the 
concern that it may impact how beneficiaries respond to CAHPS surveys 
and, consequently, the CAHPS measure scores. To that end, we believe 
that this would be a great opportunity for plans to focus even more on 
supporting their enrollees, being proactive and anticipating enrollees' 
needs, and working with them in a customized way to mitigate any 
challenges that enrollees might face in a pandemic environment. We are 
continuing to monitor whether additional Star Ratings adjustments need 
to be proposed for future years.
    Comment: Several commenters stated the weight increase should not 
proceed at this time due to widespread restricted access to providers 
due to concern about capacity and public safety as a result of COVID-
19, and the unknown duration of such restrictions. For example, 
beneficiaries may not be able to assess their experience with in-person 
encounters, and responses may be biased by exigencies secondary to 
COVID-19. One notes the proposed CAHPS weight changes for the 2021 
measurement period provide little time for health plans to adjust for 
the volatility and consistency of CAHPS responses and difficulties in 
measurement.
    Response: Again, we believe that this would be the ideal time for 
plans to take the opportunity to focus even more on supporting their 
enrollees, being proactive and anticipating enrollees' needs, and 
working with them in a customized way to mitigate any challenges that 
enrollees might face in a pandemic environment, particularly challenges 
in accessing services. As previously stated, these changes are for the 
2021 measurement period so plans have time to adjust to the impacts of 
COVID-19. Even in a pandemic environment, increasing the weight for 
experience measures will encourage plans to focus on an enrollee's 
experience with the plan (for example, plan communication, plan 
innovation, mitigation of access issues). CMS will continue to monitor 
the impact of the public health emergency on quality measurement. For 
CAHPS measures, widespread changes in industry performance should be 
reflected in the cut points.
Summary of Regulatory Changes
    After consideration of the comments and for the reasons indicated 
in the proposed rule and in the responses to comments, we are 
finalizing the provisions regarding the weight increase for patient 
experience/complaints and access measures as proposed at Sec. Sec.  
422.166(e)(1)(iii) and (iv) and 423.186(e)(1)(iii) and (iv).
    In the proposed rule, we stated that if both Tukey outlier deletion 
and increasing the weight of patient experience/complaints measures and 
access measures were adopted the net savings for the Medicare Trust 
Fund would be $368.1 million for 2024, increasing to $999.4 million for 
2030. We are finalizing the use of Tukey outer fence outlier deletion 
as proposed but to begin one year later, with the 2024 Star Ratings, 
and are finalizing the proposal to increase the weights of the patient 
experience and complaints measures and the access measures to 4 for the 
2023 Star Ratings. Based on the combination of these final policies, we 
project the net cost to the Medicare Trust Fund would be $345.1 million 
for 2024, increasing to a net savings of $999.4 million for 2030. There 
is a net cost for 2024 since the increase in weight for patient 
experience/complaints measures and access measures results in an 
overall increase in the highest ratings for MA contracts, while in 
future years with the addition of the Tukey outlier deletion there is 
an overall decrease in the highest ratings for MA contracts.
5. Reclassification of the Statin Use in Patients With Diabetes (SUPD) 
Measure (Sec. Sec.  422.164(d)(2), 423.184(d)(2)
    Currently, the SUPD measure specifications require two diabetes 
medication fills to meet the denominator while only a single fill of a 
statin therapy is required to meet the numerator criteria. Recently, 
the Pharmacy Quality Alliance (PQA), the measure steward, has clarified 
SUPD as a process measure in a Frequently Asked Question (FAQ) (the FAQ 
can be found at https://www.pqaalliance.org/measures-overview#supd), 
therefore CMS no longer believes that the intermediate outcome measure 
classification for the SUPD measure is appropriate. We proposed to 
modify the classification of the SUPD measure from an intermediate 
outcome measure to a process measure, starting with the 2023 Star 
Ratings, based on data from the 2021 measurement period.
    We received the following comments related to our proposal, and our 
responses follow:
    Comment: The majority of commenters supported modifying the SUPD 
measure classification from an intermediate outcome to a process 
measure, changing the weight from 3 to 1. Commenters noted that 
outcomes are not measured in SUPD since it only requires a single fill 
of a statin medication. They agreed that SUPD is a process measure that 
is based on an important procedural intervention but does not capture a 
therapeutic outcome since SUPD does not monitor the medication 
adherence of a statin over a course of treatment. In addition, 
commenters noted that classifying SUPD as a process measure is 
consistent and aligns with the Part C Statin Therapy for Patients with 
Cardiovascular Disease measure.
    Response: CMS appreciates the commenters' support of this proposal. 
It is consistent with the clarification from the measure steward, the 
Pharmacy Quality Alliance (PQA), in 2019 that SUPD is a process measure 
based on the National Quality Forum's (NQF) criteria.
    Comment: A few commenters that support CMS's proposal to modify the 
SUPD measure category to a process measure also noted that CMS should 
exercise caution when creating additional measures in the Star Ratings 
program or changing measure categorizations. Commenters were concerned 
that measure weights are being changed too rapidly. One commenter also 
expressed concerns with selecting the SUPD measure and recommends that 
CMS consider replacing SUPD with the Healthcare Effectiveness Data and 
Information Set (HEDIS) measure Statin Therapy for Patients with 
Diabetes (SPD).
    Response: CMS thanks the commenters for this feedback. CMS 
carefully evaluates all of the measures incorporated in the Star 
Ratings. CMS will continue to monitor each of the measures included in 
the Star Ratings as well as future measures incorporated into the Star 
Ratings. CMS also carefully evaluates the weights of each measure.

[[Page 33844]]

The weights are based on measure type. Typically, CMS aligns the 
measure specifications with the measure steward. The Statin Therapy for 
Patients with Cardiovascular Disease (SPC) is already included in the 
Part C Star Ratings while the SUPD measure is included for Part D. CMS 
first discussed the HEDIS SPD and SPC measures, and the PQA SUPD 
measure in the 2016 Call Letter. As stated in the 2017 Call Letter, the 
SPD measure overlapped with the SUPD measure. Therefore, CMS added only 
one of the HEDIS measures (the Part C SPC measure) to the 2017 display 
page as well as the Part D SUPD measure after consideration of 
stakeholder feedback through the Call Letter process. CMS gained 
experience with calculating and reporting the measures and added SPC 
and SUPD to the Star Ratings as announced in the 2019 Call Letter.
    Comment: Commenters provided feedback on the timeline proposed for 
reclassifying SUPD starting with the 2023 Star Ratings (using 2021 
data). Some noted that SUPD is a process measure that has not changed 
in terms of specifications to warrant retaining SUPD as an intermediate 
outcome measure for the 2021 and 2022 Star Ratings. Additionally, 
commenters were concerned that retaining the classification as an 
intermediate outcome with a weight of 3, rather than immediately 
reclassifying SUPD as a process measure with a weight of 1, could lead 
to confusion, and is inconsistent with the guidance of expert measure 
developers, which could lead to instability for the Star Ratings. 
However, there were a few commenters who supported CMS's proposed 
timeline as it would take into consideration plan efforts and 
coordination needed to account for the SUPD measure reclassification.
    Response: Reclassifying SUPD as a process measure (including its 
weight), is a substantive change that must be proposed and finalized 
through rulemaking as required by Sec.  423.184(d)(2). In the April 
2018 final rule, CMS finalized the weight of 3 for SUPD for the 2021 
and 2022 Star Ratings. In the February 2020 proposed rule, CMS proposed 
to reclassify SUPD as a process measure with a weight of 1 for future 
years, starting with the 2023 Star Ratings. This timeline and approach 
is consistent with the April 2018 final rule which outlined that a key 
tenet of the Star Ratings program is to make changes prior to the 
measurement year and to give sponsors enough lead time, in order to 
ensure greater transparency and stability for the Star Ratings program 
for plan sponsors.
    Comment: A few commenters opposed reclassifying SUPD to a process 
measure or changing the weight of 3 to 1. Commenters noted that statin 
use for diabetic patients is an important and valuable intervention; 
thus, SUPD should remain classified as an intermediate outcome measure. 
Additionally, commenters were concerned with reclassifying SUPD and 
lowering the weight in the absence of outcomes-focused measures within 
the Star Ratings that address appropriate care for diabetes and 
cardiovascular care, given the strong correlation between the two 
conditions.
    Response: CMS agrees that SUPD is an important measure that is 
included in the Star Ratings. Per NQF's definition of process measures, 
CMS agrees that prescribing a statin is a step in providing good care, 
rather than an outcome of such care. Furthermore, the measure steward, 
PQA, has classified SUPD as a process measure based on NQF's 
definition. As such, CMS proposed to reclassify SUPD as a process 
measure with a weight of 1 to align with the industry definitions.
    Comment: Several commenters gave specific feedback regarding 
exclusion criteria related to SUPD, such as beneficiaries predisposed 
to statin intolerance or history of rhabdomyolysis. Commenters were 
concerned that only using prescription claims limited the types of 
exclusions included in SUPD. In addition, a few commenters noted this 
quality measure does not reflect or capture achievable outcomes related 
to reversing chronic disease or decreasing cardiovascular morbidity and 
mortality.
    Response: We thank the commenters for the feedback, but these 
comments are out of scope for this rule since the comments do not 
reference the reclassification of the SUPD measure and the subsequent 
change to the measure weight. CMS will share the measure specification 
comments with the measure steward, PQA, about the additional 
populations that were recommended for exclusion, the concerns with 
using prescription claims and exclusions, and to consider future 
measures on outcomes related to reversing chronic disease.
    Comment: A commenter was concerned with the current COVID-19 public 
health emergency and how it could impact the accuracy of the measure.
    Response: Thank you for this feedback. CMS will continue to monitor 
the impact of the public health emergency on the SUPD measure.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to the comments, we are 
finalizing the proposal without modification. Starting with the 2023 
Stars Rating, the SUPD measure will be reclassified as a process 
measure with a weight of 1. This change will be reflected in the 
Medicare Part C & D Star Ratings Technical Notes for the 2023 Star 
Ratings, which are based on the 2021 measurement period.

C. Medical Loss Ratio (MLR) (Sec. Sec.  422.2420, 422.2440, and 
423.2440)

    In the February 18, 2020 proposed rule (85 FR 9008), we proposed 
certain modifications to the medical loss ratio (MLR) regulations for 
the Medicare Part C and Part D programs. Briefly, we proposed to amend 
Sec.  422.2420(b)(2)(i) to allow MA organizations to include in the MLR 
numerator as ``incurred claims'' all amounts paid for covered services, 
including amounts paid to individuals or entities that do not meet the 
definition of ``provider'' as defined at Sec.  422.2. We also proposed 
to codify the definitions of partial, full, and non-credibility and 
credibility factors that we published in the May 2013 Medicare MLR 
final rule (78 FR 31295 through 31296). Finally, for MA medical savings 
account (MSA) contracts receiving a credibility adjustment, we proposed 
to apply a deductible-based adjustment to the MLR calculation in order 
to recognize that the variability of claims experience is greater under 
health insurance policies with higher deductibles than under policies 
with lower deductibles.
1. Background
    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. The proposed rule provided 
background on the Part C and Part D medical loss ratio (MLR) 
requirements, including the statutory and regulatory authority. The 
Part C statute, at section 1857(e)(4) of the Act, expressly imposes a 
minimum medical loss ratio requirement for MA plans. Because section 
1860D-12(b)(3)(D) of the Act incorporates by reference the requirements 
of section 1857(e) of the Act, these MLR requirements also apply to the 
Medicare Part D program. In the May 2013 Medicare MLR final rule, which 
codified the MLR requirements for Part C MA organizations and Part D 
sponsors (including organizations offering cost plans that offer the 
Part D benefit) in the regulations at 42 CFR part 422, subpart X, and 
part 423, subpart X. In the April 2018 final rule (83 FR 16440), we 
changed certain aspects of

[[Page 33845]]

the MLR calculation and revised the reporting requirements.
    For contracts for 2014 and later, MA organizations and Part D 
sponsors are required to report their MLRs and are subject to financial 
and other sanctions for a failure to meet the statutory requirement 
that they have an MLR of at least 85 percent (see Sec. Sec.  422.2410 
and 423.2410). The statute 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 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.
2. Regulatory Changes to Incurred Claims (Sec.  [thinsp]422.2420)
    Section 422.2420(a) of the regulations sets forth a high-level 
definition of the MLR as the ratio of the numerator, defined in 
paragraph (b), to the denominator, defined in paragraph (c). In 
general, MA costs are in the numerator and revenues are in the 
denominator. Section 422.2420(b)(1) identifies the three components of 
the MLR numerator for MA contracts that are not MSA contracts: (1) 
Incurred claims (as defined in paragraphs (b)(2) through (4)); (2) the 
amount of the reduction, if any, in the Part B premium for all MA plan 
enrollees under the contract for the contract year; and (3) 
expenditures under the contract for activities that improve health care 
quality, which are described in detail at Sec.  422.2430. For MA MSA 
contracts, the three components of the MLR numerator are (1) incurred 
claims (as defined in paragraphs (b)(2) through (4)); (2) expenditures 
under the contract for activities that improve health care quality; and 
(3) the amount of the deposit into the Medicare savings account for MSA 
enrollees. We proposed to revise the regulation text regarding the 
incurred claims portion of the numerator.
    Under current Sec.  422.2420(b)(2)(i), incurred claims include 
direct claims that the MA organization pays to providers (including 
under capitation contracts) for covered services (described at 
paragraph (a)(2) of that section) that are provided to all enrollees 
under the contract. Section 422.2 defines a ``provider'' for purposes 
of the MA regulations as any individual or entity that is engaged in 
the delivery of health care services in a State and is licensed or 
certified by the State to engage in that activity in the state, or to 
deliver those services if such licensing or certification is required 
by State law and regulation. Per Sec.  422.2420(a)(2), ``covered 
services'' are the benefits defined at Sec.  422.100(c): basic 
benefits, mandatory supplemental benefits, and optional supplemental 
benefits.
    As explained in greater detail in section II.A. of this final rule 
and sections II.A. and VI.F. of the proposed rule, we proposed 
revisions to the regulations at Sec.  422.100 in order to codify 
subregulatory guidance and statutory changes that have expanded the 
types of supplemental benefits that MA plans may include in their plan 
benefit packages (PBPs). The proposed amendment to Sec.  422.100(c)(2) 
would codify our longstanding interpretation of the statute to require 
a supplemental benefit to be an item or service (1) that is primarily 
health related; (2) for which the MA organization incurs a non-zero 
direct medical cost; and (3) that is not covered by Medicare Parts A, 
B, or D. In the 2019 Call Letter, issued on April 2, 2018, we announced 
that we had reinterpreted the scope of what would be ``primarily health 
related'' in order to meet this criterion to be a supplemental benefit. 
Under this reinterpretation, to be considered ``primarily health 
related,'' a supplemental benefit must diagnose, prevent, or treat an 
illness or injury, compensate for physical impairments, act to 
ameliorate the functional or psychological impact of injuries or health 
conditions, or reduce avoidable emergency and healthcare utilization; 
we explained in the contract year 2019 Call Letter how this means the 
benefit must focus directly on an enrollee's health care needs and must 
be medically appropriate and recommended by a licensed medical 
professional as part of a health care plan, but it need not be directly 
provided by one. As part of proposed Sec.  422.100(c)(2), to account 
for the types of supplemental benefits that may be offered under the 
policy changes addressed in section II.A. of this final rule and 
sections II.A. and VI.F. of the proposed rule, we also proposed 
specific provisions to address permissible supplemental benefits that 
are not primarily health related and for which the non-zero direct cost 
incurred must be a non-administrative direct cost (if it is not a 
medical cost).
    In Sec.  422.102(f), as finalized in section II.A. of this final 
rule, we are codifying regulation text implementing amendments made by 
the BBA of 2018 to section 1852(a)(3) of the Act to expand the types of 
supplemental benefits that may be offered to chronically ill enrollees, 
starting in contract year 2020. Under paragraph (D) of section 
1852(a)(3) of the Act, as added by the BBA of 2018, MA organizations 
may provide special supplemental benefits for the chronically ill 
(SSBCI) that are not primarily health related to chronically ill 
enrollees, as long as the item or service has the reasonable 
expectation to improve or maintain the chronically ill enrollee's 
health or overall function.
    As explained in the proposed rule, under current Sec.  
422.2420(b)(2)(i) of the MA MLR regulations, incurred claims in the MLR 
numerator include direct claims paid to providers for covered services 
furnished to all enrollees under an MA contract. The amendment to 
section 1852(a)(3)(D) of the Act has expanded the types of supplemental 
benefits that can be ``covered services'' under an MA plan. The 
amendments to implement that change at Sec.  422.102(f) and the 
continuation of our policy for establishing what it means for a benefit 
to be primarily health related, both, mean that permissible 
supplemental benefits might include items and services that would not 
typically be furnished by an individual or entity that is a 
``provider'' as defined at Sec.  422.2. A provider, as defined in Sec.  
422.2, is an individual or entity engaged in the delivery of health 
care services and who is licensed or certified by the State to engage 
in that activity in the State. To ensure that amounts that an MA 
organization pays for covered services to individuals or entities that 
are not health care providers are included in incurred claims under 
current Sec.  422.2420(b)(2)(i), we proposed to amend the regulation to 
remove the specification that incurred claims are payments to providers 
for covered services.
    The proposed rule explained that, if incurred claims do not include 
amounts an MA organization pays to individuals or entities that are not 
providers for supplemental benefits, including SSBCI, these 
expenditures could still potentially be included in the MLR numerator 
as expenditures related to quality improvement activities (QIAs). To be 
considered a QIA under Sec.  422.2430, a benefit must be an activity 
that falls into one or more of the categories listed in paragraph 
(a)(2) of that section, and it must be designed for the purposes listed 
in paragraph (a)(3): (1) To improve health quality; (2) to increase the 
likelihood of desired health outcomes in ways that are capable of being 
objectively measured and of producing verifiable results; (3) to be 
directed toward individual enrollees,

[[Page 33846]]

specific groups of enrollees, or other populations as long as enrollees 
do not incur additional costs for population-based activities; and (4) 
to 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. As 
explained in the proposed rule, although we believe that supplemental 
benefits that meet the expanded ``primarily health related'' standard 
at proposed Sec.  422.100(c)(2)(ii)(A) and non-primarily health related 
SSBCI described at Sec.  422.102(f) could potentially qualify as QIAs 
under Sec.  422.2430, whether a particular benefit met all of the 
requirements of that regulation would need to be determined on a case-
by-case basis. With our proposed amendments to Sec.  422.2420(b)(2)(i), 
this case-by-case determination would no longer be necessary for 
services that are covered under the plan benefit package offered by an 
MA plan pursuant to the statute and regulations governing the MA 
program; all amounts paid for covered services would be included in the 
incurred claims portion of the MLR numerator.
    As explained in the proposed rule, we believe that including in the 
MLR numerator amounts MA organizations spend on supplemental benefits 
that meet the ``primarily health related standard'' at proposed Sec.  
422.100(c)(2)(ii)(A) and on non-primarily health related SSBCI under 
Sec.  422.102(f), as amended in this final rule, is consistent with the 
purpose of the MA MLR requirement. As explained in the May 2013 
Medicare MLR final rule adopting the MLR regulations (78 FR 31284), the 
MLR requirement creates an incentive for MA organizations to reduce 
administrative costs such as marketing costs, profits, and other uses 
of plan revenues, and to help ensure that taxpayers and enrolled 
beneficiaries receive value from Medicare health plans.
    In order to ensure that the MLR numerator includes amounts MA 
organizations spend on supplemental benefits that are ``primarily 
health related'' under our current guidance and on non-primarily health 
related SSBCI under Sec.  422.102(f), as adopted in this final rule, we 
proposed the following modifications to the regulation at Sec.  
[thinsp]422.2420(b)(2)(i):
     Remove the specification that incurred claims are direct 
claims that an MA organization pays to providers for covered services 
provided to all enrollees under the contract.
     Remove the specification that incurred claims include 
payments under capitation contracts with physicians.
     Replace the phrase ``direct claims,'' which customarily 
refers to billing invoices providers submit to payers for 
reimbursement, with the general term ``amounts.''
    As amended under our proposal, Sec.  422.2420(b)(2)(i) would 
include in incurred claims all amounts that an MA organization pays 
(including under capitation contracts) for covered services, regardless 
of whether the recipient of the payment is a provider as defined in 
Sec.  422.2. Including in incurred claims amounts spent on these 
expanded supplemental benefits, as proposed, avoids creating 
uncertainty over whether payments for such covered services could 
otherwise be included in the MLR numerator (for example, as QIA-related 
expenditures), and it is consistent with our determination in the May 
2013 Medicare MLR final rule (78 FR 31289) that incurred claims should 
reflect the benefit design under the contract.
    We received 27 comments on the proposed amendments to Sec.  
422.2420(b)(2)(i). The following is a summary of the comments we 
received on the proposal and our responses:
    Comment: The majority of commenters supported the proposal. Many 
commenters believed that including in the MLR numerator as incurred 
claims all payments for covered services would provide greater 
certainty and reduce plan burden by eliminating the need to assess 
whether individual benefits meet the criteria to qualify as QIAs under 
Sec.  422.2430. A number of commenters believed that the proposed 
change would encourage the expansion of supplemental benefits to 
address social barriers to care and MA enrollees' other health needs. A 
few commenters commended us for recognizing the role played by 
individuals and entities that are not providers in implementing the 
expanded supplemental benefit flexibility. A couple of commenters noted 
that they agreed with our view that including in incurred claims 
amounts spent on these expanded supplemental benefits is consistent 
with our prior determination that incurred claims should reflect the 
benefit design under the contract.
    Response: We thank the commenters for their support. We reiterate 
that under our proposal and this final rule, only amounts expended by 
the MA organization for covered services, which must meet the standards 
of the MA program for coverage, can be included in the MLR numerator as 
incurred claims.
    Comment: A commenter supported the proposal but requested that we 
clarify that the incurred claims portion of the MLR numerator will 
include capitated payments by MA organizations to clinical risk-bearing 
entities (for example, Independent Practice Associations (IPAs), 
Physician Hospital Organizations (PHOs), and Accountable Care 
Organizations (ACOs)) that include amounts for both medical and 
administrative services, provided the arrangement satisfies a four-
factor test that was originally set forth in a guidance document \28\ 
related to the MLR rules that apply to issuers of employer group and 
individual market private insurance (hereinafter referred to as the 
``commercial MLR rules''), and later incorporated into our annual MLR 
Data Form Filing Instructions for MA organizations and Part D sponsors. 
The commenter expressed concern that, if the four-factor test does not 
remain in place, all capitated payments to providers would need to be 
divided between medical services and delegated administrative services, 
and then aggregated up to the plan level to determine the amount to be 
excluded from the MLR as administrative costs.
---------------------------------------------------------------------------

    \28\ CCIIO Technical Guidance (CCIIO 2012--001): Questions and 
Answers Regarding the Medical Loss Ratio Interim Final Rule. 
February 12, 2012.
---------------------------------------------------------------------------

    Response: The amendment to Sec.  422.2420(b)(2)(i), as proposed and 
finalized, includes in incurred claims all amounts that an MA 
organization pays (including under capitation contracts) for covered 
services, regardless of whether the recipient of the payment is a 
provider as defined in Sec.  422.2. This revision removes the 
specification that the recipient of a payment for a covered service 
must be a provider (or a physician, in the case of capitated payments) 
to be included in incurred claims. The proposed change would not, if 
finalized, exclude from the incurred claims portion of the MLR 
numerator any payments that could be included in the numerator as 
incurred claims under the current MLR rules. However, this amendment 
also does not authorize inclusion in the numerator of costs that are 
excluded from incurred claims, such as administrative expenses 
addressed in Sec.  422.2420(b)(4).
    The four-factor test referenced by the commenter has been 
incorporated into our annual MLR Data Form Filing Instructions 
(formerly the MLR Report Filing Instructions) (OMB control no.

[[Page 33847]]

0938-1232) (CMS-10476) for each contract year since contract year 2014. 
The instructions specify that amounts paid by an MA organization or 
Part D sponsor to clinical risk-bearing entities can be included in the 
MLR numerator as incurred claims if the following criteria are met:
    (1) The entity contracts with an issuer to deliver, provide, or 
arrange for the delivery and provision of clinical services to the 
issuer's enrollees but the entity is not the issuer with respect to 
those services;
    (2) The entity contractually bears financial and utilization risk 
for the delivery, provision, or arrangement of specific clinical 
services to enrollees;
    (3) The entity delivers, provides, or arranges for the delivery and 
provision of clinical services through a system of integrated care 
delivery that, as appropriate, provides for the coordination of care 
and sharing of clinical information, and which includes programs such 
as provider performance reviews, tracking clinical outcomes, 
communicating evidence-based guidelines to the entity's clinical 
providers, and other, similar care delivery efforts; and
    (4) Functions other than clinical services that are included in the 
payment (capitated or fee-for-service) must be reasonably related or 
incident to the clinical services, and must be performed on behalf of 
the entity or the entity's providers.
    Payments to risk-bearing entities that include payments for 
administrative functions performed on behalf of the entity's member 
providers are incurred claims for purposes of Sec.  422.2420 if all 
four factors outlined above are met.\29\ However, to the extent that 
administrative functions are performed on behalf of the MA organization 
or Part D sponsor, that portion of the organization's or sponsor's 
payment that is attributable to administrative functions may not be 
included in incurred claims. This is the case regardless of whether 
payment is made according to a separate, fee-for-service payment 
schedule or as part of a global, capitated fee payment for all services 
provided.\30\ We will continue to use this four-factor test to 
determine whether an MA organization can include payments to clinical 
risk-bearing entities.
---------------------------------------------------------------------------

    \29\ For example, a bundled payment to an Independent Practice 
Association (IPA) or similar entity for providing clinical services 
to enrollees which includes: The IPA processing claims payments to 
its member providers and submitting claims reports to issuers on 
behalf of its providers; performing provider credentialing to 
determine a provider's acceptability into the IPA network; and 
developing a network for its providers' benefit, can be included in 
incurred claims.
    \30\ For example, payment for processing claims in order to 
issue explanations of benefits (EOBs) to enrollees and handling any 
stage of enrollee appeals cannot be included in incurred claims. 
Payments for non-clinical services for which the contract between 
the clinical risk-bearing entity, such as an IPA, and the MA 
organization or Part D sponsor contains a ``clawback'' provision are 
not considered incurred claims for MLR reporting purposes.
---------------------------------------------------------------------------

    Comment: A commenter expressed concern that the proposed changes to 
the definition of ``incurred claims'' could be interpreted as 
sufficiently broad to permit MA plans and PDPs to include in the MLR 
numerator costs associated with pharmacy benefit manager (PBM) services 
due to the nexus between those services and beneficiary access to 
covered drugs. The commenter was concerned in particular that the 
proposed change would allow MA organizations and Part D sponsors to 
include costs for implementing utilization management tools and 
strategies in the MLR numerator as incurred claims.
    Response: We appreciate the commenter's concerns. Amending Sec.  
422.2420(b)(2)(i) as proposed to include in incurred claims amounts 
paid for covered services, regardless of whether the payment is made to 
a provider, does not allow MA organizations or Part D sponsors to 
include in the MLR numerator amounts that are identified as non-claims 
costs and excluded from incurred claims under our current rules. These 
non-claims costs that continue to be excluded from the MLR numerator 
include amounts paid to third party vendors for network development, 
administrative fees, claims processing, and utilization management 
(Sec.  422.2420(b)(4)). We note, however, that our current rules permit 
a clinical-risk bearing entity's costs related to utilization 
management and other administrative services to be included in incurred 
claims if all four factors outlined in the previous response are met. 
In addition, consistent with CCIIO's Technical Guidance,\31\ our MLR 
Data Form Filing Instructions specify that when a third party vendor, 
through its own employees,\32\ provides clinical services directly to 
enrollees, the entire portion of the amount the issuer pays to the 
third party vendor that is attributable to the third party vendor's 
direct provision of clinical services should be considered incurred 
claims, even if such amount includes reimbursement for administrative 
costs directly related to the vendor's direct provision of clinical 
services.\33\
---------------------------------------------------------------------------

    \31\ See, for example, the May 13, 2011 CCIIO Technical Guidance 
(CCIIO 2011-002), Q&A #12, available at: https://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-guidance-20110513.pdf.
    \32\ The term ``through its own employees'' does not include a 
third party vendor's contracted network of providers because such 
network providers are not considered employees of the third party 
vendor.
    \33\ The MLR Data Form Filing Instructions include the example 
of a Part D sponsor that contracts with a pharmacy benefit manager 
(PBM) to provide clinical services directly to enrollees through a 
mail order pharmacy. The instructions explain that the sponsor's 
payments to the PBM for mail order pharmacy services provided 
directly by the PBM's employees, including administrative costs 
related to the PBM's direct provision of such mail order pharmacy 
services, would be included in the sponsor's incurred claims.
---------------------------------------------------------------------------

    Comment: A commenter opposed the proposal because they believed 
that including all payments for covered services in the incurred claims 
portion of the MLR numerator would be an unnecessary and inappropriate 
deviation from the commercial MLR rules, which only include payments to 
non-providers in the MLR numerator if they meet the requirements for 
QIA-related expenditures. The commenter expressed approval for the 
approach we took in the May 2013 Medicare MLR final rule, which was to 
use the commercial MLR rules as a reference point for developing the 
MLR rules for Medicare Advantage and Part D (hereinafter referred to as 
the ``Medicare MLR rules'') and to only depart from the commercial 
rules to extent necessary and appropriate given the Medicare context 
(78 FR 31285, 31290). The commenter stated the proposed rule did not 
identify any reason that the Medicare context makes it necessary and 
appropriate to depart from the requirement in the commercial MLR rules 
that incurred claims be paid to providers for covered services. The 
commenter asserted that the Medicare context does not meaningfully 
differ from the commercial context with respect to the benefits at 
issue.
    Response: We respectfully disagree with the commenter. We continue 
to believe that it is important that we align the Medicare MLR rules 
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. However, as stated in the February 2013 Medicare 
Program; Medical Loss Ratio Requirements for the Medicare Advantage and 
the Medicare Prescription Drug Benefit Programs Proposed Rule (78 FR 
12428 through 12429) (hereinafter referred to as the ``February 2013 
Medicare MLR proposed rule''), we also recognize that the commercial 
MLR rules may need to be revised in order to fit unique

[[Page 33848]]

characteristics of the MA and Part D programs. We believe that it is 
appropriate that we depart from the commercial MLR rules and expand the 
meaning of ``incurred claims'' to include covered services furnished by 
individuals and entities that are not providers, as proposed. The 
amendment to section 1852(a)(3)(D) of the Act by the BBA of 2018 to 
expand the types of supplemental benefits that can be ``covered 
services'' under an MA plan and the implementation of that change at 
Sec.  422.102(f), as well as CMS' reinterpretation of what it means for 
a supplemental benefit offered by an MA plan to be primarily health 
related, mean that permissible supplemental benefits might include 
items and services that would not be furnished by a ``provider'' as 
defined at Sec.  422.2. As we explained in the contract year 2019 Call 
Letter, a benefit is primarily health related if it diagnoses, 
prevents, or treats an illness or injury, compensates for physical 
impairments, acts to ameliorate the functional or psychological impact 
of injuries or health conditions, or reduces avoidable emergency and 
healthcare utilization; and while we indicated that supplemental 
benefits must be medically appropriate and recommended by a licensed 
provider, we acknowledged that they might not be directly provided by a 
health care professional. Because SSBCI are only required to have a 
reasonable expectation of maintaining or improving the health or 
overall function of the chronically ill enrollee and are not required 
to be primarily health related, we believe those benefits can be 
provided by someone who is not a health care professional. We are 
concerned that uncertainty about whether payments for these benefits 
can be included in the MLR numerator may make MA organizations less 
inclined to include them in their plan offerings. We believe that it is 
contrary to Congress' intent in amending section 1852(a)(2)(D) of the 
Act, and that it undermines CMS' efforts to provide MA organizations 
with additional flexibility to meet beneficiaries' health needs through 
supplemental benefits, if the MLR fails to adapt to changes in the 
permissible benefit design and ultimately deters MA organizations from 
offering those benefits. In addition, we note that section 2718 of the 
Public Health Service Act specifies that commercial MLRs shall reflect 
the percentage of total premium revenue spent ``on reimbursement for 
clinical services provided to enrollees,'' QIAs, and non-claims costs 
(which are excluded from the MLR numerator). By contrast, section 
1857(e)(4) of the Act, which sets forth the minimum MLR requirement for 
the MA program, does not require that the portion of the MLR numerator 
consisting of non-QIA expenditures should be for ``clinical services'' 
or otherwise specify how the Secretary should calculate Medicare MLRs. 
Although the commercial and Medicare MLR requirements were both created 
by the Affordable Care Act of 2010, the statute gives the Secretary 
greater flexibility in determining how to integrate an MLR requirement 
into the Medicare program. We continue to use this flexibility to 
revise the calculation of the Medicare MLR as appropriate based on the 
unique characteristic of the MA and Part D programs, and we believe 
that amendment here is such an appropriate change.
    Comment: A commenter believed that the proposed change was both 
unnecessary and unlikely to be effective as a means of encouraging MA 
organizations to expand their supplemental benefit offerings. The 
commenter cited data showing that MA organizations had been increasing 
their supplemental benefit offerings in recent years, which the 
commenter attributed to previous rule changes. The commenter 
recommended that instead of adjusting the MLR calculation to encourage 
the expansion of coverage of supplemental benefits, we should address 
the barriers to providing supplemental benefits that have been 
identified by MA organizations--specifically, upfront costs, trade-offs 
among benefits, return on investment, and provider availability. The 
commenter cautioned that the proposal may have unintended, negative 
impacts on non-supplemental benefit coverage, but the commenter did not 
specify what it meant by non-supplemental benefit coverage or what 
those negative impacts might be.
    Response: We thank the commenter for their feedback and 
recommendations. As indicated in our response to other comments, we 
proposed to revise the meaning of ``incurred claims'' to include 
payments for covered services furnished by individuals or entities that 
are not providers as defined at Sec.  422.2 in order to avoid creating 
uncertainty about whether expenditures for supplemental benefits can be 
included in the MLR numerator, which might deter MA organizations from 
offering those benefits. Although the purpose of our proposal was not 
to give MA organizations an incentive to offer expanded supplemental 
benefits, as noted above, we did receive numerous comments, some of 
which were submitted by MA organizations, which expressed support for 
the proposed change because the commenters believed it would encourage 
plans to offer expanded supplemental benefits. Our efforts to change 
how supplemental benefits are accounted for in the MLR numerator do not 
preclude us from pursuing other opportunities that are appropriate for 
CMS to take to promote the expansion of supplemental benefits.
    Comment: A commenter requested that we clarify in final rulemaking 
the review and enforcement actions we undertake to ensure that QIA is 
not abused at the expense of MA enrollees. Another commenter requested 
that we closely examine all MA activities that are currently 
categorized as QIA to ensure that their utilization improves quality.
    Response: At present, we do not actively collect information on MA 
organizations' QIA expenditures. As a result of change to the MLR 
reporting requirements finalized in the April 2018 final rule (83 FR 
16674), MA organizations are not required to include in their annual 
MLR submissions information on their QIA expenditures. We have the 
authority under Sec.  422.2480 to conduct selected audit reviews of the 
data reported under Sec.  422.2460, 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 are required to attest to the 
accuracy of the MLR data submitted. 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: Several commenters requested that we expand our proposal 
to include in incurred claims all expenditures related to combating 
COVID-19.
    Response: The commenters did not provide specific information on 
the types of expenditures they wish to make that they believe would not 
already be included in the MLR numerator as incurred claims under our 
proposal. Without more detailed information, we are unable to determine 
whether including the expenditures that the commenters are 
contemplating in incurred claims would in fact necessitate a 
modification to our proposal, or whether there is logical outgrowth to 
make such a modification

[[Page 33849]]

or whether it is consistent with our overall policies on the Medicare 
MLR.
    Comment: We received several recommendations for additional changes 
to the MLR requirements that are outside the scope of this final rule. 
A commenter recommended that we delay implementation of the MLR 
enrollment sanctions for contracts that fail to meet the MLR 
requirement for three consecutive contract years; that we develop a 
fixed quality improvement (QI) rate that could be added to the MLR 
numerator, similar to what is permitted under the commercial MLR 
regulations (45 CFR 158.221(b)(8)); that we provide guidance to plan 
sponsors concerning corrections of prior MLR submissions when errors 
are found that impact remittance calculations and that we develop a 
process to correct such data; and that we not apply the MLR 
requirements to standalone Part D plans. A commenter recommended that 
we mandate in the final rule that Part D sponsors must utilize a system 
to apply direct and indirect remuneration (DIR) fees at the point of 
sale as a means of improving the accuracy of the reported MLRs.
    Response: We thank the commenters for their recommendations and 
will consider whether they are appropriate to address through future 
rule-making or other guidance.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to the comments, we are 
finalizing the proposal without modification.
3. Codifying Current Definitions of Partial, Full, and Non-Credibility 
and Credibility Factors (Sec. Sec.  422.2440 and 423.2440)
    The regulations at Sec. Sec.  422.2440 and 423.2440 provide for the 
application of a credibility adjustment to the medical loss ratios 
(MLRs) of certain MA and Part D contracts with relatively low 
enrollment. A credibility adjustment is a method to address the impact 
of claims variability on the experience of smaller contracts by 
adjusting the MLR upward. As discussed in the February 2013 Medicare 
MLR proposed rule (78 FR 12438), for contracts with fewer members, 
random variations in the claims experience of enrollees could cause a 
contract's reported MLR to be considerably below or above the statutory 
requirement in any particular year, even though the MA organization or 
Part D sponsor estimated in good faith that the combination of the 
projected revenues and projected claims would produce an MLR that meets 
the statutory 85 percent minimum MLR requirement. The MLR credibility 
adjustments address the effect of this random variation by increasing 
the MLR of smaller contracts, thereby reducing the probability that 
such contracts will fail to meet the minimum MLR requirement simply 
because of random claims variability.
    Whether a contract receives a credibility adjustment depends on the 
extent to which the contract has credible experience. A contract with 
credible experience is one that covers a sufficient number of 
beneficiaries for its experience to be statistically valid. A contract 
with fully credible experience has sufficient data to expect that the 
statistical variation in the reported MLR is within a reasonably small 
margin of error and will not receive a credibility adjustment under 
Sec. Sec.  422.2440(b) and 423.2440(b). A contract has non-credible 
experience if it has so few beneficiaries that it lacks valid data to 
determine whether the contract meets the MLR requirement. Under 
Sec. Sec.  422.2440(c) and 423.2440(c), a contract with non-credible 
experience is not subject to sanctions for failure to meet the 85 
percent MLR requirement. A contract has partially credible experience 
if it exceeds the enrollment threshold for non-credible experience but 
does not have a sufficient number of enrollees for its experience to be 
fully credible. For contracts with partially credible experience, a 
credibility adjustment adds additional percentage points to the MLR in 
recognition of the statistical unreliability of the underlying data.
    In the May 2013 Medicare MLR final rule (78 FR 31295 through 
31296), CMS published the definitions of partial, full, and non-
credibility and the credibility factors for partially credible MA and 
Part D contracts for contract year 2014. The factors appeared in that 
final rule in Tables 1A (finalized here as Table 1 to Sec.  422.2440) 
and 1B to (finalized here as Table 1 to Sec.  423.2440). Consistent 
with that final rule and regulations at Sec. Sec.  422.2440 and 
423.2440, for contract years 2015 through 2020, we finalized through 
the annual Advance Notice and Rate Announcement process the continued 
use of these definitions and credibility factors.
    As explained in the proposed rule, we believe that the definitions 
of partial, full, and non-credibility and the credibility factors 
published in the May 2013 Medicare MLR final rule continue to 
appropriately address the effect of random claims variability on the 
MLRs of low enrollment MA and Part D contracts. However, we believe 
that it is more consistent with the policy and principles articulated 
in Executive Order 13892 on Promoting the Rule of Law Through 
Transparency and Fairness in Civil Administrative Enforcement and 
Adjudication (October 9, 2019) that we define and publish the 
definitions of partial, full, and non-credibility and the credibility 
factors in the Federal Register, and that we codify these definitions 
and factors in the Code of Federal Regulations, as opposed to defining 
and publishing these terms and factors through the annual Advance 
Notice and Rate Announcement process. Therefore, we proposed to amend 
our regulations at Sec. Sec.  422.2440 and 423.2440 to codify the 
definitions of partial, full, and non-credibility and the credibility 
factors that we published in the May 2013 Medicare MLR final rule (78 
FR 31296).
    We proposed to amend paragraph (d) of Sec. Sec.  422.2440 and 
423.2440 by removing the current text (which states that CMS will 
define and publish definitions of partial, full, and non-credibility 
and the credibility factors through the annual Advance Notice and Rate 
Announcement process) and adding new paragraphs (d)(1) through (3) to 
specify ranges for the number of member months at which a contract's 
experience is, respectively, partially credible, fully credible, or 
non-credible. We proposed that the number of member months at which a 
contract's experience is defined as partially credible, fully credible, 
or non-credible be the same as the values that were used define each of 
those terms in the May 2013 Medicare MLR final rule. Thus, for MA 
contracts, we proposed that a contract is partially credible if it has 
at least 2,400 member months and fewer than or equal to 180,000 member 
months, fully credible if it has more than 180,000 member months, and 
non-credible if it has fewer than 2,400 member months. For Part D 
contracts, we proposed that a contract is partially credible if it has 
at least 4,800 member months and fewer than or equal to 360,000 member 
months, fully credible if it has more than 360,000 member months, and 
non-credible if it has fewer than 4,800 member months. We proposed to 
amend Sec. Sec.  422.2440 and 423.2440 by removing from paragraphs (a) 
and (b) of both sections the text which indicates that CMS determines 
whether a contract's experience is partially credible or fully 
credible, respectively, and by adding at paragraphs (a), (b), and (c) 
of both sections new language specifying that partially credible 
experience is defined at (d)(1), fully credible experience is defined 
at (d)(2), and non-credible experience is defined at (d)(3).
    At Sec.  422.2440, we proposed to add new paragraph (e) to address 
the credibility adjustment for partially

[[Page 33850]]

credible contracts. We proposed at paragraph (e)(1) that, for partially 
credible MA contracts other than MSA contracts, the credibility 
adjustment is the base credibility factor determined under proposed 
paragraph (f). At new paragraph (f), we proposed to specify that the 
base credibility factor for a partially credible MA contract is 
determined based on the number of member months and the factors in 
Table 1 to Sec.  422.2440. New paragraph (f) also states the rules for 
using Table 1 to Sec.  422.2440 to identify the base credibility 
factor: (i) When the number of member months for a partially credible 
MA contract exactly matches the amount in the ``Member months'' column 
in Table 1 to Sec.  422.2440, the value associated with that number of 
member months is the base credibility factor; and (ii) the base 
credibility factor for a number of member months between the values 
shown in Table 1 to Sec.  422.2440 is determined by linear 
interpolation.
    At Sec.  423.2440, we proposed to add new paragraph (e), which 
provides that, for partially credible Part D contracts, the applicable 
credibility adjustment is determined based on the number of member 
months and the factors in Table 1 to Sec.  423.2440. New paragraph (e) 
states the rules for using Table 1 to Sec.  423.2440 to identify the 
base credibility factor: (1) When the number of member months used to 
determine credibility exactly matches a member month category listed in 
Table 1 to Sec.  423.2440, the value associated with that number of 
member months is the credibility adjustment; and (2) the credibility 
adjustment for a number of member months between the values shown in 
Table 1 to Sec.  423.2440 is determined by linear interpolation.
    We received no comments on this proposal and are finalizing this 
provision without modification for the reasons outlined in the proposed 
rule.
4. Deductible Factor for MA Medical Savings Account (MSA) Contracts 
(Sec.  422.2440)
    We proposed to include in the MLR calculation an additional 
adjustment factor for MA medical savings account (MSA) contracts that 
receive an MLR credibility adjustment. Specifically, we proposed that 
the credibility adjustment for partially credible MA MSA contracts will 
be calculated by multiplying the applicable base credibility factor in 
Table 1 to Sec.  422.2440 by a ``deductible factor.'' This additional 
adjustment for MA MSAs is intended to recognize that the variability of 
claims experience is greater under health insurance policies with 
higher deductibles than under policies with lower deductibles, with 
high cost or outlier claims representing a larger portion of the 
overall claims experience of plans with high deductibles. As a result, 
a contract with a high average deductible is more likely to report a 
low MLR than is a contract with the same number of enrollees but with a 
low average deductible. As under the commercial MLR rules, the proposed 
deductible-based adjustment would only apply to contracts that receive 
a credibility adjustment due to low enrollment. We believe that a 
contract with experience that is fully credible has sufficient data to 
expect that the statistical variation in the reported MLR is within a 
reasonably small margin of error, regardless of the deductible level.
    In the February 2013 Medicare MLR proposed rule (78 FR 12428), we 
explained that we used the commercial MLR rules as a reference point 
for developing the Medicare MLR rules. We sought to align the 
commercial and Medicare 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 
recognized 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 way in which the Medicare MLR rules currently deviate 
from the commercial rules is the omission of a deductible-based 
adjustment to the Medicare MLR calculation. The rationale given in the 
February 2013 Medicare MLR proposed rule for omitting a deductible 
factor from the Medicare MLR calculation was that Medicare deductibles 
were more confined than deductibles in the commercial market, and that 
we believed that the limited range of Medicare cost sharing did not 
prompt the need for such an adjustment (78 FR 12439).
    As explained in the proposed rule, although we continue to believe 
that deductibles for most MA and Part D contracts are too low to 
necessitate the adoption of a deductible factor for all contracts, we 
now recognize that the February 2013 Medicare MLR proposed rule's 
rationale for excluding a deductible factor from the Medicare MLR 
calculation did not adequately take into account the specific 
characteristics of MA MSA plans, which tend to have much higher 
deductibles than other MA plan types. For contract year 2020, the 
average deductible is $454 for MA plans (excluding MA MSAs) and $6,000 
for MA MSAs. The proposed rule noted that, under the commercial MLR 
regulations at 45 CFR part 158, a deductible factor applies to the 
credibility adjustment of issuers of employer group and private health 
insurance plans that have an average deductible of $2,500 or higher. 
For contract year 2020, all MA MSAs have deductibles in excess of 
$2,500. These significantly higher deductibles in MSA plans cause MA 
MSA contracts to have more variability in their claims experience 
relative to MA contracts with the same number of enrollees but lower 
deductibles. In light of this information, we believe that it is clear 
that our policy of excluding a deductible factor for MA MSA contracts 
should be revisited.
    Further, to the extent that this variability in claims experience 
and its potential impact on the MLR calculation has deterred MA 
organizations from offering an MSA product, the proposed addition of a 
deductible factor to the MLR calculation for MA MSAs would serve to 
encourage the offering of MA MSA plans by eliminating the current 
inconsistency in how the commercial and Medicare MLR rules take into 
account the greater variability of claims experience under health 
insurance policies with high deductibles. The proposed rule noted that 
our proposal to add a deductible factor to the MLR calculation for MA 
MSA contracts aligns with the directive in Executive Order 13890 on 
Protecting and Improving Medicare for Our Nation's Seniors (October 3, 
2019) for the Secretary to take actions that ``encourage innovative MA 
benefit structures and plan designs, including through changes in 
regulations and guidance that reduce barriers to obtaining Medicare 
Medical Savings Accounts . . . .'' (emphasis added). The proposed rule 
also noted that, for many Medicare beneficiaries, the greatest barrier 
to enrolling in an MA MSA has been the lack of MA MSA plans in the 
beneficiary's area of residence. For contract year 2020, MA MSA plans 
are only available in 27 states and the District of Columbia. The 
omission of a deductible-based adjustment from the current Medicare MLR 
regulations could contribute to the limited availability of MA MSAs for 
Medicare beneficiaries because the greater variability in the MLR for 
contracts with high average deductibles--and the resulting higher risk 
of a potential remittance to CMS or sanctions under Sec.  422.2410--
could dissuade MA organizations from offering plans of this type. We 
noted in the proposed rule our belief that finalizing a deductible 
factor for MA

[[Page 33851]]

MSAs would make it less likely that MA organizations would be deterred 
from offering MA MSA plans out of concern that the MA MSA contract 
would be at risk of failing to meet the MLR requirement due to random 
variations in claims experience.
    We proposed to adopt the same deductible factors that apply under 
the commercial MLR regulations at 45 CFR part 158. As noted in the 
December 1, 2010 Health Insurance Issuers Implementing Medical Loss 
Ratio (MLR) Requirements Under the Patient Protection and Affordable 
Care Act Interim Final Rule (75 FR 74881 through 74882), the commercial 
deductible factors were based on an actuarial analysis of anticipated 
claims experience in the commercial market by actuarial consultants to 
the National Association of Insurance Commissioners (NAIC). We 
explained in the proposed rule that we would prefer to use Medicare 
data to develop the deductible factors that apply to MA MSAs, and that 
we intend to assess the feasibility of using Medicare data for this 
purpose. We noted in the proposed rule and continue to believe that the 
commercial deductible factors are suitable for adjusting MSA MLRs in 
the absence of Medicare-specific deductible factors because the 
commercial factors are designed to take into account the variability in 
claims experience resulting from similarly high deductibles. We 
proposed to apply the commercial deductible factors in the MLR 
calculation for MA MSAs. We solicited comment on whether and how 
Medicare data should be used to evaluate whether the difference in 
variability between MLRs for MSA plans and non-MSA plans necessitates 
the use of Medicare-specific deductible factors, as well as how 
Medicare data could be used to develop Medicare-specific deductible 
factors. We also solicited comment on whether and how the proposed 
deductible factors should be adjusted to account for any unique 
features of the Medicare MLR rules (for example, the inclusion of the 
MA MSA deposit amount in the Medicare MLR numerator and denominator), 
or to reflect any differences between the commercial and Medicare MLR 
rules (such as the commercial rules' lower minimum MLR requirement for 
small group and individual health insurance plans (80 percent, compared 
to the Medicare rules' 85 percent MLR requirement for all contracts)). 
We solicited comment on potential consequences of the application of a 
deductible factor to the MLR calculation for MA MSA contracts, such as 
impacts on benefits for enrollees in MSA plans.
    We proposed new Sec.  422.2440(e)(2) to specify that the 
credibility adjustment for an MA MSA contract would be the base 
credibility factor determined under new paragraph (f), multiplied by 
the deductible factor determined under new paragraph (g). At new 
paragraph (g), we proposed to specify that the applicable deductible 
factor for an MA MSA contract would be based on the enrollment-weighted 
average deductible for all MSA plans under the contract, where the 
deductible for each plan under the contract is weighted by the plan's 
portion of the total number of member months for all plans under the 
contract during the contract year for which the MLR is being 
calculated. (We note that all MA plans under an MA MSA contract must be 
MSA plans, and MSA plans may only be offered under MSA contracts.) When 
the weighted average deductible for a contract exactly matches the 
amount in the ``Weighted average deductible'' column in Table 2 to 
Sec.  422.2440, the value associated with that weighted average 
deductible is the deductible factor. The deductible factor for a 
weighted average deductible between the values shown in Table 2 to 
Sec.  422.2440 is determined by linear interpolation.
    We received 5 comments on the proposal to add a deductible factor 
to the MLR calculation for MA MSAs. The following is a summary of the 
comments we received on the proposal and our responses:
    Comment: A commenter supported the proposal. The commenter 
expressed hope that adding a deductible factor to the MLR calculation 
for MA MSA contracts would lead to the greater availability of MA MSA 
products in the marketplace, which the commenter believed would be an 
attractive option for many consumers.
    Response: We thank the commenter for their support.
    Comment: A commenter stated that they do not support policies that 
single out high-deductible health plans for preferential MLR treatment 
for the purpose of encouraging beneficiaries to enroll in such plans.
    Response: We appreciate the commenter's objection to MLR policies 
that favor certain plan types over others. However, we disagree with 
the commenter's characterization of the proposed application of a 
deductible factor to the MLR calculation for certain MSA contracts as a 
form of preferential treatment. As explained in the proposed rule and 
summarized here, we believe an additional adjustment to the MLR 
calculation for MSA contracts is appropriate because the variability of 
claims experience is greater under health insurance policies with 
higher deductibles than under policies with lower deductibles, with 
high cost or outlier claims representing a larger portion of the 
overall claims experience of plans with high deductibles. This is the 
case because high-deductible health plan enrollees' medical expenses 
must exceed a higher threshold before the plan begins to incur claims 
costs that can be included in the MLR numerator. As a result, a 
contract with a high average deductible is more likely to report a low 
MLR than is a contract with the same number of enrollees but a low 
average deductible. The deductible factor, which functions as a 
multiplier on the credibility adjustment factor, is calibrated so that 
the probability that a contract will fail to meet the MLR requirement 
is the same for all contracts that receive a credibility adjustment, 
regardless of the deductible level. Because the deductible factor is 
intended to mitigate the increased likelihood that a contract with a 
high deductible will fail to meet the MLR requirement due to random 
variations in claims experience, we believe that its application to the 
Medicare MLR calculation for MSA contracts serves to level the playing 
field for all MA contract types. We believe that the absence of a 
deductible factor from the current regulations unduly penalizes MSA 
contracts and that adding a deductible factor removes this potential 
deterrent to the offering of MSAs.
    Comment: Three commenters opposed the proposal because they 
objected to CMS giving MA organizations an incentive to enroll 
beneficiaries in high deductible health plans such as MSAs. A commenter 
expressed concern that beneficiaries may enroll in these plans due to 
their low premiums and tax benefits, without realizing that they could 
be responsible for thousands of dollars of pre-deductible costs should 
they need significant medical attention. Another commenter warned that 
Medicare beneficiaries have limited incomes and frequently experience 
chronic conditions, the proliferation of high-deductible MSAs among 
this vulnerable population could have catastrophic effects on 
beneficiary health, as enrollees forego care to avoid paying high out-
of-pocket costs. A couple of commenters cited research which suggests 
that although high deductible plans reduce costs, this may be 
attributable to a decrease in utilization of necessary medical services 
or to high

[[Page 33852]]

deductible plans enrolling younger, healthier members.
    Response: We appreciate the commenters' concerns. Expanding access 
to MSAs so that Medicare beneficiaries who see the advantages in 
enrolling in a high-deductible plan have the option of doing so is a 
priority of the Trump administration. As discussed in the proposed 
rule, the proposal to add a deductible factor to the MLR calculation 
for MA MSA contracts aligns with the directive in Executive Order 13890 
on Protecting and Improving Medicare for Our Nation's Seniors (October 
3, 2019) for the Secretary to take actions that ``encourage innovative 
MA benefit structures and plan designs, including through changes in 
regulations and guidance that reduce barriers to obtaining Medicare 
Medical Savings Accounts . . . .'' (emphasis added).
    We note that the research cited by the commenters is mostly based 
on the experience of enrollees in high-deductible health plans 
operating outside of the Medicare context. We believe that the 
widespread availability of zero premium MA plans makes it less likely 
that Medicare beneficiaries will enroll in high deductible plans due to 
the low premiums and tax benefits without adequately considering their 
potential out of pocket liability. In addition, there are protections 
to ensure that MSA enrollees have information that enables them to 
assess the coverage provided by MSA plans. Section 1852(c)(1)(B) of the 
Act and Sec.  422.111(b)(2)(ii) require that MSA plans disclose, in 
clear, accurate, and standardized form to each enrollee at the time of 
enrollment and at least annually thereafter, a comparison of the 
benefits under the plan with benefits under other MA plans.
    After consideration of the public comments we received and for the 
reasons outlined in the proposed rule and our responses to comments, we 
are finalizing the proposal without modification.

