[Federal Register Volume 87, Number 8 (Wednesday, January 12, 2022)]
[Proposed Rules]
[Pages 1842-1960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00117]



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Vol. 87

Wednesday,

No. 8

January 12, 2022

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 422 and 423





Medicare Program; Contract Year 2023 Policy and Technical Changes to 
the Medicare Advantage and Medicare Prescription Drug Benefit Programs; 
Proposed Rule

  Federal Register / Vol. 87 , No. 8 / Wednesday, January 12, 2022 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 423

[CMS-4192-P]
RIN 0938-AU30


Medicare Program; Contract Year 2023 Policy and Technical Changes 
to the Medicare Advantage and Medicare Prescription Drug Benefit 
Programs

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare Advantage (MA) 
(Part C) program and Medicare Prescription Drug Benefit (Part D) 
program regulations to implement changes related to marketing and 
communications, past performance, Star Ratings, network adequacy, 
medical loss ratio reporting, special requirements during disasters or 
public emergencies, and pharmacy price concessions. This proposed rule 
would also revise regulations related to dual eligible special needs 
plans (D-SNPs), other special needs plans, and cost contract plans.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by March 7, 2022.

ADDRESSES: In commenting, please refer to file code CMS-4192-P.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-4192-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-4192-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
Marna Metcalf Akbar, (410) 786-8251, or Melissa Seeley, (212) 616-
2329--General Questions.
Jacqueline Ford, (410) 786-7767--Part C Issues.
[email protected]--Part C and D Star Ratings Issues.
Marna Metcalf-Akbar, (410) 786-8251--D-SNP Issues.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to 
view public comments. CMS will not post on Regulations.gov public 
comments that make threats to individuals or institutions or suggest 
that the individual will take actions to harm the individual. CMS 
continues to encourage individuals not to submit duplicative comments. 
We will post acceptable comments from multiple unique commenters even 
if the content is identical or nearly identical to other comments.

Acronyms

ACC Automated Criteria Check
ANOC Annual Notice of Change
ARB At-Risk Beneficiaries
BBA Bipartisan Budget Act
CAHPS Consumer Assessment of Healthcare Providers and Systems
CMS Centers for Medicare & Medicaid Services
COI Collection of Information
COVID-19 Coronavirus 2019 Disease
C-SNP Chronic Condition Special Needs Plan
DME Durable Medical Equipment
D-SNP Dual Eligible Special Needs Plan
EOC Evidence of Coverage
FFS Fee-for-Service
FIDE SNP Fully Integrated Dual Eligible Special Needs Plan
HEDIS Healthcare Effectiveness Data and Information Set
HHS Department of Health and Human Services
HIDE SNP Highly Integrated Dual Eligible Special Needs Plan
HOS Health Outcomes Survey
HPMS Health Plan Management System
HSD Health Service Delivery
ICR Information Collection Requirement
I-SNP Institutional Special Needs Plan
MA Medicare Advantage
MAC Medicare Administrative Contractor
MACPAC Medicaid and CHIP Payment and Access Commission
MA-PD Medicare Advantage Prescription Drug
MCO Managed Care Organization
MCMG Medicare Communications and Marketing Guidelines
MACPAC Medicaid and CHIP Payment and Access Commission
MedPAC Medicare Payment Advisory Commission
MIPPA Medicare Improvements for Patients and Providers Act
MLR Medical Loss Ratio
MMA Medicare Prescription Drug, Improvement, and Modernization Act
MMP Medicare-Medicaid Plan
MOC Model of Care
MOOP Maximum Out-of-Pocket
NAMBA National Average Monthly Bid Amount
NEMT Non-emergency Medical Transportation
NMM Network Management Module
OACT Office of the Actuary
OMB Office of Management and Budget
PACE Programs of All-Inclusive Care for the Elderly
PBP Plan Benefit Package
PDE Prescription Drug Event
PDP Prescription Drug Plan
PHE Public Health Emergency
PRA Paperwork Reduction Act
RFI Request for Information
RFA Regulatory Flexibilities Act
SAE Service Area Expansion
SB Summary of Benefits
SNP Special Needs Plan
SSA Social Security Administration
TPMO Third-Party Marketing Organization

I. Executive Summary

A. Purpose

    Over 27 million individuals receive their Medicare benefits through 
Medicare Advantage (MA or Part C), including plans that offer Medicare 
Prescription Drug Benefit (Part D) coverage. Over 24 million 
individuals receive Part D coverage through standalone Part D plans. 
The primary purpose of this proposed rule is to implement changes to 
the MA and Part D programs. The proposed provisions in this rule will 
reduce out-of-pocket prescription drug costs; improve price 
transparency and market competition under the Part D program; 
strengthen consumer protections to ensure MA and Part D beneficiaries 
have accurate and accessible information about their health plan 
choices and benefits; strengthen CMS oversight of MA and Part D plans; 
and improve the integration of Medicare and Medicaid programs for 
individuals enrolled in dual eligible special needs plans (D-SNPs). The 
proposed D-SNP provisions build on the Patient Protection and 
Affordable Care Act of 2010 (Affordable Care Act) (Pub. L. 111-148), 
the

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Bipartisan Budget Act (BBA) of 2018 (Pub. L. 115-123), CMS experience 
administering the MA and Part D programs, and the experiences of 
Medicare-Medicaid Plans (MMPs) to better align and integrate benefits 
for dually eligible beneficiaries.

B. Summary of Major Provisions

1. Enrollee Participation in Plan Governance (Sec.  422.107)
    Managed care plans derive significant value from engaging enrollees 
in defining, designing, participating in, and assessing their care 
systems.\1\ We are proposing to require that any MA organization 
offering a D-SNP must establish one or more enrollee advisory 
committees in each State to solicit direct input on enrollee 
experiences. We also propose that the committee include a reasonably 
representative sample of individuals enrolled in the D-SNP(s) and 
solicit input on, among other topics, ways to improve access to covered 
services, coordination of services, and health equity for underserved 
populations. We believe that the establishment and maintenance of an 
enrollee advisory committee is a valuable beneficiary protection to 
ensure that enrollee feedback is heard by managed care plans and to 
help identify and address barriers to high-quality, coordinated care 
for dually eligible individuals.
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    \1\ Centers for Medicare & Medicaid Services. (n.d.). Person & 
Family Engagement Strategy: Sharing with Our Partners. Retrieved 
from https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/Person-and-Family-Engagement-Strategy-Summary.pdf.
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2. Standardizing Housing, Food Insecurity, and Transportation Questions 
on Health Risk Assessments (Sec.  422.101)
    Section 1859(f)(5)(A)(ii)(I) of Social Security Act (hereafter 
known as the Act) requires each special needs plan (SNP) to conduct an 
initial assessment and an annual reassessment of the individual's 
physical, psychosocial, and functional needs. We codified this 
requirement at Sec.  422.101(f)(1)(i) as part of the model of care 
requirements for all MA SNPs. Certain social risk factors can lead to 
unmet social needs that directly influence an individual's physical, 
psychosocial, and functional status. Many dually eligible individuals 
contend with multiple social risk factors such as homelessness, food 
insecurity, lack of access to transportation, and low levels of health 
literacy.\2\ Building on CMS's experience with other programs and model 
tests, we propose to require that all SNPs include standardized 
questions on housing stability, food security, and access to 
transportation as part of their health risk assessments.
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    \2\ Medicaid and CHIP Payment and Access Commission, ``Report to 
Congress on Medicaid and CHIP,'' June 2020. Retrieved from: https://www.macpac.gov/wp-content/uploads/2020/06/June-2020-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
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    Our proposal would result in SNPs having a more complete picture of 
the risk factors that may inhibit enrollees from accessing care and 
achieving optimal health outcomes and independence. We believe this 
knowledge would better equip the MA organizations offering these SNPs 
to meet the needs of their members. Our proposal would also equip MA 
organizations with person-level information that would help them better 
connect people to covered services and social service organizations and 
public programs that can help resolve housing instability, food 
insecurity, or transportation challenges. Our proposal also would have 
the benefit of standardizing these data elements collected through 
HRAs, which we believe would eventually facilitate better data exchange 
among SNPs (when an individual transitions from one SNP to another) as 
well as facilitate the care management requirements under section 
1859(f)(5) of the Act.
3. Refining Definitions for Fully Integrated and Highly Integrated D-
SNPs (Sec. Sec.  422.2 and 422.107)
    Dually eligible individuals have an array of choices for how to 
receive their Medicare coverage. We propose several changes to how we 
define fully integrated dual eligible special needs plan (FIDE SNP) and 
highly integrated dual eligible special needs plan (HIDE SNP) to help 
differentiate various types of D-SNPs, clarify options for 
beneficiaries, and improve integration.
    We propose to require, for 2025 and subsequent years, that all FIDE 
SNPs have exclusively aligned enrollment, as defined in Sec.  422.2, 
and cover Medicaid home health, durable medical equipment, and 
behavioral health services through a capitated contract with the State 
Medicaid agency. We propose to require that each HIDE SNP's capitated 
contract with the State apply to the entire service area for the D-SNP 
for plan year 2025 and subsequent years. Consistent with existing 
policy outlined in sub-regulatory guidance, we also propose to codify 
specific limited benefit carve-outs for FIDE SNPs and HIDE SNPs.
    We believe these proposals will create better experiences for 
beneficiaries and move FIDE SNPs and HIDE SNPs toward greater 
integration, which we believe is a purpose of the amendments to section 
1859(f) of the Act regarding integration made by section 50311(b) of 
the BBA of 2018.
4. Additional Opportunities for Integration Through State Medicaid 
Agency Contracts (Sec.  422.107)
    Section 164 of Medicare Improvements for Patients and Providers Act 
of 2008 (MIPPA) (Pub. L. 110-275) amended section 1859(f) of the Act to 
require that a D-SNP contract with the State Medicaid agency in each 
State in which the D-SNP operates to provide benefits, or arrange for 
the provision of Medicaid benefits, to which an individual is entitled. 
States have used these contracts to better integrate care for dually 
eligible individuals. We propose to codify new pathways through which 
States can use these contracts to require that certain D-SNPs with 
exclusively aligned enrollment (a) establish contracts that only 
include one or more D-SNPs within a State, and (b) integrate materials 
and notices for enrollees. Where States choose to use this opportunity, 
it would help individuals better understand their coverage. Because 
Star Ratings are assigned at the contract level, this proposal would 
also provide the State and the public with greater transparency on the 
quality ratings for the D-SNP(s), helping CMS and States better 
identify disparities between dually eligible beneficiaries and other 
beneficiaries and target interventions accordingly.
    We also propose mechanisms to better coordinate State and CMS 
monitoring and oversight of certain D-SNPs when a State has elected to 
require these additional levels of integration, including granting 
State access to certain CMS information systems. Collectively, our 
proposals would improve Federal and State oversight of certain D-SNPs 
(and their affiliated Medicaid managed care plans) through greater 
information-sharing among government regulators.
5. Attainment of the Maximum Out-of-Pocket Limit (Sec. Sec.  422.100 
and 422.101)
    In order to ensure that MA plan benefits do not discriminate 
against higher cost, less healthy enrollees, MA plans are required to 
establish a limit on beneficiary cost-sharing for Medicare Part A and B 
services after which the plan pays 100 percent of the service costs. 
Current guidance allows MA plans, including D-SNPs, to not count 
Medicaid-paid amounts or unpaid amounts toward this maximum out-of-
pocket (MOOP) limit, which results in

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increased State payments of Medicare cost-sharing and disadvantages 
providers serving dually eligible individuals in MA plans. We propose 
to specify that the MOOP limit in an MA plan (after which the plan pays 
100 percent of MA costs for Part A and Part B services) is calculated 
based on the accrual of all cost-sharing in the plan benefit, 
regardless of whether that cost sharing is paid by the beneficiary, 
Medicaid, other secondary insurance, or remains unpaid because of State 
limits on the amounts paid for Medicare cost-sharing and dually 
eligible individuals' exemption from Medicare cost-sharing. The 
proposal would result in more equitable payment for MA providers 
serving dually eligible beneficiaries. We project that our proposal 
would result in increased bid costs for the MOOP for some MA plans. A 
portion of those higher bid costs would result in increased Medicare 
spending of $3.9 billion over 10 years. That cost is partially offset 
by lower Federal Medicaid spending of $2.7 billion and the portion of 
Medicare spending paid by beneficiary Part B premiums, which totals 
$600 million over 10 years. The net 10-year cost estimate for the 
proposal is $614.8 million.
6. Special Requirements During a Disaster or Emergency (Sec.  
422.100(m))
    In order to ensure enrollees have uninterrupted access to care, 
current regulations provide for special requirements at Sec.  
422.100(m) for MA plans during disasters or emergencies, including 
public health emergencies (PHEs), such as requirements for plans to 
cover services provided by non-contracted providers and to waive 
gatekeeper referral requirements. The timeframe during which these 
special rules apply can be very limited depending on the type or scope 
of the disaster or emergency, while other situations, like the current 
PHE for COVID-19, may have an uncertain end date. Currently, the 
regulation states that a disaster or emergency ends (thus ending the 
obligation for MA plans to comply with the special requirements) the 
earlier of when an end date is declared or when, if no end date was 
identified in the declaration or by the official that declared the 
disaster or emergency, 30 days have passed since the declaration. This 
has caused some confusion among stakeholders, who are unsure whether to 
continue special requirements during a state of disaster or emergency 
after 30 days, or whether those special requirements do not apply after 
the 30-day time period has elapsed. This proposal would clarify the 
period of time during which MA organizations must comply with the 
special requirements to ensure access for enrollees to covered services 
throughout the disaster or emergency period, especially when the end 
date is unclear and the period renews several times. We also propose to 
codify an additional condition for triggering the special requirements 
imposed by Sec.  422.100(m)(1), specifically that there is a disruption 
in access to health care at the same time as the disaster or emergency.
7. Amend MA Network Adequacy Rules by Requiring a Compliant Network at 
Application (Sec.  422.116)
    We are proposing to amend Sec.  422.116 to require applicants to 
demonstrate that they meet the network adequacy standards for the 
pending service area as part of the MA application process for new and 
expanding service areas and to adopt a time-limited 10-percentage point 
credit toward meeting the applicable network adequacy standards for the 
application evaluation. Under our current rules, we require that an 
applicant attest that it has an adequate provider network that provides 
enrollees with sufficient access to covered services, and we will not 
deny an application based on the evaluation of the MA plan's network. 
Network adequacy reviews are a critical component for confirming that 
access to care is available for enrollees. As such, we believe that 
requiring applicants to meet network adequacy standards as part of the 
application process will strengthen our oversight of an organization's 
ability to provide an adequate network of providers to deliver care to 
MA enrollees. This change would also provide MA organizations with 
information regarding their network adequacy ahead of bid submissions, 
mitigating current issues with late changes to the bid that may affect 
the bid pricing tool. Finally, we understand that it may be difficult 
for applicants to have a full network in place almost one year ahead of 
the beginning of the contract as the proposed change for network 
adequacy rules would require. Therefore, the proposal includes a 10-
percentage point credit towards the percentage of beneficiaries 
residing within published time and distance standards for new or 
expanding service area applicants. Once the contract is operational, 
the 10-percentage point credit would no longer apply and MA 
organizations would need to meet full compliance.
8. Allow CMS To Calculate Star Ratings for Certain Measures for 2023 
Given Impacts of the COVID-19 Public Health Emergency (Sec.  422.166)
    Due to the scope and duration of the COVID-19 public health 
emergency, we codified a change to the 2022 Star Ratings methodology in 
the interim final rule titled ``Medicare and Medicaid Programs, 
Clinical Laboratory Improvement Amendments (CLIA), and Patient 
Protection and Affordable Care Act; Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency'' (CMS-
3401-IFC; 85 FR 54820), published in the Federal Register and effective 
on September 2, 2020, which included a change to our extreme and 
uncontrollable circumstances policy at 42 CFR 422.166(i)(11) to make it 
possible for us to calculate 2022 Star Ratings for MA contracts. We 
propose making a technical change at Sec.  422.166(i)(12) to enable CMS 
to calculate 2023 Star Ratings for three Healthcare Effectiveness Data 
and Information Set measures that are based on the Health Outcomes 
Survey. Specifically, these measures are Monitoring Physical Activity, 
Reducing the Risk of Falling, and Improving Bladder Control. Without 
this technical change, CMS will be unable to calculate measure-level 
2023 Star Ratings for these measures for any MA contract.
9. Past Performance Methodology To Better Hold Plans Accountable for 
Violating CMS Rules (Sec. Sec.  422.502 and 422.503)
    In the previous rulemaking cycle, CMS modified the past performance 
methodology, revising the elements that are reviewed to determine if 
CMS should permit an organization to enter into or expand an existing 
contract. The current regulatory language prohibits an organization 
from expanding or entering into a new contract if it has a negative net 
worth or has been under sanction during the performance timeframe. We 
are proposing to include an organization's record of Star Ratings, 
bankruptcy issues, and compliance actions in our methodology going 
forward.
10. Marketing and Communications Requirements on MA and Part D Plans To 
Assist Their Enrollees (Sec. Sec.  422.2260 and 423.2260, 422.2267 and 
423.2267, 422.2274 and 423.2274)
    CMS has seen an increase in beneficiary complaints associated with 
and has received feedback from beneficiary advocates and stakeholders 
concerned about the marketing practices

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of third-party marketing organizations (TPMOs) who sell multiple MA and 
Part D products. In 2020, we received a total of 15,497 complaints 
related to marketing. In 2021, excluding December, the total was 
39,617. We are unable to say that every one of the complaints are a 
result of TPMO marketing activities, but based on a targeted search, we 
do know that many are related to TPMO marketing. In addition, we have 
seen an increase in third party print and television ads, which appears 
to be corroborated by state partners. Through rulemaking, we will 
address the concerns with TPMOs by means of the following three 
proposed updates to the communications and marketing requirements under 
42 CFR parts 422 and 423, subpart V: (1) We propose to define TPMOs in 
the regulation at Sec. Sec.  422.2260 and 423.2260 to remove any 
ambiguity associated with MA plans/Part D sponsors responsibilities for 
TPMO activities associated with the selling of MA and Part D plans, (2) 
we propose to add a new disclaimer that would be required when TPMOs 
market MA plans/Part D products (Sec. Sec.  422.2267(e) and 
423.2267(e)), and (3) we propose an update to Sec. Sec.  422.2274 and 
423.2274 to require additional plan oversight requirements associated 
with TPMOs, in addition to what is already required under Sec. Sec.  
422.504(i) and 423.505(i) if the TPMO is a first tier, downstream or 
related entity (FDRs).
    CMS' January 2021 final rule (86 FR 5864) did not require notice 
and taglines, based on the HHS Office for Civil Rights repeal of 
certain notice and tagline requirements associated with section 1557 of 
the Patient Protection and Affordable Care Act of 2010 (Affordable Care 
Act). In the months since the publication of this rule, CMS gained 
additional insight regarding the void created by the lack of 
notification requirements. Based on the significant population (12.2 
percent) of those 65 and older who speak a language other than English 
in the home and complaints CMS received through our Complaint Tracking 
Module, we propose to require MA and Part D plans create a multi-
language insert that would inform the reader, in the top fifteen 
languages used in the U.S., that interpreter services are available for 
free. As a note, CMS provides plans a list of all languages that are 
spoken by 5 percent or more of the population for every county in the 
U.S. We propose to require the inclusion of the multi-language insert 
whenever a Medicare beneficiary is provided a CMS required material 
(for example, Evidence of Coverage, Annual Notice of Change, enrollment 
form, Summary of Benefits) as defined under Sec. Sec.  422.2267(e) and 
423.2267(e). Finally, we propose codifying a number of current sub-
regulatory communications and marketing requirements that were 
inadvertently not included during the previous updates to 42 CFR parts 
422 and 423, subpart V.
11. Greater Transparency in Medical Loss Ratio Reporting (Sec. Sec.  
422.2460 and 423.2460)
    To improve transparency and oversight concerning the use of Trust 
Fund dollars, we are proposing to reinstate the detailed medical loss 
ratio (MLR) reporting requirements that were in effect for contract 
years 2014 to 2017, which required reporting of the underlying data 
used to calculate and verify the MLR and any remittance amount, such as 
incurred claims, total revenue, expenditures on quality improving 
activities, non-claims costs, taxes, and regulatory fees. In addition, 
we are proposing the collection of additional details regarding plan 
expenditures so we can better assess the accuracy of MLR submissions, 
the value of services being provided to enrollees under MA and Part D 
plans, and the impacts of recent rule changes that removed limitations 
on certain expenditures that count toward the 85 percent MLR 
requirement.
12. Pharmacy Price Concessions to Drug Prices at the Point of Sale 
(Sec.  423.100)
    The ``negotiated prices'' of drugs, as the term is currently 
defined in Sec.  423.100, must include all network pharmacy price 
concessions except those contingent amounts that cannot ``reasonably be 
determined'' at the point-of-sale. Under this exception, negotiated 
prices typically do not reflect any performance-based pharmacy price 
concessions that lower the price a sponsor ultimately pays for a drug, 
based on the rationale that these amounts are contingent upon 
performance measured over a period that extends beyond the point of 
sale and thus cannot reasonably be determined at the point of sale.
    We are proposing to eliminate this exception for contingent 
pharmacy price concessions. We are proposing to delete the existing 
definition of ``negotiated prices'' at Sec.  423.100 and to adopt a new 
definition for the term ``negotiated price'' at Sec.  423.100, which we 
are proposing to define as the lowest amount a pharmacy could receive 
as reimbursement for a covered Part D drug under its contract with the 
Part D plan sponsor or the sponsor's intermediary (that is, the amount 
the pharmacy would receive net of the maximum negative adjustment that 
could result from any contingent pharmacy payment arrangement and 
before any additional contingent payment amounts, such as incentive 
fees). To implement the proposed change at the point of sale, Part D 
sponsors and their pharmacy benefit managers (PBMs) would load revised 
drug pricing tables reflecting the lowest possible reimbursement into 
their claims processing systems that interface with contracted 
pharmacies. The proposed changes would take effect on January 1, 2023, 
meaning, if finalized, Part D sponsors would need to account for the 
changes in the bids that they submit for contract year 2023.
    We are also proposing to add a definition of ``price concession'' 
at Sec.  423.100. Although ``price concession'' is a term important to 
the adjudication of the Part D program, it has not yet been defined in 
the Part D statute, Part D regulations, or sub-regulatory guidance. We 
are proposing to define price concession in a broad manner to include 
all forms of discounts and direct or indirect subsidies or rebates that 
serve to reduce the costs incurred under Part D plans by Part D 
sponsors.

C. Summary of Costs and Benefits

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II. Provisions of the Proposed Rule

A. Improving Experiences for Dually Eligible Individuals

1. Overview and Background
    Over 11 million people are concurrently enrolled in both Medicare 
and Medicaid. 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.\3\
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    \3\ For example, see chapter 1 of Medicaid and CHIP Payment and 
Access Commission, Report to Congress on Medicaid and CHIP, June 
2021, and chapter 12 of Medicare Payment Advisory Committee, June 
2019 Report to the Congress: Medicare and the Health Care Delivery 
System.
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    ``Integrated care'' refers to delivery system and financing 
approaches that--
     Maximize person-centered coordination of Medicare and 
Medicaid services, across primary, acute, long-term, behavioral, and 
social domains;
     Mitigate cost-shifting incentives, including total-cost-
of-care accountability across Medicare and Medicaid; and
     Create seamless experiences for beneficiaries.
    There is a range of approaches to integrating Medicare and Medicaid 
benefits or financing for dually eligible individuals, including 
through demonstrations and existing programs. The most prevalent forms 
of integrated care use capitated financing, including capitation of 
health plans to cover the full range of Medicare and Medicaid services. 
Some States have carefully married MA dual eligible special needs plans 
(D-SNPs) with Medicaid managed care organizations (MCOs) to create 
integrated care programs for dually eligible individuals. Researchers 
have generally found positive results from such integrated care 
approaches. For example, a study in Minnesota showed that enrollees in 
fully integrated Medicare-Medicaid managed care plans had greater 
primary care physician use and lower inpatient hospital and emergency 
department use in comparison to service delivery when Medicare and 
Medicaid-funded services were delivered independently. The study also 
found that home and community-based service use was greater for the 
fully integrated Medicare-Medicaid managed care plans than the 
comparison population and nursing

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facility use was no greater.\4\ A study in Oregon found that dually 
eligible individuals enrolled in plans with aligned financial 
incentives for Medicare and Medicaid experienced more improvement in 
their care relative to those enrolled in nonaligned Medicare Advantage 
and Medicaid managed care plans.\5\ Other studies have found that 
integrated care programs foster high beneficiary satisfaction,\6\ 
perform better than non-integrated plans on certain quality metrics,\7\ 
and provide benefit flexibility needed to allow beneficiaries to 
continue living in the community.\8\ Overall, the number of dually 
eligible individuals in integrated care or financing models or both has 
increased over time, now exceeding 1 million beneficiaries, but it 
remains the exception rather than the rule in most States.\9\
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    \4\ 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.
    \5\ 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: 
https://journals.sagepub.com/doi/abs/10.1177/1077558717740206.
    \6\ Health Management Associates. Value Assessment of the Senior 
Care Options (SCO) Program (July 21, 2015). Retrieved from https://www.mahp.com/wp-content/uploads/2017/04/SCO-White-Paper-HMA-2015_07_20-Final.pdf.
    \7\ Medicare Payment Advisory Committee. ``Chapter 3, Care 
coordination programs for dual-eligible beneficiaries.'' In June 
2012 Report to Congress: Medicare and Health Care Delivery System 
(June 16, 2012). Retrieved from https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun12_ch03.pdf.
    \8\ Ibid.
    \9\ CMS Medicare-Medicaid Coordination Office FY 2020 Report to 
Congress, available at: https://www.cms.gov/files/document/reporttocongressmmco.pdf.
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    An increasing number of dually eligible individuals are enrolled in 
managed care plans. The broader trend toward managed care presents 
opportunities for integrated care. It also presents risks for further 
fragmentation and complexity. In fact, while enrollment in integrated 
care has increased, it is also becoming increasingly likely that dually 
eligible individuals are in one sponsor's Medicaid MCO and a 
competitor's D-SNP. The result: Duplicative health risk assessments 
(HRAs); multiple ID cards, handbooks, and provider and pharmacy 
directories; strong incentives for cost-shifting where possible; 
multiple care coordinators; more complex billing processes for 
providers; and similar other fragmented care, burdens, or increased 
costs.
    The Medicare Payment Advisory Commission (MedPAC), Medicaid and 
CHIP Payment and Access Commission (MACPAC), and a wide array of health 
policy organizations have long pushed for greater CMS investment in 
integrated care. Over the last few years, MedPAC and MACPAC have 
written extensively on opportunities to promote integration through 
managed care policies.\10\
---------------------------------------------------------------------------

    \10\ Most recently, see MACPAC's June 2021 Report to Congress 
and MedPAC's June 2019 Report to Congress.
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    Section 2602 of the Patient Protection and Affordable Care Act of 
2010 (Pub. L. 111-148) (Affordable Care Act) established the Medicare-
Medicaid Coordination Office (MMCO) within CMS to better align and 
integrate benefits for dually eligible individuals, including specific 
responsibilities. Section 50311(b)(2) of the Bipartisan Budget Act 
(BBA) of 2018 amended that provision to also charge MMCO with--
     Developing regulations and guidance related to the 
integration or alignment of policy and oversight under Medicare and 
Medicaid regarding D-SNPs; and
     Serving as the single point of contact for States on D-SNP 
issues.
    In two recent MA/Part D rulemakings, CMS has adopted regulations 
\11\ to: (1) Promote better information sharing between States and D-
SNPs; (2) unify appeals processes across Medicare and Medicaid for 
certain D-SNPs that are also capitated for Medicaid benefits; and (3) 
phase out ``D-SNP look-alike'' plans that enroll a high percentage of 
dually eligible individuals without meeting the requirements for D-
SNPs.\12\
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    \11\ For a discussion of codified requirements for information 
sharing between States and D-SNPs and unified appeals processes, see 
the final rule titled ``Medicare and Medicaid Programs; Policy and 
Technical Changes to the Medicare Advantage, Medicare Prescription 
Drug Benefit, Programs of All-Inclusive Care for the Elderly (PACE), 
Medicaid Fee-For-Service, and Medicaid Managed Care Programs for 
Years 2020 and 2021,'' (84 FR 15710 through 15717 and 84 FR 15720 
through 15744) at: https://www.federalregister.gov/documents/2019/04/16/2019-06822/medicare-and-medicaid-programs-policy-and-technical-changes-to-the-medicare-advantage-medicare. For a 
discussion of codified contract limitations on D-SNP look-alike 
plans, see the final rule titled ``Medicare Program; Contract Year 
2021 Policy and Technical Changes to the Medicare Advantage Program, 
Medicare Prescription Drug Benefit Program, and Medicare Cost Plan 
Program,'' (85 CFR 33805 through 33820) at: https://www.federalregister.gov/documents/2020/06/02/2020-11342/medicare-program-contract-year-2021-policy-and-technical-changes-to-the-medicare-advantage-program.
    \12\ For a discussion of D-SNP look-alikes, see 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,'' (85 FR 9018 through 9025) at: https://www.govinfo.gov/content/pkg/FR-2020-02-18/pdf/2020-02085.pdf.
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    Despite this recent work, additional actions are needed to maximize 
the potential of D-SNPs to deliver person-centered integrated care--and 
ultimately better health outcomes and independence in the community--
for dually eligible older adults, people with disabilities, and people 
with end stage renal disease.
    Maximizing the potential of D-SNPs to achieve these goals will 
require a sustained effort over multiple years, including--
     Partnership with and technical assistance for States;
     Technical assistance and support for providers and health 
plans, especially among the local not-for-profit plans that 
disproportionately serve Medicaid beneficiaries;
     Monitoring and oversight that protects beneficiaries and 
promotes person-centered coordination of care; and
     Federal rulemaking to raise the bar on integration without 
excessive disruption for enrollees.
    We are working to improve and increase options for more integrated 
care in a variety of ways, including through D-SNPs and Medicare-
Medicaid Plans (MMPs).
a. Dual Eligible Special Needs Plans
    Special needs plans (SNPs) are MA plans created by the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 
108-173) that are specifically designed to provide targeted care and 
limit enrollment to special needs individuals. Under section 1859(b)(6) 
of the Act, SNPs restrict enrollment to certain populations. The most 
common type of SNP is a dual eligible special needs plan, or D-SNP, in 
which enrollment is limited to individuals entitled to medical 
assistance under a State plan under title XIX of the Act.
    D-SNPs are intended to integrate or coordinate care for dually 
eligible individuals more effectively than standard MA plans or the 
original Medicare fee-for-service (FFS) program by focusing enrollment 
and care management on this population. As of January 2021, 
approximately 3.3 million dually eligible individuals (more than 1 of 
every 4 dually eligible individuals) were enrolled in 627 D-SNPs.\13\
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    \13\ Centers for Medicare & Medicaid Services. SNP Comprehensive 
Report (January 2021). 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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[[Page 1851]]

    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 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 
contracts with State Medicaid agencies 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.
    Most 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 certain D-SNPs with exclusively aligned 
enrollment, termed ``applicable integrated plans.'' These requirements, 
along with clarifications to existing regulations, were codified in the 
``Medicare and Medicaid Programs; Policy and Technical Changes to the 
Medicare Advantage, Medicare Prescription Drug Benefit, Programs of 
All-Inclusive Care for the Elderly (PACE), Medicaid Fee-For-Service, 
and Medicaid Managed Care Programs for Years 2020 and 2021'' final rule 
(84 FR 15696 through 15744) (hereinafter referred to as the April 2019 
final rule).\14\
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    \14\ See https://www.govinfo.gov/content/pkg/FR-2019-04-16/pdf/2019-06822.pdf.
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    For a more comprehensive review of D-SNPs and legislative history, 
see 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,'' (85 FR 9018 through 9021) which appeared in the 
Federal Register on February 18, 2020 (hereinafter referred to as the 
February 2020 proposed rule).\15\
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    \15\ See https://www.govinfo.gov/content/pkg/FR-2020-02-18/pdf/2020-02085.pdf.
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b. Medicare-Medicaid Plans
    To test additional models of integrated care, we established the 
Medicare-Medicaid Financial Alignment Initiative (FAI) in July 2011 
with the goal of improving outcomes and experiences for full-benefit 
dually eligible individuals while reducing costs for both States and 
the Federal government. Although the FAI includes two models, the model 
with the largest number of States participating is a capitated model 
through which CMS, the State, and health plans (called Medicare-
Medicaid Plans or MMPs) enter into three-way contracts to coordinate 
the full array of Medicare and Medicaid services for members.
    Certain elements of the capitated model demonstrations vary by 
State, but all MMPs include--
     A beneficiary advisory committee or governance board to 
provide ongoing input on plan operations;
     An integrated set of member materials, including provider 
directories, beneficiary notices, and a single ID card;
     Person-centered care planning, including HRAs and care 
plans;
     Care coordination and assistance with care transitions;
     Aligned Medicare and Medicaid plan enrollment and 
disenrollment effective dates;
     Medicare provider network adequacy standards specific to 
the dually eligible individual population;
     Integrated grievance and appeal processes at the plan 
level;
     Joint oversight by CMS and the States through contract 
management teams;
     Benefit flexibility, an integrated medical loss ratio 
(MLR), and other financing provisions intended to promote person-
centeredness and mitigate incentives for cost-shifting across programs; 
and
     A set of CMS core and State-specific quality measures, a 
subset of which are part of performance-based risk through a quality 
withhold on the payment to the MMP.
    CMS and States partnered with MMPs to create a seamless experience 
for beneficiaries, but MMPs operate as both MA organizations and 
Medicaid managed care organizations. As such, unless waived by CMS, 
MMPs are required to comply with Medicaid managed care requirements 
under 42 CFR part 438, with MA (also known as Part C) requirements in 
title XVIII of the Act as well as 42 CFR part 422 and, with regard to 
the Medicare prescription drug benefit, Part D requirements in title 
XVIII of the Act and 42 CFR part 423. Section 1115A of the Act (as 
added by section 3021 of the Affordable Care Act) authorizes waiver of 
certain Medicare provisions and CMS used that authority to waive 
several Medicare requirements for the FAI. For States participating in 
the capitated model, CMS typically uses authority under section 
1115(a), 1915(b), 1915(c), or 1932(a) of the Act to waive or exempt the 
State from certain provisions of title XIX of the Act or establish the 
authority to deliver Medicaid services through managed care.
    As of July 2021, there are 39 MMPs in nine States serving 
approximately 400,000 members.\16\
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    \16\ MMP enrollment as of December 2020. See CMS Monthly 
Enrollment by Contract Report (December, 2020). Retrieved from 
https://www.cms.gov/research-statistics-data-and-systemsstatistics-trends-and-reportsmcradvpartdenroldatamonthly/enrollment-contract-2020-12.
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    While an independent evaluation of the FAI is still underway, we 
have already gleaned several lessons regarding integrated, managed care 
from the capitated financial alignment model:
     Enrollee participation in governance helps identify and 
address barriers to high-quality, coordinated care. Stakeholder 
engagement has been an important tenet of the FAI since its inception. 
We required participating States to work with a variety of 
stakeholders, including beneficiaries and their advocates, as a 
condition of demonstration approval and implementation processes. Some 
have cultivated robust and impactful advisory bodies. For example, 
Massachusetts developed a One Care Implementation Council,\17\ at least 
half of whose membership is comprised of enrollees and/or their 
representatives, charged with tracking quality of services, providing 
support and input to the State, and promoting accountability and 
transparency. The three-way contracts used in the capitated financial 
alignment model require MMPs to establish enrollee advisory committees 
and/or recruit enrollees to governing boards to ensure plans regularly 
obtain enrollee input on issues of program management. These advisory 
committees often provide input on enrollee materials, access to covered 
services, outreach campaigns, and other topics. Not every advisory 
committee operates at the same level, and many MMPs have had to 
recalibrate their approaches to ensure robust participation over time, 
but all have made strides toward seeking out and incorporating enrollee 
feedback. We believe such mechanisms help MMPs

[[Page 1852]]

improve the experiences of dually eligible individuals.
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    \17\ For more information on the One Care Implementation 
Council, see the Center for Consumer Engagement in Health Innovation 
at Community Catalyst & the LeadingAge LTSS Center @UMass Boston. 
``The One Care Implementation Council: Stakeholder Engagement Within 
a Duals Demonstration Initiative.'' (June, 2018). Retrieved from 
https://www.healthinnovation.org/resources/publications/body/One-Care-Implementation-Council-Review-June-2018-1.pdf.
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     Assessment processes are a vehicle for identifying and 
addressing unmet need, particularly those related to social 
determinants of health. MMPs are required to offer care coordination 
services to each beneficiary, including an HRA of the enrollee's 
physical, psychosocial, and functional status which meet all minimum 
requirements for MA plans in section 1859(f)(5)(A)(ii) of the Act but 
often include additional elements to assess social risk factors. As of 
September 2020, MMPs had performed over 1.3 million HRAs, and in doing 
so identified significant unmet need among members, particularly 
related to food insecurity and housing instability.\18\ For example, we 
commonly learn of HRAs identifying people with no regular source of 
care, untreated chronic conditions, unsafe living conditions, and/or 
imminent eviction or homelessness. By identifying these unmet needs 
through the HRA process, MMPs are then able to address them with 
interventions from care coordinators, connections to community 
organizations, and by incorporating goals and actions into beneficiary 
care plans.
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    \18\ MMP reported monitoring measure data. Measure data are 
provided for informational purposes only and do not constitute 
official evaluation results. Full measure specifications can be 
found in the reporting requirements documents, available at: https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/MMPInformationandGuidance/MMPReportingRequirements.html.
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     Medicare-Medicaid integration correlates with high levels 
of beneficiary satisfaction. MMP members report high levels of 
satisfaction with their MMPs through member experience surveys. When 
asked to rate their health plan on a scale from 0 to 10 (with 0 being 
the worst possible and 10 being the best possible), 91 percent of 
respondents rated their health plan and health care a 7 or higher in 
2019, the most recent year for which data are available.\19\ Sixty-six 
percent of all respondents rated their MMP a 9 or 10 in 2019, up from 
59 percent in 2016.\20\ These ratings have improved continuously (by 
five percentage points per year on average) since the MMPs started 
reporting such data in 2015 and are on par with ratings in the broader 
Medicare Advantage program.\21\
---------------------------------------------------------------------------

    \19\ Centers for Medicare & Medicaid Services. Enrollee 
Experiences in the Medicare-Medicaid Financial Alignment Initiative: 
Results through the 2019 CAHPS Surveys. (October 2020) Retrieved 
from https://www.cms.gov/files/document/faicahpsresults.pdf.
    \20\ Ibid.
    \21\ CMS analysis of MMP and Medicare Advantage CAHPS data 2015-
2019.
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     Carving in Medicaid behavioral health benefits helps 
promote better coordination of behavioral health and physical health 
services. Behavioral health conditions are pervasive among dually 
eligible individuals. For example, nearly one-third of individuals who 
are dually eligible for Medicare and Medicaid have been diagnosed with 
a serious mental illness, such as schizophrenia, bipolar disorder, or 
major depressive disorder, a rate almost three times higher than for 
non-dually eligible Medicare beneficiaries.\22\ Fragmented physical and 
behavioral health care, delivered across multiple providers and funding 
sources, can decrease access to care and lead to poor health 
status.\23\ MMPs in all capitated demonstration States except for 
California and Michigan include Medicaid behavioral health benefits in 
their plan benefit package. In California, specialty mental health 
services and substance use disorder treatment covered by Medicaid are 
financed and administered by county behavioral health departments, and 
MMPs are required to coordinate with the counties for members served by 
both entities. Coordination between the MMPs and the counties has 
varied by county and has often been difficult; challenges include 
confusion for plans over county-level variation on which services are 
covered by the county or the MMP, limited behavioral health provider 
resources to participate in interdisciplinary care teams, and legal and 
communication barriers to sharing data between county providers and 
MMPs.
---------------------------------------------------------------------------

    \22\ Congressional Budget Office. ``Dual-Eligible Beneficiaries 
of Medicare and Medicaid: Characteristics, Health Care Spending, and 
Evolving Policies.'' (June, 2013). Retrieved from: https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/44308dualeligibles2.pdf. This report classified Medicare enrollees 
as having a mental illness if they had a diagnosis from the previous 
year of schizophrenia; major depressive, bipolar, and paranoid 
disorders; or other major psychiatric disorders.
    \23\ Medicaid and CHIP Payment and Access Commission. 
``Integration of Behavioral and Physical Health Services in 
Medicaid.'' (March, 2016). Retrieved from: https://www.macpac.gov/wp-content/uploads/2016/03/Integration-of-Behavioral-and-Physical-Health-Services-in-Medicaid.pdf.
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     Integrated beneficiary communication materials can enhance 
the beneficiary experience. The Medicare and Medicaid programs have 
different, and sometimes inconsistent, requirements for how plans 
communicate with individuals. CMS and partnering States, however, 
require MMPs to provide a single set of integrated member materials 
designed to meet Federal and State requirements and convey information 
to members in a more streamlined fashion. CMS tested such materials 
with beneficiaries to maximize readability and understanding.
     Effective joint oversight of integrated managed care 
products is possible. Through the FAI, we have shown it is possible to 
create a successful framework for joint State and CMS oversight and 
contract management. Contract management teams (CMTs) consisting of 
State Medicaid and CMS staff work hand in hand to assure compliance 
with the relevant Medicare, Medicaid, and State requirements and MMP 
three-way contract requirements, and to promote MMP performance in 
meeting the needs and preferences of beneficiaries. Through each CMT, 
State and CMS staff coordinate to jointly issue guidance and 
operational clarification and, as needed, may coordinate to issue joint 
CMS-State compliance actions. CMTs regularly meet with State ombudsman 
organizations, State-convened advisory groups, and may also meet with 
local stakeholders, such as beneficiary advocates, enabling more rapid 
problem-solving and real-time feedback on plan performance and 
beneficiary experience.\24\ CMS has also developed and refined audit 
protocols specific to three-way contracts between CMS, the States, and 
the MMPs, and CMS and State staff coordinate to avoid scheduling 
conflicting Medicare and Medicaid audits that can cause a plan to split 
resources between two regulators. Based on feedback from States and 
MMPs and our own experiences for the last eight years, we believe these 
joint oversight processes, along with having performance data specific 
to the local MMPs, have improved communications and driven performance 
improvement.
---------------------------------------------------------------------------

    \24\ RTI International, ``Financial Alignment Initiative 
Massachusetts Once Care: Third Evaluation Report,'' (April 2019), 
Retrieved from: https://innovation.cms.gov/files/reports/fai-ma-thirdevalrpt.pdf; RTI International, ``Financial Alignment 
Initiative Michigan MI Health Link First Evaluation Report (Sept 
2019), Retrieved from: https://innovation.cms.gov/files/reports/fai-mi-firstevalrpt.pdf; RTI International, ``Financial Alignment 
Initiative MyCare Ohio: First Evaluation Report ``(Nov 15 2018), 
Retrieved from: https://innovation.cms.gov/files/reports/fai-oh-firstevalrpt.pdf; RTI International, ``Financial Alignment 
Initiative South Carolina Healthy Connections Prime: First 
Evaluation Report (Sept 2019), Retrieved from: https://innovation.cms.gov/files/reports/fai-sc-firstevalrpt.pdf.
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     Integrated care and joint oversight provide a platform for 
quality improvement. The capitated model demonstrations have shown it 
is

[[Page 1853]]

possible to effectively incentivize innovation and investment for 
better serving the dually eligible population. MMPs and CMTs 
collaborate on continuous performance improvement. Like MA plans, MMPs 
report quality and performance data such as Consumer Assessment of 
Healthcare Providers and Systems (CAHPS) and Healthcare Effectiveness 
Data and Information Set (HEDIS) at the contract level. Because the MMP 
is the only plan under the three-way contract, CMS and the State have 
access to performance and quality data specific to each individual MMP. 
(This is similar to how States generally approach Medicaid managed care 
contracts and quality reporting. In contrast, a D-SNP may be one of 
many plan benefit packages under a single MA contract, making it 
difficult to get a true picture of a particular MA plan's performance.) 
CMS routinely shares State and national performance data on CAHPS and 
HEDIS metrics with States and MMPs to identify high and low performing 
plans. Through the CMTs, State and CMS staff have worked with MMPs to 
identify specific quality metrics to drive performance improvement and 
have developed specific quality and performance improvement projects at 
an MMP and/or demonstration level. These efforts have helped to drive 
significant year-over-year improvement in CAHPS and HEDIS measures. 
From 2016 to 2018, MMPs as a group improved performance on measures 
related to care coordination like Care for Older Adults (by an average 
of 17 percent across three separate measures) and Medication 
Reconciliation Post-Discharge (by 54 percent), and on key outcome 
measures like Controlling High Blood Pressure (by 16 percent) and Plan 
All-Cause Readmissions (17 percent reduction for beneficiaries age 65 
and over).\25\ Compared to MA plans as a group, MMPs improved at a 
higher rate on these measures over the same time period. MA plans as a 
group improved by an average of 5 percent across the Care for Older 
Adults measures (although only D-SNPs report those measures) and by 32 
percent on the Medication Reconciliation Post-Discharge measure, while 
the Plan All-Cause Readmissions measure had a 16 percent reduction for 
beneficiaries age 65 and over.\26\ Overall, MA plans saw no change to 
performance on the Controlling High Blood Pressure measure.\27\
---------------------------------------------------------------------------

    \25\ CMS analysis of the MMP performance on HEDIS data reported 
2017-2019.
    \26\ CMS analysis of Medicare Advantage performance on HEDIS 
data reported 2017-2019.
    \27\ Ibid.
---------------------------------------------------------------------------

     There is potential for market distortions in areas with 
multiple options targeting the same population. The MMP experience has 
shown that we can create a competitive market among MMPs with multiple 
choices for beneficiaries in the same service area and maintain high 
expectations for plans around care coordination and cost effectiveness. 
However, it has also shown the potential for beneficiary confusion and 
disruption in markets where MMPs are competing with other products 
targeting dually eligible individuals, including D-SNPs and, more 
recently, D-SNP look-alikes. For example, fully integrated D-SNPs (FIDE 
SNPs) served the same population as MMPs that were under New York's 
Fully Integrated Dual Advantage (FIDA) capitated model demonstration 
and the FIDE SNPs were offered by the same parent organization as the 
MMPs, creating confusion among beneficiaries and providers about each 
program's role.\28\ Differences in Medicare capitation payments gave 
parent organizations a financial incentive to prioritize enrollment in 
FIDE SNPs over MMPs.\29\ In addition to the financial challenges, the 
MMPs experienced low enrollment spread among a high number of MMPs \30\ 
due to providers not wanting to meet prescriptive care coordination 
requirements and encouraging patients not to participate. In 
California, D-SNP look-alikes emerged following the State's decision to 
limit eligibility for D-SNPs to beneficiaries not otherwise eligible 
for MMPs.\31\ In its June 2018 report to Congress, MedPAC describes 
broker commissions as another factor incentivizing enrollment in the D-
SNP look-alike plans over the MMPs in States like California that 
prohibit MMPs from using brokers.\32\ For a more thorough discussion of 
market dynamics in New York and California, see MedPAC's June 2018 
report to Congress.\33\ For a more comprehensive review of D-SNP look-
alike plans, see pages 9019-9021 in the February 2020 proposed 
rule.\34\
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    \28\ Medicare Payment Advisory Committee. ``Chapter 9, Managed 
care plans for dual eligible beneficiaries.'' In June 2018 Report to 
Congress: Medicare and Health Care Delivery System (June 15, 2018). 
Retrieved from https://www.medpac.gov/docs/default-source/reports/jun18_ch9_medpacreport_sec.pdf?sfvrsn=0.
    \29\ Ibid.
    \30\ Per MedPAC's June 2018 report, as of June 2017, 156,000 
full-benefit dually eligible individuals were eligible to 
participate in FIDA, but only 4,708 individuals (3 percent) were 
enrolled among 14 MMPs.
    \31\ Pursuant to Welfare and Institutions Code section 
14132.277(d), for seven counties, DHCS only offered D-SNP contracts 
(that is, contracts between the State and the D-SNP that are 
required under 42 CFR 422.107 for an MA organization to offer a D-
SNP) to plans that were approved as of 1/1/13 and new enrollment 
into those D-SNPs is limited to beneficiaries not otherwise eligible 
for Medicare-Medicaid plans. The State also did not permit existing 
D-SNPs to expand service area into the seven counties.
    \32\ Medicare Payment Advisory Committee. ``Chapter 9, Managed 
care plans for dual eligible beneficiaries.'' In June 2018 Report to 
Congress: Medicare and Health Care Delivery System (June 15, 2018). 
Retrieved from https://www.medpac.gov/docs/default-source/reports/jun18_ch9_medpacreport_sec.pdf?sfvrsn=0.
    \33\ Ibid.
    \34\ As finalized in Sec.  422.514 by the ``Medicare Program; 
Contract Year 2021 Policy and Technical Changes to the Medicare 
Advantage Program, Medicare Prescription Drug Benefit Program, 
Medicaid Program, and Medicare Cost Plan Program'' (85 FR 33796 
through 33911) (hereinafter referred as the May 2020 final rule), 
CMS will no longer enter into a contract with a new D-SNP look-alike 
beginning in CY 2022 or an existing D-SNP look-alike beginning in CY 
2023.
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     State investment is critical to successful implementation 
of integrated care either through MMPs or D-SNPs. True integration of 
Medicare and Medicaid requires long-term State participation. However, 
interest and capacity in pursuing integrated care for dually eligible 
individuals varies considerably from State to State, and sometimes from 
year to year. One of the many lessons from the MMP experience has been 
that standing up a demonstration of this scope requires significant 
State resources. However, even outside of MMPs, many of the features of 
integration also require significant State effort. States that have 
successfully utilized D-SNP contracts to integrate or align Medicare 
and Medicaid programmatic and administrative elements outside of the 
FAI have also invested in building State capacity, including 
establishing dedicated staff or contractors with Medicare knowledge and 
expertise, building technical capacity to integrate Medicare and 
Medicaid data, and creating analytic resources to support ongoing 
program operations and oversight.\35\ For example, to maximize 
integration opportunities, D-SNP members may also enroll in the same 
organization's Medicaid plan. State investment in establishing 
enrollment and assignment processes to enable alignment of Medicare and 
Medicaid enrollment require upfront and ongoing monitoring resources.
---------------------------------------------------------------------------

    \35\ A. Kruse and M. Herman Soper. State Efforts to Integrate 
Care for Dually Eligible Beneficiaries: 2020 Update. Center for 
Health Care Strategies, Inc., February 2020. Available at https://www.chcs.org/media/State-Efforts-to-Integrate-Care-for-Dually-Eligible-Beneficiaries_022720.pdf.