V. Codifying Existing Part C and D Program Policy

A. Medicare Advantage (MA) and Cost Plan Network Adequacy (Sec. Sec.  
417.416 and 422.116)

    Section 1852(d)(1)(A) of the Act establishes that an organization 
offering an MA plan may select the providers from whom the benefits 
under the plan are provided so long as the organization makes such 
benefits available and accessible with reasonable promptness to each 
individual electing the plan within the plan service area. This is 
generally implemented at Sec.  422.112(a), which provides that a 
coordinated care plan must maintain a network of appropriate providers 
that is sufficient to provide adequate access to covered services to 
meet the needs of the population served. In the April 15, 2010, 
Medicare Program; Policy and Technical Changes to the Medicare 
Advantage and the Medicare Prescription Drug Benefit Program Final Rule 
(75 FR 19691), CMS added criteria at Sec.  422.112(a)(10) for 
determining whether an MA plan network is adequate and meets the 
statutory standard by codifying that MA plans must have networks that 
are consistent with the prevailing community pattern of health care 
delivery in the service area. The regulation provides that CMS will 
consider factors that make up the community patterns of health care, 
which CMS will use as a benchmark in evaluating MA plan networks, and 
lists certain examples of those factors in Sec.  422.112(a)(10)(i) 
through (v). CMS explained in the October 22, 2009, Medicare Program; 
Policy and Technical Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs Proposed Rule (74 FR 54644) that it 
would develop an automated system for reviewing network adequacy based 
on the elements that define community patterns of health care delivery 
and that we would define through subregulatory guidance how CMS would 
operationalize these factors.
    Since that time, CMS has routinely provided subregulatory guidance 
to MA organizations that defines how CMS measures and assesses network 
adequacy.\34\ We built the Network Management Module (NMM) in HPMS to 
facilitate automated reviews of plan networks and to annually transmit 
information to MA plans about provider/facility specialty types that 
are subject to maximum time and distance standards, minimum number 
requirements, and other critical information needed for the network 
adequacy reviews. The NMM also gave existing MA organizations and new 
applicants to the MA program the opportunity to routinely test their 
networks against our standards. Currently, we require that 
organizations contract with a sufficient number of specified providers/
facilities to ensure that 90 percent of the beneficiaries have access 
to at least one provider/facility of each specialty type within the 
published maximum time and distance standards. We update and refine the 
data and information that feed into network adequacy measures and 
perform analyses as needed. It is important that CMS ensure that MA 
organizations maintain an adequate network of contracted providers that 
are capable of providing medically necessary covered services to 
beneficiaries, both to ensure compliance with section 1851(d) of the 
Act and to protect beneficiaries. The network adequacy rules protect 
beneficiaries by ensuring that most, it not all, of the beneficiaries 
enrolled in a plan have access to providers within a reasonable time 
and distance from where the beneficiaries reside.
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    \34\ See ``Medicare Advantage and Section 1876 Cost Plan Network 
Adequacy Guidance'' https://www.cms.gov/Medicare/Medicare-Advantage/MedicareAdvantageApps/index.
---------------------------------------------------------------------------

    In this final rule, we are codifying existing network adequacy 
standards to provide MA organizations with a greater understanding of 
how CMS measures and assesses network adequacy by adding a new 
regulation at Sec.  422.116. Specifically, we are codifying in Sec.  
422.116 the list of provider and facility specialty types subject to 
network adequacy reviews, county type designations and ratios, maximum 
time and distance standards, minimum number requirements, and 
exceptions. The regulation also addresses CMS's annual publishing of 
the Provider Supply file and Health Service Delivery (HSD) reference 
file to release updated numbers and maximums for these standards in 
subsequent years. The final regulation reflects modifications from our 
current network adequacy policy to further account for access needs in 
all counties, including rural counties, and to take into account the 
impact of telehealth providers in contracted networks. Section 
1876(c)(4) of the Act imposes similar requirements for cost plans 
offered under section 1876 of the Act to make Medicare-covered services 
available and accessible to each enrollee with reasonable promptness 
when medically necessary. Under this authority, we are also amending 
Sec.  417.416(e) to require 1876 cost organizations to also comply with 
the network adequacy standards described in Sec.  422.116. A summary of 
our proposal follows.
1. General Provisions
    We proposed in Sec.  422.116(a) that each network-based MA plan 
demonstrate that it has an adequate contracted provider network that is 
sufficient to provide access to medically necessary covered services 
consistent with standards in section 1851(d) of the Act, the 
regulations at Sec. Sec.  422.112(a) and 422.114(a), and the rules in 
new Sec.  422.116. We also proposed that when required by CMS, an MA 
organization

[[Page 33853]]

must attest that it has an adequate network for access and availability 
of a specific provider or facility type that CMS does not independently 
evaluate in a given year. We explained that we would require such 
attestation in the MA organization's application or contract for a 
given year, but we might require the attestation when performing other 
network adequacy reviews, such as when there is a significant change in 
the MA plan's provider network.
    We cross-referenced Sec.  422.114(a)(3)(ii) to identify the 
network-based plan types that would be subject to these network 
adequacy requirements. Network-based MA plans include all coordinated 
care plans in Sec.  422.4(a)(1), network-based MA private-fee-for-
service (PFFS) plans in Sec.  422.4(a)(3), and 1876 cost organizations. 
Generally, network-based MA medical savings account (MSA) plans are 
considered coordinated care plans in accordance with Sec.  
422.4(a)(1)(iii)(D), which includes ``other network plans'' as a type 
of coordinated care plan. However, since MSA plans do not require 
contracted networks, we proposed to exclude MSA plans from the 
requirements in Sec.  422.116. By cross-referencing Sec.  
422.114(a)(3)(ii), we carved out an MA regional plan that meets access 
requirements substantially through deemed contracting, so local and 
regional PFFS plans operating in CMS defined network areas must meet 
CMS network adequacy requirements at Sec.  422.116.
    We proposed, at paragraph (a)(2), to codify the general rule 
underlying Sec.  422.116 that an MA plan must meet maximum time and 
distance standards and contract with a specified minimum number of each 
provider and facility specialty type, with each contract provider type 
within maximum time and distance of at least one beneficiary (in our MA 
Medicare Sample Census) in order to count toward the minimum number. 
The location of a contracted provider specialty or facility is not 
required to be within the county or state boundaries to be considered 
within the time and distance standards. The minimum number criteria and 
the time and distance criteria vary by the county type. We proposed to 
establish the specific provider and facility types; county types; 
specific time and distance standards by county designation; and 
specific minimum provider number requirements in paragraphs (b), (c), 
(d) and (e), respectively, of Sec.  422.116. Regardless of whether CMS 
evaluates a plan's network against the access and adequacy standards in 
a given year, a plan's network must meet these standards and will be 
held to full compliance with the standards. At paragraphs (a)(3) 
through (4), we proposed to codify additional general rules about the 
network adequacy requirements in this section. At paragraph (a)(3), we 
proposed general rules for which provider types are not counted in 
evaluating network adequacy. In paragraph (a)(4), we proposed to codify 
certain administrative practices we have instituted over the past 
several years. Specifically, we proposed to annually update and make 
available Health Service Delivery (HSD) reference files in advance of 
our review of plan networks. These HSD files contain the minimum 
provider and facility number requirements, minimum provider ratios, and 
the minimum time and distance standards. We also proposed that we would 
annually update and make available a Provider Supply file that 
identifies available providers and facilities with office locations and 
specialty types. The Provider Supply file is updated annually based on 
information from the Integrated Data Repository (IDR), which has 
comprehensive claims data, as well as information from public sources. 
We may also update the Provider Supply file based on its findings from 
validation of provider information.
2. Provider and Facility Specialty Types
    We proposed to codify at Sec.  422.116(b) the list of provider and 
facility specialty types that have been subject to CMS network adequacy 
standards in the past, as not all specialty types are included in 
network adequacy reviews. We identified and proposed to codify the 27 
provider specialty types and 14 facility specialty types that are 
currently used in the evaluation of network adequacy in each service 
area. We identified these provider and facility specialty types as 
critical to providing services based on review of Medicare FFS) 
utilization patterns, utilization of provider/facility specialty types 
in Medicare FFS and managed care programs, and the clinical needs of 
Medicare beneficiaries. We proposed to codify at Sec.  422.116(a)(3) 
existing policy on the provider and facility types that are not counted 
in evaluating network adequacy: Specialized, long-term care, and 
pediatric/children's hospitals and providers and facilities contracted 
with the organization only for its commercial, Medicaid, or other non-
MA plans. In paragraph (a)(3), we also proposed that hospital-based 
dialysis may count in network adequacy criteria for the facility type 
of Outpatient Dialysis. We clarified that primary care providers, the 
first provider specialty in our proposed list in paragraph (b)(1), are 
measured as a single specialty by combining provider specialty codes 
(001-006) in the HSD reference file.
    Section 2005 of the SUPPORT Act establishes a new Medicare Part B 
benefit for Opioid Use Disorder treatment services furnished by Opioid 
Treatment Programs (OTPs) on or after January 1, 2020. OTPs provide 
medication-assisted treatment for people diagnosed with an Opioid Use 
Disorder and must be certified by the Substance Abuse and Mental Health 
Services Administration (SAMHSA) and accredited by an independent, 
SAMHSA-approved accrediting body. We did not propose to include OTPs as 
a facility type in Sec.  422.116(b)(2) and explained it was due to the 
newness of the benefit and that we may consider adding OTPs to the 
facility type list in future proposals. However, we reminded MA 
organizations that they are required to pay for medically necessary 
care from certified OTPs.
    We proposed at Sec.  422.116(b)(3) that CMS may remove a specialty 
or facility type from the network adequacy evaluation for a particular 
year by not including the type in the annual publication of the HSD 
reference file. For example, in the past CMS removed oral surgery as a 
provider specialty type from the HSD reference file, and replaced home 
health and durable medical equipment with an attestation in its 
application about the plan's network ensuring access to providers of 
these types. We proposed at Sec.  422.116(a)(1) to require an MA plan 
to submit an attestation when required by CMS. We explained that we 
would require an MA organization to complete an attestation that it has 
an adequate network that provides the required access to and 
availability of provider specialty or facility types even where we do 
not evaluate access ourselves. Network adequacy criteria are measured 
for each individual specialty type and do not roll up into an aggregate 
score. Therefore, the removal of a specialty type from the network 
review will not affect the outcome of an MA plan's network review and 
use of an attestation in lieu of evaluation will permit us some 
necessary flexibility. In light of the lack of change to the list we 
have used over the past several years, we did not propose any means for 
CMS to add new provider specialty or facility types to the network 
adequacy evaluation without additional rulemaking.
3. County Type Designations
    We proposed at Sec.  422.116(c) to codify our current policy 
regarding county designations. Network adequacy is

[[Page 33854]]

assessed at the county level, and counties are classified into five 
county type designations: Large Metro, Metro, Micro, Rural, or CEAC 
(Counties with Extreme Access Considerations). These metrics provide 
the means by which the various network adequacy criteria are 
differentiated to represent large geographic variations across the 
United States and its territories. They are based on the population 
size and the population density of each county.
    We proposed to codify at Sec.  422.116(c) the five county type 
designations using population size and density parameters that were 
identified in Table 6 in the proposed rule (85 FR 9094). Under our 
proposal, a county must meet both the population and density parameters 
for inclusion in a given county type designation and we explained that 
the proposed parameters are consistent with those we have used in 
conducting network adequacy reviews in prior years. We explained that 
we based the parameters on approaches used by the United States Census 
Bureau in its classification of ``urbanized areas'' and ``urban 
clusters,'' and by the Office of Management and Budget (OMB) in its 
classification of ``metropolitan'' and ``micropolitan.'' To calculate 
population density at the county level, we divided the latest county-
level population \35\ estimate by the land area \36\ for that county. 
We also stated that our county designation methodology was designed 
specifically for MA network adequacy and may not be appropriate for 
other purposes.
---------------------------------------------------------------------------

    \35\ United States Census Bureau. American Factfinder. Annual 
Estimates of the Resident Population: April 1, 2010 to July 1, 2018: 
2018 Population Estimates. Retrieved from: https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=PEP_2017_PEPANNRES&src=pt.
    \36\ United States Census Bureau. American Factfinder. 
Population, Housing Units, Area, and Density: 2010--United States--
County by State; and for Puerto Rico: 2010 Census Summary File 1. 
Retrieved from: https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=DEC_10_SF1_GCTPH1.US05PR&prodType=table.
---------------------------------------------------------------------------

4. Maximum Time and Distance Standards and Customization
    We proposed in Sec.  422.116(a)(2) that network adequacy is 
measured using both maximum time and distance standards and minimum 
number requirements that vary by county type. In Sec.  422.116(d), we 
proposed that CMS determines maximum time and distance standards by 
county type and specialty type and publishes these standards annually 
in the HSD Reference file. Maximum time and distance standards are set 
by county designation, referred to as the ``base'' time and distance 
standards, or by a process referred to as ``customization.'' We 
proposed to codify the base time and distance standards by county 
designation that are in current practice with recent network reviews 
and included the standards in Table 7 of the proposed rule (85 FR 9095) 
as well as in the proposed regulation text as Table 1 to paragraph 
(d)(2). We also explained in greater detail how the specific time and 
distance standards we proposed for each provider and facility type and 
county designation were developed and refer readers to the proposed 
rule for that discussion (85 FR 9097).
    As explained in the proposed rule, we have added flexibility in 
recent years to expand the time (in minutes) and distance (in miles) 
standards beyond the base standards in cases where, due to a shortage 
of supply of providers or facilities, it is not possible to meet the 
base time and distance standards. We proposed to codify this 
flexibility and the process for using it at Sec.  422.116(d)(3) and 
refer to it as ``customization.'' To customize distance standards, we 
use software to map provider location data from the Provider Supply 
file against the population distribution data in CMS's MA Medicare 
Sample Census.\37\ For each specialty and county where there are 
insufficient providers within the base distance standard, we use 
mapping results to identify the distance at which 90 percent of the 
population would have access to at least one provider or facility in 
the applicable specialty type. The resulting distance is then rounded 
up to the next multiple of five (51.2 miles would be rounded up to 55 
miles), and a multiplier specific to the county designation is applied 
to determine the analogous maximum time criterion. We requested comment 
on our customization methodology and whether we should adjust factors 
in the distance calculation to achieve outcomes that are more 
equitable.
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    \37\ CMS built the MA Medicare Sample Census, which derives from 
information maintained by CMS on the residence of Medicare 
beneficiaries. CMS built the Sample Census to be an adequate 
representative sample of Medicare beneficiaries in each applicable 
county. This file is only available to CMS and is only utilized for 
the purposes of measuring network adequacy.
---------------------------------------------------------------------------

    Customization of base criteria may be triggered based on 
information received through exception requests from plans, or from 
other sources, such as certificates of need (CON) from state 
departments of health. However, we proposed that CMS may only use 
customization to increase time and distance standards from the base 
standards, and may not reduce time and distance standards below the 
base standards. We solicited comment from the industry on other sources 
of information that CMS should consider and how it would work within 
the structure of our network adequacy standards.
    Historically, we have required that at least 90 percent of the 
beneficiaries residing in a particular county have access to at least 
one provider/facility of each specialty type within the published 
maximum time and distance standards for that county. In an effort to 
encourage more MA offerings in rural areas, we proposed to reduce this 
percentage to 85 percent in Micro, Rural, and CEAC counties. In these 
generally ``rural'' counties, there is evidence of a lower supply of 
physicians, particularly specialists, compared to urban areas.\38\ In 
order to account for this shortage, two state Medicaid programs that 
utilize network adequacy criteria have adjusted percentages in rural 
counties to require that standards be met for less than 100 percent of 
enrollees. New Jersey allows an 85 percent coverage requirement for 
primary care in ``non-urban counties'' but 90 percent in urban 
counties.\39\ Tennessee's Medicaid managed care program takes a 
slightly different approach, requiring that 60 percent of enrollees 
have access within 60 miles and 100 percent within 90 miles.\40\ 
Additionally, the Part D program has a 90 percent retail pharmacy 
network coverage requirement in urban and suburban areas that drops to 
70 percent for rural areas.\41\ Further, our data indicates that 
existing failures in MA plans' meeting the time and distance standards 
frequently occur at the range between 80 to 89 percent of 
beneficiaries. As a result, we proposed to adopt a similar change in 
our MA network adequacy approach to account for access challenges in 
Micro, Rural,

[[Page 33855]]

and CEAC counties; at Sec.  422.116(d)(4)(i) we proposed that at least 
85 percent of the beneficiaries have access to at least one provider/
facility of each specialty type within the published time and distance 
standards in Micro, Rural, and CEAC counties. We estimated that 
approximately 14 percent of contracts (96 contracts) operating in these 
county designations will benefit from the reduced percentage and will 
no longer need to submit an exception request. We proposed to codify 
the existing policy of using a 90 percent threshold for Large Metro and 
Metro counties in Sec.  422.116(d)(4)(ii). We noted that this specific 
proposal did not include a change from current policy requirements for 
a minimum number of provider specialties and facilities and that we 
proposed, at paragraph (e), that MA plans would still be required to 
maintain contracts with a minimum number of providers in each county.
---------------------------------------------------------------------------

    \38\ Department of Health and Human Services, National Advisory 
Committee on Rural Health and Human Services (2018) ``Rural Health 
Insurance Market Challenges: Policy Brief and Recommendations.'' 
Retrieved April 3, 2019, from: https://www.hrsa.gov/sites/default/files/hrsa/advisory-committees/rural/publications/2018-Rural-Health-Insurance-Market-Challenges.pdf.
    \39\ State of New Jersey Dept. of Human Services. ``Contract 
Between State of New Jersey Department of Human Services Division of 
Medical Assistance and Health Services and _____, Contractor'' Sec. 
4.8.8 ``Provider Network Requirements'' Retrieved April 5, 2019, 
from: https://www.state.nj.us/humanservices/dmahs/info/resources/care/hmo-contract.pdf.
    \40\ State of Tennessee, Department of Finance and 
Administration, Division of Health Care Finance and Administration, 
Division of TennCare (2019) ``Statewide Contract with Amendment 9--
January 1, 2019'' Attachment IV. Retrieved April 3, 2019, from: 
https://www.tn.gov/content/dam/tn/tenncare/documents/MCOStatewideContract.pdf.
    \41\ Section 423.120(a)(1.).
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    We also proposed to give an MA plan a 10-percentage point credit 
towards the percentage of beneficiaries residing within the applicable 
time and distance standards for certain provider specialty types when 
the plan contracts with telehealth providers for those specified 
specialty types. For example, in a rural county where an MA plan must 
have 85 percent of beneficiaries residing within applicable time and 
distance standards, the MA plan would receive an additional 10 
percentage points towards the 85 percent requirement should they 
contract with applicable telehealth providers under Sec.  422.135. We 
explained that this is not currently part of the network adequacy 
evaluation, but we believed it is appropriate in light of the expanding 
coverage in the MA program of additional telehealth benefits. In the 
April 2019 final rule, we adopted Sec.  422.135 to implement the option 
for MA plans to offer additional telehealth benefits as part of their 
coverage of basic benefits under section 1852(m) of the Act, as amended 
by section 50323 of the BBA of 2018. In that rulemaking, we solicited 
feedback from the industry concerning the impact, if any, that 
telehealth should have on network adequacy policies. We received 
approximately 35 responses from stakeholders in managed care, provider, 
advocacy, and government sectors. While health plans clearly favored 
taking into account telehealth access while evaluating network 
adequacy, providers had more concerns that telehealth services could be 
used to replace, rather than supplement, in-person healthcare delivery. 
A commenter stated that it is imperative that beneficiaries continue to 
have the choice to access services in-person not only as a matter of 
preference, but to ensure those that do not have access to the required 
technologies are not left without care. Section 1852(m)(4) of the Act 
and the regulation at Sec.  422.135(c)(1) require that an enrollee in 
an MA plan offering additional telehealth benefits must retain the 
choice of receiving health care services in person rather than through 
electronic exchange (that is, as telehealth). With that in mind, and 
emphasizing the importance of maintaining an in-person network, we did 
not propose any changes to how we currently calculate minimum provider 
requirements and MA plans would still contract with a minimum number of 
providers for each specialty type. We explained that we believed this 
is imperative for MA plans to be able to provide in-person care when 
needed or when preferred by the beneficiary and that contracting with 
telehealth providers as a supplement to an existing in-person 
contracted network would give enrollees more choices in how they 
receive health care. Further, we explained that it is important and 
appropriate to account for contracted telehealth providers in 
evaluating network adequacy consistent with reflecting how MA plans 
supplement, but do not replace, their in-person networks with 
telehealth providers. We proposed, at Sec.  422.116(d)(5) to provide a 
10-percentage point credit towards the percentage of beneficiaries 
residing within time and distance standards for specific provider 
specialty types by county when the MA plan includes one or more 
telehealth providers that provide additional telehealth benefits, as 
defined in Sec.  422.135, in its contracted network. Since additional 
telehealth benefits described at Sec.  422.135 only apply to MA plans, 
cost plans would not be eligible for this 10-percentage point credit 
under proposed Sec.  417.416(e)(3).
    We explained that a 10-percentage point credit is an appropriate 
amount that proportionately supplements a plan's percentage score 
because telehealth providers add value to a contracted provider 
network, but should not have the same level of significance or value as 
an in-person provider. Additionally, we noted how information from 
prior network adequacy reviews show that many failures in meeting time 
and distance standards occur in this 80 to 89 percent range. Therefore, 
we stated, a 10-percentage point credit is significant enough to have 
an impact on MA plans and encourage the use of telehealth, while being 
proportionate to the role that telehealth providers have in a 
contracted network. Further, we proposed to apply this telehealth 
credit only to five specific provider specialty types: Dermatology, 
psychiatry, neurology, otolaryngology and cardiology. We explained that 
this limited approach would allow CMS to monitor the effectiveness of 
the credit, while also allowing us to determine whether there may be 
access or quality of care impacts. As we discussed in the April 2019 
final rule, additional telehealth benefits are monitored by CMS through 
account management activities, complaint tracking and reporting, and 
auditing activities. These oversight operations will alert CMS to any 
issues with access to care and CMS may require MA organizations to 
address these matters if they arise.
    We explained how we identified the five provider types for this 
proposal. CMS considered previous input from industry stakeholders, 
publicly available studies, and analyses of Medicare claims data for 
telehealth services in determining applicable provider specialty types. 
We considered not only the potential that telehealth has within a 
specialty type, but also the observed access challenges for provider 
specialty types over the years of our network adequacy reviews. In our 
experience, most MA plans do not have challenges meeting time and 
distance standards for primary care as compared to non-primary care 
provider specialty types. We also stated that it is critical to quality 
health care that Medicare beneficiaries have a primary care provider 
that they can visit in person and within a suitable time and distance. 
Therefore, despite the potential and prevalence of telehealth for 
furnishing primary care services, we did not believe that it was 
necessary to take telehealth access into account when measuring and 
setting minimum standards for access to primary care providers. We 
solicited comments on the provider specialty types we proposed to be 
eligible for the telehealth credit and whether CMS should expand or 
limit this credit to a different set of provider specialties.
    In the proposed rule, we explained that we had received comments 
from providers and physician groups about the limitations of current 
network adequacy policies on dialysis treatment when performed in a 
hospital, at home, or in an outpatient facility. Some research 
suggested that home-based dialysis may offer advantages over in-center 
hemodialysis, including patient convenience, reduction in costs 
associated with dialysis, and potentially improved patient quality of 
life and blood pressure control with greater

[[Page 33856]]

survival and fewer hospitalizations.\42\ We acknowledged in the 
proposed rule that there is more than one way to access medically 
necessary dialysis care and stated that we wanted plans to exercise all 
of their options to best meet a beneficiary's health care needs. We 
solicited comment on: (1) Whether CMS should remove outpatient dialysis 
from the list of facility types for which MA plans need to meet time 
and distance standards; (2) allowing plans to attest to providing 
medically necessary dialysis services in its contract application (as 
is current practice for DME, home health, and transplant services) 
instead of requiring each MA plan to meet time and distance standards 
for providers of these services; (3) allowing exceptions to time and 
distance standards if a plan is instead covering home dialysis for all 
enrollees who need these services; and (4) customizing time and 
distance standards for all dialysis facilities.
---------------------------------------------------------------------------

    \42\ Comparative Effectiveness of Home-Based Kidney Dialysis 
Versus In-Center or Other Outpatient Kidney Dialysis Locations--A 
Systematic Review [internet]: https://www.ncbi.nlm.nih.gov/books/NBK344417/.
---------------------------------------------------------------------------

    Additionally, we explained that CMS had received comments 
concerning patterns of provider consolidation and its impact on higher 
costs for patients. We received feedback from stakeholders that 
providers in concentrated areas may leverage network adequacy 
requirements in order to negotiate prices well above Medicare FFS 
rates. We solicited comment on existing problems and behavior in non-
rural, consolidated provider markets and recommendations that we could 
take to encourage more competition in these markets.
    We also proposed a policy to incorporate consideration of 
Certificate of Need (``CON'') laws into our network evaluations, as a 
modification from our current policy after a brief summary of the 
topic. President Trump's Executive Order 13890 on Protecting and 
Improving Medicare for Our Nation's Seniors (October 3, 2019) calls for 
adjustments to network adequacy requirements to account for the 
competitiveness of state health care markets, including taking into 
account whether states maintain CON laws or other anticompetitive 
restrictions. Many states began adopting CON laws in the 1960s and 
1970s in part to promote resource savings and to prevent investments 
that could raise hospital costs.\43\ A number of studies have found no 
evidence that CON programs have led to resource savings, and in some 
instances, may raise health care costs. In one study published in 2013, 
researchers studied whether states that dropped CON programs 
experienced changes in costs or reimbursements from coronary artery 
bypass graft surgery or percutaneous coronary interventions.\44\ In 
this study, the cost savings from removing the CON requirements 
slightly exceeded the total fixed costs of new facilities that entered 
after deregulation. Another study published in 2016 concluded that 
there is no evidence that CON requirements limit health care price 
inflation and little evidence that they reduce health care 
spending.\45\ It further concluded that CON laws are associated with 
higher per unit costs and higher total healthcare spending. Most 
relevant here, other studies suggest that the removal of these laws 
that serve as a barrier to entry into the market lead to greater access 
to providers and a redistribution of health care services to higher 
quality providers, improving the overall quality of health 
outcomes.\46\
---------------------------------------------------------------------------

    \43\ Daniel Sherman, ``The Effect of State Certificate-of-Need 
Laws on Hospital Costs: An Economic Policy Analysis,'' Federal Trade 
Commission, January 1988.
    \44\ Vivian Ho, Meei-Hsiang Ku-Goto, ``State Deregulation and 
Medicare Costs for Acute Cardiac Care,'' Med Care Res Rev., April 
2013.
    \45\ Matthew D. Mitchell, ``Do Certificate-of-Need Laws Limit 
Spending?'' Mercatus Working Paper, Mercatus Center at George Mason 
University, Arlington, VA, September 2016.
    \46\ David M. Cutler, Robert S. Huckman, and Jonathan T. 
Kolstad, ``Input Constraints and the Efficiency of Entry: Lessons 
from Cardiac Surgery,'' American Economic Journal: Economic Policy, 
February 2010.
---------------------------------------------------------------------------

    After listing this research, we stated that it pointed out that CON 
laws restrict the supply and competition for healthcare services and 
increases costs and that CON laws adversely affect access in states and 
counties where they are in effect, including for MA organizations that 
operate in those areas. CMS pays MA organizations a capitated amount in 
each county for the provision of Medicare benefits based on the 
expected costs to provide benefits. When MA organizations must pay more 
for benefits, as the research demonstrates happens when there are fewer 
providers or facilities with which to contract, that reduces the access 
to benefits offered by MA organizations. In order to take into account 
the adverse effects that CON laws have on access, we proposed in Sec.  
422.116(d)(6) to provide that MA organizations may receive a 10-
percentage point credit towards the percentage of beneficiaries 
residing within published time and distance standards for affected 
provider and facility types in states that have CON laws, or other 
state imposed anticompetitive restrictions, that limit the number of 
providers or facilities in a county or state. In the proposed rule, we 
explained that, where appropriate, CMS may instead address network 
adequacy by customizing base time and distance standards in states with 
CON laws. We explained that the proposal was justified based on the 
studies cited that have shown that CON laws adversely affect 
competition and free market entry in states and that our network 
adequacy policy thus should provide for us to consider this factor when 
evaluating the adequacy of an MA organization's contracted network.
    We proposed to make this credit equal to and in addition to, if 
applicable, the proposed telehealth credit (10 percentage points) for 
reasons similar to those for the telehealth credit policy: Information 
from prior network adequacy reviews show that many failures in meeting 
time and distance standards occur in the 80 to 89 percent range. We 
explained that, under our proposal, CMS could elect to grant this 
credit instead of customizing time and distance standards depending on 
a number of factors, like the speed of implementing customized 
standards, operational and timing constraints, and the amount of work 
required to calculate customized time and distance standards. We 
solicited comment on additional criteria or factors we should consider 
when deciding whether to apply the 10-percentage point credit or 
customize time and distance standards in the impacted states or 
counties. Additionally, we solicited comment about what other actions 
CMS could take in markets with state CON laws.
    We also considered whether there are circumstances where a more 
limited application of network adequacy flexibility might be more 
appropriate. We solicited comment as to how and under what 
circumstances we should refrain from applying the 10 percentage point 
credit, should mitigate the size of this credit, or other actions we 
might undertake to apply this flexibility in a more limited manner.
5. Minimum Number Standards
    We proposed to codify the current policy that MA plans must 
contract with a specified minimum number of each provider and facility 
specialty type in Sec.  422.116(e). The MA plan must have a minimum 
number of in-person providers and facilities in each county for each 
specialty type specified in paragraph (b). We explained the general 
rules at Sec.  422.116(e)(1) that the provider or facility must be 
within the maximum time and distance of at least one beneficiary in 
order to count towards the minimum number requirement and cannot be a 
telehealth-only provider. We also proposed to codify the

[[Page 33857]]

methodology for establishing the minimum number requirements for 
specific contracted provider and facility specialty types per county. 
We explained that CMS would use this methodology each year to determine 
and publish the updated minimum provider standards on an annual basis 
and that certain standards for the minimum number of providers are 
updated annually to account for changes in the Medicare population, MA 
market penetration, and county designations. Our proposal required the 
provider/facility to be within the maximum time and distance of at 
least one beneficiary in order to count towards the minimum number 
requirements. We noted that the location of a contracted provider 
specialty or facility is not required to be within the county or state 
boundaries to be considered within the time and distance standards.
    We proposed to codify at Sec.  422.116(e)(2)(iii), our existing 
practice that all facilities, except for acute inpatient hospitals 
facilities, have a minimum number requirement of one. We limited the 
methodology for establishing and changing the required minimum number 
standard to acute inpatient hospitals and other non-facility provider 
specialties. We proposed the methodology at Sec.  422.116(e)(3): CMS 
determines the minimum number requirement for all provider specialty 
types and Acute Inpatient Hospitals by multiplying the ``minimum 
ratio'' by the ``number of beneficiaries required to cover,'' dividing 
the resulting product by 1,000, and rounding up to the next whole 
number. The steps and components of the methodology were proposed in 
paragraphs (e)(3)(i) and (ii) and explained in the preamble of the 
proposed rule.
    The Minimum Ratio is the number of providers required per 1,000 
beneficiaries, and for Acute Inpatient Hospitals, the number of beds 
per 1,000 beneficiaries. We stated that CMS had established minimum 
ratios in 2011 using a number of data sources, including, Medicare fee-
for-service claims data, American Medical Association (AMA) and 
American Osteopathic Association (AOA) physician workforce data, U.S. 
Census population data, National Ambulatory Medical Care Survey data, 
AMA data on physician productivity, and published literature. We 
proposed to codify those minimum ratios in the regulation at Sec.  
422.116(e)(3)(i) and reproduced it in the preamble as Table 13. (85 FR 
9101)
    We stated that the Number of Beneficiaries Required to Cover is 
also calculated by CMS based on an established methodology. The Number 
of Beneficiaries Required to Cover is the minimum population that an MA 
plan's network should be able to serve and represents the potential 
number of beneficiaries an organization may serve within a county. We 
proposed at Sec.  422.116(e)(3)(ii)(A) that the Number of Beneficiaries 
Required to Cover is calculated by multiplying the ``95th Percentile 
Base Population Ratio'' times the total number of Medicare 
beneficiaries residing in a county. We explained that CMS uses its MA 
State/County Penetration data to calculate the total number of Medicare 
beneficiaries residing in a county. For counties with lower 
populations, and particularly for specialties with lower minimum 
ratios, the minimum number is usually one.
    We proposed to continue the current policy of calculating the 95th 
Percentile Base Population Ratio annually for each county type. We 
explained in the proposed rule that CMS has previously allowed MA 
organizations to provide their expected enrollment and then define 
their networks based on that number, but had later developed and 
implemented a more objective means to measure network adequacy for all 
MA plans consistently. Based on our position that the 95th Percentile 
Base Population Ratio is a fair and consistent enrollment estimate that 
can be applied to new and current plans, we proposed to codify its 
continued use. While it varies over time as MA market penetration and 
plan enrollment changes across markets, the 95th Percentile Base 
Population Ratio currently ranges between 0.073 and 0.145 depending on 
county type, indicating that MA plans are expected to have networks at 
least sufficient to cover between 7.3 percent (Large Metro) and 14.5 
percent (CEAC) of the Medicare beneficiaries in the county. This ratio 
represents the proportion of Medicare beneficiaries enrolled in the 
95th percentile MA plan (that is, 95 percent of plans have enrollment 
lower than this level). We explained in the proposed rule how to 
calculate the 95th Percentile Base Population Ratio. We use the List of 
PFFS Network Counties \47\ to exclude PFFS plans in non-networked 
counties \48\ from the calculation at the county type level. We use the 
MA State/County Penetration data \49\ to determine the number of 
eligible Medicare beneficiaries in each county, and our Monthly MA 
Enrollment data \50\ to determine enrollment at the contract ID and 
county level, including only enrollment in RPPO, LPPO, HMO, HMO/POS, 
healthcare prepayment plans under section 1833 of the Act, and network 
PFFS plan types. We calculate penetration at the contract ID and county 
level by dividing the number of enrollees for a given contract ID and 
county by the number of eligible beneficiaries in that county. Finally, 
we group counties by county designation to determine the 95th 
percentile of penetration among MA plans for each county type. We 
proposed to codify the methodology for calculating the 95th Percentile 
Base Population Ratio at Sec.  422.116(e)(3)(ii)(B).
---------------------------------------------------------------------------

    \47\ CMS. PFFS Plan Network Requirements. Retrieved from: 
https://www.cms.gov/Medicare/Health-Plans/PrivateFeeforServicePlans/NetworkRequirements.html.
    \48\ Non-networked counties in this context means there are not 
at least two networked plans operating in that county.
    \49\ CMS. MA State/County Penetration. Retrieved from: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/MA-State-County-Penetration.html.
    \50\ CMS. Monthly MA Enrollment by State/County/Contract. 
Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-MA-Enrollment-by-State-County-Contract.html.
---------------------------------------------------------------------------

6. Exceptions
    Finally, we also proposed to codify in paragraph (f) a process by 
which an MA plan may request and receive an exception from the network 
adequacy standards in Sec.  422.116. Under our current policy, CMS 
conducts network adequacy reviews through an automated process, but 
also allows for exceptions to that process when failures are detected 
in the submitted network. We proposed to codify the exceptions process, 
the basis upon which an MA plan may request an exception, and the 
factors that CMS may consider when evaluating an MA organization's 
request for an exception to the standards in Sec.  422.116. We proposed 
that an MA organization may request an exception when two criteria are 
met: (1) Certain providers or facilities are not available for the MA 
organization to meet the network adequacy criteria as shown in the 
Provider Supply file for the year for a given county and specialty 
type, and (2) the MA organization has contracted with other providers 
and facilities that may be located beyond the limits in the time and 
distance criteria, but are currently available and accessible to most 
enrollees, consistent with the local pattern of care. For example, 
certain providers/facilities may not be available for contracting when 
the provider has moved or retired, or when the provider/facility does 
not contract with any

[[Page 33858]]

organizations or exclusively with another organization. We proposed 
that we would implement and interpret the regulation such that the MA 
plan would have to contract with telehealth providers, mobile 
providers, or providers outside the time and distance standards, but 
accessible to most enrollees (or consistent with the local pattern of 
care), in order for the MA plan to request an exception by CMS. In 
evaluating exception requests, CMS proposed that it would consider: (i) 
Whether the current access to providers and facilities is different 
from the HSD reference and Provider Supply files for the year; (ii) 
whether there are other factors present, in accordance with Sec.  
422.112(a)(10)(v), that demonstrate that network access is consistent 
with or better than the original Medicare pattern of care; and (iii) 
whether approval of the exception is in the best interests of 
beneficiaries. These three criteria were proposed to be codified at 
paragraph (f)(2)(i), (ii) and (iii).
    Currently, CMS collects information for purposes of testing an MA 
organization's network adequacy using the PRA-approved collection 
titled, ``Triennial Network Adequacy Review for Medicare Advantage 
Organizations and 1876 Cost Plans, CMS-10636, OMB 0938-1346.'' \51\ CMS 
relies on this collection of information to evaluate whether an MA 
organization maintains a network of appropriate providers and 
facilities that is sufficient to provide adequate access to covered 
services based on the needs of the population served. In the PRA 
package, CMS explained that organizations must comply with the current 
CMS network adequacy criteria posted in the HSD reference file on CMS's 
website and updated annually. We proposed to codify the standards in 
order to formalize the use of criteria posted in the HSD reference file 
by codifying and explaining the standards and, where necessary, the 
formulas used to calculate network adequacy standards (that is, 
provider/facility types, maximum time and distance standards, minimum 
provider/facility numbers). We proposed that CMS would continue to use 
the HSD reference file as a means to communicate these standards to MA 
organizations and that we anticipated that there would be no updates or 
changes required to the approved collection of information for CMS to 
assess network adequacy. We stated in the proposed rule how the 
codified provisions would not impose any new or revised information 
collection requirements (that is, reporting, recordkeeping, or third-
party disclosure requirements) or burden. We confirm here that these 
provisions are not subject to the PRA.
---------------------------------------------------------------------------

    \51\ https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10636.
---------------------------------------------------------------------------

    We thank commenters for their input to help inform our final rule 
on network adequacy policies. We received the following comments on 
this proposal, and our response follows:
    Comment: A number of commenters gave feedback regarding the 
provider and facility specialty type lists in Sec.  422.116(b). Some 
commenters suggested that CMS add provider specialty types for physical 
therapist, occupational therapist, transplant providers, psychologists, 
clinical social workers, nurse specialists, emergency physicians, and 
optometry. A few commenters suggested that CMS add transplant centers 
and inpatient rehabilitation hospitals and units to the list of 
facility specialty types.
    Response: We appreciate the many viewpoints and recommendations on 
this subject. The regulation at Sec.  422.112(a) require that MA 
organizations must ensure that all covered services are available and 
accessible under the plan. Further, MA organizations must maintain a 
network of providers to provide adequate access to covered services and 
must make arrangements for care outside the plan provider network, at 
in-network cost-sharing, when network providers are unavailable. As a 
result of this critical protection, we do not require that all provider 
and facility specialties be subject to network adequacy standards. In 
past network adequacy reviews, we have not evaluated every possible 
provider type that may provide a Medicare covered benefit in our 
network reviews. We also have not evaluated provider subspecialties, 
especially those that are extremely specialized in nature. We ensure 
access to all Medicare covered services through monitoring and 
investigating complaints in the CMS Complaint Tracking Module. We 
identify which provider and facility specialty types are critical and 
necessary to evaluate separately based on a review of Medicare FFS 
utilization patterns, utilization of provider/facility specialty types 
in Medicare FFS, specialties in other managed care programs, and the 
clinical needs of Medicare beneficiaries. For example, we consider the 
utilization rate of specific provider types in order to determine if it 
justifies the effort of developing specific standards, collecting data 
from plans, and analyzing the information. Therefore, we proposed to 
codify network adequacy standards for the 27 provider specialty types 
and 14 facility specialty types that are currently used in the 
evaluation of network adequacy in each service area and have well-
established base time and distance standard associated with them. We 
emphasize that MA enrollees are entitled to access to all medically 
necessary services from Medicare participating providers and facilities 
whether or not the provider or facility type is subject to specific 
network adequacy standards under Sec.  422.116.
    Comment: In response to our identification of other options we were 
considering regarding outpatient dialysis centers, many commenters 
supported removing outpatient dialysis from the list of facility 
specialty types, and instead, requiring an attestation in its contract 
application. These commenters explained that this change would drive 
patient-centered innovation in dialysis treatment, encourage 
competition, and bring down high reimbursement costs for dialysis 
treatment. They also pointed out that this change would be consistent 
with how CMS monitors and ensures beneficiary access to durable medical 
equipment, home health care, and transplant services. Commenters 
suggested that the use of an attestation would ensure patient 
protection while also giving plans the flexibility they need to expand 
the delivery of innovative solutions to beneficiaries with End Stage 
Renal Disease (ESRD) requiring dialysis treatment. A few commenters 
that supported the removal of outpatient dialysis also suggested that 
providing exceptions for plans covering home dialysis for all 
beneficiaries who need such services or customizing time and distance 
standards for dialysis facilities would also improve the proposal.
    On the other hand, many commenters recommended that CMS finalize 
its proposal and maintain maximum time and distance standards for 
outpatient dialysis centers without change. These commenters raised 
concerns that the removal of outpatient dialysis as a facility type 
would result in the discrimination of ESRD patients by MA plans because 
the network design would discourage patients with ESRD from enrolling. 
A few commenters believed that the removal of outpatient dialysis 
centers from the list of facility and specialty types for which we 
would use specific standards would conflict with the intent of the 21st 
Century Cures Act, which allows ESRD patients to enroll in MA plans in 
2021. Some commenters raised access to care concerns and pointed out 
barriers to home dialysis,

[[Page 33859]]

such as housing insecurity and a lack of caregiver support, and others 
explained the need to have both home dialysis and in-center dialysis 
options of care and to leave the treatment choice in the hands of the 
patient. Lastly, a couple commenters did not believe that CMS provided 
adequate notice in the proposed rule to make any changes to outpatient 
dialysis in the final rule.
    Response: In our proposal, we explained that we believed that there 
is more than one way to access medically necessary dialysis care and we 
sought to improve our network adequacy standards as they relate to 
measuring and setting minimum standards for access to dialysis 
services. We do not agree with commenters that the removal of 
outpatient dialysis facilities will result in network designs that 
discriminate against or discourage ESRD beneficiaries from enrolling in 
MA plans. Regardless of whether a facility or provider specialty type 
is subject to network adequacy standards, MA organizations are required 
in Sec.  422.112(a)(3) to arrange for health care services outside of 
the plan provider network when network providers are unavailable or 
inadequate to meet an enrollee's medical needs. Section 422.112(a)(10) 
requires MA plans to ensure access and availability to covered services 
consistent with the prevailing community pattern of health care 
delivery in the areas served by the network. The factors making up 
community patterns of health care delivery that CMS considers when 
evaluating an MA plan network--and which continue to apply regardless 
whether a specific time and distance or minimum number requirement is 
established pursuant to Sec.  422.116 for a provider specialty or 
facility type--are at Sec.  422.112(a)(10). For example, for any 
provider or facility types that are not included in network adequacy 
standards at Sec.  422.116, CMS may consider the number and 
geographical distribution of eligible health care providers available 
to potentially contract with an MA organization to furnish plan covered 
services within the service area when deciding if MA plans meet access 
and availability requirements. Additionally, we may consider the 
prevailing market conditions in the service area of the MA plan and, 
more specifically, the number and distribution of health care providers 
contracting with other health care plans (both commercial and Medicare) 
operating in the service area of the plan. Therefore, if network 
providers are incapable of meeting the enrollee's medical needs because 
the burden of travel to the in-network dialysis center is inconsistent 
with the prevailing community pattern of health care delivery in the 
area, the MA plan must arrange for care outside of the network and at 
in-network cost-sharing in order to meet the MA plan's obligation under 
the MA program rules to furnish covered services. The network adequacy 
maximum time and distance standards proposed at Sec.  422.116 are one 
way that we quantify prevailing patterns of health care delivery in 
areas, but it is not the only way to evaluate a network, as Sec.  
422.112(a)(10) provides. Most importantly, it does not mean that MA 
organizations do not need to maintain an adequate contracted network of 
contracted providers simply because a provider or facility type is not 
included in the network adequacy standards at Sec.  422.116. MA 
organizations must maintain a network of contracted providers that is 
sufficient to provide adequate access to covered services to meet the 
needs of the population served and is consistent with the prevailing 
community pattern of health care delivery in the areas where the 
network is being offered. This critical beneficiary protection ensures 
that MA enrollees have similar reasonable access to providers and 
facilities as beneficiaries in FFS Medicare. Therefore, we believe that 
MA plans will continue to provide adequate access to dialysis 
providers. We disagree with commenters that believe that the removal of 
outpatient dialysis from the list being finalized in Sec.  422.116 of 
facility types that are separately evaluated on time and distance and 
minimum number standards would necessarily lead to discrimination 
against ESRD patients or would conflict with the intent of the 21st 
Century Cures Act. The 21st Century Cures Act removed the prohibition 
against beneficiaries with ESRD from enrolling in an MA plan effective 
for plan years beginning on or after January 1, 2021. MA organizations 
must abide by all existing legal and regulatory anti-discrimination 
requirements, which include prohibitions on discrimination on the basis 
of health status, for any beneficiaries with ESRD enrolling in an MA 
plan.
    For CMS performance data collected for Part C Star Ratings, CMS 
surveys beneficiaries on the ease of getting needed care and seeing 
specialists, as well as getting appointments and care quickly, through 
the Consumer Assessment of Healthcare Providers and Systems (CAHPS) 
survey questions. MA organizations are incentivized by CMS Star Ratings 
policies to maintain high-star ratings by scoring well on these types 
of survey measures. Further, if beneficiaries believe that an MA 
organization is discriminating against them, complaints may be 
submitted into the Complaint Tracking Module (CTM). We monitor and 
investigate complaints related to access concerns and work with 
regional office caseworkers to resolve any issues with the MA 
organizations. We would take compliance or enforcement actions against 
an MA organization for failing to provide adequate access to medically 
necessary services, as warranted.
    Also, we do not believe that the removal of outpatient dialysis as 
a facility type would cause access to care concerns. As we pointed out, 
MA organizations must maintain a contracted network that is sufficient 
to provide adequate access to covered services, and this includes the 
ability for enrollees to receive care in-person at an outpatient 
dialysis facility. We agree with commenters that this change will drive 
patient-centered treatment in dialysis services, which is at the heart 
of our intent in considering this change in policy. While we proposed 
to codify maximum time and distance standards for the facility type 
outpatient dialysis, we also solicited comments about four options to 
improve measuring and setting standards for access to dialysis services 
because we wanted MA plans to use more than one treatment modality to 
address access to dialysis services: (1) Removing outpatient dialysis 
from the list of facility types with specific evaluation standards; (2) 
allowing plans to attest to providing medically necessary dialysis 
services in its contract application (as is current practice for DME, 
home health, and transplant services); (3) allowing exceptions to time 
and distance standards if a plan is instead covering home dialysis for 
all enrollees who need these services; and (4) customizing time and 
distance standards for all dialysis facilities. We believe that by 
eliminating the outpatient dialysis facility type from the list in 
Sec.  422.116(b)(2), MA organizations have the freedom to enhance their 
networks by contracting with dialysis providers that offer dialysis 
treatment through home-based modalities. These home based modalities 
give enrollees flexibility and control over their lives so that 
enrollees can choose the treatments that best meet their needs. We 
agree with commenters and understand that beneficiaries undergoing 
dialysis treatment often face changes in circumstances that may warrant 
movement from one modality to another. We believe this further

[[Page 33860]]

supports our intent to encourage MA organizations to establish networks 
that provide the most advanced and available treatment options to 
Medicare beneficiaries.
    We also agree with commenters that the removal of outpatient 
dialysis from the list of facilities for which there are specific time 
and distance and minimum provider standards could encourage greater 
competition in dialysis treatment and treatment modalities, which will 
eventually lead to lower costs for Medicare beneficiaries without 
resulting in the denial of, or access to, lesser care. The removal of 
outpatient dialysis as a facility type from our network adequacy 
standards allows all dialysis treatments to be treated equally, which 
will encourage MA organizations to contract with facilities that offer 
different forms of dialysis treatments, rather than just dialysis at an 
outpatient facility. We believe this increased competition among 
treatment modalities could drive down plan and patient costs for 
dialysis services. We do not believe that creating exceptions related 
to home dialysis or customizing time and distance standards will bring 
about the same level of change that CMS is seeking. CMS will continue 
to oversee the provision of dialysis services through its monitoring 
efforts to ensure that MA beneficiaries have access to medically 
necessary care that meets their needs. We routinely monitor access to 
care complaints and impose compliance or enforcement actions, when 
necessary, to hold MA organizations accountable for the provision of 
all medically necessary covered services.
    Lastly, a few commenters did not believe that CMS provided adequate 
notice and sufficient detail in the proposed rule for the alternative 
that we are finalizing here. We disagree and believe that our proposal 
and continued consideration of other options for outpatient dialysis 
were clear in the proposed rule. We received numerous comments 
discussing the four options we identified in the proposed rule (85 FR 
9099), as well as the proposal to include outpatient dialysis as a 
facility type with maximum time and distance standards. The comments, 
as we have previously discussed, weighed these options and clearly 
discussed the benefits and drawbacks on the merits of the issues 
presented, indicating to us that our consideration of other options for 
outpatient dialysis was understood by commenters. We thank commenters 
for all of their input in helping to inform us as we considered a final 
policy concerning outpatient dialysis.
    In this final rule, we are removing outpatient dialysis as a 
facility specialty type at Sec.  422.116(b)(2) that is subject to 
network adequacy standards. Under our authority in Sec.  422.116(a)(1), 
we intend to require that MA organizations submit an attestation that 
it has as an adequate network that provides the required access and 
availability to dialysis services, including outpatient facilities. We 
are finalizing the 27 provider specialty types and the other 13 
facility types (that is, the types other than outpatient dialysis 
facilities) in Sec.  422.116(b) as proposed.
    Comment: A few comments questioned our proposal at Sec.  
422.116(b)(3) specifying that CMS may remove a provider or facility 
type from the network adequacy evaluation for a particular year by not 
including the type in the annual publication of the HSD reference file. 
A few commenters recommended that both additions and removals of 
provider and facility types be subject to notice and comment 
rulemaking.
    Response: The HSD reference file is built annually by applying the 
rules in Sec.  422.116. We reiterate the importance of the beneficiary 
protection at Sec.  422.112(a), that even if a provider or facility 
specialty type is not subject to network adequacy standards, that 
access to providers at in-network cost-sharing must be provided by the 
MA organization. We proposed the ability to remove specialty types in 
the HSD reference file to account for circumstances where it may not be 
necessary to evaluate the number and accessibility of each of the 27 
specialty and 13 facility types in a particular year. Additionally, as 
we described in our proposal, Sec.  422.116(a) will permit us to 
require an MA plan to complete an attestation that it has an adequate 
network that provides the required access to and availability of 
provider or facility specialty types even where we do not evaluate 
access ourselves. Since network adequacy criteria are measured for each 
individual specialty type and do not roll up into an aggregate score, 
the removal of a specialty type from the network review will not affect 
the outcome of an MA plan's network review and, as discussed throughout 
this section of this final rule, we believe that there are adequate 
protections available to ensure that enrollee access to services is not 
compromised. We are finalizing Sec.  422.116(b)(3) to allow CMS to 
remove a provider or facility type from the network adequacy evaluation 
for a particular year by not including the type in the annual 
publication of the HSD reference file.
    Comment: Most commenters supported the proposed base time and 
distance standards. There were a few commenters that suggested that CMS 
consider alternative approaches to codifying a uniformly applied time 
and distance standard. A commenter suggested that CMS allow for the use 
of a combination of qualitative and quantitative standards. Others 
commenters suggested measures of provider availability (for example, 
percentage accepting new patients, timeliness of appointment 
availability), performance on access-related quality and patient 
experience measures, and degree of physical co-location of services.
    Response: We appreciate the recommendations and, because we are 
always looking for new ways of improving the network adequacy reviews, 
will take them into consideration for potential future policy 
development. Our network adequacy methodology, as proposed and as 
finalized here, aims to objectively evaluate the networks of various 
types of coordinated care plans across a national landscape that 
includes urban, suburban, and rural regions. We believe that using 
quantitative methods that account for some degree of variance across 
these different regions provides a fair and reasonable evaluation that 
we can efficiently test against hundreds of MA plans annually. 
Therefore, we are finalizing base time and distance standards that vary 
by county type designation and take into account the nature of the 
provider or facility supply in the health care marketplace. Further, 
the customization process, which we are finalizing as proposed at 
paragraph Sec.  422.116(d)(3), allows us to adjust the base time and 
distance standards, when needed, to take into account the unique 
characteristics of specific regions, such as geographic landscape, 
which may alter the pattern of care in a county. We also proposed an 
exceptions process at Sec.  422.116(f), which allows us to also 
consider qualitative characteristics that may serve as the rationale 
for a valid exception when an MA network fails to meet time and 
distance standards. We have continued to hone and improve our network 
adequacy methodology since 2011 and believe our objective and 
transparent approach allows for the proper balance of quantitative and 
qualitative measures that allows CMS to quickly and efficiently measure 
the adequacy of hundreds of MA networks in a given year. We also note 
that some of the performance measures (for example, patient experience 
and access-related quality measures) suggested are

[[Page 33861]]

already included in CMS's MA plan Star Ratings system, which is used to 
measure how well plans perform in several categories, including quality 
of care and customer service. We do not believe it is necessary to 
duplicate those as part of network evaluations.
    Therefore, we are finalizing the general rules for network adequacy 
proposed at Sec.  422.116(a), with the exception of Sec.  
422.116(a)(3)(ii), which will not be finalized to align with how we are 
not finalizing specific standards for Outpatient Dialysis facilities. 
Also, we are finalizing the county type designations at Sec.  
422.116(c) and the maximum time and distance standards at Sec.  
422.116(d) as proposed, with the exception of the maximum time and 
distance standards for the Outpatient Dialysis facility type for 
reasons previously discussed.
    Comment: A number of commenters supported the proposed base time 
and distance standards at Sec.  422.116(d). A few commenters 
recommended changes to the proposed base time and distance standards in 
specific county type designations or due to the plan type. Some 
commenters recommended that Institutional Special Needs Plans (I-SNPs) 
should have reduced network adequacy standards for specific provider or 
facility types like podiatry, primary care, diagnostic radiology, 
physical therapy, occupational therapy, and speech therapy, or should 
be excepted altogether from the measures. Others recommended that we 
reduce time and distance standards for occupational therapy and 
dermatology in all county types, and for primary care and psychiatry in 
non-metro county types.
    Response: We conduct network adequacy reviews at the contract 
level, meaning we evaluate the adequacy of the MA organization's 
network across all of their plan types (for example, HMOs, PPOs, SNPs); 
we do not singularly evaluate the network of a specific plan benefit 
package. We believe that conducting network reviews at the contract 
level allows us to consider the broadest availability of contracted 
providers and facilities for an MA organization while also providing 
administrative efficiency for CMS to evaluate fewer HSD network 
submissions. Therefore, our network methodology does not change base 
time and distance standards based on the plan type being reviewed, such 
as an I-SNP. We also do not believe that it would be necessary to 
change our network adequacy standards based on the plan types that we 
review. For example, while I-SNPs may be unique in that beneficiaries 
may receive a number of health care services from a single institution, 
there are also I-SNP institutionalized-equivalent beneficiaries that 
reside at home. Further, these beneficiaries may still need to travel 
to another facility to receive specialized care or the specialty 
providers will need to travel to deliver the care. As a result, we 
believe that even for plans like I-SNPs, it is important that MA 
organizations maintain a contracted network that can deliver medically 
necessary care and is compliant with our network adequacy standards.
    We have honed and improved its base time and distance standards for 
each specific provider and facility type in each county designation 
over a period of nine years. For example, we updated maximum time and 
distance standards when the new county designation methodology was 
implemented (that is, moving from classifying counties based on 
metropolitan statistical areas to the current county designations) and 
have adjusted some standards based on a significant change in supply. 
We proposed base time and distance standards that we believe represent 
a fair expectation for health care patterns of delivery in the five 
county types based on many years of data and network evaluation. 
Additionally, the customization process, as proposed and finalized, 
allows us to adjust standards at the county and provider/facility type 
level where needed to take into account factors like utilization or 
supply patterns that indicate the base time and distance standards are 
not reflective of prevailing patterns of community health care 
delivery. Therefore, we are not making any changes to our base time and 
distance standards in the final rule and are finalizing these standards 
as proposed.
    Comment: A number of commenters supported the minimum provider 
number requirements at Sec.  422.116(e). Commenters supported CMS's 
policy that there be at least one contracted provider or facility 
specialty type within required time and distance standards that is 
accessible to Medicare beneficiaries. A commenter recommended that CMS 
use the same minimum provider ratio in the calculation of the minimum 
provider number requirement in all county types.
    Response: We thank commenters for their support of this policy. As 
we described in our proposed rule, CMS established minimum ratios in 
2011 using a number of data sources, including, Medicare fee-for-
service claims data, American Medical Association (AMA) and American 
Osteopathic Association (AOA) physician workforce data, U.S. Census 
population data, National Ambulatory Medical Care Survey data, AMA data 
on physician productivity, and published literature. We proposed 
Minimum Ratios for each provider and county type at Sec.  
422.116(e)(3)(i). The Minimum Ratio is the number of providers required 
per 1,000 beneficiaries. As the overall population and population 
density widely varies between large metro and rural county types, so 
does the rate of health care utilization in these areas. Health care 
utilization patterns are higher in metro areas, and therefore, our 
proposed Minimum Ratios are slightly higher in metro county types. In 
accordance with our current rules at Sec.  422.112(a)(10), we 
considered the prevailing patterns of community health care delivery, 
such as whether the service area is comprised of rural or urban areas, 
when developing the Minimum Ratios. We are finalizing the minimum 
number requirements as proposed in Sec.  422.116(e).
    Comment: Many commenters supported our proposed customization 
process at Sec.  422.116(d)(3). In particular, commenters supported 
that CMS may only use customization to increase time and distance 
standards from the base standards. A commenter suggested that CMS allow 
health plans to provide feedback on county time and distance standard 
changes to ensure appropriate customization is consistent year after 
year. Other commenters suggested that geographic barriers like rivers, 
mountains, and oceans should trigger customization, in addition to 
supply shortages.
    Response: We appreciate commenters' support of our customization 
process. We agree with commenters that geographic barriers that play a 
significant role in utilization patterns are triggering events that may 
result in the customization of time and distance standards by CMS. We 
clarify here, and in additional regulation text being finalized at 
Sec.  422.116(d)(3), that when necessary due to utilization or supply 
patterns, CMS may set maximum time and distance standards for specific 
provider or facility types for specific counties by customization. We 
stated in the proposed rule that customization of base criteria may be 
triggered based on provider or facility supply shortages, information 
received through exception requests from plans, or from other sources, 
such as restrictions or limitations caused by state certificate of need 
(CON) laws. When information from these sources shows that utilization 
or supply patterns indicate the base time and distance standards are 
not reflective of prevailing patterns of community health care 
delivery, CMS

[[Page 33862]]

may customize the maximum time and distance standards. In the past, CMS 
has only customized maximum time and distance standards by increasing 
them above the base time and distance standard and will continue this 
policy by finalizing Sec.  422.116(d)(iv). We solicited comment in the 
proposed rule about other sources of information that we should 
consider as part of the customization analysis, but we do not believe 
that it is necessary or appropriate to limit the source or type of 
information that could be used to trigger the customization analysis. 
By codifying a standard to guide when we will use customization without 
limiting the information that would indicate that utilization or supply 
standards make it necessary to use customized, instead of the base, 
time and distance standards, we are ensuring that the network adequacy 
evaluations appropriately reflect access and availability of health 
care for each area.
    Customization of base time and distance standards occurs narrowly 
and is very specific to the provider or facility specialty type and 
county where the triggering event occurs. Further, MA organizations 
will not be subject to reductions in the time and distance standard 
below the base standards at Sec.  422.116(d)(2); CMS will only be 
increasing from the base standards through customization to take into 
account the information and utilization and supply standards that 
trigger the need for customization and make it easier for MA 
organizations to comply with network adequacy standards. As such and 
because the regulation describes the standards governing the 
customization process, we do not believe an opportunity for prior 
review and comment on customized time and distance standards before 
implementation is the best course of action. As we mentioned, we 
consider information from exception requests to help inform our 
customization of time and distance standards. Should an MA organization 
continue to fail to meet customized time and distance standards, the 
organization may submit an exception request and provide further 
information about why its network cannot meet the standard. CMS will 
take that information under consideration for the current network 
review and may make additional adjustments to the customized time and 
distance standards in the following year. We believe this is the most 
efficient means of receiving MA organization input on customized 
standards as circumstances in counties change year over year. 
Therefore, we are finalizing the customization process at Sec.  
422.116(d)(3), with an addition to clarify that CMS may set maximum 
time and distance standards for provider or facility types for specific 
counties when necessary due to utilization or supply patterns.
    Comment: We received numerous comments expressing support for the 
reduction in the percentage of beneficiaries residing within maximum 
time and distance standards in Micro, Rural, and CEAC counties from 90 
percent to 85 percent. Some commenters described this as a reasonable 
adjustment in light of the limited availability of some providers in 
rural areas. They explained that this proposal could increase access to 
MA plans for beneficiaries residing in rural areas by bringing 
competition and better health care choices to beneficiaries. Other 
commenters that were supportive of the proposal also requested that CMS 
make this reduction applicable to all five county type designations, 
rather than limiting it to Micro, Rural, and CEAC counties. A few 
commenters suggested that we further reduce the percentage down to 80 
percent.
    We also received some comments that expressed opposition to this 
reduction. Some commenters expressed concern that reducing the 
threshold requirement may result in the unintended consequence of 
leaving some rural communities without appropriate access to essential 
services because it would reduce the incentives for MA plans to 
contract with specialists.
    Response: We thank commenters for their viewpoints on our proposal 
to reduce the percentage of beneficiaries residing within maximum time 
and distance to 85 percent at Sec.  422.116(d)(4)(i). We agree that a 
reduction is necessary in rural counties (Micro, Rural, and CEAC) due 
to the limited availability of providers and the lower population 
density in those areas. CMS considers the number and geographical 
distribution of eligible providers available to potentially contract 
with an MA organization when evaluating a network based on community 
patterns of care under Sec.  422.112. The beneficiary population is 
typically less dense per square mile than in metro counties so we 
believe having a reduced threshold will make the standards more 
consistent with the community patterns of care in rural areas. As a 
result, we agree with commenters that this adjustment may increase 
access to MA plans for beneficiaries residing in rural areas. We do not 
believe that this reduction will result in leaving some rural 
communities without appropriate access to essential services. Our 
minimum number requirements proposed at Sec.  422.116(e) require that 
an MA plan contract with at least one provider within maximum time and 
distance standards of a beneficiary in the area. Further, CMS rules at 
Sec.  422.112(a) require that MA organizations must ensure that all 
covered services are available and accessible under the plan, 
regardless of how many providers or facilities are contracted with the 
MA organization. MA organizations must make arrangements for care 
outside the plan provider network, at in-network cost-sharing, when 
network providers are unavailable or the network is insufficient. 
Therefore, beneficiaries in these rural communities will continue to 
have access to specialty providers and facilities because MA 
organizations are still required to contract with at least one or must 
pay for health care services rendered at non-contracted Medicare 
participating providers at the Medicare FFS rate.
    We proposed a modest reduction of 5 percent and limited this 
reduction to only Micro, Rural, and CEAC counties. We believe this to 
be an appropriate adjustment based on our data that shows that existing 
failures in MA plans' meeting the time and distance standards 
frequently occur at the range between 80 to 89 percent of 
beneficiaries. We understand that some commenters would like CMS to see 
an increased reduction or expand this reduction to all county types, 
however, we believe that the approach we are finalizing will allow us 
to observe the impacts of this policy change on MA plans and health 
care providers; we may consider further adjustments to the percentage 
as needed. Additionally, as this policy change was also intended to 
drive more MA plan access in rural areas, we do not believe it is 
necessary or appropriate at this time to apply this reduction to the 
access standard for metro counties. We are finalizing the reduction in 
the percentage of beneficiaries residing within maximum time and 
distance to 85 percent for Micro, Rural, and CEAC counties at Sec.  
422.116(d)(4)(i).
    Comment: We received numerous comments about the 10-percentage 
point telehealth credit towards the percentage of beneficiaries 
residing within published time and distance standards for applicable 
provider specialty types proposed at Sec.  422.116(d)(5). Most 
commenters were very supportive and appreciated CMS' support of 
telehealth goals and thought that CMS's proposal would incentivize MA 
organizations to contract with providers that have adopted telehealth 
technology. A few

[[Page 33863]]

commenters were opposed to this ``telehealth credit'' and felt that 
telehealth should be implemented into network adequacy in a way that 
does not diminish access to in-person care. These commenters believed 
that allowing a telehealth credit would make it too easy for MA 
organizations to comply with a standard that is set for in-person 
access to a provider. Also, opposing commenters believed that this 
policy may unintentionally encourage plans to use telehealth services 
as substitutes for existing in-person services, even in areas where 
provider availability and beneficiary access are strong.
    Response: We appreciate commenters support for this proposal as 
well as the concerns that were raised by the commenters that opposed 
it. We believe the telehealth credit that we proposed upholds maximum 
time and distance standards for the applicable provider specialty types 
and provides a modest incentive for MA organizations to supplement 
their networks with providers that can furnish additional telehealth 
benefits. Our proposal does not decrease the maximum time and distance 
standards that must be maintained for compliance with our network 
adequacy measures for the applicable provider types; it allows for a 
reduced portion of the beneficiary population to be within those 
maximum time and distance standards. For example, in Metro counties, MA 
organizations would still need to ensure that they contract with in-
person providers that are within maximum time and distance standards of 
at least 80 percent of the beneficiary population even after the credit 
is applied. We believe it is important and appropriate to account for 
contracted telehealth providers in evaluating network adequacy 
consistent with reflecting how MA plans supplement, but do not replace, 
in-person networks with telehealth providers. The rules at Sec.  
422.135(c) for providing additional telehealth benefits require that 
the MA organizations furnish in-person access to the specified Part B 
service at the election of the enrollee. This protection preserves the 
beneficiary's right to choose when they would prefer to have medically 
necessary care provided in-person rather than through electronic 
exchange (that is, through electronic information and 
telecommunications technology). Further, our telehealth credit proposal 
does not count telehealth-only providers as equal to providers that 
deliver in-person care. We limited the impact that supplementing a 
network with telehealth providers could have on the network adequacy 
standards by offering a 10-percentage point credit, while maintaining 
the maximum time and distance standards required for the applicable 
provider types. We believe this approach appropriately incentivizes MA 
organizations to contract with providers that offer additional 
telehealth benefits and maintains standards that ensure that in-person 
providers are within a reasonable time and distance for most 
beneficiaries.
    Comment: Some commenters suggested that CMS modify the telehealth 
credit by increasing the credit to as high as a 20-percentage point 
credit.
    Response: Our proposal attempted to strike the proper balance 
between incentivizing MA organizations to contract with providers that 
offer additional telehealth benefits while also maintaining adequate 
access to in-person care for the same provider specialties. Therefore, 
we proposed a 10-percentage point credit towards the percentage of 
beneficiaries residing within maximum time and distance standards. We 
believe a 10-percentage point credit is an appropriate amount that 
proportionately supplements a plan's percentage threshold because 
telehealth providers add value to a contracted provider network, but 
should not have the same level of significance or value as an in-person 
provider. Additionally, information from prior network adequacy reviews 
show that many failures in meeting time and distance standards occur in 
this 80 to 89 percent range. We believe an increase to a 20-percentage 
point credit would be too significant at this time. We plan to observe 
the frequency and impact of this telehealth credit in network adequacy 
reviews and will consider adjusting this percentage in the future as 
needed.
    Comment: A few commenters recommended that CMS add to the 
applicable provider list of dermatology, psychiatry, cardiology, 
neurology, and otolaryngology proposed at Sec.  422.116(d)(5) by also 
including the provider types of ophthalmology, allergy and immunology, 
nephrology, primary care, gynecology, endocrinology, infectious 
diseases, or making all provider types applicable for the telehealth 
credit. Commenters encouraged CMS to expand the list of specialty 
providers to account for advances in medical technology and promote 
beneficiary choice in how to receive medical services.
    Response: We appreciate commenters' suggestions on expanding the 
list of applicable provider types for this telehealth credit. As we 
explained in the previous comment response, we believe the telehealth 
credit amount is properly balanced to maintain adequate access to in-
person care while also incentivizing MA organizations to contract with 
telehealth providers. We note that in the proposed rule, we did not 
believe it was necessary to take telehealth into account for primary 
care providers. 85 FR 9099. However, the use of and access to primary 
care doctors via telehealth, as well as other provider specialties 
highlighted by commenters (whose comments referred to circumstances 
outside the Public Health Emergency), has been critically important in 
delivering medical care to Medicare beneficiaries during the during the 
COVID-19 pandemic Public Health Emergency. Based on our experience 
during this emergency, we observed how important it is to have policies 
that encourage the widespread availability of telehealth services at 
all times. Additionally, President Trump's Executive Order 13890 on 
Protecting and Improving Medicare for Our Nation's Seniors (October 3, 
2019) called for enhanced access to health outcomes made possible 
through telehealth services or other innovative technologies as a way 
to secure and improve Medicare. In light of the COVID-19 pandemic and 
this Executive Order, we now believe that we should expand the list of 
specialty provider types finalized at Sec.  422.116(d)(5) and there is 
no reason to restrict this credit to only provider types that are the 
most apt to provide telehealth services or for which we have seen 
potential for failing to meet the specific time and distance standards. 
New medical technologies and treatments are rapidly evolving across 
various providers and we would like to broaden the scope of eligible 
providers to account for these developments by implementing 
recommendations from commenters on the provider types in Sec.  
422.116(b)(1) that should be eligible for the telehealth credit. 
However, we also do not believe that it is appropriate to make this 
credit available to all provider types at this time. Therefore, based 
on the comments received, we are adding the following provider types to 
the list finalized at Sec.  422.116(d)(5): Ophthalmology, Allergy and 
Immunology, Nephrology, Primary Care, Gynecology/OB/GYN, Endocrinology, 
and Infectious Diseases.
    Comment: A few commenters recommended that we modify CMS's proposal 
at Sec.  422.116(d)(5) to include 1876 cost plan telehealth providers 
that provide telehealth services through supplemental benefits.
    Response: Our proposal at Sec.  422.116(d)(5) limited the credit to

[[Page 33864]]

providers that provide additional telehealth benefits, as defined in 
Sec.  422.135, in its contracted networks. As we pointed out in the 
proposed rule, additional telehealth benefits described at Sec.  
422.135 only apply to MA plans. For that reason, our proposal did not 
extend the 10-percentage point credit to cost plans. We believe this is 
appropriate because of the protections and rules that exist for 
additional telehealth benefits that that require access to in-person 
care at the election of the enrollee. Telehealth services offered 
through supplemental benefits are not subject to these rules and may be 
too limited in scope to warrant a credit for network adequacy. 
Therefore, we are finalizing this telehealth credit as proposed at 
Sec.  422.116(d)(5).
    Comment: We received numerous comments in support of our proposal 
at Sec.  422.116(d)(6) that MA organizations may receive a 10-
percentage point credit towards the percentage of beneficiaries 
residing within published time and distance standards for affected 
provider and facility types in states that have CON laws, or other 
state imposed anticompetitive restrictions, that limit the number of 
providers or facilities in a county or state. Some commenters expressed 
agreement with our discussion in the proposed rule that CON laws have a 
negative impact on network adequacy, reduce competition, result in 
higher prices and lower patient access. Other commenters opposed the 
``CON law credit'' and disagreed with our viewpoint on the impact that 
CON laws. Opposing commenters suggested that CON laws are not a 
significant barrier to providers in underserved areas and help assure 
that there is not an overabundance of specialized facilities that need 
to treat patients in order to remain in business, which causes an 
overutilization of services. These commenters were concerned that a 10-
percentage point credit may hinder enrollee access to providers. We 
received some comments seeking clarification on the term ``other 
anticompetitive restrictions'' and the conditions under which the CON 
law credit will be available.
    Response: We appreciate commenters' varying viewpoints on CON laws 
and their impact on network adequacy. We continue to believe that CON 
laws adversely affect competition and free market entry, and therefore, 
MA organizations must pay more for benefits when there is a limited 
supply of providers or facilities. We believe the 10-percentage point 
credit is an appropriate adjustment to make for MA organizations that 
contract with providers or facilities that are affected by CON laws in 
counties and states. As previously mentioned, prior network adequacy 
reviews show that many failures in meeting time and distance standards 
occur in the 80 to 89 percent range. Like the telehealth credit, this 
credit does not reduce the maximum time and distance criteria required 
for specific providers or facilities; it reduces the compliance 
threshold that MA organizations must meet in order to meet our network 
adequacy standards. Even when this credit applies, MA organizations 
must still contract providers and facilities where a majority of 
beneficiaries reside within maximum time and distance standards.
    We proposed that MA organizations may receive a 10-percentage point 
credit towards the percentage of beneficiaries residing within 
published time and distance standards for affected provider and 
facility types in states that have CON laws, or other state imposed 
anticompetitive restrictions, that limit the number of providers or 
facilities in a county or state. We are implementing this network 
adequacy policy in furtherance of President Trump's Executive Order 
13890 on Protecting and Improving Medicare for Our Nation's Seniors 
(October 3, 2019), which called for adjustments to network adequacy 
requirements to account for the competitiveness of state health care 
markets, including taking into account whether states maintain 
Certificate of Need (CON) laws or other anticompetitive restrictions. 
We clarify here that the term ``anticompetitive restrictions'' at Sec.  
422.116(d)(6) is meant to encompass state laws that restrict the 
provider or facility supply of specialty types listed at Sec.  
422.116(b), even if the state does not formally call them CON laws. For 
example, Wisconsin does not have a CON law, but has a limit on the 
maximum number of approved hospital beds .\52\
---------------------------------------------------------------------------

    \52\ http://docs.legis.wisconsin.gov/statutes/statutes/150/VII/93.
---------------------------------------------------------------------------

    Additionally, we clarify that CMS will identify the states, 
counties and provider/facility specialty types where the CON law credit 
will be available for MA organizations. CMS has conducted comprehensive 
research on every state to determine whether the state uses CON laws or 
other anticompetitive restrictions and whether those laws affect the 
provider or facility types in our network adequacy standards at Sec.  
422.116(b). As we have described in regulation text, CMS may customize 
base time and distance standards in states with CON laws in lieu of 
allowing for the 10-percentage point credit. We clarify here and in 
regulation text at Sec.  422.116(d)(6), that CMS may use customization 
when necessary due to utilization or supply patterns. Therefore, the 
10-percentage point credit will not be allowable in counties where the 
specific provider or facility type maximum time and distance standards 
have already been customized. CMS will use the HPMS Network Management 
Module to identify the county and provider/facility combinations that 
are eligible for this 10-percentage point credit and MA organizations 
will need to submit a credit request for each provider or facility type 
they believe has been affected by the CON or anticompetitive laws.
    Therefore, we are finalizing at Sec.  422.116(d)(6) that in a state 
with CON laws, or other state imposed anti-competitive restrictions 
that limit the number of providers or facilities in the state or a 
county in the state, CMS will either award the MA organization a 10-
percentage point credit towards the percentage of beneficiaries 
residing within published time and distance standards for affected 
providers and facilities in paragraph (b) of this section or, when 
necessary due to utilization or supply patterns, customize the base 
time and distance standards.
    Comment: We received some comments about the cumulative effect of 
the telehealth and CON law credits on the percentage of beneficiaries 
residing within published time and distance standards. Some commenters 
questioned whether it was allowable to combine the two credits and 
others expressed concern with the effect of combining the two credits. 
Commenters were concerned that the combined change in the compliance 
percentage would likely have adverse impacts on provider access and 
choice.
    Response: When discussing the CON law credit in the proposed rule, 
we stated that the CON law credit could be ``in addition to'' the 
telehealth credit, when applicable. We confirm that interpretation here 
and reiterate that both of these credits may be applied together to the 
percentage of beneficiaries residing within maximum time and distance 
standards at Sec.  422.116(d)(4). We note that these credits do not 
reduce the actual maximum time and distance standards themselves, and 
that CMS still requires that MA organizations contract with providers 
where a majority of beneficiaries (that is, no less than 65 percent in 
rural counties, and 70 percent in non-rural counties, when both credits 
apply) reside within maximum time and distance standards for in-person 
access to care when

[[Page 33865]]

needed. Additionally, we reiterate that Sec.  422.112(a) requires that 
MA organizations must ensure that all covered services are available 
and accessible under the plan and that MA organizations must maintain a 
network of providers to provide adequate access to covered services and 
must make arrangements for care outside the plan provider network, at 
in-network cost-sharing, when network providers are unavailable or the 
network is inadequate.
    Comment: A few commenters recommended changes to our proposed 
exceptions process. Some commenters recommended that CMS shift from 
categorically treating an ``inability to contract'' as an invalid 
rationale for an exception and instead consider it a valid rationale 
relating to consolidated or concentrated provider markets. Others 
recommended that CMS consider exceptions based on documented provider 
activities that have resulted in anticompetitive practices impeding 
efforts to meet network adequacy standards. Another commenter suggested 
that where there may be repeated exception requests based on 
geographical barriers, CMS should consider granting permanent 
exceptions. Finally, a commenter requested that CMS revise its language 
in Sec.  422.116(f) to expressly provide for exceptions for I-SNPs 
because they commonly furnish services in long-term care facilities.
    Response: Under our proposal, an MA organization may request an 
exception when two criteria are met. First, certain providers or 
facilities are not available for the MA organization to meet the 
network adequacy criteria as shown in the Provider Supply file for the 
year for a given county and specialty type; second, the MA organization 
has contracted with other providers and facilities that may be located 
beyond the limits in the time and distance criteria but are currently 
available and accessible to most enrollees, consistent with the local 
pattern of care. We explained in the proposed rule the meaning of 
``available'' by providing examples, such as when the provider has 
moved or retired, or when the provider/facility does not contract with 
any organizations or exclusively with another organization. (85 FR 
9102-9103). However, we distinguish these examples from situations 
where an MA organization is unable to successfully negotiate and 
establish a contract with a provider or facility, which we refer to as 
the ``inability to contract.'' The non-interference provision at 
section 1854(a)(6) of the Act prohibits us from requiring any MA 
organization to contract with a particular hospital, physician, or 
other entity or individual to furnish items and services or require a 
particular price structure for payment under such a contract. As such, 
we cannot assume the role of arbitrating or judging the bona fides of 
contract negotiations between an MA organization and available 
providers or facilities. With respect to comments about ``documented 
provider activities that have resulted in anticompetitive practices,'' 
we believe that commenters are also referring to price negotiations 
between MA organizations and providers. We maintain that the 
``inability to contract'' with an available provider or facility is not 
a valid justification for an exception at Sec.  422.116(f). Therefore, 
we will generally not accept an organization's assertion that it cannot 
meet our network adequacy criteria because providers/facilities are not 
willing to contract with it.
    With respect to comments about permanent exceptions for geographic 
barriers, we clarify here that we would not create a ``permanent'' 
exception, as this would unnecessarily burden the exception process. 
Instead, we would utilize our customization process to recalibrate 
maximum time and distance requirements in accordance with the local 
pattern of care. As mentioned in our discussion about customization, we 
use information received through exception requests to stay informed 
and determine which counties or provider/facility types require a 
permanent adjustment in maximum time and distance standards through 
customization to account for things such as geographic characteristics 
or changes in supply.
    Finally, we reiterate here that we do not believe it is necessary 
to change network adequacy standards based on the plan types that we 
review. Beneficiaries may still need to travel to another facility to 
receive specialized care or the specialty providers may need to travel 
to deliver the care to the long-term care facility. As a result, we do 
not believe any specific exceptions are needed for I-SNPs.
    We proposed to codify the three criteria that we consider when 
evaluating exception requests at paragraphs (f)(2)(i), (ii) and (iii); 
that CMS considers whether the current access to providers and 
facilities is different from the HSD reference and Provider Supply 
files for the year; there are other factors present, in accordance with 
Sec.  422.112(a)(10)(v), that demonstrate that network access is 
consistent with or better than the original Medicare pattern of care; 
and approval of the exception is in the best interests of 
beneficiaries. We reiterate that all three criteria must be met for CMS 
to approve an exception. We are finalizing the exceptions process and 
these criteria at Sec.  422.116(f) as proposed.
    Comment: Some commenters, in connection with a proposal to revise 
Sec.  422.502 to address how CMS would use an entity's past performance 
on an MA contract in evaluating applications for new plans or service 
area expansions, stated that CMS should be more specific about what is 
and is not a basis for denying applications in connection with network 
adequacy in order to minimize uncertainty and unpredictability for MA 
organizations. Commenters suggested that CMS should add other and more 
specific criteria for use in considering applications.
    Response: Although we are not addressing in this final rule the 
proposal to revise Sec.  422.502 to address our use of information 
about past performance in evaluating an application, we understand that 
our statement in the proposed rule about how we would require an entity 
applying for a new MA contract to provide an attestation about the 
adequacy of its network could be seen as touching on that topic. We 
will address our proposal about Sec.  422.502 in a future final rule, 
but believe that additional clarity regarding attestations about 
meeting the network adequacy regulation and how they would be used in 
the context of applications for new MA contracts or service area 
expansions should be addressed as part of our network evaluation 
regulation.
    We proposed specific regulation text (which we are finalizing) in 
Sec.  422.116(a) that each network-based MA plan must demonstrate that 
it has an adequate contracted provider network. In addition, we 
proposed that when required by CMS, an MA organization must attest that 
it has an adequate network for access and availability of a specific 
provider or facility type that CMS does not independently evaluate in a 
given year (85 FR 9093). We explained that we anticipated requiring 
such attestation in the MA organization's application or contract for a 
given year but we might require the attestation when performing other 
network adequacy reviews, such as when there is a significant change in 
the MA plan's provider network.
    Under our current network adequacy policy, as described in the PRA 
approved collection of information titled, ``Triennial Network Adequacy 
Review for Medicare Advantage Organizations and 1876 Cost Plans'' (CMS-
10636) and referenced in our

[[Page 33866]]

proposed rule, we removed network reviews from the application process 
beginning in 2018 for contract year 2019. Therefore, failures detected 
during network reviews are no longer used as a basis to deny an MA 
application. In the proposed rule, we made clear that an attestation 
could be used in connection with applications. In light of the comments 
discussed above, and to address the intersection of our regulations 
regarding network adequacy and the bases for denying applications, we 
are finalizing regulatory text to explicitly provide that we do not 
require information other than an attestation regarding compliance with 
network adequacy requirements as part of the application for a new or 
expanding service area and will not deny such an application on the 
basis of such requirements. This provides greater clarity regarding how 
network adequacy and the application process intersect by codifying the 
current practice of relying on other mechanisms, such as our triennial 
reviews, to evaluate compliance with the specific network adequacy 
standards finalized in Sec.  422.116 and to enforce those standards. 
The provision we are finalizing here at Sec.  422.116(a)(1)(ii), 
however, does not prohibit CMS from considering or using information 
about an entity's failure to comply with a MA contract for purposes of 
an application denial when or if that compliance failure was associated 
with access to services or network adequacy evaluations and resulted in 
the imposition of an intermediate sanction or civil money penalty under 
to part 422 subpart O, with the exception of a sanction imposed under 
Sec.  422.752(d). Therefore, we are finalizing regulatory text at Sec.  
422.116(a)(1)(ii) that CMS does not require information, other than an 
attestation, regarding compliance with Sec.  422.116 as part of an 
application for a new or expanding service area and will not deny 
application on the basis of an evaluation of the applicant's network 
for the new or expanding service area.
    After careful consideration of all comments received, and for the 
reasons set forth in the proposed rule and in our responses to the 
related comments summarized earlier, we are finalizing the proposed 
changes to Sec. Sec.  417.416(e)(3) and 422.116 with the following 
modifications:
     We are finalizing regulatory text at Sec.  
422.116(a)(1)(ii) that CMS does not require information, other than an 
attestation, regarding compliance with Sec.  422.116 as part of an 
application for a new or expanding service area and will not deny 
application on the basis of an evaluation of the applicant's network 
for the new or expanding service area. Accordingly, we are designating 
the text we proposed at paragraph (a)(1) as paragraph (a)(1)(i) in the 
final regulation.
     We are not finalizing Sec.  422.116(a)(3)(ii), which 
clarified the definition of the facility type Outpatient Dialysis.
     We are not finalizing Outpatient Dialysis in the list of 
facility specialty types at Sec.  422.116(b)(2) and are finalizing the 
list of other facility-types as proposed but with different numbering, 
accordingly.
     We are not finalizing the base maximum time and distance 
standards for Outpatient Dialysis for all county designations at Sec.  
422.116(d)(2).
     We are finalizing the customization process at Sec.  
422.116(d)(3) with a modification that describes what triggers 
customization by CMS.
     We are finalizing Sec.  422.116(d)(5) as proposed with the 
addition of Ophthalmology, Allergy and Immunology, Nephrology, Primary 
Care, Gynecology/OB/GYN, Endocrinology, and Infectious Diseases 
provider specialty types to the list of provider types for which the 
telehealth credit is available.
     We are finalizing Sec.  422.116(d)(6) with a modification 
that describes when CMS may use the customization process as it relates 
to Certificate of Need or other anticompetitive laws.

M. Special Election Periods (SEPs) for Exceptional Conditions 
(Sec. Sec.  422.62, 422.68, 423.38, and 423.40)

1. Part C Special Election Periods (Sec.  422.62)
    Section 1851(e)(4) of the Act establishes special election periods 
(SEPs) during which, if certain circumstances exist, an individual may 
request enrollment in a Medicare Advantage (MA) plan or discontinue the 
election of an MA plan and change his or her election to original 
Medicare or to a different MA plan. We have codified SEPs for the 
following circumstances specifically addressed in section 1851(e)(4) of 
the Act:
     SEP for Non-renewals or Termination.
     SEP for Changes in Residence.
     SEP for Contract Violation.
    Section 1851(e)(4)(D) of the Act also grants the Secretary the 
authority to create SEPs for individuals who meet other exceptional 
conditions. This authority is codified at Sec.  422.62(b)(4). CMS has 
historically included in regulation those SEPs that the statute 
explicitly authorizes and has established the SEPs for exceptional 
circumstances in our subregulatory guidance rather than through 
regulation.
    We proposed to codify a number of SEPs that we have adopted and 
implemented through subregulatory guidance as exceptional circumstances 
SEPs. Consistent with Sec.  422.68(c), we also proposed to revise Sec.  
422.68(d) to clarify that for SEPs that are described in Sec.  
422.62(b), elections are effective as of the first day of the first 
calendar month following the month in which the election is made, 
unless otherwise noted.
    The proposed MA SEPs are summarized below. (Readers should refer to 
the proposed rule for more detail on these SEPs.):
    SEP for Employer/Union Group Health Plan (EGHP) Elections. We 
proposed to revise Sec.  422.62(b)(4) to codify a SEP for individuals 
making MA enrollment requests into or out of employer sponsored MA 
plans, for individuals to disenroll from an MA plan to take employer 
sponsored coverage of any kind, and for individuals disenrolling from 
employer sponsored coverage (including COBRA coverage) to elect an MA 
plan.
    SEP for Individuals Who Disenroll in Connection with a CMS 
Sanction. At new Sec.  422.62(b)(5), we proposed to codify the SEP for 
individuals enrolled in an MA plan offered by an MA organization that 
is sanctioned by CMS.
    SEP for Individuals Enrolled in Cost Plans that are Non-renewing 
their Contracts. At new Sec.  422.62(b)(6), we proposed to codify the 
SEP for individuals enrolled in cost plans that are non-renewing their 
contracts for the area in which the enrollee lives.
    SEP for Individuals in the Program of All-inclusive Care for the 
Elderly (PACE). At new Sec.  422.62(b)(7), we proposed to codify the 
SEP allowing an MA plan enrollee to disenroll from an MA plan at any 
time in order to enroll in PACE.
    SEP for Individuals Who Terminated a Medigap Policy When They 
Enrolled For the First Time in an MA Plan and Who Are Still in a Trial 
Period. We proposed, at new Sec.  422.62(b)(8), to codify the SEP for 
individuals who are eligible for guaranteed issue of a Medigap policy 
under section 1882(s)(3)(B)(v) of the Act upon disenrollment from the 
MA plan in which they are enrolled.
    SEP for Individuals With ESRD Whose Medicare Entitlement 
Determination Was Made Retroactively. We proposed to codify at new 
Sec.  422.62(b)(9) that individuals whose Medicare entitlement 
determination based on ESRD was made retroactively would have a SEP to 
prospectively elect an MA plan offered

[[Page 33867]]

by the MA organization, provided they met certain requirements.
    SEP for Individuals Whose Medicare Entitlement Determination Was 
Made Retroactively. We proposed, at new Sec.  422.62(b)(10), to codify 
a SEP for individuals whose Medicare entitlement determination was made 
retroactively.
    SEP for Individuals Who Lose Special Needs Status. At new Sec.  
422.62(b)(11), we proposed to codify the SEP for individuals enrolled 
in an MA special needs plan (SNP) who are no longer eligible for the 
SNP because they no longer meet the applicable special needs status.
    SEP for Individuals Who Belong to a Qualified SPAP or Who Lose SPAP 
Eligibility. At new Sec.  422.62(b)(12), we proposed to codify a SEP 
for individuals who belong to a qualified State Pharmaceutical 
Assistance Program (SPAP) to make one election to enroll in an MA-PD 
plan each calendar year.
    SEP for Enrollment Into a Chronic Care SNP and for Individuals 
Found Ineligible for a Chronic Care SNP. At new Sec.  422.62(b)(13), we 
proposed to codify the SEP allowing individuals with severe or 
disabling chronic conditions to enroll in a Chronic Care SNP (C-SNP) 
designed to serve individuals with those conditions.
    SEP for Disenrollment from Part D to Enroll in or Maintain Other 
Creditable Coverage. At new Sec.  422.62(b)(14), we proposed to codify 
the SEP that provides an opportunity for individuals to disenroll from 
an MA-PD plan (only by electing Original Medicare or an MA-only plan) 
in order to enroll in or maintain other creditable drug coverage (such 
as TRICARE or VA coverage) as defined in Sec.  423.56(b).
    SEP to Enroll in an MA Plan with a Star Rating of 5 Stars. At new 
Sec.  422.62(b)(15), we proposed to codify the SEP allowing an eligible 
individual to enroll in an MA plan with a Star Rating of 5 stars during 
the plan contract year in which that plan has the 5-star overall 
rating.
    SEP for Non-U.S. Citizens who Become Lawfully Present. At new Sec.  
422.62(b)(16), we proposed to codify the SEP for non-U.S. citizens who 
become lawfully present in the United States.
    SEP for Providing Individuals who Requested Materials in Accessible 
Formats Equal Time to Make Enrollment Decisions. We proposed to codify, 
at new Sec.  422.62(b)(17), a SEP for situations where an MA 
organization or CMS was unable to provide required notices or 
information in an accessible format, as requested by an individual, 
within the same timeframe that it was able to provide the same 
information to individuals who did not request an accessible format.
    SEP for Individuals Affected by a FEMA-Declared Weather-Related 
Emergency or Major Disaster. We proposed to codify, at new Sec.  
422.62(b)(18), the SEP for individuals affected by a weather-related 
emergency or major disaster who were unable to make an election during 
another valid election period.
    SEP for Significant Change in Provider Network. At new Sec.  
422.62(b)(23), we proposed to codify the SEP that is available when CMS 
determines that mid-year changes to an MA plan's provider network are 
significant, based on the effect on, or potential to affect, current 
plan enrollees' continued access to covered benefits.
    SEP for Individuals Enrolled in a Plan Placed in Receivership. We 
proposed to establish a new SEP, at new Sec.  422.62(b)(24), for 
individuals enrolled in plans offered by MA organizations experiencing 
financial difficulties to such an extent that a state or territorial 
regulatory authority has placed the organization in receivership.
    SEP for Individuals Enrolled in a Plan that has been Identified by 
CMS as a Consistent Poor Performer. We proposed to establish a new SEP, 
at new Sec.  422.62(b)(25), for individuals who are enrolled in plans 
identified with the low performing icon (LPI) in accordance with Sec.  
422.166(h)(1)(ii).
    SEP for Individuals Affected by a Federal Employee Error. At new 
Sec.  422.62(b)(21), we proposed to codify a SEP for individuals whose 
enrollment or non-enrollment in an MA-PD plan is erroneous due to an 
action, inaction or error by a federal employee.
    SEP for Other Exceptional Circumstances. Lastly, we proposed to 
retain the authority currently at Sec.  422.62(b)(4) to create SEPs for 
individuals who meet other exceptional conditions established by CMS 
and move it to new Sec.  422.62(b)(26).
    Also based on the Secretary's authority to create SEPs for 
individuals who meet exceptional conditions, we proposed to codify the 
following SEPs currently outlined in subregulatory guidance that 
coordinate with Part D election periods:
    SEP for Individuals Who Experience an Involuntary Loss of 
Creditable Prescription Drug Coverage. At new Sec.  422.62(b)(19), we 
proposed to codify the SEP for individuals who experience an 
involuntary loss of creditable prescription drug coverage, including a 
reduction in the level of coverage so that it is no longer creditable 
but not including any such loss or reduction due to a failure to pay 
premiums.
    SEP for Individuals Who Are Not Adequately Informed of a Loss of 
Creditable Prescription Drug Coverage. At new Sec.  422.62(b)(20), we 
proposed to codify a SEP for individuals who are not adequately 
informed of a loss of creditable prescription drug coverage, or that 
they never had creditable coverage.
    SEP for Individuals Eligible for an Additional Part D IEP. At new 
Sec.  422.62(b)(22), we proposed to codify the SEP for an individual 
who is eligible for an additional Part D Initial Enrollment Period 
(IEP) to have an MA SEP to coordinate with the additional Part D IEP.
    These proposed revisions would codify existing subregulatory 
guidance for SEPs that MA organizations have previously implemented and 
are currently following, except the SEP for Individuals Enrolled in a 
Plan Placed in Receivership and the SEP for Individuals Enrolled in a 
Plan that has been identified by CMS as a Consistent Poor Performer. We 
also proposed minor editorial changes in Sec.  422.62(b) and (c), such 
as changing ``Original Medicare'' to ``original Medicare.''
    In general, we received support for the proposed SEPs. We received 
specific comments on the following proposed SEPs. (Comments that apply 
to SEPs proposed for both MA and Part D will be addressed in this 
section and not repeated in the Part D SEP section.) The comments on 
those proposals and our responses follow:
SEP for Employer/Union Group Health Plan (EGHP) Elections
    Comment: A commenter recommended that we revise the current 
description of this SEP, which is that it is available to individuals 
who have (or are enrolling in) an employer or union sponsored MA plan, 
and change it to indicate that it is available to individuals who have 
(or are enrolling in) an employer or union sponsored plan.
    Response: We interpret this comment as a request to ensure that 
this SEP is available to individuals who have (or are enrolling in) an 
employer or union sponsored plan that is not an MA plan. As proposed, 
this SEP is available to individuals who are moving from employer or 
union coverage of any kind to an employer or union sponsored MA plan. 
In addition, the SEP is available to individuals who wish to disenroll 
from an MA plan to take employer or union sponsored coverage of any 
kind. As such, we believe the comment is addressed by the SEP, as 
proposed.