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[[Page 1854]]

    Since the outset of the FAI, our shared goal with State partners 
has been to develop models that promote greater Medicare-Medicaid 
integration that, if successful, could be implemented on a broader 
scale. Below we propose to incorporate into the broader MA program many 
of the MMP practices that successfully improved experiences for dually 
eligible individuals.
2. Summary of D-SNP Proposals Related to MMP Characteristics
    Many of the proposals that follow would incorporate certain MMP 
policies into the regulations governing D-SNPs or, in several cases, 
certain types of D-SNPs. We describe those proposals in greater detail 
in this section of this proposed rule. Table 1 summarizes how our 
proposals relate to MMP policies.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP12JA22.004

BILLING CODE 4120-01-C
3. Enrollee Participation in Plan Governance (Sec.  422.107)
    CMS believes managed care plans derive significant value from 
engaging enrollees in defining, designing, participating in, and 
assessing their care systems.\36\ By soliciting and responding to 
enrollee input, plans can better ensure that policies and procedures 
are responsive to the needs, preferences, and values of enrollees and 
their families and caregivers. One of the ways managed care plans can 
engage dually eligible individuals is by including enrollees in plan 
governance, such as establishing enrollee advisory committees and 
placing enrollees on governing boards. Engaging enrollees in these ways 
seeks to keep enrollee and caregiver voices front and center in plan 
operations and can help plans achieve high-quality, comprehensive, and 
coordinated care.\37\ Federal regulations for other programs, such as 
the Programs of All-Inclusive Care for the Elderly and Medicaid managed 
care plans that cover long-term services and supports (LTSS) include 
requirements for stakeholder engagement and committees, including input 
from beneficiaries. We describe these requirements later in this 
section.
---------------------------------------------------------------------------

    \36\ Centers for Medicare & Medicaid Services. (n.d.). Person & 
Family Engagement Strategy: Sharing with Our Partners. Retrieved 
from https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/Person-and-Family-Engagement-Strategy-Summary.pdf.
    \37\ Resources for Integrated Care and Community Catalyst, 
``Listening to the Voices of Dually Eligible Beneficiaries: 
Successful Member Advisory Councils'', 2019. Retrieved from: https://www.resourcesforintegratedcare.com/Member_Engagement/Video/Listening_to_Voices_of_Dually_Eligible_Beneficiaries.
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    Stakeholder engagement has been an important tenet of the FAI since 
its inception. As required by the three-way contracts between CMS, 
States, and MMPs, all MMPs established enrollee advisory committees. 
These enrollee advisory committees provide a mechanism for MMPs to 
solicit feedback directly from enrollees, assisting MMPs in identifying 
and resolving emerging issues, and ensuring they meet the needs of 
dually eligible individuals. While three-way contract terms differ by 
State, all three-way contracts require the enrollee advisory committees 
to meet at least quarterly, be comprised of enrollees, family members, 
and other caregivers that reflect the diversity of the demonstration 
population, and provide regular feedback to the MMP's governing board. 
MMPs have flexibility in conducting these meetings, including 
determining how to recruit and train enrollees, number of participants,

[[Page 1855]]

discussion topics, and how feedback is disseminated and used.
    CMS's contractor Resources for Integrated Care partnered with 
Community Catalyst, a non-profit advocacy organization, to offer a 
series of webinars and other written technical assistance to help 
enhance MMPs' operationalization of these committees.\38\ In their 
work, the Resources for Integrated Care and Community Catalyst 
identified some practices leading to successful enrollee advisory 
committees. These include MMP efforts to--
---------------------------------------------------------------------------

    \38\ Resources for Integrated Care and Community Catalyst, 
``Member Engagement in Plan Governance Webinar Series'', 2019. 
Retrieved from: https://www.resourcesforintegratedcare.com/concepts/member_engagement.
---------------------------------------------------------------------------

     Recruit enrollees through care coordinator referrals and 
community outreach events;
     Listen to enrollee feedback;
     Be responsive to enrollee feedback by identifying 
meaningful changes made because of comments shared and, if the plan is 
not able to implement a suggestion, providing a rationale;
     Disseminate feedback to appropriate departments across the 
plan;
     Promote consistent enrollee participation through supports 
like transportation to the committee meetings, meals, and a stipend; 
and
     Provide ongoing training to enrollees to help them feel 
comfortable and empowered to provide feedback.\39\
---------------------------------------------------------------------------

    \39\ Resources for Integrated Care and Community Catalyst, 
``Listening to the Voices of Dually Eligible Beneficiaries: 
Successful Member Advisory Councils'', 2019. Retrieved from: https://www.resourcesforintegratedcare.com/Member_Engagement/Video/Listening_to_Voices_of_Dually_Eligible_Beneficiaries.
---------------------------------------------------------------------------

    In late 2018, Federal and State officials led conversations with 
MMPs to gain a better understanding of the enrollee advisory 
committees, promising practices, challenges, and how plans are using 
the feedback received from enrollees and caregivers. A significant 
number of MMPs reported value from having an advisory committee and 
that the committee contributes to operational improvements through: (1) 
Understanding challenges with community resources and potential gaps in 
services; (2) improving enrollee communications, including printed 
materials and the website enhancements; (3) identifying barriers to 
medication adherence and what adherence tools might be most useful to 
enrollees; and (4) improving delivery of non-emergency transportation, 
dental, vision, and over-the-counter benefits. A few MMPs reported a 
neutral value of the advisory committee meetings, citing benefits from 
enrollee feedback but also challenges in enrollee participation and 
willingness to engage on issues beyond their personal circumstances. 
Overall, though, the MMPs reported the committees provided a valuable 
perspective that shapes the plan's approach to recovery, wellness, and 
overall access to health care as well as prioritize areas where 
additional assistance is needed for enrollees.
    More recently, MMPs have utilized enrollee advisory committees to 
gain insight into the effectiveness of specific enrollee materials. For 
example, some MMPs have shared redacted care plans with enrollee 
advisory committees for enrollee feedback. Other MMPs have shared draft 
influenza vaccination outreach materials with their enrollee advisory 
committees and used the quarterly meetings to discuss influenza 
prevention. During 2020 and 2021, MMPs have used these committees to 
discuss ways to educate enrollees about COVID-19 prevention and 
vaccines. We have had the opportunity to observe some of these meetings 
and found the dialogue between enrollees and their caregivers and the 
MMPs to be open and constructive, with all parties interested in 
sharing information, listening, and identifying solutions. Other 
programs overseen by CMS include similar committees or mechanisms for 
beneficiaries to provide feedback and have a role in plan 
administration.
a. Participant Advisory Committees in PACE Organizations
    In addition to MMPs, Programs of All-Inclusive Care for the Elderly 
(PACE) organizations, per Sec.  460.62(b), must establish participant 
advisory committees to advise the PACE organization governing body on 
matters of concern to participants. The majority of the 51,000 PACE 
participants are dually eligible individuals.\40\
---------------------------------------------------------------------------

    \40\ CMS, Medicare Advantage, Cost, PACE, Demo, and Prescription 
Drug Plan Contract Report--Monthly Summary Report (Data as of June 
2021). Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Contract-and-Enrollment-Summary-Report.
---------------------------------------------------------------------------

    CMS initially required PACE organizations to establish consumer 
advisory committees as part of the Federal regulations codifying the 
PACE program in a November 1999 interim final rule with comment period 
(IFC) for PACE (64 FR 66234). The November 1999 IFC noted that consumer 
participation through advisory committees is a ``well accepted 
community organization vehicle to maximize the involvement of consumers 
in a program designed to serve them'' and that through the use of a 
consumer advisory committee consumers are also ``likely to feel a 
greater stake in the operation of the program'' (64 FR 66242). The 
original regulation, codified at Sec.  460.62, required PACE 
participants and participant representatives to comprise the majority 
of committee membership, but there was no Federal requirement relating 
to how frequently PACE organizations were required to convene the 
committees.
    In a December 2006 final rule (71 FR 71244 through 71337), we made 
minor revisions to the PACE consumer advisory committee regulation text 
at Sec.  460.62, including changing the name to participant advisory 
committee (71 FR 71265). We also clarified in the preamble that the 
final rule was not specifying the size of the participant advisory 
committee but that we expected each committee to be representative of 
the size and population of the PACE organization's participants.
    The requirements at Sec.  460.62 allow PACE organizations 
flexibility in determining the frequency, scope, and participation on 
these advisory committees. Through its many years of experience 
overseeing PACE organizations, CMS has learned that PACE organizations 
value the participant advisory committees as an important way to 
receive direct feedback from PACE participants to improve program 
policy and operations. Attendance at participant advisory committees 
may include PACE organization leadership, including executive directors 
and PACE center directors. Since PACE participants visit the PACE 
center at least once per week, feedback provided by PACE participants 
at the participant advisory committees is generally focused on 
challenges with transportation between the PACE center and their 
residences and preferences for meals and activities provided at the 
PACE center. Per Sec.  460.62(c), PACE organizations must have a 
participant representative on their governing body. These participant 
representatives act in part as a liaison of the participant advisory 
committee to the PACE organization governing body and the participant 
advisory committee, presenting issues from the participant advisory 
committee to the governing body. The link between the participant 
advisory committee and the governing body helps to elevate issues 
raised by participants to PACE organization leadership.

[[Page 1856]]

b. Member Advisory Committees in Medicaid Managed Care Plans
    Medicaid managed care plans that cover long-term services and 
supports (LTSS) are also required to solicit active member and other 
stakeholder input through the use of a member advisory committee. 
Recognizing that stakeholder engagement is an important member 
protection and is critical to the success of Medicaid managed LTSS 
programs, CMS requires certain Medicaid managed care plans providing 
LTSS to establish and maintain a member advisory committee. Per 42 CFR 
438.110, as adopted in the ``Medicaid and Children's Health Insurance 
Program (CHIP) Programs; Medicaid Managed Care, CHIP Delivered in 
Managed Care, and Revisions Related to Third Party Liability'' final 
rule (81 FR 27655 through 27658) (hereinafter referred to as the May 
2016 final rule), when LTSS are covered under a risk contract between a 
State and a Medicaid managed care plan (that is a Medicaid managed care 
organization (MCO), prepaid inpatient health plan (PIHP), or prepaid 
ambulatory health plan (PAHP)), each Medicaid managed care plan must 
establish a member advisory committee. The committee must include at 
least a reasonably representative sample of the LTSS population, or 
other individuals representing those members, covered under the 
contract with the Medicaid managed care plan. CMS designed this 
requirement in a way that gives managed care plans covering LTSS 
flexibility to work with their stakeholder communities to establish the 
most effective member engagement process.
c. Proposal for D-SNP Enrollee Advisory Committees
    We believe that the establishment and maintenance of an enrollee 
advisory committee is a valuable beneficiary protection to ensure that 
enrollee feedback is heard by D-SNPs and to help identify and address 
barriers to high-quality, coordinated care for dually eligible 
individuals. Therefore, we propose at Sec.  422.107(f) that any MA 
organization offering one or more D-SNPs in a State must establish and 
maintain one or more enrollee advisory committees to solicit direct 
input on enrollee experiences. We also propose at Sec.  422.107(f) that 
the committee include a reasonably representative sample of individuals 
enrolled in the D-SNP(s) and solicit input on, among other topics, ways 
to improve access to covered services, coordination of services, and 
health equity for underserved populations.
    We propose to establish the new paragraph at Sec.  422.107(f) under 
our authority at section 1856(b)(1) of the Act to establish in 
regulation other standards not otherwise specified in statute that are 
both consistent with Part C statutory requirements and necessary to 
carry out the MA program and our authority at section 1857(e) of the 
Act to adopt other terms and conditions not inconsistent with Part C as 
the Secretary may find necessary and appropriate. We believe that a 
requirement for an MA organization offering one or more D-SNPs to 
establish one or more enrollee advisory committees is not inconsistent 
with either the Part C statute or administration of the MA program. 
While current law does not impose such a requirement, our experience 
with existing requirements for MMPs and PACE demonstrates that the use 
of advisory committees improves plans' ability to meet their enrollees' 
needs by providing plans with a deeper understanding of the communities 
the plans serve and the challenges and barriers their enrollees face, 
as well as serving as a convenient mechanism to obtain enrollee input 
on plan policy and operational matters. Our experience also suggests 
that advisory committees complement other mechanisms for enrollee 
feedback--such as surveys, focus groups, and complaints--with most 
advisory committees featuring longer-term participation by enrollees 
who can share their lived experiences while also learning how to best 
advocate over time for broader improvements for all enrollees. We 
believe the performance of all D-SNPs would benefit from this new 
requirement. Further, this requirement would be consistent with the 
existing requirement at Sec.  438.110 for Medicaid plans to establish 
member advisory committees when those Medicaid managed care plans cover 
LTSS.
    While we describe the proposed advisory committee at Sec.  
422.107(f) as an enrollee advisory committee consistent with the use of 
the term ``enrollee'' in MA regulations we note that ``enrollee'' under 
the proposed Sec.  422.107(f) requirement for D-SNPs has the same 
meaning as ``member'' under the Sec.  438.110 requirement for Medicaid 
plans.
    We believe that D-SNPs should work with enrollees and their 
representatives to establish the most effective and efficient process 
for enrollee engagement. We expect the evolution and adoption of 
telecommunications technology, including as experienced during the 
COVID-19 public health emergency, will mean that the most effective 
modalities for enrollee input may change over time. Therefore, we 
choose not to propose Federal requirements as to the specific 
frequency, location, format, participant recruiting and training 
methods, or other parameters for these committees beyond certain 
minimum requirements. Further, our proposal includes flexibility for MA 
organizations in how they structure their enrollee advisory 
committee(s). Though we are choosing to be nonprescriptive on meeting 
frequency, location, format, enrollee recruitment, training, and other 
parameters, we encourage D-SNPs to adopt identified best practices \41\ 
to ensure advisory committee meetings are accessible to all enrollees, 
including but not limited to enrollees with disabilities, limited 
literacy (including limited digital literacy), and lack of meaningful 
access technology and broadband.
---------------------------------------------------------------------------

    \41\ Resources for Integrated Care and Community Catalyst, 
``Engaging Members in Plan Governance'', 2019. Retrieved from: 
https://www.resourcesforintegratedcare.com/node/433#PlanGov.
---------------------------------------------------------------------------

    First, we propose that the MA organization offering one or more D-
SNP(s) in a State must have one or more enrollee advisory committees 
that serve the D-SNP(s) offered by the MA organization in that State. 
Under our proposed rule, an MA organization would be able to choose 
between establishing one single enrollee advisory committee for one or 
multiple D-SNPs in that State or by establishing more than one 
committee in that State to meet proposed Sec.  422.107(f).
    Second, we propose that the advisory committee must have a 
reasonably representative sample of enrollees of the population 
enrolled in the dual eligible special needs plan or plans, or other 
individuals representing those enrollees. By using the phrase 
``representative sample'' in the regulation text, we intend D-SNPs to 
incorporate multiple characteristics of the total enrollee population 
of the D-SNP(s) served by the enrollee committee, including but not 
limited to geography and service area, and demographic characteristics. 
An MA organization that offers separate D-SNPs in multiple counties in 
a State could decide to convene one enrollee advisory committee to 
solicit feedback across the membership of all these D-SNP plans as long 
as that committee's participants reasonably represent the totality of 
the D-SNP membership. Alternatively, this MA organization could convene 
an enrollee advisory committee for each D-SNP in each county where the 
D-SNP is offered. The MA organization could also choose to implement a 
combination

[[Page 1857]]

of the aforementioned approaches, such as establishing an enrollee 
advisory committee that solicits enrollees from a D-SNP offered in one 
county and establishing an enrollee advisory committee with enrollees 
representing D-SNPs offered in more than one county. For example, a MA 
organization that offers separate D-SNPs in Broward, Hillsborough, and 
Orange counties in Florida could establish one enrollee advisory 
committee that convenes membership representative of these distinct 
regions of Florida via virtual communications methods, or it could 
establish separate enrollee advisory committees in each county, or it 
could implement some combination of these approaches. Similarly, for MA 
organizations that offer separate D-SNPs serving full-benefit dually 
eligible individuals and partial-benefit dually eligible individuals in 
the same State, proposed Sec.  422.107(f) provides flexibility for MA 
organizations to solicit enrollee input through one or more committees 
where separate committees might represent specific eligibility groups. 
Ensuring that the enrollee advisory committee is representative of the 
covered population of the D-SNP(s) that are served by the committee is 
key to achieving the goals of requiring an enrollee advisory committee.
    Finally, we propose that the advisory committee must, at a minimum, 
solicit input on ways to improve access to covered services, 
coordination of services, and health equity among underserved 
populations, which is a CMS priority aligned with Executive Order 13985 
on Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government (January 20, 2021). CMS encourages D-
SNPs to consider the CMS Office of Minority Health Disparities Impact 
Statement as a potential tool to improve health equity for underserved 
populations among their enrollment.\42\ Our proposal does not specify 
other responsibilities or obligations for the committee, but we 
encourage D-SNPs to solicit input from enrollees on other topics will 
be part of the committee's responsibilities.
---------------------------------------------------------------------------

    \42\ CMS Office of Minority Health, Health Equity Technical 
Assistance. Retrieved from: https://www.cms.gov/About-CMS/Agency-Information/OMH/equity-initiatives/Health-Equity-Technical-Assistance.
---------------------------------------------------------------------------

    Specifically, we propose the following amendments to Sec.  422.107:
     Revise the section heading from ``Special needs plans and 
dual eligible: Contract with State Medicaid Agency'' to ``Requirements 
for dual eligible special needs plans'' to reflect how, as amended, 
Sec.  422.107 will address D-SNP requirements, such as the enrollee 
advisory committee, in addition to the State Medicaid agency contracts 
and their content; and
     Add new paragraph (f) to require that any MA organization 
offering one or more D-SNPs in a State must establish and maintain one 
or more enrollee advisory committees that serve the D-SNPs offered by 
the MA organization, with at least a reasonably representative sample 
of the population enrolled in the dual eligible special needs plan or 
plans, or other individuals representing those enrollees, and solicit 
input on, among other topics, ways to improve access to covered 
services, coordination of services, and health equity for underserved 
populations.
    An MA organization that offers one or more D-SNPs and offers (or is 
under a parent organization that offers) one or more Medicaid managed 
care plans that cover long term services and supports--including the MA 
organizations associated with all FIDE SNPs and most HIDE SNPs--would 
be subject to our proposal and Sec.  438.110. In some circumstances, 
especially among FIDE SNPs and HIDE SNPs, we expect that organizations 
could meet the requirements in our proposal and Sec.  438.110 through 
one enrollee advisory committee. Section 438.110(b) requires the member 
advisory committees to include at least a reasonably representative 
sample of the LTSS populations covered, but it does not preclude the 
membership of other enrollees as well. Therefore, an advisory committee 
could, in some cases, be reasonably representative of both the LTSS 
population and the D-SNP, even if enrollment in the D-SNP is not 
limited to LTSS users. Some State Medicaid agency contracts, such as 
those in Idaho, Massachusetts, Minnesota, New Jersey, and Pennsylvania, 
already require member advisory committees for FIDE SNPs that operate 
in those States in compliance with Sec.  438.110, because the MCOs 
affiliated with those FIDE SNPs cover LTSS. Therefore, based on our 
review of State Medicaid agency contracts, we expect that a number of 
FIDE SNPs and HIDE SNPs affiliated with Medicaid managed care plans 
that cover LTSS already operate enrollee advisory committees that would 
comply with our proposal and Sec.  438.110. The proposed regulation 
permits an organization that operates a D-SNP that is affiliated with a 
Medicaid managed care plan to use one enrollee advisory committee to 
meet both the requirement under Sec.  438.110 and the requirement 
proposed at Sec.  422.107(f), when all the criteria in both regulations 
are met and the State permits this arrangement. In other circumstances, 
it may not be feasible for an organization to operate a single enrollee 
advisory committee that meets the requirements of our proposal and 
Sec.  438.110. Those organizations would need to operate multiple 
enrollee advisory committees.
    Our experience with MMPs establishing and maintaining enrollee 
advisory committees demonstrates that these plans have found the 
committees useful and carefully consider feedback provided by enrollees 
to inform plan decisions without prescriptive Federal requirements for 
the committees. As a result, we are not proposing specific prescriptive 
requirements for how D-SNPs must interact with and use these enrollee 
committees. However, we solicit comments on our proposal, including 
whether we should include more prescriptive requirements on how D-SNPs 
select enrollee advisory committee participants, training processes on 
creating and running a successful committee, the responsibilities of 
the enrollee advisory committees, and additional topics for enrollee 
input, and whether we should limit the enrollee advisory committee 
proposed at Sec.  422.107(f) to a subset of D-SNPs. We also solicit 
comments on whether our approach to allow MA organizations to meet the 
requirements in proposed Sec. Sec.  422.107(f) and 438.110 through one 
enrollee advisory committee could dilute the Sec.  438.110 requirement 
by detracting from the focus on LTSS enrollees. Consistent with PACE, 
if our proposal is finalized, we would update the CMS audit protocols 
for D-SNPs to request documentation of enrollee advisory committee 
meetings. As we learn about the implementation experiences of these 
committees, if proposed Sec.  422.107(f) is finalized, we would 
consider more prescriptive requirements in the future, if needed.
4. Standardizing Housing, Food Insecurity, and Transportation Questions 
on Health Risk Assessment (Sec.  422.101)
    Section 1859(f)(5)(A)(ii)(I) of the Act requires each SNP to 
conduct an initial assessment and an annual reassessment of the 
individual's physical, psychosocial, and functional needs using a 
comprehensive risk assessment tool that CMS may review during oversight 
activities, and ensure that the results from the initial assessment and 
annual reassessment conducted for each individual enrolled in the plan 
are addressed in the individual's

[[Page 1858]]

individualized care plan. We codified this requirement at Sec.  
422.101(f)(1)(i) as a required component of the D-SNP's MOC. In 
practice, we allow each SNP to develop its own HRA, as long as it meets 
the statutory and regulatory requirements.\43\ In the final rule titled 
``Medicare and Medicaid Programs; Contract Year 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'' (86 FR 
5864) (hereinafter referred to as the January 2021 final rule), we 
noted that D-SNPs also receiving capitation for Medicaid services may 
combine their Medicare-required HRA with a State Medicaid-required HRA 
to reduce assessment burden for enrollees (86 FR 5879). Certain social 
risk factors can lead to unmet social needs that directly influence an 
individual's physical, psychosocial, and functional status.\44\ This is 
particularly true for food insecurity, housing instability, and access 
to transportation. The following are examples of actions that CMS has 
taken since 2014 to address social risk through the identification and 
standardization of screening for risk factors:
---------------------------------------------------------------------------

    \43\ In the CY 2016 Call Letter (an attachment to the 
Announcement of Calendar Year (CY) 2016 Medicare Advantage 
Capitation Rates and Medicare Advantage and Part D Payment Policies) 
released on April 6, 2015, CMS encouraged SNPs to adopt the 
components in the CDC's ``A Framework for Patient-Centered Health 
Risk Assessments'' tool but did not mandate their use. Specifically, 
CMS encouraged the use of elements that identify the medical, 
functional, cognitive, psychosocial and mental health care needs of 
enrollees.
    \44\ Hugh Alderwick and Laura M. Gottlieb, ``Meanings and 
Misunderstandings: A Social Determinants of Health Lexicon for 
Health Care Systems: Milbank Quarterly,'' Milbank Memorial Fund, 
November 18, 2019, https://www.milbank.org/quarterly/articles/meanings-and-misunderstandings-a-social-determinants-of-health-lexicon-for-health-care-systems/.
---------------------------------------------------------------------------

     IMPACT Act of 2014. The Improving Medicare Post-Acute Care 
Transformation Act of 2014 Section 2(a) (Pub. L. 113-185), hereinafter 
referred to as the IMPACT Act, amended the Social Security Act (the 
Act) by adding section 1899B to the Act. Section 1899B(b)(1) of the Act 
requires, in part, that the Secretary require certain post-acute care 
(PAC) providers to submit standardized patient assessment data with 
respect to certain categories of data. CMS finalized several 
standardized patient assessment data requirements, including on social 
determinants of health.\45\
---------------------------------------------------------------------------

    \45\ See the ``Medicare and Medicaid Programs: CY 2020 Home 
Health Prospective Payment System Rate Update; Home Health Value-
Based Purchasing Model; Home Health Quality Reporting Requirements; 
and Home Infusion Therapy Requirements'' final rule (84 FR 39151 
through 39161) as an example. In the interim final rule with comment 
period (IFC) ``Medicare and Medicaid Programs, Basic Health Program 
and Exchanges; Additional Policy and Regulatory Revisions in 
Response to the COVID-19 Public Health Emergency and Delay of 
Certain Reporting Requirements for the Skilled Nursing Facility 
Quality Reporting Program'' (85 FR 27550 through 27629), CMS delayed 
the compliance dates for these standardized patient assessment data 
under the Inpatient Rehabilitation Facility (IRF) Quality Reporting 
Program (QRP), Long-Term Care Hospital (LTCH) QRP, Skilled Nursing 
Facility (SNF) QRP, and the Home Health (HH) QRP due to the public 
health emergency. In the ``CY 2022 Home Health Prospective Payment 
System Rate Update; Home Health Value-Based Purchasing Model 
Requirements and Model Expansion; Home Health and Other Quality 
Reporting Program Requirements; Home Infusion Therapy Services 
Requirements; Survey and Enforcement Requirements for Hospice 
Programs; Medicare Provider Enrollment Requirements; and COVID-19 
Reporting Requirements for Long-Term Care Facilities'' final rule 
(86 FR 62240 through 62431), CMS finalized its proposals to require 
collection of standardized patient assessment data under the IRF QRP 
and LTCH QRP effective October 1, 2022, and January 1, 2023 for the 
HH QRP.
---------------------------------------------------------------------------

     Accountable Health Communities (AHC) Model. The AHC Model, 
which is being tested under section 1115A of the Act, tests whether 
systematically screening for health-related social needs and referrals 
to community-based organizations to resolve identified unmet needs will 
improve healthcare utilization and reduce costs. Over a five-year 
period, organizations implementing the AHC Model, known as Bridge 
Organizations, are screening community-dwelling Medicare and Medicaid 
beneficiaries to identify their health-related social needs and 
providing navigation assistance to connect those beneficiaries with 
community services.\46\ Some Bridge Organizations are also engaging key 
stakeholders in community-level continuous quality improvement 
activities to align the community service capacity with the community's 
service needs. For purposes of the model, the CMS Innovation Center 
developed the AHC Health-Related Social Needs (HRSN) Screening Tool. 
The tool asks 10 standardized questions that identify a patient's HRSNs 
in five core domains: Housing instability, food insecurity, 
transportation problems, utility help needs, and interpersonal 
safety.47 48 The first AHC Model evaluation report, 
assessing model implementation from 2017 to 2020,\49\ demonstrated high 
prevalence of social risk factors among eligible high-need 
beneficiaries. Food insecurity was the most commonly reported social 
risk factor.
---------------------------------------------------------------------------

    \46\ CMS Innovation Center, ``Findings at a Glance: Accountable 
Health Communities: Evaluation of Performance Years 1-3 (2017-
2020).'' Retrieved from: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt-fg.
    \47\ CMS Innovation Center, ``The Accountable Health Communities 
Health-Related Social Needs Screening Tool.'' Retrieved from: 
https://innovation.cms.gov/files/worksheets/ahcm-screeningtool.pdf.
    \48\ There are now Logical Observation Identifiers Names and 
Codes (LOINC) terms available for the AHC HRSN Screening Tool, as of 
June 2021. For more information, see: https://loinc.org/loinc/96777-8/.
    \49\ RTI International, ``Accountable Health Communities (AHC) 
Model Evaluation First Evaluation Report,'' Dec 2020. Retrieved 
from: https://innovation.cms.gov/data-and-reports/2020/ahc-first-eval-rpt.
---------------------------------------------------------------------------

    Many dually eligible individuals contend with multiple social risk 
factors such as food insecurity, homelessness, lack of access to 
transportation, and low levels of health literacy.\50\ Nonetheless, we 
have not previously required that SNP HRAs specifically collect 
information about these issues. We believe requiring SNPs to include 
standardized questions about social risk factors is appropriate in 
light of the impact these factors may have on health care and outcomes 
for the enrollees in these plans and that access to this information 
will better enable SNPs to design and implement effective models of 
care.
---------------------------------------------------------------------------

    \50\ Medicaid and CHIP Payment and Access Commission, ``Report 
to Congress on Medicaid and CHIP,'' June 2020. Retrieved from: 
https://www.macpac.gov/wp-content/uploads/2020/06/June-2020-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
---------------------------------------------------------------------------

    We propose to amend Sec.  422.101(f)(1)(i) to require that all SNPs 
(chronic condition special needs plans, D-SNPs, and institutional 
special needs plans) include one or more standardized questions on the 
topics of housing stability, food security, and access to 
transportation as part of their HRAs. These questions will help SNPs 
gather the necessary information in order to conduct a comprehensive 
risk assessment of each individual's physical, psychosocial, and 
functional needs as required at Sec.  422.101(f)(1)(i) and will inform 
the development and implementation of each enrollee's comprehensive 
individualized plan of care as required at Sec.  422.101(f)(1)(ii). 
Rather than include the specific questions in regulation text, we 
propose that the questions be specified in sub-regulatory guidance. 
This would afford us some flexibility to modify questions to maintain 
consistency with standardized questions that are developed for other 
programs while still providing MA organizations with clear 
requirements; we intend to provide ample notice to MA organizations of 
any changes in the questions over time. Should we finalize our 
proposal, SNPs would comply with the new requirement added to Sec.  
422.101(f) by

[[Page 1859]]

including in their HRAs the standardized questions on these topics that 
we would specify in sub-regulatory guidance. At a minimum, we intend to 
align selected questions with the Social Determinants of Health (SDOH) 
Assessment data element \51\ established as part of the USCDI v2, when 
finalized and where applicable.
---------------------------------------------------------------------------

    \51\ For more information, see: https://www.healthit.gov/isa/taxonomy/term/1801/uscdi-v2.
---------------------------------------------------------------------------

    While we are proposing that the regulation text specify that the 
wording of individual questions would be established through sub-
regulatory guidance, we provide here examples of the questions on these 
topics used in other Medicare contexts to provide better context on the 
proposed requirement and to solicit public comment. These examples 
include the transportation question in the post-acute care patient/
resident instruments and the housing and food insecurity questions from 
the AHC Model HRSN Screening Tool: \52\
---------------------------------------------------------------------------

    \52\ For the Accountable Health Communities Health-Related 
Social Needs Screening Tool, see https://innovation.cms.gov/files/worksheets/ahcm-screeningtool.pdf. The PAC assessment utilized the 
same transportation question as the AHC HRSN Tool.
---------------------------------------------------------------------------

    Housing. What is your living situation today? \53\
---------------------------------------------------------------------------

    \53\ Adapted from National Association of Community Health 
Centers and partners, National Association of Community Health 
Centers, Association of Asian Pacific Community Health 
Organizations, Association OPC, Institute for Alternative Futures. 
(2017). PRAPARE. http://www.nachc.org/research-and-data/prapare/.

 I have a steady place to live
 I have a place to live today, but I am worried about losing it 
in the future
 I do not have a steady place to live (I am temporarily staying 
with others, in a hotel, in a shelter, living outside on the street, on 
a beach, in a car, abandoned building, bus or train station, or in a 
park)

    Food. Some people have made the following statements about their 
food situation. Please answer whether the statements were OFTEN, 
SOMETIMES, or NEVER true for you and your household in the last 12 
months. Within the past 12 months, you worried that your food would run 
out before you got money to buy more.\54\
---------------------------------------------------------------------------

    \54\ Adapted from Hager, E.R., Quigg, A.M., Black, M.M., 
Coleman, S.M., Heeren, T., Rose-Jacobs, R., Cook, J.T., Ettinger de 
Cuba, S.E., Casey, P.H., Chilton, M., Cutts, D.B., Meyers A.F., 
Frank, D.A. (2010). Development and Validity of a 2-Item Screen to 
Identify Families at Risk for Food Insecurity. Pediatrics, 126(1), 
26-32. doi:10.1542/peds.2009-3146.

 Often true
 Sometimes true
 Never true

    Within the past 12 months, the food you bought just didn't last and 
you didn't have money to get more.

 Often true
 Sometimes true
 Never true

    Transportation. Has lack of transportation kept you from medical 
appointments, meetings, work, or from getting things needed for daily 
living? \55\
---------------------------------------------------------------------------

    \55\ National Association of Community Health Centers and 
partners, National Association of Community Health Centers, 
Association of Asian Pacific Community Health Organizations, 
Association OPC, Institute for Alternative Futures. (2017). PRAPARE. 
http://www.nachc.org/research-and-data/prapare/.

 Yes, it has kept me from medical appointments or from getting 
my medications
 Yes, it has kept me from non-medical meetings, appointments, 
work, or from getting things that I need
 No

    Our proposal would result in SNPs having a more complete picture 
for each enrollee of the risk factors that may inhibit accessing care 
and achieving optimal health outcomes and independence. We believe that 
these questions are sufficiently related to and provide information on 
enrollees' physical, psychosocial, and functional needs to be 
appropriate to include the HRA. Having knowledge of this information 
for each enrollee would better equip MA organizations to develop an 
effective plan of care for each enrollee that identifies goals and 
objectives as well as specific services and benefits to be provided. 
Our proposal would also equip SNPs with person-level information that 
would help them better connect enrollees to covered services (for 
example, non-emergency medical transportation, when capitated by 
Medicaid or covered as a supplemental benefit) and to social service 
organizations and public programs that can help resolve housing 
instability, food insecurity, transportation needs, or other 
challenges. Coordinating care along these lines is consistent with the 
obligations under Sec.  422.112(b)(3) for MA organizations that offer 
coordinated care plans.
    We are not explicitly proposing that SNPs be accountable for 
resolving all risks identified in these assessment questions, but Sec.  
422.101(f)(1)(i) requires that the results from the initial and annual 
HRAs be addressed in the individualized care plan. Results of the HRAs 
do not require SNPs to provide housing or food insecurity supports, but 
having the results means that SNPs would need to consult with enrollees 
about their unmet social needs, which may include homelessness and 
housing instability, for example, in developing each enrollee's care 
plan. A SNP could demonstrate this in several ways, consistent with its 
MOC. For example, a SNP may make a referral to an appropriate community 
partner, consistent with the individual's goals and preferences, to 
assist in meeting these needs. The SNP may also adapt communication 
methods to fit the individual's circumstances and take steps to 
maximize access to covered services that may meet the individual's 
needs and preferences, especially for supplemental benefits that may 
help with housing instability, food insecurity, or transportation.
    SNPs currently report to CMS the number of completed HRAs, and, as 
part of the Medicare Part C Program Audit Protocols for SNP Care 
Coordination, we currently review a sample of HRAs and ICPs.\56\ 
However, we do not currently collect specific data elements from HRAs 
for all SNP enrollees, in part because the data elements vary from plan 
to plan. By standardizing certain data elements, our proposal would 
make those data elements available for collection by CMS from the SNPs 
for all enrollees. (States can also use their contracts with D-SNPs at 
Sec.  422.107 to require reporting of these data elements in the HRA to 
the State or its designee.) While we continue to consider whether, how, 
and when we would have the SNPs actually report data to CMS, we believe 
having such information could help us to better understand the 
prevalence and trends in certain social risk factors across SNPs and 
further consider ways to support SNPs in promoting better outcomes for 
their enrollees. We believe standardizing these data elements could 
also eventually facilitate better data exchange among SNPs (such as 
when an individual changes SNPs).
---------------------------------------------------------------------------

    \56\ For more information, see: https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/ProgramAudits.
---------------------------------------------------------------------------

    We understand that some States may separately require that Medicaid 
managed care plans collect similar information, potentially creating 
inefficiencies and added assessment burden on dually eligible 
individuals who are asked similar, but not identical information, in 
multiple HRAs. We believe that the benefit gained by all SNPs having 
standardized information about these social risk factors outweighs this 
potential risk. These questions build on other work across CMS. Where 
States are interested in requiring

[[Page 1860]]

assessment questions, we recommend that States consider conforming to 
the standardized questions we implement for use under this proposed 
rule and, for integrated care programs, ensuring that plans do not need 
to ask the same enrollees similar or redundant questions. However, we 
also seek input from States about what questions they are using and how 
we can best minimize assessment burden while ensuring that SNPs and 
States are capturing actionable information on social risk factors.
    We are considering several alternatives to our proposal. We are 
considering requiring fewer or more assessment questions on additional 
topics related to social risk factors or different combinations of 
questions from the post-acute care patient/resident assessment 
instruments and AHC Model HRSN Screening Tool. For example, we are 
considering requiring that SNPs use the post-acute care patient/
resident assessment instruments questions on health literacy (``How 
often do you need to have someone help you when you read instructions, 
pamphlets, or other written material from your doctor or pharmacy?'') 
and social isolation (``How often do you feel lonely or isolated from 
those around you?''). We believe these would provide valuable insight 
but are not proposing to require HRAs to include standardized questions 
in these areas out of parsimony. We focused on the proposed areas since 
there is a large evidence base suggesting they have a particularly 
significant influence on the physical, psychosocial, and functional 
needs of the enrollees.\57\ For example, our experience with the FAI 
demonstrations has shown that lack of transportation can have a large 
impact in securing needed health care services. Our proposal would not 
preclude SNPs from asking additional questions related to these areas 
as long as the minimum standardized questions (specified in CMS sub-
regulatory guidance pursuant to the regulation) are included as part of 
the HRA.
---------------------------------------------------------------------------

    \57\ See Kushel MB, Gupta R, Gee L, Haas JS. Housing instability 
and food insecurity as barriers to health care among low-income 
Americans. J Gen Intern Med. 2006;21(1):71-7. doi: 10.1111/j.1525-
1497.2005.00278.x.
---------------------------------------------------------------------------

    We considered soliciting comment in this preamble on different 
examples of questions on housing, food, and transportation other than 
the examples included above, such as the housing-related questions from 
the U.S. Department of Veteran Affairs' Homelessness Screening Clinical 
Reminder \58\ or the housing-, food-, and transportation-related 
questions from the Medicare Current Beneficiary Survey.\59\ We also 
considered simply proposing that all HRAs address certain domains (for 
example, housing), without authorizing CMS to specify the standardized 
questions to be used. However, we believe the benefit of flexibility 
for SNPs is outweighed by the challenges posed by use of multiple 
different questions used by different SNPs across the country. Having 
different questions that touch on the same topics in different ways 
would pose difficulties for interoperability, comparability, and 
reporting on these risk factors. We are considering specifying that the 
new questions only apply to certain enrollees and not others. For 
example, we are considering whether the questions on housing insecurity 
would be relevant for enrollees in congregate housing. However, because 
people may move between settings, including from an institutional 
placement to the community, we believe that such a proposal would add 
complexity without obvious benefit.
---------------------------------------------------------------------------

    \58\ For more information, see the U.S. Department of Veteran 
Affairs, VA National Center of Homelessness Among Veterans March 
2014 Research Brief ``Using a Universal Screener to Identify 
Veterans Experiencing Housing Instability'' at https://www.va.gov/HOMELESS/Universal_Screener_to_Identify_Veterans_Experiencing_Housing_Instability_2014.pdf.
    \59\ For more information, see https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/MCBS.
---------------------------------------------------------------------------

    Finally, due to the processes associated with developing HRA tools, 
approval of MOCs, and MOC implementation, we would not enforce this 
requirement until contract year 2024. However, we are also considering 
whether to have our proposed requirement take effect at a later date, 
such as contract year 2025, to allow MA organizations more time to work 
our proposed new questions into their existing SNP HRAs. We welcome 
comments on our proposal and these potential alternatives including 
adding questions regarding health literacy, social isolation, or other 
areas. We also welcome comments on when CMS would need to issue sub-
regulatory guidance providing the specific questions to be included in 
the HRA to ensure that MA organizations would have sufficient time to 
incorporate the required questions.
5. Refining Definitions for Fully Integrated and Highly Integrated D-
SNPs (Sec. Sec.  422.2 and 422.107)
    Dually eligible individuals have an array of choices for how to 
receive their Medicare coverage, including Original Medicare with a 
standalone prescription drug plan, non-SNP MA plans, multiple types of 
SNPs, and Programs of All-inclusive Care for the Elderly. Those choices 
can be complex and, for some, overwhelming. An average Medicare 
beneficiary will have access to 54 MA plans in 2022, excluding MMPs and 
PACE, compared to 39 MA plans in 2020.\60\ In one extreme example, 
dually eligible individuals in Los Angeles have over 85 choices for 
Medicare coverage for 2022, including 70 MA plans, nine D-SNPs, two 
FIDE SNPs, and five MMPs--more Medicare options to choose from than 
Medicare-only beneficiaries.\61\
---------------------------------------------------------------------------

    \60\ Information from 2022 Landscape Source Files. Retrieved 
from https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn. Excludes EGWPs.
    \61\ Ibid.
---------------------------------------------------------------------------

    Our own terminology is complex too. While we have defined terms 
through rulemaking in Sec.  422.2, there remains nuance and variation 
that may make it difficult for members of the public--and even the 
professionals who support them--to readily understand what may be 
unique about a certain type of plan or what a beneficiary can expect 
from any FIDE SNP, for example. We propose several changes to how we 
define FIDE SNPs and HIDE SNPs that we believe will ultimately help to 
differentiate various types of D-SNPs and clarify options for 
beneficiaries. Our proposals would lay the groundwork for potential 
future improvements to Medicare Plan Finder and other communications to 
help beneficiaries better understand their options for integrated 
coverage of Medicare and Medicaid benefits.
a. Exclusively Aligned Enrollment for FIDE SNPs
    Section 422.2 defines the term ``fully integrated dual eligible 
special needs plan,'' most recently updated in the May 2020 final rule. 
Under the current definition, FIDE SNPs are plans that: (i) Provide 
dually eligible individuals access to Medicare and Medicaid benefits 
under a single entity that holds both an MA contract with CMS and a 
Medicaid managed care organization (MCO) contract under section 1903(m) 
of the Act with a State Medicaid agency, (ii) under the capitated 
Medicaid managed care contract, provide coverage, subject to some 
limited flexibility for carve-outs, of primary care, acute care, 
behavioral health, and LTSS, and coverage of nursing facility services 
for a period of at least 180 days during the plan year; (iii) 
coordinate delivery of covered Medicare and Medicaid benefits using 
aligned care management and specialty care network methods for high-
risk beneficiaries; and

[[Page 1861]]

(iv) employ policies and procedures approved by CMS and the State to 
coordinate or integrate beneficiary communication materials, 
enrollment, communications, grievance and appeals, and quality 
improvement.
    The current definition of a FIDE SNP does not require that the MA 
contract limit enrollment to the individuals who are enrolled in the 
affiliated MCO. One benefit of FIDE SNP designation for the MA 
organization is that the MA plan may qualify for a frailty adjustment 
as part of CMS's risk adjustment of its MA capitation payments under 
section 1853(a)(1) of the Act and Sec.  422.308(c); FIDE SNPs with a 
similar average level of frailty (as determined by the Secretary) as 
the PACE program may qualify for the frailty adjustment, which may 
result in increased aggregate payment from CMS.
    Section 422.2 also defines the term ``aligned enrollment'' as 
referring to when a full-benefit dually eligible individual is an 
enrollee of a D-SNP and receives coverage of Medicaid benefits from the 
D-SNP or from a Medicaid MCO that is: (1) The same organization as the 
MA organization offering the D-SNP; (2) its parent organization; or (3) 
another entity that is owned and controlled by the D-SNP's parent 
organization. When State policy limits a D-SNP's membership to 
individuals with aligned enrollment, Sec.  422.2 refers to that 
condition as exclusively aligned enrollment.
    Exclusively aligned enrollment is an important design feature for 
maximizing integration of care for all the D-SNP's enrollees. It 
facilitates the use of integrated beneficiary communication materials 
(because all beneficiaries in the D-SNP are also in the companion 
Medicaid MCO), clarifies overall accountability for outcomes and 
coordination of care, and makes feasible the requirement (effective 
January 1, 2021) that the plan use unified grievance and appeals 
procedures for both Medicare and Medicaid benefits.
    All MMPs operate with exclusively aligned enrollment, and several 
States require exclusively aligned enrollment for FIDE SNPs that 
operate in the State by including this requirement in the State 
Medicaid agency contract that is required for D-SNPs by Sec.  
422.107(b). However, the current regulatory definition of FIDE SNP 
permits certain forms of unaligned enrollment between Medicare and 
Medicaid coverage. That is, a beneficiary may be in one parent 
organization's FIDE SNP for coverage of Medicare services but a 
separate company's Medicaid managed care plan (or in a Medicaid FFS 
program) for coverage of Medicaid services.
    In 2021, there are 69 FIDE SNPs in 12 States, enrolling 264,146 
beneficiaries as of January 2021.\62\ Fifty-seven of those 69 FIDE SNPs 
have exclusively aligned enrollment. Only Arizona, Pennsylvania, and 
Virginia currently contract with FIDE SNPs without requiring 
exclusively aligned enrollment.
---------------------------------------------------------------------------

    \62\ CY 2021 data is from CMS review of CY 2021 State Medicaid 
agency contracts submitted by FIDE SNPs. 2016 data is from Verdier, 
J., A. Kruse, R. Lester, et al. 2016. State contracting with 
Medicare Advantage dual eligible special needs plans: Issues and 
options. Washington, DC: Integrated Care Resource Center. Retrieved 
from https://www.integratedcareresourcecenter.com/sites/default/files/ICRC_DSNP_Issues__Options.pdf.
---------------------------------------------------------------------------