[[Page 33868]]

    Comment: A commenter recommended that CMS codify the retroactive 
effective date guidelines related to this SEP, which are referenced in 
subregulatory guidance. Specifically, where there is a delay between 
the time in which the member completes the enrollment or disenrollment 
request with the EGHP and when it is ultimately received by the health 
plan, the current guidelines indicate that the effective date may be 
retroactive up to, but may not exceed, 90 days from the date the MA 
organization received the request from the employer or union group. The 
disenrollment effective date guidelines indicate up to 90 days' 
retroactive payment adjustment is possible in cases where the EGHP does 
not provide the plan with timely notification of a member's requested 
disenrollment.
    Response: We did not propose to codify a provision for retroactive 
payment adjustment due to employer or union delays in providing the MA 
organization with timely notification of a member's requested 
disenrollment, and we decline to adopt such a provision at this time. 
It has been CMS' longstanding expectation that in the event an MA 
organization chooses to delegate to an employer or union the collection 
and initial processing of beneficiary enrollment and disenrollment 
requests, the MA organization's agreement with the employer or union 
would require the employer or union to meet enrollment and 
disenrollment processing timeliness requirements that ensure the timely 
submission of enrollment and disenrollment requests. As such, 
retroactivity is necessary when the employer or union fails to meet 
these processing timeliness requirements.
SEP for Individuals Who Terminated a Medigap Policy When They Enrolled 
For the First Time in an MA Plan and Who Are Still in a Trial Period
    Comment: A commenter who expressed support for this proposal urged 
CMS to ensure that beneficiaries under age 65 with ESRD who have 
guaranteed issue rights under state laws and rules are aware of them.
    Response: We appreciate the commenters' support and agree that 
education and outreach are essential for individuals to understand 
their enrollment options. We will continue to partner with existing 
stakeholders to ensure that clear and comprehensive information is 
provided to beneficiaries so they are able to make an informed coverage 
choice.
SEP for Individuals Affected by a Federal Employee Error
    Comment: A commenter, citing some stakeholder concerns regarding 
the 2019 redesign of the Medicare Plan Finder (MPF) tool, requested 
that CMS articulate in regulatory language (either in the SEP for 
individuals affected by a federal employee error or a separate entry) 
that a SEP for exceptional circumstances may exist when there are 
errors in the MPF or other CMS-issued or managed information platforms 
that beneficiaries used when making their decisions.
    Response: We appreciate the comment. As the MPF and other CMS-
issued or managed information platforms are the responsibility of the 
federal government, a beneficiary who relied on erroneous information 
on these platforms would be eligible for this SEP. As a result, we do 
not see a need to revise the current regulatory text or establish a 
new, separate SEP.
SEP for Individuals Affected by a FEMA-Declared Weather-Related 
Emergency or Major Disaster
    Comment: A number of commenters supported the proposal to codify 
this SEP and many of them recommended that it be expanded to address 
State-declared emergencies and public health emergencies such as COVID-
19. A commenter questioned if the SEP would apply when FEMA provides 
fire management assistance. Commenters also requested that the end date 
should be revised so that the SEP is available to eligible individuals 
in cases where the emergency is declared with a retroactive effective 
date and/or lasts for more than 4 months.
    Response: We appreciate the comments and agree that eligibility for 
this SEP should not be solely contingent upon a FEMA declaration. Based 
on these comments and consistent with our goal of providing an 
enrollment or disenrollment opportunity to an individual who missed an 
election period due to circumstances beyond his or her control, we will 
revise the proposed SEP to include any emergency declaration issued by 
a Federal, state, or local government entity in response to a disaster 
or other emergency. This would not include instances in which fire 
management assistance is provided by FEMA, as this occurs prior to the 
declaration of an emergency or major disaster as part of state and/or 
local government efforts to stop the spread of fire and mitigate fire 
risk to the built environment, and is not itself an emergency 
declaration. We also agree with the comment that the SEP end date 
should be revised so that the SEP is available to eligible individuals 
in cases where the emergency is declared with a retroactive effective 
date and/or lasts for more than four months. We believe that the SEP 
end date should be related to the end of the emergency period, not the 
start of the emergency period.
    As such, in Sec. Sec.  422.68(b)(18) and 423.38(c)(23) we will 
change the scope of the SEP so that it applies to FEMA-declared 
emergencies/disasters, as well as disaster or other emergency 
declarations issued by a federal, state or local government entity. It 
will be available in the geographic areas identified in the emergency/
disaster declaration. We also specify in this paragraph that the SEP 
will--
     Start as of the date the declaration is made, the incident 
start date or, if different, the start date identified in the 
declaration, whichever is earlier; and
     End 2 full calendar months following the end date 
identified in the declaration or, if different, the date the end of the 
incident is announced, whichever is later. This 2-month period is 
consistent with other longstanding SEPs such as the SEP for Significant 
Change in Provider Network and the SEP for Individuals Whose Medicare 
Entitlement Determination Made Retroactively.
    In finalizing the SEP with these revisions, we will retain the 
requirement that the individual was eligible for an election period at 
the time of the incident period and did not make an election during 
that election period because he or she was prevented from doing so due 
to the incident. We will refer to this SEP as the SEP for Government 
Entity-Declared Disaster or Other Emergency.
SEP for Individuals Enrolled in a Plan Placed in Receivership
    Comment: A commenter stated that it is unclear how an MA 
organization might know if another MA organization is having financial 
problems during the enrollment period and, therefore, would not know if 
a beneficiary is eligible for this SEP.
    Response: The SEP is available only to individuals enrolled in a 
plan offered by an organization that has actually been placed into 
receivership, which, in our experience, is always a well-publicized 
event in the impacted area, usually involving a high level of media 
attention. We believe that MA organizations offering plans in the area 
in which another MA organization has been placed into receivership will 
be aware of such an event through its normal course of business in the 
areas it serves. When a beneficiary requests

[[Page 33869]]

enrollment on the basis of their current plan being placed into 
receivership, the new plan can accept the beneficiary's verbal or 
written attestation as proof of their eligibility for this SEP.
    Comment: Two commenters suggested that CMS allow MA plans and Part 
D sponsors to accept verbal beneficiary attestation as proof of 
eligibility for this SEP and not require additional proof of election 
eligibility. They believed that allowing verbal beneficiary attestation 
will expedite enrollment processing and may reduce enrollment denials. 
Additionally, they believed it would be consistent with current SEPs 
permitting verbal attestation for election period eligibility, such as 
the SEPs for Change in Residence, EGHP, etc.
    Response: We did not propose that additional proof of eligibility 
for this SEP be required. Consistent with longstanding policy regarding 
eligibility for any SEP, an applicant's written or verbal attestation 
of SEP eligibility is sufficient.
SEP for Individuals Enrolled in a Plan That Has Been Identified by CMS 
as a Consistent Poor Performer
    Comment: A commenter, who expressed support for this new SEP and 
the new SEP for Individuals Enrolled in a Plan Placed in Receivership, 
requested that if a beneficiary who is eligible for these new SEPs or 
any other SEP has an agent of record, that a pathway be created for the 
agent of record to make the plan change.
    Response: Beneficiaries are not precluded from using an agent/
broker or any other available means to enroll in a plan when the 
beneficiary qualifies for a SEP.
    Comment: Another commenter who expressed support for this new SEP 
and the new SEP for Individuals Enrolled in a Plan Placed in 
Receivership stated that impacted beneficiaries should be able to make 
elections utilizing these new SEPs only through contacting CMS 
directly, adding that to include these two new SEPs on plan enrollment 
forms, enrollment websites and other enrollment mechanisms is an 
unnecessary burden. The commenter believed that adding two new SEPs 
would be confusing for beneficiaries, as there are already numerous 
SEPs for beneficiaries to understand. This commenter also stated that 
the two new SEPs should be available to beneficiaries only outside of 
the Annual Enrollment Period (AEP) and only until such time as CMS 
terminates its contract with the plan. The commenter stated that an MA 
parent organization would not be able to identify a plan that has been 
identified by CMS as a consistent poor performer or a plan that has 
been placed in receivership and requested that CMS not require plans to 
offer these two new SEPs until contract year 2022.
    Response: We appreciate the comment and believe that any potential 
beneficiary confusion can be minimized by presenting these two new 
election opportunities to beneficiaries in a clear and accurate manner. 
We believe that it is important that the SEPs be available throughout 
the year, not just outside of the AEP, given the effective date 
implications. That is, if a beneficiary finds it necessary to change 
plans during October or November using one of these SEPs, their new 
coverage should be effective the next month and they should not have to 
wait until January 1 or later. We disagree with the commenter and do 
not believe that it is an unnecessary burden to mention these two SEPs 
in plan materials where other SEPs are listed, such as the Attestation 
of Eligibility for an Enrollment Period. Exclusion of the two new SEPs 
would result in beneficiaries not being fully aware of all potential 
election periods available to them. With regard to the comment that an 
MA parent organization would not be able to identify a plan that has 
been identified by CMS as a consistent poor performer, we note that 
since plans are able to accept a verbal or written attestation from the 
beneficiary that they are eligible for a SEP, plans are able to accept 
a verbal or written attestation regarding eligibility for the SEP for 
Individuals Enrolled in a Plan Placed in Receivership and the SEP for 
Individuals Enrolled in a Plan that has been Identified by CMS as a 
Consistent Poor Performer. In addition, plans are able to verify 
another organization's LPI status via the Medicare Plan Finder or the 
released Star Rating summary report. As a result, we do not see a 
reason to delay the offering of these two new SEPs until contract year 
2022.
SEP for Significant Change in Provider Network
    Comment: A commenter suggested that CMS revise this SEP so that it 
may be used when an individual plan enrollee's provider is terminated 
without cause, adding that while there is an existing SEP for 
significant change in an MA provider network, it is only triggered when 
a threshold of terminations is met. The commenter states that an 
individual may have joined a plan specifically because their provider 
contracts with it, or have developed a relationship with that provider 
they wish to maintain.
    Response: We appreciate the comment. As stated in the proposed 
rule, CMS considers significant changes to provider networks to be 
those that go beyond individual or limited provider terminations that 
occur during the routine course of plan operations. CMS appreciates 
that an individual would want to maintain a relationship with an 
individual provider, however, an individual provider's termination from 
a plan would not disrupt or affect that enrollee's continued access to 
covered benefits. CMS continues to believe this SEP is best reserved 
for network changes that are significant and have the potential to 
affect the access of covered benefits for a large number of enrollees.
SEP for Individuals with ESRD Whose Medicare Entitlement Determination 
Was Made Retroactively
    Comment: Two commenters supported the proposal to codify a SEP for 
individuals with ESRD whose Medicare entitlement determination was made 
retroactively because it would allow beneficiaries to enroll who were 
not able during the customary period, as well as ensure that 
beneficiaries may enroll into an MA plan if certain conditions are met 
prior to the MA ESRD enrollment rule taking effect in 2021. Both 
commenters recommended that educational outreach be made to individuals 
with ESRD.
    Response: We appreciate the commenters' support and agree that 
education and outreach are essential for individuals to understand 
their enrollment options. We will continue to partner with existing 
stakeholders to ensure that clear and comprehensive information is 
provided to beneficiaries so they are able to make an informed coverage 
choice.
SEP for Other Exceptional Circumstances
    Comment: A commenter expressed strong support for CMS' statement 
that it retains the ability to grant case-by-case exceptional 
circumstance SEPs, and that the list at Sec.  422.62(b)(26) is not 
exhaustive. The commenter expressed concern that leaving the creation 
of new SEPs solely to rulemaking will mean that it will take longer to 
implement new, necessary SEPs should the need arise and will make the 
agency's response less nimble and may hinder its ability to quickly 
meet the needs of beneficiaries. The commenter urges CMS to reiterate, 
or otherwise educate, plan sponsors, 1-800-MEDICARE counselors and CMS 
staff that despite exceptional circumstance SEPs now being codified, 
that such discretion still exits.

[[Page 33870]]

    Response: We appreciate the commenters' support and continue to 
believe that it is important to retain the discretion to establish SEPs 
on a case-by-case basis. As such, at newly redesignated Sec.  
422.62(b)(26) and newly redesignated Sec.  423.38(c)(34), we are 
finalizing our proposal to codify a SEP for other exceptional 
circumstances, which are, as stated in the proposed rule, situations in 
which it is in the best interest of the beneficiary that she or he be 
provided an enrollment (or disenrollment) opportunity. To date, CMS has 
used the existing authority at Sec. Sec.  422.62(b)(4) and 
423.38(c)(8)(ii) to assist individuals whose unique situations are 
outside the parameters of the existing SEPs, in order to address an 
individual's exceptional circumstances related to new enrollments or 
enrollment/disenrollment from an MA or Part D plan. These SEPs, which 
we also refer to as enrollment exceptions, are utilized when the reason 
is not captured in an existing SEP or specific circumstances require an 
exception to the predefined criteria. Consistent with current practice, 
CMS will consider granting an enrollment exception when one or more of 
the following factors is present:
    ++ Extraordinary Circumstances--Circumstances beyond the 
beneficiary's control that prevented him or her from submitting a 
timely request to enroll or disenroll from a plan during a valid 
enrollment period. This is inclusive of, but not limited to, a serious 
medical emergency of the beneficiary or their authorized representative 
during an entire election period, a change in hospice status, or mailed 
enrollment forms returned as undeliverable on or after the last day of 
an enrollment period.
    ++ Erroneous Election--Situations in which a beneficiary provides a 
verbal or written allegation that his or her enrollment in a MA or Part 
D plan was based upon misleading or incorrect information provided by a 
plan representative or State Health Insurance Assistance Program (SHIP) 
counselor, including situations where a beneficiary states he or she 
was enrolled into a plan without his or her knowledge or consent, and 
requests cancellation of the enrollment or disenrollment from the plan.
    ++ Plan Accessibility--A SEP may be warranted to ensure beneficiary 
access to services and where without the approval of an enrollment 
exception, there could be adverse health consequences for the 
beneficiary. This is inclusive of, but not limited to, maintaining 
continuity of care for a chronic condition and preventing an 
interruption in treatment.
    CMS will review supporting details and documentation to determine 
eligibility for the SEP for exceptional circumstances, which, as 
currently implemented, can be in response to an individual 
beneficiary's request for an exception to the current enrollment rules, 
as well as CMS' determination that an exception is warranted for a 
group of beneficiaries. The SEP would take effect once CMS makes its 
determination and the enrollee has been notified. The effective date 
for an enrollment or disenrollment election using an approved 
enrollment exception would be based on the beneficiary's circumstances 
and may either be prospective or retroactive.
    In addition to proposing to codify SEPs established in sub-
regulatory guidance, as well as proposing two new SEPs (related to 
plans placed into receivership or being identified as a consistent poor 
performer), we requested comments on other SEPs that should be 
considered for codification. In response to that request, we received 
the following feedback:
    Comment: A commenter urged us to establish a SEP for individuals in 
MA or Part D plans who are impacted by significant changes in their 
plan benefits from one year to the next, for example, significantly 
higher premiums or reduced benefits. They believed that this was 
particularly important for individuals with standalone PDPs since they 
do not have the same option to change plans during the first three 
months of the year afforded to those who begin the year enrolled in an 
MA plan (pursuant to the MA OEP). The commenter stated that most people 
who are enrolled in a given plan tend to rely on that plan remaining 
more or less the same, and, as a consequence, many people do not 
carefully scrutinize their Annual Notice of Change (ANOC) or other plan 
documents describing annual changes.
    Response: Every Fall, CMS conducts a robust educational campaign 
that urges beneficiaries to review their plan benefits and make changes 
if their plan no longer meets their needs or if there are other options 
that could lower their out-of-pocket expenses. The ANOC is an important 
resource that plans are required to send to members detailing how 
benefits will change in the next plan year. Ultimately, it is the 
beneficiary's responsibility to assess their own drug and healthcare 
needs and determine if there is a better plan for them. We appreciate 
the commenter's concern, but will not be finalizing the suggested SEP.
    Comment: Two commenters recommended that we establish a SEP for 
beneficiaries who have been accepted for admission to, or have been 
admitted to, an extended neoplastic disease care hospital and a 
physician has noted that the individual has life expectancy of ninety 
days or less. The commenters stated that this was important because 
individuals who are diagnosed with advanced cancer are often at the end 
of their lives and should be able to disenroll from their MA plan to 
Original Medicare if the hospital where they choose to receive their 
care is outside of the plan's network. The commenters also noted that, 
as an alternative or an addition, CMS should determine extended 
neoplastic disease care hospitals to be ``institutions'' so that 
beneficiaries would be eligible for the Open Enrollment Period for 
Institutionalized Individuals (OEPI). The commenters noted that if this 
change was made, an additional revision should be made to waive the 90-
day length of stay requirement.
    Response: While we understand and are sympathetic to beneficiaries 
diagnosed with advanced cancer, we do not believe that the 
establishment of a new SEP is an appropriate remedy to this very 
specific situation. When establishing (and now codifying) SEPs, we look 
for broad scenarios where we believe it is imperative that 
beneficiaries have opportunities to join, change, or disenroll from 
plans. Beneficiaries who are not able to disenroll from their MA plan 
to return to Original Medicare still have access to Medicare Part A and 
Part B benefits. MA plans are required to cover all services covered by 
Original Medicare and if a member needs covered medical care that the 
providers in the plan's network cannot provide, the plan must cover 
care from an out-of-network provider.
    The absence of neoplastic disease care hospitals from the list of 
facilities considered to be institutions is outside the scope of this 
proposal.
    Comment: A commenter requested that we codify two SEPs that are in 
Chapter 2 of the Medicare Managed Care manual that were not included in 
the proposed SEPs in 42 CFR part 422: The SEP for Dual-Eligible 
Individuals and Other LIS Eligible Individuals and the SEP for CMS and 
State-Initiated Enrollments. Similarly, they also requested that we 
codify two SEPs in Chapter 3 of the Medicare Prescription Drug Benefit 
Manual that were not included in the proposed SEPs in 42 CFR part 423: 
The SEP for Full-Benefit Dual Individuals with Retroactive Uncovered 
Months and the SEP for Individuals Involuntarily Disenrolled

[[Page 33871]]

from an MA-PD plan due to loss of Part B.
    Response: We appreciate the comments. The commenter requests that 
we codify in the Part C regulations the SEP for Dual-Eligible 
Individuals and Other LIS Eligible Individuals that is included in 
Chapter 2 of the Medicare Managed Care Manual. We disagree that this 
SEP should be codified as a Part C SEP, as it is included in the Part C 
enrollment guidance merely as a reiteration of an already existing Part 
D SEP at Sec.  423.38(c)(4). To codify this in the Part C regulations 
would result in the establishment of additional election periods that 
we did not intend to establish. The basis for the existing SEP for 
Dual-Eligible Individuals and Other LIS Eligible Individuals is the 
fact that the beneficiary is (or has been) receiving the Part D low 
income subsidy, which is specific to Part D and why the SEP is codified 
in 42 CFR part 423 and not proposed as a SEP in part 422. Therefore, we 
decline to codify a SEP for Dual-Eligible Individuals and Other LIS 
Eligible Individuals in the Part C regulations.
    The commenter also requests that we codify in the Part C 
regulations the SEP for CMS and State-Initiated Enrollments that is 
included in Chapter 2 of the Medicare Managed Care Manual. This SEP is 
based on Sec.  422.60(g)(5), which states that individuals who are 
passively enrolled by CMS into an MA-PD plan are eligible for the Part 
D SEP described in Sec.  423.38(c)(10). To codify a new Part C SEP 
would be redundant; therefore, we decline the commenter's request to do 
so.
    The commenter also requests that we codify in the Part D 
regulations the SEP for Full-Benefit Dual Eligible Individuals with 
Retroactive Uncovered Months that is included in Chapter 3 of the 
Medicare Prescription Drug Benefit Manual. As described in guidance, 
this SEP addresses the scenario in which a Part D eligible individual 
needs prescription drug coverage through the Limited Income Newly 
Eligible Transition (LI NET) program prior to his or her enrollment in 
a Part D plan, either by submitting an application to a plan or by 
being auto-enrolled by CMS into a plan for a future date. Since the 
process for establishing retroactive drug coverage through LI NET is a 
CMS-directed process, and does not involve an individual taking action 
to request enrollment in a plan, we did not propose to codify this SEP, 
and we decline to do so in this final rule.
    Lastly, the commenter requests that we codify in the Part D 
regulations the SEP for Individuals Involuntarily Disenrolled from an 
MA-PD plan due to loss of Part B that is included in Chapter 3 of the 
Medicare Prescription Drug Benefit Manual. As described in 
subregulatory guidance, individuals who are involuntarily disenrolled 
from an MA-PD plan due to loss of Part B but who continue to be 
entitled to Part A have a SEP to enroll in a PDP. The SEP begins when 
the individual is advised of the loss of Part B and continues for two 
additional months. We agree with the commenter that this SEP should be 
codified; the fact that it was not included in the proposed rule was an 
oversight. In response to this comment, we will codify at Sec.  
423.38(c)(33) the SEP for Individuals Involuntarily Disenrolled from an 
MA-PD plan due to loss of Part B.
    In addition to comments received on specific SEPs and suggested 
SEPs, we also received the general comments discussed below.
    Comment: A commenter recommended that CMS codify its guidance from 
Chapter 2 of the Medicare Managed Care Manual (MMCM), section 30.4, 
that an organization is not required to contact an applicant to confirm 
SEP eligibility if the enrollment request includes the applicant's 
attestation of SEP eligibility. The commenter stated that codifying 
this guidance would be particularly helpful in instances where the SEP 
is based on factual circumstances such as the beneficiary's former plan 
is placed in receivership or has been consistently poor performing, and 
the beneficiary attestation is the easiest source of the information.
    Response: In codifying these SEPs, we focused on what the SEPs were 
and detailed the situations when they would be applicable. We did not 
include in the proposed rule the codification of subregulatory guidance 
regarding attestation of SEP eligibility. We believe that details 
concerning the operational processing of enrollment requests are better 
suited for sub-regulatory guidance where we are able to go into more 
detail and provide examples and context. As such, we are declining the 
commenter's recommendation to codify guidance related to beneficiary 
attestations.
    Comment: A commenter urged CMS to also consider that some 
beneficiaries may experience financial or enrollment difficulties 
stemming from the COVID-19 disruption. Concerned that some 
beneficiaries who have temporarily lost their Part B coverage for non-
payment of premium may miss their opportunity to enroll through the 
open enrollment that ended in March 2020 due to staffing disruptions at 
local social security offices.
    Response: We are aware that given the ongoing COVID-19 pandemic, 
stakeholders are looking for flexibilities for all aspects of Medicare 
enrollment and entitlement. However, it appears that the commenter is 
providing feedback regarding Medicare Part B enrollment and associated 
rules in 42 CFR part 407. We did not include in the proposed rule any 
new or revised regulations regarding Part B enrollment periods or loss 
of Part B coverage for non-payment of premium. We thank the commenter 
for their insights, but decline to address or modify any Part B 
enrollment rules given that they are outside the scope of this 
rulemaking.
    Comment: A commenter stated that CMS should clarify whether the 
effective date for certain SEPs should be the first of the month 
following when the request is made. The commenter referenced SEPs such 
as the SEP for Individuals Who Disenroll in Connection with a CMS 
Sanction, the SEP for Individuals in PACE or the SEP for Individuals 
Who Dropped a Medigap Policy When They Enrolled For the First Time in 
an MA Plan and Who are Still in a ``Trial Period.'' In addition, 
another commenter requested that we clarify the effective date for 
enrollment requests the organization receives from individuals eligible 
for the SEP for Individuals Whose Medicare Entitlement Determination 
Made Retroactively. As stated in the proposed rule, the effective date 
is the first day of the month following the MA organization's receipt 
of the election, but cannot be earlier than the first day of the month 
in which the notice of the Medicare entitlement determination is 
received by the individual. The commenter recommends that CMS permit 
retroactive enrollment based on when the beneficiary receives the 
notice of entitlement.
    Response: We proposed to specify at Sec. Sec.  422.68(d) and 
423.40(c) that the effective date for elections made using SEPs 
described in Sec. Sec.  422.62(b) and 423.38(c) is the first day of the 
calendar month following the month in which the election is made, 
unless otherwise noted. This applies to the SEP for Individuals Whose 
Medicare Entitlement Determination Made Retroactively as well, since it 
is not until an individual is notified of the Medicare entitlement 
determination that he or she, or an MA or Part D plan sponsor for that 
matter, would be aware of the determination and the Part A and/or Part 
B effective dates. We therefore disagree with the commenter that CMS 
should permit an enrollment to be retroactive to a date prior to when 
an individual received notification of

[[Page 33872]]

Medicare entitlement or prior to the date the individual requests 
enrollment in the plan.
    After considering the public comments, we are finalizing all MA 
SEPs as proposed, with the exception of the SEP for Individuals 
Affected by a FEMA-Declared Weather-Related Emergency or Major Disaster 
at Sec.  422.68(b)(18), which will be renamed the SEP for Government 
Entity-Declared Disaster or Other Emergency. This paragraph is being 
revised to change the scope of the SEP so that it applies to FEMA-
declared emergencies, as well as emergency declarations issued by a 
federal, state or local government entity. We are also specifying in 
this paragraph that the SEP will--
     Start as of the date the declaration is made, the incident 
start date or, if different, the start date identified in the 
declaration, whichever is earlier; and
     End 2 full calendar months following the end date 
identified in the declaration or, if different, the date the end of the 
incident is announced, whichever is later.
    In addition, we are adopting without modification the minor 
editorial changes in Sec.  422.62(b) and (c) and the changes proposed 
at Sec.  422.68 regarding effective dates of the SEPs.
2. Part D Special Election Periods (Sec.  423.38)
    Section 1860D-1(b)(3) of the Act establishes special election 
periods (SEPs) during which, if certain circumstances exist, an 
individual may enroll in a stand-alone Part D prescription drug plan 
(PDP) or disenroll from a PDP and enroll in another PDP or in an MA 
plan that includes Part D benefits (MA-PD plan). We have codified SEPs 
for the following circumstances, which are explicitly discussed in the 
Act:
     SEP for Involuntary Loss of Creditable Prescription Drug 
Coverage.
     SEP for Individuals Not Adequately Informed about 
Creditable Prescription Drug Coverage.
     SEP for Enrollment/Non-enrollment in Part D due to an 
Error by a Federal Employee.
     SEP for Dual- and Other LIS-Eligible Individuals.
     SEP for MA-PD enrollee using the MA SEP65.
    Section 1860D-1(b)(1)(B) of the Act directs us to adopt enrollment 
rules ``similar to (and coordinated with)'' those under Part C. 
Accordingly, in addition to those SEPs as previously described, we have 
applied certain SEPs established under the MA program to the Part D 
program. The SEPs from the MA program that have been codified for Part 
D include the following:
     SEP for Non-renewals or Terminations.
     SEP for Changes in Residence.
     SEPs for Contract Violation.
    Section 1860D-1(b)(3)(C) of the Act also grants the Secretary the 
authority to create SEPs for individuals who meet other exceptional 
conditions, which is reflected at Sec.  423.38(c)(8)(ii). Pursuant to 
this authority, we have previously codified SEPs for the following 
circumstances:
     SEP for Individuals Who Gain, Lose, or Have a Change in 
their Dual or LIS-Eligible Status.
     SEP for CMS and State-Initiated Enrollments.
    CMS proposed to codify the following SEPs for exceptional 
circumstances, which are currently outlined in subregulatory guidance. 
Except as was noted in the proposed rule, our intent was to codify the 
current policy, and we solicited specific comment as to whether we 
overlooked any feature of the current policy that should be codified 
and if there were other exceptional circumstances we did not identify 
for which we should consider establishing a special election period.
    We also proposed to revise Sec.  423.40(c) to clarify that for SEPs 
that are described in Sec.  423.38(c), elections are effective as of 
the first day of the first calendar month following the month in which 
the election is made, unless otherwise noted. In addition, we noted 
that, consistent with longstanding subregulatory guidance, the 
organization is not required to contact an applicant to confirm SEP 
eligibility if the enrollment request includes the applicant's 
attestation of SEP eligibility.
    The proposed Part D SEPs are summarized below. (Readers should 
refer to the proposed rule for more detail on these SEPs.
    SEP for Employer/Union Group Health Plan (EGHP) elections. At new 
Sec.  423.38(c)(11), we proposed to codify that individuals making 
enrollment requests into or out of employer sponsored Part D plans 
(PDPs), for individuals to disenroll from a PDP to take employer 
sponsored coverage of any kind, and for individuals disenrolling from 
employer sponsored coverage (including COBRA coverage) would be 
eligible for a SEP to elect a PDP.
    SEP for Individuals Who Disenroll in Connection with a CMS 
Sanction. At new Sec.  423.38(c)(12), we proposed to codify the SEP for 
individuals enrolled in a PDP offered by a Part D plan sponsor that is 
sanctioned by CMS.
    SEP for Individuals Enrolled in Cost Plans that are Non-renewing 
their Contracts. At new Sec.  423.38(c)(13), we proposed to codify the 
SEP for individuals enrolled in cost plans that are non-renewing their 
contracts for the area in which the enrollee lives.
    SEP for Individuals in the Program of All-inclusive Care for the 
Elderly (PACE). At new Sec.  423.38(c)(14), we proposed to codify the 
SEP allowing individuals to disenroll from a PDP at any time in order 
to enroll in PACE.
    SEP for Institutionalized Individuals. At new Sec.  423.38(c)(15), 
we proposed to codify the SEP allowing individuals who move into, 
reside in, or move out of an institution, as defined at Sec.  422.2, to 
enroll in or disenroll from a PDP.
    SEP for Individuals Who Enroll in Part B during the Part B General 
Enrollment Period (GEP). At new Sec.  423.38(c)(16), we proposed to 
codify the SEP for individuals who are not entitled to premium free 
Part A and who enroll in Part B during the GEP for Part B (January-
March) for an effective date of July 1st to enroll in a PDP.
    SEP for Individuals Who Belong to a Qualified SPAP or Who Lose SPAP 
Eligibility. At new Sec.  423.38(c)(17), we proposed to codify a SEP 
for individuals who belong to a qualified SPAP to make one election to 
enroll in a Part D plan each calendar year.
    SEP for Disenrollment from Part D to Enroll in or Maintain Other 
Creditable Coverage. At new Sec.  423.38(c)(18), we proposed to codify 
the SEP that provides an opportunity for individuals to disenroll from 
a Part D plan in order to enroll in or maintain other creditable drug 
coverage (such as TriCare or VA coverage) as defined in Sec.  
423.56(b).
    SEP for Individuals Disenrolling from a Cost Plan who also had the 
Cost Plan Optional Supplemental Part D Benefit. At new Sec.  
423.38(c)(19), we proposed to codify that individuals who disenroll 
from a cost plan and the cost plan's optional supplemental Part D 
benefit would have a SEP to enroll in a PDP.
    SEP to Enroll in a PDP with a Star Rating of 5 Stars. At new Sec.  
423.38(c)(20), we proposed to codify the SEP allowing an eligible 
individual to enroll in a PDP with a Star Rating of 5 stars during the 
plan contract year in which that plan has the 5-star overall rating.
    SEP for Non-U.S. Citizens who become Lawfully Present. At Sec.  
423.38(c)(21), we proposed to codify the SEP for non-U.S. citizens who 
become lawfully present in the United States.
    SEP for Providing Individuals who Requested Materials in Accessible 
Formats Equal Time to Make Enrollment

[[Page 33873]]

Decisions. At Sec.  423.38(c)(22), we proposed to codify the SEP in 
situations where the Part D plan sponsor or CMS was unable to provide 
required notices or information in an accessible format, as requested 
by an individual, within the same timeframe that it was able to provide 
the same information to individuals who did not request an accessible 
format.
    SEP for Individuals Affected by a FEMA-Declared Weather Related 
Emergency or Major Disaster. At Sec.  423.38(c)(23), we proposed to 
codify the SEP for individuals affected by a weather-related emergency 
or major disaster who were unable to make an election during another 
valid election period.
    SEP for Individuals Enrolled in a Plan Placed in Receivership. We 
proposed to establish a new SEP, at new Sec.  423.38(c)(31), for 
individuals enrolled in a Part D plan offered by a plan sponsor that is 
experiencing financial difficulties to such an extent that a state or 
territorial regulatory authority has placed the sponsor in 
receivership.
    SEP for Individuals Enrolled in a Plan that has been Identified by 
CMS as a Consistent Poor Performer. We proposed to establish a new SEP, 
at new Sec.  423.38(c)(32), for individuals who are enrolled in plans 
identified with the low performing icon (LPI) in accordance with Sec.  
423.186(h)(1)(ii).
    SEP for Other Exceptional Circumstances. We proposed to retain the 
authority currently at Sec.  423.38(c)(8)(ii) to create SEPs for 
individuals who meet other exceptional conditions established by CMS 
and move it to new Sec.  423.38(c)(34).
    Also based on the Secretary's authority to create SEPs for 
individuals who meet exceptional conditions, we proposed to codify the 
following SEPs currently outlined in manual instructions that 
coordinate with Part C election periods:
    SEP for Individuals Who Terminated a Medigap Policy When They 
Enrolled For the First Time in an MA Plan, and Who Are Still in a Trial 
Period. We proposed to codify at new Sec.  423.38(c)(24) a coordinating 
Part D SEP for individuals who disenrolled from their MA plan during 
their trial period (and have guaranteed issue rights).
    SEP for an Individual using the MA Open Enrollment Period for 
Institutionalized Individuals (OEPI) to Disenroll from a MA-PD plan. At 
new Sec.  423.38(c)(25), we proposed to codify that an individual 
disenrolling from an MA-PD plan has a SEP to request enrollment in a 
PDP.
    Medicare Advantage Open Enrollment Period (MA OEP). At new Sec.  
423.38(c)(26), we proposed to codify that MA enrollees using the MA OEP 
would have a SEP to add or change Part D coverage.
    SEP to request enrollment into a PDP after loss of special needs 
status or to disenroll from a PDP in order to enroll in an MA SNP. At 
new Sec.  423.38(c)(27), we proposed to codify the SEP to request 
enrollment in a PDP for those who are no longer eligible for a SNP 
because they no longer meet the plan's special needs criteria.
    SEP for Enrollment into a Chronic Care SNP and for Individuals 
Found Ineligible for a Chronic Care SNP. At proposed Sec.  
423.38(c)(28), we proposed to codify the SEP for both Part C and Part D 
for those individuals with severe or disabling chronic conditions to 
enroll in a Chronic Care SNP (C-SNP) designed to serve individuals with 
those conditions.
    SEP for Individuals Using the 5-Star SEP to Enroll in a 5-Star Plan 
without Part D Coverage. At new Sec.  423.38(c)(29), we proposed to 
codify that individuals who use the 5-star SEP we proposed to be 
codified at Sec.  422.62(b)(15) to enroll in a 5-star MA plan that does 
not include Part D benefits or a 5-star cost plan would have a SEP to 
enroll in a PDP or in the cost plan's optional supplemental Part D 
benefit.
    SEP to enroll in a PDP for MA enrollees using the ``SEP for 
Significant Change in Provider Network'' to disenroll from an MA Plan. 
We proposed to codify at new Sec.  423.38(c)(30) that MA enrollees 
using the ``SEP for Significant Change in Provider Network'' to 
disenroll from an MA plan (proposed at Sec.  422.62(b)(23)) would be 
able to request enrollment in a PDP.
    The revisions we proposed would codify existing subregulatory 
guidance for SEPs that Part D sponsors have previously implemented and 
are currently following, except for the SEP for Individuals Enrolled in 
a Plan Placed in Receivership and the SEP for Individuals Enrolled in a 
Plan that has been Identified by CMS as a Consistent Poor Performer. We 
also proposed a few minor editorial changes in Sec.  423.38(c), such as 
changing ``3'' to ``three.''
    While most of the comments received on our SEP proposals related to 
SEPs that are applicable to both MA and Part D and, thus, were 
addressed above, we did receive one Part D-specific SEP comment.
    Comment: While commenting on the proposed SEPs, a few commenters 
requested that we revisit the changes to the dual SEP finalized in 
April 2018 (83 FR 16514), when this SEP was changed from a monthly SEP 
to one that allows an individual to enroll in, or disenroll from, an MA 
plan once per calendar quarter during the first nine months of the 
year. A commenter stated that an ongoing SEP for dual eligible 
individuals to enroll in either a FIDE SNP or a HIDE SNP would provide 
greater choice and access to integrated care options. Other commenters 
believed these beneficiaries needed the flexibility to change their 
healthcare coverage at any time during the year and viewed the previous 
ongoing dual SEP as an important beneficiary protection.
    Response: As we noted in the April 2018 final rule, we understood 
that many commenters preferred an ongoing dual SEP, but we believed 
that adopting limitations was an appropriate step toward encouraging 
care coordination, achieving positive health outcomes, and discouraging 
extraneous beneficiary movement during the plan year. We were--and 
continue to be--mindful of the unique health care challenges that dual 
and other LIS-eligible beneficiaries may face. Under the revised rules, 
dual and other LIS-eligible beneficiaries continue to have additional 
flexibilities not afforded to other Part D-eligible beneficiaries and 
are able to make elections during the year. Given that our overall 
goals of improving administration of benefits and coordination of care 
have not changed, and we believe that continuity of enrollment helps us 
achieve these goals, we will not be revising the dual SEP at this time.
    After considering the public comments, we are finalizing all SEPs 
as proposed, with the exception of the following:
     The SEP for Individuals Affected by a FEMA-Declared 
Weather-Related Emergency or Major Disaster at Sec.  423.38(c)(23) will 
be renamed the SEP for Government Entity-Declared Disaster or Other 
Emergency. This paragraph is being revised to change the scope of the 
SEP so that it applies to FEMA-declared emergencies/disasters, as well 
as disaster or other emergency declarations issued by a federal, state 
or local government entity. We are also specifying in this paragraph 
that the SEP will--
    [cir] Start as of the date the declaration is made, the incident 
start date or, if different, the start date identified in the 
declaration, whichever is earlier; and
    [cir] End 2 full calendar months following the end date identified 
in the declaration or, if different, the date the end of the incident 
is announced, whichever is later. This 2 month period

[[Page 33874]]

is consistent with other longstanding SEPs.
     As discussed in the MA SEP section, at Sec.  423.38(c)(33) 
we are codifying the SEP for Individuals Involuntarily Disenrolled from 
an MA-PD plan due to loss of Part B. This SEP is currently in 
subregulatory guidance, but was inadvertently omitted from the proposed 
rule.
     We are designating the SEP for Other Exceptional 
Circumstances from proposed Sec.  423.38(c)(33) to Sec.  423.38(c)(34).
    In addition, we are adopting without modification the minor 
editorial changes in Sec.  423.38(c) and the changes proposed at Sec.  
423.40 regarding effective dates of the SEPs.

VI. Technical Changes

A. Advance Notice and Announcement of Part D Risk Adjustment Factors 
(Sec.  423.329)

    The Part D statute, and the regulations implementing the statute, 
specify that we must publish the Part D risk adjustment factors at the 
time of publication of the Part C risk adjustment factors (section 
1860D-15(c)(1)(D) of the Act and Sec.  423.329(b)(4)). We proposed to 
amend Sec.  423.329(b)(4) to stipulate our intention to publish Part D 
risk adjustment factors using the process through which we would adopt, 
and announce the capitation rates and risk adjustment methodology for 
the MA program (section 1853(b)(1)(B) of the Act and Sec.  
422.312(a)(1)(ii)).
    The existing regulation codifying section 1860D-15(c)(1)(D) of the 
Act mirrors the statutory language of publishing Part D risk adjustment 
at the time of Part C risk adjustment factor publication but does not 
specify the means by which CMS will do so. In the vein of the MMA, 
which added a new ``Part D'' to the Medicare statute (sections 1860D-1 
through 42 of the Act), and directed that important aspects of the Part 
D program be similar to, and coordinated with law for, the MA program, 
CMS interpreted section 1860D-15(c)(1)(D) of the Act to mean that Part 
D risk adjustment factors should be published as part of the Advance 
Notice and Rate Announcement process used for Part C (section 
1853(b)(1)(B) of the Act and Sec.  422.312(a)(1)(ii)). This amendment 
revises the regulation text to clarify our interpretation of the 
statute under which we will continue to publish Part D risk adjustment 
factors through the Advance Notice and Rate Announcement process. This 
final rule codifies the current interpretation of the statutory 
requirement and will not change how we propose and finalize the Part D 
risk adjustment model.
    We did not receive comments on this proposal and therefore are 
finalizing this provision without modification.

B. Advance Notice and Announcement of Part C Annual Capitation Rate, 
Benchmarks, and Methodology Changes (Sec.  422.312)

    In the February 18, 2020 proposed rule, we proposed a technical 
change to align the timeframes identified in Sec.  422.312(b)(1) and 
(2) with the current statutory text (section 1853(b) of the Act). 
Section 1853(b) of the Act specifies the process through which we 
propose, adopt, and announce changes in risk adjustment methodology and 
capitation rates for the MA program. When first written, section 
1853(b)(2) of the Act called for a 45-day advance notice period for the 
annual capitation rate and factors (for example, risk) used to adjust 
those rates and did not explicitly address a minimum comment period. 
However, the Securing Fairness in Regulatory Timing Act of 2015 (Pub. 
L. 114-106) (SFRTA) amended section 1853(b) of the Act to require a 60-
day advance notice period and a 30-day comment period.
    The regulation implementing the advance notice and comment period, 
as written, mirrors the statute's original timeframe for issuance of 
the advance notice and requires only a 15-day comment period. While CMS 
adjusted operational practices to comply with current statutory 
requirements, we did not update the CFR provision. In this final rule, 
we update the advance notice of changes in methodology requirements at 
Sec.  422.312(b)(1) and (2) by revising paragraph (b)(1) to refer to 60 
days and paragraph (b)(2) to refer to 30 days, as stated in statute.
    Comment: A commenter supported the proposal to revise the 
timeframes to follow the current statute to provide a 60-day advance 
notice period and a 30-day comment period. The commenter believes the 
60-day timeframe allows more time for analysis and comment on 
methodology changes, including risk adjustment in MA.
    Response: We thank the commenter for their support. We are 
finalizing this provision as proposed without modification.

VII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (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,'' as 
defined under 5 CFR 1320.3(c) of the PRA's implementing regulations, is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. To fairly evaluate whether an information collection 
requirement should be approved by OMB, section 3506(c)(2)(A) of the 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 our February 18, 2020, proposed rule (85 FR 9002), we solicited 
public comment on our proposed information collection requirements, 
burden estimates, and assumptions. We did not receive any such public 
comments as it pertains to the proposed information collection 
requirements, burden estimates, and assumptions that are being 
finalized in this rule.
    However, five changes were made to this section based on our 
further consideration of these issues:
     We have added section VII.B.1. of this final rule 
specifically addressing information collection requirements regarding 
SSBCI.
     Section VII.A. of this final rule reflects wage updates 
for 2019 as well as the differences between the 2019 and 2018 rates. 
The changes in Table 2 were then used to update the estimates for each 
of the provisions.
     As discussed more fully in section VII.B.3. of this final 
rule regarding the impact of the ESRD provision, CMS expects a 
shortened enrollment form to be available starting in 2021. This 
enrollment form is expected to reduce the time burden for completing an 
enrollment form from 30 minutes to 20 minutes. This reduction affects 
the impacts of several provisions in this section.
     As discussed in the next few paragraphs, and as further 
detailed in the provisions whose impact is estimated in this section, 
the implementation of certain provisions finalized in this rule will be 
delayed compared to the proposal. This has resulted in recalculations 
that are specific to several provisions and discussed as appropriate in 
the respective sections.
     The implementation date for the contract limitation on 
existing D-SNP look-alikes finalized in Sec.  422.514(d) has been 
delayed one year, as discussed in

[[Page 33875]]

section II.B of this final rule. As a result, we assume that the burden 
related to this provision will take place over the two years prior to 
the implementation rather than one year, as we assumed in the proposed 
rule. The details are provided later in this section.
     This final rule does not finalize all provisions in the 
proposed rule. Given the need to focus our attention on more immediate 
regulatory actions, this final rule implements a subset of the 
provisions that were proposed in the February 2020 proposed rule. In 
this regard, we are limiting this rule to this set of provisions. The 
remaining proposals will be addressed in a separate final rule that we 
expect to publish later in 2020. Thus, the collection of information 
requirements are expected to be addressed as follows:
     Rule Number 1: PRA-related Requirements/Burden Finalized 
in this Rule
    ++ Special Supplemental Benefits for the Chronically Ill (SSBCI) 
(Sec.  422.102)
    ++ Contracting Standards for Dual Eligible Special Needs Plan (D-
SNP) Look-Alikes (Sec.  422.514)
    ++ Medicare Advantage (MA) Plan Options for End-Stage Renal Disease 
(ESRD) Beneficiaries (Sec. Sec.  422.50, 422.52, and 422.110)
    ++ Medical Loss Ratio (MLR) (Sec.  422.2440)
    ++ Special Election Periods (SEPs) for Exceptional Conditions 
(Sec. Sec.  422.62 and 423.38)
     Rule Number 2: PRA-related Requirements to be Addressed 
Later in 2020
    ++ Improvements to Care Management Requirements for Special Needs 
Plans (SNPs) (Sec.  422.101)
    ++ Mandatory Drug Management Programs (DMPs) (Sec.  423.153)
    ++ Beneficiaries with History of Opioid-Related Overdose Included 
in Drug Management Programs (DMPs) (Sec.  423.100)
    ++ Eligibility for Medication Therapy Management Programs (MTMPs) 
(Sec.  423.153) and Information on the Safe Disposal of Prescription 
Drugs
    ++ Beneficiaries' Education on Opioid Risks and Alternative 
Treatments (Sec.  423.128)
    ++ Suspension of Pharmacy Payments Pending Investigations of 
Credible Allegations of Fraud and Program Integrity Transparency 
Measures (Sec. Sec.  405.370, 422.500, 422.503, 423.4, 423.504, and 
455.2)
    ++ Beneficiary Real Time Benefit Tool (RTBT) (Sec.  423.128)
    ++ Establishing Pharmacy Performance Measure Reporting Requirements 
(Sec.  423.514)
    ++ Service Delivery Request Processes under PACE (Sec. Sec.  
460.104 and 460.121)
    ++ Appeals Requirements under PACE (Sec. Sec.  460.122 and 460.124)
    ++ Documenting and Tracking the Provision of Services under PACE 
(Sec.  460.98)
    ++ Documentation in Medical Records under PACE (Sec.  460.210)
    ++ PACE Participant Rights: Contact Information and Access 
Requirements (Sec.  460.112)
    ++ Stipulated Decisions in Part C (Sec.  422.562)

A. Wage Data

    To derive average costs, we are using data from the U.S. Bureau of 
Labor Statistics' (BLS's) May 2019 National Occupational Employment and 
Wage Estimates for all salary estimates (http://www.bls.gov/oes/current/oes_nat.htm). In this regard, Table 1 presents the mean hourly 
wage, the cost of fringe benefits and overhead (calculated at 100 
percent of salary), and the adjusted hourly wage.

                          Table 1--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                                    Mean hourly    benefits and      Adjusted
           Occupation title                  Occupation code        wage ($/hr)    overhead ($/    hourly  wage
                                                                                        hr)           ($/hr)
----------------------------------------------------------------------------------------------------------------
Actuaries.............................  15-2011.................           58.16           58.16          116.32
All Occupations [used for impact on     00-0000.................           25.72             n/a             n/a
 enrollees filling out forms].
Business Operations Specialist, all     13-1198.................           38.57           38.57           77.14
 others.
Compliance Officer....................  13-1041.................           35.03           35.03           70.06
Computer Programmers..................  15-1251.................           44.53           44.53           89.06
General Operations Manager............  11-1021.................           59.15           59.15          118.30
Health Technician, All Other..........  29-9098.................           28.17           28.17           56.34
Office Support and Administrative       43-9199.................           18.41           18.41           36.82
 Support.
Physician.............................  29-1216.................           96.85           96.85          193.70
----------------------------------------------------------------------------------------------------------------

    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. We believe that doubling the hourly wage to 
estimate total cost is a reasonably accurate estimation method.
    Wages for Individuals: For beneficiaries, we believe that the 
burden will be addressed under All Occupations (at $25.72/hr) 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 
wage adjustment, we are not adjusting this figure for fringe benefits 
and overhead since the individuals' activities will occur outside the 
scope of their employment.
    Revised Wage and Cost Estimates: While our proposed rule's costs 
were based on BLS's May 2018 wages, this final rule uses BLS's May 2019 
wages which are the most current as of the publication date of this 
rule. Changes to the adjusted wages represent shifts in average wages 
of occupations between 2018 and 2019 and are presented in Table 2. This 
table only contains wage estimates for occupations used in both the 
proposed rule and this final rule. However, provisions which were not 
estimated in the proposed rule but were estimated in the final rule 
require consideration of additional occupational titles beyond those in 
this table.

[[Page 33876]]



                       Table 2--Comparison of Proposed and Finalized Adjusted Hourly Wages
----------------------------------------------------------------------------------------------------------------
                                                                    CMS-4190-P:     CMS-4190-F:
           Occupation title                  Occupation code       May 2018 ($/    May 2019 ($/   Difference ($/
                                                                        hr)             hr)             hr)
----------------------------------------------------------------------------------------------------------------
Actuaries.............................  15-2011.................          111.78          116.32           +4.54
All Occupations *.....................  00-0000.................           24.98           25.72           +0.74
Business Operations Specialist, all     13-1198.................           74.00           77.14           +3.14
 others.
Compliance Officer....................  13-1041.................           69.72           70.06           +0.34
Computer Programmers..................  15-1251.................           86.14           89.06           +2.92
General Operations Manager............  11-1021.................          119.12          118.30           -0.82
Health Technician, All Other..........  29-9098.................           50.90           56.34           +5.44
Office Support and Administrative       43-9199.................           36.04           36.82           +0.78
 Support.
Physician.............................  29-1216.................          202.86          193.70           -9.16
----------------------------------------------------------------------------------------------------------------
* Represents the mean hourly rate for individuals which, as explained above, is not adjusted for fringe benefits
  and overhead.

B. Information Collection Requirements (ICRs)

    The following ICRs are listed in the order of appearance within the 
preamble (see sections II through VI) of this final rule.
1. ICRs Regarding Special Supplemental Benefits for the Chronically Ill 
(SSBCI) (Sec.  422.102)
    As explained in section II.A. of this final rule, CMS is finalizing 
provisions for furnishing SSBCI. In section II.A. of this final rule, 
CMS adopts a regulation to implement section 1852(a)(3)(D) of the Act, 
which authorizes MA plans to furnish special supplemental benefits 
exclusively to chronically ill enrollees, as defined in the statute. 
SSBCI are currently allowed in 2020.
    In this final rule, we are finalizing four SSBCI provisions with 
paperwork burden. We are finalizing the proposed requirements at Sec.  
422.102(f)(3) requiring MA plans offering SSBCI to: (i) Develop written 
policies for determining enrollee eligibility and document the 
determination that an enrollee is a chronically ill enrollee based on 
the definition in statute and regulation; (ii) make information and 
documentation related to determining enrollee eligibility available to 
CMS upon request; (iii) have written policies based on objective 
criteria for determining a chronically ill enrollee's eligibility to 
receive a particular SSBCI and document these criteria; and (iv) 
document each determination that an enrollee is eligible to receive an 
SSBCI and make this information available to CMS upon request. We 
address the collection of information in a reorganized fashion to 
address the functions that are required by the regulation as a whole 
rather than by how the regulation is structured and codified. We 
address these required MA organization functions and activities as 
follows:
    In this final rule, we are finalizing four SSBCI provisions with 
paperwork burden. We are finalizing the proposed requirements at Sec.  
422.102(f)(3)(i) through (iv) requiring MA plans offering SSBCI to:
    (1) Have written policies for determining enrollee eligibility to 
be considered chronically ill and must have written policies based on 
objective criteria for determining a chronically ill enrollee's 
eligibility to receive a particular SSBCI;
    (2) document in writing the criteria for determining enrollee 
eligibility for being considered chronically ill and must also document 
in writing the enrollee's eligibility to receive a particular SSBCI;
    (3) Make information and documentation related to determining 
enrollee eligibility available upon request;
    (4) document each determination that an enrollee is eligible to 
receive an SSBCI, and make information concerning enrollee eligibility 
criteria available to CMS.
    In this section, we estimate the paperwork burden of each of these 
four functions required by the final regulation. The following changes 
will be submitted to OMB for approval under control number 0938-0763 
(CMS-R-262).
    a. Per Sec.  422.102(f)(3)(i), plans must have written policies for 
determining enrollee eligibility to be considered chronically ill and, 
per paragraph (f)(3)(iii), must have written policies based on 
objective criteria for determining a chronically ill enrollee's 
eligibility to receive a particular SSBCI.
    Since the authority to offer and cover SSCBI is already being 
implemented, we assume most MA organizations already have developed the 
required policies since it would be difficult to score the cost in 
their bids without having such policies. We similarly assume that most 
plans have internal written memos documenting these criteria and that 
they have updated their systems to record enrollee eligibility for 
SSBCI (since without such documentation they would have no way of 
knowing when to reimburse providers for furnishing SSBCI to enrollees).
    Therefore, this provision codifies existing practice.
    However, even though we expect that the policies have already been 
developed, we have inadvertently neglected to account for the 
requirement and burden in any of our collection of information 
requests. We are correcting this oversight via this proposed and final 
rulemaking activity.
    We estimate that it will take a team of one compliance officer (at 
$70.06/hr), one physician (at $193.70/hr), and one general operations 
manager (at $118.30/hr) a total of 5 hours to develop the necessary 
policies. The team's hourly cost is $382.06/hr ($70.06/hr + $193.70/hr 
+ $118.30/hr). In aggregate, the annual burden for 234 parent 
organizations is 1,170 hours (234 plans * 5 hrs) at a cost of $447,010 
(1,170 hr * $382.06/hr) or $1,910 ($447,010/234) per organization.
    This is an annual requirement/burden since plan packages renew each 
year and the SSBCI criteria must therefore be reevaluated, including 
confirmation of existing criteria, each year.
    b. Per Sec.  422.102(f)(3)(i), plans must also document in writing 
those criteria for determining enrollee eligibility for being 
considered chronically ill and, per Sec.  422.102(f)(3)(iii), must also 
document in writing the enrollee's eligibility to receive a particular 
SSBCI.
    We estimate it will take 2 hours at $56.34/hr for a health 
technician to document in writing the objective criteria for 
determining an enrollee's eligibility to be considered chronically ill 
and to be eligible to receive a particular SSBCI. In aggregate, we 
estimate an annual burden of 468 hours (234 plans * 2 hr/plan) at a 
cost of $26,367 (468 hrs * $56.34/hr) or $113 per plan.

[[Page 33877]]

    This is an annual requirement/burden since documentation must be 
performed each contract year.
    c. Per Sec.  422.102(f)(3)(iv), plans must also document each 
determination that an enrollee is eligible to receive an SSBCI and make 
this information available to CMS upon request. To date, MA 
organizations have only been able to include non-primarily health 
related SSBCI in the plan offerings since January 1, 2020, during one 
contract year (that is, 2020). While early indications show that 
utilization for these benefits have been low, we expect the use of 
these benefits to grow over time as MA organizations become more 
familiar with them and have time to include them in future plan 
offerings. Thus, our data is not indicative of future usage.
    To offer SSBCI, a plan must determine, as defined in legislation, 
that an enrollee is chronically ill and that the items or services 
furnished under the SSBCI have a reasonable expectation of improving or 
maintaining the health or overall function of the chronically ill 
enrollee. This determination would require a review of the enrollee's 
health records (for example, diagnosis codes, frequency of 
hospitalizations, and doctor's notes) as well as a determination and 
review by plan medical staff that the SSBCI has a reasonable 
expectation of improving or maintaining the health or overall function 
of the chronically ill enrollee.
    Thus the process may be partially automated with the remainder of 
the process requiring medical review. We accordingly must account for 
three contributions to total impact:
    (1) Initial creation of software, annualized over 3 years: 
Initially, software will be created to collect basic data elements 
(claims, diagnoses, hospitalizations, drug utilization) for physician 
review. We expect a team of three professionals: A compliance officer 
would identify categories of eligible SSBCI, the physician would 
identify needed data elements for review, and the computer programmer 
would automate this part of the process. We expect a burden of 2,808 
hours (234 parent organizations times 12 hours (8 hours for a 
programmer plus 2 hours for a compliance officer plus 2 hours for a 
physician)) at an annualized cost of $96,717 ((\1/3\) times 2808 hours 
times a team wage of $103.33/hr ([8 hours times $89.06 (computer 
programmer) + (2 hours times 70.06 (compliance officer) + (2 hours 
times $193.70 (physician))]/12).
    (2) Annual physician review of cases: We expect ongoing plan 
physician review in all years (including the first) to ascertain if the 
SSBCI is expected to have the desired impact on enrollees. We assume 3 
hours of review per month per parent organization, resulting in 36 
hours per parent organization per year. In aggregate, we expect a 
burden of 8,424 hours (234 parent organization times 36 hours per 
parent organization) at an annual burden of $1,631,729 (8,424 hours 
times $193.70/hr, physician wage).
    (3) Annual update of software: It would clearly be overly 
burdensome to review each SSBCI case. Thus as cases are reviewed, we 
expect the continual review of new cases to generate additional 
criteria that can be automated. We assume half the time for updates as 
for the initial first-year creation. We assume a burden of 1,170 hours 
(234 parent organizations times 5 hours (1 hour for a compliance 
officer plus 4 hours for a computer programmer) at a cost of $99,754 
(1170 hours times a team wage of $85.26/hr ([4 hours times $89.06 
(computer programmer) plus 1 hour times $70.06 (compliance officer)]/
5). Table 3 summarizes all burdens connected with SSBCI.
    (4) Make information concerning enrollee eligibility criteria 
available to CMS.
    We are not requiring MA plans to report or submit this information 
on a regular or consistent basis to CMS. We do not intend to closely 
monitor or regularly request this documentation and reiterate that MA 
plans will have discretion in designing which items and services to 
offer as SSBCI and for which chronically ill enrollees to cover them, 
so long as the statutory and regulatory standards are met. CMS intends 
to use this authority to collect information as necessary for program 
oversight, such as if there are specific, consistent, and/or severe 
complaints that an MA plan is violating the rules set forth in Sec.  
422.102(f). Based on our experience with serious plan complaints, we 
anticipate requesting no more than 5 plans per year to complete this 
task. Consequently, since this provision is expected to affect less 
than 10 entities per year, it is exempt from paperwork burden (5 CFR 
1320.3(c)(4)). Table 3 summarizes the various burdens associated with 
SSBCI.

                                                 Table 3--Summary of Burden for SSBCI at Sec.   422.102
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Total       Time per
    Provision           Regulatory        OMB Control         Subject        Number of    number of     response    Total time   Labor cost  Annual cost
                         citation             No.                           respondents   responses       (hr)         (hr)        ($/hr)        ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
SSBCI............  422.102(f)(3)(i)...  ..............  SSBCI: Criteria             234            1           12         2808       103.33       96,717
                                                         (Initial
                                                         Software).
SSBCI............  422.102(f)(3)(i)...  ..............  SSBCI: Criteria             234            1           36         8424        193.7    1,631,729
                                                         (Physician
                                                         review).
SSBCI............  422.102(f)(3)(i)...  ..............  SSBCI: Criteria             234            1            5         1170        85.26       99,754
                                                         (Software
                                                         updates).
SSBCI............  422.102(f)(3)(ii)..  ..............  Written criteria..          234            1            2          468        56.34       26,367
SSBCI............  422.102(f)(3)(iii).  ..............  Enrollee                    234            1            9         2106        86.95      179,465
                                                         eligibility.
                  --------------------------------------------------------------------------------------------------------------------------------------
    Total........  ...................  ..............  ..................          234  ...........       Varies       14,976  ...........    2,034,032
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. ICRs Regarding Contracting Standards for Dual Eligible Special Needs 
Plan (D-SNP) Look-Alikes (Sec.  422.514)
    The following changes will be submitted to OMB for approval under 
control numbers 0938-0753 (CMS-R-267) and 0938-NEW (CMS-10718). The 
requirements under CMS-R-267 are associated with burden on MA plans 
identified as D-SNP look-alikes under Sec.  422.514(d) and (e) (see 
section VII.B.1.a. of this final rule). The requirements under CMS-
10718 are associated with burden on the enrollees in these MA plans 
(see section VII.B.1.b. of this final rule).
    We did not receive any comments on our proposed collection of 
information requirements and burden estimates; however, we are updating 
our proposed burden estimates to reflect the change in this final rule 
delaying the prohibition on the renewal of existing D-SNP look-alikes 
by one year. As indicated above in section VII.A. of this final rule, 
we have also revised our proposed cost figures based on more recent BLS 
wage estimates.

[[Page 33878]]

    As described in section II.B. of this final rule, we are 
establishing new contract requirements that we believe are necessary to 
fully implement federal D-SNP requirements, especially those related to 
Medicare-Medicaid integration codified at Sec. Sec.  422.2, 422.107, 
and 422.629 through 422.634 pursuant to the BBA of 2018. We are 
finalizing a prohibition on CMS entering into a new contract for plan 
year 2022 and future years for any non-SNP MA plan that projects in its 
bid submitted under Sec.  422.254 that 80 percent or more of the plan's 
total enrollment are enrollees entitled to medical assistance under a 
state plan under Title XIX of the Act. Additionally, we are finalizing 
a prohibition for plan year 2023 and future years on CMS renewing an 
existing contract for any non-SNP MA plan that an MA organization 
offers that has actual enrollment, as determined by CMS in January of 
the current year, consisting of 80 percent or more of enrollees who are 
entitled to medical assistance under a state plan under title XIX of 
the Act, unless the MA plan has been active for less than 1 year and 
has enrollment of 200 or fewer individuals at the time of such 
determination.
    Our dually eligible enrollment threshold at Sec.  422.514(d) will 
apply to any plan that is not a SNP as defined in Sec.  422.2. We are 
applying this requirement only to non-SNP plans to allow for the 
disproportionate dually eligible enrollment that characterizes D-SNPs, 
institutional SNPs, and some chronic or disabling condition SNPs by 
virtue of the populations that the statute expressly permits each type 
of SNP to exclusively enroll. The requirement is also limited to states 
where there is a D-SNP or any other plan authorized by CMS to 
exclusively enroll dually eligible individuals, such as a Medicare-
Medicaid Plan (MMP). We are establishing this limitation because it is 
only in such states that the implementation of D-SNP requirements 
necessitates our new contracting requirements. That is, in a state with 
no D-SNP or comparable managed care plan, the D-SNP requirements have 
not had any relevance historically, and therefore the operation of a D-
SNP look-alike does not have any material impact on the full 
implementation of federal D-SNP requirements.
    The contract requirement based on the projected enrollment in the 
plan bid at Sec.  422.514(d)(1) will prevent MA organizations from 
designing new D-SNP look-alikes. Under at Sec.  422.514(d)(2), we will 
make the determination whether an MA organization has an existing non-
SNP MA plan with actual enrollment exceeding the established threshold 
using the enrollment in January of the current year. Using data from 
the most recently available contract year, the 2020 bid submission 
process, we estimate that there are 67 MA plans that have enrollment of 
dually eligible individuals that is 80 percent or more of total 
enrollment. Of these 67 MA plans, 62 plans are in 19 states \53\ where 
there are D-SNPs or comparable managed care plans and will be subject 
to Sec.  422.514(d). These 62 plans projected a total enrollment of 
180,758 for contract year 2020.
---------------------------------------------------------------------------

    \53\ These 62 plans are located in Arizona, Arkansas, 
California, Hawaii, Idaho, Illinois, Indiana, Louisiana, Michigan, 
Mississippi, New Jersey, New Mexico, North Carolina, Ohio, Oregon, 
South Carolina, Tennessee, Utah, and Washington.
---------------------------------------------------------------------------

    MA organizations will likely non-renew for plan year 2022 or 2023 
those plans that exceed our criteria in Sec.  422.514(d)(1) and (2). 
The MA organization has the opportunity to make an informed business 
decision to transition enrollees into another MA-PD plan (offered by it 
or by its parent organization) by: (1) Identifying, or applying and 
contracting for, a qualified MA-PD plan, including a D-SNP, in the same 
service area; or (2) creating a new D-SNP through the annual bid 
submission process. We expect the vast majority of D-SNP look-alike 
enrollees to be transitioned into a plan offered by the same parent 
organization as the D-SNP look-alike, and we expect in rare instances 
that the non-renewing plan may choose to not transition enrollees.
    The changes required of MA organizations based on this final rule 
impact D-SNP look-alikes (see section VII.B.1.a. of this final rule) 
and their enrollees (see section VII.B.1.b. of this final rule). While 
we cannot predict the actions of each affected MA organization with 100 
percent certainty, we base our burden estimates on the current 
landscape of D-SNP look-alikes, the availability of D-SNPs or MA-PD 
plans under the same parent organization in the same service area, and 
the size and resources of the MA organization.
a. MA Plan Requirements and Burden
    As indicated, the following changes will be submitted to OMB for 
approval under control number 0938-0753 (CMS-R-267). Subject to 
renewal, the control number is currently set to expire on December 31, 
2021.
    At Sec.  422.514(e), we are finalizing a process for an MA 
organization with a D-SNP look-alike to transition individuals who are 
enrolled in its D-SNP look-alike to another MA-PD plan offered by the 
MA organization, or by another MA organization with the same parent 
organization as the MA organization, to minimize disruption as a result 
of the prohibition on contract renewal for existing D-SNP look-alikes. 
Under this final rule, an MA organization with a non-SNP MA plan 
determined to meet the enrollment threshold in Sec.  422.514(d)(2) 
could transition enrollees into another MA-PD plan offered by the same 
MA organization (or by another MA organization with the same parent 
organization as the MA organization), as long as that receiving MA-PD 
plan meets certain criteria specified in Sec.  422.514(e)(1)(i)-(iv). 
The process finalized at Sec.  422.514(e) allows, but does not require, 
the MA organization to transition dually eligible enrollees from D-SNP 
look-alikes into D-SNPs and other qualifying MA-PD plans for which the 
enrollees are eligible without the transitioned enrollees having to 
complete an election form. This transition process is conceptually 
similar with the proposed ``crosswalk exception'' procedures at Sec.  
422.530(a) and (b) as described in the proposed rule; however, this 
final rule allows the transition process to apply across contracts or 
legal entities and from non-SNP to SNPs provided that the receiving 
plan is otherwise be of the same plan type (for example, HMO or PPO) as 
the D-SNP look-alike.
    While the contract limitation for existing D-SNP look-alikes begins 
in the 2023 plan year, we intend for the transition process to take 
effect in time for D-SNP look-alikes operating in 2020 and 2021 to 
utilize the transition process for enrollments effective January 1, 
2021 or January 1, 2022, respectively. Based on the current landscape 
for D-SNP look-alikes, we believe the vast majority of D-SNP look-
alikes are able to move current enrollees into another MA-PD plan using 
the transition process we are finalizing in this rule. We expect many 
of these plans will choose to transition membership for the 2022 and 
2023 plan years. Therefore, we are assuming the burden of the 62 plans 
transitioning enrollees will happen for half the plans in 2021 (for a 
2022 effective date) and half the plans in 2022 (for a 2023 effective 
date).
    We estimate each plan will take a one-time amount of 2 hours at 
$77.14/hr for a business operations specialist to submit all enrollment 
changes to CMS necessary to complete the transition process. D-SNP 
look-alikes that transition enrollees into another non-SNP plan will 
take less time than D-SNP look-alikes that transition eligible 
beneficiaries into a D-SNP because they will not need to verify 
enrollees'

[[Page 33879]]

Medicaid eligibility. The 2-hour time estimate accounts for any 
additional work to confirm an enrollee's Medicaid eligibility for D-SNP 
look-alikes transitioning eligible enrollees to a D-SNP. The burden for 
MA organizations to transition enrollees to other MA-PD plans during 
the 2021 and 2022 plan years is 124 hours (62 D-SNP look-alikes * 2 hr/
plan) at a cost of $9,565 (124 hr * $77.14/hr). We averaged this burden 
for the 62 plans over the 2021 and 2022 plan years, resulting in an 
annual burden of 62 hours (124 hr/2 yr) at a cost of $4,783 ($9,565/2 
yr).
    The vast majority of MA organizations with existing D-SNP look-
alikes also have an MA-PD plan with a premium of $0 or a D-SNP in the 
same service area as the D-SNP look-alike. Consequently, we do not 
believe many MA organizations will choose to create a new D-SNP as a 
result of this final rule. The prevalence of existing MA-PD plans and 
D-SNPs also makes it unlikely that an MA organization will need to 
expand a service area for an existing MA-PD plan or D-SNP. Therefore, 
we do not expect this provision to have further impact beyond the 
currently burden approved under control number 0938-0935 (CMS-10237) 
for creating a new MA-PD plan or D-SNP and expanding a service area.
    As finalized in Sec.  422.514(e)(2)(ii), the MA organization will 
be required to describe changes to MA-PD plan benefits and provide 
information about the MA-PD plan into which the individual is enrolled 
in the Annual Notice of Change (ANOC) that the MA organization must 
send, consistent with Sec.  422.111(a), (d), and (e). Consistent with 
Sec.  422.111(d)(2), enrollees will receive this ANOC describing the 
change in plan enrollment and any differences in plan enrollment at 
least 15 days prior to the first day of the annual election period 
(AEP). As each MA plan must send out the ANOC to all enrollees 
annually, we do not estimate that MA organizations will incur 
additional burden for transitioned enrollees. The current burden for 
the ANOC is approved under control number 0938-1051 (CMS-10260).
    Additionally, we do not expect any plans will be required to send 
affected enrollees a written notice consistent with the non-renewal 
notice requirements at Sec.  422.506(a)(2) and described at Sec.  
422.514(e)(4), as we anticipate all MA organizations with D-SNP look-
alikes will be able to transition their enrollees into another MA-PD 
plan (or plans). However, we are finalizing the requirement to ensure 
protection of enrollees if the situation does occur.
    In subsequent years (2023 and beyond), we estimate that at most 
five plans per year will be identified as D-SNP look-alikes under Sec.  
422.514(d) due to meeting the enrollment threshold for dually eligible 
individuals or operating in a state that will begin contracting with D-
SNPs or other integrated plans. We believe that these plans would non-
renew and transition their membership into another MA-PD plan or a D-
SNP. Therefore, the annual burden for the 2023 plan year and subsequent 
years is estimated at 10 hours (5 plans * 2 hr/plan) at a cost of $771 
(10 hr * $77.14/hr) for a business operations specialist to transition 
enrollees into a new MA-PD plan.
    The average annual burden for MA plans over three years is 45 hours 
([62 hr + 62 hr + 10 hr]/3 yr) at a cost of $3,446 ([$4,783 + $4,783 
+$771]/3 yr). The impact is summarized in Table 4.
b. MA Plan Enrollee Requirements and Burden
    The following changes will be submitted to OMB for approval under 
control number 0938-NEW (CMS-10718). The control number for CMS-10718 
has yet to be issued. The status of OMB's review/approval can be 
monitored at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202003-0938-002.
    Section 422.514(e)(2) allows any individual transitioned from a D-
SNP look-alike to another MA-PD plan to stay in the MA-PD plan 
receiving the enrollment or make a different election. The enrollees 
may choose new forms of coverage for the following plan year, including 
a new MA-PD plan or receiving services through the original Medicare 
fee-for-service program option and enrollment in a stand-alone 
Prescription Drug Plan (PDP). Because the enrollment transition process 
will be effective on January 1 and notices would be provided during the 
AEP, affected individuals have opportunities to make different plan 
selections through the AEP (prior to January 1) or the Medicare 
Advantage Open Enrollment Period (after January 1). Affected 
individuals may also qualify for a Special Election Period (SEP), such 
as the SEP for plan non-renewals at Sec.  422.62(b)(1) or the SEP for 
dually eligible/LIS beneficiaries at Sec.  423.38(c)(4).
    Based on our experience with passive enrollment of dually eligible 
beneficiaries into a new plan under the same parent organization for 
MMPs in the Financial Alignment Initiative, we estimate that one 
percent of the 180,758 transitioning D-SNP look-alike enrollees will 
select a new plan or the original Medicare fee-for-service program and 
PDP option rather than accepting the transition into a different MA-PD 
plan or D-SNP under the same MA organization as the D-SNP look-alike in 
which they are currently enrolled. We estimate that 1,808 enrollees 
(180,758 transitioning D-SNP look-alike enrollees * 0.01), will opt out 
of the new plan into which the D-SNP look-alike transitioned them. 
Consistent with the burden estimates under the aforementioned control 
number, the enrollment process requires 20 minutes (0.3333 hours) and 
remains unchanged. For this final rule, the total added burden for 
enrollees will be 603 hours (1,808 enrollees * 0.3333 hr/response) at a 
cost of $15,509 (603 hr * $25.72/hr). We are averaging this burden over 
the 2021 and 2022 plan years, resulting in an annual burden of 302 
hours (603 hr/2 yr) at a cost of $7,755 ($15,509/2 yr).
    As stated previously, we believe that in subsequent years (2023 and 
beyond), at most five plans will be identified as D-SNP look-alikes and 
therefore this final regulation would have a much smaller impact on MA 
enrollees after the initial period of implementation. Since the current 
62 D-SNP look-alike plans have 180,758 enrollees in 62 plans, we 
estimate 14,577 enrollees (180,758 enrollees * 5/62 plans) in 5 plans. 
Therefore, the maximum number of enrollees affected per year is 
estimated to be 146 enrollees (14,577 total enrollees estimated in five 
plans * 0.01 who would select another plan). This would amount to a 
maximum annual burden of 49 hours (146 enrollees * 0.3333 hr) at a cost 
of $1,260 (49 hr * $25.72/hr).
    The average annual enrollee burden over three years is therefore 
218 hours ([302 hr + 302 hr + 49 hr]/3 yr) at a cost of $5,590 ([$7,755 
+ $7,755 + $1,260]/3yr). The estimates are summarized in Table 4.
c. Burden Summary
    The burden for the provisions are summarized in Table 4.

[[Page 33880]]



                                    Table 4--Summary of Burden Estimates for Contract Requirements at Sec.   422.514
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        OMB Control No.
           Respondents                  Subject          (CMS ID No.)            2021                2022                2023           3-year  average
--------------------------------------------------------------------------------------------------------------------------------------------------------
MA organization.................  Transition          0938-0753 (CMS-R-   $4,783 (62 hr)....  $4,783 (62 hr)....  $771 (10 hr)......  $3,446 (45 hr)
                                   enrollees (Sec.     267).
                                   422.514(e)).
Beneficiaries...................  Enrollment request  0938-NEW (CMS-      $7,755 (302 hr)...  $7,755 (302 hr)...  $1,260 (49 hr)....  $5,590 (218 hr)
                                   (Sec.               10718).
                                   422.514(e)).
                                 -----------------------------------------------------------------------------------------------------------------------
    Total.......................  ..................  ..................  $12,538 (364 hr)..  $12,538 (364 hr...  $2,031 (59 hr)....  $9,036 (263 hr)
--------------------------------------------------------------------------------------------------------------------------------------------------------

3. ICRs Regarding Medicare Advantage (MA) Plan Options for End-Stage 
Renal Disease (ESRD) Beneficiaries (Sec. Sec.  422.50, 422.52, and 
422.110)
    As discussed in section III.A. of this final rule, we are revising 
Sec. Sec.  422.50(a)(2), 422.52(c), and 422.110(b) to allow ESRD 
beneficiaries, without any limitation not otherwise applicable for 
enrollment in the MA program to enroll in an MA plan. In estimating the 
impact of this provision, we are required to separately estimate impact 
on beneficiaries and plans. Enrollment processing and notification 
requirements codified at Sec.  422.60, are not being revised as part of 
this rulemaking, and no new or additional information collection 
requirements are being imposed.
    Additionally, as explained in section VIII.D.1 of this final rule, 
OACT has already incorporated an increase in ESRD enrollment in the 
Medicare Trust Fund baseline due to the legislation. Therefore, there 
is no need to estimate plan burden. However, the burden to enrollees 
for completing enrollment forms has not been incorporated into the OACT 
baseline and therefore is estimated later in this section.
    We did not receive any public comments on our proposed 
requirements. In the proposed rule, beneficiary burden was estimated 
using the ``long'' enrollment form that is currently approved by OMB 
under control number 0938-0753 (CMS-R-267). Based on internal review, 
in this final rule, the beneficiaries will instead, be completing a 
new, ``shortened'' form (OMB control number 0938-NEW (CMS-10718)) for 
enrollment into MA plans beginning with the 2020 AEP, for a January 1, 
2021 effective date. The new ``shortened'' enrollment form, which is 
three pages in length, (compared to the current model form which is 
seven pages), limits the data collection to the minimum that is 
lawfully required to process the enrollment and other limited 
information that the sponsor is required to, or chooses to, provide to 
the beneficiary.
    As indicated in the beginning of this section, the shortened form 
has been subject to the standard non-rule PRA process (see 84 FR 63655 
(November 18, 2019), 84 FR 64319 (November 21, 2019), and 85 FR 13163 
(March 6, 2020)) and is currently under OMB review.
    In this final rule, we are correcting our proposed beneficiary 
burden estimates by considering the completion of the shortened 
enrollment form (CMS-10718) in lieu of (CMS-R-267). As indicated in 
section VII.A. of this final rule, we have also revised our proposed 
cost figures based on more recent BLS wage estimates.
    To elect a MA plan, an individual must complete and sign an 
election form, complete another CMS-approved election method offered by 
the MA plan, or call 1-800-MEDICARE, and provide information required 
for enrollment. Regardless of the enrollment mechanism, similar 
identifying information is collected by the MA plan to process the 
enrollment.
    Although not effective until January 1, 2021, section 17006 of the 
Cures Act amends the Act by allowing ESRD beneficiaries, without any 
limitation not otherwise applicable for enrollment in the MA program, 
to enroll in an MA plan. The burden is associated with the effort for 
an ESRD beneficiary seeking to enroll in a MA plan to complete an 
enrollment request. Because there will be an increase in the number of 
beneficiaries eligible to elect an MA plan starting in plan year 2021, 
the number of beneficiaries who are expected to initiate an enrollment 
action will increase. However, the erroneous per response time estimate 
of 30 minutes (0.5 hr) (CMS-R-267) that was set out in our proposed 
rule will decrease to 20 minutes (0.3333 hr) per response based on 
beneficiary completion of the new, shortened enrollment form (CMS-
10718)).
    As detailed in section VIII.D.1. of this final rule, OACT estimates 
an average increase of 59,000 ESRD beneficiaries to enroll in MA plans 
per year in 2021 through 2023. Therefore, we expect an average annual 
burden of 19,665 hours (59,000 new ESRD enrollees * 0.3333 hr) at a 
cost of $505,784 (19,665 hr * $25.72/hr).
4. ICRs Regarding Medical Loss Ratio (MLR) (Sec.  422.2440)
MSA Enrollment
    The anticipated changes affecting MSA enrollment will be submitted 
to OMB for approval under control number 0938-0753 (CMS-R-267). Subject 
to renewal, the control number is currently set to expire on December 
31, 2021. We did not receive any comments pertaining to our proposed 
requirements or burden estimates. However, based on internal review, we 
have updated our proposed time to complete the enrollment form and 
adjusted (increased) our enrollment figures to better reflect 
implementation in 2022-2024. As indicated above in section VII.A. of 
this final rule, we have also revised our proposed cost figures based 
on more recent BLS wage estimates.
    As discussed in section IV.D.4. of this rule, we are finalizing our 
proposal to amend Sec.  422.2440 to provide for the application of a 
deductible factor to the MLR calculation for MA MSA contracts that 
receive a credibility adjustment. The deductible factor would serve as 
a multiplier on the credibility factor. The application of the 
deductible factor would increase the MLRs of MSA contracts that receive 
this adjustment.
    We believe that the change to the MLR calculation for MSAs could 
potentially cause the number of enrollees in MSA plans to increase 
relative to enrollment projections under the current regulations 
because we expect more MA organizations to offer MA MSA plans based on 
this change in the MLR calculation. Consistent with the proposed rule, 
for this impact estimate, we assume the following:
     Enrollment in MSAs will double over the first 3 years that 
the change is in effect. We believe 3 years is a reasonable time frame 
for the enrollment changes resulting from this policy to be phased in. 
We project that enrollment will double in order to avoid potentially 
understating the cost for the

[[Page 33881]]

proposal. Our estimate is based on the largest potential change in 
enrollment that we could reasonably anticipate. We acknowledge that the 
change could have no impact on enrollment.
     Relative to projections in the baseline, MSA enrollment 
will be 33.33 percent higher in contract year 2022 (increasing from 
7,812 to 10,416), 66.67 percent higher in 2023 (increasing from 8,179 
to 13,632), and 100 percent higher in contract year 2024 (increasing 
from 8,531 to 17,062) to contract year 2030 (increasing from 10,354 to 
20,708).
     Half of the new enrollees in MA MSA plans would otherwise 
have been enrolled in other types of MA plans, and half would otherwise 
have been enrolled in FFS Medicare. We did not have a basis for 
assuming whether migration to MSAs would predominantly be from FFS 
Medicare or from non-MSA MA plans.
    The process for enrolling in an MA plan is the same regardless of 
whether that plan is an MSA or a non-MSA. Therefore, we assume that the 
burden to enroll in an MSA plan and a non-MSA plan is the same. 
Therefore, the increased burden related to changes in MSA enrollment is 
attributable only to the portion of potential new MSA enrollees who 
would be expected to enroll in (or remain in) FFS Medicare if the 
proposal were not finalized. The cost burden of the provision is 
summarized in Table 5.
a. Beneficiary Requirements and Burden
    For beneficiaries, the burden associated with the expected increase 
in MSA enrollment as a consequence of the addition of a deductible 
factor to the MSA MLR calculation is related to the effort it takes for 
a beneficiary to complete an enrollment request. It takes 0.5 hours at 
$25.72/hr for a beneficiary to complete an enrollment form. We assume 
no burden increase for the estimated 50 percent of additional MSA 
enrollees who would otherwise be enrolled in a non-MSA MA plan. For 
2022, the burden for all beneficiaries is estimated at 434 hours 
(2,604/2 beneficiaries * 0.3333 hr) at a cost of $11,162 (651 hr * 
$25.72/hr). For 2023, the burden for all beneficiaries is estimated at 
909 hours (5,453/2 beneficiaries * 0.3333 hr) at a cost of $23,379 
(1,302 hr * $25.72/hr). For 2024, the burden for all beneficiaries is 
estimated at 1,422 hours (8,531/2 beneficiaries * 0.3333 hr) at a cost 
of $ $36,574 (1,422 hr * $25.72/hr).
    The average burden per year is 922 hours ([434 + 909 + 1422]/3) at 
a cost of $23,705 ([11,162 + 23,379 + 36,574]/3).
b. MA Organization Estimate
    There are currently four MA organizations offering MSA plans in 
2020. We project that this number will double in 2022 as a result of 
the change. We therefore estimate that the change would result in 
approximately 2,604 total additional enrollments in MSAs in 2022, or 
326 additional enrollments per organization (2,604 individuals/8 
organizations); in 2023, 5,453 total additional enrollments in MSAs, or 
682 additional enrollments per organization (5,453 individuals/8 
organizations); and in 2024, and 8,531 total additional enrollments, or 
1,066 additional enrollments per organization (8,531 individuals/8 
organizations).
    An MA organization must give a beneficiary prompt written notice of 
acceptance or denial of the enrollment request in a format specified by 
CMS that meets the requirements set forth in this section. The burden 
associated with each organization providing the beneficiary prompt 
written notice, performed by an automated system, is estimated at 1 
minute per application processed. We estimate that it will take 1 
minute at $77.14/hr for a business operations specialist to 
electronically generate and submit a notice to convey the enrollment or 
disenrollment decision for each beneficiary. As noted previously, we 
anticipate that half of the new enrollees in MSAs will already be 
enrolled in other MA plans, meaning the current burden estimate for 
their enrollment is already accounted for in the currently approved 
collection.
    For 2022, the burden to complete the notices for the other half of 
new MSA enrollees (that is, the new enrollees who would otherwise 
enroll in FFS Medicare) is approximately 22 hours (2,604/2 notices * 1 
min/60) at a cost of $1,697 (22 hr * $77.14/hr) or $1.30 per notice 
($1,697/1,302 notices) or $212 per organization ($1,697/8 MA 
organizations). For 2023, the burden to complete the notices for the 
half of new MSA enrollees who would otherwise enroll in FFS Medicare is 
approximately 45 hours (5,453/2 notices * 1 min/60) at a cost of $3,471 
(45 hr * $77.14/hr) or $1.28 per notice ($3,471/2,727 notices) or $434 
per organization ($3,471/8 MA organizations). For 2024, the burden is 
approximately 71 hours (8,531/2 notices * 1 min/60) at a cost of $5,477 
(71 hr * $77.14/hr) or $1. 1.34 per notice ($5,470/4,090 notices) or 
$685 per organization ($5,246/8 MA organizations).
    The average burden per year is 46 hours ([22 hr + 45 hr + 71 hr]/3) 
at an average cost of $3,548 ([$1,697 + $3,471 + $5,477]/3).
    The burden associated with electronic submission of enrollment 
information to CMS is estimated at 1 minute at $77.14/hr for a business 
operations specialist to submit the enrollment information to CMS 
during the open enrollment period. For 2022, the burden to complete the 
notices for the other half of new MSA enrollees (that is, the new 
enrollees who would otherwise enroll in FFS Medicare) is approximately 
22 hours (2,604/2 notices * 1 min/60) at a cost of $1,697 (22 hr * 
$77.14/hr) or $1.30 per notice ($1,697/1,302 notices) or $212 per 
organization ($1,697/8 MA organizations). For 2023, the burden to 
complete the notices for the half of new MSA enrollees who would 
otherwise enroll in FFS Medicare is approximately 45 hours (5,453/2 
notices * 1 min/60) at a cost of $3,471 (45 hr * $77.14/hr) or $1.28 
per notice ($3,471/2,727 notices) or $434 per organization ($3,471/8 MA 
organizations). For 2024, the burden is approximately 71 hours (8,531/2 
notices * 1 min/60) at a cost of $5,477 (71 hr * $77.14/hr) or $1.33 
per notice ($5,477/4,090 notices) or $685 per organization ($5,477/8 MA 
organizations).
    The average burden per year is 46 hours ([22 hr + 45 hr + 71 hr]/3) 
at an average cost of $3,548 ([$1,697 + $3,471 + $5,477]/3).
    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 $36.82/hr for an office and 
administrative support worker to perform record retention for the 
additional MA MSA enrollees.
    In aggregate, we estimate an annual burden for 2022 of 109 hours 
(2,604/2 beneficiaries * 5 min/60) at a cost of approximately $4,013 
(109 hr * $36.82/hr) or $502 per organization ($4,013/8 MA 
organizations). For 2023, we estimate an aggregated annual burden of 
227 hours (5,453/2 beneficiaries * 5 min/60) at a cost of approximately 
$8,358 (227 hr * $36.82/hr) or $1,634 per organization ($7,821/8 MA 
organizations). For 2024, we estimate an aggregated annual burden of 
355 hours (8,531/2 beneficiaries * 5 min/60) at a cost of approximately 
$13,071 (355 hr * $36.82/hr) or $1,634 per organization ($13,071/8 MA 
organizations).
    The average burden per year is 230 hours ([109 hr + 227 hr + 355 
hr]/3) at an average cost of $8,481 ([$4,013 + $8,358 + $13,071]/3).
MLR Calculation
    The changes affecting the MLR calculation will be submitted to OMB 
for approval under control number 0938-1232 (CMS-10476). Subject to

[[Page 33882]]

renewal, the control number is currently set to expire on December 31, 
2021.
    We did not receive any public comments on our proposed requirements 
or burden estimates. We are finalizing the requirements as proposed. We 
are also finalizing the burden estimates, with the following revisions: 
(1) We updated our cost figures using more recent BLS wage estimates; 
(2) we reduced the hour burden for an enrollee to fill out an 
enrollment form; and (3) we adjusted the 3-year phase-in period for the 
anticipated enrollment changes from 2021 to 2023 in the proposed rule 
to 2022 to 2024 in this final rule.
    MA organizations will need to spend additional time calculating the 
MLRs for MSA contracts in order to apply the deductible factor. We 
estimate that for each of the 8 MA organizations that we anticipate 
will offer MSA contracts in 2022 and in each year through 2030, it will 
take an actuary approximately 5 minutes (0.0833 hr) at $116.32/hr to 
calculate the deductible factor for the contract. In aggregate, we 
estimate an annual burden of 0.6664 hours (0.0833 hr * 8 MA 
organizations) at a cost of $78 (0.6664 hr x $116.32/hr) or $10 per 
organization ($78/8 organizations).
    For 2022, we estimate a total burden for all MA organizations 
resulting from this provision to be 154 hours (22 hr + 22 hr + 109 hr + 
0.6664 hr) at a cost of $7,485 ($1,697 + $1,697 + $4,013 + $78). Per 
organization, we estimate an annual burden of 19.3 hours (154 hr/8 MA 
organizations) at a cost of $935.63 ($7,485/8 organizations).
    For 2022, we estimate a total burden for all MA organizations 
resulting from this provision to be 154 hours (22 hr + 22 hr + 109 hr + 
0.6664 hr) at a cost of $7,485 ($1,697 + $1,697 + $4,013 + $78). Per 
organization, we estimate an annual burden of 19.3 hours (154 hr/8 MA 
organizations) at a cost of $935.63 ($7,485/8 organizations).
    For 2023, we estimate a total burden for all MA organizations 
resulting from this provision to be 318 hours (45 hr + 45 hr + 227 hr + 
0.6664 hr) at a cost of $15,378 ($3,471 + $3,471 + $8,358 + $78). Per 
organization, we estimate an annual burden of approximately 40 hours 
(318 hr/8 MA organizations) at a cost of $1,922.50 ($15,378/8 
organizations).
    For 2024, we estimate a total burden for all MA organizations 
resulting from this provision to be 498 hours (71 hr + 71 hr + 355 hr + 
0.6664 hr) at a cost of $24,103 ($5,477 + $5,477 + $13,071 + $78). Per 
organization, we estimate an annual burden of approximately 62 hours 
(498 hr/8 MA organizations) at a cost of $3,013 ($24,103/8 
organizations).
    The burden for beneficiaries is a single burden for each year and 
has been estimated above.
d. Summary
    The figures in Table 5 associated with beneficiaries' enrollment 
requests, MA organizations providing beneficiaries with notice of 
acceptance or denial of the enrollment request, MA organizations' 
submission of enrollment information to CMS, and MA organizations' 
retention of a copy of the notice in beneficiaries' records will be 
submitted to OMB for approval under control number 0938-0753 (CMS-R-
267). The figures associated with the calculation of the deductible 
factor for MA MSA contracts will be submitted to OMB for approval under 
control number 0938-1232 (CMS-10476).

                                                          Table 5--Impact of MSA/MLR by Subject
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        OMB Control No.
           Respondents                  Subject          (CMS ID No.)            2022                2023                2024               Average
--------------------------------------------------------------------------------------------------------------------------------------------------------
Beneficiaries...................  Enrollment request  0938-0753.........  $11,162...........  $23,379...........  $36,574...........  $23,705
                                  (Sec.   422.2440).  (CMS-R-267).......  (434 hr)..........  (909 hr)..........  (1,422 hr)........  (922 hr)
MA organizations................  Notice to           0938-0753.........  $1,697............  $3,471............  $5,477............  $3,548
                                   beneficiaries.     (CMS-R-267).......  (22 hr)...........  (45 hr)...........  (71 hr)...........  (46 hr)
                                  (Sec.   422.2440).
MA organizations................  Submission to CMS.  0938-0753.........  $1,697............  $3,471............  $5,477............  $3,548
                                  (Sec.   422.2440).  (CMS-R-267).......  (22 hr)...........  (45 hr)...........  (71 hours)........  (46 hrs)
MA organizations................  Record retention..  0938-0753.........  $4,013............  $8,358............  $13,071...........  $8,481
                                  (Sec.   422.2440).  (CMS-R-267).......  (109 hr)..........  (227 hr)..........  (355 hr)..........  (230 hr)
MA organizations................  Calculation of      0938-1232.........  $78...............  $78...............  $78...............  $78
                                   deductible factor. (CMS-10476).......  (0.6664 hr).......  (0.6664 hr).......  (0.6664 hr).......  (0.6664 hr)
                                  (Sec.   422.2440).
                                 -----------------------------------------------------------------------------------------------------------------------
    Total.......................  ..................  ..................  $7,485............  $15,378...........  $24,103...........  $15,655
                                                                          (154 hr)..........  (318 hr)..........  (498 hr)..........  (322 hr)
--------------------------------------------------------------------------------------------------------------------------------------------------------

5. ICRs Regarding Special Election Periods (SEPs) for Exceptional 
Conditions (Sec. Sec.  422.62 and 423.38)
    The following changes will be submitted to OMB for approval under 
control number 0938-0753 (CMS-R-267) for Part C and 0938-0964 (CMS-
10141) for Part D.
    As discussed in section V.B. of this final rule, we are finalizing 
all SEPs as proposed, with the exception of the SEP for Government 
Entity--Declared Disaster or Other Emergency at Sec. Sec.  
422.68(b)(18) and 423.38(c)(23), which we are finalizing, with 
modification. We are also codifying the SEP for Individuals 
Involuntarily Disenrolled from an MA-PD plan due to loss of Part B, 
which was inadvertently omitted from the proposed rule.
    We did not receive any comments on our proposed requirements and 
are finalizing them without change. As indicated in section VII.A. of 
this final rule, we have revised our proposed cost figures based on 
more recent BLS wage estimates. We are not making any changes to our 
proposed time estimates.
    We are codifying certain Part C (at Sec.  422.62(b)(4) through 
(25)) and Part D (at Sec.  423.38(c)(11) through (32)) SEPs for 
exceptional circumstances currently set out in sub-regulatory guidance 
that MA organizations and Part D plan sponsors have implemented and are 
currently following. We are also establishing two new additional SEPs 
for exceptional circumstances: The SEP for Individuals Enrolled in a 
Plan Placed in Receivership and the SEP for Individuals Enrolled in a 
Plan that has been identified by CMS as a Consistent Poor Performer.
    We do not believe the changes will adversely impact individuals 
requesting enrollment in Medicare health or drug plans, the plans 
themselves, or their current enrollees. Similarly, we do not believe 
the changes would have any impact on the Medicare Trust Fund.
    MA organizations and Part D plan sponsors are currently assessing 
applicants' eligibility for election

[[Page 33883]]

periods as part of existing enrollment processes; therefore, no 
additional burden is anticipated from this change. However, because the 
burden for determining an applicant's eligibility for an election 
period has not previously been submitted to OMB, due to inadvertent 
oversight, we are seeking their approval under the aforementioned OMB 
control numbers.
    The following changes will be submitted to OMB for approval under 
control number 0938-0753 (CMS-R-267). We estimate it would take 5 
minutes (0.0833 hr) at $77.14/hr for a business operations specialist 
to determine an applicant's eligibility for an election period.
    The burden for all MA organizations is estimated at 142,497 hours 
(1,710,650 beneficiary SEP elections * 0.0833 hr) at a cost of 
$10,992,219 (142,497 hr * $77.14/hr) or $60,731 per parent organization 
($10,992,219/181 MA parent organizations).
    The following changes will be submitted to OMB for approval under 
control number 0938-0964 (CMS-10141). The burden for all Part D parent 
organizations is estimated at 155,564 hours (1,867,519 beneficiary SEP 
elections * 0.0833 hr) at a cost of $12,000,207 (155,564 hr * $77.14/
hr) or $226,419 per Part D parent organization ($12,000,207/53 Part D 
parent organizations).
    As discussed in section V.B. of this final rule, we are finalizing 
all SEPs as proposed, with the exception of the SEP for Government 
Entity--Declared Disaster or Other Emergency at Sec. Sec.  
422.68(b)(18) and 423.38(c)(23). We are also codifying the SEP for 
Individuals Involuntarily Disenrolled from an MA-PD plan due to loss of 
Part B, which was inadvertently omitted from the proposed rule.

C. Summary of Information Collection Requirements and Associated Burden 
Estimate

                                                                       Table 6--Annual Information Collection Requirements
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Total  number     Total       Time per                                   Total
           Provision                 Regulatory       OMB  Control No.   Respondent  type  Response  summary        of         number of     response    Total  annual   Labor cost  annual cost
                                      citation                                                                  respondents    responses       (hr)       time  (hr)       ($/hr)         ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
D-SNP Look-Alikes..............  Sec.   422.514(e).  0938-NEW.........  Enrollees........  D-SNP Look-                 1,954        1,954       0.3333             218        25.72        5,590
                                                                                            Alikes:
                                                                                            Enrollment.
ESRD...........................  Sec.  Sec.          0938-NEW.........  Enrollees........  ESRD: Enrollment.          59,000       59,000       0.3333          19,665        25.72      505,784
                                  422.50 and 422.52.
MSA MLR........................  Sec.  Sec.          0938-0753........  Enrollees........  MSA MLR: Filling           16,588       16,588       0.3333             922        25.72       23,705
                                  422.2420,                                                 out enrollment
                                  422.2440, and                                             forms.
                                  422.2430.
                                 Subtotal Enrollees  Varies...........  Enrollees........  Varies...........          77,542       77,542       Varies          20,805       Varies      535,079
SSCBI..........................  422.102(f)(3)(i)..  0938-0763........  MA Plans.........  SSBCI: Criteria               234            1           12           2,808       103.33       96,717
                                                                                            (initial
                                                                                            software update).
SSCBI..........................  422.102(f)(3)(i)..  0938-0763........  MA Plans.........  SSBCI: Criteria               234            1           36           8,424        193.7    1,631,729
                                                                                            (Annual
                                                                                            physician
                                                                                            review).
SSCBI..........................  422.102(f)(3)(i)..  0938-0763........  MA Plans.........  SSBCI: Criteria               234            1            5           1,170        85.26       99,754
                                                                                            (Software
                                                                                            updates).
SSCBI..........................  422.102(f)(3)(ii).  0938-0763........  MA Plans.........  SSBCI:                        234            1            2             468        56.34       26,367
                                                                                            Documentation.
SSCBI..........................  422.102(f)(3)(iii)  0938-0763........  MA Plans.........  SSBCI: Enrollee               234            1            9             702        86.95       61,039
                                                                                            records.
D-SNP Look-Alikes..............  Sec.   422.514 (e)  0938-0753........  MA Plans.........  D-SNP Look-                    67           67            2              45        77.14        3,446
                                                                                            Alikes:
                                                                                            Transition.
MSA MLR........................  Sec.  Sec.          0938-0753........  MA Plans.........  MSA MLR: Notify                 8            8       0.0167              46        77.14        3,548
                                  422.2420,                                                 enrollees.
                                  422.2440, and
                                  422.2430.
MSA MLR........................  Sec.  Sec.          0938-0753........  MA Plans.........  MSA MLR: Submit                 8            8       0.0167              46        77.14        3,548
                                  422.2420,                                                 to CMS.
                                  422.2440, and
                                  422.2430.
MSA MLR........................  Sec.  Sec.          0938-0753........  MA Plans.........  MSA MLR: Archive.               8            8       0.0833             230        36.82        8,481
                                  422.2420,
                                  422.2440, and
                                  422.2430.
MSA MLR........................  Sec.  Sec.          0938-1252........  MA Plans.........  MSA MLR:                        8            8       0.0833          0.6664       116.32           78
                                  422.2420,                                                 Calculation of
                                  422.2440, and                                             the deductible
                                  422.2430.                                                 factor.
Part C Election Period.........  Sec.   422.62.....  0938-0753........  MA Plans.........  Part C Election               181    1,710,650       0.0833         142,497        77.14   10,992,219
                                                                                            Period:
                                                                                            Determine
                                                                                            eligibility.