    We propose to amend the definition of ``fully integrated dual 
eligible special needs plan'' at Sec.  422.2 with a new paragraph (5) 
that requires, for 2025 and subsequent years, that all FIDE SNPs have 
exclusively aligned enrollment. Our proposed change would move FIDE 
SNPs toward greater integration in the provision of Medicare and 
Medicaid benefits for dually eligible individuals and make the options 
available to these beneficiaries simpler to understand. Requiring all 
FIDE SNPs to have exclusively aligned enrollment would simplify the 
ways we, States, and benefit counselors communicate about FIDE SNPs by 
eliminating some of the confusing scenarios related to unaligned 
enrollment that our current definition permits. It would allow all 
enrollees to have their Medicare and Medicaid benefits explained under 
the FIDE SNP clearly, which is made more difficult when some enrollees 
are, but others are not, also enrolled in the affiliated Medicaid MCO. 
Our proposed change promotes higher levels of Medicare-Medicaid 
integration by ensuring that that all FIDE SNPs can deploy integrated 
beneficiary communication materials and unify appeals and grievance 
procedures for all the Medicare and Medicaid benefits covered through 
the FIDE SNP and affiliated Medicaid MCO; such unified procedures are 
not feasible when some FIDE SNP members do not receive the Medicaid 
benefits from the same organization.
    Under our proposed definition, all FIDE SNPs would (1) be capitated 
for Medicaid services, with some permissible exceptions proposed at 
Sec.  422.107(g) and (h) and discussed later in this section, for all 
of their enrollees, and (2) based on meeting the definition of 
applicable integrated plans in Sec.  422.561, operate unified appeals 
and grievance processes and continue delivery of benefits during an 
appeal. Ultimately, we believe this change in the definition of a FIDE 
SNP will help simplify options and provide a better plan experience for 
dually eligible beneficiaries, as they will be able to receive all 
their covered Medicare and Medicaid benefits through one organization.
    In the absence of a State Medicaid policy change (to require or 
facilitate exclusively aligned enrollment) in Arizona, Pennsylvania, or 
Virginia, our proposal would result in 12 plans losing FIDE SNP status. 
However, our proposal would not prohibit those States and plans from 
operating as they currently do but would simply mean that the affected 
plans would be HIDE SNPs rather than FIDE SNPs beginning January 1, 
2025. (A HIDE SNP is another type of D-SNP defined at Sec.  422.2 which 
we describe in more detail in section II.A.5.d. of this proposed rule.) 
A consequence of this would be that these plans would not qualify for 
the frailty adjustment, as described in Sec.  422.308(c)(4); however, 
only six of the 12 potentially-affected FIDE SNPs qualify for the 
frailty adjustment in 2021 because only those six plans have a similar 
average level of frailty (as determined by the Secretary) as the PACE 
program. States may also choose to require, through their State 
Medicaid agency contracts under Sec.  422.107, that MA organizations 
create separate plan benefit packages (that is, separate D-SNPs), with 
one for exclusively aligned enrollment and the other for unaligned 
enrollment, the former of which would meet our proposed criteria and 
allow the organization to maintain FIDE SNP status for a share of its 
current FIDE SNP enrollment while using one or more new, separate D-
SNPs for the unaligned enrollment. MA organizations would need to 
submit a request to CMS for a crosswalk exception under Sec.  
422.530(c)(4)(i), which we are proposing in section II.A.6.a. to 
redesignate from Sec.  422.530(c)(4), for such enrollment transitions.
    Finally, because the definition of aligned enrollment is specific 
to full-benefit dually eligible individuals, our proposal would newly 
preclude partial-benefit dually eligible individuals from enrolling in 
FIDE SNPs. Like with unaligned enrollees, enrollment of partial-benefit 
dually eligible individuals, who receive no Medicaid benefits other 
than coverage of Medicare premiums and--in some cases--Medicare cost-
sharing, precludes a D-SNP from clearly communicating the Medicaid 
benefits available through the FIDE SNP or using unified appeals and 
grievance procedures for adjudication of both Medicare and Medicaid 
benefits. For CY 2021, however, no FIDE SNPs

[[Page 1862]]

enroll partial-benefit dually eligible individuals. As such, we do not 
believe this would have any meaningful impact for plans currently 
operating as FIDE SNPs. Moving forward, we believe that the benefits to 
be achieved with FIDE SNPs having exclusively aligned enrollment for 
Medicare beneficiaries eligible for full Medicaid benefits, as proposed 
here, and the associated greater levels of integration in the provision 
and coverage of benefits and plan administration outweigh the potential 
negative effects for partial-benefit dually eligible individuals, who 
would be limited to enrollment in HIDE SNPs, coordination-only D-SNPs, 
other MA plans, or the original Medicare FFS program.
b. Capitation for Medicare Cost-Sharing for FIDE SNPs and Solicitation 
of Comments for Applying to Other D-SNPs
    Section 1902(a)(10)(E) of the Act directs States to pay providers 
for Medicare coinsurance and deductibles for dually eligible 
individuals in the Qualified Medicare Beneficiary (QMB) program. Under 
section 1905(p)(3) of the Act, ``Medicare cost-sharing'' includes costs 
incurred with respect to a dually eligible individual in the QMB 
program,\63\ ``without regard to whether the costs incurred were for 
items and services for which medical assistance [Medicaid] is otherwise 
available under the plan.'' For QMBs, Medicare cost-sharing amounts 
include Medicare Parts A and B premiums, coinsurance, and deductibles, 
and at State option, Medicare Advantage (MA) premiums. Section 
1902(n)(2) of the Act permits the State to limit payment for Medicare 
cost-sharing to the amount necessary to provide a total payment to the 
provider (including Medicare, Medicaid State plan payments, and third-
party payments) equal to the amount a State would have paid for the 
service under the Medicaid State plan.\64\ About 8.8 million dually 
eligible individuals are enrolled in the QMB program.\65\ Some States 
also elect to cover all Medicare cost-sharing for Medicare 
beneficiaries eligible for full Medicaid benefits who are not QMBs. 
This election means the State pays Medicare cost-sharing for a non-QMB 
full-benefit dually eligible individual even if the Medicare service is 
not covered under the Medicaid State plan. Absent such an election by 
the State, the State would pay the Medicare cost-sharing for non-QMB 
full-benefit dually eligible individual only if the Medicare service, 
such as inpatient hospitalization, is also covered under the Medicaid 
State plan. \66\ Typically, States allow FIDE SNP enrollment of both 
QMB and non-QMB full-benefit dually eligible individuals.
---------------------------------------------------------------------------

    \63\ Under 1905(p)(1) of the Act, a QMB is an individual who is 
entitled to hospital insurance benefits under Part A of Medicare, 
with income not exceeding 100 percent of the Federal poverty level, 
and resources not exceeding three times the SSI limit, adjusted 
annually by the Consumer Price Index. For more information about QMB 
eligibility and benefits, see chapter 1, section 1.6.2.1 and 
Appendices 1.A and 1.B of the Manual for the State Payment of 
Medicare Premiums, found here: https://www.cms.gov/files/document/chapter-1-program-overview-and-policy.pdf.
    \64\ For example, if the Medicare (or MA) rate for a service is 
$100, of which $20 is beneficiary coinsurance, and the Medicaid rate 
for the service is $90, the State would only pay $10. If the 
Medicaid rate is $80 or lower, the State would make no payment. This 
is often referred to as the ``lesser of'' policy. Under the ``lesser 
of'' policy, a State caps its payment of Medicare cost-sharing at 
the Medicaid rate for a particular service.
    \65\ CMS Medicare-Medicaid Coordination Office, ``Data Analysis 
Brief: Medicare-Medicaid Dual Eligible Enrollment: 2006-2019''. 
Retrieved from: https://www.cms.gov/files/document/medicaremedicaiddualenrollmenteverenrolledtrendsdatabrief.pdf.
    \66\ See Chapter II, sections E.4 through E.6 of the Medicaid 
Third Party Liability Handbook at https://www.medicaid.gov/medicaid/eligibility/downloads/cob-tpl-handbook.pdf.
---------------------------------------------------------------------------

    CMS automatically forwards claims under the original Medicare FFS 
program to State Medicaid agencies and other secondary payers to 
adjudicate the claims for payment of any Medicare cost-sharing.\67\ 
This automatic claims crossover process greatly reduces provider burden 
by eliminating the need for providers to submit separate claims to both 
Medicare and the State Medicaid agency, or a Medicaid managed care 
plan, such as a Medicaid MCO, prepaid inpatient health plan (PIHP), or 
prepaid ambulatory health plan (PAHP), as defined at Sec.  438.2, for 
payment of Medicare cost-sharing when it is covered by Medicaid. For 
providers serving dually eligible individuals enrolled in MA plans, 
including FIDE SNPs, HIDE SNPs, and other D-SNPs, there is no guarantee 
of an automated crossover process to State Medicaid agencies or 
Medicaid managed care plans to process Medicaid payment of Medicare 
cost-sharing. This means the providers must submit claims to the MA 
plan, then determine the responsible State Medicaid agency or Medicaid 
managed care plan, and then submit another claim to the State Medicaid 
agency or Medicaid managed care plan for adjudication of the claims for 
Medicare cost-sharing.
---------------------------------------------------------------------------

    \67\ State Medicaid agencies and Medicaid managed care plans 
enter into a Coordination of Benefits Agreement (COBA) for the 
purpose of coordinating health insurance benefits and facilitating 
the proper payment of claims for beneficiaries enrolled in the 
original Medicare FFS program. Within the COBA, State Medicaid 
agencies and Medicaid managed care plans elect which COBA claims for 
CMS to transfer. For more information, see: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/COBA-Trading-Partners/Coordination-of-Benefits-Agreements/Coordination-of-Benefits-Agreement-page.
---------------------------------------------------------------------------

    One way to alleviate provider burden and streamline claims 
processing is for the State Medicaid agency to make a capitated payment 
for Medicaid coverage of Medicare cost-sharing to the MA plan in which 
a dually eligible individual (specifically, a QMB or other dually 
eligible individual for which the State covers Medicare cost-sharing) 
is enrolled. When the State contract with the MA plan includes 
capitated payment for Medicaid coverage of Medicare cost-sharing, the 
provider submits one claim to the MA plan, and the MA plan adjudicates 
the claim for Medicare coverage of services and for Medicaid payment of 
Medicare cost-sharing without the provider submitting separate claims 
to the MA plan and the proper Medicaid entity (that is, State Medicaid 
agency or Medicaid managed care plan). Additionally, this arrangement 
reduces other potential obstacles, including determining the proper 
Medicaid entity to bill for Medicare cost-sharing, determining a 
beneficiary's applicable coverage of Medicare cost-sharing (for 
example, in States that pay Medicare cost-sharing for Medicare 
beneficiaries eligible for full Medicaid benefits who are not QMBs), 
and the potential for improper QMB billing.
    We propose to specify in Sec.  422.2 that FIDE SNPs are required to 
cover Medicare cost- sharing as defined in section 1905(p)(3)(B), (C) 
and (D) of the Act, without regard to how section 1905(n) limits that 
definition to QMBs, as part of the FIDE SNP's coverage of primary and 
acute care; this means that the proposed amendment would require FIDE 
SNPs to cover Medicare cost -sharing for both QMB and non-QMB full-
benefit dually eligible FIDE SNP enrollees. We intend this revision to 
encompass all cost-sharing, whether it is in the form of coinsurance, 
copayments, or deductibles, for Medicare Part A and Part B benefits 
covered by the D-SNP. The current definition of a FIDE SNP at Sec.  
422.2 requires a FIDE SNP's capitated contract with the State Medicaid 
agency to provide coverage, consistent with State policy, of specified 
primary care, acute care, behavioral health, and LTSS, and provide 
coverage of nursing facility services for a period of at least 180 days 
during the plan year. Medicare covers most primary care and acute care 
services and Medicare is always the primary payer for any Medicare-
covered services with Medicaid covering any Medicare cost-sharing in 
such cases.

[[Page 1863]]

Under this proposal, a FIDE SNP would cover Medicare payment for 
primary care and acute care covered by Medicare and the Medicaid 
payment for any Medicare cost-sharing in such cases. In plan year 2021, 
all 69 FIDE SNPs include Medicare cost-sharing in their capitated 
contracts with the State Medicaid agency.\68\ Therefore, we do not 
expect our proposal to have any impact on existing FIDE SNPs.
---------------------------------------------------------------------------

    \68\ CMS Special Needs Plan Comprehensive Report, January 2021: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/MCRAdvPartDEnrolData/Special-Needs-Plan-SNP-
Data#:~:text=Special%20Needs%20Plan%20%28SNP%29%20Data%20%20%20,%20%2
02021-03%20%206%20more%20rows%20.
---------------------------------------------------------------------------

    We chose to propose this change only for FIDE SNPs because FIDE 
SNPs are the only type of D-SNP that must cover Medicaid acute and 
primary care benefits and are better equipped, compared to other D-
SNPs, to make improvements for coordination of benefits and 
adjudication of claims. This is especially true when capitation for 
Medicare cost-sharing is combined with a requirement for exclusively 
aligned enrollment (as proposed in section II.A.5.a. of this proposed 
rule to amend the FIDE SNP definition at Sec.  422.2). Under our 
proposal, a provider serving a dually eligible individual enrolled in a 
FIDE SNP with exclusively aligned enrollment would submit a single 
claim to the FIDE SNP for both Medicare and Medicaid coverage of the 
service; the FIDE SNP would adjudicate the claim for a covered service 
for any applicable Medicare payment, Medicaid payment, and Medicaid 
payment of Medicare cost-sharing. In this way, the proposed additions 
to the definition of FIDE SNPs at Sec.  422.2 would ensure that all 
FIDE SNPs include elements--capitation for Medicare cost-sharing and 
exclusively aligned enrollment--that result in improved beneficiary and 
provider experiences. This proposal furthers the level of integration 
required for FIDE SNPs in a way that we believe would achieve those 
improved experiences. In other types of D-SNPs, such as HIDE SNPs, 
members may participate in the HIDE SNP for their Medicare benefits and 
an unaffiliated Medicaid managed care plan or the State Medicaid FFS 
program for their Medicaid acute and primary care benefits. When 
Medicare and Medicaid plan enrollment is unaligned, as it is in many 
HIDE SNPs, a provider serving a dually eligible individual enrolled in 
a HIDE SNP would submit a claim to the HIDE SNP for Medicare payment of 
the service, then submit a second claim to the Medicaid managed care 
plan or the State Medicaid program for Medicaid payment of the covered 
benefit.
    Our proposal does not include Medicare Parts A and B premiums in 
the requirement for FIDE SNPs to cover Medicare cost-sharing. We do not 
believe that it is necessary to require FIDE SNPs (or other D-SNPs) to 
pay premiums as there is a loss of efficiency and no additional 
integration of benefits to be achieved by having a State pay a 
capitation rate to an MA organization for the MA organization to cover 
Medicare premiums. The State Medicaid agency will continue to pay the 
Medicare Parts A and B premiums on behalf of dually eligible 
beneficiaries in accordance with Sec. Sec.  406.26 and 406.32(g) and 
part 407, subpart C, of the chapter. Therefore, we propose to 
specifically exclude payment of Medicare premiums as a coverage 
requirement for dually eligible beneficiaries enrolled in FIDE SNPs.
    In addition to our proposal for FIDE SNPs, we encourage States to 
include Medicaid coverage of Medicare Part A and Part B cost-sharing 
(other than Medicare premiums) for dually eligible individuals in their 
capitated contracts with all D-SNPs as a method of reducing provider 
burden and improving access. We considered proposing a requirement that 
all D-SNPs have a contract with States for capitation for Medicare 
cost-sharing. Unlike FIDE SNPs with our proposed requirement for 
exclusively aligned enrollment, applying a requirement to other D-SNPs 
raises a number of complicating, but we believe solvable, problems. In 
States that have capitated payment arrangements with Medicaid managed 
care plans to cover Medicaid primary and acute services and behavioral 
health, such coverage typically requires the Medicaid managed care plan 
to cover Medicare cost-sharing when Medicare covers the service. That 
means, when enrollment is not aligned between a D-SNP and the Medicaid 
managed care plan, the result is not a streamlined payment process for 
the provider. A contract with the D-SNP for capitated coverage of 
Medicare cost-sharing--and a carve-out of Medicare cost-sharing 
coverage from the Medicaid managed care contract--can put Medicare 
coverage of services and Medicaid coverage of Medicare cost-sharing 
under a single entity, but could be a complicated process for States to 
implement. For States without Medicaid managed care programs for dually 
eligible individuals, contracting (with capitation payments) with D-
SNPs for coverage of Medicare cost-sharing can be a more 
straightforward process. We solicit feedback on the feasibility, 
implementation, estimated time to enact, and impact of requiring 
capitated Medicare cost-sharing for all D-SNPs to inform future 
rulemaking.
    In the CY 2020 Medicare Parts C and D Draft Call Letter, we 
requested comments on the ways to extend the benefits of the automatic 
claims crossover process for services provided to dually eligible 
individuals in MA plans and discussed those comments in the CY 2020 
Medicare Parts C and D Final Call Letter.\69\ Commenters described the 
need for MA plans to have real-time Medicaid eligibility and enrollment 
data to facilitate better coordination of care and Medicare cost-
sharing payment across MA plans and Medicaid MCOs. Therefore, we also 
considered proposing a requirement for States to provide real-time 
Medicaid managed care plan enrollment data to D-SNPs to enable better 
coordination between the D-SNP and the State and/or Medicaid managed 
care plan. We chose not to propose a requirement at this time to allow 
more time for us to consider the operational challenges for States. We 
solicit feedback on the pros and cons of requiring State Medicaid data 
exchanges to provide real-time Medicaid FFS program and Medicaid 
managed care plan enrollment data with D-SNPs, and the impact of such a 
requirement on States, Medicaid managed care plans, D-SNPs, providers, 
and beneficiaries.
---------------------------------------------------------------------------

    \69\ CMS, Announcement of Calendar Year (CY) 2020 Medicare 
Advantage Capitation Rates and Medicare Advantage and Part D Payment 
Policies and Final Call Letter, April 1, 2019. Retrieved from: 
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2020.pdf.
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c. Scope of Services Covered by FIDE SNPs
(1) Need for Clarification of Medicaid Services Covered by FIDE SNPs
    CMS first defined the term ``fully integrated dual eligible special 
needs plan'', or FIDE SNP, at Sec.  422.2 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 
(76 FR 21432) (hereinafter referred to as the April 2011 final rule) to 
implement section 3205(b) of the Affordable Care Act (which amended 
section 1853(a)(1)(B)(vi) of the Act to add a frailty adjustment to the 
risk adjustment payments for certain FIDE SNPs). That definition 
provided that a FIDE SNP must have a capitated contract with a State 
Medicaid agency that includes coverage of specified primary, acute, and 
long-term care

[[Page 1864]]

benefits and services, consistent with State policy. We explained then 
that the term ``consistent with State policy'' recognizes the 
variability in the degree and extent to which Medicaid services are 
covered from one State to the next (76 FR 21444). Section 1859(f)(3)(D) 
of the Act, as added by section 164(c)(3)(D) of MIPPA, uses the phrase 
``consistent with State policy'' to describe the Medicaid long-term 
care services that the D-SNP may include in its contract with the State 
Medicaid agency. As used in the definition of FIDE SNP, the term 
``specifies'' acknowledges that States vary in the degree in which 
Medicaid services are covered by the State under its Medicaid program 
(encompassing the Medicaid State plan and any waivers) by only 
requiring the FIDE SNP to cover those services specified by the State 
Medicaid agency as covered in its Medicaid program. Further, in the 
April 2011 final rule (76 FR 21444), we explained that the FIDE SNP 
definition at Sec.  422.2 requires the plan to provide all Medicaid-
covered primary, acute, and long-term care services and supports (LTSS) 
to beneficiaries, and not some combination thereof.
    Despite this discussion in the 2011 final rule that FIDE SNPs would 
provide all primary, acute, and long-term care services and benefits 
covered by the State Medicaid program, we did not operationalize review 
of State Medicaid agency contracts in that way. CMS determined D-SNPs 
to be FIDE SNPs even where the State carved out certain primary care, 
acute care, and LTSS benefits from the Medicaid coverage required from 
the D-SNP. In effect, we allowed States flexibility in the coverage 
provided by FIDE SNPs, not only to accommodate differences in the 
benefits covered under various State Medicaid programs but to 
accommodate differences in State contracting strategies for managed 
care broadly, and for FIDE SNPs in particular. In the April 2019 final 
rule (84 FR 15706 through 15707), we revised the FIDE SNP definition at 
Sec.  422.2 to add Medicaid behavioral health services to the list of 
services that a FIDE SNP must include in its capitated contract with 
the State Medicaid agency. But, consistent with how we were 
operationalizing this definition, we explained that our amendment would 
allow plans to meet the FIDE SNP definition even where the State 
excluded Medicaid behavioral health services from the capitated 
contract.
    The way we have applied the definition of FIDE SNPs has not enabled 
us to ensure FIDE SNPs fully integrate Medicare and Medicaid services 
for dually eligible individuals, which was the goal of the April 2011 
final rule. We propose to revise paragraph (2) of the definition of a 
FIDE SNP at Sec.  422.2 to clearly specify which services and benefits 
must be covered under the FIDE SNP capitated contract with the State 
Medicaid agency, and thus bring fuller integration of Medicaid benefits 
to individuals enrolled in FIDE SNPs. Our proposal would revise 
paragraph (2) of the existing definition into paragraphs (2)(i) through 
(v), with each of the new paragraphs addressing specific coverage 
requirements. We believe the proposed requirements described in this 
section strike the appropriate balance between flexibility for 
variations in State Medicaid policy and our goal of achieving full 
integration in FIDE SNPs. In addition, as discussed more fully in 
section II.A.5.e., our proposed revision of the definition, in 
conjunction with a proposal to add Sec.  422.107(g) and (h), includes 
flexibility for approval of some limited carve-outs of LTSS and 
behavioral health services.
(2) Requiring FIDE SNPs To Cover All Medicaid Primary and Acute Care 
Benefits
    Primary and acute care benefits for dually eligible beneficiaries 
are generally covered by Medicare as the primary payer rather than 
Medicaid. We propose revisions to the FIDE SNP definition in paragraph 
(2)(i) of Sec.  422.2 to limit the FIDE SNP designation to D-SNPs that 
cover all primary care and acute care services and Medicare cost-
sharing--to the extent such benefits are covered for dually eligible 
individuals in the State Medicaid program--through their capitated 
contracts with State Medicaid agencies. Our proposal here means that 
all primary and acute care services, including the Medicare cost-
sharing covered by the State Medicaid program (as discussed earlier in 
section II.A.5.b. of this proposed rule) must be covered by the FIDE 
SNP under the MCO contract between the State and the organization that 
offers the FIDE SNP and the MCO. We seek comment on whether we should 
allow for specific carve-outs of some of these benefits and services. 
We welcome specific examples of primary and acute care benefits that 
are either currently carved out of FIDE SNP capitated contracts with 
State Medicaid agencies or should be carved out and request that 
comments include the reason for the existing and proposed future carve-
outs.
    We are clarifying here that Medicaid non-emergency medical 
transportation (NEMT) as defined in Sec.  431.53 is not a primary or 
acute care service included in the scope of this provision. We 
recognize that Medicaid NEMT is a critical service for dually eligible 
individuals to access primary and acute care services. However, we do 
not consider NEMT coverage to be required for FIDE SNPs under the 
current or proposed definition. We note that States are able to 
contract with their D-SNPs, or the affiliated Medicaid managed care 
plans, to cover NEMT. Such contracting might provide these plans with 
useful tools to facilitate access to care for their members and make it 
easier for States to coordinate Medicaid NEMT with overlapping services 
provided by D-SNPs as Medicare supplemental benefits.
(3) Requiring FIDE SNPs To Cover Medicaid Home Health and Durable 
Medical Equipment
    We propose to require that, effective beginning in 2025, each FIDE 
SNP must cover additional Medicaid benefits to the full extent that 
those benefits are covered by the State Medicaid program. Those 
benefits we are proposing to add are home health services, as defined 
in Sec.  440.70, and durable medical equipment (DME) services, as 
defined in Sec.  440.70(b)(3). We believe that FIDE SNPs should be 
required to cover the Medicaid home health and DME benefits because 
home health and DME are critical services for dually eligible 
individuals, necessitate coordination due to being covered by both the 
Medicare and Medicaid programs, and are not clearly captured under 
other parts of the existing definition. Based on our review of State 
coverage requirements for Medicaid MCOs affiliated with FIDE SNPs, all 
current FIDE SNPs already cover Medicaid home health services and DME, 
so we do not expect this proposal to impact any existing FIDE SNPs. 
However, we propose that this change in the scope of required coverage 
by FIDE SNPs would not apply until 2025 in case there are other 
circumstances of which we are not aware that would necessitate 
additional time to adapt to our proposal.
    As such, we propose to add a new paragraph (2)(iv) of the FIDE SNP 
definition at Sec.  422.2 related to scope of services to clarify that 
a FIDE SNP's capitated contract with the State Medicaid agency must 
include all Medicaid home health services as defined at Sec.  440.70. 
Also, we propose to add a new paragraph (2)(v) of the FIDE SNP 
definition at Sec.  422.2 related to scope of services to clarify that 
a FIDE SNP's capitated contract with the State Medicaid agency must 
include all Medicaid DME as defined at Sec.  440.70(b)(3).

[[Page 1865]]

(4) Requiring FIDE SNPs To Cover Medicaid Behavioral Health Services
    Behavioral health needs are extensive among dually eligible 
individuals. Nearly one-third of individuals who are dually eligible 
for Medicare and Medicaid have been diagnosed with a serious mental 
illness, such as schizophrenia, bipolar disorder, or major depressive 
disorder, a rate almost three times higher than for non-dually eligible 
Medicare beneficiaries.\70\ Full-benefit dually eligible individuals 
experience higher rates of bipolar disorder and are more likely to use 
at least one Medicare or Medicaid community mental health service than 
partial benefit dually eligible individuals.\71\ Fragmented physical 
and behavioral health care, delivered across multiple providers and 
funding sources, can decrease access to care and lead to poor health 
status.\72\ Some studies, such as the ``Improving Mood--Promoting 
Access to Collaborative Treatment for Late-Life Depression'' study, 
provide evidence that coordinated medical and behavioral health care 
lead to better behavioral health outcomes.\73\
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    \70\ Congressional Budget Office. ``Dual-Eligible Beneficiaries 
of Medicare and Medicaid: Characteristics, Health Care Spending, and 
Evolving Policies.'' (June 2013). Retrieved from: https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/44308dualeligibles2.pdf. This report classified Medicare enrollees 
as having a mental illness if they had a diagnosis from the previous 
year of schizophrenia; major depressive, bipolar, and paranoid 
disorders; or other major psychiatric disorders.
    \71\ Integrated Care Resources Center, Working With Medicare 
Webinar, https://www.integratedcareresourcecenter.com/sites/default/files/4.15.20%20WWM%20BH%20Slide%20Deck_for%20508%20Review.pdf.
    \72\ Medicaid and CHIP Payment and Access Commission. 
``Integration of Behavioral and Physical Health Services in 
Medicaid.'' March 2016. Available at: https://www.macpac.gov/wp-content/uploads/2016/03/Integration-of-Behavioral-and-Physical-Health-Services-in-Medicaid.pdf.
    \73\ Unutzer, et al., Journal of the American Medical 
Association, ``Collaborative Care Management of Late-life Depression 
in the Primary Care Setting: A Randomized Controlled Trial'', 
December 11, 2002. Available at: https://aims.uw.edu/resource-library/collaborative-care-management-late-life-depression-primary-care-setting-randomized.
---------------------------------------------------------------------------

    We explained earlier in this section that, consistent with how we 
were operationalizing the FIDE SNP definition since first adopting it 
at Sec.  422.2 as established in the April 2011 final rule, we have 
allowed plans to meet the FIDE SNP definition even where a State 
excluded Medicaid behavioral health services from the capitated 
contract with the State Medicaid agency. In the April 2019 final rule, 
we added behavioral health services to the list of benefits that a D-
SNP must cover, consistent with State policy, to obtain the FIDE SNP 
designation. We stated that complete carve out of behavioral health by 
a State from the scope of the Medicaid coverage provided by a FIDE SNP 
would be permissible (84 FR 15706-15707). We believe that a revision to 
that policy is appropriate and propose to establish in a new paragraph 
(2)(iii) in the FIDE SNP definition at Sec.  422.2 requiring that, for 
2025 and subsequent years, the capitated contract with the State 
Medicaid agency must include coverage of Medicaid behavioral health 
services. This proposal would require the Medicaid MCO that is offered 
by the same entity offering the FIDE SNP to cover all behavioral health 
services covered by the State Medicaid program for the enrollees in the 
FIDE SNP. Our proposal to require FIDE SNPs to cover Medicaid 
behavioral health services is consistent with sections 
1853(a)(1)(B)(iv) and 1859(f)(8)(D)(i)(II) of the Act. We propose the 
2025 date to allow time for MA organizations and States to adapt to our 
proposal.
    Restricting FIDE SNP designation to plans capitated for Medicaid 
behavioral health services, as well as other benefits, has two 
advantages. First, it better comports with a common understanding of 
being ``fully integrated''--the term used in sections 1853(a)(1)(B)(iv) 
and 1859(f)(8)(D)(i)(II) of the Act--because of the importance of 
behavioral health services for dually eligible individuals. Absent 
coverage of Medicaid behavioral health services, a FIDE SNP would be 
less able to effectively coordinate overlapping behavioral health 
services covered by Medicare and Medicaid and would have an incentive 
to steer beneficiaries toward Medicaid-covered services for which it is 
not financially responsible. Coverage of Medicaid behavioral health 
services also facilitates integrating behavioral health and physical 
health services, which can result in improved outcomes for dually 
eligible beneficiaries.\74\ In addition, our proposal would more 
clearly distinguish a FIDE SNP--which would have to cover both LTSS and 
behavioral health services--from a HIDE SNP--which must cover either 
LTSS or behavioral health services. This would reduce confusion among 
stakeholders.
---------------------------------------------------------------------------

    \74\ Unutzer, et al., Journal of the American Medical 
Association, ``Collaborative Care Management of Late-life Depression 
in the Primary Care Setting: A Randomized Controlled Trial'', 
December 11, 2002. Available at: https://aims.uw.edu/resource-library/collaborative-care-management-late-life-depression-primary-care-setting-randomized.
---------------------------------------------------------------------------

    Since codifying the definition of HIDE SNP in the April 2019 final 
rule, we have received many questions from MA organizations and other 
stakeholders about the difference between a FIDE SNP and HIDE SNP, and 
we attempted to further explain the distinction in a January 17, 2020 
Health Plan Management System memorandum titled, ``Additional Guidance 
on CY 2021 Medicare-Medicaid Integration Requirements for Dual Eligible 
Special Needs Plans'' (January 2020 memorandum).\75\ Requiring a FIDE 
SNP to include Medicaid behavioral health services, with the exception 
of limited carve-outs as proposed at Sec.  422.107(h) and described in 
section II.A.5.e., would make the coordination continuum from HIDE SNP 
to FIDE SNP easier to explain and understand since HIDE SNP designation 
would allow for a carve-out in full or in part of either Medicaid 
behavioral health services or LTSS while FIDE SNP designation would 
allow for only limited carve-outs of Medicaid behavioral health 
services (or, as discussed in section II.A.5.e., of LTSS). As proposed, 
Sec.  422.107(h) would permit limited exclusions from coverage of 
Medicaid behavioral health services by both FIDE SNPs and HIDE SNPs 
while treating those plans as providing coverage of the category of 
benefits. Under the proposal, the permissible carve-outs would be 
limited to a minority of beneficiaries eligible to enroll in the D-SNP 
and use Medicaid behavioral health services or constitute a small part 
of the total scope of behavioral health services for which Medicaid is 
generally the primary payer. Thus, under our proposal, FIDE SNPs would 
cover the vast majority of Medicaid behavioral health benefits and 
Medicaid LTSS benefits, and HIDE SNPs would cover the vast majority of 
Medicaid behavioral health benefits or Medicaid LTSS benefits (or 
potentially both categories of benefits).
---------------------------------------------------------------------------

    \75\ CMS Medicare-Medicaid Coordination Office, ``Additional 
Guidance on CY 2021 Medicare-Medicaid Integration Requirements for 
Dual Eligible Special Needs Plans'', January 17, 2020. Retrieved 
from: https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-memos-archive/hpms-memo-5.
---------------------------------------------------------------------------

    Most FIDE SNPs already have contracts with States to cover Medicaid 
behavioral health benefits, indicating that the market has already 
moved in this direction and relatively few FIDE SNPs would be impacted 
by our proposal. Our review of State Medicaid agency contracts for FIDE 
SNPs in CY 2021 indicates that States include full coverage of Medicaid 
behavioral health services for 45 of the 69 FIDE SNPs.\76\ The FIDE 
SNPs with contracts that carve

[[Page 1866]]

out Medicaid behavioral health include two FIDE SNPs in California, 17 
FIDE SNPs in New York, and five FIDE SNPs in Pennsylvania.\77\ Based on 
a New York State Medicaid policy change, we expect FIDE SNPs in New 
York to cover Medicaid behavioral health services, effective January 1, 
2023, so we do not anticipate our proposal will negatively impact FIDE 
SNPs in New York.\78\ If the remaining FIDE SNPs in California and 
Pennsylvania do not meet the proposed FIDE SNP definition at Sec.  
422.2, they may still meet the HIDE SNP definition proposed at Sec.  
422.2. We believe the benefit of restricting FIDE SNP designation to 
plans that cover Medicaid behavioral health services in the capitated 
contract with the State Medicaid agency outweighs the benefit of 
continuing to allow FIDE SNP designation for plans that do not cover 
these benefits.
---------------------------------------------------------------------------

    \76\ CMS review of CY 2021 State Medicaid agency contracts for 
FIDE SNPs.
    \77\ See https://www.cms.gov/files/document/smacdsnpintegrationstatusesdata.xlsx.
    \78\ New York State Department of Health, New York State Office 
of Mental Health, and New York State Office of Alcoholism and 
Substance Abuse Services, ``Duals Integration: Adding Behavioral 
Health Services into Medicaid Advantage Plus,'' December 2020.
---------------------------------------------------------------------------

    Increasing the minimum scope of services that FIDE SNPs must cover 
in an integrated fashion is consistent with how section 1859(f)(8)(D) 
of the Act identifies Medicaid LTSS and behavioral health services as 
key areas for the integration of services. While the statute generally 
describes the increased level of integration that is required by 
referring to coverage of behavioral health or LTSS or both, we believe 
that exceeding that minimum standard is an appropriate goal for FIDE 
SNPs. The most integrated D-SNPs--FIDE SNPs--should cover the broadest 
array of Medicaid-covered services, including the behavioral health 
treatment and LTSS that are so important to the dually eligible 
population.
    Further, increasing the minimum scope of services for FIDE SNPs is 
not inconsistent with section 1853(a)(1)(B)(iv) of the Act, which 
states that such plans are fully integrated with capitated contracts 
with States for Medicaid benefits, including LTSS. While section 
1853(a)(1)(B)(iv) does not specify coverage of behavioral health 
services, it does not exclude coverage of behavioral health services 
either given that the section speaks generally to FIDE SNPs having 
fully integrated contracts with States for Medicaid benefits. As 
discussed earlier in this section, behavioral health services are 
critical for dually eligible individuals and benefit from coordination 
with Medicare services and, we believe, coverage of Medicaid behavioral 
health benefits by a D-SNP is key to achieving fully integrated status.
    Specifically, we propose the following changes at paragraph (2) of 
the FIDE SNP definition at Sec.  422.2 related to scope of services:
     Strike the words ``provides coverage consistent with State 
policy of'' and replace them with ``requires coverage of the following 
benefits, to the extent Medicaid coverage of such benefits is available 
to individuals eligible to enroll in a FIDE SNP in the State, except as 
approved by CMS under Sec.  422.107(g) and (h)'' to clarify the 
services the FIDE SNP must include in its capitated contract with the 
State Medicaid agency;
     Redesignate to a new paragraph (2)(i) the requirement that 
a FIDE SNP's capitated contract with the State Medicaid agency must 
include all primary care and acute care covered under the State 
Medicaid program, and newly specify that these contracts must include 
Medicare cost-sharing as defined in section 1905(p)(3)(B), (C), and (D) 
of the Act, without regard to the limitation of that definition to 
qualified Medicare beneficiaries;
     Redesignate to a new paragraph (2)(ii) the requirement 
that a FIDE SNP's capitated contract with the State Medicaid agency 
include all LTSS covered under State Medicaid policy, including 
coverage of nursing facility services for a period of at least 180 days 
during the plan year;
     Add new paragraph (2)(iii) to require that a FIDE SNP's 
capitated contract with the State Medicaid agency must include Medicaid 
behavioral health services for plan year 2025 and subsequent years;
     Add new paragraph (2)(iv) to require that a FIDE SNP's 
capitated contract with the State Medicaid agency must include all 
Medicaid home health services as defined at Sec.  440.70 for plan year 
2025 and subsequent years; and
     Add new paragraph (2)(v) to require that a FIDE SNP's 
capitated contract with the State Medicaid agency must include all 
Medicaid DME as defined at Sec.  440.70(b)(3) for plan year 2025 and 
subsequent years.
d. Clarification of Coverage of Certain Medicaid Services by HIDE SNPs
    CMS first defined the term ``highly integrated dual eligible 
special needs plan'', or HIDE SNP, at Sec.  422.2 in the April 2019 
final rule. As currently defined at Sec.  422.2, a HIDE SNP is a type 
of D-SNP offered by an MA organization that has--or whose parent 
organization or another entity that is owned and controlled by its 
parent organization has--a capitated contract with the Medicaid agency 
in the State in which the D-SNP operates that includes coverage of 
Medicaid LTSS, Medicaid behavioral health services, or both, consistent 
with State policy. As stated in the April 2019 final rule (84 FR 
15705), the HIDE SNP designation is consistent with section 
1859(f)(8)(D)(i)(II) of the Act that recognizes a level of integration 
that does not meet the requirements of the FIDE SNP with respect to the 
breadth of services provided under a Medicaid capitated contract with 
the State.
    We propose to update the HIDE SNP definition at Sec.  422.2 
consistent with proposed changes to the FIDE SNP definition described 
earlier in section II.A.5.c. of this proposed rule to more clearly 
outline the services HIDE SNPs must include in their contracts with 
State Medicaid agencies. Similar to our proposal for the revised FIDE 
SNP definition, we propose to move away from the current use of 
``coverage, consistent with State policy'' language in favor of more 
clearly articulating the minimum scope of Medicaid services that must 
be covered by a HIDE SNP. Specifically, we propose the following at 
paragraph (2) of the HIDE SNP definition at Sec.  422.2:
     Strike the words ``consistent with State policy, of long-
term services and supports, behavioral health services, or both'' and 
instead require a HIDE SNP to have a capitated contract with the State 
Medicaid agency that requires the HIDE SNP to cover, at a minimum, 
Medicaid long-term services and supports or Medicaid behavioral health 
services;
     Reorganize paragraphs (1) and (2) into paragraphs (1)(i) 
and (ii) to outline that the capitated contract is between the State 
Medicaid agency and the MA organization or between the State Medicaid 
agency and the MA organization's parent organization, or another entity 
that is owned and controlled by its parent organization;
     Redesignate paragraph (2) into paragraphs (2)(i) and (ii) 
to state that the capitated contract requires coverage of LTSS, 
including community-based LTSS and some days of coverage of nursing 
facility services during the plan year, or behavioral health services 
to the extent Medicaid coverage of such services is available to 
individuals eligible to enroll in a HIDE SNP in the State; and
     To redesignated paragraph (2), add the words ``except as 
approved by CMS under Sec.  422.107(g) or (h)'' such that the HIDE SNP 
``requires coverage of the following benefits, to the extent Medicaid 
coverage of such benefits is

[[Page 1867]]

available to individuals eligible to enroll in a HIDE SNP in the State, 
except as approved by CMS under Sec.  422.107(g) or (h),'' to clarify 
that the HIDE SNP must cover under its capitated Medicaid contract the 
full scope of the Medicaid benefit for the specified LTSS or Medicaid 
behavioral health services, except for limited carve-outs that CMS 
permits under proposed Sec.  422.107(g) or (h); and
     Add new paragraph (3) to require that the capitated 
Medicaid contract applies in the entire service area of the D-SNP for 
plan year 2025 and subsequent plan years.
    Later in this section, we describe in more detail our proposal to 
require the capitated contract applies in the entire service area for 
the D-SNP. Otherwise, our proposal is generally a reorganization and 
clarification of the scope of Medicaid benefits that must be covered by 
a HIDE SNP.
e. Medicaid Carve-Outs and FIDE SNP and HIDE SNP Status
    As discussed earlier, we propose to require FIDE SNPs and HIDE SNPs 
to cover the full scope of the Medicaid coverage under the State 
Medicaid program of the categories of services that are specified as 
minimum requirements for these plans as outlined in sections II.A.5.c. 
and II.A.5.d. In both definitions, we propose that coverage of the full 
scope of the specified categories of Medicaid benefits is subject to an 
exception that may be permitted by CMS under Sec.  422.107(g) or (h). 
We propose to codify at Sec.  422.107(g) and (h), respectively, current 
CMS policy allowing limited carve-outs from the scope of Medicaid LTSS 
and Medicaid behavioral health services that must be covered by FIDE 
SNPs and HIDE SNPs. As discussed in section II.A.5.c.1. of this 
proposed rule, CMS has historically determined D-SNPs to be FIDE SNPs 
even where the State carved out certain primary care, acute care, LTSS, 
and behavioral health services from the Medicaid coverage furnished by 
the MCO offered by the FIDE SNP. CMS has similarly permitted carve-outs 
of the scope of Medicaid coverage furnished in connection with HIDE 
SNPs. We believe that codifying these policies would improve 
transparency for stakeholders and allow us to better enforce our 
policies to limit benefit carve-outs.
    Our proposal is consistent with the policy described in a 
memorandum CMS issued in January 2020,\79\ with some revisions to 
improve clarity and avoid misinterpretations of our policy that might 
result from language in the memorandum that differs in the allowed 
carve-outs for LTSS and behavioral health services. Like the 
memorandum, our proposal is designed to accommodate differences in 
State Medicaid policy--for example, the desire to retain delivery 
through the Medicaid FFS program of specific waiver services applicable 
to a small, specified population, or to retain coverage in the Medicaid 
FFS program for specific providers--without significantly undermining 
the level of Medicaid integration provided by HIDE SNPs and FIDE SNPs. 
While we generally favor integration and worry that Medicaid benefit 
carve-outs work against integration, we believe our proposal strikes a 
balance between the current realities of State managed care policy, 
applicable statutory provisions, and our implementation of those 
statutory provisions toward the goal of raising the bar on integration.
---------------------------------------------------------------------------

    \79\ CMS, ``Additional Guidance on CY 2021 Medicare-Medicaid 
Integration Requirements for Dual Eligible Special Needs Plans'', 
January 17, 2020. Retrieved from: https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-memos-archive/hpms-memo-5.
---------------------------------------------------------------------------

    Currently and under our proposal to revise the definition, a D-SNP 
may meet the criteria for designation as a HIDE SNP if it covers either 
Medicaid LTSS or Medicaid behavioral health services under a State 
Medicaid agency contract. The Medicaid contract may be between the 
State and either the legal entity providing the D-SNP, the parent 
organization of the D-SNP, or a subsidiary owned or controlled by the 
parent organization of the D-SNP. As discussed in the April 2019 final 
rule (84 FR 15705), the breadth of Medicaid LTSS coverage under a HIDE 
SNP does not have to be as broad as the coverage of Medicaid benefits 
provided by a FIDE SNP. For example, a HIDE SNP is not required to 
provide at least 180 days of nursing facility coverage during the plan 
year. If the HIDE SNP designation is based on coverage of Medicaid 
LTSS, such capitated coverage must include both of the following: 
Community-based LTSS, subject to permissible carve-outs, and 
institutional LTSS. Institutional LTSS must include coverage of nursing 
facility services with some days for which Medicaid coverage is primary 
but, in contrast to a FIDE SNP, may be less than 180 days each plan 
year. However, if a HIDE SNP designation is based on coverage of 
Medicaid behavioral health services, the HIDE SNP can cover some 
community-based and/or institutional LTSS or no LTSS.
    We currently grant FIDE SNP status despite Medicaid LTSS carve-outs 
of limited scope if such carved-out services (1) apply to a minority of 
the full-benefit dually eligible LTSS users eligible to enroll in the 
FIDE SNP who use long-term services and supports or (2) constitute a 
small part of the total scope of Medicaid LTSS provided to the majority 
of full-benefit dually eligible individuals eligible to enroll in the 
FIDE SNP who use Medicaid LTSS. Examples of permissible LTSS carve-outs 
for FIDE SNPs that apply to a minority of full-benefit dually eligible 
LTSS users may include services specifically limited to individuals 
with intellectual or developmental disabilities, individuals with 
traumatic brain injury, or children. Carve-outs of specific Medicaid 
LTSS would be permissible if the carved-out services would typically 
only be a small component of the broad array of LTSS provided to the 
majority of Medicaid LTSS users eligible to enroll in the FIDE SNP. We 
would not, however, expect to approve carve-outs for LTSS services for 
a specific population--for example, individuals with intellectual or 
developmental disabilities--if enrollment in the FIDE SNP was limited 
to individuals with those disabilities. For example, personal emergency 
response systems or home modifications may be important supports for 
participants in a Medicaid home and community-based waiver program. 
However, those specific services would rarely constitute the 
preponderance of an enrolled dually eligible individual's care plan 
because most individuals receiving such services also receive other 
types of in-home supports, such as personal care services. In contrast, 
we would not expect to approve carve-outs of in-home personal care or 
related services provided to older adults or people with disabilities 
even if such services were limited to individuals meeting a nursing 
home level of care.
    D-SNPs can currently obtain the HIDE SNP designation with limited 
carve-outs of Medicaid behavioral health services from their capitated 
contracts. A behavioral health services carve-out would be of limited 
scope if such service: (1) Applies primarily to a minority of the full-
benefit dually eligible users of behavioral health services eligible to 
enroll in the HIDE SNP; or (2) constitutes a small part of the total 
scope of behavioral health services provided to the majority of 
beneficiaries eligible to enroll in the HIDE SNP. We specify that only 
a small part of the Medicaid behavioral health services may be carved 
out in order to ensure that the innovative services that many Medicaid 
programs provide to individuals with severe and moderate