[[Page 33884]]

 
Part D Election Period.........  Sec.   422.38.....  0938-0964........  Part D Plans.....  Part D Election                53    1,867,519       0.0833         155,564        77.14   12,000,207
                                                                                            Period:
                                                                                            Determine
                                                                                            eligibility.
                                 Subtotal MA Plans.  Varies...........  MA Plans.........  Varies...........             309       Varies       Varies         312,001       Varies   24,927,133
                                 Grand Total All...  Varies...........  Varies...........  Varies...........          77,851  ...........  ...........         332,806  ...........   25,462,212
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

VIII. Regulatory Impact Analysis

A. Statement of Need

    This final rule implements a subset of the proposals from the 
proposed rule. We took a measured approach to review each provision 
proposed and focused finalizing in this first final rule those most 
helpful for bidding, those that address the COVID-19 pandemic and 
public health emergency, as well as those topics on which issuing a 
final rule now would advance the MA program.
    Summaries of the public comments that are within the scope of the 
provisions' proposed regulatory impact analyses implemented in this 
final rule are included in this section with our responses under the 
appropriate headings. The provisions in this final rule implement 
specific provisions of the BBA of 2018 and the 21st Century Cures Act. 
The statutory need for these policies is clear. However, this rule also 
contains discretionary policies, hence we provide economic 
justification in the following paragraphs.
    We estimate that the proposed Star Ratings provisions would result 
in an overall net savings for the Medicare Trust Fund. There are two 
changes that may impact a contract's Star Rating: (1) We proposed to 
increase measure weights for patient experience/complaints and access 
measures from two to four to further emphasize the patient voice, and 
(2) we proposed the use of Tukey outlier deletion, which is a standard 
statistical methodology for removing outliers, to increase the 
stability and predictability of the non-CAHPS measure cut points. The 
increased weight reflects CMS's commitment to put patients first and to 
empower patients to work with their doctors to make health care 
decisions that are best for them. Since more outliers tend to be at the 
low end of the distribution (worse performers), directly removing 
outliers causes some shifting downward in overall Star Ratings. The 
increased measure weights for patient experience/complaints and access 
revision is assumed to be a cost to the Medicare Trust Fund given the 
ratings for these measures tend to be higher relative to other 
measures, and the Tukey outlier deletion is assumed to be a saver to 
the Medicare Trust Fund after the first year since directly removing 
outliers results in a shift downward in ratings. The aggregate savings 
to the Medicare Trust Fund over 2024-2030 is $4.1 billion.

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), Executive Order 13272 on Proper Consideration of 
Small Entities in Agency Rulemaking (August 13, 2002), section 1102(b) 
of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA) (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). This rule, under 
Executive Order 12866, is economically significant with over $100 
million in costs, benefits, or transfers annually. Pursuant to the 
Congressional Review Act (5 U.S.C. 801 et seq.), the Office of 
Information and Regulatory Affairs designated this rule as a major rule 
as defined by 5 U.S.C. 804(2).
    A regulatory impact analysis must be made for major rules with 
economically significant effects ($100 million or more in any one 
year). We estimate that this final rule is economically significant as 
measured by the $100 million threshold and hence, it is also a major 
rule under the Congressional Review Act. Accordingly, we have prepared 
a regulatory impact analysis that to the best of our ability presents 
the costs and benefits of this rulemaking.
    Section 202 of 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 2020, that threshold is approximately $156 
million. This final rule is not anticipated to have an unfunded effect 
on state, local, or tribal governments, in the aggregate, or on the 
private sector of $154 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, preempt state law or have federalism implications, the 
requirements of Executive Order 13132 are not applicable.
    If regulations impose administrative costs on reviewers, such as 
the time needed to read and interpret this final rule, then we should 
estimate the cost associated with regulatory review. There are 
currently 795 contracts (which includes MA, MA-PD, and PDP contracts), 
55 state Medicaid agencies, and 300 Medicaid MCOs. We also expect a 
variety of other organizations to review (for example, consumer 
advocacy groups, major Pharmacy Benefit Managers). We expect that each 
organization will designate one person to review the rule. A reasonable 
maximal number is 2,000 total reviewers. We note that other assumptions 
are possible.
    Using the BLS wage information for medical and health service 
managers (code 11-9111), we estimate that the cost of reviewing this 
final rule is $110.74 per hour, including fringe benefits and overhead 
costs (http://www.bls.gov/oes/current/oes_nat.htm). Assuming an average 
reading speed, we estimate that it will take approximately 100 hours 
for each person to review this final rule. For each entity that reviews 
the rule, the estimated cost is therefore $11,074 (100 hours * 
$110.74). Therefore, we estimate that the

[[Page 33885]]

maximum total cost of reviewing this final rule is $22 million ($11,074 
* 2,000 reviewers). We expect that many reviewers will not review the 
entire rule but just the sections that are relevant to them. If each 
person on average reviews 10 percent of the rule, then the cost would 
be $2.2 million.
    Note that this analysis assumed one reader per contract. Some 
alternatives include assuming one reader per parent organization. Using 
parent organizations instead of contracts will reduce the number of 
reviewers. However, we believe it is likely that review will be 
performed by contract. The argument for this is that a parent 
organization might have local reviewers assessing potential region-
specific effects from this final rule.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by OMB.

C. Impact on Small Businesses--Regulatory Flexibility Analysis (RFA)

    The RFA, as amended, requires agencies to analyze options for 
regulatory relief of small businesses if a rule has a significant 
economic 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 has several provisions. Although some provisions 
are technical or codify existing guidance, and therefore are not 
expected to have economic impact beyond current operating expenses, 
there are other provisions with paperwork or other costs. These 
provisions are analyzed in both this section and in section VII of this 
final rule. A compact summary of burdens by year and provision are 
summarized in Tables 6 and 16 of this final rule.
    This rule has several affected stakeholders. They include (1) 
insurance companies, including the five types of Medicare health plans, 
MA organizations, PDPs, cost plans, Medical Savings Account plans 
(MSA), PACE organizations, and demonstration projects, (2) providers, 
including institutional providers, outpatient providers, clinical 
laboratories, and pharmacies, and (3) enrollees.
    Some descriptive data on these stakeholders are as follows:
     Pharmacies and Drug Stores, NAICS 446110, have a $30 
million threshold for ``small size'' with 88 percent of pharmacies, 
those with less than 20 employees, considered small.
     Direct Health and Medical Insurance Carriers, NAICS 
524114, have a $41.5 million threshold for ``small size,'' with 75 
percent of insurers having under 500 employees meeting the definition 
of small business.
     Ambulatory Health Care Services, NAICS 621, including 
about 2 dozen sub-specialties, including Physician Offices, Dentists, 
Optometrists, Dialysis Centers, Medical Laboratories, Diagnostic 
Imaging Centers, have a threshold ranging from $8 to $35 million 
(Dialysis Centers, NAICD 621492, have a $41.5 million threshold). 
Almost all firms are big, and this also applies to sub-specialties. For 
example, for Physician Offices, NAICS 621111, receipts for offices with 
under 9 employees exceed $34 million.
     Hospitals, NAICS 622, including General Medical and 
Surgical Hospitals, Psychiatric and Substance Abuse Hospitals, and 
Specialty Hospitals have a $41.5 million threshold for small size, with 
half of the hospitals (those with between 20-500 employees) considered 
small.
     Skilled Nursing Facilities (SNFs), NAICS 623110, have a 
$30 million threshold for small size, with half of the SNFs (those with 
under 100 employees) considered small.
    We are certifying that this final rule does not have a significant 
economic impact on a substantial number of small entities. To defend 
our position, we first describe at a high level the cash flows related 
to the Medicare program. We then provide more specific details.
    The high-level underlying idea in creating the MA, Medicare Cost-
plan, and MA-PD Medicare health insurance programs, is to allow private 
insurers to coordinate care, resulting in efficiencies of cost. The 
high-level underlying idea in creating the non-government-managed 
Prescription Drug program (PDPs and drug portion of MA-PDs) is to allow 
beneficiaries to obtain prescription drugs in a competitive market to 
reduce costs. For MA, MA-PD and Cost plans, enrollees obtain the same 
Original Medicare Part A and Part B services they would otherwise 
obtain in the original Medicare program, albeit at reduced cost 
(however, for the small percentage of plans bidding above the 
benchmark, enrollees pay more, but this percentage of plans is not 
``significant'' as defined by the RFA and as justified below).
    The savings achieved by the MA and the MA-PD plans, the amount of 
reduced cost, can then be used by the private insurers in a variety of 
ways, including providing benefits supplemental to original Medicare. 
Some examples of these supplemental benefits include vision, dental, 
and hearing. The cost for furnishing these supplemental benefits comes 
from a combination of the Trust Fund and enrollee premiums.
    Part D plans submit bids and are paid by the Medicare Trust Fund 
for their projected costs in the form of direct premium subsidy and 
reinsurance. For any enrolled low-income beneficiaries, they receive 
low-income premium subsidy and low-income cost-sharing subsidy in 
addition. The national average monthly bid amount, or NAMBA, determines 
the base premium. A plan's premium is the sum of the base premium and 
the difference between its bid amount and the NAMBA.
    Thus the cost of providing services by these insurers is met by a 
variety of government funding and in some cases by enrollee premiums.
    In order to achieve these goals, the government pays the MA health 
plans a portion of the funds that would have been paid had plan 
enrollees remained in original Medicare. These funds are then used to 
provide additional benefits on behalf of the health plans' enrollees. 
Thus, by the initial design of the Medicare health plan programs, the 
various insurance programs were not expected to suffer burden or losses 
since, in this very unique insurance relationship, the private 
companies are being supported by the government who, in turn, is saving 
money because health plans, by virtue of coordinating care, are 
furnishing the same services, albeit at reduced cost. This lack of 
expected burden applies to both large and small health plans.
    The unique MA regulations, such as those in this final rule, are 
defined so that small entities are not expected to incur additional 
burden since the cost of complying with any final rule is passed on to 
the government.
    We next examine in detail each of the stakeholders and explain how 
they can bear cost. (1) For Pharmacies and Drug Stores, NAICS 446110; 
(2) for Ambulatory Health Care Services, NAICS 621, including about two 
dozen sub-specialties, including Physician Offices, Dentists, 
Optometrists, Dialysis Centers, Medical Laboratories, Diagnostic 
Imaging Centers, and Dialysis Centers, NAICD 621492; (3) for Hospitals, 
NAICS 622, including General Medical and Surgical Hospitals, 
Psychiatric and Substance Abuse Hospitals, and Specialty Hospitals; and 
(4) for SNFs, NAICS 623110: Each of these are providers (inpatient, 
outpatient, or pharmacy) that furnish plan-covered services to plan 
enrollees. Whether these providers are contracted or, in the case of 
PPOs, PFFS, and MSA, non-contracted with the MA plan, their aggregate 
payment for services is the sum of the enrollee cost sharing and

[[Page 33886]]

plan payments. For non-contracted providers, Sec.  422.214 requires 
that a non-contracted provider accept payment that is least what they 
would have been paid had the services been furnished in a fee-for-
service setting. For contracted providers, Sec.  422.520 requires that 
the payment is governed by a contract which the provider and plan 
mutually agree to. Consequently, for these providers, there is no 
additional cost burden above the already existing burden in original 
Medicare.
    For Direct Health and Medical Insurance Carriers, NAICS 524114, 
plans estimate their costs for the coming year and submit bids and 
proposed plan benefit packages. Upon approval, the plan commits to 
providing the proposed benefits, and CMS commits to paying the plan 
either (1) the full amount of the bid, if the bid is below the 
benchmark, which is a ceiling on bid payments annually calculated from 
original Medicare data; or (2) the benchmark, if the bid amount is 
greater than the benchmark.
    Theoretically, there is additional burden if plans bid above the 
benchmark. However, consistent with the RFA, the number of these plans 
is not substantial. Historically, only two percent of plans bid above 
the benchmark, and they contain roughly one percent of all plan 
enrollees. Since the CMS criteria for a substantial number of small 
entities is 3 to 5 percent, the number of plans bidding above the 
benchmark is not substantial.
    The preceding analysis shows that meeting the direct cost of this 
final rule does not have a significant economic impact on a substantial 
number of small entities, as required by the RFA.
    There are certain indirect consequences of these provisions which 
also create impact. We have already explained that 98 percent of the 
plans bid below the benchmark. Thus, their estimated costs for the 
coming year are fully paid by the government. However, the government 
additionally pays the plan a ``beneficiary rebate'' amount that is an 
amount equal to a percentage (between 50 and 70 percent depending on a 
plan's quality rating) multiplied by the amount by which the benchmark 
exceeds the bid. The rebate is used to provide additional benefits to 
enrollees in the form of reduced cost sharing, lower Part B or Part D 
premiums, or supplemental benefits. (Supplemental benefits may also 
partially be paid by enrollee premiums if the plan choses to use 
premiums.) It would follow that if the provisions of this final rule 
cause the bid to increase and if the benchmark remains unchanged or 
increases by less than the bid does, the result would be a reduced 
rebate and possibly fewer supplemental benefits for the health plans' 
enrollees.
    However, supplemental benefits are only one approach to using the 
rebate. The experience of OACT at CMS is that from year to year plans 
prefer to reduce their administrative costs, including profit margins, 
rather than substantially change their benefit package. This is true 
due to marketing forces; a plan lowering supplemental benefits even one 
year may lose its enrollees to competing plans that offer these 
supplemental benefits. Thus, it is advantageous to the plan to 
temporarily reduce administrative costs, including margins, rather than 
reduce benefits.
    We note that we do not have definitive data on this. That is, we 
can at most note the way administrative costs and supplemental benefits 
vary from year to year. The thought processes behind the plan are not 
reported. More specifically, when supplemental benefits are reduced, we 
have no way of knowing the cause for this reduction, whether it be new 
provisions, market forces, or other causes.\54\
---------------------------------------------------------------------------

    \54\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3893317/.
---------------------------------------------------------------------------

    Based on the above, we certify that this final rule does not have a 
significant economic impact on a substantial number of small entities.
    Finally, we note that this rule has an impact on enrollees. While 
enrollees as a group do not constitute a ``small business'' as defined 
by the RFA, and hence the impact of this final rule on enrollees is not 
discussed in this section, throughout this final rule we have carefully 
noted the impact on enrollees. One major impact on enrollees as 
presented in section VII of this final rule is the estimated half hour 
burden at a cost of $13 per enrollee for filling out enrollment forms. 
While the aggregate amount for all enrollees is several million, the 
per enrollee burden is not significant.

D. Anticipated Effects

    Some provisions of this final rule have negligible impact either 
because they are technical provisions or are provisions that codify 
existing guidance. Other provisions have an impact although it cannot 
be quantified or whose estimated impact is zero. Throughout the 
preamble, we have noted when provisions have no impact. Additionally, 
this Regulatory Impact Analysis discusses several provisions with 
either zero impact or impact that cannot be quantified. The remaining 
provisions are estimated in section VII of this final rule and in this 
Regulatory Impact Analysis. Where appropriate, when a group of 
provisions have both paperwork and non-paperwork impact, this 
Regulatory Impact Analysis cross-references impacts from section VII of 
this final rule in order to arrive at total impact. Additionally, this 
Regulatory Impact Analysis provides pre-statutory impact of several 
provisions whose additional current impact is zero because their impact 
has already been experienced as a direct result of the statute. For 
further discussion of what is estimated in this Regulatory Impact 
Analysis, see Table 16 and the discussion afterwards.
1. Medicare Advantage (MA) Plan Options for End-Stage Renal Disease 
(ESRD) Beneficiaries (Sec. Sec.  422.50, 422.52, and 422.110)
    We are codifying requirements under section 17006 of the Cures Act 
that, effective for the plan year beginning January 1, 2021, would 
remove the prohibition on beneficiaries with ESRD enrolling in an MA 
plan. Since we are codifying existing statute, there is no impact to 
program expenditures. In order to estimate the impact of requirements 
under section 17006 of the Cures Act, a pre-statute baseline was used 
to estimate the impacts.
    There are two primary assumptions that contribute to the regulatory 
impact analysis for this provision: (1) The increased number of 
beneficiaries with ESRD who choose to enroll in an MA health plan; and 
(2) the cost differential between MA and FFS for those enrollees with 
ESRD.
    We are expecting that there will be an influx of beneficiaries 
switching from FFS to MA beginning on January 1, 2021 due to the 
provision. In 2019, there were 532,000 enrollees in ESRD status with 
Medicare Part A benefits as shown in the Medicare Enrollment 
Projections tables of the 2020 Rate Announcement. Of these, 401,000 
enrollees were in the FFS program, which results in 131,000 in Private 
Health Plans. This equates to a private health penetration rate of 
about 25 percent. Absent the ESRD enrollment provision of the Cures 
Act, we project that ESRD enrollment in Private Health plans will grow 
to 144,000 in 2021, representing about 26 percent of the projected 2021 
total ESRD population of 559,000. Based on an analysis by OACT, ESRD 
enrollment in MA plans is expected to increase by 83,000 due to the 
Cures Act provision. This increase is assumed to be phased in over 6 
years, with half of the beneficiaries (41,500) enrolling during 2021.
    Next, we determine the cost differential of the projected ESRD

[[Page 33887]]

enrollees that are new to MA in 2021 due to the Cures Act. The cost 
differential between MA and FFS ESRD enrollees is attributed to the 
adjustment to MA risk scores for differences in diagnosis coding 
between MA and FFS beneficiaries. The Coding Intensity (Annual) was 
derived by examining historical risk score data and computing the 
differences between MA and FFS risk scores. Demographic differences 
(age, gender factors) for enrollees have been separated and removed 
from risk score comparisons so that the final differences are 
considered health status differences.
    Table 7 shows the cost for codifying section 17006 of the Cures 
Act, removing the prohibition for ESRD beneficiaries to enroll in MA 
plans. The United States Per Capita Cost (USPCC) amounts for Part A and 
Part B can be found in the 2020 Rate Announcement. The Gross Costs 
(before backing out the Part B premium portion) is calculated by 
multiplying the Additional MA ESRD Enrollment by the ESRD-USPCC rates, 
which are on a per member per month basis, multiplied by 12 (the number 
of months in a year) multiplied by the Composite Coding Intensity. The 
Net Cost is calculated by multiplying the Gross Costs by the Net of 
Part B Premium amount which averages between 85.6% and 84.9% from 2021-
2030. The Net Costs range from $23 million in contract year 2021 to 
$440 million in contract year 2030.

    Table 7--Estimated Cost per Year (millions) to the Medicare Trust Fund for Removing the Prohibition for ESRD Beneficiaries To Enroll in MA Plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Contract year                   2021       2022       2023       2024       2025       2026       2027       2028       2029       2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Additional MA ESRD Enrollment:............     41,500     62,250     73,317     78,850     81,617     83,000     83,000     83,000     83,000     83,000
USPCC Pt A FFS ($):.......................      3,206      3,328      3,447      3,562      3,681      3,801      3,924      4,052      4,184      4,320
USPCC Pt B FFS ($):.......................      4,900      5,109      5,329      5,573      6,383      6,662      6,953      7,257      7,574      7,905
USPCC FFS ($):............................      8,106      8,437      8,776      9,136     10,063     10,462     10,877     11,309     11,758     12,225
Coding Intensity (Annual) (%):............       0.65       0.80       0.79       0.63       0.46       0.30       0.14       0.14       0.13       0.13
Coding Intensity (Composite) (%):.........       0.65       1.46       2.26       2.90       3.38       3.69       3.84       3.98       4.12       4.25
Gross Cost ($ millions):..................         26         92        174        251        333        384        416        448        482        518
Net of Part B Premium (%):................      85.60      85.60      85.50      85.40      85.30      85.20      85.00      84.90      84.90      84.90
Net Cost ($ millions):....................         23         79        149        214        284        327        353        381        410        440
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because these increases are already included in the baseline, they 
are not included in Table 15, nor do they contribute to the monetized 
table calculations (Table 15). However, notes to Table 15 and 
observations in the conclusion do mention this impact.
    Comment: A commenter thanked CMS for sharing its projection of the 
magnitude of ESRD migration from Original Medicare to Medicare 
Advantage in 2021 and in future years; however, the commenter expressed 
several concerns with the methods and assumptions used. For example, 
the commenter requested CMS (i) produce a range of impacts, (ii) 
produce an alternative methodology based on adjustment to MOOP limits, 
and (iii-iv) reconsider certain assumptions about MLR and migration 
patterns. The commenter also asked if CMS, in considering migration 
patterns, took note that many ESRD retirees are already in EGWPs or 
that migration to MA plans will likely be higher in the under-65 ESRD 
population due to the lack of alternatives.
    Response: A range of impacts for the estimated costs to the 
Medicare Trust Funds for removing the prohibition for ESRD 
beneficiaries to enroll in MA plans is described in section VIII.E.1. 
of this final rule.
    CMS does not have the information readily available to produce an 
alternative adjustment to MOOPs; the proposal related to the MOOP 
limits for MA plans will be addressed in a future final rule. The cost 
to the plan sponsor of having a MOOP is captured as a supplemental 
benefit in the bid pricing. The plan sponsor bid pricing models and 
methodologies are proprietary health plan information and are not 
readily available to CMS. Furthermore, the MOOP for 2021 applies to all 
MA enrollees (ESRD and non-ESRD) and we do not believe it is reasonable 
to project alternative ESRD enrollment projections based on a MOOP that 
applies to all MA enrollees.
    We did consider the migration patterns for EGWP ESRD beneficiaries 
versus Individual ESRD beneficiaries. We surmised that the costs 
differences between EGWP and Individual ESRD coverages are not 
significant enough to display the migration patterns separately. 
Displaying projections at that coverage level would not provide further 
understanding of the financial projections since the cost differences 
are not too different.
    We did consider the migration patterns for younger versus older 
ESRD beneficiaries. In response to the commenter on page G24, we noted 
that the higher average age of the MA ESRD enrollee versus the lower 
average age of the FFS ESRD enrollee is a main reason that there are 
fewer kidney transplants in the MA population. Our expectation is that 
younger ESRD beneficiaries will begin to enroll in MA starting in 2021 
and that the kidney transplant incidence rate for the two programs will 
begin to merge.
    After review and consideration of the comments, we are finalizing 
this provision without modification.
2. Medicare Fee-for-Service (FFS) Coverage of Costs for Kidney 
Acquisitions for Medicare Advantage (MA) Beneficiaries (Sec.  422.322) 
and Exclusion of Kidney Acquisition Costs From Medicare Advantage (MA) 
Benchmarks (Sec. Sec.  422.258 and 422.306)
    Section 17006(b) of the Cures Act amended section 1853(k) and (n) 
of the Act to exclude standardized costs for kidney acquisitions from 
MA benchmarks starting in 2021. As such, we will codify these 
requirements so that, effective for the contract year beginning January 
1, 2021, MA

[[Page 33888]]

organizations will no longer be responsible for costs for organ 
acquisitions for kidney transplants for their beneficiaries. Removing 
these costs from the MA benchmarks will decrease the amounts paid to 
the plans from the Medicare trust funds. Instead, as required by 
statute, Medicare FFS will cover the kidney acquisition costs for MA 
beneficiaries, effective 2021.
    Since the budget baseline has reflected this change from the Cures 
Act, there is no additional impact of the proposed codification of this 
change to the computation of rates. To estimate the impact of the 
statute when published we used a pre-statute baseline. This impact of 
the statute will therefore not be included in Table 15 or Table 14, 
which deal with impacts of current provision.
    Our analysis in the next section shows that: (1) FFS coverage of 
kidney acquisition costs for MA beneficiaries results in net costs to 
the Medicare Trust Funds ranging from $212 million in 2021 to $981 
million in 2030; (2) Excluding kidney acquisition costs from MA 
benchmarks results in net savings estimated to range from $594 million 
in 2021 to $1,346 million in 2030. In addition, we anticipate no change 
in plan, provider, or beneficiary burden for these provisions. Plan 
burden would not be impacted by the change in their payment rate. 
Provider burden will not be impacted because they continue to bill for 
kidney acquisition regardless of whether they receive payment from FFS 
Medicare or MA organizations. Finally, beneficiaries would not be 
impacted by the change in the source of payment for the acquisition of 
the organ.
    Next, we describe the steps used to calculate the savings 
associated with excluding kidney acquisition costs from MA benchmarks 
as well as the costs associated with requiring FFS coverage of kidney 
acquisition costs for MA beneficiaries.
    First, we examined the FFS cost of kidney acquisition coverage. We 
calculate the expected costs to the FFS program for covering kidney 
acquisitions from the MA population starting in 2021. The costs for 
these services are expected to be lower than the amount that is 
expected to be excluded from the MA benchmarks for two reasons.
     The MA penetration rate for ESRD enrollees is lower than 
for the non-ESRD enrollees. This means that a higher percentage of 
beneficiaries with ESRD are in FFS than in MA, so there will likely be 
fewer kidney transplants in MA versus FFS. However, this enrollment 
difference will likely lessen as ESRD enrollees are permitted to enroll 
in MA plans beginning in 2021.
     The kidney transplant incidence rate for MA ESRD enrollees 
has historically been much lower than the kidney transplant incidence 
rate for FFS ESRD enrollees. We suspect that this is due to MA ESRD 
enrollees being in dialysis status for a shorter duration than FFS 
enrollees. Again, we believe that this difference (between MA and FFS) 
in the kidney transplant incidence rate will decrease over time as more 
ESRD beneficiaries enroll in MA plans.
    The kidney transplant incidence rate is computed by dividing the 
number of kidney transplants by the ESRD enrollment separately for the 
MA and FFS programs. As shown in Table 8, the FFS kidney transplant 
incidence rate has historically often been more than three times the MA 
rate.

                           Table 8--Medicare FFS and MA Kidney Transplants (2013-2017)
----------------------------------------------------------------------------------------------------------------
                                       2013            2014            2015            2016            2017
----------------------------------------------------------------------------------------------------------------
Number of Kidney Transplants              13,964          13,866          14,400          15,191          15,346
 FFS:...........................
ESRD Enrollment FFS (000's):....             385             390             394             401             402
Transplant Incidence FFS (%):...             3.6             3.6             3.7             3.8             3.8
Number of Kidney Transplants MA:             929           1,015             957           1,137           1,382
ESRD Enrollment MA (000's):.....              69              78              89              96             108
Transplant Incidence MA (%):....             1.3             1.3             1.1             1.2             1.3
----------------------------------------------------------------------------------------------------------------

    As mentioned, we expect that as a greater portion of enrollees with 
ESRD will join MA plans, starting in 2021, the difference in the kidney 
transplant incidence rate between MA and FFS will begin to lessen, as 
shown in Table 9. The total number of MA and FFS kidney transplants are 
expected to grow by 3 percent per year which is based on the 2013-2017 
historical growth rate. That rate is higher than the average increase 
in MA and FFS ESRD enrollment of 2 percent for 2013-2017. Since the 
kidney transplant growth is projected to be higher than the ESRD 
enrollment growth, we expect the kidney transplant incidence rate to 
increase over time.

                           Table 9--Medicare FFS and MA Kidney Transplants (2018-2030)
----------------------------------------------------------------------------------------------------------------
                                        2018       2019       2020       2021       2022       2023       2024
----------------------------------------------------------------------------------------------------------------
Number of Kidney Transplants MA &       17,230     17,747     18,279     18,828     19,392     19,974     20,573
 FFS:..............................
Kidney Transplant Incidence FFS            3.9        4.0        4.0        4.2        4.3        4.4        4.3
 (%):..............................
Kidney Transplant Incidence MA (%):        1.4        1.4        1.4        1.6        1.8        2.0        2.2
ESRD Enrollment FFS (000's):.......        401        401        408        373        358        353        352
ESRD Enrollment MA (000's):........        120        131        137        186        213        231        242
----------------------------------------------------------------------------------------------------------------
                                          2025       2026       2027       2028       2029       2030  .........
----------------------------------------------------------------------------------------------------------------
Number of Kidney Transplants MA &       21,191     21,826     22,481     23,155     23,850     24,566  .........
 FFS:..............................
Kidney Transplant Incidence FFS            4.3        4.2        4.2        4.1        4.1        4.0  .........
 (%):..............................
Kidney Transplant Incidence MA (%):        2.4        2.6        2.8        3.0        3.2        3.4  .........
ESRD Enrollment FFS (000's):.......        354        358        364        369        374        379  .........
ESRD Enrollment MA (000's):........        250        256        261        266        270        274  .........
----------------------------------------------------------------------------------------------------------------


[[Page 33889]]

    Then we calculate the average kidney acquisition costs using FFS 
claims data from CMS data systems. The average kidney acquisition costs 
ranged from $69,000 in 2013 to $83,000 in 2017, which equates to an 
annual growth rate of 4.7 percent. This percentage was used to estimate 
average kidney acquisition costs during the projection period of 2018 
to 2030.
    The gross costs to the FFS program for covering MA kidney 
acquisition costs are computed by multiplying the MA transplant 
incidence rate by the number of MA ESRD enrollees multiplied by the 
average kidney acquisition cost. This computation was completed for the 
years 2021-2030. The gross costs, as found in the Table 10, range from 
$298 million in 2021 to $1,384 million in 2030. Again, we apply the 
government share of the gross savings factors as well as the Part B 
premium factors to compute the net costs to the Medicare Trust Funds. 
These factors are the same as those used to calculate the savings for 
excluding kidney acquisition costs from the MA benchmarks. The net 
costs to the Medicare Trust Funds after applying these factors are 
expected range from $212 million in 2021 to $981 million in 2030.

                                       Table 10--Costs to the FFS Program for Covering MA Kidney Acquisition Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    2021       2022       2023       2024       2025       2026       2027       2028       2029       2030    2021-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kidney Transplant Incidence MA         1.6        1.8        2.0        2.2        2.4        2.6        2.8        3.0        3.2        3.4  .........
 (%):..........................
ESRD Enrollment................        186        213        231        242        250        256        261        266        270        274  .........
MA.............................
(000's):.......................
Avg Kidney Acq Costs...........     99,146    103,804    108,680    113,786    119,131    124,728    130,587    136,722    143,145    149,870  .........
($'s):.........................
Gross Costs....................      297.9      401.3      503.0      605.7      713.5      828.7      950.2    1,082.5    1,226.1    1,383.7    7,992.6
($Millions):...................
Avg Gov't Share of Gross              83.0       83.0       83.0       83.1       83.2       83.2       83.2       83.4       83.4       83.4  .........
 Savings (%):..................
Net of Part B Premium (%):.....       85.6       85.6       85.5       85.4       85.3       85.2       85.0       84.9       84.9       84.9  .........
Net Costs ($Millions):.........      211.7      284.9      357.0      429.5      506.0      587.1      672.3      766.5      869.1      980.8    5,664.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Next, we examined the MA cost of kidney acquisition coverage. We 
used data based on the kidney acquisition costs for the FFS 
beneficiaries to compute the portion of the MA benchmark that has been 
attributed to kidney acquisition costs. In order to compute the amount 
that the MA health plans have been reimbursed for these costs in the 
past, we tabulated Medicare's share of kidney acquisition costs and the 
number of Medicare discharges from the Medicare Cost Reports (Form CMS-
2552-10) for certified kidney transplant centers. The kidney 
acquisition costs were computed for the years 2013-2017 (the latest 
data that was available at the time of this study) using information 
from the Medicare Cost Reports for FFS beneficiaries at the county-
level. The county level per member per month (PMPM) costs are derived 
by summing the kidney acquisition costs for each county and dividing 
these amounts by the county specific Medicare FFS enrollment. These 
annual costs per member are then divided by 12 in order to compute the 
PMPM's.
    Next, we examine the historical kidney acquisition cost PMPM trend 
for the years 2013-2017 to project these costs for the years 2018-2030. 
In aggregate, the kidney acquisition PMPM costs grew at an average rate 
of 6.4 percent during 2013-2017. This trend is used to estimate these 
costs for the 2018-2030 period.
    To calculate the gross savings to the Medicare Trust Funds, we 
multiply the projected MA enrollment by the annual per member kidney 
acquisition costs. We then apply two additional factors to the gross 
savings in order to compute the net savings to the Medicare Trust 
Funds:
     Average government share of gross savings. Government 
expenditures are the sum of bids and rebates. Rebates are the portion 
of the difference between the MA benchmarks and MA bids that the health 
plans use to pay for additional supplemental benefits or reductions in 
enrollee cost sharing. The government retains the remaining difference 
between MA benchmarks and MA bids. We estimate that bids will be 
reduced by 50 percent of the total reduction in benchmarks.
     Net of Part B premium. Medicare enrollees, not the Trust 
Funds, are responsible for approximately 25 percent of their Part B 
costs.
    The government share of gross savings factors are expected to be 
between 83.0 percent and 83.4 percent during the period 2021-2030. The 
net of Part B premium factors are expected to be 85.6 percent and 84.9 
percent during that same period. The results can be found in Table 11. 
The net savings due to excluding kidney acquisition costs from MA 
benchmarks is estimated to range from $594 million in 2021 to $1,346 
million in 2030.

            Table 11--Per-Year Calculations, Representing the Pre-Statute Baseline Based on Medicare FFS Coverage of Kidney Acquisition Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    2013       2014       2015       2016       2017       2018       2019       2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kidney Acq.....................       1.72       1.82       1.95       2.08       2.20       2.34       2.49       2.65  .........  .........  .........
Costs..........................
(PMPM):........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      2021       2022       2023       2024       2025       2026       2027       2028       2029       2030  2021-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kidney Acq Costs (PMPM):.......       2.82       3.00       3.20       3.40       3.62       3.85       4.10       4.36       4.64       4.94  .........
Medicare Advantage Enrollment       24,690     25,624     26,508     27,380     28,237     29,070     29,861     30,607     31,313     32,035  .........
 Projection (000's):...........
Gross Savings ($Millions):.....      836.2      923.5    1,016.6    1,117.4    1,226.3    1,343.4    1,468.4    1,601.7    1,743.7    1,898.4   13,175.6

[[Page 33890]]

 
Average government share of           83.0       83.0       83.0       83.1       83.2       83.2       83.2       83.4       83.4       83.4  .........
 Gross Savings (%):............
Net of Part B Premium (%):.....       85.6       85.6       85.5       85.4       85.3       85.2       85.0       84.9       84.9       84.9  .........
Net Savings ($Millions):.......      594.1      655.7      721.5      792.3      869.5      951.7    1,038.9    1,134.1    1,235.9    1,345.6    9,339.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: A commenter expressed concern about the estimates in the 
regulatory impact analysis that concluded the net savings attributable 
to the exclusion of kidney acquisition costs from MA benchmarks exceed 
the net costs attributable to FFS coverage of kidney acquisition costs. 
The commenter also pointed to the Congressional Budget Office's 
November 2016 cost estimate of the Cures Act, which reported no change 
in federal spending, to underscore the notion that the net savings 
estimated in the proposed rule were not intended by the change in law.
    Response: We thank the commenter for this feedback. Total MA kidney 
acquisition costs have historically been lower than total FFS kidney 
acquisition costs for two main reasons: (1) MA transplant incidence has 
been lower than FFS transplant incidence; and (2) MA ESRD enrollment 
(as a percent of total MA enrollment) has been lower than FFS ESRD 
enrollment (as a percent of total FFS enrollment). These factors result 
in a lower number of MA kidney transplants per capita versus FFS kidney 
transplants per capita. We expect savings from the exclusion of kidney 
acquisition costs from the MA benchmarks since MA plans have 
historically been reimbursed for these costs based on the higher rate 
of transplantation in FFS. We believe our impact analysis sufficiently 
outlined why the shift in responsibility from MA to FFS is not budget 
neutral.
    Comment: Some commenters requested that we explain why the 
estimates in the 2021 Advance Notice appear to diverge from the 
estimates included in the proposed rule. The commenters indicated that 
the FFS cost of kidney acquisition would be an estimated $2.82 PMPM 
while the Advance Notice indicated that the carve-out impact estimate 
would be $4 PMPM.
    Response: The Medicare FFS cost of kidney acquisitions estimate 
provided in the proposed rule is a national estimate of the impact on 
the Medicare Trust Funds. In contrast, the preliminary estimate 
provided in the calendar year 2021 Advance Notice represents a county-
level average impact of excluding kidney acquisition costs from FFS 
experience on the MA non-ESRD county rates. Additionally, the estimates 
provided in the proposed rule and the Advance Notice were calculated 
using different trending assumptions and underlying data. The updated 
estimate of the impact figure that was provided in the calendar year 
2021 Advance Notice is $3.
    Comment: A few commenters questioned the credibility of county 
level data in determining the kidney acquisition cost carve-out amounts 
and requested that CMS release the supporting data and analyses. A 
commenter specifically pointed to Tables 26 and 27 in the proposed 
rule, noting that there were approximately 75,000 kidney transplants 
paid by FFS during 2014-2018 (the data period used to compute the 
kidney acquisition carve-out amounts). The commenter expressed concern 
regarding the credibility of using 75,000 events to develop 3,225 
county specific carve-out factors, and requested that the kidney 
acquisition cost factors be developed across broader geographic areas 
than counties in order to mitigate variability and potential 
credibility issues that may exist when forecasting county level carve-
out amounts.
    Response: CMS provided a step-by-step description of the 
methodology for calculating the kidney acquisition costs to be excluded 
from the MA benchmarks on pages 25 and 26 of the calendar year 2021 
Advance Notice.\55\ Consistent with the statutory requirement to 
exclude the cost of kidney acquisitions for organ transplants from the 
primary components of the MA capitation rates, CMS finalized the kidney 
acquisition carve-out methodology after considering all public comments 
received.
---------------------------------------------------------------------------

    \55\ The Advance Notice and Rate Announcement for each year are 
available online at: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.
---------------------------------------------------------------------------

    Organ acquisition costs for transplants are paid on a reasonable 
cost basis, separately from the MS-DRG (Medicare Severity Diagnosis 
Related Group) payment. Hospitals are paid the estimated amount for 
these costs through interim biweekly payments throughout the year, 
referred to as ``pass-through amounts'' (pass-through amounts include 
other costs as well). For MA rate calculations to date, these FFS pass-
through amounts are estimated and specifically added to the inpatient 
claim records to account for the eventual payment in the FFS program on 
a reasonable cost basis. The kidney acquisition costs included in the 
pass-through amounts are added to all discharges from kidney transplant 
centers by the county of the beneficiary's residence. Since the number 
of these discharges greatly exceeds the number of transplants, there is 
sufficient data to calculate credible kidney carve out factors and 
there is no need to adjust for credibility. Kidney acquisition costs 
are not allocated by the number of transplants. Since the pass-through 
KAC amounts are calculated and included at the county level, the carve-
out factors must be developed at the county level to be consistent.
    Comment: A commenter expressed concern about potential barriers to 
access to transplantation in MA, citing language in the proposed rule 
that stated that the transplant incidence rate for ESRD beneficiaries 
has historically been higher in FFS than in MA.
    Response: Our data indicated that MA ESRD enrollees have been in 
dialysis status for a shorter duration and are typically older than FFS 
ESRD enrollees. We have observed that in the Medicare program, the 
incidence of kidney transplants is typically inversely correlated with 
age; the younger the ESRD enrollee, the more likely that a kidney 
transplant will occur. Historically, MA enrollees are less likely than 
FFS enrollees to receive a kidney transplant since the average age of 
MA ESRD enrollees is higher than the average age of FFS ESRD enrollees. 
It is our interpretation of this data that on average, older ESRD 
enrollees are not as likely to be eligible for a kidney transplant due 
to other underlying health conditions that typically occur as these 
enrollees age. The 2020 Kidney Disease: Improving Global Outcomes 
(KDIGO) Clinical Practice Guideline on the Evaluation and Management of 
Candidates for Kidney Transplantation

[[Page 33891]]

outlines a comprehensive, evidence-based set of guidelines and 
recommendations designed to assist health care professionals assess 
suitability for candidacy for kidney transplantation. While clinicians 
are advised against excluding patients because of age alone, the 
guidelines recommend that they consider age in the context of other 
comorbidities, including frailty, which may affect outcomes. As MA 
enrollees have typically become eligible for Medicare due to age and 
disability and are, on average, older than FFS enrollees, MA ESRD 
enrollees may, on average, be more likely to have comorbidities that 
make them less suitable for kidney transplantation. As more ESRD 
beneficiaries enroll in MA plans, we anticipate that the profile of 
these beneficiaries will change and the difference in the transplant 
incidence rate for ESRD beneficiaries enrolled in MA and those in FFS 
will decrease.
    After careful consideration of all comments received, we are 
finalizing the exclusion of kidney acquisition costs from MA benchmarks 
and coverage under FFS Medicare as proposed.
3. Reinsurance Exceptions (Sec.  422.3)
    It is difficult to determine whether there would be a cost or 
savings impact to this proposal. The use of reinsurance or other 
arrangements permitted by the proposal is a choice for MA 
organizations, which they can exercise if they believe it is in their 
business interests to purchase. While purchasing reinsurance coverage 
has a cost associated with it, the use of reinsurance provides 
financial protection that may generate offsetting savings to the MA 
organization, or reduce their risk. Therefore, we are unable to 
quantitatively estimate the impacts of this provision.
    We solicited stakeholder comment on (i) how this provision may be 
used, (ii) likely costs and savings, and (iii) other related impacts. 
We received no comments on this regulatory impact analysis for this 
proposal and therefore are finalizing this provision without 
modification.
4. Medicare Advantage (MA) and Part D Prescription Drug Program Quality 
Rating System (Sec. Sec.  422.162, 422.166, 423.182, and 423.186)
    We proposed measure updates as well as the methodology changes 
(concerning outliers and the weight of patient experience/complaints 
and access measures). These measure updates are routine and do not have 
an impact on the highest ratings of contracts (that is, overall rating 
for MA-PDs, Part C summary rating for MA-only contracts, and Part D 
summary rating for PDPs). These type of routine changes have 
historically had very little or no impact on the highest ratings. 
Hence, there will be no, or negligible, impact on the Medicare Trust 
Fund from the routine changes.
    The cost impacts due to the Star Ratings updates are calculated by 
quantifying the difference in the MA organization's final Star Rating 
with the final rule and without the final rule. There are two ways that 
our final rule could cause a contract's Star Rating to change: (1) To 
increase measure weights for patient experience/complaints and access 
measures from two to four; and (2) the use of Tukey outlier deletion, 
which is a standard statistical methodology for removing outliers. 
There are assumed to be Medicare Trust Fund impacts due to the Star 
Ratings changes associated with these two revisions to the methodology. 
The increased measure weights for patient experience/complaints and 
access revision is assumed to be a cost to the Medicare Trust Fund, as 
there are more contracts that would see their Star Ratings increase 
than decrease. The Tukey outlier deletion is assumed to be a saver to 
the Medicare Trust Fund after the first year, as more contracts would 
see their Star Ratings decrease rather than increase.
    All impacts are considered transfers since no goods or services are 
increased or decreased.
    The impact analysis for the Star Ratings updates takes into 
consideration the final quality ratings for those contracts that would 
have Star Ratings changes under this final rule. There are two ways 
that Star Ratings changes will impact the Medicare Trust Fund:
     A Star Rating of 4.0 or higher will result in a QBP for 
the MA organization, which, in turn, leads to a higher benchmark. MA 
organizations that achieve an overall Star Rating of at least 4.0 
qualify for a QBP that is capped at 5 percent (or 10 percent for 
certain counties).
     The rebate share of the savings will be higher for those 
MA organizations that achieve a higher Star Rating. The rebate share of 
savings amounts to 50 percent for plans with a rating of 3.0 or fewer 
stars, 65 percent for plans with a rating of 3.5 or 4.0 stars, and 70 
percent for plans with a rating of 4.5 or 5.0 stars.
    In order to estimate the impact of the Star Ratings updates, the MA 
baseline assumptions are updated with the assumed Star Ratings changes 
described in this final rule. The MA baseline is completed using a 
complicated, internal CMS model. The main inputs into the MA baseline 
model include enrollment and expenditure projections. Enrollment 
projections are based on three cohorts of beneficiaries: (i) Dual-
eligible beneficiaries; (ii) beneficiaries with employer-sponsored 
coverage; and (iii) all others, including individual-market enrollees. 
MA enrollment for all markets is projected by trending the growth in 
the penetration rates for the 2011 through 2018 base data. The key 
inputs for the expenditure projections include the following:
     United States Per Capita Cost (USPCC) growth rates.
     Adjustment to MA risk scores for differences in diagnosis 
coding between MA and fee-for-service beneficiaries.
     Quality bonus (county-specific).
     Phase-out of Indirect Medical Education (county-specific).
    Projections are performed separately for payments from the Part A 
and Part B trust funds. Aggregate projected payments are calculated as 
the projected per capita cost times the projected enrollment. The 
Medicare Trust Fund impacts are calculated by taking the difference of 
the MA baseline with the Star Ratings changes and the original MA 
baseline.
    The results are presented in Table 12. The last column of Table 12 
presents net savings to the Medicare Trust Fund once both provisions 
are in place; in 2024 the costs are $345.1 million; the net savings 
will grow over time reaching $999.4 million by 2030. The first year 
only includes the implementation of the weight change, while future 
years include both the weight change and Tukey outlier deletion 
resulting in a change from the first year as a cost to the Medicare 
Trust Fund to a net savings in future years. The aggregate savings over 
2024 to 2030 are $4.1 billion. Ordinary inflation is carved out of 
these estimates. The source for ordinary inflation is Table II.D.1. of 
the 2019 Medicare Trustees report. It should be noted that there are 
inflationary factors that are used in the projected Star Ratings and 
are used in these estimates. The Star Ratings are assumed to inflate at 
a higher rate for the lower rated contracts than for the higher rated 
contracts. MA organizations with low Star Ratings have a better chance 
of improving their quality ratings than MA organizations that have 
already achieved a high Star Rating. For instance, a contract with a 
Star Rating of 4.5 has less room to increase its Star Rating than a 
contract with a Star Rating of 3.0.
    There is a large projected reduction in the costs associated with 
the increase in the weight of measures classified as

[[Page 33892]]

patient experience/complaints and access measures in 2029. This is due 
to several contracts that are projected to achieve a 4.0 Star Rating in 
2029 and are eligible for the QBP at that time, even after this final 
rule is applied. This narrows the difference in costs between the final 
rule and the original baseline.
    The impact on costs is not seen until 2024 for the increase in 
weights and 2025 for the Tukey outlier deletion since these policies 
are being implemented for the 2021 and 2022 measurement years (meaning 
performance periods), respectively. A change for the 2021 measurement 
year impacts the 2023 Star Ratings which determines the MA QBPs for the 
2024 contract year. Similarly, a change for the 2022 measurement year 
impacts the 2024 Star Ratings which determines the MA QBPs for the 2025 
contract year.

                           Table 12--Calculations of Net Savings per Year to the Medicare Trust Fund for Star Ratings Updates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Increased cost
                                                                                            (weight) in                    Savings from
                                                                          Increased cost  patient access                   Tukey outlier    Net savings
                                                                            (weight) in   and experience/  Savings from     deletion ($    with ordinary
                      Calendar year                          Ordinary     patient access   complaints ($   Tukey outlier  millions) with     inflation
                                                           inflation (%)  and experience/ millions) with    deletion ($      ordinary      carved out ($
                                                                           complaints ($     ordinary        millions)       inflation       millions)
                                                                             millions)       inflation                      carved out
                                                                                            carved out
--------------------------------------------------------------------------------------------------------------------------------------------------------
2024....................................................            3.20           391.4           345.1               0             0.0          -345.1
2025....................................................            3.20           305.4           260.9             935           798.8           537.9
2026....................................................            3.20           296.1           245.1        1,029.00           851.8           606.7
2027....................................................            3.20           343.4           275.4        1,110.50           890.8           615.3
2028....................................................            3.20           301.1           234.0        1,296.50          1007.7           773.7
2029....................................................            2.60            93.9            71.1        1,356.90          1027.9           956.8
2030....................................................            2.60            95.7            70.7        1,449.20          1070.0           999.4
    Totals with inflation carved out....................  ..............  ..............          1502.3  ..............          5647.0          4144.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: In all but the last column both costs and savings are expressed as positive numbers. Positive numbers in the last column indicate savings while
  negative numbers indicate net cost.

    We received the following comments on our estimates of cost 
impacts, and our responses follow.
    Comment: A couple of commenters wanted more information on the 
modeling related to the financial impacts.
    Response: The modeling is based on taking the difference of the MA 
baseline with the Star Ratings changes (Tukey outlier deletion and the 
weight increase for patient experience/complaints and access measures) 
and the original MA baseline which is described in the Medicare 
Trustees Report available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf. CMS assumptions related to enrollment and revenue 
growth are available in the Medicare Trustees Report. Some commenters 
referenced analyses that Wakely \56\ conducted that suggested a higher 
impact for deletion of outliers. As we are implementing these changes 
on top of guardrails, which will already limit significant movements of 
cut points from year-to-year, we do not believe that the estimates 
should be higher than what was included in the notice of proposed 
rulemaking.
---------------------------------------------------------------------------

    \56\ Wakely Consulting Group. Star Rating Variability of Patient 
Experience and Access Measures: Analyzing the Impact of Variable 
Star Rating Cut Points and Measure Level Results. March 2020.
---------------------------------------------------------------------------

    As many commenters noted, the COVID-19 public health emergency does 
create more uncertainly in terms of how performance and quality metrics 
will change following the pandemic. At this time there is too much 
uncertainty to revise these estimates to reflect the impact of the 
pandemic on quality measure scores. CMS will continue to monitor the 
impact for additional changes.
    Comment: A few commenters mentioned the analysis by Wakely 
referenced in the prior comment which suggests that CMS may have 
overestimated the weight impact on Star Ratings for plans. The report 
also found there is significant year-over-year volatility in average 
Star Ratings for patient experience/complaints and access measures, 
despite consistent trends in plan performance over time and that 
increasing the weight of these measures could impact the stability of 
the Star Ratings program.
    Response: The Wakely report claims that the volatility in cut 
points over time is primarily driven by the clustering methodology. CMS 
disagrees with this conclusion. The majority of measures included in 
the patient experience/complaints and access categories do not use the 
clustering methodology. CAHPS measure Star Ratings are calculated using 
relative distribution and significance testing, per Sec. Sec.  
422.166(a)(3) and 423.186(a)(3). CMS has seen over time that changes in 
measure cut points are primarily driven by differences in the 
distribution of scores over time and changes in industry performance. 
It is also not clear whether Wakely took into consideration other 
changes to the Star Ratings methodology over time, including the 
retirement of the Part D appeals and BMI measures.
    In the proposed rule, CMS proposed outlier deletion using the Tukey 
outer fence outlier removal. The main objective of removing outliers is 
to stabilize cut points and prevent large year-to-year fluctuations in 
cut points. Even for skewed distributions, Tukey outlier removal works 
to stabilize cut points to avoid substantial year-to-year fluctuations 
in cut points that can be caused by extreme outliers.
    Comment: A couple of commenters questioned the budget estimates for 
the new policies. They mentioned the Wakely report noting that the 
report estimated that increasing the weights of patient experience/
complaints and access measures in the 2023 Star Ratings would only 
increase MA plan payments by $83 million--nearly 5 times less than what 
CMS estimated. A commenter stated that when combined with the proposal 
to exclude outliers, more MA enrollees would be in plans negatively 
impacted than those who would see positive results. The commenter 
requested CMS to first provide more details on its methodology to allow 
plans to run similar simulations to better understand the impact of the

[[Page 33893]]

proposed change to the weighting for these measures and plan ratings
    Response: It is unclear to CMS how Wakely did their simulations. 
For example, it appears that Wakely did not understand that the CAHPS 
measures are not calculated using the clustering methodology, and 
consequently, Tukey outlier deletion would not be applied to that group 
of measures. CMS simulations were conducted assuming the implementation 
of guardrails which limits the fluctuation in cut points and assuming 
the retirement of the Part D appeals and BMI measures. Wakely stated 
they applied mean resampling and guardrails to the Star Rating cut 
points prior to applying Tukey outlier deletion; therefore, the 
estimated impact of Tukey outlier deletion does not include the impact 
of mean resampling and guardrails. We specifically proposed that prior 
to applying mean resampling with hierarchal clustering, Tukey outer 
fence outliers are removed and this is how CMS conducted the 
simulations. This may be causing some of the discrepancies. As 
described above, CMS estimated the change in the ratings of MA 
contracts and then modeled the cost impact using that information and 
enrollment and expenditure projections. Enrollment projections are 
based on three cohorts of beneficiaries: (i) Dual-eligible 
beneficiaries; (ii) beneficiaries with employer-sponsored coverage; and 
(iii) all others, including individual-market enrollees. MA enrollment 
for all markets is projected by trending the growth in the penetration 
rates for the 2011 through 2018 base data. The key inputs for the 
expenditure projections include the USPCC growth rates, adjustment to 
MA risk scores, quality bonuses (county-specific), and phase-out of 
indirect medical education (county-specific).
    After careful consideration of all comments received, and for the 
reasons set forth in our responses to the related comments summarized 
earlier, we are finalizing our impact analysis for the Star Ratings 
updates to include delayed implementation of Tukey outlier deletion by 
one year.
5. Medical Loss Ratio (MLR) (Sec. Sec.  422.2420, 422.2440, and 
423.2440)
Regulatory Changes to Incurred Claims (Sec.  [thinsp]422.2420)
    As discussed in section IV.D.2 of this final rule, we are 
finalizing our proposal to amend the regulation at Sec.  
422.2420(b)(2)(i) so that the incurred claims portion of the MLR 
numerator for an MA contract would include all amounts that an MA 
organization pays (including under capitation contracts) for covered 
services for all enrollees under the contract. Prior to this regulatory 
change, Sec.  422.2420(b)(2)(i) specified that incurred claims include 
direct claims that an MA organization pays to providers as defined in 
Sec.  422.2 (including under capitation contracts with physicians) for 
covered services provided to all enrollees under the contract.
    We proposed this amendment so that incurred claims in the MLR 
numerator will include expenditures for certain supplemental benefits 
that MA organizations are newly authorized to offer to MA enrollees as 
a result of recent policy and legislative changes. As explained in 
greater detail in section II.A. of this final rule and sections II.A. 
and VI.F. of the proposed rule, recent subregulatory guidance and 
statutory changes have expanded the types of supplemental benefits that 
MA organizations may offer to enrollees. Beginning in 2020, pursuant to 
section 1852(a)(3)(D) of the Act, as amended by the BBA of 2018, MA 
organizations may provide SSBCI. SSBCI can include benefits that are 
not primarily health related, as long as the item or service has the 
reasonable expectation to improve or maintain the chronically ill 
enrollee's health or overall function. In addition, effective January 
1, 2019, CMS' interpretation of ``primarily health related benefits,'' 
which is used as a criterion for supplemental benefits, has been 
changed to include services or items used to diagnose, compensate for 
physical impairments, ameliorate the functional/psychological impact of 
injuries or health conditions, or reduce avoidable emergency and 
healthcare utilization. To be considered ``primarily health related,'' 
a supplemental benefit must focus directly on an enrollee's health care 
needs and should be recommended by a licensed medical professional as 
part of a health care plan, but it need not be directly provided by 
one.
    This impact analysis assumes that the amendments to Sec.  
422.2420(b)(2)(i) would not impact MA enrollee benefits. In other 
words, the analysis assumes the amendments would change the types of 
expenditures that could be included in the MLR numerator as incurred 
claims, but there would be no impact on the level or number of 
permissible enrollee benefits that MA plans elect to offer.
    The requirements pertaining to the calculation and reporting of MA 
contracts' MLRs are presented in 42 CFR part 422, subpart X. MA 
organizations that do not meet the 85 percent minimum MLR requirement 
for a contract year are required to remit funds to us (Sec.  
422.2410(b)). We collect remittances by deducting the amounts owed from 
MA organizations' monthly payments (Sec.  422.2470(c)). In the absence 
of statutory language directing us to return remitted funds to the 
Medicare Trust Fund, we transfer remittances to the Treasury. For 
purposes of this impact analysis, we assume contracts that have an MLR 
of less than 85 percent for one contract year do not continue to fail 
to meet the MLR requirement for an additional two consecutive contract 
years, which would result in imposition of enrollment sanctions, or for 
an additional four consecutive contract years, which would result in 
contract termination. This is consistent with our experience; although 
the MLR requirement has only been in effect for five contract years, to 
date, very few contracts have been subject to MLR-related enrollment 
sanctions, and only one contract has failed to meet the MLR requirement 
for more than three consecutive contract years. No contract has been 
terminated for failure to meet the MLR requirement for five consecutive 
contract years.
    Total remittances for individual contract years can be substantial. 
Based on internal CMS data, the simple average of total remittances 
across all contracts for contract years 2014--2017 is $131 million. If 
we adjusted these payments to a 2017 level by trending for enrollment 
and per capita growth but carving out ordinary inflation, the average 
would be $139 million.
    We anticipate that the amendments to Sec.  422.2420(b)(2)(i), which 
we are finalizing in this final rule, would increase the numerator of 
the MLR because the incurred claims category would include certain 
expenditures that would not qualify for inclusion in the numerator 
under the current regulations. Specifically, under the amendments to 
Sec.  422.2420(b)(2)(i) that we are finalizing, incurred claims would 
include amounts that an MA organization pays (including under 
capitation contracts) for covered services, regardless of whether 
payment is made to an individual or entity that is a provider as 
defined at Sec.  422.2. We expect that this will cause some MA 
contracts which formerly would not have satisfied the 85 percent 
minimum MLR requirement to now meet or exceed it. For contracts that 
still fail to meet the 85 percent threshold, we anticipate that the 
amount of remittances would decrease. In other words, we anticipate 
that the amendments to Sec.  422.2420(b)(2)(i) that we are finalizing 
will effectively result in a transfer of funds from the Treasury

[[Page 33894]]

to the MA organizations through the Medicare Trust Fund. Amounts that 
MA organizations would remit and which the Treasury would receive under 
the regulations prior to their amendment by this final rule will 
instead remain with the MA organizations, implying that MA 
organizations will enjoy cost savings while the Treasury has a cost 
impact. The net impact on the Medicare Trust Fund is expected to be 
zero, since there will be no additional transfers from or to the 
Medicare Trust Fund; the only issue will be whether the MA 
organizations retain additional funds or the Treasury receives fewer 
funds.
    To estimate the amount of payments made for services that would be 
included in incurred claims under the amendments to Sec.  
422.2420(b)(2)(i) that we are finalizing, we used data in the 2019 
submitted bids to estimate the increase in the supplemental benefits 
category for the primarily health related benefits that MA 
organizations could include in their PBPs starting in 2019. This 
estimate is complicated by the fact that, in the absence of the 
amendments to Sec.  422.2420(b)(2)(i), some types of supplemental 
benefits that MA organizations could offer starting in 2019 could 
potentially meet the requirements at Sec.  422.2430 to be quality 
improvement activities (QIAs) for MLR purposes, meaning expenditures 
for those benefits could be included in the MLR numerator. Based on the 
2019 submitted bid information, a consideration of the types of 
benefits that MA organizations could offer under our reinterpretation 
of the ``primarily health related'' definition, and the likelihood that 
some of these benefits would meet the requirements at Sec.  422.2430(a) 
to be QIAs, we estimated a 52 percent increase in projected 
expenditures for the categories of ``primarily health related'' 
supplemental benefits that would not qualify for inclusion in the MLR 
numerator as ``incurred claims'' under Sec.  422.2420(b)(2)(i), as 
defined prior to the amendment that we are finalizing in this final 
rule, or as QIA under Sec.  422.2430(a). The first year that the 
expanded interpretation of ``primarily health related benefits'' was 
implemented was 2019, and so the increase seen in these categories for 
2019 is attributed to this reinterpretation. To date, MA organizations 
have only been able to include non-primarily health related SSBCI in 
their plan offerings for one year (that is, 2020). While early 
indications show that utilization for these benefits have been low, we 
expect the use of these benefits to grow over time as MA organizations 
become more familiar with them and have time to include them in future 
plan offerings. Due to the absence of credible data for SSBCI, the 
impact on future MLR remittances is currently unquantifiable. We will 
continue to track SSBCI information and adjust the forecasts as more 
information becomes available.
    We then reevaluated the MLRs for those contracts that failed to 
meet the 85 percent MLR requirement for contract years 2014--2017 by 
revising the numerator calculation to incorporate the 52 percent 
increase in the previously listed benefits. The change in the numerator 
calculation resulted in several of the contracts passing the MLR 
requirement instead of failing. For contracts that would not have met 
the MLR requirement even with the revised numerator calculation, the 
amount of remittances decreased. The average decrease in remittance 
payments over the four-year period (that is, 2014--2017) is estimated 
to be $25.8 million (in 2017 dollars).
    In order to project the decrease in remittances for the years 
2021--2030, the $25.8 million was increased using estimated enrollment 
and per capita increases based on Tables IV.C1 and IV.C3 of the 2019 
Medicare Trustees Report, with ordinary inflation (Table II.D1 of the 
2019 Medicare Trustees Report) carved out of the estimates.
    The results are presented in Table 13, which shows that for the 
first year of the finalized provision, 2021, there will effectively be 
a transfer from the Treasury through the Medicare Trust Fund of $35.3 
million to MA organizations. (For computational transparency, the table 
also shows the amounts that would have been transferred to MA 
organizations for 2017--2020 if the change we are finalizing in this 
final rule had been in place in those years.) This transfer is in the 
form of a reduction in the remittance amounts withheld from MA 
capitated payments. This amount (that is, the amount of remittances not 
withheld from MA capitated payments under the finalized provision) is 
projected to grow over 10 years, resulting in a $56.4 million transfer 
from the Treasury through the Medicare Trust Fund to MA organizations 
in 2030. The total transfer from the Treasury to MA organizations over 
10 years is $455 million. There is $0 impact on the Medicare Trust 
Fund.

                     Table 13--Transfer of Remittances From the Treasury to MA Organizations
----------------------------------------------------------------------------------------------------------------
                                                     Medicare         Average
                                                     Advantage      annual per       Ordinary      Net costs  ($
                      Year                          enrollment        capita         inflation       millions)
                                                     increase       increase %
----------------------------------------------------------------------------------------------------------------
2017............................................  ..............  ..............  ..............            25.8
2018............................................             7.7             5.5             3.2            28.4
2019............................................             6.7             5.5             3.2            31.0
2020............................................             5.0             5.5             3.2            33.3
2021............................................             3.6             5.5             3.2            35.3
2022............................................             3.8             5.5             3.2            37.5
2023............................................             3.5             5.5             3.2            39.7
2024............................................             3.3             5.5             3.2            41.9
2025............................................             3.1             5.5             3.2            44.2
2026............................................             3.0             5.5             3.2            46.5
2027............................................             2.7             5.5             3.2            48.8
2028............................................             2.5             5.5             3.2            51.1
2029............................................             2.3             5.5             2.6            53.8
2030............................................             2.0             5.5             2.6            56.4
                                                 ---------------------------------------------------------------
    Total 2021-2030.............................  ..............  ..............  ..............           455.2
----------------------------------------------------------------------------------------------------------------


[[Page 33895]]

    We received no comments on our impact analysis and are finalizing 
the proposal without modification.
Deductible Factor for MA Medical Savings Account (MSA) Contracts (Sec.  
422.2440)
    As discussed in section IV.D.4. of this final rule, we are 
finalizing our proposal to amend Sec.  422.2440 to provide for the 
application of a deductible factor to the MLR calculation for MA MSA 
contracts that receive a credibility adjustment. The deductible factor 
will serve as a multiplier on the credibility factor. We are also 
finalizing our proposal to adopt and codify in new paragraph (g) of 
Sec.  422.2440 the same deductible factors that appear in the 
commercial MLR regulations at 45 CFR 158.232(c)(2). For partially 
credible MA MSA contracts, the deductible factor will range from 1.0 
for MA MSA contracts that have a weighted average deductible of less 
than $2,500 to 1.736 for MA MSA contracts have a weighted average 
deductible of $10,000 or more.
    In section IV.D.4. of this final rule, we explain that we proposed 
to add a deductible factor to the MLR calculation for MSAs so that 
organizations currently offering MSA plans, or those that are 
considering entering the market, are not deterred from offering MSAs 
due to concern that they will be unable to meet the MLR requirement as 
a result of random variations in claims experience. Although we believe 
that the deductible factors would adequately address any such concerns 
by making it less likely that an MSA contract will fail to meet the MLR 
requirement due to random variations in claims experience, we are 
uncertain whether or how the proposed change to the MLR calculation for 
MA MSA contracts will impact the availability of MA MSAs or the number 
of beneficiaries enrolled in MA MSAs. Due to this uncertainty, we 
estimate that the cost impact of the change to the MLR calculation for 
MA MSAs will be as low as $0 or as high as $40 million over 10 years 
(2021-2030).
    We do not anticipate that applying a deductible factor to the MLR 
calculation for MA MSA contracts will have an impact on remittances to 
the federal government. For contract years 2014-2018 (the most recent 
contract year for which MA MSAs have submitted MLR data), no MA MSA 
contract has failed to meet the 85 percent minimum MLR requirement. If 
the deductible factor had applied to the MLR calculation for MA MSAs 
for contract years 2014-2018, although the MLRs for partially credible 
MA MSAs would have been higher, total remittances by MA MSAs would have 
remained at $0. We do not anticipate that MSA contracts that currently 
meet the MLR requirement will have more difficulty doing so after the 
deductible factor is applied to the MLR calculation, starting in 
contract year 2021. We anticipate that new MA MSA contracts that MA 
organizations may choose to offer as a result of this regulatory change 
will also succeed in meeting the MLR requirement, in light of the 
experience of current MSAs and in consideration of the more generous 
credibility adjustment that potential new MSAs would be expected to 
receive as a result of the application of the deductible factor.
    We believe that the cost impact of this regulatory change, if any, 
will be attributable to an increase in MA MSA enrollment as these plans 
become more widely available as a result of MA organizations choosing 
to offer MA MSAs in response to the change to the MLR calculation. To 
develop the upper limit of the cost estimate for this impact analysis 
($40 million over 10 years), we assumed that the change to the MLR 
calculation for MSAs would cause MA MSA enrollment to double over the 
first 3 years that the change is in effect. We estimated that, relative 
to previous enrollment projections that did not account for the 
amendments that we are finalizing in this final rule, this regulatory 
change MSA enrollment will be 33.33 percent higher in 2022, 66.67 
percent higher in 2023, and 100 percent higher in 2024 to 2030. We 
assumed that half of the new enrollees in MA MSA plans would otherwise 
have been enrolled in other types of MA plans, and half would otherwise 
have been enrolled in FFS Medicare.
    We did consider the migration patterns for EGWP ESRD beneficiaries 
versus Individual ESRD beneficiaries. We surmised that the costs 
differences between EGWP and Individual ESRD coverages are not 
significant enough to display the migration patterns separately. 
Displaying projections at that coverage level would not provide further 
understanding of the financial projections since the cost differences 
are not too different. Furthermore, EGWP plans have not submitted bids 
since 2017 and their payments are based on aggregated Individual bids 
so the cost differences would not be expected to be too different.
    We then determined the difference between the amount we pay for 
each MA MSA plan enrollee and the amount we pay for each enrollee in a 
non-MSA MA plan or FFS Medicare. We generally incur greater costs for 
MA MSA enrollees relative to enrollees in other MA plans because 100 
percent of the difference between the MA MSA's projection of the cost 
of A/B services (referred to as the MSA premium) and the benchmark is 
deposited in the enrollee's account. By contrast, for non-MSA MA plans 
that bid under the benchmark, we retain between 30 percent and 50 
percent of the amount by which the benchmark exceeds the bid. FFS 
spending per enrollee is approximately 100 percent of the amount we pay 
to MA plans for each enrollee. Therefore, the cost to the Medicare 
program for each additional MA MSA enrollee is approximately the same 
regardless of whether the enrollee would otherwise have been enrolled 
in a non-MSA MA plan or in FFS Medicare.
    The estimated annual cost to the Medicare Trust fund by contract 
year is presented in Table 14. This estimate takes into account the 
projected growth in MSA enrollment in the part C baseline projection 
supporting the Mid-Session Review of the FY 2020 President's Budget. 
The estimated annual cost reflects the additional cost to the Medicare 
program for each beneficiary who enrolls in an MA MSA plan in lieu of a 
non-MSA MA plan or FFS Medicare, multiplied by the projected increase 
in the number of enrollees in MA MSA plans.

                    Table 14--Estimated Cost per Year to the Medicare Trust Fund for Changes to MLR Calculation for MA MSA Contracts
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Contract year              2021       2022       2023       2024       2025       2026       2027       2028       2029       2030    2021-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual cost (millions).........       $0.0       $1.2       $2.4       $4.0       $4.4       $4.8       $5.2       $5.6       $6.0       $6.4      $40.0
Proposed Annual Increase in MA           0      2,604      5,453      8,531      8,876      9,213      9,531      9,833     10,118     10,354  .........
 MSA Enrollment................
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 33896]]

    We received no comments on our impact analysis and are finalizing 
the proposal without modification.
6. Medicare Advantage (MA) and Cost Plan Network Adequacy (Sec. Sec.  
417.416 and 422.116)
    Our final rule codifies the standards and methodology used 
currently, with some modifications, to evaluate network adequacy for MA 
plans and section 1876 cost plans; the final rule includes the list of 
provider and facility specialty types subject to network adequacy 
reviews, county type designations and ratios, maximum time and distance 
standards and minimum number requirements. The final rule also 
formalizes the CMS exceptions process and requires the annual 
publishing of the Health Services Delivery (HSD) reference file, which 
will provide updated numbers and maximums for these standards in 
subsequent years, and the Provider Supply File, which lists available 
providers and facilities, including their corresponding office 
locations and specialty types. CMS will continue to use the current 
PRA-approved collection of information in conjunction with the HPMS 
Network Management Module as a means for MA organizations to submit 
network information when required. As this has been the process for 
conducting network adequacy reviews since 2016, we do not expect any 
additional burden on MA plans as it relates to the network adequacy 
review process.
    Our final rule is solely related to the sufficiency of contracted 
networks that MA organizations must maintain and has no impact on the 
provision of Medicare benefits that must be provided in either in-
network and out-of-network settings. As a result, we do not expect any 
impact on the Medicare Trust Fund.
    However, we are finalizing three modifications to current network 
adequacy policy that may have qualitative impacts on MA organizations. 
In Micro, Rural, and CEAC county designation types, we are reducing the 
percentage of beneficiaries residing within maximum time and distance 
standards from 90 percent to 85 percent. We will allow for a 10-
percentage point credit towards the percentage of beneficiaries 
residing within maximum time and distance when MA organizations 
contract with one or more telehealth providers in the specialties of 
Dermatology, Psychiatry, Neurology, Otolaryngology, Cardiology, 
Ophthalmology, Allergy and Immunology, Nephrology, Primary Care, 
Gynecology/OB/GYN, Endocrinology, and Infectious Diseases. Similarly, 
MA organizations may receive a 10-percentage point credit towards the 
percentage of beneficiaries residing within published time and distance 
standards for affected provider and facility types in states that have 
CON laws, or other state imposed anti-competitive restrictions, if the 
laws limit the number of providers or facilities in a county or state.
    With respect to the reduction in percentage of beneficiaries 
residing within maximum time and distance standards in rural counties, 
we expect that MA organizations will have a greater likelihood of 
complying with our reduced percentage in the initial network submission 
and will not need to request an exception for CMS's consideration. It 
is not possible to fully quantify the level of effort or hours required 
for an MA organization to submit an exception request, as they are 
submitted for multiple reasons. However, generally, we expect that this 
change will decrease the administrative burden on MA organizations when 
going through the network review process. Conceivably, the 
administrative costs included in an MA organization's bid could 
decrease. However, the decrease in administrative burden could be 
offset by the increase in administrative burden of contracting with 
telehealth providers. Additionally, more MA organizations may consider 
providing contracted services in areas that have traditionally been 
difficult to establish a sufficient network. The ability to meet 
compliance standards in new markets is a reasonable factor that may 
drive MA organization behavior, but we cannot quantify the likelihood 
of this, as many other factors are considered when entering new 
markets. In theory, the reduction in the rural percentage could 
conceivably increase MA enrollment, however our enrollment projections 
currently do not consider health plans' network adequacy information, 
and any changes to enrollment projections would be very minor.
    By crediting MA organizations 10-percentage points towards the 
percentage of beneficiaries residing within time and distance standards 
for contracting with telehealth providers for certain specialties, we 
anticipate that this will be one of many factors that will help 
encourage MA organizations to contract with providers that offer 
telehealth services. However, we do not expect this policy change to 
significantly alter MA organization contracting patterns related to 
telehealth providers.
    For the 10-percentage point credit for affected providers and 
facilities in states with CON laws, we expect that MA organizations 
will have a greater likelihood of complying with network adequacy 
standards in the initial network submission and will not need to 
request an exception for CMS's consideration. As we discussed earlier, 
it is not possible to fully quantify the level of effort or hours 
required for an MA organization to submit an exception request, but it 
is possible the administrative costs included in an MA organization's 
bid could decrease. However, we believe time associated with completing 
exception requests is nominal will not have a significant impact on the 
overall administrative costs submitted in a plan's bid.
    In summary, we believe this proposal will have a non-quantifiable, 
negligible economic impact. We received no comments on the regulatory 
impact of this proposal, and therefore, we are finalizing this 
provision without modification.

E. Alternatives Considered

    We intend to address the proposals that had Alternatives Considered 
sections from the February 2020 proposed rule in subsequent rulemaking. 
CMS did not develop Alternatives Considered sections for most of the 
provisions in this final rule as they generally are direct 
implementations of federal laws or codifications of existing policy for 
the Part C and D programs. In this section, CMS includes discussions of 
Alternatives Considered for the provisions to which they are 
applicable.
1. Medicare Advantage (MA) Plan Options for End-Stage Renal Disease 
(ESRD) Beneficiaries (Sec. Sec.  422.50, 422.52, and 422.110)
    We have considered alternatives to estimated costs to the Medicare 
Trust Funds for removing the prohibition for ESRD beneficiaries to 
enroll in MA plans. Table 7 above displays the baseline scenario that 
ESRD enrollment in MA plans is expected to increase by 83,000 due to 
the Cures Act provision. This increase is assumed to be phased in over 
6 years, with half of the beneficiaries (41,500) enrolling during 2021. 
Table 7 shows the net cost to range from $23 million in CY 2021 to $440 
million in CY 2030 which sums to $2.66 billion cost for those 10 years.
    The upper scenario uses the assumption that the entire ESRD 
enrollment increase in MA plans of 83,000 will occur in 2021. All other 
assumptions are expected to remain the same as those in the baseline. 
Under this upper scenario, net costs are expected to range from $45 
million in CY 2021 to $440 million in CY2030

[[Page 33897]]

which sums to $2.73 billion cost for the 10 year projection period.
    The lower scenario uses a slower ESRD enrollment increase 
assumption. Under this scenario, the ESRD enrollment will linearly 
increase from 8,300 in 2021 to 83,000 in 2030. All other assumptions 
are expected to remain the same as those in the baseline. Under this 
lower scenario, net costs are expected to range from $5 million in CY 
2021 to $440 million in CY2030 which sums to $1.87 billion cost for the 
10 year projection period.
2. Medicare Advantage (MA) and Part D Prescription Drug Program Quality 
Rating System (Sec. Sec.  422.162, 422.164, 422.166, 422.252, 423.182, 
423.184, and 423.186)
    We have considered alternative methodologies for deleting outliers 
prior to clustering for determining cut points for non-CAHPS measures 
for the Star Ratings program.
    For example, we have considered trimming, which removes scores 
below and above a certain percentile. As stated in the NPRM, this 
methodology would remove scores regardless of whether they are true 
outliers; thus, this methodology would not meet the policy goal of 
removing outliers as well as the approach we proposed and might not 
have a negligible impact on the cost estimates.
    For the Tukey outlier deletion provision as described in section 
VIII.D.5. of this final rule, we considered which year it should begin. 
In the NPRM we proposed for it to begin for the 2021 measurement year, 
which impacts the 2023 Star Ratings and 2024 Quality Bonus Payment 
ratings. To provide more time for the healthcare delivery system to 
adapt to changes from the COVID-19 pandemic, we are finalizing a delay 
until the 2022 measurement year, which impacts the 2024 Star Ratings 
and the 2025 Quality Bonus Payment ratings. The cost impact of this 
change is $713 million (that is, this amount will not be saved from the 
Medicare Trust Fund in 2024).
    We have also considered alternatives to the doubling of the weight 
from 2 to 4 for patient experience/complaints measures and access 
measures for the Star Ratings program as described in section VIII.D.5. 
of this final rule. For example, we considered a weight increase to 3 
or 5 for these measures. With a weight increase to 3, there are very 
small changes in the number of contracts that would increase their 
highest Star Rating, resulting in negligible impacts on Quality Bonus 
Payments and costs to the Medicare Trust Fund relative to a weight of 
4. Similarly, if we were to increase the weight even further to 5, we 
anticipate even greater impacts on the Quality Bonus Payments and, 
consequently, costs to the Medicare Trust Fund.
    Finally, we considered delaying any weight increase given the 
uncertainty about how COVID-19 will impact the healthcare system; 
however, we decided to proceed to further emphasize the importance of 
patient experience/complaints measures and access measures.
3. Medical Loss Ratio (MLR) (Sec. Sec.  422.2420, 422.2440, and 
423.2440)
    We considered finalizing the proposal to add a deductible factor to 
the MLR calculation for MA MSA contracts (section VIII.D.6. of this 
final rule) with an applicability date of January 1, 2022, rather than 
January 1, 2021, since this rule is not being finalized until after the 
deadline for MA organizations to apply to offer MSA plans in 2021. 
However, as discussed in greater detail in section IV.D.4. of this 
final rule, we believe that the credibility factors used to adjust the 
MLRs of low enrollment contracts do not adequately account for the 
impact of claims variability on the MLRs of high deductible MSA 
contracts. We therefore believe it is appropriate that we finalize the 
provision to add a deductible factor to the MLR calculation for MA MSA 
contracts with an applicability date of January 1, 2021, as this will 
allow the deductible factor to be applied when calculating the contract 
year 2021 MLRs for current MA MSA contracts. However, as no current MA 
MSA contract has failed to meet the minimum MLR requirement for a 
previous contract year, we do not anticipate that applying a deductible 
factor to those contracts' contract year 2021 MLRs will have an impact 
on remittances.

F. Accounting Statement and Table

    The following table summarizes savings, costs, and transfers by 
provision. As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Table 15, we 
have prepared an accounting statement showing the savings, costs, and 
transfers associated with the provisions of this final rule for 
calendar years 2021 through 2030. Table 15 is based on Tables 16A, 16B, 
and 16C which lists savings, costs, and transfers by provision. Table 
15 is expressed in millions of dollars with both costs and savings 
listed as positive numbers; aggregate impact is expressed as a negative 
number (cost versus savings). The sign of the transfers follow the 
convention of Table 16 with positive numbers reflecting costs (as 
transfers) to government entities (the Medicare Trust Fund and the 
Treasury) and negative numbers reflecting savings to government 
entities. As can be seen, the net annualized impact of this rule is a 
cost of about $1.9 million per year. The raw aggregate cost over 10 
years is $18.5 million. Due to transfers, there is net annualized 
reduced spending by government agencies (the Medicare Trust Fund and 
Treasury) of $290-$335 million. A breakdown of these savings from 
various perspectives may be found in Table 16.

                                           Table 15--Accounting Table
                                                 (millions $) *
----------------------------------------------------------------------------------------------------------------
              Item                 Annualized at 7%    Annualized at 3%         Period          Who is impacted
----------------------------------------------------------------------------------------------------------------
Net Annualized Monetized Savings  (1.9).............  (1.9).............  Contract Years      Federal
                                                                           2021-2030.          government, MA
                                                                                               organizations and
                                                                                               Part D Sponsors.
Annualized Monetized Savings....  ..................  ..................  Contract Years      ..................
                                                                           2021-2030.
Annualized Monetized Cost.......  1.9...............  1.9...............  Contract Years      Federal
                                                                           2021-2030.          government, MA
                                                                                               organizations and
                                                                                               Part D Sponsors.

[[Page 33898]]

 
Transfers.......................  (293.7)...........  (334.5)...........  Contract Years      Transfers between
                                                                           2021-2030.          the Dept of
                                                                                               Treasury and CMS
                                                                                               (Medicare Trust
                                                                                               Fund, Plans, and
                                                                                               Sponsors).
----------------------------------------------------------------------------------------------------------------
* The ESRD enrollment and Kidney acquisition cost provisions which affected the pre-statutory baseline but did
  not further impact the codifications of this rule would have added $128.3 and $113.1 million respectively in
  annualized transfer savings, resulting in total annualized transfer savings of $421.99 and $447.65 savings at
  7 percent and 3 percent respectively. Note: Negative numbers indicate a net reduction in dollar spending by
  the government.

    The following Table 16 summarizes savings, costs, and transfers by 
provision and forms a basis for the accounting table. For reasons of 
space, Table 16 is broken into Table 16A (2021 through 2024), Table 16B 
(2025 through 2028), and Table 16C (2029-2030), as well as raw totals. 
In these tables, all numbers are positive; positive numbers in the 
savings columns indicate actual dollars saved while positive numbers in 
the costs columns indicate actual dollars spent; the aggregate row 
indicates savings less costs and does not include transfers. All 
numbers are in millions. Tables 16A, B, and C form the basis for Table 
15.

[[Page 33899]]

[GRAPHIC] [TIFF OMITTED] TR02JN20.001


[[Page 33900]]



                Table 16C--Aggregate Savings, Cost, and Transfers in Millions by Provision and Year From 2029 Through 2030 and Raw Totals
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Raw 10 year  Raw 10 year  Raw 10 year
                                         2029      2029  Cost      2029         2030     2030  Costs      2030        totals       totals       totals
                                       Savings                  Transfers     Savings                  Transfers    (savings)     (costs)    (transfers)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Savings......................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........
Total Costs........................  ...........          1.8  ...........  ...........          1.8  ...........  ...........         18.5  ...........
Aggregate Total....................        (1.8)  ...........  ...........        (1.8)  ...........  ...........       (18.5)  ...........  ...........
Total Transfers....................  ...........  ...........      (900.0)  ...........  ...........      (939.8)  ...........  ...........    (3,669.4)
Health Plan Quality Rating system..  ...........  ...........      (956.8)  ...........  ...........      (999.4)  ...........  ...........    (4,144.6)
Medical Loss Ratio Regulation......  ...........  ...........         53.8  ...........  ...........         56.4  ...........  ...........        455.2
MSA MLR............................  ...........  ...........          3.0  ...........  ...........          3.2  ...........  ...........         20.0
SSBCI..............................  ...........          1.8  ...........  ...........          1.8  ...........  ...........         18.5  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The following information supplements Table 16 and also identifies 
how impacts calculated in section VII of this final rule affect the 
calculations of this section and the tables.
     Table 16 includes a row for the paperwork burden of the 
SSBCI provision, whose impact is about $1 million a year.
     For the transfer rows, positive numbers indicate transfers 
that result in increased dollar spending by the government, while 
negative numbers indicate transfers that result in reduced dollar 
spending by the government. Costs are expressed as positive numbers; 
however, net savings are expressed as negative numbers to reflect that 
the net impact is a cost, not a savings.
     For two provisions, Parts C and D SEPs, and ESRD 
enrollment, calculations of impact, either paperwork impact or Medicare 
Trust Fund impact, have been provided in the narrative along with 
tables providing 10-year summaries. However, since these impacts are 
already reflected in current spending, in other words, since the 
provisions do not change current spending, these impacts have not been 
included in Table 16. Similarly, as explained the section VII, since 
the SSBCI paperwork burden is already being spent (similar to SEP), the 
burden is not included in the summary table.
     Besides the enrollment burden for the SEP provision, there 
is an additional cost of $0.5 million arising from burden to 
beneficiaries for filling out enrollment forms in several provisions. 
These costs have been duly noted in section VII of this final rule but 
were not included in Table 16 since Table 16 deals mainly with impacts 
on the Medicare Trust Fund and industry.
     For two provisions, D-SNP look alike and MSA MLR, the 
impact calculated in section VII of this final rule is $0.0 million and 
hence these amounts are not included in Table 16. They are however 
included in Table 6 of section VII of this final rule.
    We received comments on impacts in certain individual provisions. 
These comments as well as our responses have been addressed in the 
appropriate provision sections above. However, none of these comments 
led to changes in impacts. Additionally, we did not receive any 
comments on the summary or monetized table and are therefore finalizing 
these numbers as is with appropriate adjustments for provisions not 
included in this first final rule.

G. Conclusion

    As indicated in Table 16, while the SSBCI provision has a paperwork 
burden of about $1 million per year, the other provisions of this final 
rule are all classified as transfers because consumption of goods or 
usage of services is neither increased nor decreased. However, we note 
that the provisions of this part 1 of this final rule will reduce 
dollar spending of the government by about $300 million a year. The 
primary driver of this is the Tukey outlier provision.
    As indicated in Table 16, the government agencies have a net 
reduction in spending of $3.65 billion over 10 years. The driver of 
reduction is the use of the Tukey outlier deletion for Star Ratings 
after the first year of implementation. Other provisions also affect 
government spending: (1) The MLR provisions will reduce civil penalties 
to the Treasury by about 0.46 billion; (2) the MLA MSR provisions will 
cost the government an extra $40 million due to increased spending on 
benefits arising from expected increased MSA enrollment; (3) the 
increased weight in patient experience/complaints and access measures 
and Tukey outlier deletion in the health plan quality rating system 
(Star Ratings) will reduce Medicare Trust Fund spending by about $1.5 
billion.

H. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017, and 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.'' This rule has an 
aggregate cost of $1 million a year arising from paperwork burden 
associated with the SSBCI provision, and consequently, this rule is 
classified as a regulatory action for the purposes of Executive Order 
13771. At a 7 percent rate, this rule is estimated to cost $1.2 million 
a year in 2016 dollars over an infinite horizon.

List of Subjects

42 CFR Part 417

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

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Medicare, Penalties, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 423

    Administrative practice and procedure, Emergency medical services, 
Health facilities, Health maintenance organizations (HMO), Medicare, 
Penalties, Privacy, Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

[[Page 33901]]

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

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

    Authority: 42 U.S.C. 1302 and 1395hh, 42 U.S.C. 300e, 300e-5, 
and 300e-9, and 31 U.S.C. 9701.

0
 2. Section 417.416 is amended by adding paragraph (e)(3) to read as 
follows:


Sec.  417.416   Qualifying condition: Furnishing of services.

* * * * *
    (e) * * *
    (3) The HMO or CMP must meet network adequacy standards specified 
in Sec.  422.116 of this chapter.

PART 422--MEDICARE ADVANTAGE PROGRAM

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

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

0
4. Section 422.3 is added to read as follows:


Sec.  422.3   MA organizations' use of reinsurance.

    (a) An MA organization may obtain insurance or make other 
arrangements for the cost of providing basic benefits to an individual 
enrollee in either of the following ways--
    (1) The MA organization must retain risk for at least the first 
$10,000 in costs per individual enrollee for providing basic benefits 
during a contract year; or
    (2) If the MA organization uses insurance or makes other 
arrangements for sharing such costs proportionately on a per member per 
year first dollar basis, the MA organization must retain risk based on 
the following:
    (i) The actuarially equivalent value of the retained risk is 
greater than or equal to the value of risk retained in paragraph (a)(1) 
of this section.
    (ii) The MA organization makes a determination of actuarial 
equivalence based on reasonable actuarial methods. For example, a 
reasonable method for determining actuarial equivalence would be to 
equate the percentage of net claim costs that the MA organization would 
retain under paragraphs (a)(1) and (a)(2)(i) of this section.
    (b) In evaluating compliance with section 1855(b) of the Act and 
with paragraph (a) of this section, CMS will consider a parent 
organization and any of its subsidiaries to be part of the MA 
organization.
    (c) The type of payment arrangement used between an MA organization 
and contracting physicians, other health professionals or institutions 
for the financial risk specified in section 1855(b)(4) of the Act (that 
is, the financial risk on a prospective basis for the provision of 
basic benefit by those physicians or other health professionals or 
through those institutions) is not limited by paragraph (a) of this 
section.


Sec.  422.50   [Amended]

0
5. Section 422.50 is amended in paragraph (a)(2) introductory text by 
removing the phrase ``Has not been'' and adding in its place the phrase 
``For coverage before January 1, 2021, has not been''.


Sec.  422.52   [Amended]

0
6. Section 422.52 is amended in paragraph (c) by removing the phrase 
``CMS may waive Sec.  422.50(a)(2)'' and adding in its place the phrase 
``For plan years beginning before January 1, 2021, CMS may waive Sec.  
422.50(a)(2)''.

0
7. Section 422.62 is amended by--
0
a. Revising paragraphs (b) introductory text and (b)(3) introductory 
text;
0
b. Redesignating paragraph (b)(4) as paragraph (b)(26); and
0
c. Adding a new paragraph (b)(4) and paragraphs (b)(5) through (25).

    The revisions and additions read as follows:


Sec.  422.62   Election of coverage under an MA plan.

* * * * *
    (b) Special election periods (SEPs). An individual may at any time 
(that is, not limited to the annual coordinated election period) 
discontinue the election of an MA plan offered by an MA organization 
and change his or her election from an MA plan to original Medicare or 
to a different MA plan under any of the following circumstances:
* * * * *
    (3) The individual demonstrates to CMS that--
* * * * *
    (4) The individual is making an MA enrollment request into or out 
of an employer sponsored MA plan, is disenrolling from an MA plan to 
take employer sponsored coverage of any kind, or is disenrolling from 
employer sponsored coverage (including COBRA coverage) to elect an MA 
plan. This SEP is available to individuals who have (or are enrolling 
in) an employer or union sponsored MA plan and ends 2 months after the 
month the employer or union coverage of any type ends. The individual 
may choose an effective date that is not earlier than the first of the 
month following the month in which the election is made and no later 
than up to 3 months after the month in which the election is made.
    (5) The individual is enrolled in an MA plan offered by an MA 
organization that has been sanctioned by CMS and elects to disenroll 
from that plan in connection with the matter(s) that gave rise to that 
sanction.
    (i) Consistent with disclosure requirements at Sec.  422.111(g), 
CMS may require the MA organization to notify current enrollees that if 
the enrollees believe they are affected by the matter(s) that gave rise 
to the sanction, the enrollees are eligible for a SEP to elect another 
MA plan or disenroll to original Medicare and enroll in a PDP.
    (ii) The SEP starts with the imposition of the sanction and ends 
when the sanction ends or when the individual makes an election, 
whichever occurs first.
    (6)(i) The individual is enrolled in a section 1876 cost contract 
that is not renewing its contract for the area in which the enrollee 
resides.
    (ii) This SEP begins December 8 of the then-current contract year 
and ends on the last day of February of the following year.
    (7) The individual is disenrolling from an MA plan to enroll in a 
Program of All-inclusive Care for the Elderly (PACE) organization or is 
enrolling in an MA plan after disenrolling from a PACE organization.
    (i) An individual who disenrolls from PACE has a SEP for 2 months 
after the effective date of PACE disenrollment to elect an MA plan.
    (ii) An individual who disenrolls from an MA plan has a SEP for 2 
months after the effective date of MA disenrollment to elect a PACE 
plan.
    (8) The individual terminated a Medigap policy upon enrolling for 
the first time in an MA plan and is still in a ``trial period'' and 
eligible for ``guaranteed issue'' of a Medigap policy, as outlined in 
section 1882(s)(3)(B)(v) of the Act.
    (i) This SEP allows an eligible individual to make a one-time 
election to disenroll from his or her first MA plan to join original 
Medicare at any time of the year.
    (ii) This SEP begins upon enrollment in the MA plan and ends after 
12 months of enrollment or when the individual disenrolls from the MA 
plan, whichever is earlier.
    (9) Until December 31, 2020, the individual became entitled to 
Medicare based on ESRD for a retroactive effective date (whether due to 
an administrative delay or otherwise) and was not provided the 
opportunity to elect an MA

[[Page 33902]]

plan during his or her Initial Coverage Election Period (ICEP).
    (i) The individual may prospectively elect an MA plan offered by an 
MA organization, provided--
    (A) The individual was enrolled in a health plan offered by the 
same MA organization the month before their entitlement to Parts A and 
B;
    (B) The individual developed ESRD while a member of that health 
plan; and
    (C) The individual is still enrolled in that health plan.
    (ii) This SEP begins the month the individual receives the notice 
of the Medicare entitlement determination and continues for 2 
additional calendar months after the month the notice is received.
    (10) The individual became entitled to Medicare for a retroactive 
effective date (whether due to an administrative delay or otherwise) 
and was not provided the opportunity to elect an MA plan during their 
initial coverage election period (ICEP). This SEP begins the month the 
individual receives the notice of the retroactive Medicare entitlement 
determination and continues for 2 additional calendar months after the 
month the notice is received. The effective date would be the first of 
the month following the month in which the election is made but would 
not be earlier than the first day of the month in which the notice of 
the Medicare entitlement determination is received by the individual.
    (11)(i) The individual enrolled in an MA special needs plan (SNP) 
and is no longer eligible for the SNP because he or she no longer meets 
the applicable special needs status.
    (ii) This SEP begins the month the individual's special needs 
status changes and ends when the individual makes an enrollment request 
or 3 calendar months after the effective date of involuntary 
disenrollment from the SNP, whichever is earlier.
    (12) The individual belongs to a qualified State Pharmaceutical 
Assistance Program (SPAP) and is requesting enrollment in an MA-PD 
plan.
    (i) The individual may make one MA election per year.
    (ii) This SEP is available while the individual is enrolled in the 
SPAP and, upon loss of eligibility for SPAP benefits, for an additional 
2 calendar months after either the month of the loss of eligibility or 
notification of the loss, whichever is later.
    (13)(i) The individual has severe or disabling chronic conditions 
and is eligible to enroll into a Chronic Care SNP designed to serve 
individuals with those conditions. The SEP is for an enrollment 
election that is consistent with the individual's eligibility for a 
Chronic Care SNP. Individuals enrolled in a Chronic Care SNP who have a 
severe or disabling chronic condition which is not a focus of their 
current SNP are eligible for this SEP to request enrollment in a 
Chronic Care SNP that focuses on this other condition. Individuals who 
are found after enrollment not to have the qualifying condition 
necessary to be eligible for the Chronic Care SNP are eligible for a 
SEP to enroll in a different MA plan.
    (ii) This SEP is available while the individual has the qualifying 
condition and ends upon enrollment in the Chronic Care SNP. This SEP 
begins when the MA organization notifies the individual of the lack of 
eligibility and extends through the end of that month and the following 
2 calendar months. The SEP ends when the individual makes an enrollment 
election or on the last day of the second of the 2 calendar months 
following notification of the lack of eligibility, whichever occurs 
first.
    (14) The individual is enrolled in an MA-PD plan and requests to 
disenroll from that plan to enroll in or maintain other creditable 
prescription drug coverage.
    (i) This SEP is available while the individual is enrolled in an 
MA-PD plan. The effective date of disenrollment from the MA plan is the 
first day of the month following the month a disenrollment request is 
received by the MA organization.
    (ii) Permissible enrollment changes during this SEP are to 
disenroll from an MA-PD plan and elect original Medicare or to elect an 
MA-only plan, resulting in disenrollment from the MA-PD plan.
    (15) The individual is requesting enrollment in an MA plan offered 
by an MA organization with a Star Rating of 5 Stars. An individual may 
use this SEP only once for the contract year in which the MA plan was 
assigned a 5-star overall performance rating, beginning the December 
8th before that contract year through November 30th of that contract 
year.
    (16) The individual is a non-U.S. citizen who becomes lawfully 
present in the United States.
    (i) This SEP begins the month the individual attains lawful 
presence status and ends the earlier of when the individual makes an 
enrollment election or 2 calendar months after the month the individual 
attains lawful presence status.
    (ii) [Reserved]
    (17) The individual was adversely affected by having requested, but 
not received, required notices or information in an accessible format, 
as outlined in section 504 of the Rehabilitation Act of 1973 within the 
same timeframe that the MA organization or CMS provided the same 
information to individuals who did not request an accessible format.
    (i) The SEP begins at the end of the election period during which 
the individual was seeking to make an enrollment election and the 
length is at least as long as the time it takes for the information to 
be provided to the individual in an accessible format.
    (ii) MA organizations may determine eligibility for this SEP when 
the criterion is met, ensuring adequate documentation of the situation, 
including records indicating the date of the individual's request, the 
amount of time taken to provide accessible versions of the requested 
materials and the amount of time it takes for the same information to 
be provided to an individual who does not request an accessible format.
    (18) Individuals affected by an emergency or major disaster 
declared by a Federal, state or local government entity are eligible 
for a SEP to make a MA enrollment or disenrollment election. The SEP 
starts as of the date the declaration is made, the incident start date 
or, if different, the start date identified in the declaration, 
whichever is earlier, and ends 2 full calendar months following the end 
date identified in the declaration or, if different, the date the end 
of the incident is announced, whichever is later. The individual is 
eligible for this SEP provided the individual--
    (i)(A) Resides, or resided at the start of the SEP eligibility 
period described in this paragraph (b)(18), in an area for which a 
federal, state or local government entity has declared an emergency or 
major disaster; or
    (B) Does not reside in an affected area but relies on help making 
healthcare decisions from one or more individuals who reside in an 
affected area; and
    (ii) Was eligible for another election period at the time of the 
SEP eligibility period described in this paragraph (b)(18); and
    (iii) Did not make an election during that other election period 
due to the emergency or major disaster.
    (19) The individual experiences an involuntary loss of creditable 
prescription drug coverage, including a reduction in the level of 
coverage so that it is no longer creditable and excluding any loss or 
reduction of creditable coverage that is due to a failure to pay 
premiums.