[[Page 1868]]

mental illness are covered through the D-SNP or the affiliated Medicaid 
managed care plan. We believe that level of integrated coverage is a 
minimum standard for a D-SNP to be considered highly or fully 
integrated. It would be insufficient for a HIDE SNP or FIDE SNP to 
solely cover the counseling services where Medicare is primary. 
Examples of permissible carve-outs that apply to primarily a minority 
of full-benefit dually eligible users of such services who are eligible 
to enroll in the HIDE SNP include school-based services for individuals 
under 21 years of age and court-mandated services. Examples of 
permissible carve-outs that constitute a small part of the total scope 
of Medicaid behavioral health services include inpatient psychiatric 
facilities and other residential services, such as payment of Medicare 
cost-sharing or coverage of days not covered by Medicare; substance 
abuse treatment, such as payment of Medicare cost-sharing or coverage 
of services not covered by Medicare; services provided by a Federal 
Qualified Health Center or Rural Health Clinic; and Medicaid-covered 
prescription drugs for treatment of behavioral health conditions. We 
believe such carve-outs would still allow FIDE SNPs and HIDE SNPs to 
meaningfully integrate Medicaid behavioral health coverage for their 
enrollees. We seek comment on whether we have struck the right balance 
in permitting such carve-outs, including for the examples cited 
previously.
    Specifically, we propose the following language at Sec.  422.107:
     Add new paragraph (g) to describe that a D-SNP may meet 
the FIDE SNP or HIDE SNP definition at Sec.  422.2 even if the contract 
between the State and the plan carves out some Medicaid LTSS, as long 
as the carve-out, as approved by CMS, applies primarily to a minority 
of beneficiaries eligible to enroll in the D-SNP who use long-term 
services and supports or constitutes a small part of the total scope of 
Medicaid LTSS provided to the majority of beneficiaries eligible to 
enroll in the D-SNP;
     Add new paragraph (h) to describe that a D-SNP may meet 
the FIDE SNP or HIDE SNP definition at Sec.  422.2 even if the contract 
between the State and the plan carves out some Medicaid behavioral 
health services, as long as the carve-out, as approved by CMS, applies 
primarily to a minority of beneficiaries eligible to enroll in the D-
SNP who use behavioral health services or constitutes a small part of 
the total scope of behavioral health services provided to the majority 
of beneficiaries eligible to enroll in the D-SNP; and
     Redesignate paragraph (e) ``Date of Compliance'' as new 
paragraph (i) due to the proposed new paragraphs (e) through (h).
    We intend to administer this proposed regulation consistent with 
our current policy and therefore anticipate little disruption to occur 
because of this proposed change.
f. Service Area Overlap Between FIDE SNPs and HIDE SNPs and Companion 
Medicaid Plans
    MA organizations can achieve greater integration when they 
maximally align their FIDE SNP and HIDE SNP service areas with the 
service areas of the affiliated Medicaid managed care plan (meaning the 
entities that offer capitated Medicaid benefits for the same members 
under a capitated contract with the State). Service area alignment also 
better comports with the minimum Medicare-Medicaid integration 
standards established by section 50311(b) of the BBA of 2018, which 
amended section 1859 of the Act and is codified at Sec.  422.2.
    Currently, under Sec.  422.2, a D-SNP can meet the requirements to 
be designated as a FIDE SNP and HIDE SNP even if the service area 
within a particular State does not fully align with the service area of 
the companion Medicaid plan (or plans) affiliated with their 
organization.\80\ For FIDE SNP and HIDE SNP members outside the 
companion Medicaid plan's service area, this lack of alignment does 
little to integrate Medicare and Medicaid benefits as the D-SNP member 
does not have the option to join the companion Medicaid plan. In its 
June 2019 report to Congress, MedPAC illustrated service area 
misalignment between D-SNPs and companion Medicaid managed LTSS plans, 
finding a significant number of D-SNP members not in the same service 
area as the D-SNP sponsor's Medicaid managed LTSS offering.\81\ In its 
June 2021 report to Congress, MACPAC recommended States use the State 
Medicaid agency contracts (required for D-SNPs by Sec.  422.107(b)) to 
completely align service areas between a D-SNP and a Medicaid managed 
care plan to better integrate coverage and care.\82\ We believe 
requiring service area alignment in the definitions of FIDE SNP and 
HIDE SNP would encourage MA organizations and States to create better 
experiences for beneficiaries and move toward greater integration, 
which would be consistent with the amendments to section 1859(f) of the 
Act made by section 50311(b) of the BBA of 2018.
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    \80\ CMS has acknowledged this and encouraged MA organizations 
to align these service areas in guidance issued on January 17, 2020, 
regarding D-SNPs. See https://www.cms.gov/files/document/cy2021dsnpsmedicaremedicaidintegrationrequirements.pdf.
    \81\ Medicare Payment Advisory Commission, ``Report to the 
Congress: Medicare and the Health Care Delivery System,'' June 2019. 
Retrieved from: https://medpac.gov/docs/default-source/reports/jun19_medpac_reporttocongress_sec.pdf.
    \82\ MACPAC, Report to Congress on Medicaid and CHIP, ``Chapter 
6: Improving Integration for Dually Eligible Beneficiaries: 
Strategies for State Contracts with Dual Eigible Special Needs 
Plan,'' June 2021. Retrieved at: https://www.macpac.gov/wp-content/uploads/2021/06/June-2021-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
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    Under our authority at section 1859(f)(8)(D) of the Act to require 
that all D-SNPs meet certain minimum criteria for Medicare and Medicaid 
integration, we are proposing to amend the definitions of FIDE SNP and 
HIDE SNP at Sec.  422.2. We propose to amend the FIDE SNP definition by 
adding new paragraph (6) and the HIDE SNP definition by adding new 
paragraph (3) to require that the capitated contracts with the State 
Medicaid agency cover the entire service area for the D-SNP for plan 
year 2025 and subsequent years. Requiring the service area of the 
Medicaid capitated contract to include at least the service area of the 
D-SNP contract allows all FIDE SNP and HIDE SNP enrollees to access 
both Medicare and Medicaid benefits from a single parent organization. 
These proposed changes to Sec.  422.2 are in addition to the other 
edits proposed to the definitions of FIDE SNP and HIDE SNP at Sec.  
422.2 as described in this proposed rule.
    Our proposal addresses an unintended loophole to the minimum D-SNP 
integration criteria we have adopted as part of the definitions of FIDE 
SNP and HIDE SNP: Where a D-SNP can qualify as either a FIDE SNP or 
HIDE SNP by only having a small portion of its members in the same 
service area as the companion Medicaid plan. Where the overlap in the 
service areas for the separate MA D-SNP contract and the Medicaid 
capitated contract is small, the opportunity for Medicare-Medicaid 
integration is similarly limited as only enrollees in that overlapping 
area have the potential to receive benefits from an integrated plan 
with both MA and Medicaid managed care plan contracts under a single 
parent organization. In such a FIDE SNP or HIDE SNP, the members 
without access to the companion Medicaid plan might not benefit even 
from the improved care coordination possible under the notification 
requirement at Sec.  422.107(d) required for a D-SNP that is not a FIDE 
SNP or HIDE SNP if the State has not imposed that requirement. We do 
not believe that is consistent with the goals and purposes

[[Page 1869]]

of increasing integration for D-SNPs as a whole or particularly for 
FIDE SNPs and HIDE SNPs, which are supposed to have more than a bare 
minimum level of integration.
    The proposal is not intended to limit State options for how they 
contract with managed care plans for their Medicaid programs, but to 
require the FIDE and HIDE SNPs to limit their MA service areas to areas 
within the service areas for the companion Medicaid plan. Our proposal 
would not limit the service area of the companion Medicaid plan to that 
of the D-SNP service area. Therefore, the companion Medicaid plan may 
have a larger service area than the D-SNP. States, in their contracting 
arrangements for Medicaid managed care programs, may wish to limit the 
service areas of the affiliated Medicaid managed care plans, but we 
recognize that States have other policy objectives better met with 
larger service areas in their Medicaid managed care programs.
    In plan year 2021, all FIDE SNPs meet the service area requirement 
being proposed. Most, but not all, HIDE SNPs also meet the proposed 
requirement. As of June 2021, there were 1,302,505 HIDE SNP members 
across 16 States in 186 HIDE SNP plan benefit packages and 89 
contracts.\83\ In four States, 20 HIDE SNPs have service area gaps with 
their affiliated MCOs, leaving 97,004 members in 174 counties with no 
corresponding Medicaid plan.\84\ Approximately half the D-SNPs with 
unaligned service area have over 50 percent of their enrollment in the 
unaligned service area, and the vast majority of HIDE SNP members and 
counties with unaligned service areas are concentrated in one State and 
one parent organization. Therefore, we believe some HIDE SNPs have only 
met the D-SNP integration requirements for a fraction of their 
enrollment due to the unintended gap in integration that is created by 
a lack of service area alignment.
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    \83\ CMS, SNP Comprehensive report, June 2021. Retrieved at: 
https://www.cms.gov/research-statistics-data-and-systemsstatistics-trends-and-reportsmcradvpartdenroldataspecial-needs/snp-comprehensive-report-2021-06.
    \84\ Internal analysis based on data from: CMS, Monthly 
Enrollment by Contract, March 2021. Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Enrollment-by-Contract; 
CMS, Monthly Enrollment by Contract/Plan/State/County, March 2021. 
Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Enrollment-by-Contract-Plan-State-County; CMS, D-SNP Integration 
Levels for CY 2021. Retrieved from: https://www.cms.gov/files/document/smacdsnpintegrationstatusesdata.xlsx; and service area 
information from State Medicaid agency websites.
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    If finalized, an MA organization impacted by our proposal would 
have several options. First, the organization can work with the State 
to expand their companion Medicaid plan service area to the full D-SNP 
service area, thus increasing the opportunity for integrated care and 
qualifying as a HIDE SNP under our proposal. Second, the MA 
organization can request to crosswalk enrollees (using the crosswalk 
exception currently at Sec.  422.530(c)(4), which we are proposing to 
redesignate as Sec.  422.530(c)(4)(i) in section II.A.6.a.) from the 
existing D-SNP that includes the service area outside of the companion 
Medicaid plan service area into a new D-SNP; the end result is two 
separate D-SNPs, one which qualifies as a HIDE SNP (because it has the 
overlapping service area with the companion Medicaid plan and meets 
other requirements) and another D-SNP that, because it is neither a 
FIDE SNP nor a HIDE SNP, would need to meet the notification 
requirement at Sec.  422.107(d). Third, the MA organization can keep 
the existing service area for the existing D-SNP and contract with the 
State as a non-HIDE D-SNP by meeting the notification requirement at 
Sec.  422.107(d).
    These options all require the MA organization to collaborate with 
the State Medicaid agency. We believe that a State currently engaged 
with MA organizations to integrate care through a HIDE SNP would likely 
be willing to work with the MA organization to come into compliance 
with the proposed rule. However, if the State was unwilling to engage 
with the MA organization, the MA organization would need to end the 
HIDE SNP plan benefit package in the unaligned service area. We seek 
comment on whether this proposal would likely result in additional, 
unintended disruption for current HIDE SNP membership, particularly if 
such unintended disruption is for more than the initial year of 
transition. We generally believe that the additional integration--and 
the benefits from higher integration--outweigh the limited disruption 
potentially caused by realignment of FIDE SNP and HIDE SNP service 
areas to meet this proposed requirement by 2025.
    We are considering an alternative of establishing a minimum 
percentage of enrollment or service area overlap between the D-SNP 
affiliated Medicaid plan and having FIDE SNPs and HIDE SNPs attest to 
meeting the minimum overlap requirement. That is, a D-SNP would qualify 
as a FIDE SNP or HIDE SNP if a minimum percentage of the D-SNP 
enrollment resides in the companion Medicaid plan (or plans) service 
area or if a minimum percentage of the D-SNP service area overlaps with 
the companion Medicaid plan (or plans). We are also considering an 
amendment to explicitly codify how the current requirements permit D-
SNPs to be designated as a FIDE SNP or HIDE SNP even if their service 
area within a particular State does not fully align with the service 
area of the companion Medicaid plan (or plans). We are not proposing 
either of these alternative approaches because we believe these 
alternatives create greater operational complexity (in the case of 
establishing a minimum percentage overlap) and would fail to help us 
achieve our objectives of clarifying options for beneficiaries and 
creating better coordination of Medicare and Medicaid benefits for all 
enrollees of the FIDE SNP or HIDE SNP compared to current practice. We 
seek comment on these alternatives, including input on what an 
appropriate percentage threshold of overlap in the services areas 
should be, whether an attestation process would provide the necessary 
level of oversight, and whether the status quo, with a clarification in 
the regulation text, creates a sufficient level of integration for FIDE 
SNPs and HIDE SNPs. We are interested in comments on whether the 
alternatives create sufficient improvements in coordination of the 
Medicare and Medicaid benefits compared to current practice or if the 
alternatives would adequately address the policy goals outlined in this 
proposal.
6. Additional Opportunities for Integration Through State Medicaid 
Agency Contracts (Sec.  422.107)
    Section 164 of MIPPA amended section 1859(f) of the Act to require 
that each D-SNP contract with the State Medicaid agency to provide 
benefits, or arrange for the provision of Medicaid benefits, to which 
an enrollee is entitled. Implementing regulations are codified at Sec.  
422.107. Notwithstanding this State contracting requirement for D-SNPs, 
section 164(c)(4) of MIPPA does not obligate a State to contract with a 
D-SNP, which therefore provides States with significant control over 
the availability of D-SNPs in their markets. The State's discretion to 
contract with D-SNPs, combined with the State's control over its 
Medicaid program, creates flexibility to require greater integration of 
Medicare and Medicaid benefits from the D-SNPs that operate in the 
State. For example, to develop products that integrate Medicare and 
Medicaid coverage, several states--

[[Page 1870]]

including Arizona, Hawaii, Idaho, Massachusetts, Minnesota, New Jersey, 
Pennsylvania, and Tennessee--operate Medicaid managed care programs for 
dually eligible individuals in which the State requires that the 
Medicaid MCOs serving dually eligible individuals offer a companion D-
SNP product. These States also require specific care coordination or 
data sharing activities in their contracts with D-SNPs.\85\
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    \85\ Verdier, J., Kruse, A., Sweetland Lester, R., Philip, A.M., 
and Chelminsky, D. State Contracting with Medicare Advantage Dual 
Eligible Special Needs Plans: Issues and Options (November 2016). 
Retrieved from https://www.integratedcareresourcecenter.com/sites/default/files/ICRC_DSNP_Issues__Options.pdf; MACPAC, Report to 
Congress on Medicaid and CHIP, ``Chapter 6: Improving Integration 
for Dually Eligible Beneficiaries: Strategies for State Contracts 
with Dual Eligible Special Needs Plan,'' (June 2021). Retrieved from 
https://www.macpac.gov/wp-content/uploads/2021/06/June-2021-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
---------------------------------------------------------------------------

    Even among States that have used the State Medicaid agency contract 
at Sec.  422.107 to promote integration, we believe there are 
additional opportunities to improve beneficiary experiences and health 
plan oversight. We propose addressing such opportunities in this 
section of this proposed rule.
    We propose a new paragraph (e) at Sec.  422.107 to describe 
conditions under which CMS would facilitate compliance with certain 
contract terms that States require of D-SNPs that operate in the State. 
Proposed paragraph (e)(1) provides that CMS will take the steps 
described in proposed paragraphs (e)(2) and (3) when a State Medicaid 
agency's contracts with D-SNPs require exclusively alignment enrollment 
and require the D-SNPs to request MA contracts that only include one or 
more State-specific D-SNPs and that such D-SNPs use integrated member 
materials. We do not believe that proposed paragraph (e)(1), in and of 
itself, creates or limits opportunities already available to States to 
contract with D-SNPs. The primary purpose of proposed paragraph (e)(1) 
is to establish a pathway for States with parameters for how CMS will 
work with the State when the State wishes to require D-SNPs with 
exclusively aligned enrollment in that State to operate under D-SNP-
only MA contracts and use specific integrated enrollee materials. The 
requirements described in proposed paragraph (e)(1) require work on the 
part of CMS to facilitate compliance by D-SNPs with the State's 
requirements. Therefore, proposed paragraphs (e)(2) and (3) describe 
steps CMS would take when the conditions of proposed paragraph (e)(1) 
are met.
a. Limiting Certain MA Contracts to D-SNPs
    Special needs plans, including D-SNPs, are currently included as 
separate plans, also known as ``plan benefit packages (PBPs),'' under 
the same contract number along with any other MA plans of the same 
product type (for example, health maintenance organization (HMO), 
preferred provider organization (PPO), etc.) offered by the legal 
entity that is the MA organization. MA organizations may offer multiple 
PBPs under the same contract number, and the plans under these 
contracts may have service areas in multiple States or regions. PBPs 
under one contract number may have very different benefit packages and 
serve different populations. MA organizations report medical loss 
ratios and certain quality measures--including many Star Ratings 
measures--at the contract level, which does not allow for 
differentiation of PBPs that are D-SNPs. While we capture some measures 
at the PBP level, unless a D-SNP is the only PBP in a contract, it is 
not possible to ascertain a full and complete picture of the quality 
performance (for example, CAHPS, HEDIS,\86\ Medicare Health Outcomes 
Survey (HOS), Star Ratings) of the D-SNP distinguished from other PBPs 
in the contract. Combining data from all PBPs offered under a contract, 
however, ensures that there is generally a large enough sample to 
administer CAHPS surveys and calculate HEDIS measures; CMS has 
discussed the possibility of collecting data and assigning Star Ratings 
at the plan level in the past, such as in the April 2018 final rule (83 
FR 16526 through 16528). Currently, Sec. Sec.  422.162(b) and 
423.182(b) provide for Star Ratings to be assigned at a contract level.
---------------------------------------------------------------------------

    \86\ Certain HEDIS measures are reported by SNPs at the PBP 
level and are available in public use files that can be used to 
review and assess D-SNP performance outside of CMS's Quality Star 
Rating program. These PBP-level measures are used to calculate the 
Care for Older Adults measures in Star Ratings, but they are not 
used to calculate Star Ratings to compare performance across MA 
plans. The public use files are available at: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/mcradvpartdenroldata?redirect=/mcradvpartdenroldata.
---------------------------------------------------------------------------

    It has been a long-standing CMS policy that CMS only award a legal 
entity one contract for each product type (for example, HMO, PPO, RPPO, 
etc.) it seeks to offer for all PBPs for the totality of the 
States.\87\ Under CMS's administration of the MA program, SNPs and non-
SNPs may be PBPs in the same contract(s) so long as they are the same 
product type (for example, SNP HMO and non-SNP HMO PBPs can be in the 
same contract, but a SNP HMO and non-SNP PPO would not be). Except 
under our existing authority in Sec.  422.550 where there is a change 
in ownership or for purposes of model tests under Section 1115A that 
utilized D-SNPs, CMS has not previously permitted MA organizations to 
create separate D-SNP contracts. If necessary, under Sec. Sec.  
422.504(k) and 423.504(e), CMS does have authority to sever specific 
PBPs from a contract and to deem a separate contract is in place for 
the severed PBP(s).
---------------------------------------------------------------------------

    \87\ The following memo outlines the policy for CY2020, which 
has been in effect for several years: CMS HPMS Memo, ``Release of 
Notice of Intent to Apply for Contract Year 2021 Medicare Advantage 
(MA), Medicare-Medicaid Plans (MMP), and Prescription Drug Benefit 
(Part D) and Related CY 2021 Application Deadlines'', October 17, 
2019. Retrieved from https://www.cms.gov/files/document/2021-noia-partcpartd-mmp.pdf.
---------------------------------------------------------------------------

    The majority of D-SNPs are in contracts that include other non-SNP 
MA plans. Of the 276 D-SNP PBPs offered in CY 2021, only 88 (32 
percent) are in D-SNP-only contracts.\88\ Given the important 
distinctions of D-SNPs in comparison to other MA plans, States and 
other stakeholders have expressed an interest in better understanding 
performance of these plans without data being combined with non-D-SNPs. 
Throughout our work with MMPs, we and our State partners benefited from 
having performance data that was specific to the MMP.
---------------------------------------------------------------------------

    \88\ CMS, Contract Management Reports 2020, SNP Type and Subtype 
Report, August 7, 2020.
---------------------------------------------------------------------------

    Therefore, we are proposing to codify a pathway where if a State 
requires an MA organization to establish a contract that only includes 
one or more D-SNPs with exclusively aligned enrollment within a State, 
the MA organization may apply for such a contract using the existing MA 
application process. We do not anticipate this proposal would create a 
large volume of new contracts, because most States do not meet the 
prerequisite of requiring exclusively aligned enrollment, and--among 
those that do--some D-SNPs are already in D-SNP-only contracts. The 
proposed language at Sec.  422.107(e)(1)(i) would give States the 
flexibility to require an MA organization to establish one or more D-
SNP-only contracts, which would provide more transparency in D-SNP plan 
performance within States. For example, the Florida State Medicaid 
agency could allow an MA organization serving South Florida and the 
Florida Panhandle to establish one D-SNP-only contract for South 
Florida and a separate D-SNP-only contract for the Florida 
Panhandle.\89\
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    \89\ Due to smaller enrollment compared to broader MA contracts, 
D-SNP-only contracts may experience sample size issues, such that 
certain quality measures (for example, HEDIS and CAHPS) may not have 
sufficient data to reliably report performance. States may want to 
consider this implication when contemplating whether to establish D-
SNP-only contracts, particularly if a State wishes to further limit 
D-SNP-only contracts based on regions within the State.

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[[Page 1871]]

    Where States choose to use this opportunity, it would have several 
benefits. First, it would provide the State and the public with greater 
transparency on the quality ratings for the D-SNP, reflecting outcomes 
and experiences specific to dually eligible individuals in the 
State.\90\ This can help CMS and States better identify disparities 
between dually eligible and other beneficiaries and target 
interventions accordingly where the population covered by the D-SNP-
only contract is of sufficient size to reliably report performance on 
quality measures and surveys. Second, it would improve transparency on 
financial experiences related to furnishing Medicare and Medicaid 
benefits because the contract's medical loss ratio would reflect 
Medicare financial experience specific to dually eligible individuals 
in the State that are enrolled in a companion Medicaid MCO as well as 
the D-SNP because this proposal is limited to D-SNPs with exclusively 
aligned enrollment. Exclusively aligned enrollment, as defined in Sec.  
422.2, means the Medicaid MCO that furnishes Medicaid benefits is the 
same as the D-SNP, the D-SNP's parent organization, or owned and 
controlled by the D-SNP's parent organization. Third, it would allow a 
D-SNP to create a MOC that is specific to the State, which would 
facilitate review by the State and provide opportunities for greater 
customization of the MOC to the State's Medicaid-related policies and 
priorities. Fourth, it would enable CMS to review and evaluate the 
provider network specific to the D-SNPs offered under that D-SNP-only 
contract.
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    \90\ Star Ratings for the new D-SNP-only contracts would be 
calculated in accordance with Sec.  422.166. As described at Sec.  
422.166(d)(2)(vi), new D-SNP-only contracts that do not have 
sufficient data to calculate and assign ratings and do not meet the 
definition of low enrollment or new MA plans at Sec.  422.252 would 
be assigned Quality Bonus Payment ratings based on the enrollment-
weighted average highest rating (as defined at Sec.  422.162) of the 
parent organization's other MA contract(s).
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    We describe at proposed Sec.  422.107(e)(2) how the CMS 
administrative steps to permit a new D-SNP-only contract would be 
initiated by receipt of a letter from the State Medicaid agency 
indicating its intention to include the contract requirements under 
Sec.  422.107(e)(1) in its contract with specific MA organizations 
offering, or intending to offer, D-SNPs with exclusively aligned 
enrollment in the State. We will provide States with additional 
information on timelines and procedures in sub-regulatory guidance; we 
may also address our recommendations for best practices and identify 
considerations for States that are considering this. We would expect 
the following steps--which are consistent with current timeframes and 
procedures for submission of applications, bids and other required 
materials to CMS--to be taken if a State sought to include these 
requirements for the 2025 plan year:
     Consistent with CMS recommendations, the State consults 
with CMS, MA organizations, and other stakeholders beginning in early 
2023 on whether to add the requirements at Sec.  422.107(e)(1) to its 
State Medicaid agency contract.
     Upon reaching a decision to proceed, the State would 
notify CMS (by letter) and the affected MA organizations by August 2023 
to enable the MA organization and CMS to start the necessary steps.
     Following existing timelines and procedures for 
applications, bids, and other annual submissions, and consistent with 
Sec.  422.501(b), the impacted MA organizations would submit a 
Notification of Intent to CMS to apply for a new D-SNP-only contract in 
November of 2023 and an application for a new D-SNP-only contract 
(beginning January 2025) in February of 2024.
     CMS and the State would develop integrated SB, Formulary, 
and combined Provider and Pharmacy Directory model materials from 
January through June 2024.
     The impacted MA organizations would submit a bid for the 
D-SNP PBP in the new D-SNP-only contract per Sec.  422.254 by the first 
Monday in June 2024.
     The impacted MA organizations would not submit a bid in 
June 2024 for the D-SNP PBP that had been included in the non-D-SNP-
only MA contract, indicating it is non-renewing the existing PBP.
     The affected D-SNPs would submit their State Medicaid 
agency contracts, including the provisions described at Sec.  
422.107(e)(1), in July of 2024 and the D-SNP's request to use the 
proposed crosswalk exception at Sec.  422.530(c)(4)(ii) in June of 2024 
to move enrollees from the non-renewing D-SNP to the new D-SNP offered 
under the D-SNP-only contract.
     Subject to compliance with all Part C and Part D 
requirements, CMS would approve the new D-SNP PBP and its bid in the D-
SNP-only contract for CY 2025 in September 2024.
     Dually eligible beneficiaries enrolled in non-renewing D-
SNP PBPs could be crosswalked to the new D-SNP PBP in October 2024 for 
a January 1, 2025 effective date if the MA organization requests the 
crosswalk exception proposed at Sec.  422.530(c)(4)(ii) and it is 
approved by CMS.
     The new D-SNP PBP into which individuals are crosswalked 
describes changes to the MA-PD benefits and provides information about 
the D-SNP PBP in the Annual Notice of Change, which must be sent 
consistent with Sec.  422.111(a), (d), and (e) for beneficiary receipt 
in early October 2024.
    Establishing D-SNP-specific contracts creates some new challenges. 
CMS would have added administrative burden to oversee a larger number 
of contracts. MA organizations would similarly experience new burdens, 
such as additional reporting to CMS, calculation of HEDIS measures, and 
administration of HOS and CAHPS surveys. We believe these costs are 
modest relative to the benefits. We solicit comments on other 
consequences that would flow from our proposal, both in terms of 
benefits for the MA organizations, States, and dually eligible 
individuals and potential unforeseen difficulties for these 
stakeholders.
    Finally, to avoid any significant beneficiary disruption, we 
propose a new crosswalk exception to allow MA sponsors to seamlessly 
move D-SNP members into any D-SNP-only contract created under this 
proposal. Our proposed crosswalk exception would apply only for 
movement between plans of the same product type (HMO, PPO, etc.) under 
the same parent organization for the following contract year when the 
new D-SNP is created under a new D-SNP-only contract based on a State 
requirement as described in proposed Sec.  422.107(e). It would allow 
transition to a D-SNP under a contract subject to proposed Sec.  
422.107(e) from a D-SNP that is non-renewing, has enrollees residing in 
the portion of the current service area impacted by the service area 
reduction, or has its eligible population newly restricted by a State 
contract. To add this new crosswalk exception, we propose redesignating 
the existing paragraph (c)(4) into new paragraphs (c)(4)(i) and (ii) in 
Sec.  422.530. Under this proposal, the processes used for other 
crosswalk exceptions (for example, the notice to CMS and CMS' review 
and approval of the crosswalk exception) would apply to this new 
crosswalk exception.
    We seek comment on this new proposed crosswalk exception and 
whether any additional beneficiary protections should apply.

[[Page 1872]]

b. Integrated Member Materials
    Communicating information to enrollees and potential enrollees is 
an important function of MA plans, Part D plans, and Medicaid managed 
care plans--and D-SNPs with exclusively aligned enrollment must comply 
with all of those rules.\91\ There are advantages for enrollees in D-
SNPs with exclusively aligned enrollment in receiving one set of 
communications that integrates all of the required content, as 
discussed in more detail later in this section, so we are proposing a 
mechanism and some parameters to facilitate a State's election to have 
D-SNPs with exclusively aligned enrollment use certain communications 
materials that integrate content about Medicare and Medicaid. Under 
this proposal, the applicable Medicaid managed care and MA requirements 
and standards would continue to apply to the integrated materials. As 
background, we discuss in this section some of the requirements for 
mandatory communications materials in the MA and Medicaid programs.
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    \91\ Because D-SNPs must offer Part D benefits, they are subject 
to both MA requirements in part 422 and Part D requirements in part 
423. See Sec. Sec.  422.2 (definition of specialized MA plans for 
special needs individuals) and 422.500.
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    CMS requires MA plans and Part D plans to furnish specific 
information to enrollees and potential enrollees, with some specific 
requirements outlined in Sec. Sec.  422.111 and 423.128 and additional 
requirements at Sec. Sec.  422.2261, 422.2267, 423.2261, and 423.2267. 
For information that CMS deems vital to Medicare beneficiaries, 
including information related to enrollment, benefits, health, and 
rights, CMS may develop and provide materials or content for MA 
organizations and Part D sponsors in either standardized or model form. 
Standardized materials are subject to requirements of the Paperwork 
Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.) and the Office of 
Management and Budget (OMB) collection of information approval process 
no less than every 3 years.\92\ While MA organizations and Part D 
sponsors must use standardized materials and content in the form and 
manner CMS provides, CMS model materials and content are examples of 
how to convey information to beneficiaries. MA organizations and Part D 
sponsors may use CMS's model materials or craft their own materials or 
content, provided the MA organization or Part D sponsor accurately 
conveys the vital information in the required material or content to 
the beneficiary and follows CMS's order of content, when specified. In 
Sec. Sec.  422.2267 and 423.2267, we refer to such materials and 
content collectively as required materials.
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    \92\ Refer to www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995 and www.govinfo.gov/content/pkg/FR-1995-08-29/pdf/95-21235.pdf.
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    CMS also includes similar, minimum Federal requirements in Sec.  
438.10 for Medicaid managed care plans (including MCOs) to furnish 
certain materials and information to enrollees and potential enrollees 
in a manner that is easily understood and readily accessible (OMB 
control number 0938-0920). However, CMS does not create standardized or 
model materials for use by Medicaid managed care plans. States may 
create such required materials and have primary responsibility for 
ensuring that Medicaid managed care plans comply with the minimum 
information requirements in Sec.  438.10 and any additional 
requirements imposed by the State. Among the materials that Medicaid 
managed care plans must distribute are enrollee handbooks, provider 
directories, and formularies.
    To allow MA organizations and Part D sponsors sufficient time to 
populate required materials with plan-specific information; submit them 
through the CMS Health Plan Management System (HPMS) for submission, or 
submission and approval, as applicable; translate them into any non-
English language that is the primary language of at least 5 percent of 
the individuals in the service area; and make them available to 
beneficiaries by the required dates indicated later in this section, 
CMS aims to issue required materials and instructions annually by the 
end of May for the following plan year.
    Among the required materials that MA organizations and Part D 
sponsors must provide to current and prospective members, and post to 
their websites by October 15 prior to the beginning of the plan year, 
are--
     Evidence of Coverage (EOC), which is a standardized 
communications material that tells members how to get plan-covered 
health care services and prescription drugs and explains member rights 
and responsibilities. To comply with Sec.  422.111(b)(2)(iii), CMS 
expects D-SNPs to modify language in the standardized EOC, as 
applicable, to address and include Medicaid benefits for which 
enrollees are eligible, and CMS permits D-SNPs to use further 
modifications to explain Medicaid benefits the D-SNP furnishes to its 
enrollees. Plans must send the EOC, or a notice informing enrollees how 
to access it electronically, to current enrollees by October 15 of each 
year and to new enrollees within 10 days of CMS's confirmation of 
enrollment or the last day of the month prior to the enrollment 
effective date (whichever is later). The EOC is similar to the model 
enrollee handbook that States are required to develop for Medicaid MCOs 
to send under Sec.  438.10(c)(4)(ii).
     Annual Notice of Changes (ANOC), which is a standardized 
marketing material that provides information to current members about 
changes for the upcoming contract year. It identifies any changes to 
the plan's health care services, prescription drugs, cost-sharing for 
MA benefits (including Part A and Part B benefits and supplemental 
benefits), and administrative items such as contract number or 
grievance and appeal procedures. D-SNPs may also modify language in the 
ANOC, as applicable, to address and include Medicaid changes. Plans 
must send the ANOC to current enrollees for receipt no later than 
September 30 of each year, except that enrollees with an October 1, 
November 1, or December 1 enrollment effective date must receive the 
ANOC within 10 calendar days from receipt of CMS confirmation of 
enrollment or by last day of month prior to effective date, whichever 
is later.
     Summary of Benefits (SB), which is a model marketing 
material that provides prospective members a description of health care 
services and prescription drugs the plan will cover in the upcoming 
contract year. It helps individuals determine which plans best meet 
their needs. D-SNPs must describe or identify their Medicaid benefits, 
and FIDE SNPs and HIDE SNPs may display integrated benefits where 
applicable. Plans are not required to send SBs to all prospective 
members but, in our experience, many do and make the SB available by 
October 15 of each year. CMS permits distribution of marketing 
materials as early as October 1 of each year.
     Formulary, which is a model communications material that 
includes the list of Medicare Part D drugs the plan covers when the 
drugs are medically necessary and filled at one of the plan's network 
pharmacies. The formulary also includes information about plan-covered 
over-the-counter (OTC) drugs and non-drug OTC products, any mail-order 
procedures, and utilization management procedures such as prior 
authorizations, step therapy, or quantity limits that the plan 
requires.\93\ Plans must send the Formulary, or a notice informing how 
to

[[Page 1873]]

access it electronically, for current enrollees, for receipt by October 
15 of each year, and to new enrollees within 10 days of CMS's 
confirmation of enrollment or the last day of the month prior to the 
enrollment effective date (whichever is later).
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    \93\ Refer to www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Part-D-Model-Materials.
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     Provider Directory, which is a model communications 
material that lists the number, types, and addresses for the plan's 
network providers and rules about access to providers, such as 
authorization and referral requirements. D-SNPs using this model may 
identify Medicare providers who also accept Medicaid.\94\ Plans must 
send the Provider Directory, or a notice informing how to access it 
electronically, for current enrollees, for receipt by October 15 of 
each year, and to new enrollees within 10 days of CMS's confirmation of 
enrollment or the last day of the month prior to the enrollment 
effective date (whichever is later).
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    \94\ Refer to www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/MarketngModelsStandardDocumentsandEducationalMaterial.
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     Pharmacy Directory, which is a model communications 
material that contains a list of the plan's network pharmacies and 
contact information, including all retail, mail-order, home infusion, 
and long-term care options.\95\ Plans must send the Pharmacy Directory, 
or a notice informing how to access it electronically, for current 
enrollees for receipt by October 15 of each year, and to new enrollees 
within 10 days of CMS's confirmation of enrollment or the last day of 
the month prior to the enrollment effective date (whichever is later).
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    \95\ Refer to https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/HPMS/HPMS-Memos-Archive-Annual.
---------------------------------------------------------------------------

    CMS encourages D-SNPs to add related Medicaid information in the 
EOC, ANOC, SB, and Provider Directory. Further integrating Medicare and 
Medicaid information in these required materials, as well as in the 
Formulary and Pharmacy Directory, can improve beneficiary experiences 
by providing a more seamless description of health care coverage and 
enhancing the understanding of and satisfaction with the coverage both 
programs provide.
    CMS conducts studies to improve the effectiveness of the model and 
standardized beneficiary materials and content that we provide to MA 
and Part D plans for their use in communicating with enrollees and 
potential enrollees. To test materials, we conduct individual 
interviews with dually eligible individuals and desk reviews by 
contractors, CMS subject matter experts, and advocacy organizations. 
Since 2015, we have tested an integrated EOC, ANOC, SB, Formulary, and 
combined Provider and Pharmacy Directory. For example, a 2017 study 
focused on beneficiary assessment of the Provider and Pharmacy 
Directory. Beneficiaries consistently described the CMS model directory 
as ``clear,'' ``simple,'' and ``easy to read.'' Beneficiaries also 
noted that the integrated version of the directory with the combined 
information on Medicare and Medicaid providers/pharmacies was 
comparatively better than separate Medicare and Medicaid directories 
they received from their current or previous insurance plans. We 
received similarly positive feedback from individuals with disabilities 
and from Spanish-speaking beneficiaries who tested a translated 
version.
    MMPs participating in the capitated financial alignment model and 
the Minnesota Senior Health Options (MSHO) plans in the Demonstration 
to Align Administrative Functions for Improvements in Beneficiary 
Experience use integrated versions of these required materials. In 
addition, since 2019, CMS has worked with Massachusetts, New Jersey, 
and the FIDE SNPs in each State to develop and annually update certain 
integrated materials that the States require and issue to these plans. 
For contract years 2020 and 2021, we provided high-level assistance to 
New York as the State developed select integrated materials that its 
Medicaid Advantage Plus (MAP) plans could use. We are also working with 
California for contract year 2023 to develop integrated materials for 
those D-SNPs with exclusively aligned enrollment receiving Cal 
MediConnect members at the end of the California capitated FAI 
demonstration in 2022.
    For the D-SNPs we have worked with, CMS typically begins 
development of integrated national templates and State-specific models 
with the SB; a Formulary that contains Medicare Part D, Medicaid, and 
OTC drugs as well as non-drug OTC products; and one combined Medicare 
and Medicaid Provider and Pharmacy Directory. Starting with these 
materials has several advantages. First, these materials integrate key 
Medicare and Medicaid information, which dually eligible individuals 
can use to make more knowledgeable decisions about their health care 
choices. Second, the SB, Formulary, and Provider and Pharmacy Directory 
are required materials but are not standardized and, therefore, are not 
subject to the PRA clearance process, which often takes nine months or 
more to complete. In contrast, D-SNPs must use standardized materials, 
as discussed earlier, without modification to the language, content, 
format, or order of information except in a few, specific instances per 
Sec.  422.2267. Third, the SB, Formulary, and Provider and Pharmacy 
Directory models are not lengthy or overly complex. They also offer 
opportunities for D-SNPs in different States with different Medicaid 
requirements to provide prospective and current dually eligible 
enrollees a more seamless presentation of essential information about 
their Medicare and Medicaid coverage. This can contribute to increased 
understanding of and satisfaction with the coverage both programs 
provide.
    To provide a more coordinated beneficiary experience, we propose at 
Sec.  422.107(e) to codify a pathway by which CMS would coordinate with 
a State that chooses to require, through its State Medicaid agency 
contract, that certain D-SNPs use an integrated SB, Formulary, and 
combined Provider and Pharmacy Directory (which would have to comply 
with Sec. Sec.  422.111, 422.2267(e)(11), 423.128, 423.2267(e), and 
438.10(h)). Proposed Sec.  422.107(e)(1) establishes factual 
circumstances that would commit CMS to certain actions under proposed 
paragraphs (e)(2) and (3). We anticipate that there would be 
operational and administrative steps at the CMS and State level that 
would be necessary before a D-SNP could implement integrated 
communications materials, such as collaboration and coordination by CMS 
and the State on potential template materials, identification of 
potential conflicts between regulatory requirements at 42 CFR parts 422 
and 423 and State law, and setting up a process for joint or 
coordinated review and oversight of the integrated materials. CMS 
annually reviews the contracts between States and D-SNPs that are 
required by Sec.  422.107(b) each July for the following plan year. 
There would generally be insufficient time for the necessary 
operational and administrative steps to implement integrated 
communications materials between the review of the contract and the 
dates by which communications materials must be provided to current 
enrollees and made available for prospective enrollees during the 
annual coordinated election period that begins October 15 each year. 
Therefore, proposed paragraph (e)(2) would require that CMS work in 
good faith with States upon receipt of a letter of intent regarding the 
State's inclusion of a requirement for a D-SNP with exclusively aligned 
enrollment to use

[[Page 1874]]

integrated materials and apply for a D-SNP-only contract. We intend 
that these efforts include the work to develop model integrated 
materials before the State Medicaid agency contract submissions are due 
for the contract year for which the D-SNP would use the integrated 
materials.
    We do not intend through this proposal to significantly change 
timelines for plans to prepare materials nor do we intend to require 
any State to mandate that D-SNPs use integrated materials. We intend 
for this proposal to assure interested States that CMS would do its 
part to make it possible for D-SNPs to comply with State Medicaid 
agency contract terms to use materials that integrate Medicare and 
Medicaid content, including at a minimum the Summary of Benefits, 
Formulary, and combined Provider and Pharmacy Directory if a State 
Medicaid Agency seeks to require D-SNPs with exclusively aligned 
enrollment to perform as described at Sec.  422.107(e).
    We are considering including the EOC and ANOC as part of the 
minimum scope of integrated materials identified in proposed Sec.  
422.107(e)(1)(ii). However, without yet navigating the PRA process for 
creating integrated versions of these materials, it may be better to 
re-assess integration of these materials at a later date. We welcome 
comments on this alternative and whether including these additional 
materials as part of the minimum scope of integration addressed in 
proposed Sec.  422.107(e)(1)(ii) would better further our goals or 
better suit the needs of States that may use the pathway we are 
proposing at Sec.  422.107(e) to achieve more integration for certain 
D-SNPs. Either way, our proposal would not preclude CMS and States from 
collaborating on other integrated materials, including an integrated 
EOC or ANOC. As proposed, Sec.  422.107(e) applies only when a State 
requires D-SNPs with exclusively aligned enrollment to use the minimum 
scope of integrated materials specified in paragraph (e)(1)(ii) and to 
seek CMS approval of D-SNP-only contracts. While we have proposed 
minimum parameters, a State that wishes to require D-SNPs with 
exclusively aligned enrollment to do more (for example, use additional 
integrated materials) may do so under this proposal. Further, we do not 
intend to prohibit or foreclose the possibility that CMS will work with 
States on other potential integration efforts that are not within the 
scope of Sec.  422.107(e)(1).
c. Joint State/CMS Oversight
    MA organizations receiving capitated payments through MA and from 
the State Medicaid agency must comply with different sets of Medicare 
and Medicaid requirements, including requirements imposed at the State 
level that are not identical to Federal minimum standards for Medicaid 
managed care plans in part 438. CMS and States have built separate 
infrastructure to monitor compliance with each set of requirements. 
This has three drawbacks related to integrated care approaches for 
dually eligible individuals. First, State regulators may be unaware of 
important compliance or performance problems related to the delivery of 
Medicare services or imposed on D-SNPs (or MA plans generally), and CMS 
may be unaware of important compliance or performance problems related 
to the delivery of Medicaid services, even when both parties are 
monitoring the same organization's coverage of services to the same 
people. Second, State and CMS officials may pursue different 
performance improvement priorities applicable to the plan(s) that cover 
dually eligible individuals, even when the plan(s) are under the same 
parent organization and serving the same enrollees. Third, 
uncoordinated oversight by CMS and the States can create inefficiencies 
for health plans where regulators seek duplicative information or 
initiate Medicare and Medicaid audits at the same time. We propose to 
address these drawbacks by giving States the opportunity to collaborate 
with CMS on oversight activities for the specific D-SNPs that operate 
under the conditions described at proposed paragraph (e)(1).
(1) State Access to the Health Plan Management System
    We propose in paragraph (e)(3)(i) a mechanism to address access by 
States to the CMS Health Plan Management System (HPMS) (or a successor 
system) to better coordinate State and CMS monitoring and oversight of 
D-SNPs that operate under the conditions described at proposed 
paragraph (e)(1). HPMS is web-enabled information system where health 
and drug plans, plan consultants, third party vendors, and 
pharmaceutical manufacturers work with CMS to fulfill the plan 
enrollment, operational, and compliance requirements of the MA and 
Prescription Drug programs. Our experience granting State access to 
HPMS through the FAI and a related demonstration in Minnesota suggest 
that HPMS access is a useful tool and that State access is without 
known problematic unintended consequences. Therefore, we propose that 
CMS would grant State access to HPMS, or any successor system, to 
facilitate monitoring and oversight for D-SNPs operating under the 
specific contract terms required by the State that are described in 
proposed paragraph (e)(1).
    Under our proposal, approved State Medicaid officials would be able 
to use HPMS to conduct a number of information sharing and oversight 
activities for these D-SNPs including, but not limited to, reviewing 
marketing materials, and viewing models of care, member complaints, 
plan benefits, formulary, network, and other basic contract management 
information. This access would allow State users the ability to 
directly view D-SNP information without requiring or asking the D-SNP 
to send the information to the States and would facilitate State-CMS 
communication on D-SNP performance because the State users would be 
able to review the same data and information available to CMS. MA 
organizations offering D-SNPs with exclusively aligned enrollment may 
benefit when it reduces the need for States to separately obtain the 
same information that is already available in HPMS.
    State access would be limited to approved users and subject to 
compliance with HHS and CMS policies and standards and with applicable 
laws in the use of HPMS data and the system's functionality. Based on 
the current architecture of HPMS, approved State officials would only 
have access specific to information related to the MA contract(s) 
described in proposed paragraph (e)(1)(i). This proposal would not 
limit CMS's discretion to make HPMS accessible in other circumstances 
not described in our proposal but would authorize State access, which 
would include access to information about the MA organization and the 
applicable D-SNP(s) and D-SNP-only contract, and information submitted 
by the MA organization through HPMS, under the specific circumstances 
described in the proposed regulation. We seek feedback on our proposal, 
including feedback from MA organizations about CMS providing approved 
State officials with access to HPMS as a means to share information as 
it relates to the provisions of this proposed rule.
(2) State-CMS Coordination on Program Audits
    Proposed paragraph (e)(3)(ii) establishes that CMS would coordinate 
with State Medicaid officials on program audits. This coordination

[[Page 1875]]

would include sharing major audit findings for State awareness related 
to D-SNPs subject to proposed paragraph (e)(1).
    CMS conducts audits of MA plans periodically to assess compliance 
with Federal requirements, including D-SNP-specific care coordination 
requirements. We believe that there are benefits for CMS, the State, 
and the MA organization to increasing coordination in connection with 
such audits. For example, providing State officials the opportunity to 
join the entrance and exit conference, as we have in the FAI and 
related demonstrations, has afforded greater transparency for State 
Medicaid officials into the Medicare-focused auditing process. 
Similarly, we would offer to work with States to attempt to avoid 
scheduling simultaneous State and Federal audits. For example, if State 
officials share a schedule of their planned Medicaid audits for MA 
organizations with contracts subject to proposed paragraph (e)(1) 
before CMS finalizes its audit schedule in October preceding the audit 
year, CMS may be able to adjust its program audit schedule to avoid 
overlapping audits. If a State official shares a schedule of planned 
audits with CMS after October, CMS could alternatively alert the State 
Medicaid agency if any of the State's planned audits are scheduled to 
overlap with a CMS program audit. This process would reduce the risk of 
concurrent Medicare and Medicaid program audits, thereby reducing the 
risk that an MA organization is insufficiently responsive to auditors 
or its performance slips because it is managing concurrent audits. We 
currently have the ability to coordinate with State Medicaid agencies 
on audits, but we are proposing to codify how CMS would commit to 
coordination in situations where Sec.  422.107(e) applies. This would 
help in setting expectations for and provide clarity to stakeholders, 
especially State Medicaid agencies. While these activities are provided 
as examples, we do not intend to limit our discretion to coordinate 
with States in the audit process outside of the parameters in proposed 
Sec.  422.107(e)(3)(ii); we would evaluate the extent of coordination 
in each circumstance relevant to the D-SNP-only contract established as 
a result of the State's contract requirements described in paragraph 
(e)(1).
(3) State Input on Provider Network Exceptions
    As part of implementing the proposed policy to coordinate on 
program audits and providing access to HPMS, CMS expects to use 
existing authority and flexibility as it pertains to the review of 
medical provider networks, particularly the review of network 
exceptions, to solicit and receive input from State Medicaid agencies. 
CMS requires all MA organizations to maintain a network of appropriate 
providers that is sufficient to provide adequate access to covered 
services. Currently, MA organizations submit their provider networks to 
CMS for review at the overall contract level on a triennial basis or 
when there is a triggering event such as an application or a 
significant provider/facility termination.\96\ As indicated in the 
Medicare Advantage and Section 1876 Cost Plan Network Adequacy 
Guidance,\97\ MA organizations are required to demonstrate network 
adequacy by submitting data for specific contracted provider and 
facility specialty types via the Network Management Module (NMM) of 
HPMS. To the extent an MA organization offers one or more D-SNPs, State 
Medicaid officials may be uniquely positioned to provide relevant 
information to CMS during our adjudication of certain network adequacy 
decisions, specifically when an MA organization seeks an exception to 
our network adequacy standards in Sec.  422.116. We are not proposing 
to adopt specific regulation text in Sec.  422.107(e)(3) regarding 
potential collaboration with State Medicaid agencies in connection with 
adjudicating requests for an exception to network adequacy requirements 
for D-SNPs that operate under the conditions described at proposed 
paragraph (e)(1) because a regulatory amendment is not necessary to 
support this process; however, our proposal here outlines how we expect 
this type of collaboration to work.
---------------------------------------------------------------------------

    \96\ Medicare Advantage and Section 1876 Cost Plan Network 
Adequacy Guidance (Last updated: June 17, 2020). Retrieved at 
Medicare Advantage and Section 1876 Cost Plan Network Adequacy 
Guidance (cms.gov).
    \97\ https://www.cms.gov/files/document/medicareadvantageandsection1876costplannetworkadequacyguidance6-17-2020.pdf.
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    When an MA plan fails to meet the specific network adequacy 
standards in Sec.  422.116(b) through (e), the MA plan may request an 
exception to these network adequacy criteria. Exceptions are limited to 
specific situations and conditions identified in Sec.  422.116(f)(1) 
and, in considering whether to grant an exception, CMS considers 
whether current access to providers and facilities is different from 
the data CMS uses to evaluate network adequacy; whether there are 
factors present, as identified in Sec.  422.112(a)(10), that 
demonstrate that network access is consistent with or better than the 
original Medicare pattern of care; and whether approval of the 
exception is in the best interests of beneficiaries. State Medicaid 
agencies may have information and insight about such other factors that 
might be relevant in setting a standard for an acceptable health care 
delivery network in a particular service area. For example, State 
Medicaid agencies could provide information about the number and scope 
of providers enrolled and screened by the State Medicaid agency, local 
practice patterns, geographic barriers, or transportation dynamics.
    In this proposed rule, CMS is proposing to amend Sec.  
422.116(a)(1)(ii) to require compliance with network adequacy standards 
as part of an application for a new or expanding MA service area (see 
section II.C. of this proposed rule). In addition, CMS intends to reach 
out to States when a MA organization with a D-SNP contract described in 
Sec.  422.107(e)(1) submits an exception request that does not meet the 
requirements at Sec.  422.116(f)(1). In those instances, CMS may 
collaborate with the respective State to identify if there are other 
factors, as described at Sec.  422.112(a)(10), that may be relevant 
before making a determination on the exception request. We piloted a 
similar approach in the Financial Alignment Initiative and a related 
demonstration in Minnesota where States provided input to inform the 
exception review process.
    Collectively, our proposed paragraph (e)(3) at Sec.  422.107 would 
improve Federal and State oversight of certain D-SNPs (and their 
affiliated Medicaid managed care plans) through greater information-
sharing among government regulators. We have successfully tested these 
approaches in other circumstances and believe applying them under the 
conditions described in proposed paragraph (e)(1) would provide greater 
transparency to the regulated industry while assuring States that CMS 
will be a willing partner. We welcome comments on our proposals.
d. Comment Solicitation on Financing Issues
    In Medicare and Medicaid, benefits funded by one payer (for 
example, behavioral health treatment funded by Medicaid) may generate 
savings for the other payer (for example, reduced emergency room and 
inpatient admissions funded by Medicare). For dually eligible 
beneficiaries, each payer has an incentive to provide benefits and 
focus spending in a manner that promotes its own cost saving, which may 
not be consistent with meeting beneficiaries' overall needs. In the 
Financial Alignment Initiative, we tried

[[Page 1876]]

to solve for this financial misalignment through integrated financial 
approaches, including blending Medicare and Medicaid capitation 
payments \98\ and evaluating integrated Medicare-Medicaid medical loss 
ratios (MLRs).\99\ Based on this experience, we are assessing whether 
there are ways to take two elements of MMP financial methodology and 
apply to D-SNPs: (1) Integrated MLRs; and (2) consideration of the 
expected impact of benefits provided by MA organizations on Medicaid 
cost and utilization in the evaluation of Medicaid managed care 
capitation rates for actuarial soundness. We describe each in this 
section.
---------------------------------------------------------------------------

    \98\ For more information on the ratesetting methodology for the 
FAI capitated model, see Joint Rate-Setting Process for the 
Financial Alignment Initiative's Capitated Model, available at: 
https://www.cms.gov/files/document/capitatedmodelratesettingprocess03192019.pdf.
    \99\ Unless waived by CMS, MMPs are required to comply with 
Medicaid managed care requirements under 42 CFR part 438 and with MA 
requirements in Part C and Part D of Title XVIII of the Act and 42 
CFR parts 422 and 423. While (unlike MA plans) MMPs do not submit 
bids, the existing payment policies for each program generally apply 
to MMPs, including requirements related to actuarial soundness of 
Medicaid capitation rates and the MLR reporting required in both the 
Medicare and Medicaid programs.
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    MA organizations, including those offering FIDE SNPs and other 
integrated plans with both MA and Medicaid managed care plan contracts, 
separately report medical loss ratio (MLR) results for their Medicare 
experience (per subpart X of part 422) and, where applicable, their 
Medicaid experience (per Sec.  438.8). MA organizations submit MLR 
reports in a timeframe and manner specified by CMS. As required by 
section 1857(e) of the Act, CMS collects remittances for MLRs below a 
minimum threshold of 85 percent; additionally, enrollment sanctions 
apply for MA contracts that fail to meet minimum MLR thresholds for 
three consecutive years, while contracts are terminated for those MA 
organizations that fail to meet these thresholds for 5 consecutive 
years. Medicaid managed care plans calculate and report their MLR 
experience for each contract year (per Sec.  438.8), with actuarially 
sound rates set to achieve an MLR of at least 85 percent (per Sec.  
438.4(b)(9)). Additional Medicaid MLR requirements vary at States' 
discretion, including the option to impose remittance requirements.
    While the MA and Medicaid managed care MLR requirements are 
similar, they are not identical. Areas of difference include treatment 
of fraud reduction expenses, credibility adjustments, the level of 
detail reported, and use of MLR results in ratesetting. While these 
differences serve program purposes in the separate Medicare Advantage 
and Medicaid managed care programs, they can make it challenging to 
compare MLRs across programs and to evaluate the performance of a plan 
that integrates Medicare and Medicaid benefits. For example, an 
integrated plan may show a low MLR for Medicare Advantage and a high 
MLR for Medicaid managed care if it successfully delivers more 
community behavioral health treatment that results in fewer emergency 
room visits and hospitalizations. In this example, however, even if the 
aggregate payment amount across Medicare and Medicaid generally matches 
the combined cost of furnishing covered benefits to enrollees, both 
Medicare and Medicaid would potentially make adjustments. For example, 
if the Medicare MLR was below 85 percent, CMS would recoup funds from 
the plan. If the Medicaid MLR exceeds a reasonable maximum threshold 
that would account for reasonable administrative costs, the State would 
evaluate that when setting future capitation rates, the result of which 
may be to increase the Medicaid capitation rates in subsequent years. 
Further, as MA plans report MLR results at the contract level (not the 
plan level), MLR data specific to a particular FIDE SNP is not 
necessarily available. In contrast, MMPs report a combined Medicare and 
Medicaid MLR to CMS and States, with such reporting building off MA 
requirements, meeting Medicaid requirements, and offering a more 
complete picture of these integrated plans' performance.\100\
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    \100\ In the FAI capitated model, CMS waived section 1857(e) of 
the Act, which requires MA MLR remittances, insofar as such 
provisions were inconsistent with the methodology for determining 
MLRs for the demonstration. For more information, see the signed 
memoranda of understanding for capitated model demonstrations 
available at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/ApprovedDemonstrationsSignedMOUs. The MLR approach varies across 
capitated model demonstrations, with most demonstrations requiring 
remittances for MLRs below thresholds of 85 to 87 percent, while the 
remaining demonstrations include other risk mitigation approaches, 
such as risk corridors, that provide the opportunity for recoupment 
of MMPs' gains above specified thresholds. More information on such 
arrangements may be found in the MMP three-way contracts available 
at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/CapitatedModel.
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    In the rulemaking to implement the statutory requirement for an MLR 
for MA plans, CMS received comments requesting we allow the MLR for D-
SNPs and FIDE SNPs to include Medicare and Medicaid costs and revenue, 
to better evaluate such plans' performance and spending. \101\ While we 
do not believe we have the statutory authority to include Medicaid 
experience as part of the Medicare MLR requirement, States may require 
additional data to be reported, including combined Medicare-Medicaid 
MLRs, in addition to the MLR reporting required by Sec.  438.8. Such 
reporting would be in addition to, and not a substitute for, the 
required MA MLR under Sec. Sec.  422.2400 through 422.2490 and Medicaid 
managed care MLR under Sec.  438.8.
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    \101\ Summaries of the comments and CMS's responses may be found 
in the 2013 Medicare Program; Medical Loss Ratio Requirements for 
the Medicare Advantage and the Medicare Prescription Drug Benefit 
Programs final rule (78 FR 31283).
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    As described in section II.A.6.a., we propose at Sec.  422.107(e) 
to make an option available through which States could require D-SNPs 
with exclusively aligned enrollment to operate under MA contracts that 
only include one or more D-SNPs that operate in that State. While such 
D-SNPs would still have to calculate and report separate Medicare and 
Medicaid MLRs under the applicable program requirements (absent a 
waiver), having a separate contract for certain D-SNPs would better 
equip States to evaluate MLRs and financial performance specific to 
that D-SNP product. Combining MA MLR information with corresponding 
Medicaid MLR data could potentially provide a more complete picture of 
plan financial performance in an integrated environment, as compared to 
what may be available currently.
    We are seeking feedback on the extent to which this approach would 
better allow States to evaluate the performance of integrated plans. We 
are also interested in feedback from stakeholders--including States, 
health plans, actuaries, and advocates--on the impact of separate 
Medicare and Medicaid MLR requirements on meeting integration goals, 
administrative burden for plans and others through separate MLR 
standards, and whether the current approach provides sufficient data 
for State decision making and policy development.
    Integrated plans serving dually eligible beneficiaries receive 
Medicaid capitation payments from States for coverage of Medicaid-
covered services. These Medicaid managed care capitation rates are 
subject to actuarial soundness requirements under Sec.  438.4. Several 
States limit enrollment in D-SNPs to achieve exclusively aligned 
enrollment in which all D-SNP enrollees are also in an affiliated 
Medicaid managed care plan, for which these 42 CFR part 438 actuarial 
soundness requirements apply.

[[Page 1877]]

    In the FAI capitated model, CMS developed an approach to Medicaid 
actuarial soundness within the model to take into account the effects 
of Medicare payment for Medicare covered benefits, for which Medicaid 
is a secondary payer, as well as the opportunities for efficiencies in 
an integrated program, when developing the Medicaid capitation rates 
paid in the FAI model.\102\ Since we developed this approach, CMS has 
expanded options for MA plans to offer a broader array of supplemental 
benefits than available 10 years ago.\103\ This change also expands the 
potential that MA supplemental benefits have an impact on lowering 
Medicaid costs because the MA supplemental benefit must be used first 
to pay for any items and services that are covered by both the MA plan 
and Medicaid. In some cases, MA plans may offer the types of community 
supports or LTSS that previously were only available through Medicaid. 
As a result, the MA supplemental benefit may replace or be used before 
using the Medicaid benefit, which would lower utilization and overall 
costs to cover Medicaid benefits when an integrated plan covers both 
Medicare and Medicaid services for the same enrollees.
---------------------------------------------------------------------------

    \102\ As described in the signed memoranda of understanding for 
capitated model demonstrations available at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/ApprovedDemonstrationsSignedMOUs, ``Assessment of actuarial 
soundness under 42 CFR 438.6, in the context of this Demonstration, 
should consider both Medicare and Medicaid contributions and the 
opportunities for efficiencies unique to an integrated care program. 
CMS considers the Medicaid actuarial soundness requirements to be 
flexible enough to consider efficiencies and savings that may be 
associated with Medicare. Therefore, CMS does not believe that a 
waiver of Medicaid actuarial soundness principles is necessary in 
the context of this Demonstration.''
    \103\ The BBA of 2018 (Pub. L. 115-123) amended section 1852(a) 
of the Act to expand the types of supplemental benefits that may be 
offered by MA plans to chronically ill enrollees as of plan year 
2020, to specifically allow those ``supplemental benefits that, with 
respect to a chronically ill enrollee, have a reasonable expectation 
of improving or maintaining the health or overall function of the 
chronically ill enrollee and may not be limited to being primarily 
health related benefits.'' In addition, the ``Medicare Program; 
Contract Year 2021 Policy and Technical Changes to the Medicare 
Advantage Program, Medicare Prescription Drug Benefit Program, and 
Medicare Cost Plan Program'' which appeared in the Federal Register 
on June 2, 2020 (June 2020 final rule) finalized provisions to allow 
for plans to target other chronic conditions included in the 
Medicare Managed Care Manual. In the January 2021 final rule, CMS 
codified existing policy on supplemental benefits, including the 
criteria for a supplemental benefit, the expanded definition of 
``primarily health related,'' and the reinterpreted uniformity 
requirements.
---------------------------------------------------------------------------

    With this context and our FAI model experience, we believe that 
Medicaid managed care capitation rates can be actuarially sound as 
required by Sec.  438.4 when those rates are developed in a way that 
considers the impact of MA supplemental benefits and any State-specific 
requirements in the State Medicaid agency contract, D-SNP MOC, or MMP 
contract on the costs and utilization of the Medicaid benefits covered 
by the Medicaid managed care capitation rates. MA supplemental benefits 
and State-specific D-SNP requirements may impact Medicaid-related costs 
and utilization, and Medicaid rate setting could consider the impact on 
both: (1) Replacing costs that would otherwise be a Medicaid 
responsibility, as a primary impact; and (2) affecting expenditures on 
other Medicaid benefits, as a secondary impact. For example, intensive 
care coordination, covered by MA plans through supplemental benefits or 
as administrative expenses, could reasonably be expected to impact 
Medicaid costs by (a) reducing Medicaid care coordination costs 
directly; and (b) indirectly reducing Medicaid expenditures through 
lower Medicare cost-sharing as a result of preventing avoidable 
hospitalizations. We seek feedback on this interpretation, including 
from States, health plans, and actuaries, on the extent to which 
consideration of the impact of Medicare-covered benefits on costs and 
utilization of Medicaid services as described here advances integration 
goals and is consistent with actuarial standards of practice. We also 
request input on what information States, actuaries, and others would 
need to evaluate actuarial soundness under this approach. Finally, we 
solicit feedback on other options related to financing for integrated 
plans CMS should evaluate and consider for future rulemaking or sub-
regulatory clarification.
7. Definition of Applicable Integrated Plan Subject to Unified Appeals 
and Grievances Procedures (Sec.  422.561)
    In Sec.  422.561, we propose to expand the universe of D-SNPs that 
are required to have unified grievance and appeals processes by 
revising the definition of an applicable integrated plan. The April 
2019 final rule introduced the concept of applicable integrated plans, 
which we defined as FIDE SNPs and HIDE SNPs whose Medicare and Medicaid 
enrollment is exclusively aligned (meaning State policy limits a D-
SNP's enrollment to those whose Medicare and Medicaid enrollment is 
aligned as defined in Sec.  422.2) and the companion Medicaid MCOs for 
those D-SNPs, thereby making it feasible for these plans to implement 
unified grievance and appeals processes. We limited the universe of 
potential applicable integrated plans to FIDE SNPs and HIDE SNPs with 
exclusively aligned enrollment to ensure, first, that all enrollees are 
covered with the same scope of benefits and, second, that the plans 
implementing unified grievances and appeals offered a sufficiently 
substantial range of Medicaid benefits to make the unification of 
Medicare and Medicaid processes meaningful for beneficiaries and 
worthwhile for States and plans.
    Because the landscape of integrated plans has evolved in the past 
several years, we believe there are integrated D-SNPs other than FIDE 
SNPs and HIDE SNPs for which a unified grievance and appeals process is 
feasible and, therefore, we should require the unified process. 
Expanding the process to these plans would simplify the grievance and 
appeals steps for beneficiaries enrolled in these plans for their 
Medicare and Medicaid benefits and extend the protection of 
continuation of benefits pending appeal as described in Sec.  422.632 
to additional beneficiaries. Section 50311(b) of the BBA of 2018 
amended section 1859(f)(8)(B) of the Act to direct establishment of 
procedures, to the extent feasible, unifying Medicare and Medicaid 
grievances and appeals. We believe that unified grievance and appeals 
procedures are feasible for the additional D-SNPs. Accordingly, we 
propose, effective January 1, 2023, to expand the definition of the 
term applicable integrated plan to include an additional type of D-SNP 
subject to the rule.
    We propose to include as applicable integrated plans certain 
combinations of Medicaid managed care plans and D-SNPs that are not 
FIDE SNPs or HIDE SNPs but meet three other conditions. First, State 
policy must limit the D-SNP's enrollment to beneficiaries enrolled in 
an affiliated Medicaid managed care plan that provides the 
beneficiary's Medicaid managed care benefits. Second, each enrollee's 
Medicaid managed care benefits must be covered under a capitated 
contract between (1) the MA organization, the MA organization's parent 
organization, or another entity that is owned and controlled by its 
parent organization and (2) a Medicaid MCO or the State Medicaid 
agency. Under our proposal, the definition of ``applicable integrated 
plan'' will include (1) a D-SNP that has, by State policy, fully 
aligned enrollment with an affiliated Medicaid plan owned by the same 
parent organization, where

[[Page 1878]]

the affiliated Medicaid plan has a capitated contract with a Medicaid 
MCO to provide all of the beneficiary's Medicaid managed care benefits 
(2) and its affiliated Medicaid plan. Third, the Medicaid coverage 
under the capitated contract must include primary care and acute care, 
including Medicare cost-sharing as defined in section 1905(p)(3)(B), 
(C) and (D) of the Act, without regard to the limitation of that 
definition to qualified Medicare beneficiaries, and must include at 
least one of the following: Medicaid home health services, Medicaid 
durable medical equipment, or Medicaid nursing facility services.
    Where each of these conditions is met, enrollees receive all of 
their Medicare and Medicaid benefits that are available through managed 
care in the State through a D-SNP and affiliated Medicaid managed care 
plan. We believe such plans integrate a sufficiently broad range of 
Medicaid benefits so as to make unifying their grievance and appeals 
processes worthwhile. Our proposal would not change grievance and 
appeals processes for any Medicaid services not covered by the Medicaid 
managed care plan that is affiliated with the D-SNP where the three 
conditions are met. We anticipate our proposal would newly require 
unified appeals and grievances processes in a number of plans in 
California following the end of the California capitated financial 
alignment model demonstration.
    We propose to reorganize the definition of applicable integrated 
plan in Sec.  422.561 by adding new subsections to the definition in 
Sec.  422.561 to show separate definitions before and after January 1, 
2023. The proposed definition after January 1, 2023, expands the 
universe of applicable integrated plans to include a D-SNP and 
affiliated Medicaid managed care plan that meets these three criteria. 
Under the proposed revisions to Sec.  422.561, current paragraphs (1) 
and (2) will become paragraphs (2)(i)(A) and (B) and apply before 
January 1, 2023. Proposed new paragraph (2) of the definition will 
apply beginning January 1, 2023, and will include paragraphs (2)(i) and 
(ii). Proposed new paragraphs (2)(i)(A) and (B) include the current 
definition, and proposed new paragraph (2)(ii) includes the new 
category of D-SNPs and affiliated Medicaid managed care plans that 
would qualify as an applicable integrated plan. New proposed paragraph 
(2)(ii)(A) addresses enrollment requirements for the D-SNP, and new 
proposed paragraph (2)(ii)(B) addresses what types of contracting must 
be in place, and new proposed paragraph (2)(ii)(C) the minimum Medicaid 
benefits that must be covered by the capitated contract with the State 
Medicaid agency or contract with Medicaid MCO. Under our proposal, the 
definition of ``applicable integrated plan'' remains unchanged from the 
current definition for the period before January 1, 2023, and would 
include additional types of D-SNPs and affiliated Medicaid plans on and 
after January 1, 2023.
8. Permitting MA Organizations With Section 1876 Cost Contract Plans To 
Offer Dual Eligible Special Needs Plans (D-SNPs) in the Same Service 
Area (Sec.  422.503(b)(5))
    Section 1876(h) of the Act established reasonable cost 
reimbursement contracts or ``cost contracts,'' as defined at Sec.  
417.401 as Medicare contracts under which CMS pays the health 
maintenance organization (HMO) or competitive medical plan (CMP) on a 
reasonable cost basis. Cost contracts arrange for Medicare services and 
provide members several flexibilities not offered to MA plan members, 
such as the ability to enroll in a plan that offers only Part B 
benefits and to receive health care services outside of the cost 
contract plan's network of providers through original Medicare. As of 
January 2021, approximately 173,250 beneficiaries were enrolled in 
seven cost contracts offered in nine States.\104\
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    \104\ Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Contract-and-Enrollment-Summary-Report.html.
---------------------------------------------------------------------------

    Federal statute and regulation restrict cost contracts in several 
ways. First, as provided in section 1876(h)(5)(A) of the Act and Sec.  
417.402(b), CMS no longer enters into cost contracts. Second, CMS 
established a requirement, originally at Sec.  422.501(b)(4), that an 
entity seeking to contract as an MA organization must not accept new 
members under a cost contract plan in any area in which it seeks to 
offer an MA plan when implementing the original Part C requirements in 
the interim final rule titled ``Medicare Program; Establishment of the 
Medicare+Choice Program'' (HCFA-1030-IFC) (63 FR 35014 through 35015; 
35100) (hereinafter referred to as the June 1998 final rule). CMS later 
moved this requirement to Sec.  422.503(b)(5). The June 1998 final rule 
stated that CMS established this prohibition to eliminate the potential 
for an organization to encourage higher cost members to enroll under 
its cost contract plan while healthy members were enrolled in its risk-
based MA plan. Manipulating enrollment in this way would shift costs to 
the government away from the entity.
    Third, MIPPA and the Medicare Access and CHIP Reauthorization Act 
of 2015 (Pub. L. 114-10) (hereinafter referred to as MACRA) amended 
section 1876(h)(5)(C) of the Act by specifying that cost contract plans 
operating in service areas or portions of service areas with two MA 
plans meeting minimum enrollment requirements would be non-renewed. 
Implementing regulations are codified at Sec.  417.402(c) and went into 
effect at the end of CY 2018, leading to a significant decrease in cost 
contract enrollment.\105\
---------------------------------------------------------------------------

    \105\ Ibid.
---------------------------------------------------------------------------

    The prohibition on an entity accepting new enrollees in a cost 
contract plan while offering an MA plan in the same service area was 
amended in ``Medicare Program; Contract Year 2015 Policy and Technical 
Changes to the Medicare Advantage and the Medicare Prescription Drug 
Benefit Programs'' (CMS-4159-F) (hereinafter referred to as the May 
2014 final rule) to apply to: (1) A parent organization owning a 
controlling interest in a separate legal entity accepting new members 
under a cost contract plan, and (2) another separate legal entity owned 
by the same parent organization as the legal entity accepting new 
members under a cost contract plan (79 FR 29850; 29959). An error in 
the amendment in the May 2014 final rule prevented this change from 
being correctly codified in the CFR. This error was corrected in the 
January 2021 final rule (86 FR 6099).
    As stated in the May 2014 final rule, CMS did not exempt entities 
with both cost contract plans and D-SNPs from the regulatory provision 
at Sec.  422.503(b)(5) because we did not believe that the Medicare 
premium and cost-sharing differences in cost contract plans and MA 
plans, including D-SNPs, necessarily reduced the incentives an 
organization may have for moving an individual from one of its plans to 
another. We also stated that D-SNPs, which frequently serve members 
with greater frailty and morbidity than the general Medicare 
population, may have an even greater incentive to move members to a 
cost contract plan.
    Since CMS finalized the policy in the 2014 final rule, we have 
gained more experience relevant to this D-SNP policy decision through 
the Demonstration to Align Administrative Functions for Improvements in 
Beneficiary Experience conducted in partnership with the State of 
Minnesota.\106\ Three of the seven MA

[[Page 1879]]

organizations offering Minnesota D-SNPs participating in the 
demonstration--comprising almost 60 percent of the demonstration 
enrollment--also sponsored cost contract plans in overlapping counties. 
To prevent disruption to the demonstration, we waived Sec.  
422.503(b)(5) for these entities, using our authority under section 
1115A of the Act. This waiver avoided the risk that these entities 
would, instead of closing the cost contract plans to new enrollment 
where the service areas overlapped with D-SNPs, non-renew their D-SNPs 
during the demonstration, which would undermine our ability to carry 
out successfully the model test. In addition, non-renewal of these D-
SNPs could potentially have led to large-scale disenrollment from 
Minnesota Senior Health Options, a D-SNP and Medicaid MCO program with 
evidence of strongly favorable outcomes for dually eligible older 
adults.\107\
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    \106\ See https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Minnesota.html.
    \107\ 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.
---------------------------------------------------------------------------

    Although the waiver and model were not designed to test this 
specific issue, the waiver of Sec.  422.503(b)(5) provided an 
opportunity to test whether creating an exception for D-SNPs would 
result in substantial shifts of D-SNP members to cost contract plans 
offered under the same parent organization. The Minnesota 
demonstration, which is focused on alignment of administrative 
procedures, did not change the incentives for shifting of members that 
was the rationale for Sec.  422.503(b)(5). In the demonstration, we 
required that each of the affected D-SNPs report annually the number of 
D-SNP members who switched to the entity's cost contract plan. If two 
percent or more of a D-SNP's enrollment switched to the cost contract 
plan, CMS would further investigate enrollment patterns, potentially 
require corrective actions, and rescind the waiver.
    The results of this reporting have been instructive. In no year 
since the waiver was established has the number of D-SNP members 
switching to the affiliated cost contract plan approached the 2 percent 
threshold. The two remaining D-SNPs with cost contract plans under the 
same parent organization \108\ which had a combined December 2020 D-SNP 
enrollment of 19,168, reported a total of 10 members switched to the 
affiliated cost contract plans during the 2020 plan year. The 
enrollment patterns for prior reporting periods are similar: only a 
small number of individuals switched from a D-SNP to a cost contract 
plan affiliated with the same entity.
---------------------------------------------------------------------------

    \108\ One of the three entities offer a D-SNP and cost contract 
plan ceased offering a cost contract plan in the same market as its 
D-SNP in January 2019.
---------------------------------------------------------------------------

    In addition to this reporting, we reviewed current enrollment data 
on all cost contract plans to see if the two parent organizations 
offering both a cost contract plan and a D-SNP in the demonstration 
have a higher enrollment of dually eligible individuals than in the 
cost contract plans without such affiliated D-SNPs. The average 
enrollment of dually eligible individuals across all cost contracts in 
December 2020 was 3.6 percent, and ranged from 1.62 percent to 12.2 
percent. In comparison, about 20 percent of Medicare Advantage 
enrollees are dually eligible individuals.\109\ The two cost contracts 
operating in Minnesota that had affiliated D-SNPs were consistently on 
the low end of that range, with average enrollments of dually eligible 
individuals of 1.6 percent and 3.5 percent respectively. These averages 
suggest that the availability of a D-SNP that shares a parent 
organization with a cost contract plan may decrease such likelihood of 
dually eligible individuals enrolling in a cost contract plan.
---------------------------------------------------------------------------

    \109\ CMS, ``Data Analysis Brief: Managed Care Enrollment Trends 
among Dually Eligible and Medicare-only Beneficiaries, 2006 through 
2019''. March 2021. Retrieved from https://www.cms.gov/files/document/managedcareenrollmenttrendsdatabrief.pdf.
---------------------------------------------------------------------------

    The data from the Minnesota demonstration shows allowing both a D-
SNP and a cost contract plan under the same parent organization has not 
resulted in a substantial number of members moving from the D-SNP to 
the cost contract plan. We believe that the number of such plan 
switches is likely minimal for the reasons outlined by the commenters 
in the May 2014 final rule: the premiums charged by cost plans are 
unattractive to low-income dually eligible individuals who have access 
to a D-SNP that charges no premium.
    We also note that the cost contract plans outside of the 
demonstration that had more than 5 percent dually eligible enrollment 
included cost contract plan options with zero-dollar premiums. This 
indicates that the typical cost contract plan premium functions as a 
deterrent to enrollment by full-benefit dually eligible individuals.
    Based on this evidence, we believe that allowing a parent 
organization to accept new enrollees in a cost contract plan it offers 
in the same service area as the entity offers a D-SNP or seeks to offer 
a new D-SNP will not undermine the policy goals that underlie Sec.  
422.503(b)(5)--that is, prohibiting entities from steering high-cost 
members to their cost contract plans and lower cost members to their 
risk-bearing MA plans. In addition, creating an exception to Sec.  
422.503(b)(5) for D-SNPs would allow the entities in Minnesota that 
currently offer both D-SNPs (through the demonstration) and cost 
contract plans in the same market to continue enrollment in both plans 
after the end of the demonstration, thus avoiding potentially 
significant disruption to Medicare beneficiaries that would result from 
each MA organization's non-renewal of one of the two types of products. 
More broadly, the exception removes a regulatory barrier that, in 
Minnesota and several other States, can impede D-SNPs from entering a 
market where cost contract plans remain. Without a D-SNP, States have 
few options to integrate Medicare and Medicaid services and improve the 
experience of care for dually eligible individuals. In particular, 
removing this barrier would allow entities offering cost contract plans 
in rural markets in the nine States \110\ where cost contract plans are 
currently offered, including markets without multiple MA plan 
alternatives, to work with those States to offer new D-SNPs, which 
could further State goals for integrating Medicare and Medicaid 
services. We anticipate that this flexibility would provide dually 
eligible individuals in those States new choices for integrated 
coverage. Therefore, we propose to revise paragraph Sec.  
422.503(b)(5)(i) and (ii) to allow an MA organization to offer a D-SNP 
and also--
---------------------------------------------------------------------------

    \110\ For CY 2021, cost contract plans were offered in Colorado, 
Iowa, Illinois, Kansas, Minnesota, Nebraska, North Dakota, South 
Dakota, Wisconsin.
---------------------------------------------------------------------------

     Offer an 1876 reasonable cost plan that accepts new 
enrollees;
     Share a parent organization with a cost contract plan that 
accepts new enrollees;
     Be a subsidiary of a parent organization offering a cost 
contract plan that accepts new enrollees; or
     Be a parent organization of a cost contract plan that 
accepts new enrollees.
    Should we finalize this proposal, we would monitor patterns of 
enrollment and disenrollment. To the extent we see any pattern that 
suggests that sponsors are persuading D-SNP members to

[[Page 1880]]

move into the cost plan, we would investigate and pursue corrective 
actions or additional rulemaking, potentially including the future 
rulemaking to remove or restrict the exemption proposed here. We seek 
comment on the proposed exception for D-SNPs and our process for 
monitoring for unintended consequences.
    We are considering more limited exceptions to the requirements at 
Sec.  422.503(b)(5) that may more closely fit our policy goals of 
removing regulatory obstacles to the availability of D-SNPs that could 
further Medicare-Medicaid integration. We are also considering whether 
additional limitations could guard against entities steering less 
healthy, higher cost enrollees toward their cost contract plans. 
Specifically, we are considering limiting the exception to:
     D-SNPs designated as highly integrated D-SNPs (HIDE SNPs), 
as defined at Sec.  422.2, which are capitated for Medicaid behavioral 
health or Medicaid long-term services and supports, or both; and to 
fully integrated D-SNPs (FIDE SNPs), as defined at Sec.  422.2, which 
are capitated for a comprehensive set of Medicaid long-term services 
and supports;
     D-SNPs that only enroll full-benefit dually eligible 
individuals, who qualify for full Medicaid benefits, rather than D-SNPs 
that also enroll partial-benefit dually eligible individuals, who are 
only eligible for Medicaid coverage of Medicare premiums or cost-
sharing;
     D-SNPs that charge no beneficiary premium for individuals 
eligible for the full Part D low income subsidy;
     D-SNPs that are affiliated with cost contract plans that 
charge premiums for enrollees eligible for the full Part D low income 
premium subsidy; or
     Combinations of these types of D-SNPs.
    We are concerned that these alternatives would add complexity to 
the regulation that we do not believe is necessary to achieve our 
primary aim of removing regulatory barriers that impede the 
availability of new D-SNPs to integrate Medicare and Medicaid services 
and improve care for dually eligible individuals. However, we seek 
comment on whether inclusion of some or all of these additional 
alternative criteria in the revisions to Sec.  422.503(b)(5) would 
strengthen the overall policy.
9. Requirements To Unify Appeals and Grievances for Applicable 
Integrated Plans (Sec. Sec.  422.629, 422.631, 422.633, and 422.634)
    In the final rule ``Medicare and Medicaid Programs; Policy and 
Technical Changes to the Medicare Advantage, Medicare Prescription Drug 
Benefit, Programs of All-Inclusive Care for the Elderly (PACE), 
Medicaid Fee-For-Service, and Medicaid Managed Care Programs for Years 
2020 and 2021,'' which appeared in the Federal Register on April 16, 
2019, we established procedures for unified appeals and grievances and 
require certain D-SNPs and Medicaid MCOs to use them beginning in 2021 
(84 FR 15680). Section 50311 of the BBA of 2018 amended section 1859 of 
the Act to add new requirements for D-SNPs to unify Medicare and 
Medicaid appeals and grievance procedures for integrated D-SNPs.
    We codified the regulations for unified appeal and grievance 
procedures Sec. Sec.  422.629 through 422.634 (84 FR 15720). These 
procedures apply to applicable integrated plans, which are defined at 
Sec.  422.561 as FIDE SNPs and HIDE SNPs with exclusively aligned 
enrollment. We propose an amendment to the definition of applicable 
integrated plan in section II.A.7. of this proposed rule. These rules 
took effect for the 2021 plan year. Based on our initial implementation 
experience and feedback from stakeholders, we are proposing several 
adjustments, clarifications, and corrections to these regulations at 
Sec. Sec.  422.629 through 422.634. We do not intend for these 
proposals to substantially change current policy.
a. Providing Enrollees Information on Presenting Evidence and Testimony 
(Sec.  422.629(d))
    We propose adding additional language to Sec.  422.629(d) to codify 
in regulation a provision from existing sub-regulatory guidance.\111\ 
We propose to revise Sec.  422.629(d) to require that, as part of its 
responsibilities pertaining to an enrollee's presenting evidence for an 
integrated grievance or appeal, an applicable plan provide an enrollee 
with information on how evidence and testimony should be presented to 
the plan. While we believe this requirement is within the scope of the 
current requirement that applicable integrated plans inform enrollees 
of the limited timeframe for presenting evidence as stated in Sec.  
422.629(d) and otherwise provide enrollees with reasonable assistance 
in taking procedural steps related to grievances and appeals as 
required at Sec. Sec.  422.562(a)(5) (applicable to D-SNPs) and 
438.406(a) (applicable to Medicaid managed care plans), revision of the 
regulation text will clarify this. We believe that this proposed 
addition will ensure that enrollees better understand the process for 
submitting evidence and testimony to the plan so that their information 
is timely considered with their appeal. In addition, our proposal would 
reorganize Sec.  422.629(d) to improve the readability of the 
provision.
---------------------------------------------------------------------------

    \111\ CMS, ``Addendum to the Parts C & D Enrollee Grievances, 
Organization/Coverage Determinations, and Appeals Guidance for 
Applicable Integrated Plans''. Retrieved from: https://www.cms.gov/files/document/dsnpartscdgrievancesdeterminationsappealsguidanceaddendum.pdf.
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b. Technical Correction (Sec.  422.629(k))
    We propose technical changes to Sec.  422.629(k)(4)(ii) to correct 
a minor error from the April 2019 final rule. This paragraph references 
the integrated organization determination decision, however, the 
requirements in paragraph (k)(4) relate to integrated reconsideration 
determinations. Therefore, we are proposing to replace the word 
``organization'' with ``reconsideration'' and remove the word 
``decision'' from the end of the sentence in Sec.  422.629(k)(4)(ii).
c. Accommodate State Medicaid Representation Rules (Sec.  422.629(l))
    At Sec.  422.629(l)(1), we propose adding additional language to 
codify in regulation current sub-regulatory guidance \112\ regarding 
the appointment of a representative. The Medicare Parts C & D Enrollee 
Grievances, Organization/Coverage Determinations, and Appeals Guidance, 
Section 20.2, lists several elements that should be included in an 
appointment of representation form. A State, in its Medicaid program, 
may have developed other forms or requirements for appointment of 
representation forms that are accepted in appeals cases. We propose to 
amend Sec.  422.629(l)(1) to ensure that we are not restricting the 
means that an enrollee would otherwise have, outside of the integrated 
appeals process, to appoint a representative. We propose to add 
language to clarify that an enrollee's representative includes any 
person authorized under State law. We propose to reorganize paragraph 
(l)(1) as part of this amendment. Specifically, we propose to revise 
paragraph (l)(1)(i) to list the enrollee and to revise paragraph 
(l)(1)(ii) to list the enrollee's representative, including any person 
authorized under State law. We also propose to move the content of 
current paragraph (l)(1)(ii) that deals with rights of assignees to a 
new

[[Page 1881]]

Sec.  422.629(l)(4) as discussed in section II.A.9.d. of this proposed 
rule.
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    \112\ CMS, ``Addendum to the Parts C & D Enrollee Grievances, 
Organization/Coverage Determinations, and Appeals Guidance for 
Applicable Integrated Plans''. Retrieved from: https://www.cms.gov/files/document/dsnpartscdgrievancesdeterminationsappealsguidanceaddendum.pdf.
---------------------------------------------------------------------------

d. Clarifying the Role of Assignees and Other Parties (Sec.  
422.629(l))
    In the April 2019 final rule, we finalized Sec.  422.629(l)(1)(ii) 
to include assignees of the enrollee and other providers with 
appealable interests in the proceedings as individuals who could file 
an integrated grievance, request an integrated organization 
determination, or request an integrated reconsideration. In so doing, 
we inadvertently created confusion, particularly pertaining to the 
rights of non-contracted providers. Like contracted providers, non-
contracted providers can request an initial integrated organization 
determination on behalf of an enrollee if they treat or intend to treat 
the enrollee; this is reflected in Sec.  422.629(l)(1)(iv) and (l)(3) 
and is consistent with MA rules at Sec.  422.566(c)(1)(ii). However, 
our policy is that assignees (for example, a non-contracted provider to 
whom an enrollee has assigned their appeal rights) and other providers 
with appealable interests can only file an integrated reconsideration; 
assignees cannot file a grievance, and until the initial organization 
determination is completed, there is no enrollee interest to assign or 
other appealable interest at stake. This policy is also consistent with 
the MA rules which do not specifically allow anyone other than an 
enrollee to file a grievance (Sec.  422.564), and which require a 
provider to waive any right to payment from the enrollee for the 
service to be an assignee and a party to the organization determination 
(Sec.  422.574(b)) who is then able to file a request for a 
reconsideration under Sec.  422.578. We are therefore proposing to move 
the content of Sec.  422.629(l)(1)(ii) to new paragraph (l)(4). As 
noted in section II.A.9.c. of this proposed rule, we propose to add new 
language at Sec.  422.629(l)(1)(ii) in its place addressing who can be 
an enrollee's representative.
    In new paragraph (l)(4) we propose to clarify which individuals or 
entities can request an integrated reconsideration and are considered 
parties to the case but who do not have the right to request an 
integrated grievance or integrated organization determination. At 
proposed paragraph (l)(4)(i), we would permit an assignee of the 
enrollee (that is, a physician or other provider who has furnished or 
intends to furnish a service to the enrollee and formally agrees to 
waive any right to payment from the enrollee for that service) to 
request an integrated reconsideration. At proposed paragraph 
(l)(4)(ii), we would permit any other provider or entity (other than 
the applicable integrated plan) who has an appealable interest in the 
proceeding to request an integrated reconsideration.
e. Timelines for Processing Payment Requests (Sec.  422.631)
    In the April 2019 final rule, we neglected to specify explicitly 
how the MA ``prompt payment'' rules at Sec.  422.520 governing payment 
of claims apply to applicable integrated plans. The MA organization 
determination timeline rules at Sec.  422.568(c) state that the prompt 
payment rules at Sec.  422.520 govern the timeline for requests for 
payment. However, as finalized, Sec.  422.631 establishes the timelines 
for integrated reconsiderations in lieu of the timelines at Sec.  
422.568 but does not include a specific reference to the prompt payment 
rules at Sec.  422.520 and does not include (in lieu of the rule in 
Sec.  422.520(c) that is applicable to all MA plans) a different rule 
for applicable integrated plans. As a result, we have received several 
questions from applicable integrated plans requesting that we clarify 
what timeline applies to processing payment requests.
    Accordingly, at Sec.  422.631(d), we propose to add a new paragraph 
(d)(3) to require applicable integrated plans to process payment 
requests according to the prompt payment provisions set forth in Sec.  
422.520, which will mirror the current provision at Sec.  422.568(c). 
We believe these prompt payment provisions are generally consistent 
with Medicaid prompt payment standards and therefore will not create 
any inconsistencies with State Medicaid policies in this area. We 
welcome comments on this issue.
f. Clarifying Integrated Reconsideration Request (Sec.  422.633(e) and 
(f))
    We are proposing changes to Sec.  422.633(e)(1) to clarify who may 
file a request for an expedited post-service integrated reconsideration 
(that is, one that is related to payment). Our proposal would clarify 
that an enrollee may request an expedited integrated reconsideration 
related to payment that can qualify as expedited, but a provider's 
right to request an expedited integrated reconsideration on behalf of 
an enrollee is limited to pre-service integrated reconsideration 
requests. In the preamble to the April 2019 final rule, we noted that 
there may be rare circumstances in which a dually eligible enrollee's 
financial need is so pressing that an enrollee's reimbursement request 
meets the standard for expediting a post-service integrated 
reconsideration request. This was a departure from the MA rule at Sec.  
422.584(a), and we intended to limit this option to requests filed by 
enrollees. As finalized, however, Sec.  422.633(e) does not distinguish 
between pre-service and post-service expedited requests filed by the 
enrollee and those filed by a provider on the enrollee's behalf.
    During implementation of these new unified procedures, we received 
several comments pointing out that Sec.  422.633(e), as finalized, 
permits a provider to request an expedited post-service integrated 
reconsideration on behalf of an enrollee. This was not our intent, 
because a post-service case can only meet the expedited standard if the 
enrollee has already paid a provider and urgently needs reimbursement 
from the applicable integrated plan. We believe that a provider should 
not deliver a service, accept the enrollee's payment, and then argue on 
the enrollee's behalf that the enrollee needs an expedited decision on 
reimbursement. We also did not intend to place the burden on plans to 
accept such requests and assess whether the standard for expedited 
treatment is met when these post-service appeals are filed by 
providers. We are therefore proposing to specify in Sec.  
422.633(e)(1)(i) that expedited post-service integrated reconsideration 
requests are limited to those requested by an enrollee, and in Sec.  
422.633(e)(1)(ii) that providers acting on behalf of an enrollee may 
only request pre-service expedited integrated reconsiderations. This 
proposed change aligns provider appeal rights with MA regulations which 
do not allow expedited integrated reconsideration determinations in 
cases where services or items have already been furnished (see Sec.  
422.584(a)).
    During implementation, we also received several questions from 
plans regarding the timeframe, at Sec.  422.633(f), for applicable 
integrated plans to make integrated reconsideration determinations in 
cases involving payment requests from providers where the provider has 
obtained and filed a waiver of liability from the enrollee. In the 
April 2019 final rule, we required all integrated reconsiderations, 
including those involving requests for payment, be resolved within 30 
days, which is consistent with Medicaid rules at Sec.  438.408(b)(2) 
but shorter than the 60 days permitted under Sec.  422.590(b)(1). In 
response to the sub-regulatory guidance issued subsequent to the April 
2019 rule but before the effective date of the regulation, several 
plans commented that meeting a 30-day timeframe for all requests for 
payment would be difficult. We believe that the shorter 30-day 
timeframe is appropriate for beneficiary requests and consistent with 
Medicaid

[[Page 1882]]

rules. However, we seek comment regarding whether allowing a 60-day 
timeframe for non-contracted provider payment requests where the 
provider has obtained a waiver of liability from the enrollee would 
simplify plan operations without adversely affecting beneficiaries or 
access to care. We also seek comment regarding whether adopting such a 
timeframe for non-contracted provider payment requests would conflict 
with any State-specific Medicaid rules or processes concerning provider 
appeals.
    Lastly, in response to several questions we have received since the 
regulation became effective regarding the availability of extensions 
for standard and expedited integrated reconsiderations, we are 
proposing at Sec.  422.633(f)(3) to add language to clarify that 
extensions of up to 14 days are available for any integrated 
reconsiderations (either standard and expedited) other than those 
regarding Part B drugs. In our proposal at Sec.  422.633(f)(3) we would 
exclude integrated reconsiderations about Part B drugs from the 
authority for extensions. This is consistent with current Sec.  
422.633(f), which provides that integrated reconsidered determinations 
regarding Part B drugs must comply with the timelines governing Part B 
drugs established in Sec. Sec.  422.584(d)(1) and 422.590(c) and 
(e)(2). Our current sub-regulatory guidance addresses this as well.
g. Timeframes for Service Authorization After a Favorable Decision 
(Sec.  422.634(d))
    We are proposing changes to Sec.  422.634(d) to clarify the 
requirements for how quickly an applicable integrated plan must 
authorize or provide a service after a favorable decision for an 
enrollee upon appeal. The current regulatory text includes timeframes 
for how quickly services must be put in place for an enrollee after 
receipt of a favorable decision on an integrated reconsideration or 
State fair hearing. The current regulation refers to timeframes 
specified in Sec. Sec.  422.618 and 422.619 for implementing decisions 
made by the IRE and additional entities on the Medicare side. In 
reviewing feedback received from applicable integrated plans, we 
believe that these requirements should more clearly describe timeframes 
for authorizing services in all situations where an applicable 
integrated plan's decision is reversed.
    We propose reorganizing Sec.  422.634(d) to more explicitly address 
each scenario that an applicable integrated plan will face when 
effectuating a reversal. In proposed paragraph (d)(1), we propose to 
address cases where the applicable integrated plan reverses its own 
decision in an appeal for services that were not furnished while the 
appeal was pending. We propose that an applicable integrated plan must 
authorize or provide the service as expeditiously as the enrollee's 
condition requires and within the sooner of: (1) 72 hours from the date 
of the reversed decision; or (2) 30 calendar days (7 calendar days for 
a Part B drug) after the date that the applicable integrated plan 
received the integrated reconsideration request.
    This would be a slight change from the current requirements, which 
require applicable integrated plans to authorize or provide the service 
as expeditiously as the enrollee's condition requires but not later 
than 72 hours from the date of the reversed decision. The current 72-
hour rule is adopted from the Medicaid managed care rule at Sec.  
438.424(a). However, as applied in Sec.  422.634(d), there is the 
possibility that in some cases an enrollee could wait longer for a 
determination to be effectuated by an applicable integrated plan than 
the enrollee would have to wait under the current MA regulation (Sec.  
422.618(a)(1) and (3)), which requires effectuation no later than 30 
calendar days after the MA plan receives the reconsideration request, 
or 7 calendar days for Part B drugs. If, for example, the applicable 
integrated plan reversed its decision on the 29th day after receiving 
the reconsideration request (for a request that is not a Part B drug), 
as allowed under Sec.  422.633(f)(1), under the current text of Sec.  
422.634(d) it would still have another 72 hours to effectuate the 
determination. We also propose to include the Part B drug timeframe 
from Sec.  422.618(a)(3) in Sec.  422.634(d)(1)(ii)(B) to ensure 
enrollees of applicable integrated plans get the same timely 
effectuation for these drugs; this is consistent with how current Sec.  
422.633(f) provides that integrated reconsidered determinations 
regarding Part B drugs must comply with the timelines governing 
reconsidered determinations regarding Part B drugs established in 
Sec. Sec.  422.584(d)(1) and 422.590(c) and (e)(2), which apply to 
other MA plans. We believe our proposal better reflects the directive 
in section 1859(f)(8)(B)(ii) of the Act to adopt requirements that are 
most protective for enrollees.
    In proposed paragraph (d)(2), for the sake of clarity we propose to 
place in its own paragraph the requirement for the applicable 
integrated plan to authorize or provide a Medicaid-covered service no 
later than 72 hours from the date the plan is notified of a decision 
reversed by a State fair hearing. We propose no changes to this 
effectuation timeline.
    Lastly, we propose to add a new paragraph (d)(3) to require the 
same timelines for an applicable integrated plan to effectuate 
reversals by the Medicare independent review entity, an administrative 
law judge or attorney adjudicator at the Office of Medicare Hearings 
and Appeals, or the Medicare Appeals Council as apply to other MA plans 
at Sec. Sec.  422.618 and 422.619.
    We request comment on whether the additional language provides 
clarity to applicable integrated plans on their responsibility to 
provide a service after an integrated organizational determination or 
integrated reconsideration is overturned.
10. Technical Update to State Medicaid Agency Contract Requirements 
(Sec.  422.107)
    Section 422.107(c) lists minimum requirements for State Medicaid 
agency contracts. Paragraph (c)(6) requires that the contract document 
the verification of an enrollee's eligibility for ``both Medicare and 
Medicaid.'' We propose to strike the reference to Medicare in paragraph 
(c)(6). All MA plans, including D-SNPs, already verify Medicare 
eligibility as part of accepting beneficiary coverage elections under 
Sec.  422.60. See also Chapter 2 of the Medicare Managed Care Manual 
for additional details.\113\ Therefore, it is not essential for the 
contract between the State Medicaid agency and the D-SNP to document 
how the D-SNP verifies Medicare eligibility. Functionally, our proposal 
would have no impact on the responsibilities of a plan to verify 
eligibility. However, it would remove a detail from the State Medicaid 
agency contract minimum requirements, thus simplifying our review of 
the contracts.
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    \113\ See https://www.cms.gov/medicare/health-plans/healthplansgeninfo/downloads/mc86c02.pdf.
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11. Compliance With Notification Requirements for D-SNPs That 
Exclusively Serve Partial-Benefit Dually Eligible Beneficiaries (Sec.  
422.107(d))
    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 and coordination of the delivery of Medicare and 
Medicaid benefits. We codified these minimum integration requirements 
in the April 2019 final rule at Sec.  422.2, stating that a D-SNP must 
either (i) be a HIDE SNP or FIDE SNP or (ii) meet the additional 
requirement specified in Sec.  422.107(d) as required for its contract 
with the State Medicaid agency. When it applies,

[[Page 1883]]