[[Page 33903]]

    (i) The individual is eligible to request enrollment in an MA-PD 
plan.
    (ii) The SEP begins when the individual is notified of the loss of 
creditable coverage and ends 2 calendar months after the later of the 
loss (or reduction) or the individual's receipt of the notice.
    (iii) The effective date of this SEP is the first of the month 
after the enrollment election is made or, at the individual's request, 
may be up to 3 months prospective.
    (20) The individual was not adequately informed of a loss of 
creditable prescription drug coverage, or that they never had 
creditable coverage. CMS determines eligibility for this SEP on a case-
by-case basis, based on its determination that an entity offering 
prescription drug coverage failed to provide accurate and timely 
disclosure of the loss of creditable prescription drug coverage or 
whether the prescription drug coverage offered is creditable.
    (i) The individual is eligible for one enrollment in, or 
disenrollment from, an MA-PD plan.
    (ii) This SEP begins the month of CMS' determination and continues 
for 2 additional calendar months following the determination.
    (21) The individual's enrollment or non-enrollment in an MA-PD plan 
is erroneous due to an action, inaction, or error by a Federal 
employee.
    (i) The individual is permitted enrollment in, or disenrollment 
from, the MA-PD plan, as determined by CMS.
    (ii) This SEP begins the month of CMS approval of this SEP on the 
basis that the individual's enrollment was erroneous due to an action, 
inaction, or error by a Federal employee and continues for 2 additional 
calendar months following this approval.
    (22) The individual is eligible for an additional Part D Initial 
Election Period, such as an individual currently entitled to Medicare 
due to a disability and who is attaining age 65.
    (i) The individual is eligible to make an MA election to coordinate 
with the additional Part D Initial Election Period.
    (ii) The SEP may be used to disenroll from an MA plan, with or 
without Part D benefits, to enroll in original Medicare, or to enroll 
in an MA plan that does not include Part D benefits, regardless of 
whether the individual uses the Part D Initial Election Period to 
enroll in a PDP.
    (iii) The SEP begins and ends concurrently with the additional Part 
D Initial Election Period.
    (23) Individuals affected by a significant change in plan provider 
network are eligible for a SEP that permits disenrollment from the MA 
plan that has changed its network to another MA plan or to original 
Medicare. This SEP can be used only once per significant change in the 
provider network.
    (i) The SEP begins the month the individual is notified of 
eligibility for the SEP and extends an additional 2 calendar months 
thereafter.
    (ii) An enrollee is affected by a significant network change when 
the enrollee is assigned to, currently receiving care from, or has 
received care within the past 3 months from a provider or facility 
being terminated from the provider network.
    (iii) When instructed by CMS, the MA plan that has significantly 
changed its network must issue a notice, in the form and manner 
directed by CMS, that notifies enrollees who are eligible for this SEP 
of their eligibility for the SEP and how to use the SEP.
    (24) The individual is enrolled in a plan offered by an MA 
organization that has been placed into receivership by a state or 
territorial regulatory authority. The SEP begins the month the 
receivership is effective and continues until it is no longer in effect 
or until the enrollee makes an election, whichever occurs first. When 
instructed by CMS, the MA plan that has been placed under receivership 
must notify its enrollees, in the form and manner directed by CMS, of 
the enrollees' eligibility for this SEP and how to use the SEP.
    (25) The individual is enrolled in a plan that has been identified 
with the low performing icon in accordance with Sec.  
422.166(h)(1)(ii). This SEP exists while the individual is enrolled in 
the low performing MA plan.
* * * * *

0
8. Section 422.68 is amended by revising paragraph (d) to read as 
follows:


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

* * * * *
    (d) Special election periods. For an election or change of election 
made during a special election period as described in Sec.  422.62(b), 
the coverage or change in coverage is effective the first day of the 
calendar month following the month in which the election is made, 
unless otherwise noted.
* * * * *

0
10. Section 422.102 is amended by adding paragraph (f) to read as 
follows:


Sec.  422.102  Supplemental benefits.

* * * * *
    (f) Special supplemental benefits for the chronically ill (SSBCI)--
(1) Requirements--(i) Chronically-ill enrollee. (A) A chronically ill 
enrollee is an individual enrolled in the MA plan who has one or more 
comorbid and medically complex chronic conditions that meet all of the 
following:
    (1) Is life threatening or significantly limits the overall health 
or function of the enrollee;
    (2) Has a high risk of hospitalization of other adverse health 
outcomes; and
    (3) Requires intensive care coordination.
    (B) CMS may publish a non-exhaustive list of conditions that are 
medically complex chronic conditions that are life threatening or 
significantly limit the overall health or function of an individual.
    (ii) SSBCI definition. A special supplemental benefit for the 
chronically ill (SSBCI) is a supplemental benefit that has, with 
respect to a chronically ill enrollee, a reasonable expectation of 
improving or maintaining the health or overall function of the 
enrollee; an SSBCI that meets the standard in this paragraph (f)(1)(ii) 
may also include a benefit that is not primarily health related.
    (2) Offering SSBCI. (i) An MA plan may offer SSBCI to a chronically 
ill enrollee only as a mandatory supplemental benefit.
    (ii) Upon approval by CMS, an MA plan may offer SSBCI that are not 
uniform for all chronically ill enrollees in the plan.
    (iii) An MA plan may consider social determinants of health as a 
factor to help identify chronically ill enrollees whose health or 
overall function could be improved or maintained with SSBCI. An MA plan 
may not use social determinants of health as the sole basis for 
determining eligibility for SSBCI.
    (3) Plan responsibilities. An MA plan offering SSBCI must do all of 
the following:
    (i) Must have written policies for determining enrollee eligibility 
and must document its determination that an enrollee is a chronically 
ill enrollee based on the definition in paragraph (f)(1)(i) of this 
section.
    (ii) Make information and documentation related to determining 
enrollee eligibility available to CMS upon request.
    (iii) Must have written policies based on objective criteria for 
determining a chronically ill enrollee's eligibility to receive a 
particular SSBCI and must document these criteria.
    (iv) Document each determination that an enrollee is eligible to 
receive an SSBCI and make this information available to CMS upon 
request.

[[Page 33904]]

Sec.  422.110  [Amended]

0
11. Section 422.110 is amended in paragraph (b) by removing the phrase 
``An MA organization'' and adding in its place the phrase ``For 
coverage before January 1, 2021, an MA organization''.

0
12. Section 422.116 is added to read as follows:


Sec.  422.116   Network adequacy.

    (a) General rules--(1) Access. (i) A network-based MA plan, as 
described in Sec.  422.114(a)(3)(ii) but not including MSA plans, must 
demonstrate that it has an adequate contracted provider network that is 
sufficient to provide access to covered services in accordance with 
access standards described in section 1852(d)(1) of the Act and in 
Sec. Sec.  422.112(a) and 422.114(a)(1) and by meeting the standard in 
paragraph (a)(2) of this section. When required by CMS, an MA 
organization must attest that it has an adequate network for access and 
availability of a specific provider or facility type that CMS does not 
independently evaluate in a given year.
    (ii) CMS does not require information, other than an attestation, 
regarding compliance with Sec.  422.116 as part of an application for a 
new or expanding service area and will not deny application on the 
basis of an evaluation of the applicant's network for the new or 
expanding service area.
    (2) Standards. An MA plan must meet maximum time and distance 
standards and contract with a specified minimum number of each provider 
and facility-specialty type.
    (i) Each contract provider type must be within maximum time and 
distance of at least one beneficiary (in the MA Medicare Sample Census) 
in order to count toward the minimum number.
    (ii) The minimum number criteria and the time and distance criteria 
vary by the county type.
    (3) Applicability of MA network adequacy criteria. (i) The 
following providers and facility types do not count toward meeting 
network adequacy criteria:
    (A) Specialized, long-term care, and pediatric/children's 
hospitals.
    (B) Providers that are only available in a residential facility.
    (C) Providers and facilities contracted with the organization only 
for its commercial, Medicaid, or other products.
    (ii) [Reserved]
    (4) Annual updates by CMS. CMS annually updates and makes the 
following available:
    (i) A Health Service Delivery (HSD) Reference file that identifies 
the following:
    (A) All minimum provider and facility number requirements.
    (B) All provider and facility time and distance standards.
    (C) Ratios established in paragraph (e) of this section in advance 
of network reviews for the applicable year.
    (ii) A Provider Supply file that lists available providers and 
facilities and their corresponding office locations and specialty 
types.
    (A) The Provider Supply file is updated annually based on 
information in the Integrated Data Repository (IDR), which has 
comprehensive claims data, and information from public sources.
    (B) CMS may also update the Provider Supply file based on findings 
from validation of provider information submitted on Exception Requests 
to reflect changes in the supply of health care providers and 
facilities.
    (b) Provider and facility-specialty types. The provider and 
facility-specialty types to which the network adequacy evaluation under 
this section applies are specified in this paragraph (b).
    (1) Provider-specialty types. The provider-specialty types are as 
follows:
    (i) Primary Care.
    (ii) Allergy and Immunology.
    (iii) Cardiology.
    (iv) Chiropractor.
    (v) Dermatology.
    (vi) Endocrinology.
    (vii) ENT/Otolaryngology.
    (viii) Gastroenterology.
    (ix) General Surgery.
    (x) Gynecology, OB/GYN.
    (xi) Infectious Diseases.
    (xii) Nephrology.
    (xiii) Neurology.
    (xiv) Neurosurgery.
    (xv) Oncology--Medical, Surgical.
    (xvi) Oncology--Radiation/Radiation Oncology.
    (xvii) Ophthalmology.
    (xviii) Orthopedic Surgery.
    (xix) Physiatry, Rehabilitative Medicine.
    (xx) Plastic Surgery.
    (xxi) Podiatry.
    (xxii) Psychiatry.
    (xxiii) Pulmonology.
    (xxiv) Rheumatology.
    (xxv) Urology.
    (xxvi) Vascular Surgery.
    (xxvii) Cardiothoracic Surgery.
    (2) Facility-specialty types. The facility specialty types are as 
follows:
    (i) Acute Inpatient Hospitals.
    (ii) Cardiac Surgery Program.
    (iii) Cardiac Catheterization Services.
    (iv) Critical Care Services--Intensive Care Units (ICU).
    (v) Surgical Services (Outpatient or ASC).
    (vi) Skilled Nursing Facilities.
    (vii) Diagnostic Radiology.
    (viii) Mammography.
    (ix) Physical Therapy.
    (x) Occupational Therapy.
    (xi) Speech Therapy.
    (xii) Inpatient Psychiatric Facility Services.
    (xiii) Outpatient Infusion/Chemotherapy.
    (3) Removal of a provider or facility-specialty type. CMS may 
remove a specialty or facility type from the network adequacy 
evaluation for a particular year by not including the type in the 
annual publication of the HSD reference file.
    (c) County type designations. Counties are designated as a specific 
type using the following population size and density parameters:
    (1) Large metro. A large metro designation is assigned to any of 
the following combinations of population sizes and density parameters:
    (i) A population size greater than or equal to 1,000,000 persons 
with a population density greater than or equal to 1,000 persons per 
square mile.
    (ii) A population size greater than or equal to 500,000 and less 
than or equal to 999,999 persons with a population density greater than 
or equal to 1,500 persons per square mile.
    (iii) Any population size with a population density of greater than 
or equal to 5,000 persons per square mile.
    (2) Metro. A metro designation is assigned to any of the following 
combinations of population sizes and density parameters:
    (i) A population size greater than or equal to 1,000,000 persons 
with a population density greater than or equal to 10 persons per 
square mile and less than or equal to 999.9 persons per square mile.
    (ii) A population size greater than or equal to 500,000 persons and 
less than or equal to 999,999 persons with a population density greater 
than or equal to 10 persons per square mile and less than or equal to 
1,499.9 persons per square mile.
    (iii) A population size greater than or equal to 200,000 persons 
and less than or equal to 499,999 persons with a population density 
greater than or equal to 10 persons per square mile and less than or 
equal to 4,999.9 persons per square mile.
    (iv) A population size greater than or equal to 50,000 persons and 
less than or equal to 199,999 persons with a population density greater 
than or equal to 100 persons per square mile and less than or equal to 
4999.9 persons per square mile.
    (v) A population size greater than or equal to 10,000 persons and 
less than or

[[Page 33905]]

equal to 49,999 persons with a population density greater than or equal 
to 1,000 persons per square mile and less than or equal to 4999.9 
persons per square mile.
    (3) Micro. A micro designation is assigned to any of the following 
combinations of population sizes and density parameters:
    (i) A population size greater than or equal to 50,000 persons and 
less than or equal to 199,999 persons with a population density greater 
than or equal to 10 persons per square mile and less than or equal to 
99.9 persons per square mile.
    (ii) A population size greater than or equal to 10,000 persons and 
less than or equal to 49,999 persons with a population density greater 
than or equal to 50 persons per square mile and less than 999.9 persons 
per square mile.
    (4) Rural. A rural designation is assigned to any of the following 
combinations of population sizes and density parameters:
    (i) A population size greater than or equal to 10,000 persons and 
less than or equal to 49,999 persons with a population density of 
greater than or equal to 10 persons per square mile and less than or 
equal to 49.9 persons per square mile.
    (ii) A population size less than 10,000 persons with a population 
density greater than or equal 50 persons per square mile and less than 
or equal to 999.9 persons per square mile.
    (5) Counties with extreme access considerations (CEAC). For any 
population size with a population density of less than 10 persons per 
square mile.
    (d) Maximum time and distance standards--(1) General rule. CMS 
determines and annually publishes maximum time and distance standards 
for each combination of provider or facility specialty type and each 
county type in accordance with paragraphs (d)(2) and (3) of this 
section.
    (i) Time and distance metrics measure the relationship between the 
approximate locations of beneficiaries and the locations of the network 
providers and facilities.
    (ii) [Reserved]
    (2) By county designation. The following base maximum time (in 
minutes) and distance (in miles) standards apply for each county type 
designation, unless modified through customization as described in 
paragraph (d)(3) of this section.

                                                               Table 1 to Paragraph (d)(2)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Large  metro                Metro                   Micro                   Rural                   CEAC
                                 -----------------------------------------------------------------------------------------------------------------------
     Provider/Facility type                       Max                     Max                     Max                     Max                     Max
                                   Max  time    distance   Max  time    distance   Max  time    distance   Max  time    distance   Max  time    distance
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary Care....................           10          5           15         10           30         20           40         30           70         60
Allergy and Immunology..........           30         15           45         30           80         60           90         75          125        110
Cardiology......................           20         10           30         20           50         35           75         60           95         85
Chiropractor....................           30         15           45         30           80         60           90         75          125        110
Dermatology.....................           20         10           45         30           60         45           75         60          110        100
Endocrinology...................           30         15           60         40          100         75          110         90          145        130
ENT/Otolaryngology..............           30         15           45         30           80         60           90         75          125        110
Gastroenterology................           20         10           45         30           60         45           75         60          110        100
General Surgery.................           20         10           30         20           50         35           75         60           95         85
Gynecology, OB/GYN..............           30         15           45         30           80         60           90         75          125        110
Infectious Diseases.............           30         15           60         40          100         75          110         90          145        130
Nephrology......................           30         15           45         30           80         60           90         75          125        110
Neurology.......................           20         10           45         30           60         45           75         60          110        100
Neurosurgery....................           30         15           60         40          100         75          110         90          145        130
Oncology--Medical, Surgical.....           20         10           45         30           60         45           75         60          110        100
Oncology--Radiation/Radiation              30         15           60         40          100         75          110         90          145        130
 Oncology.......................
Ophthalmology...................           20         10           30         20           50         35           75         60           95         85
Orthopedic Surgery..............           20         10           30         20           50         35           75         60           95         85
Physiatry, Rehabilitative                  30         15           45         30           80         60           90         75          125        110
 Medicine.......................
Plastic Surgery.................           30         15           60         40          100         75          110         90          145        130
Podiatry........................           20         10           45         30           60         45           75         60          110        100
Psychiatry......................           20         10           45         30           60         45           75         60          110        100
Pulmonology.....................           20         10           45         30           60         45           75         60          110        100
Rheumatology....................           30         15           60         40          100         75          110         90          145        130
Urology.........................           20         10           45         30           60         45           75         60          110        100
Vascular Surgery................           30         15           60         40          100         75          110         90          145        130
Cardiothoracic Surgery..........           30         15           60         40          100         75          110         90          145        130
Acute Inpatient Hospitals.......           20         10           45         30           80         60           75         60          110        100
Cardiac Surgery Program.........           30         15           60         40          160        120          145        120          155        140
Cardiac Catheterization Services           30         15           60         40          160        120          145        120          155        140
Critical Care Services--                   20         10           45         30          160        120          145        120          155        140
 Intensive Care Units (ICU).....
Surgical Services (Outpatient or           20         10           45         30           80         60           75         60          110        100
 ASC)...........................
Skilled Nursing Facilities......           20         10           45         30           80         60           75         60           95         85
Diagnostic Radiology............           20         10           45         30           80         60           75         60          110        100
Mammography.....................           20         10           45         30           80         60           75         60          110        100
Physical Therapy................           20         10           45         30           80         60           75         60          110        100
Occupational Therapy............           20         10           45         30           80         60           75         60          110        100
Speech Therapy..................           20         10           45         30           80         60           75         60          110        100
Inpatient Psychiatric Facility             30         15           70         45          100         75           90         75          155        140
 Services.......................
Outpatient Infusion/Chemotherapy           20         10           45         30           80         60           75         60          110        100
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 33906]]

    (3) By customization. When necessary due to utilization or supply 
patterns, CMS may set maximum time and distance standards for provider 
or facility types for specific counties by customization in accordance 
with the following rules:
    (i) CMS maps provider location data from the Provider Supply file 
against its MA Medicare Sample Census (which provides MA enrollee 
population distribution data) or uses claims data to identify the 
distances beneficiaries travel according to the usual patterns of care 
for the county.
    (ii) CMS identifies the distance at which 90 percent of the 
population would have access to at least one provider or facility in 
the applicable specialty type.
    (iii) The resulting distance is then rounded up to the next 
multiple of 5, and a multiplier specific to the county designation is 
applied to determine the analogous maximum time.
    (iv) Customization may only be used to increase the base time and 
distance standards specified in paragraph (d)(2) of this section and 
may not be used to decrease the base time and distance standards.
    (4) Percentage of beneficiaries residing within maximum time and 
distance standards. MA plans must ensure both of the following:
    (i) At least 85 percent of the beneficiaries residing in micro, 
rural, or CEAC counties have access to at least one provider/facility 
of each specialty type within the published time and distance 
standards.
    (ii) At least 90 percent of the beneficiaries residing in large 
metro and metro counties have access to at least one provider/facility 
of each specialty type within the published time and distance 
standards.
    (5) MA telehealth providers. An MA plan receives a 10 percentage 
point credit towards the percentage of beneficiaries residing within 
published time and distance standards for the applicable provider 
specialty type and county when the plan includes one or more telehealth 
providers that provide additional telehealth benefits, as defined in 
Sec.  422.135, in its contracted networks for the following provider 
specialty types:
    (i) Dermatology.
    (ii) Psychiatry.
    (iii) Cardiology.
    (iv) Neurology.
    (v) Otolaryngology.
    (vi) Ophthalmology.
    (vii) Allergy and Immunology.
    (viii) Nephrology.
    (ix) Primary Care.
    (x) Gynecology/OB/GYN.
    (xi) Endocrinology.
    (xii) Infectious Diseases.
    (6) State Certificate of Need (CON) laws. In a State with CON laws, 
or other state imposed anti-competitive restrictions that limit the 
number of providers or facilities in the State or a county in the 
State, CMS will award the MA organization a 10-percentage point credit 
towards the percentage of beneficiaries residing within published time 
and distance standards for affected providers and facilities in 
paragraph (b) of this section or, when necessary due to utilization or 
supply patterns, customize the base time and distance standards.
    (e) Minimum number standard. CMS annually determines the minimum 
number standard for each provider and facility-specialty type as 
follows:
    (1) General rule. The provider or facility must--
    (i) Be within the maximum time and distance of at least one 
beneficiary in order to count towards the minimum number standard 
(requirement); and
    (ii) Not be a telehealth-only provider.
    (2) Minimum number requirement for provider and facility-specialty 
types. The minimum number for provider and facility-specialty types are 
as follows:
    (i) For provider-specialty types described in paragraph (b)(1) of 
this section, CMS calculates the minimum number as specified in 
paragraph (e)(3) of this section.
    (ii) For facility-specialty types described in paragraph (b)(2)(i) 
of this section, CMS calculates the minimum number as specified in 
paragraph (e)(3) of this section.
    (iii) For facility-specialty types described in paragraphs 
(b)(2)(ii) through (xiv) of this section, the minimum requirement 
number is 1.
    (3) Determination of the minimum number of for certain provider and 
facility-specialty types. For specialty types in paragraphs (b)(1) and 
(b)(2)(i) of this section, CMS multiplies the minimum ratio by the 
number of beneficiaries required to cover, divides the resulting 
product by 1,000, and rounds it up to the next whole number.
    (i)(A) The minimum ratio for provider specialty types represents 
the minimum number of providers per 1,000 beneficiaries.
    (B) The minimum ratio for facility specialty type specified in 
paragraph (b)(2)(i) of this section (acute inpatient hospital) 
represents the minimum number of beds per 1,000 beneficiaries.
    (C) The minimum ratios are as follows:

                                        Table 2 to Paragraph (e)(3)(i)(C)
----------------------------------------------------------------------------------------------------------------
          Minimum ratio             Large metro        Metro           Micro           Rural           CEAC
----------------------------------------------------------------------------------------------------------------
Primary Care....................            1.67            1.67            1.42            1.42            1.42
Allergy and Immunology..........            0.05            0.05            0.04            0.04            0.04
Cardiology......................            0.27            0.27            0.23            0.23            0.23
Chiropractor....................            0.10            0.10            0.09            0.09            0.09
Dermatology.....................            0.16            0.16            0.14            0.14            0.14
Endocrinology...................            0.04            0.04            0.03            0.03            0.03
ENT/Otolaryngology..............            0.06            0.06            0.05            0.05            0.05
Gastroenterology................            0.12            0.12            0.10            0.10            0.10
General Surgery.................            0.28            0.28            0.24            0.24            0.24
Gynecology, OB/GYN..............            0.04            0.04            0.03            0.03            0.03
Infectious Diseases.............            0.03            0.03            0.03            0.03            0.03
Nephrology......................            0.09            0.09            0.08            0.08            0.08
Neurology.......................            0.12            0.12            0.10            0.10            0.10
Neurosurgery....................            0.01            0.01            0.01            0.01            0.01
Oncology--Medical, Surgical.....            0.19            0.19            0.16            0.16            0.16
Oncology--Radiation/Radiation               0.06            0.06            0.05            0.05            0.05
 Oncology.......................
Ophthalmology...................            0.24            0.24            0.20            0.20            0.20
Orthopedic Surgery..............            0.20            0.20            0.17            0.17            0.17
Physiatry, Rehabilitative                   0.04            0.04            0.03            0.03            0.03
 Medicine.......................
Plastic Surgery.................            0.01            0.01            0.01            0.01            0.01
Podiatry........................            0.19            0.19            0.16            0.16            0.16

[[Page 33907]]

 
Psychiatry......................            0.14            0.14            0.12            0.12            0.12
Pulmonology.....................            0.13            0.13            0.11            0.11            0.11
Rheumatology....................            0.07            0.07            0.06            0.06            0.06
Urology.........................            0.12            0.12            0.10            0.10            0.10
Vascular Surgery................            0.02            0.02            0.02            0.02            0.02
Cardiothoracic Surgery..........            0.01            0.01            0.01            0.01            0.01
Acute Inpatient Hospitals.......            12.2            12.2            12.2            12.2            12.2
----------------------------------------------------------------------------------------------------------------

    (ii)(A) Number of beneficiaries required to cover. (1) The number 
of beneficiaries required to cover is calculated by multiplying the 
95th percentile base population ratio by the total number of Medicare 
beneficiaries residing in a county.
    (2) CMS uses its MA State/County Penetration data to calculate the 
total number of beneficiaries residing in a county.
    (B) 95th percentile base population ratio. (1) The 95th percentile 
base population ratio is:
    (i) Calculated annually for each county type and varies over time 
as MA market penetration and plan enrollment change across markets; and
    (ii) Represents the proportion of Medicare beneficiaries enrolled 
in the 95th percentile MA plan (that is, 95 percent of plans have 
enrollment lower than this level).
    (2) CMS calculates the 95th percentile base population ratio as 
follows:
    (i) Uses its most recent List of PFFS Network Counties to exclude 
any private-fee-for-service (PFFS) plans in non-networked counties from 
the calculation at the county-type level.
    (ii) Uses its most recent MA State/County Penetration data to 
determine the number of eligible Medicare beneficiaries in each county.
    (iii) Uses its Monthly MA Enrollment By State/County/Contract data 
to determine enrollment at the contract ID and county level, including 
only enrollment in regional preferred provider organization (RPPO), 
local preferred provider organization (LPPO), HMO, HMO/provider 
sponsored organization (POS), healthcare prepayment plans under section 
1833 of the Act, and network PFFS plan types.
    (iv) Calculates penetration at the contract ID and county level by 
dividing the number of enrollees for a given contract ID and county by 
the number of eligible beneficiaries in that county.
    (v) Groups counties by county designation to determine the 95th 
percentile of penetration among MA plans for each county type.
    (f) Exception requests. (1) An MA plan may request an exception to 
network adequacy criteria in paragraphs (b) through (e) of this section 
when both of the following occur:
    (i) Certain providers or facilities are not available for the MA 
plan to meet the network adequacy criteria as shown in the Provider 
Supply file for the year for a given county and specialty type.
    (ii) The MA plan has contracted with other providers and facilities 
that may be located beyond the limits in the time and distance 
criteria, but are currently available and accessible to most enrollees, 
consistent with the local pattern of care.
    (2) In evaluating exception requests, CMS considers whether--
    (i) The current access to providers and facilities is different 
from the HSD reference and Provider Supply files for the year;
    (ii) There are other factors present, in accordance with Sec.  
422.112(a)(10)(v), that demonstrate that network access is consistent 
with or better than the original Medicare pattern of care; and
    (iii) Approval of the exception is in the best interests of 
beneficiaries.

0
13. Section 422.162 is amended in paragraph (a) by adding a definition 
for ``Tukey outer fence outliers'' in alphabetical order to read as 
follows:


Sec.  422.162   Medicare Advantage Quality Rating System.

    (a) * * *
    Tukey outer fence outliers are measure scores that are below a 
certain point (first quartile-3.0 x (third quartile-first quartile)) or 
above a certain point (third quartile + 3.0 x (third quartile-first 
quartile)).
* * * * *

0
14. Section 422.166 is amended--
0
a. By revising paragraph (a)(2)(i); and
0
b. In paragraphs (e)(1)(iii) and (iv) by removing the phrase ``weight 
of 2'' and adding in its place ``weight of 4''.

    The revision reads as follows:


Sec.  422.166   Calculation of Star Ratings.

    (a) * * *
    (2) * * *
    (i) The method maximizes differences across the star categories and 
minimizes the differences within star categories using mean resampling 
with the hierarchal clustering of the current year's data. Effective 
for the Star Ratings issued in October 2022 and subsequent years, CMS 
will add a guardrail so that the measure-threshold-specific cut points 
for non-CAHPS measures do not increase or decrease more than the value 
of the cap from 1 year to the next. Effective for the Star Ratings 
issued in October 2023 and subsequent years, prior to applying mean 
resampling with hierarchal clustering, Tukey outer fence outliers are 
removed. The cap is equal to 5 percentage points for measures having a 
0 to 100 scale (absolute percentage cap) or 5 percent of the restricted 
range for measures not having a 0 to 100 scale (restricted range cap). 
New measures that have been in the Part C and D Star Rating program for 
3 years or less use the hierarchal clustering methodology with mean 
resampling with no guardrail for the first 3 years in the program.
* * * * *


Sec.  422.258   [Amended]

0
15. Section 422.258 is amended in paragraphs (d)(3), (d)(5) 
introductory text, (d)(5)(i) introductory text, (d)(5)(ii), and 
(d)(6)(i) by removing the reference ``Sec.  422.306(c)'' and adding in 
its place the reference '' Sec.  422.306(c) and (d)''.
    165. Section 422.306 is amended--
0
a. In the introductory text by:
0
i. Removing ``Sec. Sec.  422.308(b) and 422.308(g)'' and adding in its 
place ``Sec.  422.308(b) and (g)''; and
0
ii. Removing the phrase ``year under paragraph (c) of this section'' 
and adding in its place the phrase ``year under paragraph (c) of this 
section and costs for kidney acquisitions in the area for the year 
under paragraph (d) of this section''; and
0
b. By adding paragraph (d).

    The addition reads as follows:


Sec.  422.306   Annual MA capitation rates.

* * * * *
    (d) Exclusion of costs for kidney acquisitions from MA capitation 
rates. Beginning with 2021, after the annual capitation rate for each 
MA local area is determined under paragraph (a) or (b) of

[[Page 33908]]

this section, the amount is adjusted in accordance with section 
1853(k)(5) of the Act to exclude the Secretary's estimate of the 
standardized costs for payments for organ acquisitions for kidney 
transplants covered under this title (including expenses covered under 
section 1881(d) of the Act) in the area for the year.


Sec.  422.312   [Amended]

0
17. Section 422.312 is amended--
0
a. In paragraph (b)(1) by removing the phrase ``45 days'' and adding in 
its place the phrase ``60 days''; and
0
b. In paragraph (b)(2) by removing the phrase ``15 days'' and adding in 
its place the phrase ``30 days''.

0
18. Section 422.322 is amended by adding paragraph (d) to read as 
follows:


Sec.  422.322   Source of payment and effect of MA plan election on 
payment.

* * * * *
    (d) FFS payment for expenses for kidney acquisitions. Paragraphs 
(b) and (c) of this section do not apply with respect to expenses for 
organ acquisitions for kidney transplants described in section 
1852(a)(1)(B)(i) of the Act.

0
19. Section 422.514 is amended by--
0
a. Revising the section heading and the heading for paragraph (a).
0
b. Adding paragraphs (d), (e), and (f).

    The revisions and additions read as follows:


Sec.  422.514   Enrollment requirements.

    (a) Minimum enrollment rules. * * *
* * * * *
    (d) Rule on dual eligible enrollment. In any state where there is a 
dual eligible special needs plan or any other plan authorized by CMS to 
exclusively enroll individuals entitled to medical assistance under a 
state plan under title XIX, CMS does not:
    (1) Enter into a contract under this subpart, for plan year 2022 
and subsequent years, for a new MA plan that--
    (i) Is not a specialized MA plan for special needs individuals as 
defined in Sec.  422.2; and
    (ii) Projects enrollment in its bid submitted under Sec.  422.254 
that 80 percent or more enrollees of the plan's total enrollment are 
enrollees entitled to medical assistance under a state plan under title 
XIX.
    (2) Renew a contract under this subpart, for plan year 2023 and 
subsequent years, for an MA plan that--
    (i) Is not a specialized MA plan for special needs individuals as 
defined in Sec.  422.2; and
    (ii) Has actual enrollment, as determined by CMS using the January 
enrollment of the current year, consisting of 80 percent or more of 
enrollees who are entitled to medical assistance under a state plan 
under title XIX, unless the MA plan has been active for less than 1 
year and has enrollment of 200 or fewer individuals at the time of such 
determination.
    (e) Transition process and procedures. (1) For coverage effective 
January 1 of the next year, and subject to the disclosure requirements 
described in paragraph (e)(2) of this section, an MA organization may 
transition enrollees in a plan specified in paragraph (d)(2) of this 
section into another MA plan or plans (including into a dual eligible 
special needs plan for enrollees who are eligible for such a plan) 
offered by the MA organization, or another MA organization that shares 
the same parent organization as the MA organization, for which the 
individual is eligible in accordance with Sec. Sec.  422.50 through 
422.53 if the MA plan or plans receiving such enrollment--
    (i) Would not meet the criteria in paragraph (d)(2)(ii) of this 
section, as determined in the procedures described in paragraph (e)(3) 
of this section, with the addition of the newly enrolled individuals 
(unless such plan is a Specialized MA plan for Special Needs 
Individuals as defined in Sec.  422.2);
    (ii) Is an MA-PD plan described at Sec.  422.2;
    (iii) Has a combined Part C and Part D premium of $0.00 for 
individuals eligible for the premium subsidy for full subsidy eligible 
individuals described in Sec.  423.780(a) of this chapter; and
    (iv) Is of the same plan type (for example, HMO or PPO) as the plan 
specified in paragraph (d)(2) of this section.
    (2) An MA organization may transition individuals under paragraph 
(e)(1) of this section without requiring the individual to file the 
election form under Sec.  422.66(a) if--
    (i) The enrolled individual is eligible to enroll in the MA plan; 
and
    (ii) The MA-PD plan into which individuals are transitioned 
describes changes to MA-PD benefits and provides information about the 
MA-PD plan in the Annual Notice of Change, which must be sent 
consistent with Sec.  422.111(a), (d), and (e).
    (3) For the purpose of approving a MA organization to transition 
enrollment under this paragraph (e), CMS determines whether a non-SNP 
MA plan would meet the criteria in paragraph (d)(2) of this section by 
adding the cohort of individuals identified by the MA organization for 
enrollment in a non-SNP MA plan to the April enrollment of such plan 
and calculating the resulting percentage of dual eligible enrollment.
    (4) In cases where an MA organization does not transition current 
enrollees under paragraph (e)(1) of this section, the MA organization 
must send a written notice to enrollees who are not transitioned, 
consistent with Sec.  422.506(a)(2).
    (f) Special considerations. Actions taken pursuant to paragraph (d) 
of this section warrant special consideration to exempt affected MA 
organizations from the denial of an application for a new contract or 
service area expansion in accordance with Sec. Sec.  422.502(b)(3) and 
(4), 422.503(b)(6) and (7), 422.506(a)(3) and (4), 422.508(c) and (d), 
and 422.512(e)(1) and (2).

0
20. Section 422.2420 is amended by revising paragraph (b)(2)(i) to read 
as follows:


Sec.  422.2420   Calculation of the medical loss ratio.

* * * * *
    (b) * * *
    (2) * * *
    (i) Amounts that the MA organization pays (including under 
capitation contracts) for covered services, described at paragraph 
(a)(2) of this section, provided to all enrollees under the contract.
* * * * *

0
21. Section 422.2440 is revised to read as follows:


Sec.  422.2440   Credibility adjustment.

    (a) An MA organization may add the credibility adjustment specified 
under paragraph (e) of this section to a contract's MLR if the 
contract's experience is partially credible, as defined in paragraph 
(d)(1) of this section.
    (b) An MA organization may not add a credibility adjustment to a 
contract's MLR if the contract's experience is fully credible, as 
defined in paragraph (d)(2) of this section.
    (c) For those contract years for which a contract has non-credible 
experience, as defined in paragraph (d)(3) of this section, sanctions 
under Sec.  422.2410(b) through (d) will not apply.
    (d)(1) A contract's experience is partially credible if it is based 
on the experience of at least 2,400 member months and fewer than or 
equal to 180,000 member months.
    (2) A contract's experience is fully credible if it is based on the 
experience of more than 180,000 member months.
    (3) A contract's experience is non-credible if it is based on the 
experience of fewer than 2,400 member months.
    (e)(1) The credibility adjustment for a partially credible MA 
contract, other

[[Page 33909]]

than an MSA contract, is equal to the base credibility factor 
determined under paragraph (f) of this section.
    (2) The credibility adjustment for a partially credible MA MSA 
contract is the product of the base credibility factor, as determined 
under paragraph (f) of this section, multiplied by the deductible 
factor, as determined under paragraph (g) of this section.
    (f) The base credibility factor for partially credible experience 
is determined based on the number of member months for all enrollees 
under the contract and the factors shown in Table 1 of this section. 
When the number of member months used to determine credibility exactly 
matches a member month category listed in Table 1 of this section, the 
value associated with that number of member months is the base 
credibility factor. The base credibility factor for a number of member 
months between the values shown in Table 1 of this section is 
determined by linear interpolation.
    (g) The deductible factor is based on the enrollment-weighted 
average deductible for all MSA plans under the MA MSA contract, where 
the deductible for each plan under the contract is weighted by the 
plan's portion of the total number of member months for all plans under 
the contract. When the weighted average deductible exactly matches a 
deductible category listed in Table 2 of this section, the value 
associated with that deductible is the deductible factor. The 
deductible factor for a weighted average deductible between the values 
shown in Table 2 of section is determined by linear interpolation.

  Table 1 to Sec.   422.2440--Base Credibility Factors for MA Contracts
------------------------------------------------------------------------
                                               Base credibility factor
               Member months                   (additional percentage
                                                       points)
------------------------------------------------------------------------
<2,400....................................  N/A (Non-credible).
2,400.....................................  8.4%.
6,000.....................................  5.3%.
12,000....................................  3.7%.
24,000....................................  2.6%.
60,000....................................  1.7%.
120,000...................................  1.2%.
180,000...................................  1.0%.
>180,000..................................  0.0% (Fully credible).
------------------------------------------------------------------------


   Table 2 to Sec.   422.2440--Deductible Factors for MA MSA Contracts
------------------------------------------------------------------------
                                                            Deductible
               Weighted average deductible                    factor
------------------------------------------------------------------------
<$2,500.................................................           1.000
$2,500..................................................           1.164
$5,000..................................................           1.402
>=$10,000...............................................           1.736
------------------------------------------------------------------------

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

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

    Authority:  42 U.S.C. 1302, 1306, 1395w-101 through 1395w-152, 
and 1395hh.


0
23. Section 423.38 is amended by revising paragraph (c)(8) and adding 
paragraphs (c)(11) through (34) to read as follows:


Sec.  423.38   Enrollment periods.

* * * * *
    (c) * * *
    (8) The individual demonstrates to CMS, in accordance with 
guidelines issued by CMS, that the PDP sponsor offering the PDP 
substantially violated a material provision of its contract under this 
part in relation to the individual, including, but not limited to any 
of the following:
    (i) Failure to provide the individual on a timely basis benefits 
available under the plan.
    (ii) Failure to provide benefits in accordance with applicable 
quality standards.
    (iii) 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.
* * * * *
    (11) The individual is making an enrollment request into or out of 
an employer sponsored Part D plan, is disenrolling from a Part D plan 
to take employer sponsored coverage of any kind, or is disenrolling 
from employer sponsored coverage (including Consolidated Omnibus Budget 
Reconciliation Act (COBRA) coverage) to elect a Part D plan.
    (i) This special election period (SEP) is available to individuals 
who have (or are enrolling in) an employer or union sponsored Part D 
plan and ends 2 months after the month the employer or union coverage 
of any type ends.
    (ii) The individual may choose an effective date that is not 
earlier than the first of the month following the month in which the 
election is made and no later than up to 3 months after the month in 
which the election is made.
    (12) The individual is enrolled in a Part D plan offered by a Part 
D plan sponsor that has been sanctioned by CMS and elects to disenroll 
from that plan in connection with the matter(s) that gave rise to that 
sanction.
    (i) Consistent with the disclosure requirements at Sec.  
423.128(f), CMS may require the sponsor to notify current enrollees 
that if the enrollees believe they are affected by the matter(s) that 
gave rise to the sanction, the enrollees are eligible for a SEP to 
elect another PDP.
    (ii) The SEP starts with the imposition of the sanction and ends 
when the sanction ends or when the individual makes an election, 
whichever occurs first.
    (13) The individual is enrolled in a section 1876 cost contract 
that is non-renewing its contract for the area in which the enrollee 
resides.
    (i) Individuals eligible for this SEP must meet Part D plan 
eligibility requirements.
    (ii) This SEP begins December 8 of the then-current contract year 
and ends on the last day of February of the following year.
    (14) The individual is disenrolling from a PDP to enroll in a 
Program of All-inclusive Care for the Elderly (PACE) organization or is 
enrolling in a PDP after disenrolling from a PACE organization.
    (i) An individual who disenrolls from PACE has a SEP for 2 months 
after the effective date of PACE disenrollment to elect a PDP.
    (ii) An individual who disenrolls from a PDP has a SEP for 2 months 
after the effective date of PDP disenrollment to elect a PACE plan.
    (15) The individual moves into, resides in, or moves out of an 
institution, as defined by CMS, and elects to enroll in, or disenroll 
from, a Part D plan.
    (16) The individual is not entitled to premium free Part A and 
enrolls in Part B during the General Enrollment Period for Part B 
(January through March) for an effective date of July 1st are eligible 
to request enrollment in a Part D plan that begins April 1st and ends 
June 30th, with a Part D plan enrollment effective date of July 1st.
    (17) The individual belongs to a qualified State Pharmaceutical 
Assistance Program (SPAP) and is requesting enrollment in a Part D 
plan.
    (i) The individual is eligible to make one enrollment election per 
year.
    (ii) This SEP is available while the individual is enrolled in the 
SPAP and, upon loss of eligibility for SPAP benefits, for an additional 
2 calendar months after either the month of the loss of eligibility or 
notification of the loss, whichever is later.

[[Page 33910]]

    (18) The individual is enrolled in a Part D plan and elects to 
disenroll from that Part D plan to enroll in or maintain other 
creditable prescription drug coverage.
    (19)(i) The individual is enrolled in a section 1876 cost contract 
and an optional supplemental Part D benefit under that contract and 
elects a Part D plan upon disenrolling from the cost contract.
    (ii) The SEP begins the month the individual requests disenrollment 
from the cost contract and ends when the individual makes an enrollment 
election or on the last day of the second month following the month the 
cost contract enrollment ended, whichever is earlier.
    (20) The individual is requesting enrollment in a Part D plan 
offered by a Part D plan sponsor with a Star Rating of 5 Stars. An 
individual may use this SEP only once for the contract year in which 
the Part D plan was assigned a 5-star overall performance rating, 
beginning the December 8 before that contract year through November 30 
of that contract year.
    (21)(i) The individual is a non-U.S. citizen who becomes lawfully 
present in the United States.
    (ii) This SEP begins the month the enrollee attains lawful presence 
status and ends the earlier of when the individual makes an enrollment 
election or 2 calendar months after the month the enrollee attains 
lawful presence status.
    (22) The individual was adversely affected by having requested, but 
not received, required notices or information in an accessible format, 
as outlined in section 504 of the Rehabilitation Act of 1973, within 
the same timeframe that the Part D plan sponsor or CMS provided the 
same information to individuals who did not request an accessible 
format.
    (i) The SEP begins at the end of the election period during which 
the individual was seeking to make an election and the length is at 
least as long as the time it takes for the information to be provided 
to the individual in an accessible format.
    (ii) Part D plan sponsors may determine eligibility for this SEP 
when the criterion is met, ensuring adequate documentation of the 
situation, including records indicating the date of the individual's 
request, the amount of time taken to provide accessible versions of 
materials and the amount of time it takes for the same information to 
be provided to an individual who does not request an accessible format.
    (23) Individuals affected by an emergency or major disaster 
declared by a federal, state or local government entity are eligible 
for a SEP to make a Part D enrollment or disenrollment election. The 
SEP starts as of the date the declaration is made, the incident start 
date or, if different, the start date identified in the declaration, 
whichever is earlier, and ends 2 full calendar months following the end 
date identified in the declaration or, if different, the date the end 
of the incident is announced, whichever is later. The individual is 
eligible for this SEP provided the individual--
    (i)(A) Resides, or resided at the start of the SEP eligibility 
period described in this paragraph (c)(23), in an area for which a 
Federal, state or local government entity has declared an emergency or 
major disaster; or
    (B) Does not reside in an affected area but relies on help making 
healthcare decisions from one or more individuals who reside in an 
affected area;
    (ii) Was eligible for another election period at the time of SEP 
eligibility period described in this paragraph (c)(23); and
    (iii) Did not make an election during that other election period 
due to the emergency or major disaster.
    (24) The individual is using the SEP at Sec.  422.62(b)(8) of this 
chapter to disenroll from a MA plan that includes Part D benefits.
    (i) This SEP permits a one-time election to enroll in a Part D 
plan.
    (ii) This SEP begins upon disenrollment from the MA plan and 
continues for 2 calendar months.
    (25)(i) An individual using the MA Open Enrollment Period for 
Institutionalized Individuals (OEPI) to disenroll from a MA plan that 
includes Part D benefits plan is eligible for a SEP to request 
enrollment in a Part D plan.
    (ii) The SEP begins with the month the individual requests 
disenrollment from the MA plan and ends on the last day of the second 
month following the month MA enrollment ended.
    (26) An individual using the Medicare Advantage Open Enrollment 
Period (MA OEP) to elect original Medicare is eligible for a SEP to 
make a Part D enrollment election.
    (27)(i) The individual is enrolled in a MA special needs plan (SNP) 
and is no longer eligible for the SNP because he or she no longer meets 
the specific special needs status.
    (ii) The individual may request enrollment in a Part D plan that 
begins the month the individual's special needs status changes and ends 
the earlier of when he or she makes an election or 3 months after the 
effective date of involuntary disenrollment from the SNP.
    (28) The individual is found, after enrollment into a Chronic Care 
SNP, not to have the required qualifying condition.
    (i) This individual is eligible to enroll prospectively in a Part D 
plan.
    (ii) This SEP begins when the MA organization notifies the 
individual of the lack of eligibility for the Chronic Care SNP and 
extends through the end of that month and the following 2 calendar 
months.
    (iii) The SEP ends when the individual makes an enrollment election 
or on the last day of the second of the 2 calendar months following 
notification of the lack of eligibility, whichever occurs first.
    (29) The individual uses the SEP at Sec.  422.62(b)(15) of this 
chapter to enroll in a MA Private Fee-for-Service plan without Part D 
benefits, or enrolls in a section 1876 cost plan, is eligible to 
request enrollment in a PDP or the cost plan's optional supplemental 
Part D benefit, if offered.
    (i) This SEP begins the month the individual uses the SEP at Sec.  
422.62(b)(15) of this chapter and continues for 2 additional months.
    (ii) [Reserved]
    (30) An individual who uses the SEP at Sec.  422.62(b)(23) of this 
chapter to disenroll from a MA plan is eligible to request enrollment 
in a PDP.
    (i) This SEP begins the month the individual is notified of 
eligibility for the SEP at Sec.  422.62(b)(23) of this chapter and 
continues for an additional 2 calendar months.
    (ii) This SEP permits one enrollment into a PDP.
    (iii) This SEP ends when the individual has enrolled in the PDP.
    (iv) An individual may use this SEP to request enrollment in a PDP 
subsequent to having submitted a disenrollment to the MA plan or may 
simply request enrollment in the PDP, resulting in automatic 
disenrollment from the MA plan.
    (31) The individual is enrolled in a plan offered by a Part D plan 
sponsor that has been placed into receivership by a state or 
territorial regulatory authority. The SEP begins the month the 
receivership is effective and continues until it is no longer in effect 
or until the enrollee makes an election, whichever occurs first. When 
instructed by CMS, the MA plan that has been placed under receivership 
must notify its enrollees, in the form and manner directed by CMS, of 
the enrollees' eligibility for this SEP and how to use the SEP.
    (32) The individual is enrolled in a plan that has been identified 
with the low performing icon in accordance with Sec.  
423.186(h)(1)(ii). This SEP exists while

[[Page 33911]]

the individual is enrolled in the low performing Part D plan.
    (33) The individual was involuntarily disenrolled from an MA-PD 
plan due to loss of Part B but continues to be entitled to Part A. This 
SEP begins when the individual is advised of the loss of Part B and 
continues for 2 additional months.
    (34) The individual meets other exceptional circumstances as CMS 
may provide.
* * * * *

0
24. Section 423.40 is amended by revising paragraph (c) to read as 
follows:


Sec.  423.40   Effective dates.

* * * * *
    (c) Special enrollment periods. For an enrollment or change of 
enrollment in Part D made during a special enrollment period specified 
in Sec.  423.38(c), the coverage or change in coverage is effective the 
first day of the calendar month following the month in which the 
election is made, unless otherwise noted.
* * * * *

0
25. Section 423.182 is amended in paragraph (a) by adding a definition 
for ``Tukey outer fence outliers'' in alphabetical order to read as 
follows:


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

    (a) * * *
    Tukey outer fence outliers are measure scores that are below a 
certain point (first quartile-3.0 x (third quartile-first quartile)) or 
above a certain point (third quartile + 3.0 x (third quartile-first 
quartile)).
* * * * *

0
26. Section 423.186 is amended--
0
a. By revising paragraph (a)(2)(i); and
0
b. In paragraphs (e)(1)(iii) and (iv) by removing the phrase ``weight 
of 2'' and adding in its place ``weight of 4''.
    The revision reads as follows:


Sec.  423.186   Calculation of Star Ratings.

    (a) * * *
    (2) * * *
    (i) The method maximizes differences across the star categories and 
minimizes the differences within star categories using mean resampling 
with the hierarchal clustering of the current year's data. Effective 
for the Star Ratings issued in October 2022 and subsequent years, CMS 
will add a guardrail so that the measure-threshold-specific cut points 
for non-CAHPS measures do not increase or decrease more than the value 
of the cap from one year to the next. Effective for the Star Ratings 
issued in October 2023 and subsequent years, prior to applying mean 
resampling with hierarchal clustering, Tukey outer fence outliers are 
removed. The cap is equal to 5 percentage points for measures having a 
0 to 100 scale (absolute percentage cap) or 5 percent of the restricted 
range for measures not having a 0 to 100 scale (restricted range cap). 
New measures that have been in the Part C and D Star Rating program for 
3 years or less use the hierarchal clustering methodology with mean 
resampling with no guardrail for the first 3 years in the program.
* * * * *

0
27. Section 423.329 is amended by revising paragraph (b)(4) to read as 
follows:


Sec.  423.329   Determination of payments.

* * * * *
    (b) * * *
    (4) Publication. CMS publishes the risk adjustment factors 
established under paragraph (b)(1) of this section for the upcoming 
calendar year in the Advance Notice and Rate Announcement publications 
specified under Sec.  422.312 of this chapter.
* * * * *

0
28. Section 423.2440 is revised to read as follows:


Sec.  423.2440   Credibility adjustment.

    (a) A Part D sponsor may add the credibility adjustment specified 
under paragraph (e) of this section to a contract's MLR if the 
contract's experience is partially credible, as defined in paragraph 
(d)(1) of this section.
    (b) A Part D sponsor may not add a credibility adjustment to a 
contract's MLR if the contract's experience is fully credible, as 
defined in paragraph (d)(2) of this section.
    (c) For those contract years for which a contract has non-credible 
experience, as defined in paragraph (d)(3) of this section, sanctions 
under Sec.  423.2410(b) through (d) will not apply.
    (d)(1) A contract's experience is partially credible if it is based 
on the experience of at least 4,800 member months and fewer than or 
equal to 360,000 member months.
    (2) A contract's experience is fully credible if it is based on the 
experience of more than 360,000 member months.
    (3) A contract's experience is non-credible if it is based on the 
experience of fewer than 4,800 member months.
    (e) The credibility adjustment for partially credible experience is 
determined based on the number of member months for all enrollees under 
the contract and the factors shown in Table 1 of this section. When the 
number of member months used to determine credibility exactly matches a 
member month category listed in Table 1 of this section, the value 
associated with that number of member months is the credibility 
adjustment. The credibility adjustment for a number of member months 
between the values shown in Table 1 of this section is determined by 
linear interpolation.

Table 1 to Sec.   423.2440--Credibility Adjustments for Part D Contracts
------------------------------------------------------------------------
                                               Credibility adjustment
               Member months                   (additional  percentage
                                                       points)
------------------------------------------------------------------------
<4,800....................................  N/A (Non-credible).
4,800.....................................  8.4%.
12,000....................................  5.3%.
24,000....................................  3.7%.
48,000....................................  2.6%.
120,000...................................  1.7%.
240,000...................................  1.2%.
360,000...................................  1.0%.
>360,000..................................  0.0% (Fully credible).
------------------------------------------------------------------------


    Dated: May 7, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: May 20, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-11342 Filed 5-22-20; 8:45 am]
BILLING CODE 4120-01-P