Sec.  422.107(d) requires that the D-SNP notify the State Medicaid 
agency, or individuals or entities designated by the State Medicaid 
agency, of hospital and skilled nursing facility (SNF) admissions for 
at least one group of high-risk full-benefit dually eligible 
individuals, as determined by the State Medicaid agency. We direct 
readers to the April 2019 final rule for a more detailed explanation of 
our intent and rationale for this approach (84 FR 15710 through 15717).
    While implementing these minimum integration standards, CMS 
identified some MA organizations that have separate D-SNP PBPs for 
partial-benefit and full-benefit dually eligible individuals. Providing 
separate PBPs for full-benefit dually eligible individuals enables MA 
organizations to more clearly explain and coordinate the Medicaid 
benefits that those enrollees are entitled to receive. In addition, 
HIDE SNPs or FIDE SNPs that limit enrollment to full-benefit dually 
eligible individuals qualify to unify Medicare and Medicaid appeals and 
grievance processes under Sec. Sec.  422.629 through 422.634. MA 
organizations that have D-SNPs with a combination of full-benefit and 
partial-benefit dually eligible enrollees can choose to ``split'' the 
D-SNP into two plans to take advantage of these opportunities. We 
codified a crosswalk exception to facilitate this process at Sec.  
422.530(c)(4) in the January 2021 final rule. (In section II.A.6.a., we 
are proposing to redesignate this crosswalk to Sec.  422.530(c)(4)(i) 
in this proposed rule.)
    However, D-SNPs that only enroll partial-benefit dually eligible 
individuals (hereinafter referred to as ``partial-benefit-only D-
SNPs'') have no explicit pathway to meaningfully meet one of the three 
integration standards under Sec.  422.2. In a partial-benefit-only D-
SNP, no plan enrollees are eligible for the minimum set of Medicaid 
services that a D-SNP must cover to qualify as a HIDE SNP or FIDE SNP. 
Additionally, there are no full-benefit dually eligible individuals 
that the plan could identify for notification of hospital and SNF 
admissions (and no Medicaid services to coordinate post notification) 
as required by Sec.  422.107(d).
    In lieu of requiring inclusion of this notification requirement in 
the State Medicaid agency contract for partial-benefit-only D-SNPs 
during the initial CY 2021 implementation of the D-SNP integration 
requirements, CMS issued guidance permitting an alternative in January 
2020.\114\ The MAO offering the partial-benefit-only D-SNP would be 
considered as meeting the integration requirements in connection with 
the partial-benefit-only D-SNP provided that the MAO also offers a 
full-benefit-only D-SNP in the same State and under the same contract 
and that full-benefit-only D-SNP meets the integration requirements in 
the definition of a D-SNP at Sec.  422.2.
---------------------------------------------------------------------------

    \114\ CMS Medicare-Medicaid Coordination Office, ``Additional 
Guidance on CY 2021 Medicare-Medicaid Integration Requirements for 
Dual Eligible Special Needs Plans'', January 17, 2020. Retrieved 
from: https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-memos-archive/hpms-memo-5.
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    We are proposing to codify this policy with the additional 
requirement that the service areas of the full-benefit-only D-SNP 
covers the entire service area of the partial-benefit-only D-SNP. That 
is, we propose revising Sec.  422.107(d) to provide that partial-
benefit-only D-SNPs are not required to meet the notification 
requirement in Sec.  422.100(d) when the MA organization also offers a 
D-SNP with enrollment limited to full-benefit dually eligible 
individuals that meets the integration criteria at Sec.  422.2 and is 
in the same State and service area and under the same parent 
organization. We propose to add this by reorganizing paragraph (d). The 
current provision in paragraph (d) would be redesignated as new 
paragraph (d)(1) and amended to reference exceptions listed in proposed 
paragraph (d)(2). Proposed paragraph (d)(2) provides that paragraph 
(d)(1) does not apply to any D-SNP that, under the terms of its 
contract with the State Medicaid agency, only enrolls beneficiaries 
that are not entitled to full medical assistance under a State plan 
under title XIX if the SNP operates under the same parent organization 
and in the same service area as a D-SNP limited only to full-benefit 
dually eligible individuals that meets the requirements at (d)(1).
    We believe our proposal is consistent with the minimum integration 
required by section 1859(f)(8) of the Act because it achieves the same 
level of coordination with State Medicaid agencies for partial-benefit 
dually eligible enrollees as would be achieved if there were one PBP 
including both full-benefit and partial-benefit dually eligible 
individuals. Additionally, for full-benefit dually eligible enrollees, 
the two-PBP structure facilitates a higher level of integration of 
Medicare and Medicaid benefits (for example, where the two-PBP 
structure would result in more applicable integrated plans with unified 
appeals processes).
    We do not anticipate any negative impact for beneficiaries or 
partial-benefit-only D-SNPs as a result of this proposed rule. For CY 
2021, nine partial-dual-only D-SNP PBPs operate under the same MA 
contract and same service area as a full-benefit-only D-SNP. All nine 
operate in either Florida or Virginia. In CY 2021, one other Virginia 
D-SNP enrolled partial-benefit dually eligible individuals with a 
corresponding D-SNP for full-benefit dually eligible individuals under 
the same parent organization. The proposed changes to Sec.  422.107(d) 
would allow these partial-benefit-only D-SNPs to continue as they are 
currently operating.
12. Attainment of the Maximum Out-of-Pocket (MOOP) Limit (Sec. Sec.  
422.100 and 422.101)
    Section 1852(b)(1) of the Act prohibits discrimination by MA 
organizations on the basis of health status-related factors and directs 
that CMS may not approve an MA plan if CMS determines that the design 
of the plan and its benefits are likely to substantially discourage 
enrollment by certain MA eligible individuals. Under the authority of 
sections 1852(b)(1)(A), 1856(b)(1), and 1857(e)(1) of the Act, CMS 
added Sec. Sec.  422.100(f)(4) and (5) and 422.101(d)(2) and (3), 
effective for coverage in 2011, to require all MA plans (including 
employer group waiver plans (EGWPs) and special needs plans (SNPs)) to 
establish limits on enrollee out-of-pocket cost-sharing for Parts A and 
B services that do not exceed the annual limits established by CMS (75 
FR 19709 through 19711). Section 1858(b)(2) of the Act requires a limit 
on in-network and out-of-pocket expenses for enrollees in Regional 
Preferred Provider Organization (RPPO) MA plans. In addition, MA Local 
PPO (LPPO) plans, under Sec.  422.100(f)(5), and RPPO plans, under 
section 1858(b)(2) of the Act and Sec.  422.101(d)(3), are required to 
have two maximum out-of-pocket (MOOP) limits (also called catastrophic 
limits) established by CMS annually, including (a) an in-network and 
(b) a total catastrophic (combined) limit that includes both in-network 
and out-of-network items and services covered under Parts A and B. 
After the MOOP limit is reached, the MA plan pays 100 percent of the 
costs of items and services covered under Parts A and B.
    In the April 2011 final rule (76 FR 21508), CMS established the 
approach MA organizations must use to track the enrollee's progress 
toward the plan MOOP limit. Under this policy, the in-network 
(catastrophic) and combined (total catastrophic) MOOP limits consider 
only the enrollee's actual out-of-pocket spending for purposes of 
tracking to the enrollee's progress toward the plan MOOP limit. This

[[Page 1884]]

approach also applies to D-SNPs. Thus, for any D-SNP enrollee, MA plans 
had the option to count only those amounts the individual enrollee is 
responsible for paying net of any State responsibility or exemption 
from cost-sharing toward the MOOP limit rather than the cost-sharing 
amounts for services the plan has established in its plan benefit 
package. As a result, in practice the MOOP limit does not cap the 
amount a State could pay for a dually eligible MA enrollee's Medicare 
cost-sharing, nor does it cap the amount of Medicare cost-sharing that 
remains unpaid for providers serving dually eligible enrollees because 
of the prohibition on collecting Medicare cost-sharing from certain 
dually eligible individuals and the limits on State payments of 
Medicare cost-sharing under State lesser-of policies.\115\ Thus, MA 
plans are paying amounts for non-dually eligible enrollees that they do 
not pay for dually eligible enrollees, even when different enrollees 
use the same volume of services; States, in certain circumstances, pay 
cost-sharing for dually eligible enrollees that is otherwise covered by 
the MA plans for non-dually eligible enrollees; and providers serving 
dually eligible MA enrollees are systemically disadvantaged relative to 
providers serving non-dually eligible MA enrollees, which we believe 
may negatively affect access to Medicare providers for dually eligible 
enrollees.
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    \115\ Section 1902(n)(2) of the Act permits the State to limit 
payment for Medicare cost-sharing for QMBs to the amount necessary 
to provide a total payment to the provider (including Medicare, 
Medicaid State plan payments, and third-party payments) equal to the 
amount a State would have paid for the service under the Medicaid 
State plan. For example, if the Medicare (or MA) rate for a service 
is $100, of which $20 is beneficiary coinsurance, and the Medicaid 
rate for the service is $90, the State would only pay $10. If the 
Medicaid rate is $80 or lower, the State would make no payment. See 
Chapter II, sections E.4 through E.6 of the Medicaid Third Party 
Liability Handbook at https://www.medicaid.gov/medicaid/eligibility/downloads/cob-tpl-handbook.pdf.
---------------------------------------------------------------------------

    We propose to revise the regulations governing the MOOP limits for 
MA plans to require that all costs for Medicare Parts A and B services 
accrued under the plan benefit package, including cost-sharing paid by 
any applicable secondary or supplemental insurance (such as through 
Medicaid, employer(s), and commercial insurance) and any cost-sharing 
that remains unpaid because of limits on Medicaid liability for 
Medicare cost-sharing under lesser-of policy and the cost-sharing 
protections afforded certain dually eligible individuals, is counted 
towards the MOOP limit. This would ensure that once an enrollee, 
including a dually eligible individual with cost-sharing protections, 
has accrued cost-sharing (deductibles, coinsurance, or copays) that 
reaches the MOOP limit established by the plan (whether at the annual 
limit set by CMS under Sec.  422.100(f) or some lesser amount), the MA 
plan must pay 100 percent of the cost of covered Medicare Part A and 
Part B services. As a result, the State Medicaid agency and other 
secondary payers would no longer be billed for any Medicare cost-
sharing for the remainder of the year. To ensure clarity in the 
regulation text for the policy on what costs are tracked for purposes 
of the MOOP limit, we are proposing to amend the regulations by adding 
Sec.  422.100(f)(4)(i) and (f)(5)(iii) to specify that MA organizations 
are responsible for tracking out-of-pocket spending accrued by the 
enrollee, and must alert enrollees and contracted providers when the 
MOOP limit is reached. In addition, we are proposing to amend Sec.  
422.101(d)(4) to substitute ``accrued'' for ``incurred'' in the 
description of how regional plans must track beneficiary out-of-pocket 
spending towards the MOOP limit. We intend this amendment to have only 
the substantive effect described here: That cost-sharing paid by any 
applicable secondary or supplemental insurance (such as through 
Medicaid) and any cost-sharing that remains unpaid because of limits on 
Medicaid liability for Medicare cost-sharing under lesser-of policy and 
the cost-sharing protections afforded certain dually eligible 
individuals, is counted towards the MOOP limit by MA plans. This 
proposal is not intended to and will not change how the word 
``incurred'' is otherwise used in the regulation. We believe that using 
a different term in the regulation text is appropriate to mark this 
change in policy from that first adopted in the April 2011 final rule. 
We note that the specific regulatory amendments may change if CMS 
publishes a final rule that addresses the MOOP limit provision 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 appeared in the Federal Register on February 18, 2020 
(85 FR 9002) (hereinafter referred to as the February 2020 proposed 
rule).
    We believe that this amendment is appropriate and necessary for 
several reasons. First, we believe this amendment will result in equal 
treatment under the MOOP limit for dually eligible MA enrollees 
compared to how Medicare-only enrollees are treated. Medicare-only MA 
enrollees receive the protection afforded by the MOOP limit after they 
have accrued cost-sharing under the MA plan benefit whether they have 
paid this cost-sharing or still owe their providers for some or all of 
the cost-sharing. In our experience, MA organizations do not impose 
additional cost-sharing liability above the MOOP limit on their 
Medicare-only enrollees if some of the pre-MOOP cost-sharing remains 
unpaid. Under our proposed amendment, dually eligible MA enrollees with 
unpaid cost-sharing due to limits on Medicaid payment of Medicare cost-
sharing under State lesser-of policies would similarly receive 100 
percent coverage of Parts A and B services under their MA plan after 
the MOOP limit was attained. In addition, dually eligible beneficiaries 
with Medicaid coverage that is secondary to Medicare would receive the 
same benefits from the MOOP as MA enrollees with employer or commercial 
insurance that is secondary to Medicare; in both cases, the Medicare 
cost-sharing counting towards the MOOP limit would be based on the out-
of-pocket costs accrued under the MA plan benefit without regard to 
whether secondary coverage pays parts or all of the Medicare cost-
sharing for Parts A and B services used before attainment of the MOOP.
    Second, we believe this amendment will ensure that the providers 
serving dually eligible enrollees in MA plans receive the same benefit 
from the MOOP limit that providers receive when they serve Medicare-
only MA enrollees, based on our understanding of how some MA plans pay 
providers after the MOOP limit is reached. Absent the revision we have 
proposed, a provider serving a dually eligible MA enrollee in a State 
that paid less than the full Medicare cost-sharing under the lesser-of 
policy (the vast majority of States) would continue to receive less 
than the full MA rate negotiated between the MA organization and the 
provider for a Part A or Part B service even after cost-sharing adds up 
to more than the MOOP limit during the course of the plan year. 
Medicare cost-sharing protections for certain dually eligible 
individuals prohibit providers from billing any of that unpaid Medicare 
cost-sharing to the beneficiary. For a Medicare-only enrollee with 
similarly high medical expenses, the provider can, for example, work 
out a payment plan for unpaid Medicare cost-sharing accumulated before 
attainment of the MOOP with the assurance that the MOOP amount would

[[Page 1885]]

limit providers' liability for unpaid Medicare cost-sharing. If the 
out-of-pocket costs that counts towards the MOOP limit are calculated 
similarly for dually eligible enrollees with Medicare cost-sharing 
protections, the providers would similarly know that there was a limit 
on the liability for unpaid Medicare cost-sharing that they must 
assume. We believe this proposal to revise the method that MA 
organizations must use to determine when the MOOP limit has been 
reached will mitigate existing provider payment disincentives related 
to serving dually eligible MA enrollees. As a result, the proposal may 
improve access to providers, including specialists, who currently limit 
the number of dually eligible MA enrollees they serve or decline to 
contract with D-SNPs.
    Third, our proposed amendments to Sec. Sec.  422.100(f)(4) and (5) 
and 422.101(d)(4) are consistent with the statutory requirement at 
section 1902(a)(25)(G) of the Act that the State plan under title XIX 
must provide that the State prohibits any health insurer (including a 
group health plan, as defined in section 607(1) of the Employee 
Retirement Income Security Act of 1974, a self-insured plan, a service 
benefit plan, and a health maintenance organization), in enrolling an 
individual or in making any payments for benefits to the individual or 
on the individual's behalf, from taking into account that the 
individual is eligible for or is provided medical assistance under 
Medicaid. The current method for calculating attainment of the MOOP 
explicitly takes into account the provision of medical assistance--
specifically the payment of Medicare cost-sharing--by Medicaid in 
determining at what point the MA plan will begin paying 100 percent of 
costs for Medicare Parts A and B services. Our proposed amendments 
would ensure that the provision of Medicare cost-sharing assistance by 
the State is no longer considered in calculating attainment of the MOOP 
limit. In particular, this will ensure that D-SNPs that contract with 
State Medicaid agencies calculate attainment of the MOOP limit 
consistent with the Medicaid State plan requirements under the Act.
    Fourth, our investigations show that D-SNPs offered by MA 
organizations currently differ in how they determine if the MOOP limit 
has been attained. Some D-SNPs calculate attainment of the MOOP as we 
propose, by adding up all cost-sharing accrued under the plan benefit 
until the MOOP limit is attained and, for the remainder of the year, 
paying 100 percent of the costs of covered services. Other D-SNPs do 
not seem to count any cost-sharing accrued under the benefit toward the 
MOOP for dually eligible individuals with Medicare cost-sharing 
protections--the D-SNPs do not count any cost-sharing amounts paid by 
the State and apparently assume that all cost sharing that is not paid 
by the State is not billed to the dually eligible enrollee because of 
the cost-sharing protections these beneficiaries receive. As a result, 
the MOOP is never attained. Our proposed amendments would bring 
consistency to how MA organizations determine if the MOOP limit has 
been attained, since it is based entirely on the claims adjudicated by 
the MA organization regardless of the enrollee's dual eligibility 
status. We believe this provides MA organizations with a 
straightforward method of determining when the MOOP limit has been 
attained based on claims data that the MA organization has in its 
possession.
    For illustrative purposes, we provide below an example of how our 
proposal would change payment for services delivered after attainment 
of the MOOP limit in a D-SNP with cost-sharing that mirrors Original 
Medicare cost-sharing and where all benefits received by the enrollee 
are from in-network providers.
    A D-SNP enrollee with unmanaged diabetes enters the hospital and 
has both legs amputated. After a lengthy hospital stay, followed by 
admission into a skilled nursing facility (SNF), the enrollee is 
discharged to her home with a power wheelchair. The enrollee also 
requires substantial follow-up care, including frequent visits with 
primary care and specialist physicians, physical and occupational 
therapy, wound care, and wheelchair modifications. The cost-sharing--
inpatient charges, SNF per day charges, and the 20 percent coinsurance 
for the power wheelchair and follow-up care--has accrued to $7,550, the 
D-SNP's MOOP limit, by June. Under the lesser-of policy, the State 
Medicaid payment policy caps total payment at the Medicaid rate for 
specific services, which resulted in payment of some of the hospital 
cost-sharing but none of the SNF per-day charges or the 20 percent 
coinsurance for the power wheelchair or follow-up services. As such, 
providers did not receive payment for the cost-sharing amounts from the 
MA plan, Medicaid, or the enrollee for the SNF, power wheelchair, or 
other follow-up services.
    Under our proposal, all of the cost-sharing, whether paid by 
Medicaid or unpaid, moves the beneficiary toward the $7,550 MOOP limit 
under the D-SNP's benefit design, after which the D-SNP would pay 100 
percent of its rate for all Medicare Part A and B services provided to 
the enrollee for the remainder of the year. Absent the implementation 
of our proposal, the enrollee would not have reached the MOOP limit in 
June, because the D-SNP did not count either the Medicaid payments of 
the cost-sharing amounts or unpaid cost-sharing (which providers are 
prohibited from collecting from the enrollee under Medicare rules) 
toward attainment of the MOOP limit. Therefore, the D-SNP would 
continue to deduct cost-sharing amounts from payment to providers and, 
due to the lesser-of policy, some providers would continue to not 
receive payment for the cost-sharing amount at all when furnishing 
services to the dually eligible enrollee. In our example, assuming the 
enrollee only receives Part B services after June, the providers of 
these services would receive only 80 percent of the total payment rate 
for the furnished services from the D-SNP, compared with the 100 
percent providers would receive under our proposal.
    For the reasons described in this section, we propose to amend 
Sec. Sec.  422.100(f)(4) and (5) and 422.101(d)(4) to provide that MA 
organizations are responsible for tracking out-of-pocket spending 
accrued by the enrollee and must alert enrollees and contracted 
providers when the MOOP limit is reached. For purposes of this 
amendment, the term accrued includes Medicare cost-sharing obligations 
regardless of whether the enrollee or another party or entity pays and 
regardless whether the provider is permitted to collect the Medicare 
cost-sharing from the enrollee.
13. Comment Solicitation on Coordination of Medicaid and MA 
Supplemental Benefits
    Section 422.107 requires each MA organization offering a D-SNP to 
have a contract with the State Medicaid agency that describes, among 
other things, the organization's responsibility to coordinate Medicaid 
benefits. State Medicaid agencies have broad flexibility to include 
provisions in their D-SNP contracts. State Medicaid agencies may 
include provisions related to the MA supplemental benefits the D-SNP 
offers, how the MA organization shares information about those 
benefits, and processes for coordinating benefits across Medicare and 
Medicaid programs.
    In this proposed rule, we describe a number of ways that State 
Medicaid agencies can use their D-SNP contracts under Sec.  422.107 to 
coordinate D-SNP supplemental benefits, including

[[Page 1886]]

reductions in Medicare cost-sharing, with Medicaid benefits. How this 
coordination works varies based on whether or not the D-SNP, or an 
affiliated Medicaid MCO, is capitated by the State Medicaid agency to 
deliver Medicaid benefits, or whether those benefits are delivered 
through the Medicaid FFS program or an unaffiliated Medicaid MCO. We 
seek comments on the following examples \116\ of potential coordination 
of Medicaid and MA supplemental benefits:
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    \116\ These examples also appeared in a May 27, 2021 FAQ 
document at: https://www.cms.gov/files/document/dsnpmedicaremedicaidcoordbenefitsfaqs.pdf.
---------------------------------------------------------------------------

     In some States, D-SNPs offer Medicare supplemental 
benefits that overlap with Medicaid benefits that the State covers on 
an FFS basis. Under section 1902(a)(25) of the Act, State Medicaid 
agencies that deliver these benefits must coordinate benefits with the 
D-SNP to ensure that Medicaid does not pay for benefits that are 
covered by the D-SNP as MA supplemental benefits. For example, a State 
could ensure that dually eligible enrollees use up the number of non-
emergency medical transportation trips provided by the D-SNP (as 
supplemental benefits) before using the overlapping Medicaid 
transportation benefits. State Medicaid agencies can also use their 
contracts with D-SNPs to require these plans to take specific actions, 
such as instructing its network providers to bill the D-SNP before 
billing the Medicaid program or providing information on benefits or 
service use to the State or its Medicaid providers, to enable 
successful and more seamless coordination of benefits.
     A D-SNP that is capitated by the State Medicaid agency to 
provide Medicaid benefits, such as dental services, can also provide 
dental services as a MA supplemental benefit, as long as the D-SNP (or 
its Medicaid MCO affiliate) is not paid twice, once by Medicare and 
once by Medicaid, for coverage of the identical benefit for the same 
enrollees in the same contract year. As noted previously, under section 
1902(a)(25) of the Act, Medicaid should not pay for a benefit that 
Medicare or an MA plan (or a third party) covers to the same extent for 
the same individual. This principle applies whether the benefits are 
paid for on an FFS or capitation basis.
    We also seek comment on other potential ways that D-SNPs and States 
can work together to coordinate Medicare and Medicaid benefits in order 
to improve D-SNP enrollee experiences and outcomes.
    State Medicaid agencies can use their contracts with D-SNPs under 
Sec.  422.107 to meet these requirements and ensure Medicaid funds 
provided to the D-SNP only pay for Medicaid benefits. These State 
contracts with D-SNPs, in combination with State Medicaid benefit 
design, can help create benefits that are in addition to Medicare 
benefits and complementary across programs. For example, a D-SNP that 
also has a Medicaid managed care contract could use both Medicare and 
Medicaid dollars to provide a benefit that, on an actuarial basis, 
equals the value of the benefit from the combination of both funding 
streams. The plan must be able to clearly identify, for Medicaid 
managed care rate setting purposes, claims that are payable under the 
Medicaid program after exhaustion of the Medicare benefit. In addition, 
Sec.  422.254 requires the MA organization to comply with actuarial 
standards in developing and submitting bids, including bids for 
supplemental benefits.
    In all cases, the capitation rate for the Medicaid benefit must be 
actuarially sound and based on the cost of furnishing only the 
Medicaid-covered benefits (Sec. Sec.  438.3(c) and (e); 438.4 through 
438.7). Similarly, the rebate allocated for the MA supplemental 
benefits must reflect the organization's estimate of the revenue 
required to furnish the MA supplemental benefits only and provide the 
actuarial basis for the bid (Sec. Sec.  422.252 through 422.256; 
422.266).
    Coordination of overlapping benefits works differently if the State 
Medicaid agency has a capitated contract with a different legal entity, 
such as a specialty dental plan or transportation vendor for services 
that overlap with the D-SNP's supplemental benefits. As noted 
previously, Medicare or the MA plan is the primary payer whenever 
Medicare and Medicaid cover the same services. As such, the State 
Medicaid agency and its capitated vendor should take the steps 
necessary to avoid duplication of services or duplicate payment for 
services delivered as MA supplemental benefits. For example, the State 
can make an adjustment to the base data used for Medicaid rate 
development to address coordination of benefits, such as when both 
Medicare (or an MA plan) and Medicaid cover a benefit, to ensure 
Medicaid rate development appropriately accounts for Medicaid being the 
payer of last resort.\117\ One more advantage of integrated care--
capitating the same organization for all services--over fragmentated 
care is elimination of the administrative burden of coordinating 
benefits and identifying the correct payments for the secondary 
coverage with each service and each processed claim.
---------------------------------------------------------------------------

    \117\ See 42 CFR 438.5 regarding rate development standards for 
Medicaid managed care capitation rates.
---------------------------------------------------------------------------

    State Medicaid agencies have flexibility to determine whether a D-
SNP supplemental benefit covered with Medicare funds substitutes for an 
identical Medicaid benefit, given that Medicare coverage is primary to 
Medicaid, with the Medicaid benefit not provided, or to coordinate the 
D-SNP benefit and Medicaid benefit to provide D-SNP enrollees with an 
enhanced benefit. For example, a State Medicaid agency can determine 
that the use of the D-SNP supplemental benefit covered with Medicare 
funds, such as coverage of two dental cleanings per year, will be 
provided first, with the same Medicaid benefit provided after the 
Medicare benefit has been exhausted, resulting in coverage of up to 
four cleanings a year, which is recommended in some cases. A State 
Medicaid agency may determine that provision of the Medicaid benefit in 
addition to the same benefit covered as a D-SNP supplemental benefit is 
not medically necessary or cost-effective, or coordinate the two 
benefits as in the example above if the State believes the additional 
benefits would improve the care and support received by dually eligible 
individuals through the two programs. The contract between the D-SNP 
and the State Medicaid agency required under Sec.  422.107 can be used 
to document the above types of determinations, and instruct the D-SNP 
for how to coordinate Medicare Part A and B benefits, MA supplemental 
benefits, and Medicaid benefits, consistent with applicable law.
    A State Medicaid agency may use the agreement required by Sec.  
422.107 between the State and the D-SNP to require a FIDE SNP to offer 
MA supplemental benefits that expand coverage of LTSS that are also 
covered under Medicaid (with the Medicaid coverage furnished by the 
FIDE SNP or its affiliated Medicaid MCO). For example, the State 
Medicaid agency may require the FIDE SNP to have coverage of an item or 
service that is only covered under Medicaid for certain beneficiaries 
by offering an MA supplemental benefit that--
     Covers the item or service as a supplemental benefit 
(provided the requirements for supplemental benefits are met per 
section 1854(c) of the Act and 42 CFR 422.2 (definition of MA plan), 
422.100(d), and other regulations) for enrollees who are not eligible 
to receive the item or benefit under Medicaid; or

[[Page 1887]]

     Fills in gaps or provides coverage that exceeds the 
amount, duration, or scope of the Medicaid coverage of the item or 
service.
    All MA plans, including D-SNPs, must comply with uniformity 
requirements in designing and offering supplemental benefits under 
section 1854(c) of the Act and Sec. Sec.  422.2, 422.100(d), and other 
regulations. CMS will consider the supplemental benefits as meeting the 
uniformity requirements in cases where some dually eligible individuals 
receive the benefit under the FIDE SNP's Medicaid managed care contract 
while other enrollees receive the benefit as an MA supplemental benefit 
because they are not eligible for Medicaid benefits under State 
Medicaid eligibility criteria. We are considering whether an amendment 
to Sec.  422.100(d)(2) would be appropriate regarding this approach to 
uniformity for supplemental benefits when a FIDE SNP arranges 
supplemental benefits this way. We welcome comments on that issue.
    For example, a State can require, via the State's contract with a 
FIDE SNP, that the FIDE SNP offer an MA supplemental benefit that 
covers home and community-based services for certain, but not all, 
enrollees, such as enrollees who either: (1) Meet the State Medicaid 
criteria to receive Medicaid home and community-based services but are 
on waiting lists (and therefore ineligible at the time to receive the 
Medicaid services); or (2) are not eligible for the Medicaid benefits, 
such as because the enrollees do not receive full Medicaid benefits 
(that is, partial-benefit dually eligible individuals) or do not meet 
State Medicaid criteria to receive home and community-based services. 
In this case, enrollees have access to medically necessary home and 
community-based services when their needs are similar, even though some 
may be funded as an MA supplemental benefit and others through 
Medicaid.
    Alternatively, a State Medicaid agency could contract with a FIDE 
SNP to use Medicare rebate dollars to pay for a supplemental benefit 
that the State wants the FIDE SNP to provide in addition to the 
Medicaid-funded benefit the FIDE SNP provides under its Medicaid 
managed care contract. For example, depending on the State Medicaid 
agency's contracting and benefit design, a D-SNP could provide its 
enrollees with 2 total weeks of respite care even though the Medicaid 
benefit is limited to 1 week, by providing an MA supplemental benefit 
for respite care. The FIDE SNP would provide the first week of respite 
care--as an MA supplemental benefit--and the second week of respite 
care in its role as a Medicaid managed care plan (where Medicaid is the 
secondary payer).
(a) Using the D-SNP MOC To Coordinate Medicaid Services
    Although not a supplemental benefit, the D-SNP MOC, required by 
Sec.  422.101(f), also provides a vehicle for State Medicaid agencies 
to work with D-SNPs to meet State goals to improve quality of care and 
address SDoH. State Medicaid agencies may work with D-SNPs with service 
areas in the State to include (and, through the State Medicaid agency 
contract at Sec.  422.107, require inclusion of) specific elements in 
the MOC and how the D-SNP delivers covered items and services 
consistent with the MOC. There is no prohibition on a State Medicaid 
agency imposing specific requirements for the D-SNP MOC that are in 
addition to Sec.  422.101(f); compliance with the approved MOC is 
included in the D-SNP's bid to provide basic benefits under Sec.  
422.101(f). For example, the State Medicaid agency contract under Sec.  
422.107 could require the D-SNP to have specific community-based 
providers involved in development of individualized care plans, deploy 
nurse practitioners for in-home care for high-risk enrollees when in-
home services are required by the individualized care plans, use health 
care providers (rather than plan staff) for care coordination 
functions, and/or set minimum payment amounts for such providers.
(b) Coordinating Coverage of Medicare Cost-Sharing
    In general, the same prohibition on duplicate Medicare and Medicaid 
payments for identical benefits applies when a D-SNP covers MA 
supplemental benefits that reduce Medicare Parts A and B cost-sharing, 
such as deductibles and coinsurance, as described for overlapping 
coverage of other Medicaid and MA supplemental benefits. How it works 
depends on whether the State Medicaid agency pays for Medicare cost-
sharing through the Medicaid FFS program or pays the D-SNP a capitated 
amount to cover the State's obligation to pay MA cost-sharing. For 
example, if a D-SNP does not impose the Part B deductible but otherwise 
uses Part B cost-sharing for its coverage of Part B Medicare benefits, 
it would have the following effects:
     It would reduce to $0 the amount the State Medicaid FFS 
program pays providers serving QMBs and other full-benefit dually 
eligible enrollees in the D-SNP for the Part B deductible.
     If the State pays the D-SNP (or its affiliate) for 
coverage of MA cost-sharing otherwise payable by the State, it would 
eliminate any cost for coverage of the Part B deductible from those 
payments to the plan. D-SNPs cannot receive duplicate payments for 
coverage of the Part B deductible--once, in the form of the capitated 
payments from the State for Medicaid coverage and again by including 
the cost of eliminating the Part B deductible in the supplemental 
benefits that are paid by the Medicare beneficiary rebate under section 
1854(b) of the Act.
    Most States pay less than the full MA cost-sharing amount due to 
the application of a ``lesser-of '' \118\ payment method for MA cost-
sharing, and some of these States capitate D-SNPs in their States to 
pay this ``lesser-of '' amount to the provider. D-SNPs in these States 
can combine Medicaid capitated payments and Medicare rebate dollars to 
more fully cover MA cost-sharing--that is, the amount a dually eligible 
individual would pay if not subject to Medicare cost-sharing 
protections \119\--provided that the State Medicaid capitation payment 
and MA bid do not both pay for the same costs. The amount paid using MA 
rebates must be based on the actuarial value of the reduction in 
Medicare cost-sharing that is part of the MA plan benefit design, and 
the State Medicaid capitation payment must be based on the actuarial 
value of Medicare cost-sharing paid for Medicare Parts A and B services 
under the ``lesser-of '' payment method. The overall reduction in 
Medicare cost-sharing must be actuarially equivalent to the Medicare 
cost-sharing paid for by the Medicaid capitated payment plus the 
Medicare rebate dollars allocated to additional reductions in Medicare 
cost-sharing compared to the actuarial value of Medicare cost-sharing 
in the original Medicare FFS program.
---------------------------------------------------------------------------

    \118\ Under the ``lesser of '' policy, a State caps its payment 
of Medicare cost-sharing at the Medicaid rate for a particular 
service. For example, if the Medicare (or MA) rate for a service is 
$100, of which $20 is beneficiary coinsurance, and the Medicaid rate 
for the service is $90, the State would only pay $10. If the 
Medicaid rate is $80 or lower, the State would make no payment.
    \119\ Qualified Medicare Beneficiaries and full benefit Medicare 
beneficiaries have protections from being charged Medicare cost-
sharing for Medicare Parts A and B services. See https://www.cms.gov/files/document/medicaremedicaidenrolleecategories.pdf 
for the protections that apply to different categories of dually 
eligible individuals.
---------------------------------------------------------------------------

    We seek comments on State and MA organization experiences and 
challenges in coordinating benefits, CMS guidance or regulations that 
may warrant clarification, and whether our current policies create any 
unintended obstacles

[[Page 1888]]

to accessing services among dually eligible beneficiaries.
14. Converting MMPs to Integrated D-SNPs
    In the 10 years since the creation of the FAI, the integrated care 
landscape has changed substantially. Congress made D-SNPs permanent in 
2018 and established, effective beginning in 2021, new minimum 
integration standards and directed the establishment of unified appeals 
and grievance procedures (which we tested through the MMPs). Changes in 
MA policy have also created a level of benefit flexibility that did not 
previously exist outside of the capitated model demonstrations, with MA 
plans increasingly offering supplemental benefits that address social 
determinants of health and long-term services and supports.\120\ These 
factors, in combination with the proposals discussed earlier in this 
proposed rule, offer the opportunity to implement integrated care at a 
much broader scale than existed when MMPs were first created. As a 
result, should we finalize the proposals in this rule that facilitate 
or require greater integration, we would work with the states 
participating in the capitated financial alignment model during CY 2022 
to develop a plan for converting MMPs to integrated D-SNPs.
---------------------------------------------------------------------------

    \120\ ATI Advisory. New, Non-Medical Supplemental Benefits in 
Medicare Advantage in 2021. May 2021. https://atiadvisory.com/wp-content/uploads/2021/06/2021-Special-Supplemental-Benefits-for-the-Chronically-Ill.pdf.
---------------------------------------------------------------------------

    The process for converting MMPs to integrated D-SNPs would depend 
in part on each State's circumstances. States may choose to use the 
opportunities under our proposed Sec.  422.107(e) to structure the 
integrated D-SNP products to replicate key features of MMPs. Interested 
States, in consultation with local stakeholders, could submit letters 
as described at proposed Sec.  422.107(e)(2) indicating intent to 
include contract requirements under Sec.  422.107(e)(1) and take steps 
toward including those new terms in their contracts with D-SNPs. 
Concurrently, the interested States would also notify the MMP sponsors 
via the transition plan required in the three-way contracts. The 
organizations offering the MMPs would submit a notice of intent to 
apply and corresponding application for an MA contract, along with the 
D-SNP application specific to the integrated product as part of the 
annual MA application process, as described in section II.A.6.a. of 
this proposed rule. These States would work together with CMS to take 
the administrative steps necessary to maintain several of the 
integrated processes developed as part of the capitated model 
demonstrations, as discussed in the previous proposals (for example, 
integrated materials, unified appeals and grievances, enrollment 
processes to support exclusively aligned enrollment, etc.). States 
would develop new or revise existing State Medicaid agency contracts 
with integrated D-SNP sponsors to reflect State-specific Medicaid-
related policies and priorities. Concurrently, States may need to 
attain appropriate Medicaid authorities to preserve integration through 
Medicaid managed care plans or may need to use existing Medicaid 
authorities to restructure Medicaid managed care contracts.
    Incorporating successful elements from MMPs into D-SNPs, using the 
processes and new requirements proposed in this rule, while phasing out 
MMPs as separate managed care products, would streamline and strengthen 
integrated care options for dually eligible individuals. It would allow 
CMS, States, and plan sponsors to concentrate quality improvement 
resources on a smaller number of products focused on dually eligible 
individuals. Now that Congress has permanently authorized SNPs, it 
would offer greater stability to States and sponsors and signal a 
longer term commitment to integration to stakeholders, including 
advocates, providers, and plans, than we could offer under time-limited 
model tests. It would also alleviate States and plans of the additional 
administrative burden associated with a demonstration, potentially 
freeing up additional resources that could be reinvested in refining 
and enhancing integrated care. We intend to continue--focusing now on 
D-SNPs--many of the technical assistance and quality improvement 
activities that we initially developed for MMPs, including--
     Learning communities;
     Direct work with beneficiary advocates and other 
stakeholders;
     Targeted efforts to improve outcomes and reduce 
disparities; and
     Capacity building on topics like person centeredness, 
disability-competent care, dementia, and behavioral health.
    Converting MMPs into integrated D-SNPs would not be without 
downsides. While the aforementioned proposals, if finalized, would 
create mechanisms and new requirements to replicate much of the 
programmatic or administrative integration found in MMPs, other aspects 
of integration would be lost, including financing provisions (such as 
integrated risk mitigation and medical loss ratio calculations) and the 
ability to conduct passive enrollment at scale. States may also no 
longer have access to the same funding we provide to support ombudsman 
and options counseling as part of the current model tests. It may also 
be challenging to replicate the integrated enrollment processes 
utilized for MMPs if States no longer process all enrollments, and it 
is possible that we would lose some integration in beneficiary 
communications materials, particularly enrollment notices, in the 
process. In addition, converting MMPs to integrated D-SNPs also means 
transitioning the over 400,000 individuals currently being served by 
MMPs, and there is risk for beneficiary confusion and disruption of 
services and care coordination during such a transition.
    In order to mitigate any disruptions that could result from 
converting MMPs to D-SNPs, we intend to work closely with States and 
other stakeholders to ensure the transition is as seamless as possible 
for MMP enrollees. To that end, we are considering use of our authority 
under section 1115A of the Act to facilitate the transition of MMP 
enrollees to D-SNPs operated by the same parent organization, subject 
to State approval, unless enrollees choose otherwise. This will 
minimize disruption of services and ensure continuity of care to the 
greatest extent possible. We already have experience with similar 
transitions at the end of the Virginia \121\ and New York MMP 
demonstrations \122\ and are working closely with the California 
Department of Health Care Services and MMPs to facilitate such a 
transition when the Cal MediConnect demonstration concludes at the end 
of 2022.\123\ We seek comment on this contemplated approach to working 
with States to convert MMPs to integrated D-SNPs.
---------------------------------------------------------------------------

    \121\ Centers for Medicare & Medicaid Services and Virginia 
Department of Medical Assistance Services. Commonwealth Coordinated 
Care (CCC) Phase-Out Plan. https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Downloads/VAPhaseOutPlan.pdf.
    \122\ Centers for Medicare & Medicaid Services and New York 
Department of Health. New York Fully Integrated Dual Advantage 
Demonstration Phase-Out Plan. September 2019. https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Downloads/NYFIDAPhaseOutPlan.pdf.
    \123\ California Department of Health Care Services. Expanding 
Access to Integrated Care for Dual Eligible Californians. March 
2021. https://www.dhcs.ca.gov/provgovpart/Documents/6422/Expanding-Access-to-Integrated-Care-for-Dual-Eligible-Californians-03-01-21.pdf.

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[[Page 1889]]

B. Special Requirements During a Disaster or Emergency (Sec.  
422.100(m))

    In the February 12, 2015, final rule titled, ``Medicare Program; 
Contract Year 2016 Policy and Technical Changes to the Medicare 
Advantage and the Medicare Prescription Drug Benefit Programs'' (80 FR 
7959) (hereinafter referred to as the 2015 final rule), CMS finalized a 
new paragraph (m) in Sec.  422.100 to codify and clarify an MA 
organization's responsibilities when health plan services are affected 
by disasters or emergencies, including public health emergencies 
(PHEs), to ensure that MA enrollees continue to have access to care 
when normal business operations are disrupted and to ensure out-of-
network providers are informed of the terms of payment for furnishing 
services to affected enrollees during disasters or emergencies. During 
the Coronavirus 2019 Disease (COVID-19) PHE, we received questions 
about the applicability of the special requirements at Sec.  
422.100(m), which prompted us to review the regulation and the laws 
related to the declaration of disasters and emergencies. In light of 
this review, we are proposing changes to clarify potential ambiguities 
in the regulation text, to further clarify the basis for determining 
the end of an MA organization's obligations to comply with special 
requirements during a disaster or emergency and to codify our previous 
guidance. Specifically, we are proposing to revise Sec.  422.100(m) to 
more clearly specify when MA organizations must begin ensuring access 
to covered benefits by meeting the requirements in paragraphs (m)(1)(i) 
through (iv) and when MA organizations are permitted to stop meeting 
those requirements.
    Section 1852(d) of the Act requires MA organizations to provide 
continued availability of and access to covered benefits, including 
making medically necessary benefits available and accessible 24 hours a 
day and 7 days a week; the ability to limit coverage to benefits 
received from a plan's network of providers is contingent on fulfilling 
this obligation. When a disaster or emergency occurs, enrollees may 
have trouble accessing services through network providers or sometimes 
must physically relocate to locations that are outside of their MA 
plan's service area. Currently, Sec.  422.100(m) requires MA 
organizations to ensure access, at in-network cost sharing, to covered 
services even when furnished by noncontracted providers when disruption 
in their MA plan's service area during a state of disaster or emergency 
impedes enrollees' ability to access covered healthcare services from 
contracted providers. Consistent with uniformity requirements for MA 
plans at Sec.  422.100(d) and other regulations, these special 
requirements must be uniformly provided to similarly situated enrollees 
who are affected by the state of disaster or emergency.
    First, we propose to amend the regulation to explicitly limit the 
application of the special requirements to when there is a disruption 
in access to health care. In the 2015 final rule, we stated in the 
preamble that the regulations at Sec.  422.100(m) were added to require 
MA organizations to ensure access, at in-network cost sharing, to 
covered services even when furnished by noncontracted providers ``when 
a disruption of care in the service area impedes enrollees' ability to 
access contracted providers and/or contracted providers' ability to 
provide needed services.'' (80 FR 7953) We propose to revise Sec.  
422.100(m)(1) to include that there must also be a disruption of access 
to health care in addition to a disaster or emergency declaration for 
the MA organization to be required to ensure access to covered benefits 
consistent with the special requirements described in Sec.  
422.100(m)(1). We propose to define ``disruption of access to health 
care'' for purposes of these special requirements by adding a new 
paragraph (m)(6); as proposed, a ``disruption of access to health 
care'' for the purpose of Sec.  422.100(m) is an interruption or 
interference in access to health care throughout the service area such 
that enrollees do not have the ability to access contracted providers 
or contracted providers do not have the ability to provide needed 
services causing MA organizations to fail to meet the prevailing 
patterns of community health care delivery in the service area under 
Sec.  422.112(a). The intent of these modifications is to clarify that 
if there is a current state of disaster or emergency that is not 
contributing to a disruption in health care services, then MA 
organizations would not be required to follow the requirements at Sec.  
422.100(m)(1)(i)-(iv). During a state of disaster or emergency, MA 
organizations must continue to meet MA access and availability 
requirements consistent with the normal prevailing community pattern of 
health care delivery in the areas where the network is being offered. 
During a state of disaster or emergency, disruptions caused by the 
disaster or emergency may prevent contracted providers from providing 
services to enrollees. If enough contracted providers are unavailable 
to enrollees, then the MA plan would not have enough contracted 
providers consistent with the normal prevailing community pattern of 
health care delivery in the service area. Per the proposed definition, 
this would indicate that there is a disruption in access to health care 
in the service area, and MA organizations would be required to follow 
the special requirements at Sec.  422.100(m)(1). This definition is not 
intended to be limited to physical barriers to access (such as 
electrical outages or transportation difficulties caused by hurricanes 
or wildfires) but to be broad enough to encompass any interruption or 
interference caused by a disaster or emergency such as a lack of 
available hospital beds or quarantine restrictions. Therefore, under 
our proposal, when a disaster or emergency interrupts that level of 
access to and availability of services, MA organizations must ensure 
access by covering basic and supplemental benefits furnished at non-
contracted facilities; waiving, in full, requirements for gatekeeper 
referrals where applicable; providing in-network cost sharing even if 
the enrollee uses out-of-network providers; and making changes that 
benefit the enrollee effective immediately without the 30-day 
notification requirement at Sec.  422.111(d)(3). Limits in other 
regulations, such as Sec. Sec.  422.204(b)(3) and 422.220 through 
422.224, on which healthcare providers may furnish benefits remain in 
place and are not eliminated by Sec.  422.100(m).
    In the definition, we refer to the normal prevailing community 
pattern of health care delivery in the service area as it usually is 
when a state of disaster or emergency does not exist, not the 
prevailing community pattern of health care delivery in the service 
area during the state of disaster or emergency. During a state of 
disaster or emergency, it is possible that access to health care will 
be disrupted affecting more than MA enrollees, including access to care 
for enrollees in commercial plans and Original Medicare. To provide an 
extreme example, an MA organization could indicate that they are 
meeting the prevailing community pattern of health care delivery when 
all of the primary care providers in the service area are closed due to 
a state of disaster, and they are therefore meeting the standard 
because everyone in the service area, no matter the type of insurance 
they have, cannot access primary care providers. As explained above, 
this would not be acceptable, as CMS is measuring the prevailing 
community pattern of health care by reference to the pre-disaster 
period. Under the proposed regulation,

[[Page 1890]]

MA organizations would be required to ensure access for their enrollees 
by complying with the special requirements listed at Sec.  
422.100(m)(1)(i) through (iv). While we consider the standard to be the 
normal prevailing community pattern of health care delivery, we 
understand this standard broadly in the context of disasters and 
emergencies. Some examples that would constitute a disruption in access 
to health care include physical barriers to accessing health care such 
as road disruptions or electrical outages, as well as other barriers to 
accessing health care such as provider offices being closed due to 
quarantine requirements from the Centers for Disease Control and 
Prevention (CDC) or state or local health departments, or hospitals 
beds being unavailable as occurred during the COVID-19 pandemic. This 
list is not intended to be exhaustive as many unforeseen circumstances 
may arise during states of disaster or emergencies that may cause 
enrollees to have trouble accessing services through normal channels or 
force them to move to safer locations that are outside of their plans' 
service areas. A disruption in access to health care could include 
disruptions in access to Medicare Part A or Part B services or to 
supplemental benefits offered by the plan, or any combination of those. 
Our proposal is intended to be broad and to focus on actual access to 
and availability of services for enrollees in a service area affected 
by a disaster or emergency. Whether the MA plan network continues to 
meet evaluation standards specified in Sec.  422.116 is not the only 
relevant consideration. For example, regarding a hospital with beds or 
other equipment unavailable to treat additional patients (as has 
occurred during COVID-19 pandemic), the hospital remains part of the MA 
organization's network, and therefore the network may be consistent 
with CMS's network adequacy standards for MA plan, but enrollees would 
not be able to access the hospital and may need to go to out-of-network 
providers to access their covered benefits. Similarly, physical 
barriers that enrollees may experience during a disaster or emergency 
(road closures, flooding, etc.) may affect enrollees unevenly, 
preventing some enrollees from accessing in-network providers. The 
provider may be part of the MA organization's network and therefore the 
network may meet the time and distance evaluation standards in Sec.  
422.116 and appear to be capable of furnishing services consistent with 
the prevailing community pattern of health care, but some enrollees may 
experience difficulty accessing that provider to obtain needed health 
services. Further, if an enrollee had to leave their home to move to a 
safer location due to a disaster or emergency, the MA organization may 
still have a network that meets the prevailing community pattern of 
health care in the service area of the enrollee's home, but the 
enrollee may not be able to access health care in their safer location 
without being able to access out-of-network care. We request comments 
from stakeholders on our proposed definition to determine whether there 
are circumstances CMS is not considering or additional standards that 
we should be using to identify when a disruption of access to health 
care is occurring.
    We propose to add a disruption of access to health care as a 
condition that must be met before the special requirements in Sec.  
422.100(m)(1) apply in order to ensure that this regulation is not 
overly broad and is appropriately tailored to address our concerns that 
MA enrollees have adequate access to medically necessary care and are 
not unduly restricted to the MA plan's network of providers. As an 
illustrative example of a situation where a disruption of access to 
health care was not present even though a state of emergency was in 
effect, the Governor of Hawaii issued a state of emergency \124\ to 
fight the Zika virus in February of 2016. This state of emergency did 
not require all MA organizations operating in Hawaii to comply with the 
requirements at Sec.  422.100(m)(1) because all provider offices were 
operating as usual, contracted providers continued in their ability to 
provide needed services, and enrollees did not face barriers in 
accessing needed services. The Opioid PHE, which began in 2017, is 
another example where there is a declared PHE by the Secretary that has 
been ongoing, but it does not necessarily constitute a disruption of 
access to health care. However, in 2017, Hurricane Maria in Puerto Rico 
led to substantial issues with access to covered services for MA 
enrollees. In connection with the Hurricane Maria, there was a 
Presidential declaration of a major disaster under the Stafford Act on 
September 20, 2017 \125\ and a Public Health Emergency declaration by 
the Secretary as of September 17, 2017.\126\ Under our proposal, MA 
organizations would be required to meet the special requirements at 
Sec.  422.100(m)(1) for the duration of similar disasters and 
emergencies where access to covered benefits is disrupted.
---------------------------------------------------------------------------

    \124\ https://governor.hawaii.gov/wp-content/uploads/2016/02/160212_EmergencyProclamation_Dengue.pdf.
    \125\ https://www.govinfo.gov/content/pkg/FR-2017-10-06/pdf/2017-21649.pdf.
    \126\ https://www.cms.gov/About-CMS/Agency-Information/Emergency/Downloads/Puerto-Rico-and-US-Virgin-Islands-PHE-Determination.pdf.
---------------------------------------------------------------------------

    Under this proposal, we propose that MA organizations would be 
initially responsible for evaluating whether there is a disruption of 
access to health care under Sec.  422.100(m). We believe MA 
organizations are best positioned to evaluate if a state of disaster or 
emergency is disrupting access to health care for enrollees in their 
service area. MA organizations would know the status of their in-
network providers (for example, whether they are operational or not, 
how many beds are filled, etc.) and would be in communication with 
their providers as issues at the provider's facilities or with an MA 
organization's enrollees arise. MA organizations should be guided by 
the explanations here, including the examples, as well as their 
particular and detailed knowledge and understanding of their enrollees, 
service areas, and networks, to reasonably assess if there is a 
disruption in access to health care in the service area. CMS expects 
that MA organizations should be aware of these and other facts 
regarding access to health care in the service areas where they offer 
plans, and should be able to evaluate those facts and apply the 
standard in the regulation to know when they must comply with the 
special requirements at Sec.  422.100(m). CMS will closely monitor 
access during disasters or emergencies to ensure MA organizations are 
applying the standard in Sec.  422.100(m)(1) correctly and complying 
with this regulation to avoid any disruptions in access to care. As we 
monitor, we will evaluate whether and when the standard in Sec.  
422.100(m)(1) as proposed to be amended here is met. If CMS discovers 
that there are problems with access for enrollees, we will direct MA 
organizations in an affected area to comply with Sec.  422.100(m), but 
we reiterate that an MA organization should be able to apply the 
standard in the regulation to the relevant facts related to a potential 
disruption in access to care during a disaster or emergency in order 
for the MA organization to know when compliance is required. MA 
organizations are required to meet the network adequacy requirements at 
Sec. Sec.  422.112(a) and 422.116 at all times to ensure enrollees have 
sufficient access to covered benefits. MA organizations that fail to 
meet network adequacy requirements must ensure access to specialty care 
by permitting enrollees to see out-of-network specialists at the 
individual enrollee's in-network cost

[[Page 1891]]

sharing level under Sec.  422.112(a)(3). In addition, MA organizations 
may need to make alternate arrangements if the network of primary care 
providers is not sufficient to ensure access to medically necessary 
care under Sec.  422.112(a)(2). This proposal would not change these 
existing and continuing regulatory requirements.
    Similar to what we have seen during the COVID-19 PHE, CMS expects 
that there will be situations where there is a disruption of access to 
health care for some period of time during a disaster or emergency but 
not at other times. Under our proposed regulation, MA organizations 
would follow the special requirements imposed by Sec.  422.100(m)(1) 
for 30 days after the disruption of access to health care ends while 
the disaster or emergency is ongoing and for 30 days after the end of 
the disaster or emergency if the disruption of access to health care, 
as defined in Sec.  422.100(m)(6), continues until the end of the 
disaster or emergency. MA organizations may also find that at later 
time period during the same disaster or emergency, there is another 
disruption of access to health care and therefore that the MA 
organization must again follow the special requirements imposed by 
Sec.  422.100(m)(1). We also recognize that there may be circumstances 
when a state of disaster or emergency is declared for an area 
containing multiple service areas (for example, the entire United 
States), but the disaster or emergency may unequally affect the various 
service areas contained in the larger area for which it is declared. It 
may be that some service areas experience a disruption of access to 
health care, but other service areas do not, or that the disruption in 
care ends for certain service areas but continues in others. Under our 
proposed regulation, in situations where a disruption of access to 
health care ends in a particular service area, but the state of 
disaster or emergency continues to be in effect for an area that 
includes that particular service area, the special requirements imposed 
by Sec.  422.100(m)(1) would be in effect for the service areas in 
which there is a disruption of access to health care (until 30 days 
after the disruption of access to health care ends) and would not be in 
effect for services in which there has not been any disruption of 
access to health care.
    We are also proposing two technical changes to our regulations at 
Sec.  422.100(m)(2) to correct some numbering issues that occurred in 
the 2015 final rule. First, we are proposing to move the text from the 
fourth-level paragraph at (m)(2)(ii)(A) to the third-level paragraph at 
(m)(2)(ii), which currently does not have text associated with it. As 
amended, the regulation at Sec.  422.100(m)(2)(ii)(A) would state that 
the Secretary of Health and Human Services (hereinafter referred to as 
the Secretary) may declare a PHE under section 319 of the Public Health 
Service Act. Second, we are proposing to remove the fourth-level 
paragraph at (m)(2)(ii)(B) because this paragraph only provides 
information about the Secretary's section 1135 waiver authority which 
is not an authority under which the Secretary may declare PHEs. In 
addition to these technical changes, we are proposing several 
clarifying revisions to our language in Sec.  422.100(m) to ensure that 
we are consistently referring to disasters and emergencies. Currently, 
the language sometimes refers only to disasters (as in the introductory 
text to paragraphs (m)(1) and (2)), but also refers to disasters and 
public health emergencies (as in the text to paragraphs (m)(3) and (4) 
and (m)(5)(i)). We therefore propose to update the language throughout 
to reference disasters and emergencies with the aim of being consistent 
in that we refer to the various types of declarations listed at Sec.  
422.100(m)(2).
    Lastly, we are proposing revisions to clarify the basis for 
determining when MA organizations are no longer required to comply with 
the special requirements for a disaster or emergency. We are proposing 
to modify the text at Sec.  422.100(m)(3) to clarify that it refers to 
the end of the special requirements for a state of disaster or 
emergency stipulated at Sec.  422.100(m)(1), not to the end of the 
state of disaster or emergency itself. We are also proposing to add a 
30-day transition period to Sec.  422.100(m)(3). Our current regulation 
at Sec.  422.100(m)(3)(iii) provides a period of 30 days from the 
initial declaration for the special requirements imposed by Sec.  
422.100(m)(1) to be in effect if the initial declaration of the 
disaster or emergency does not contain a specific end date or if the 
official or authority that declared the disaster or emergency does not 
separately identify a specific end date, and CMS has not indicated an 
end date to the disaster or emergency. This means that, under the 
current regulation, there is usually a 30-day minimum period during 
which MA plans are providing access to covered benefits with the 
additional beneficiary protections specified in paragraphs (m)(1)(i) 
through (iv), unless an explicit announcement of the end of the 
disaster or emergency has been declared. We believe that having a 
minimum period for these protections is important and appropriate. A 
transitional period from when an MA organization must comply with the 
access requirements in Sec.  422.100(m)(1) to normal coverage rules 
will protect enrollees who need time and assistance from the MA 
organization to find a contracted provider after having been treated by 
a non-contracted provider during the disaster or emergency. We intend 
for this period to serve as a protection for enrollees so they are not 
immediately responsible for the total cost of services received from a 
non-contracted provider that they have been seeing for a period of time 
due to the state of disaster or emergency. MA organizations may also 
find a transitional period helpful if they must contract with 
additional providers or otherwise make changes to their network to 
assist with the return to normal operations. We therefore propose to 
revise the regulation text at Sec.  422.100(m)(3) to require a 30-day 
transition period after the points in time identified in the regulation 
for the end of the special requirements. Specifically, we propose to 
revise paragraph (m)(3) to provide that the applicability of the 
special requirements for a disaster or emergency in paragraphs 
(m)(1)(i) through (iv) end 30 days after the latest of the events 
specified in paragraph (m)(3)(i) or (ii) occur (that is, the latest end 
date in a case where there are multiple disasters/emergencies) or end 
30 days after the condition specified in paragraph (m)(3)(iii) occurs 
(that is, there is no longer a disruption of access to health care).
    In the 2015 final rule, we finalized three circumstances as 
determining the end of the special requirements for a disaster or PHE 
in the regulations at Sec.  422.100(m)(3). First, as currently provided 
in Sec.  422.100(m)(3)(i), the source that declared the disaster or PHE 
declares an end to it. As explained in Sec.  422.100(m)(2), disasters 
or emergencies may be declared by the President of the United States 
under the Robert T. Stafford Disaster Relief and Emergency Assistance 
Act (Stafford Act) or the National Emergencies Act, by the Secretary 
who may declare a PHE under section 319 of the Public Health Service 
Act, or by Governors of States or Protectorates. We intend paragraph 
(m)(3)(i) to address circumstances when the initial declaration 
contains a specific end date or when the official or authority who 
declared the disaster or emergency separately identifies a specific end 
date. We are proposing to revise Sec.  422.100(m)(3)(i) to address 
situations that may arise where there is more than one declaration of a 
disaster

[[Page 1892]]

or emergency at the same time for the same service area(s). This 
proposed revision clarifies that MA organizations must follow the 
special requirements until the latest applicable end date when multiple 
declarations apply to the same geographic area by specifying that all 
sources that declared a disaster or emergency that include the service 
area have declared an end. For example, if a Governor of a State 
declares a state of disaster or emergency and the President also later 
declares a state of disaster, both the state and federal disasters must 
be declared at an end to trigger Sec.  422.100(m)(3)(i). If the 
President's disaster declaration ends after 20 days, but the Governor 
maintains the state of disaster for 30 days, then the special 
requirements imposed by Sec.  422.100(m)(1) would apply for MA plans in 
that area through the end of the emergency declared by the Governor, 
plus an additional 30 days for the transition period we are also 
proposing.
    Second, the regulation currently provides that CMS may declare an 
end to the state of disaster or PHE per Sec.  422.100(m)(3)(ii). Upon 
review, we intended for this regulation text to refer to the 
Secretary's authority, which is consistent with the current practice of 
the Secretary to declare an end to PHEs. However, since the Secretary 
is already considered a source under Sec.  422.100(m)(3)(i), we believe 
that modifying this requirement to refer to the Secretary is 
unnecessary and therefore we propose to remove this text.
    Third, our current regulation at Sec.  422.100(m)(3)(iii) addresses 
circumstances where a state of disaster or PHE is declared with no end 
date identified. Because Sec.  422.100(m)(3) provides that the end of 
the emergency or state of disaster ends when ``any'' of the three 
listed, if the declaration disaster or emergency timeframe has not been 
identified by the authority or official who declared the disaster or 
emergency and CMS has not indicated an end date to the disaster or 
emergency, MA plans should resume normal operations 30 days from the 
initial declaration. However, this does not properly account for how 
declarations of disasters or emergencies may be renewed with continued 
disruptions to access to health care services for enrollees. Further, 
our experiences with declarations of disasters and emergencies have 
demonstrated that the 30-day timeframe for the special requirements in 
Sec.  422.100(m)(1)(i) through (iv) may not be enough time to address 
concerns about enrollees being able to access benefits during disasters 
or emergencies, especially in cases where a disaster or emergency 
declaration has been renewed. There are circumstances where a 30-day 
time period does not cover the full length of a declared disaster or 
emergency and the current regulation is not well suited to ensure 
access for enrollees during the entire period of a disaster or 
emergency. For example, a PHE declared by the Secretary under section 
319 of the Public Health Service Act is in effect for 90 days unless 
the Secretary terminates it earlier, and the Secretary may renew the 
declaration at the end of the 90-day period.
    We propose to revise Sec.  422.100(m)(3)(ii) to address when no end 
date is identified under Sec.  422.100(m)(3)(i); in such cases, the 
applicability of the special requirements ends 30 days after the 
expiration of the declared disaster or emergency and any deadline for 
renewing the state of disaster or emergency. This modification 
clarifies that when a state of disaster or emergency is declared 
without an end date, Sec.  422.100(m)(1) will continue to apply for the 
entire duration of the declared disaster or emergency, as determined 
under the relevant authority under which it was declared, if a 
disruption of access to health care continues. Stafford Act 
declarations do not have a defined end date. When the President 
declares a national emergency under the National Emergencies Act, the 
declaration of a national emergency lasts for a year unless terminated 
earlier by the Presidential proclamation or a joint resolution of 
Congress. The President can renew the declaration for subsequent one-
year periods. When the Secretary declares a PHE under section 319 of 
the Public Health Service Act, it lasts for 90 days unless the 
Secretary terminates it earlier, and it can be renewed for 90-day 
periods. For example, if the Secretary declared a PHE under section 319 
of the Public Health Service Act, then the end date of the PHE would be 
in 90 days, unless renewed. If the Secretary chose to declare an end 
before the 90-day period ended, then the public health emergency would 
end according to the declared end date. CMS does not have the expertise 
to know whether all state declarations of emergency have a defined end 
date. Therefore, we are not proposing specific time periods but are 
proposing to amend Sec.  422.100(m)(3)(ii) to account for extensions or 
renewals of declarations of the type identified in paragraph (m)(2).
    Lastly, we propose to add the disruption of access to health care 
as a limitation under revised Sec.  422.100(m)(3)(iii) to indicate that 
the special requirements associated with a state of disaster or 
emergency may end when the disruption of access to health care ends, 
even if one of the circumstances in Sec.  422.100(m)(3)(i) or (ii) to 
end the state of disaster or emergency has not yet occurred.
    We intend to continue to issue subregulatory guidance as 
appropriate for MA organizations to explain how Sec.  422.100(m) works, 
both through the HPMS system and through the CMS Current Emergencies 
web page at: https://www.cms.gov/About-CMS/Agency-Information/Emergency/EPRO/Current-Emergencies/Current-Emergencies.-page. Further, 
we note that the Secretary may exercise the waiver authority under 
section 1135 of the Social Security Act during an emergency period 
(defined in Section 1135(g) of the Act), which exists when the 
President declares a disaster or emergency pursuant to the National 
Emergencies Act or the Stafford Act, and the Secretary declares a PHE 
pursuant to section 319 of the Public Health Service Act. Under the 
Secretary's section 1135 waiver authority, CMS may authorize DME and A/
B Medicare Administrative Contractors (MACs) to pay for Part C-covered 
services furnished to MA enrollees and seek reimbursement from MA 
organizations for those health care services, retrospectively. Detailed 
guidance and requirements for MA organizations under the section 1135 
waiver, including timeframes associated with those requirements and 
responsibilities, would be posted on the Department of Health and Human 
Services website, (https://www.hhs.gov/ gov/) and the CMS website (https://www.cms.hhs.gov/). MA organizations are expected to check these sites 
frequently during such disasters and emergencies.
    We propose the following changes to our regulations at Sec.  
422.100(m):
     Revise Sec.  422.100(m)(1) to state that when a disaster 
or emergency is declared as described in Sec.  422.100(m)(2) and there 
is disruption of access to health care as described in Sec.  
422.100(m)(6), an MA organization offering an MA plan must, until one 
of the conditions described in Sec.  422.100(m)(3) of this section 
occurs, ensure access to benefits as described in Sec.  
422.100(m)(1)(i)-(iv).
     Revise Sec.  422.100(m)(2) to refer to emergencies and 
disasters.
     Move the current text of Sec.  422.100(m)(2)(ii)(A) to 
Sec.  422.100(m)(2)(ii).
     Remove Sec.  422.100(m)(2)(ii)(B).

[[Page 1893]]

     Revise Sec.  422.100(m)(3) to specify to the end of the 
applicability of the special requirements rather than to the end of the 
disaster or emergency.
     Revise Sec.  422.100(m)(3) to add a transition period of 
30 days after the earlier of the conditions described in Sec.  
422.100(m)(3)(i) and (ii) occurs or after the condition described in 
Sec.  422.100(m)(3)(iii) occurs; during the transition, MA 
organizations must continue to comply with Sec.  422.100(m)(1).
     Revise Sec.  422.100(m)(3)(i) to clarify that MA 
organizations must follow the special requirements until all of the 
sources that declared a disaster or emergency in the service area 
declare it ended.
     Revise Sec.  422.100(m)(3)(ii) to state that no end date 
was identified in Sec.  422.100(m)(3)(i) of this section, and all 
applicable disasters or emergencies have ended, including through 
expiration of the declaration or any renewal of such declaration.
     Revise Sec.  422.100(m)(3)(iii) to state that the special 
requirements identified in Sec.  422.100(m)(1) of this section may also 
end if the disruption in access to health care services ends.
     Revise Sec.  422.100(m)(4) to refer to disasters and 
emergencies.
     Revise Sec.  422.100(m)(5)(i) to refer to disasters and 
emergencies.
     Add a new paragraph at Sec.  422.100(m)(6) to define 
``disruption of access to health care'' as an interruption or 
interference throughout the service area such that enrollees do not 
have ability to access contracted providers or contracted providers do 
not have the ability to provide needed services, resulting in MA 
organizations failing to meet the normal prevailing patterns of 
community health care delivery in the service area under Sec.  
422.112(a).

C. Amend MA Network Adequacy Rules by Requiring a Compliant Network at 
Application (Sec.  422.116)

    In the ``Medicare Program; Contract Year 2021 Policy and Technical 
Changes to the Medicare Advantage Program, Medicare Prescription Drug 
Benefit Program, and Medicare Cost Plan Program'' final rule, which 
appeared in the Federal Register on June 2, 2020 (85 FR 33796) 
(hereinafter referred to as the June 2020 final rule), CMS codified, 
with some modifications, our network adequacy criteria and access 
standards (previously outlined in sub-regulatory guidance) under a new 
regulation at Sec.  422.116. Section 1852(d)(1) of the Act permits an 
MA organization to limit the providers from which an enrollee may 
receive covered benefits provided that the MA organization, among other 
standards, makes such benefits available and accessible in the service 
area with reasonable promptness. Using our authority under the statute 
to implement, interpret and enforce these requirements, we finalized 
Sec.  422.116 setting forth specific requirements. The provisions at 
Sec.  422.116 outline standards for measuring network adequacy and 
access under a contracted provider network in accordance with 
requirements and standards in section 1852(d)(1) of the Act and in 
Sec. Sec.  422.112(a) and 422.114(a)(1) of our regulations. In 
addition, the regulation codified our then-existing policy, that CMS 
does not deny an application based on the evaluation of the applicant's 
network for a new or expanding service area. Under our policy at the 
time of the June 2020 final rule and Sec.  422.116(a)(2), an applicant 
is required to attest that it has an adequate network for access and 
availability of applicable provider and facility types at the time of 
the application for a new or expanding service area.
    We are proposing to amend Sec.  422.116(a)(1)(ii) to require 
compliance with applicable network adequacy standards set forth in 
Sec.  422.116 as part of an application for a new or expanding service 
area. As indicated in the June 2020 final rule, we currently rely on 
our existing triennial network review process and timeline to evaluate 
compliance with network adequacy standards for organizations applying 
for a new or expanding service area. As discussed in the June 2020 
final rule, we removed network adequacy reviews from the application 
process beginning in 2018 for contract year 2019. While the process of 
reviewing provider networks as part of the triennial review has thus 
far been adequate and efficient operationally, we have also experienced 
unintended consequences as discussed further in this section, and are 
therefore proposing to improve our oversight and effectiveness of 
network adequacy reviews for initial applicants and services area 
expansion (SAE) applicants by requiring provider network reviews at the 
time of such MA applications.
    Currently, consistent with Sec.  422.116(a)(1)(i) and our 
application process, applicants must attest that they meet provider 
network standards, but do not have to demonstrate that they meet CMS 
network requirements before submitting a bid for the following contract 
year. CMS's experience has shown that since adopting the attestation-
only approach for the 2019 contract year, organizations are requesting 
to remove a county (or multiple counties) from their service area (that 
is, service area reduction) after bids are submitted because the 
organization realizes that it does not have a sufficient network for 
the entire service area. For example, five organizations have requested 
to make changes to the service area of a total of 10 plans after bid 
submission deadlines since 2019.
    Bid integrity is a priority for CMS. A request by an organization 
to make service area reductions related to provider networks after bid 
submission calls into question the completeness and accuracy of the 
bid(s). The provider network is an important consideration in preparing 
the bid submission. Permitting the MA organization to make changes to 
the bid submission because of the inability to meet network adequacy, 
which is reviewed after the first Monday in June (the bid deadline), 
would subsequently allow the MA organization to introduce revised 
information into the bidding process. The introduction of this revised 
information after the first Monday in June implies that the initial bid 
submission was not complete, timely, or accurate. Requiring the 
submission of networks for review as part of the application will 
mitigate this issue, as the application review is complete before bids 
are due.
    Furthermore, network adequacy reviews are a critical component for 
confirming that access to care is available for enrollees. Our network 
evaluations ensure that we are monitoring networks and requiring 
organizations to provide sufficient access to providers and facilities 
without placing undue burden on enrollees seeking covered services. 
Adding network reviews back to the application process will help ensure 
overall bid integrity, result in improved product offerings, and 
protect beneficiaries.
    After we adopted the current policy, failures detected during 
network reviews were not a basis to deny an application and CMS 
expected plans to cure deficiencies and meet network adequacy standards 
once coverage began on January 1 of the following year. In analyzing 
the network adequacy review determinations for the years since removing 
network adequacy requirements from the application, we have observed a 
pattern across these network review outcomes: Organizations continue to 
have failures in their networks even after the contract is operational. 
For example, we found that 19 initial applicants who submitted provider 
and facility Health Service Delivery (HSD) tables since contract

[[Page 1894]]

year 2019 continued to have deficiencies upon review of their networks 
once the MA plans were operational. By changing the process and 
reviewing the provider networks as part of the application, CMS will be 
able to better understand whether the failures are due to the timing of 
the reviews, which we hope the 10-percentage point credit, discussed 
later, will account for, or whether they are failures that the 
organization cannot cure. Establishing and maintaining an adequate 
provider network capable of providing medically necessary covered 
services to enrollees is fundamental to participation in the MA 
program.
    Our current process and Sec.  422.116(a)(1)(i) do not prohibit us, 
when evaluating an application, from considering information related to 
an organization's previous failure to comply with a MA contract due to 
previous failures associated with access to services or network 
adequacy evaluations resulting in intermediate sanction or civil money 
penalty under to Part 422 Subpart O, with the exception of a sanction 
imposed under Sec.  422.752(d). This will continue to be applicable to 
our evaluation of initial or SAE applications. The changes we are 
proposing, to require compliance with network adequacy standards during 
the application process, will help us assess which organizations are 
not capable of meeting CMS standards in a given service area. As a 
result, we are proposing to broaden our ability to safeguard the MA 
program by permitting evaluations of network adequacy in connection 
with review and approval of applications for new and expanding service 
areas. This ability will help us avoid approving organizations that 
could have issues providing access to care in these new or expanded 
service areas.
    We have found that the current timing of the network adequacy 
reviews impact applicants' ability to make timely decisions regarding 
the service area in which they intend to provide coverage. The 
operational process for conducting network adequacy reviews is outlined 
in the ``Medicare Advantage and Section 1876 Cost Plan Network Adequacy 
Guidance''.\127\ The guidance currently directs initial and SAE 
applicants to upload their HSD tables containing pending service areas 
into the Health Plan Management System (HPMS) Network Management Module 
(NMM) in mid-June for CMS review. Regulations under Sec.  422.254(a)(1) 
require organizations to submit bids no later than the first Monday in 
June of each year and authorize CMS to impose sanctions or choose not 
to renew an existing contract if the bid is not complete, timely and 
accurate. CMS has issued guidance to remind MA organizations of this 
obligation that bids be complete and accurate at the time of 
submission, such as in the CY 2014 through CY 2020 Final Call Letters 
(provided as attachments to the annual Rate Announcements \128\) and 
the CY 2022 MA Technical Instructions, released in an HPMS memo on May 
12, 2021. Providing organizations with network adequacy determinations 
ahead of the bid deadline (within the application timeline) will 
provide them the opportunity to make decisions regarding their intended 
service areas before submitting bids. This practice would also help 
mitigate operational issues CMS has experienced related to requests for 
service area changes after the deadline has passed, as these kinds of 
requests may affect the MA organization's submissions on the bid 
pricing tool. For these reasons, we are proposing to revise paragraph 
(a)(1)(ii) of Sec.  422.116 to require an applicant for a new or 
expanding service area to demonstrate compliance with Sec.  422.116 and 
to explicitly authorize CMS to deny an application on the basis of an 
evaluation of the applicant's network for the new or expanding service 
area.
---------------------------------------------------------------------------

    \127\ https://www.cms.gov/files/document/medicareadvantageandsection1876costplannetworkadequacyguidance6-17-2020.pdf.
    \128\ https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.
---------------------------------------------------------------------------

    We are also proposing to add new regulation text at Sec.  
422.116(d)(7) to provide applicants with a temporary 10-percentage 
point credit towards the percentage of beneficiaries residing within 
published time and distance standards for all of the combinations of 
county designations and provider/facility types specified in 42 CFR 
422.116(d), for the proposed contracted network for a new service area 
or a service area expansion (SAE). Current CMS procedures (see ``The 
Part C--Medicare Advantage and 1876 Cost Plan Expansion and 1876 Cost 
Plan Expansion Application'' \129\) require completed applications to 
be submitted by mid-February. We understand that organizations may have 
difficulties meeting this timing for submission of a full provider 
network that the proposed change in Sec.  422.116(a)(1)(i) would 
require. We previously separated the network adequacy reviews from the 
application process due to the potential challenge of applicants 
securing a full provider network almost a year in advance of the 
contract becoming operational. In order to provide flexibility to 
organizations as they build their provider networks, we propose to 
allow the 10-percentage point credit towards the percentage of 
beneficiaries residing within published time and distance standards for 
the contracted network in the pending service area, at the time of 
application and for the duration of the application review. At the 
beginning of the applicable contract year (that is, January 1), the 10-
percentage point credit would no longer apply, and plans would need to 
be in full compliance for the entire service area. This aspect of our 
proposal will balance the burden on applicants of having network 
contracts in place close to a year before the beginning of the coverage 
year with the need to ensure that the MA plans available to enrollees 
have adequate networks for furnishing covered benefits.
---------------------------------------------------------------------------

    \129\ https://www.cms.gov/files/document/cy-2022-medicare-part-c-application-updated-1-12-2021.pdf.
---------------------------------------------------------------------------

    Under our proposal, initial and service area expansion applicants 
starting with the contract year 2024 application cycle would be 
required to submit their proposed contracted networks during the 
application process. Applicants would upload their HSD tables to the 
NMM by the application deadline, and CMS would generally follow the 
current operational processes for network reviews, which includes an 
opportunity to submit exception requests as outlined in Sec.  
422.116(f). The disposition of the exception request would be 
communicated as part of the opportunity to remedy defects found in the 
application under Sec.  422.502(c)(2). Applicants for SAEs who are also 
due for a triennial review would be required to submit their pending 
service area during the application process, and their existing network 
service areas separately, during the triennial review in mid-June.
    For these reasons, we propose the following changes to Sec.  
422.116:
     Revise Sec.  422.116(a)(1)(ii) provide that beginning for 
contract year 2024, an applicant for a new or expanding service area 
must demonstrate compliance with this section as part of its 
application for a new or expanding service area and CMS may deny an 
application on the basis of an evaluation of the applicant's network 
for the new or expanding service area.
     Add a new paragraph at Sec.  422.116(d)(7), with the 
heading, ``New or expanding service area applicants.'' to provide that 
beginning for contract year 2024, an applicant for a new or expanding 
service area receives a 10-percentage point credit towards the

[[Page 1895]]

percentage of beneficiaries residing within published time and distance 
standards for the contracted network in the pending service area, at 
the time of application and for the duration of the application review. 
At the beginning of the applicable contract year, this credit no longer 
applies and if the application is approved, the MA organization must be 
in full compliance with the section.

D. Part C and Part D Quality Rating System

1. Background
    CMS develops and publicly posts a 5-star rating system for Medicare 
Advantage (MA) and Part D plans based on the requirement to disseminate 
comparative information, including information about quality, to 
beneficiaries under sections 1851(d) and 1860D-1(c) of the Act and the 
collection of different types of quality data under section 1852(e) of 
the Act. The Star Rating system for MA and Part D plans is used to 
determine quality bonus payment (QBP) ratings for MA plans under 
section 1853(o) of the Act and the amount of beneficiary rebates under 
section 1854(b) of the Act. Cost plans under section 1876 of the Act 
are also included in the MA and Part D Star Rating system, as codified 
at Sec.  417.472(k). We use different data sources to measure quality 
and performance of contracts, such as CMS administrative data, surveys 
of enrollees, information provided directly from health and drug plans, 
and data collected by CMS contractors. Various regulations require 
plans to report on quality improvement and quality assurance and to 
provide data which help beneficiaries compare plans (for example, 
Sec. Sec.  417.472(j) and (k), 422.152(b), 423.153(c), and 423.156). 
The methodology for the Star Ratings system for the MA and Part D 
programs is codified at Sec. Sec.  422.160 through 422.166 and 423.180 
through 423.186.
    The Star Ratings are generally based on measures of performance 
during a period that is 2 calendar years before the year for which the 
Star Ratings are issued; for example, 2023 Star Ratings will generally 
be based on performance during 2021. For some measures, such as the 
cross-sectional measures collected through the Health Outcomes Survey 
(HOS), Star Ratings are based on performance up to 3 calendar years 
prior to the Star Ratings year. For example, the HOS survey 
administered in 2021 asks about care received (for example, whether a 
healthcare provider advised the member to start, increase, or maintain 
their level of exercise or physical activity) in the 12 months prior to 
the survey's administration--that is a period of time covering parts of 
the 2020 and 2021 calendar years--and the data are used for the 2023 
Star Ratings.
    In the interim final rule titled ``Medicare and Medicaid Programs; 
Policy and Regulatory Revisions in Response to the COVID-19 Public 
Health Emergency'' (85 FR 19230) published in the Federal Register on 
April 6, 2020 with a March 31, 2020 effective date (hereafter referred 
to as the ``March 31st COVID-19 IFC''), we adopted a series of changes 
to the 2021 and 2022 Star Ratings to address the disruption to data 
collection and impact on performance for the 2020 measurement period 
posed by the public health emergency (PHE) for COVID-19. The Star 
Ratings changes adopted in that rule addressed both the needs of health 
and drug plans and their providers to curtail certain data collections 
and to adapt their current practices in light of the PHE for COVID-19 
and the need to care for the most vulnerable patients, such as the 
elderly and those with chronic health conditions. As explained in the 
March 31st COVID-19 IFC, we expected to see changes in measure-level 
scores for the 2020 measurement period due to COVID-19-related 
healthcare utilization, reduced or delayed non-COVID-19 care due to 
advice to patients to delay routine and/or elective care, and changes 
in non-COVID-19 inpatient utilization. The March 31st COVID-19 IFC made 
some adjustments to account for potential changes in measure-level 
scores. (See 85 FR 19269 through 19275 for a description of the various 
adjustments.)
    The March 31st COVID-19 IFC amended, as necessary, certain 
calculations for the 2021 and 2022 Part C and D Star Ratings to address 
the expected impact of the PHE for COVID-19 on data collection and 
performance in 2020 that were immediately apparent. As the PHE for 
COVID-19 progressed in 2020 with ultimately all areas across the 
country eligible for Star Ratings disaster adjustments for extreme and 
uncontrollable circumstances under the current regulations (Sec. Sec.  
422.166(i) and 423.186(i)) for the 2022 Star Ratings, it became 
apparent that a modification to the existing disaster policy was 
required in order to calculate cut points for non-CAHPS measures for 
the 2022 Star Ratings. We adopted regulations for how Star Ratings 
would be calculated in the event of extreme and uncontrollable 
circumstances in the final rule ``Medicare and Medicaid Programs; 
Policy and Technical Changes to the Medicare Advantage, Medicare 
Prescription Drug Benefit, Programs of All-Inclusive Care for the 
Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care 
Programs for Years 2020 and 2021,'' published in the Federal Register 
in April 2019 (84 FR 15680), hereafter referred to as the April 2019 
final rule. Under Sec. Sec.  422.166(i)(9)(i) and (i)(10)(i) and 
423.186(i)(7)(i) and (i)(8)(i), the numeric scores for contracts with 
60 percent or more of their enrollees living in FEMA-designated 
Individual Assistance areas at the time of the extreme and 
uncontrollable circumstance are excluded from: (1) The measure-level 
cut point calculations for non-CAHPS measures; and (2) the performance 
summary and variance thresholds for the reward factor. The 60 percent 
rule does not apply to the calculation of cut points for CAHPS measures 
because those measures do not use the clustering methodology; thus, 
CAHPS measures were not impacted by this issue. Up until the 2022 Star 
Ratings, disasters for which any Star Rating adjustments had been made 
were localized, and the 60 percent rule had removed scores from only a 
small fraction of contracts (that is, less than 5 percent of contracts 
on average). For most measures, the extreme and uncontrollable 
circumstance adjustment applies for disasters from 2 years prior to the 
Star Ratings year (that is, a disaster that begins \130\ during the 
2020 measurement period results in a disaster adjustment for the 2022 
Star Ratings). For Part C measures derived from the HOS survey, the 
disaster adjustment is delayed an additional year due to the timing of 
the survey and 1 year recall period. In the April 2019 final rule (84 
FR 15772 through 15773), we specifically gave the example of how HOS 
and HEDIS-HOS measures \131\ for the 2023 Star Ratings would be 
adjusted for contracts affected by an extreme and uncontrollable 
circumstances in 2020. We explained how the delay for HOS measures due 
to the follow-up component of HOS and the adjustment for an extreme and 
uncontrollable circumstance would be to the Star Ratings for the year 
after the completion of the follow-up HOS survey (that is administered 
2 years after the baseline HOS survey).
---------------------------------------------------------------------------

    \130\ We use the start date of the incident period to determine 
which year of Star Ratings could be affected, regardless of whether 
the incident period lasts until another calendar year.
    \131\ The HEDIS measures derived from the HOS include Monitoring 
Physical Activity, Reducing the Risk of Falling, and Improving 
Bladder Control.
---------------------------------------------------------------------------

    Due to the unique circumstances surrounding the PHE for COVID-19 in 
which all contracts operational in 2020 qualified for the extreme and 
uncontrollable circumstance

[[Page 1896]]

adjustments, we created special rules for the 2022 Star Ratings to be 
able to calculate non-CAHPS measure-level cut points and codified these 
special rules at Sec. Sec.  422.166(i)(11) and 423.186(i)(9). Although 
the CAHPS surveys and HEDIS data collection were not completed in 2020 
(we did conduct the HOS survey in 2020 on a later schedule than usual), 
CAHPS surveys and HEDIS data collection completed in 2021 would reflect 
performance by plans in 2020 during the COVID-19 PHE and would be used 
in the 2022 Star Ratings. In the interim final rule titled ``Medicare 
and Medicaid Programs, Clinical Laboratory Improvement Amendments 
(CLIA), and Patient Protection and Affordable Care Act; Additional 
Policy and Regulatory Revisions in Response to the COVID-19 Public 
Health Emergency'' (85 FR 54820), published in the Federal Register and 
effective on September 2, 2020 (hereinafter referred to as the 
``September 2nd COVID-19 IFC''), we revised the disaster policy rules 
for calculating the non-CAHPS measure-level cut points for the 2022 
Star Ratings so we would be able to calculate the 2022 Star Ratings for 
these measures (85 FR 54844-47). The September 2nd COVID-19 IFC also 
modified the calculation of the performance summary and variance 
thresholds for the reward factor so as not to exclude the numeric 
values for affected contracts with 60 percent or more of their 
enrollees in FEMA-designated Individual Assistance areas at the time of 
the extreme and uncontrollable circumstance from the determination of 
the performance summary and variance thresholds. These changes ensured 
that CMS was able to calculate measure-level cut points for those 
measures that qualified for the disaster adjustment for the 2022 Star 
Ratings; calculate measure-level 2022 Star Ratings; apply the ``higher 
of'' policy for non-CAHPS measures as described at Sec. Sec.  
422.166(i)(3)(iv), (i)(4)(v), (i)(5), and (i)(6)(i) and (iv) and 
423.186(i)(3) and (i)(4)(i) and (iv); calculate the reward factor; and 
ultimately calculate 2022 overall and summary Star Ratings.
    We intend to address the changes and comments we received in 
response to the March 31st COVID-19 IFC and the September 2nd COVID-19 
IFC in a future final rule. We are proposing here a specific provision 
for 2023 Star Ratings for measures derived from the HOS data collection 
administered in 2020.
2. Measures Calculated From the HOS Survey
    In response to the September 2nd COVID-19 IFC, some commenters 
asked for clarification about the measures that come from the HOS 
survey and when the disaster policy would be applied in light of how 
HOS measures receive adjustment after an extreme and uncontrollable 
circumstance. A few commenters asked, based on previous logic for 
disasters and HOS measures, whether we anticipated that the impacted 
HOS data collection period would not be until 2021 and the ``higher 
of'' methodology would be applicable to reporting year 2023 for HOS 
measures. Another commenter noted that using the 2020 Star Ratings as 
an example, the contracts affected by 2018 disasters received the 
``higher of'' logic for most measures; however, the HOS and HEDIS-HOS 
measures used the ``higher of'' logic only for contracts affected by 
2017 disasters. The commenter stated if this timing applies to 2020 
disasters, the HOS and HEDIS-HOS measures will receive the higher of 
current or prior year measure-level Star Ratings in the 2023 Star 
Ratings. The commenters asked for clarification since the September 2nd 
COVID-19 IFC adopted a regulatory change to the 60 percent rule for 
only the 2022 Star Ratings. We are proposing here to address the HOS 
measures used in the 2023 Star Ratings.
    As described in the 2019 final Part C and D rule (CMS-4185-F) (84 
FR 15772 through 15773), for measures derived from the HOS survey, the 
disaster policy adjustment is for 3 years after the extreme and 
uncontrollable circumstance. Thus, we noted in the preamble to that 
rule that the 2023 Star Ratings would adjust measures derived from the 
HOS survey for 2020 extreme and uncontrollable circumstances. (85 FR 
15772 through 15773) Based on the comments received and the timing of 
the HOS administration, we propose to amend Sec.  422.166(i) to 
specifically address the 2023 Star Ratings, for measures derived from 
the 2021 HOS survey only, by adding Sec.  422.166(i)(12) to remove the 
60 percent rule for affected contracts. This amendment would ensure 
that we are able to calculate the Star Ratings cut points for the three 
HEDIS measures derived from the HOS survey and are able to include 
these measures in the determination of the performance summary and 
variance thresholds for the reward factor for the 2023 Star Ratings. 
Without removing the 60 percent rule for HEDIS measures derived from 
the HOS survey, we would not be able to calculate these measures for 
the 2023 Star Ratings or include them in the 2023 reward factor 
calculation. By removing the 60 percent rule, all affected contracts 
(that is, contracts affected by the 2020 COVID-19 pandemic) with at 
least 25 percent of their enrollees in Individual Assistance areas at 
the time of the disaster will receive the higher of the 2022 or 2023 
Star Rating (and corresponding measure score) for each of the HEDIS 
measures collected through the HOS survey as described at Sec.  
422.166(i)(3)(iv).
    As a reminder, in a Health Plan Management System memorandum issued 
on August 5, 2021 (``Medicare Health Outcomes Survey (HOS) Outcome 
Measures Moved to Display for 2022 and 2023 Star Ratings''), we 
explained that due to the pervasive way in which COVID-19 has 
undermined and continues to undermine the validity of the two HOS 
outcome measures for the 2020 and 2021 follow-up measurement periods, 
CMS will calculate the 2022 and 2023 Star Ratings without the use of 
the two measures, Improving or Maintaining Physical Health and 
Improving or Maintaining Mental Health. This decision was made applying 
the standard in Sec.  422.164(b).

E. Past Performance (Sec. Sec.  422.502, 422.504, 423.503, and 423.505)

    CMS has an obligation to ensure the organizations in which we 
contract with will be able to provide health care services to 
beneficiaries in a high-quality manner. We do not want organizations 
entering into or expanding in MA that have shown to be poor performers. 
Currently, if an organization meets all of the requirements in CMS' 
application, CMS approves the application. However, the application 
requirements do not look at an organization's prior performance in 
existing contracts. Therefore, if an organization fails to provide key 
services or administers the program poorly, their application for a new 
contract or a service area expansion would still be approved. Allowing 
poor performers into the Part C and Part D programs puts beneficiaries 
at risk for inadequate health care services and prescription drugs. To 
avoid poor performers from entering or expanding, CMS first addressed 
this issue in the MA and Part D program regulations in 2005. CMS has 
established, at Sec. Sec.  422.502(b) and 423.503(b), that we may deny 
an application submitted by an organization seeking an MA or Part D 
contract, including for a service area expansion, if that organization 
has failed to comply with the requirements of a previous MA or Part D 
contract. In the April 2011 final rule (75 FR 19684 through 19686), we 
completed

[[Page 1897]]

rulemaking that placed limits on the period of contract performance 
that CMS would review (that is, 14 months preceding the application 
deadline) and established that CMS would evaluate contract compliance 
through a methodology that would be issued periodically through sub-
regulatory guidance. In the April 2018 final rule (83 FR 16638 through 
16639), we reduced the review period to 12 months. In the January 2021 
final rule (86 FR 5864), we established that CMS would only have the 
authority to deny applications based on an organization's past 
performance if an organization was subject to an intermediate sanction 
and/or failed to maintain a fiscally sound operation during the 
performance review period. Up until the January 2021 final rule (86 FR 
5864) CMS issued a sub-regulatory methodology consisting of eleven 
areas of poor performance, including negative net worth and being under 
intermediate sanctions during the performance timeframe. The prior 
methodology assigned ``performance points'' to organizations for each 
area the organization failed (for example, had a negative net worth 
resulted in a performance point). If the total number of performance 
points reached CMS' threshold the organization's application would be 
denied based on past performance. Historically, only a handful of 
applications have been denied based on prior past performance, with 
three denials since 2017. The low number of denials has not impacted 
access to MA plans nor do we believe expanding the bases for denials 
will impact access. In fact, the average number of plans that a 
beneficiary has access to has been increasing since 2015 with 
approximately 99.7% of beneficiaries currently having access to an MA 
plan. In addition, 97.7 of eligible beneficiaries will have access to 
ten or more plans for CY 2022.
    As stated in the January 2021 final rule, CMS' overall policy with 
respect to past performance remains the same. We have an obligation to 
ensure MA organizations and Part D sponsors can fully manage their 
current contracts and books of business before expanding. CMS may deny 
applications based on past contract performance in those instances 
where the level of previous non-compliance is such that granting 
additional MA or Part D business to the responsible organization would 
pose a high risk to the success and stability of the MA and Part D 
programs and their enrollees.
    The January 2021 final rule limited the bases for denial based on 
past performance to intermediate sanctions and failure to maintain 
fiscal soundness. In this proposed rule, CMS seeks to expand the bases 
for application denial to include Star Ratings history, bankruptcy 
proceedings, and certain CMS compliance actions. CMS also proposes to 
codify the types of compliance notices which will be used as a factor 
in CMS' review of an organization's past performance. These notices are 
Notices of Non-Compliance (NONCs), Warning Letters (WLs), and 
Corrective Action Plans (CAPs).
    We propose to codify the new bases for application denial based on 
past contract performance as paragraphs (b)(1)(i)(C)--Bankruptcy filing 
or under bankruptcy proceedings, (b)(1)(i)(D)--low Star Ratings, and 
(b)(1)(i)(E)--Compliance Actions. We also propose to codify CMS' 
compliance actions which are NONCs, WLs, and CAPs in Sec. Sec.  
422.504(m) and 423.505(n). We are not proposing to add a recent history 
of Civil Money Penalties (CMPs) as a basis for a past performance 
application denial at this time, but we will consider it in future 
rulemaking. Therefore, we are soliciting comments on how best to 
incorporate CMPs into CMS' methodology used to deny applications based 
on prior contract performance.
    We are also proposing to correct a few technical issues identified 
since the final rule was published in January 2021. Specifically, we 
are proposing to correct a drafting error in Sec.  422.502(b)(1)(i)(A) 
that did not include enrollment sanctions based on medical loss ratios 
(MLRs) as a basis for an application denial. Section 
423.503(b)(1)(i)(A) already provides for the denial of an application 
if the organization failed to meet MLR requirements and was prohibited 
from enrolling new members pursuant to Sec.  423.2410(c). The technical 
correction would revise Sec.  422.502(b)(1)(i)(A) to also provide for 
the denial of an application if the organization failed to meet MLR 
requirements and was prohibited from enrolling pursuant to Sec.  
422.2410(c). The new Sec.  422.502(b)(1)(i)(A) would read as follows, 
``. . . was subject to the imposition of an intermediate sanction under 
subpart O of this part or a determination by CMS to prohibit the 
enrollment of new enrollees pursuant to Sec.  422.2410(c), with the 
exception of a sanction imposed under Sec.  422.752(d).'' Secondly, we 
are proposing to correct a minor technical error in Sec.  
423.503(b)(1)(i)(A) to remove the word ``to'' when referencing subpart 
O. The revised sentence would read ``. . . was subject to the 
imposition of an intermediate sanction under subpart O of this part or 
a determination by CMS to prohibit the enrollment of new enrollees 
pursuant to Sec.  423.2410(c).'' Finally, we are proposing to modify 
Sec. Sec.  422.502(b)(1) and 423.503(b)(1) by deleting ``. . . or fails 
to complete a corrective action plan during the 12 months preceding the 
deadline established by CMS for the submission of contract 
qualification applications. . .'' References to CAPs in Sec. Sec.  
422.502(b)(1) and 423.503(b)(1) were codified more than 15 years ago. 
Since the original provisions, CMS' corrective action process has 
changed and is no longer a reason, by itself, to deny an application. 
Our current review for past performance does not view incomplete CAPs 
as a sole basis for denying an application. Nor does CMS intend to deny 
an application on the sole basis of an incomplete CAP. Therefore, we 
propose to remove the references in Sec. Sec.  422.502(b)(1) and 
423.503(b)(1).
    As stated previously, we propose to include in Sec. Sec.  
422.502(b)(1)(i)(C) and 423.503(b)(1)(i)(C), as a reason for 
application denial, organizations that have filed for bankruptcy or are 
currently in bankruptcy proceedings. Currently, we have the authority 
to deny an application for organizations that fail to maintain a 
fiscally sound operation during the performance period. Failure to 
maintain a fiscally sound operation results in enrollees being at risk 
of not being able to obtain needed medical resources if the 
organization cannot or will not pay its providers. Similar to being 
fiscally unsound, an organization that will potentially be declared 
bankrupt may result in beneficiaries not having access to needed 
services as providers may terminate contracts when the plan fails to 
pay for their services or items. Since bankruptcy may result in the 
closure of an organization's operations, permitting an organization to 
expand while under bankruptcy proceedings is not in the best interest 
of the MA or Part D program. Based on this, we believe that any 
organization that has filed or is in bankruptcy proceedings should not 
be permitted to expand their current service area or enter into a new 
contract.
    We are also seeking to include, in Sec. Sec.  422.502(b)(1)(i)(D) 
and 423.503(b)(1)(i)(D), a recent history of low Star Ratings as a 
reason for application denial. We are proposing that CMS would deny an 
application for a new contract or a service area expansion from any 
organization that received 2.5 or fewer Stars. We previously proposed 
that low Star Ratings would be the basis for an application denial but 
decided not to finalize that proposal in the January 2021 final rule. 
In responses to comments to the January 2021 final rule,

[[Page 1898]]

we stated that a history of 3 consecutive years of low Star Ratings 
permits CMS to terminate an organization's contract, so we previously 
concluded it was not necessary to include one year of low ratings as a 
basis for a past performance application denial. However, we have re-
evaluated our position, as discussed below, and believe that a history 
of one year of low Star Ratings merits an application denial.
    CMS' Star Ratings are provided to beneficiaries to help them make 
informed health care choices. Moreover, MA organizations and Part D 
sponsors are required by Sec. Sec.  422.504(b)(17) and 423.505(b)(26) 
to maintain summary MA and/or Part D Star Ratings of at least 3 Stars. 
Contracts that have 2.5 or less Stars are considered to be ``low 
performers.'' Regulations at Sec. Sec.  422.510(a)(4) and 423.509(a)(4) 
permit CMS to terminate a contract for having less than 3 Stars for 
three consecutive years in a row for Part C summary ratings or for 
having less than 3 Stars for three consecutive years in a row for Part 
D summary ratings. Such a termination carries with it an exclusion from 
future MA or Part D application approvals for 38 months under 
Sec. Sec.  422.502(b)(3) and 423.503(b)(3), a more significant 
consequence than the 1-year application denial we are discussing in 
this proposed rule. We have concluded that providing for an application 
denial based on a 1-year history of low Star Ratings is consistent with 
CMS' current practice of graduated enforcement. Furthermore, CMS does 
not want to provide an organization at risk of being terminated in 2 
years, based on its Star Ratings history, with an opportunity to 
expand. Expansion would put more beneficiaries at risk of losing their 
health care coverage if an organization cannot improve its Star 
Ratings. As a note, terminating contracts based on Star Ratings rarely 
occurs, with the last termination being prior to 2016. Based on this, 
CMS is seeking to include one year of low Star Ratings as a reason to 
deny new applications or applications for service area expansions.
    Finally, we are proposing to codify our practice of issuing 
compliance notices in Sec. Sec.  422.504(m) and 423.505(n). CMS is also 
proposing, in Sec. Sec.  422.502(b)(1)(i)(E) and 423.503(b)(1)(i)(E), 
to include the receipt of specific types of compliance notices as a 
reason to deny new applications or applications for service area 
expansions.
    Prior to the January 2021 final rule, CMS included compliance 
letters as a category in our sub-regulatory past performance 
methodology. This methodology included NONCs, WLs, Warning Letters with 
Business Plans, and CAPs. These notices are CMS' formal way of 
recording an organization's failure to comply with statutory and/or 
regulatory requirements as well as providing notice to the organization 
to correct their deficiencies or risk further compliance and 
enforcement actions. In Sec. Sec.  422.504(m) and 423.505(n), we are 
codifying NONCs, WLs, and CAPs as types of CMS compliance actions. CMS 
has been issuing compliance notices for more than 10 years. Based on 
our experience, we have decided that Warning Letters with Business 
Plans are no longer necessary. NONCs, WL, and CAPs are sufficient to 
record non-compliance that does not yet warrant stronger enforcement 
action. Based on this, we will not codify Warning Letters with Business 
Plans as a type of compliance action.
    Of these three types of notices, Requests for CAPs are the most 
serious of the notice types. CMS issues these notices pursuant to 
Sec. Sec.  422.510(c) and 423.509(c), which require CMS to afford non-
compliant organizations the opportunity to develop and implement a 
corrective action plan prior to terminating an MA or Part D contract. 
CMS may request CAPs for a one-time egregious error or an 
organization's continued failure to correct previously identified 
deficiencies. The non-compliance resulting in a CAP request usually has 
beneficiary impact, such as failure to process appeals timely or 
marketing misrepresentation. In cases where CMS requests a CAP where 
there is no beneficiary impact, the majority are for continued non-
compliance with requirements.
    WLs are an intermediate level of compliance action, between a NONC 
and a CAP. WLs, similar to CAPs, are issued for more egregious 
instances of non-compliance or continued non-compliance. However, the 
egregiousness or continued non-compliance, at the time of the notice, 
would not warrant a request for a CAP. Examples include continued 
failure to timely send Explanation of Benefits, multiple cost/benefit 
errors on required beneficiary communication documents, and instances 
of unsolicited marketing.
    NONCs are the lowest form of a compliance action issued by CMS. 
These notices are issued for the least egregious failures. These 
failures are often a first-time offense, affect a small number/
percentage of beneficiaries, or issues that have no beneficiary impact. 
Examples may include failure to submit and/or attest to agent/broker 
compensation data or failure to upload or correctly upload marketing 
materials.
    In determining the level of severity of a compliance action, CMS 
considers whether an organization self-reported the non-compliance. CMS 
considers items self-reported when CMS would not have otherwise known 
about the issue. In cases where we direct organizations to take a 
specific action, such as reviewing and reporting errors in Summary of 
Benefits (SB) and Evidence of Coverage (EOC) documents, CMS does not 
consider this self-reporting.
    As mentioned above, self-reporting can affect the level of 
compliance action issued. CMS reviews the organization's non-compliance 
and whether the organization self-reported the issue or CMS found the 
issue through means such as, complaint reviews, notification by a State 
entity, or a review of requested data. Based on the issue involved, CMS 
determines the appropriate level of compliance that should be issued, 
such as a WL or a NONC. If the organization did self-report, CMS will 
consider lowering the level of compliance (for example, issuing a NONC 
instead of a WL). However, CMS is not required to lower the level of 
compliance action if the issue was self-reported. This is especially 
the case with respect to NONCs, where the non-compliance is significant 
enough to warrant a NONC even if self-reported.
    We propose to assign points to each type of compliance action based 
on the type of notice and then apply a compliance action threshold to 
determine if the application should be denied. The following points 
would be assigned: CAP--6 points, WL--3 points, NONC--1 point. CMS will 
then total the points accrued for each organization, and those who are 
at or above a specified threshold may have applications for new 
contracts or service area expansions denied on the basis of past 
performance.
    CMS is proposing a threshold of 13 compliance action points. CMS 
would have the right to deny applications from any organization who 
scored 13 or more compliance action points. This would be the 
equivalent of just over two CAPs. We believe any organization whose 
performance is such that two CAPs and a NONC are issued or a 
combination of compliance actions that add up to 13 points should not 
be permitted to expand. In determining this threshold, we reviewed 
compliance actions taken from 2017 through November 2021. In the review 
of this data no more than three organizations, out of over three 
hundred organizations, scored 13 or more compliance action points in 
any one year. When looking at a percentile,

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based on historical data, an organization would need be in the top 2% 
of plans based on compliance action points to accrue 13 compliance 
action points. We solicit comments on alternative methodologies for 
considering compliance notices, such as calculating outlier performance 
based on percentages.
    For these reasons, we propose to revise Sec. Sec.  422.502(b), 
422.504(m), 423.503(b), and 422.505(n) to read as set out in the 
regulatory text.

F. Marketing and Communications Requirements on MA and Part D Plans To 
Assist Their Enrollees (Sec. Sec.  422.2260 and 423.2260, 422.2267, and 
423.2267)

    Sections 1851(h) and (j) of the Act provide a structural framework 
for how MA organizations may market to beneficiaries and direct CMS to 
adopt standards related to the review of marketing materials and 
limitations on marketing activities. Section 1860D-1(b)(1)(B)(vi) of 
the Act directs that the Secretary use rules similar to and coordinated 
with the MA rules at section 1851(h) of the Act for approval of 
marketing material and application forms for Part D plan sponsors. 
Section 1860D-4(l) of the Act applies certain prohibitions under 
section 1851(h) of the Act to Part D sponsors in the same manner as 
such provisions apply to MA organizations. In addition, sections 
1852(c) and 1860D-4(a) of the Act provide that MA organizations and 
Part D sponsors must disclose specific types of information to each 
enrollee. Based on the aforementioned authorities, CMS promulgated 
regulations related to marketing and mandatory disclosures by MA 
organizations and Part D sponsors in 42 CFR part 422, subpart C (at 
Sec.  422.111) and subpart V; as well as 42 CFR part 423, subpart C (at 
Sec.  423.128) and subpart V. These regulations include the specific 
standards and prohibitions in the statute as well as standards and 
prohibitions promulgated under the statutory authority granted to the 
agency. Additionally, under 42 CFR 417.428, most marketing requirements 
in subpart V of part 422 apply to section 1876 cost plans. Because 
these proposals are applicable to MA organizations, Part D plan 
sponsors and cost plans, we collectively refer to these entities as 
``plans.'' Finally, CMS has authority to adopt additional contract 
terms for cost plans (section 1876(i)(3)(D)), MA plans (section 
1857(e)(1)), and Part D plans (section 1860D-12(b)(3)(D) of the Act) 
where such terms are not inconsistent with the Medicare statute and 
that we determine are necessary and appropriate.
    In the January 2021 final rule (86 FR 5864), we codified much of 
the communications and marketing guidance previously found in the 
Medicare Communications and Marketing Guidelines (MCMG). In this 
proposed rule, we propose to codify additional guidance from the MCMG 
that was not part of the January 2021 final rule related to member ID 
card standards, the limited access to preferred cost sharing pharmacies 
disclaimer, plan website instructions on how to appoint a 
representative, and the website posting of enrollment instructions and 
forms. In addition, we are proposing several new communications and 
marketing requirements aimed at further safeguarding Medicare 
beneficiaries, including reinstating the requirement that plans include 
a multi-language insert with specified required materials. Finally, we 
are proposing requirements to address concerns associated with third-
party marketing activities.
1. Required Materials and Content
    Under Sec.  422.111(i), MA plans must issue and reissue (as 
appropriate) member identification cards that enrollees may use to 
access covered services under the plan. Likewise, under 1860D-
4(b)(2)(A) of the Act and Sec.  423.120(c)(1), a Part D plan sponsor 
must issue a card or other type of technology that its enrollees may 
use to access negotiated prices for covered Part D drugs. Currently, 
CMS guidance for additional ID card standards resides in the MCMG. We 
are proposing to codify existing guidance for ID card requirements 
under Sec. Sec.  422.2267(e)(30) and 423.2267(e)(32). In addition, we 
will renumber the remaining required content beginning with the Federal 
Contracting statement, currently at Sec. Sec.  422.2267(e)(30) and 
423.2267(e)(32).
    In the January 2021 final rule, when codifying several other 
required disclaimers previously provided in the MCMG, Appendix 2, at 
Sec. Sec.  422.2267(e) and 423.2267(e), CMS inadvertently left out the 
disclaimer for Part D sponsors with limited access to preferred cost 
sharing pharmacies. The disclaimer provides important safeguards for 
Medicare beneficiaries enrolled in Part D plans that only provide 
access to preferred cost sharing through a limited number of pharmacies 
by alerting these beneficiaries that the preferred costs may not be 
available at the pharmacy they use, and by providing information to 
these beneficiaries about how to access the list of pharmacies offering 
prescription drugs at a preferred cost in the beneficiary's area. We 
therefore propose to codify the requirements for this disclaimer at 
Sec.  423.2267(e)(40). We also note that, as required under Sec.  
422.500, MA plans that offer the Part D benefit must comply with Part 
423 rules.
2. Website Requirements
    The regulations at Sec. Sec.  422.111(h)(2) and 423.128(d)(2) 
require plans to have an internet website and include requirements 
regarding posted content. In the January 2021 final rule, we codified 
additional requirements for plan websites at Sec. Sec.  422.2265 and 
423.2265 based on section 70.1.3 (Required Content) of the MCMG. In 
doing so, we inadvertently failed to include the requirement that plans 
post instructions about how to appoint a representative and include a 
link to a downloadable version of the CMS Appointment of Representative 
Form (Control Number 0938-0950)), as well as enrollment instructions 
and forms. We propose to include these two requirements under 
Sec. Sec.  422.2265(b)(13), 423.2265(b)(14), 422.2265(b)(14), and 
423.2265(b)(15), respectively.
3. Multi-Language Insert
    The multi-language insert (MLI) is a standardized document that 
informs the reader that interpreter services are available in Spanish, 
Chinese, Tagalog, French, Vietnamese, German, Korean, Russian, Arabic, 
Italian, Portuguese, French Creole, Polish, Hindi, and Japanese; the 15 
most common non-English languages in the United States. Beginning in 
2012, the Medicare Marketing Guidelines (MMG) required plans to include 
the MLI with the Summary of Benefits (SB), Annual Notice of Change 
(ANOC)/Evidence of Coverage (EOC), and the enrollment form (most 
recently in section 30.5.1 of the 2017 MMG, issued on June 10, 2016). 
The issuance of the MLI was independent of the translation requirements 
for any non-English language that is the primary language of at least 5 
percent of the individuals in a plan benefit package (PBP) service 
area, as currently required under Sec. Sec.  422.2267(a)(2) and 
423.2267(a)(2). However, the MLI guidance in the MMG did require plans 
to also include the required statement in any language that met the 5 
percent threshold but was not already included on the MLI.
    On May 18, 2016, the Office for Civil Rights (OCR) published a 
final rule (81 FR 31375) implementing section 1557 of the Patient 
Protection and Affordable Care Act (PPACA) (Pub. L. 111-148). Section 
1557 of the PPACA provides that an individual shall not be excluded 
from participation in, be denied the benefits of, or be subjected to

[[Page 1900]]

discrimination on the grounds prohibited under Title VI of the Civil 
Rights Act of 1964, 42 U.S.C. 2000d et seq. (race, color, national 
origin), Title IX of the Education Amendments of 1972, 20 U.S.C. 1681 
et seq. (sex (including pregnancy, sexual orientation, and gender 
identity)), the Age Discrimination Act of 1975, 42 U.S.C. 6101 et seq. 
(age), or Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794 
(disability), under any health program or activity, any part of which 
is receiving federal financial assistance; any health program or 
activity administered by the Department; or any program or activity 
administered by any entity established under Title I of the Act. Part 
of OCR's final rule included the requirement that all covered entities 
include taglines with all ``significant communications''. The sample 
tagline provided by the Department consisted of a sentence stating 
``ATTENTION: If you speak [insert language], language assistance 
services, free of charge, are available to you. Call 1-xxx-xxx-xxxx 
(TTY: 1-xxx-xxx-xxxx).'' in the top 15 languages spoken in a state or 
states. Because of the inherent duplication with the MLI, CMS issued an 
HPMS email on August 25, 2016 removing the MLI. On June 14, 2019, OCR 
published a proposed rule that, among other actions, proposed to repeal 
the requirement that notices and taglines be provided with all 
significant communications (84 FR 27846). Finally, on June 19, 2020, 
OCR published a final rule that finalized the repeal of the notice and 
tagline requirements while requiring that a covered entity take 
reasonable steps to ensure meaningful access to its programs or 
activities by LEP individuals (85 FR 37160, 37210, 37245).
    In the February 2020 proposed rule, CMS proposed an availability of 
non-English translations disclaimer. The disclaimer consists of the 
statement ``ATTENTION: If you speak [insert language], language 
assistance services, free of charge, are available to you. Call 1-XXX-
XXX-XXXX (TTY: 1-XXX-XXX-XXXX).'' We proposed that the disclaimer be 
required in all non-English languages that met the five percent 
threshold for language translation under Sec. Sec.  422.2267(a)(2) and 
423.2267(a)(2). In addition, when applicable, we proposed the 
disclaimer be added to all required materials under Sec. Sec.  
422.2267(e) and 423.2267(e). However, we did not finalize the proposed 
disclaimer in January 2021 final rule. In doing so, we stated that CMS 
believed future rulemaking regarding non-English disclaimers, if 
appropriate, was best addressed by OCR, as those requirements would be 
HHS-wide instead of limited to CMS. We also stated that deferring to 
OCR's oversight and management of any requirements related to non-
English disclaimers is in the best interest of the Medicare program.
    It is important to note that none of the actions impacting the 
various notifications of interpreter services changed the requirement 
that plans must provide these services under applicable law. Plans have 
long been required to provide interpreters when necessary to ensure 
meaningful access to limited English proficient individuals, consistent 
with existing civil rights laws. In fact, in the January 2021 final 
rule, CMS codified call center requirements under Sec. Sec.  
422.111(h)(1)(iii) and 423.128(d)(1)(iii) that requires interpreter 
services be provided to non-English speaking and limited English 
proficient (LEP) individuals at no cost.
    In the months following the publication of the January 2021 final 
rule, we have gained additional insight regarding the void created by 
the lack of any notification requirement associated with the 
availability of interpreter services for Medicare beneficiaries. The 
U.S. Census Bureau's 2019 American Community Survey (ACS) 1-year 
estimates show that 12.2 percent of individuals sixty-five and older 
speak a language other than English in the home (https://data.census.gov/cedsci/table?q=language&tid=ACSST1Y2019.S1603). CMS 
considers the materials required under Sec. Sec.  422.2267(e) and 
423.2267(e) to be vital to the beneficiary decision making process. 
Providing a notification for beneficiaries with limited English 
proficiency that translator services are available provides a clear 
path for this portion of the population to properly understand and 
access their benefits. We have also reviewed Complaint Tracking Module 
(CTM) cases related to ``language'' and found that several cases report 
beneficiary confusion stemming from not fully understanding materials 
based on a language barrier. In retrospect, we now believe that solely 
relying on the requirements delineated in OCR's 2020 rulemaking for 
covered entities to convey the availability of interpreter services is 
insufficient for the MA, cost plan, and Part D programs and is not in 
the best interest of Medicare beneficiaries who are evaluating whether 
to receive their Medicare benefits through these plans and who are 
enrolled in these plans. We believe it is counterproductive to have 
regulatory requirements for interpreter services without an 
accompanying requirement to inform beneficiaries that the service is 
available.
    We are proposing to reinstitute a requirement to use the MLI under 
Sec. Sec.  422.2267(e)(31) and 423.2267(e)(33). Similar to the 
previously required version, the MLI will state ``We have free 
interpreter services to answer any questions you may have about our 
health or drug plan. To get an interpreter, just call us at [1-xxx-xxx-
xxxx]. Someone who speaks [language] can help you. This is a free 
service.'' in the 15 most common non-English languages in the United 
States. In addition, we propose to require plans to also include the 
required statement in any language that meets the five percent 
threshold for a plan's service area, as currently required under 
Sec. Sec.  422.2267(a)(2) and 423.2267(a)(2) for translation of 
required materials, when not currently on the standardized MLI. 
Finally, we propose to require the MLI to be included with all required 
materials listed in Sec. Sec.  422.2267(e) and 423.2267(e). If OCR were 
in the future to finalize broader or more robust requirements 
associated with interpreter services than what CMS is proposing and 
plans adopted those broader or more robust OCR requirements, CMS will 
consider plans compliant with the MLI requirements we have proposed in 
this rule.
4. Third-Party Marketing Organizations
    As most recently expressed in an October 8, 2021 HPMS memo, we have 
become increasingly concerned with the activities of third-party 
marketing organizations (TPMOs) and the impact of those activities on 
Medicare beneficiaries. We have seen a significant increase in third 
party marketing (for example, television ads, direct mailers) in the 
past few years. In addition, we have seen a significant increase in 
marketing related complaints from beneficiaries directly attributed to 
the activities of TPMOs. In fact, when comparing 2020 to the first 
eleven months of 2021, marketing based CTM complaints have more than 
doubled. We believe the increase in complaints is attributed to third-
party advertising that misleads beneficiaries and results in them 
contacting third-parties to find out how they can get the advertised 
benefits. Based on the CTM data, CMS also has reviewed several sales 
and enrollment call recordings between TPMO staff and beneficiaries. 
Many of these calls demonstrate that beneficiaries are confused by 
these TPMOs, including confusion regarding who they are speaking to, 
what plans the TPMOs represent, and that the beneficiary may be unaware 
that they

[[Page 1901]]

are enrolling into a new plan during these phone conversations. CMS 
acknowledges that in some instances TPMOs can serve a role in helping 
beneficiaries find a plan that best meets their needs. However, CMS 
believes additional regulatory oversight is required to protect 
Medicare beneficiaries from bad actors in this space and to ensure that 
Medicare health and drug plans are appropriately overseeing and 
maintaining responsibility for the entities that conduct marketing and, 
potentially, enrollment activities on their behalf. Therefore, CMS 
believes additional regulatory oversight is required to protect 
Medicare beneficiaries from confusing and potentially misleading 
activities. CMS is proposing several updates to various sections of 
parts 422 and 423, subpart V.
    We first propose to define TPMOs in Sec. Sec.  422.2260 and 
423.2260 as being organizations that are compensated to perform lead 
generation, marketing, sales, and enrollment related functions as a 
part of the chain of enrollment, that is the steps taken by a 
beneficiary from becoming aware of a plan or plans to making an 
enrollment decision. In addition, the proposed definition includes that 
TPMOs may be first tier, downstream or related entity (FDRs), as 
defined under Sec. Sec.  422.504(i) and 423.505(i), but TPMOs may also 
be other businesses which are customers of an MA or Part D plan or 
customers of an MA or Part D plan's FDRs. CMS is specifically seeking 
comments from stakeholders regarding the proposed TPMO definition and 
whether it is sufficiently broad to capture the scope of the types of 
entities that may be in a position of marketing Medicare health and 
drug plans.
    We next propose a required standardized disclaimer be used by 
TPMOs, in Sec. Sec.  422.2267(e)(41) and 423.2267(e)(41), that states 
``We do not offer every plan available in your area. Any information we 
provide is limited to those plans we do offer in your area. Please 
contact Medicare.gov or 1-800-MEDICARE to get information on all of 
your options.'' MA organizations and Part D sponsors will need to 
ensure that any TPMO with which they do business, either directly or 
indirectly, utilizes this disclaimer were appropriate. MA organizations 
and Part D sponsor may ensure TPMO's adherence with these requirements 
through contractual arrangements, review of materials or other 
appropriate oversight methods available to the MA organization or Part 
D sponsor such as complaint reviews or audits. Statements from TPMOs 
such as ``we will help pick the best plan for you'' are misleading to 
beneficiaries as they generally mean the TPMO's help will be limited to 
the plans they offer. For those TPMOs who truly offer every option in a 
given service area, the disclaimer will not be required. We propose the 
disclaimer to be prominently displayed on the TPMO's website and 
marketing materials, including all print materials and television 
advertising that meet the definition of marketing. We also propose 
requiring the disclaimer be provided verbally, electronically, or in 
writing, depending on how the TPMO is interacting with the beneficiary. 
In cases where the TPMO is providing information through telephonic 
means, this disclaimer must be provided within the first minute of the 
call. We believe the disclaimer will help to reduce the type of 
beneficiary confusion CMS observed when we listened to TPMO-based sales 
calls.
    Finally, we are proposing new TPMO oversight responsibilities in 
Sec. Sec.  422.2274 and 423.2274, covering agent, broker, and other 
third-party requirements. The proposed requirements will fall under a 
newly created Sec. Sec.  422.2274(g) and 423.2274(g), with the heading 
``TPMO oversight,'' and will work in conjunction with the current FDR 
requirements, when applicable, in Sec. Sec.  422.504(i) and 423.505(i). 
We propose that, as a part of their oversight responsibilities, plans 
that do business with a TPMO, either directly or indirectly through an 
FDR, are responsible for ensuring that the TPMO adheres to any 
requirements that apply to the plan. In doing so, we are making it 
clear that an MA or Part D plan cannot purchase the services of a TPMO, 
and thereby evade responsibilities for compliance. This proposal 
includes those instances where the TPMO does not contract either 
directly with the MA organization or the Part D sponsor or indirectly 
with a plan's FDR, but where the plan or its FDR purchases leads or 
otherwise receives leads directly or indirectly from a TPMO. We believe 
it is the responsibility of the MA organization or Part D sponsor to 
have knowledge of how and from where leads or enrollments are obtained. 
We believe this requirement is necessary to address the types of 
confusing and potentially misleading activities that, as previously 
discussed, CMS understands to have resulted in hundreds of Complaint 
Tracking Module complaints related to TPMOs identified by CMS from 2020 
and 2021. In order to ensure beneficiaries are enrolled in the plan 
that best meets their needs, MA organizations and Part D sponsors must 
have knowledge and oversee all leads and enrollments. We also propose 
to require plans (and their FDRs), in their contracts, written 
arrangements, or agreements with TPMOs, to require TPMOs to disclose to 
the plan any subcontracted relationships used for marketing, lead 
generation, and enrollment; require sales calls with beneficiaries to 
be recorded in their entirety; and have TPMOs report to plans any staff 
disciplinary actions associated with Medicare beneficiary interaction 
on a monthly basis. We believe these proposed reporting requirements 
will ensure that plans are made aware of all activities associated with 
the chain of enrollment.
    In addition, we are proposing beneficiary notifications associated 
with TPMO lead generating activities. In our experience, lead 
generating activities are typically conducted by a TPMO who uses 
advertisements containing information regarding MA or Part D plans or 
programs as a means of enticing beneficiaries to respond, for example 
by calling an ``800'' number seen on TV or in a direct mail piece. When 
a beneficiary responds, their information is collected and becomes a 
``lead'' that can then be provided to a licensed agent or broker, 
typically based on renumeration, who can complete an enrollment. CMS 
has received a number of complaints from partners such as state 
regulators, State Health Insurance Assistance Programs (SHIPs), and 
Senior Medicare Patrol (SMP) who have expressed concerns that 
beneficiaries are being contacted directly by agents and brokers 
without having knowledge of how the agent had their contact 
information. We have also received a number of CTM cases where 
beneficiaries have expressed similar concerns. Based on our review of 
these cases, it seems clear that it is not a case of unsolicited 
telephonic contact, which is currently prohibited under Sec. Sec.  
422.2264(a)(2)(iv) and 423.2264(a)(2)(iv); rather it is a case of a 
beneficiary filling out a business reply card or responding to an 
advertisement that does not make it clear that doing so will result in 
being contacted by an agent or broker. We are proposing to require that 
plans ensure that TPMOs conducting lead generating activities must 
inform the beneficiary that his or her information will be provided to 
a licensed agent for future contact, or that the beneficiary is being 
transferred to a licensed agent who can enroll him or her into a new 
plan. We believe this requirement will help to eliminate beneficiary 
confusion by making the

[[Page 1902]]

role of lead generating TPMOs more transparent.
    Overall, we believe the proposed requirements associated with TPMOs 
will result in greater plan oversight of TPMOs, and in turn, result in 
a more positive beneficiary experience as it relates to learning about 
plan choices to best meet their health care needs. We also believe the 
proposed requirements, if implemented, would complement and strengthen 
existing requirements. For example, under Sec. Sec.  
422.2262(a)(1)(iii) and 423.2262(a)(1)(iii), plans must not engage in 
activities that could mislead or confuse Medicare beneficiaries. As 
previously discussed, we are concerned this requirement is not being 
met as it applies to certain TPMO activities performed on behalf of 
plans or in connection with marketing for plans. MA organizations and 
Part D sponsors are ultimately responsible for the marketing and 
enrollment activities done by them or on their behalf, ensuring that 
marketing is not misleading or confusing. The proposed disclaimers and 
notifications will ensure that beneficiaries are more informed. 
Moreover, the more robust reporting requirements and oversight proposed 
will create a better mechanism for plans to be made aware when 
beneficiary related issues to arise.
    To reiterate and summarize, the proposed new and revised regulatory 
sections and their content are as follows:
     Sections 422.2260 and 423.2260 are revised to add a 
definition for Third Party Marketing Organization (TPMO).
     Sections 422.2265(b)(13) and 423.2265(b)(14) are revised 
to add instructions on how to appoint a representative and to add 
enrollment instructions and forms.
     Sections 422.2267(e)(30) and 423.2267(e)(32) are revised 
to add the Member ID card and requirements for the card as a model 
document.
     Sections 422.2267(e)(31) and 423.2267(e)(33) are revised 
to add the Multi-Language Insert.
     Sections 422.2267(e)(41) and 423.2267(e)(41) are revised 
to add the Third-Party Marketing disclaimer.
     Section 423.2267(e)(40) is revised to add the Limited 
Access to Preferred Cost Sharing disclaimer.
     Sections 422.2274 and 423.2274 are revised to apply MA and 
Part D oversight to TPMOs.

G. Proposed Regulatory Changes to Medicare Medical Loss Ratio Reporting 
Requirements and Release of Part C Medical Loss Ratio Data (Sec. Sec.  
422.2460, 422.2490, and 423.2460)

1. Background
    Section 1103 of Title I, Subpart B of the Health Care and Education 
Reconciliation Act (Pub. L. 111-152) amended section 1857(e) of the Act 
to add a medical loss ratio (MLR) requirement to Medicare Part C (MA 
program). 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. 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 23, 2013 Federal Register, we 
published a final rule titled ``Medicare Program; Medical Loss Ratio 
Requirements for the Medicare Advantage and the Medicare Prescription 
Drug Benefit Programs'' (78 FR 31284) (hereinafter referred to as the 
May 2013 Medicare MLR final rule), we codified the MLR requirements for 
MA organizations and Part D prescription drug plan sponsors (``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.
    Generally, the MLR for each MA and Part D contract reflects the 
ratio of costs (numerator) to revenues (denominator) for all enrollees 
under the contract. For an MA contract, the MLR reflects the percentage 
of revenue received under the contract spent on incurred claims for all 
enrollees, prescription drug costs for those enrollees in MA plans 
under the contract offering the Part D benefit, quality initiatives 
that meet the requirements at Sec.  422.2430, and amounts used to 
reduce Part B premiums. The MLR for a Part D contract reflects the 
percentage of revenue received under the contract spent on incurred 
claims for all enrollees for Part D prescription drugs, and on quality 
initiatives that meet the requirements at Sec.  423.2430. The 
percentage of revenue that is used for other items such as 
administration, marketing, and profit is excluded from the numerator of 
the MLR (see Sec. Sec.  422.2401 and 423.2401; 422.2420(b)(4) and 
423.2420(b)(4); 422.2430(b) and 423.2430(b)).
    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 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, 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 revenue received by 
plan sponsors, and helps to ensure that taxpayers and enrolled 
beneficiaries receive value from Medicare health and drug plans.
    Section 1001(5) of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by section 10101(f) of the Health Care 
and Education Reconciliation Act (Pub. L. 111-152), also established a 
new MLR requirement under section 2718 of the Public Health Service Act 
that applies to issuers of employer group and individual market private 
insurance. We will refer to the MLR requirements that apply to issuers 
of private insurance as the ``commercial MLR rules.'' Regulations 
implementing the commercial MLR rules are published at 45 CFR part 158.
    We propose here modifications to the MLR reporting requirements in 
the Medicare Part C and Part D programs and to the regulation that 
governs the release of Part C MLR data.
2. Proposal To Reinstate Detailed MLR Reporting Requirements 
(Sec. Sec.  422.2460 and 423.2460)
    Each year, MA organizations and Part D sponsors submit to CMS data 
necessary for the Secretary to determine whether each MA or Part D 
contract has satisfied the minimum MLR requirement under sections 
1857(e)(4) and 1860D-12(b)(3)(D) of the Act. In the May 2013 Medicare 
MLR final rule (78 FR 31284) that established the Medicare MLR 
regulations, CMS codified at Sec. Sec.  422.2460 and 423.2460 that, for 
each contract year, each MA organization and Part D sponsor must submit 
an MLR Report to CMS that included the data needed by the MA 
organization or Part D sponsor to calculate and verify the MLR and 
remittance amount, if any, for each contract such as the amount of 
incurred claims, expenditures on quality improving activities, non-
claims costs, taxes, licensing and regulatory fees, total revenue, and 
any remittance owed to CMS under Sec.  422.2410 or Sec.  423.2410.
    To facilitate the submission of MLR data, CMS developed a 
standardized

[[Page 1903]]

MLR Report template that MA organizations and Part D sponsors were 
required to populate with their data and upload to the Health Plan 
Management System (HPMS), starting with contract year (CY) 2014 MLR 
reporting, which occurred in December 2015. Based on the data entered 
by the MA organization or Part D sponsor for each component of the MLR 
numerator and denominator, the MLR reporting software would calculate 
an unadjusted MLR for each contract. The MLR reporting software would 
also calculate and apply the credibility adjustment provided for in 
Sec. Sec.  422.2440 and 423.2440, based on the number of member months 
entered into the MLR Report, in order to calculate the contract's 
adjusted MLR and remittance amount (if any). In addition to the 
numerical fields used to calculate the MLR and remittance amount, the 
MLR Report template included narrative fields in which MA organizations 
and Part D sponsors provided detailed descriptions of the methods used 
to allocate expenses, including how each specific expense met the 
criteria for the expense category to which it was assigned.
    In developing the MLR reporting format, CMS attempted to model it 
on the tools used to report commercial MLR data. This was in keeping 
with a general policy of attempting to align the Medicare MLR 
requirements with the commercial MLR requirements 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. We also cited this policy when we amended our 
regulations to authorize the public release of the Part C and Part D 
MLR data that we collect for a contract year under Sec. Sec.  422.2460 
and 423.2460; we noted that the release of Medicare MLR data aligned 
with disclosures of MLR data that issuers of commercial health plans 
submit each year as required by section 2718 of the Public Health 
Service Act (81 FR 46162, 46405).
    In the proposed rule titled ``Medicare Program; Contract Year 2019 
Policy and Technical Changes to the Medicare Advantage, Medicare Cost 
Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit 
Programs, and the PACE Program'' (82 FR 56459), which appeared in the 
Federal Register on November 28, 2017 (hereinafter referred to as the 
November 2017 proposed rule), we proposed to modify the MLR reporting 
requirements by significantly reducing the amount of MLR data that MA 
organizations and Part D sponsors submit to CMS on an annual basis, 
starting with CY 2018. As part of an initiative to reduce the 
regulatory burden for MA organizations and Part D sponsors, we proposed 
to revise the MLR reporting requirements so that MA organizations and 
Part D sponsors would no longer be required to report the underlying 
data needed to calculate and verify the MLR and remittance amount, if 
any, for each contract; instead, they would only have to report each 
contact's MLR and the remittance amount, if any.
    We received numerous comments on our proposed changes to the MLR 
reporting requirements in the November 2017 proposed rule, which we 
addressed in the final rule titled ``Medicare Program; Contract Year 
2019 Policy and Technical Changes to the Medicare Advantage, Medicare 
Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug 
Benefit Programs, and the PACE Program'' (83 FR 16440), which appeared 
in the April 16, 2018 Federal Register (hereinafter referred to as the 
April 2018 final rule). Although MA organizations and Part D plan 
sponsors generally supported the proposed reduction in the amount of 
MLR data they would be required to submit on an annual basis, some 
commented that they did not expect their MLR reporting burden to be 
significantly reduced since they would still be required to collect and 
analyze the same information in order to calculate the MLR percentage 
and remittance amount. In response to comments that contended that we 
would be unable to conduct meaningful compliance oversight with the 
minimal amount of MLR data that we proposed to collect, we noted our 
continued authority under Sec.  422.2480 or Sec.  423.2480 to conduct 
selected audit reviews of the data reported under Sec. Sec.  422.2460 
and 423.2460 for purposes of determining that remittance amounts under 
Sec. Sec.  422.2410(b) and 423.2410(b) were calculated and reported 
accurately and sanctions under Sec. Sec.  422.2410(c) and 423.2410(c) 
were appropriately applied. We expressed our belief that we could 
continue to effectively oversee MA organizations' and Part D sponsors' 
compliance by relying solely on audits (83 FR 16675) and finalized the 
proposed changes to the MLR reporting requirements at Sec. Sec.  
422.2460 and 423.2460. As a result, for CY 2018 and subsequent contract 
years, MA organizations and Part D sponsors are only required to report 
each contact's MLR and the remittance amount, if any.
    In light of subsequent experience overseeing the administration of 
the Medicare MLR program while the simplified MLR reporting 
requirements have been in effect, and after further consideration of 
the potential impacts on beneficiaries and costs to the government and 
taxpayers when CMS has limited access to detailed MLR data, we have 
reconsidered the changes to the MLR reporting requirements that were 
finalized in the April 2018 final rule. We have come to recognize the 
limitations of our current approach to MLR compliance oversight, in 
which we do not collect the information needed to verify that a 
contract's MLR has been calculated accurately, except in the small 
number of cases that we can feasibly audit each year. For these 
reasons, which are discussed later in greater detail, we are proposing 
to reinstate the detailed MLR reporting requirements that were in 
effect for CYs 2014 through 2017. In addition, we are proposing to 
collect additional data on certain categories of expenditures, and to 
make conforming changes to our data collection tools.
    One of the factors that has prompted us to reconsider our earlier 
decision to eliminate the detailed MLR reporting requirements is the 
increase both in the amount of remittances that MA organizations and 
Part D sponsors have reported owing, and in the number of contracts 
that failed to meet the MLR requirement, in the years since we changed 
the MLR reporting requirements. At the time we issued the November 2017 
proposed rule to eliminate the detailed MLR reporting requirements, MA 
organizations and Part D sponsors had submitted MLR data only for CYs 
2014 through 2015, when total annual remittances for all contracts 
averaged $29.6 million, and an average of 16 contracts failed to meet 
the minimum MLR requirement. Taking into account the preliminary CY 
2016 MLR data that was available to CMS at the time we issued the April 
2018 final rule, annual average remittances for CYs 2014 through 2016 
totaled $91.8 million, and an annual average of 21 contracts failed to 
meet the MLR requirement. Thereafter, for CYs 2017 through 2019, the 
average amount of annual remittances more than doubled to $204.9 
million, and the average number of contracts that failed to meet the 
MLR requirement nearly doubled to 40 contracts per year, even as the 
average number of contracts subject to the MLR requirement declined 
slightly.\132\
---------------------------------------------------------------------------

    \132\ The average number of contracts subject to the MLR 
requirement was 608 per year for CYs 2014-2016 and 565 per year for 
CYs 2017-2019.
---------------------------------------------------------------------------

    As MLR remittances have grown in scale and failure to meet the MLR 
requirement has become more common, the potential impact of errors that 
skew

[[Page 1904]]

the MLR calculation also has grown beyond what our early experience 
administering the MLR requirements had led us to expect when we 
eliminated the detailed reporting requirement. This has become clear to 
us not only through observation and analysis of industry-wide changes 
in remittances, but also through anecdotal incidents. For example, in 
2021, CMS was notified by an MA organization that it had discovered an 
error in one of its processes for determining the amount that it spent 
on prescription drugs, which caused the organization to miscalculate 
the MLR for 33 of its MLR submissions for CYs 2016 through 2018. For 
one contract, this resulted in the MA organization overstating its MLR 
for CY 2018 by 1.1 percent; when the error was corrected, it was 
determined that the contract--which the parent organization originally 
reported as having met the MLR requirement--had in fact failed to meet 
the MLR requirement, and as a result the organization was required to 
remit an additional $4 million to CMS for that contract alone.
    Although it is possible that calculation errors such as in the 
above example only affect a handful of contracts, and therefore have 
limited impacts on the overall amount of remittances, we are mindful of 
how when CMS collected detailed MLR data pursuant to the reporting 
requirements that were in effect for CYs 2014 through 2017, we 
frequently detected potential errors or omissions in the reported data. 
When these issues were brought to the attention of the MA organization 
or Part D sponsor that submitted the data with a request to explain or 
correct the data, the MA organization or Part D sponsor often found it 
necessary to submit a corrected MLR Report that included changes to 
figures used to calculate the MLR.
    In Table 2, information on the MLR submissions for CYs 2014 through 
CY 2017 (the contract years for which MA organizations and Part D plan 
sponsors reported detailed MLR data that CMS collected for CYs 2014 
through 2017) is shown alongside information on the MLR submissions for 
CYs 2018 through 2019 (the contract years for which CMS collected 
minimal MLR data consistent with current Sec. Sec.  422.2460 and 
423.2460). Specifically, for each time period, the table shows the 
percentage of contracts that were flagged for potential errors during 
desk reviews and the percentage of contracts that submitted revisions 
to correct errors in the original MLR filing that had an impact on the 
MLR calculation. The percentage of contracts that submitted revised MLR 
data to correct errors in the original MLR calculation includes plan-
initiated (that is, self-disclosed) resubmissions in addition to 
resubmissions resulting from desk reviews.
[GRAPHIC] [TIFF OMITTED] TP12JA22.005

    As the table indicates, although we stopped collecting detailed MLR 
data for contract years after CY 2017, we have continued to perform 
desk reviews of the submitted data, although, due to the limited amount 
of information we receive, these are largely confined to confirming 
that, for contracts that reported failing to meet the 85 percent MLR 
requirement for a contract year and owing a remittance to CMS, the 
amount that the MA organization or Part D sponsor indicates it is 
required to remit is consistent with what we would expect based on the 
reported MLR and our records of the contract's revenues for the 
contract year. Given that we collect very little MLR data from MA 
organizations and Part D sponsors under current Sec. Sec.  422.2460 and 
423.2460, and the consequently limited nature of our current desk 
reviews, it is unsurprising that fewer contracts were flagged as 
potentially containing erroneous data for CYs 2018 and 2019 relative to 
CYs 2014 through 2017. We acknowledge that there may be valid 
explanations for the decline in the number of contracts that had to 
correct their MLR calculations, such as MA organizations and Part D 
sponsors gaining familiarity with the requirements for calculating 
their MLRs (although we would have expected any such decreases to be 
observed in the initial years of MLR reporting). However, we believe 
that the steep decline since CY 2017 in the number of contracts that 
revised and resubmitted their MLR data raises questions about whether 
errors or omissions affecting the calculation of the MLR that might 
have been flagged by CMS or discovered by MA organizations and Part D 
sponsors as a result of MLR desk reviews under the prior regulations 
are now simply going undetected. This, in turn, has led us to 
reconsider whether the savings we estimated would result from 
minimizing the MLR reporting requirements outweigh the potential cost 
of allowing errors that might have been discovered via desk reviews of 
the detailed MLR data to go undetected.
    We believe the potential for costly errors in the MLR calculation 
should be a concern not only for the government, but also for MA 
organizations and Part D sponsors, for although it is possible that 
some may have overstated their MLRs and remitted lower amounts than 
were actually owed, it is also possible that others may have 
understated their MLRs and overpaid remittances. With respect to 
contract years for which MA organizations and Part D sponsors have 
reported the limited amount of MLR data they are required to submit 
under current Sec. Sec.  422.2460 and 423.2460 (that is, CYs 2018 and 
2019), we have been

[[Page 1905]]

made aware only of MLR calculation errors that resulted in the MA 
organization or Part D plan sponsor reporting that the MLR as 
originally reported for a contract was higher than the actual MLR, 
which in some cases led to CMS collecting remittance amounts that were 
lower than the amounts that were actually owed. However, with respect 
to contract years for which we collected detailed MLR data and 
conducted desk reviews (that is, CYs 2014 through 2017), MA 
organizations and Part D sponsors that were contacted about suspected 
errors in their MLR calculations would often, in the course of 
examining issues flagged by CMS, inform us that they had discovered 
that they had made other mistakes, which when corrected caused the MLR 
for the contract to increase.
    CMS could invoke its audit authority under Sec. Sec.  422.2480 and 
423.2480 to require MA organizations and Part D sponsors to validate 
the data necessary to calculate MLRs, so that CMS is able to determine 
that that the MLRs and remittance amounts under Sec. Sec.  422.2410(b) 
and 423.2410(b) and sanctions under Sec. Sec.  422.2410(c) and (d) and 
423.2410(c) and (d) were accurately calculated, reported, and applied. 
As previously noted, CMS stated in the April 2018 final rule that we 
believed we could continue to effectively oversee MA organizations' and 
Part D sponsors' compliance by relying solely on audits (83 FR 16674). 
In response to comments that expressed concern that the audit burden 
would increase once we started relying on audits to monitor compliance, 
we stated that we did not expect that the changes to the MLR reporting 
requirements would cause MLR audits to be more burdensome than the MLR 
audits that were conducted in previous years. However, our response was 
based on an assessment that the burden associated with each individual 
audit would not increase, as we did not intend to change our MLR audit 
methodology. Upon further reflection, we believe that we would need to 
greatly expand the number of audits we conduct if we were to rely on 
them as our sole means of validating the accuracy of MLR reporting. 
Given the minimal data we currently receive from MA organizations and 
Part D sponsors, we would need to conduct comparatively resource heavy 
audits in order to identify potentially costly errors in the 
calculation of the MLR and remittance amount, including errors that 
would have been flagged systematically during the desk review process. 
We believe that the increased cost to the government and the aggregate 
burden across all of the additional MA organizations and Part D 
sponsors selected for audits would negate the savings that the April 
2018 final rule estimated would result from the changes to the MLR 
reporting requirements.\133\
---------------------------------------------------------------------------

    \133\ The April 2018 final rule (83 FR 16715) estimated that the 
change in the MLR reporting requirements that CMS finalized for CYs 
2018 and subsequent contract years would result in annual savings of 
$1,446,417 per year ($490,000 to the government and $904,884 to MA 
organizations and Part D sponsors).
---------------------------------------------------------------------------

    Furthermore, as we have continued to administer the MLR reporting 
requirements, we have come to recognize the limits and potential risks 
of an oversight approach that requires CMS to conduct time-consuming 
audits as the primary mechanism for identifying any errors that might 
impact the calculation of the MLR, and to appreciate the unique 
advantages of using desk reviews of detailed MLR data to identify 
outliers, anomalies, and omissions in the reported data that might 
indicate errors in the MLR calculation. An audit-only oversight 
approach is potentially problematic in the context of CMS' review of 
the MLR submissions that MA organizations and Part D sponsors are 
required to submit in advance of the general MLR filing deadline when 
one of their contracts fails to meet the minimum MLR requirement for 
two or more consecutive contract years. CMS requires that the MLR data 
for such contracts be reported early so that we have time to implement, 
prior to the open enrollment period, enrollment sanctions for any 
contract that fails to meet the MLR threshold for 3 or more consecutive 
years and contract termination for any contract that fails to meet the 
MLR threshold for 5 consecutive years. In the May 2013 Medicare MLR 
final rule (78 FR 31296), we explained that we were adopting this 
policy because, if we were to implement enrollment and termination 
sanctions after the start of the annual open enrollment period, this 
would create disruptions for beneficiaries who are newly enrolled in 
plans under a contract that is subject to enrollment sanctions, or all 
beneficiaries enrolled in plans under a contract that is subject to 
termination. We have typically required that these early MLR 
submissions be submitted to CMS in late July, a little more than 2 
months before open enrollment begins.
    Given the brief amount of time between when CMS receives these 
early MLR data submissions and the date when open enrollment begins, 
and the risk of disruption to beneficiaries if it is determined after 
open enrollment begins that a contract for which an early MLR 
submission was required failed to meet the MLR requirement for a third 
or fifth consecutive year, we believe it is particularly important that 
early MLR filers submit to CMS detailed MLR data, which can then be 
analyzed to quickly and independently identify potential errors in the 
MLR calculation. We believe this will reduce the likelihood that CMS 
will learn that a contract must be placed under the statutorily 
required sanctions at a time when enforcing those sanctions will force 
beneficiaries to enroll in another MA plan or in Medicare fee-for-
service (FFS). Although that particular concern could perhaps be 
addressed by only requiring that early filers submit detailed MLR 
reports, that would not address the concerns raised in the preceding 
discussion about the potential cost to the government of uncollected 
remittances, or to MA organizations and Part D sponsors due to 
overpayment of remittances, when MLR calculation errors go undetected. 
The MLR data submitted for CYs 2014 through 2017 does not indicate that 
contracts that had to early report their MLR data made up a significant 
portion of the contracts that submitted MLR data that later had to be 
revised to correct errors that impacted the MLR calculation. We discuss 
the concerns about potential errors in early filers' MLR submissions to 
further illustrate the potential consequences of CMS not receiving 
detailed MLR data, which we did not fully appreciate when we adopted 
the current MLR reporting requirements. We clarify that we believe this 
concern makes it necessary that all MA organizations and Part D 
sponsors submit detailed MLR data that CMS can use to identify 
suspected errors that might affect the MLR calculation in a timely 
manner, and without having to rely on audits or self-disclosures.
    In addition to the factors we have already discussed, we believe it 
is appropriate that we reevaluate our alignment with the commercial MLR 
rules. This is particularly true as it relates to the policy 
considerations that underlay our rulemaking to authorize the public 
release of the MLR data that MA organizations and Part D sponsors 
submit to us on an annual basis, as codified in our regulations at 
Sec. Sec.  422.2490 and 423.2490. The analysis in the November 2017 
proposed rule did not consider the benefits CMS associated with the 
release of Part C and Part D MLR data to the public, which we had 
enumerated the previous year in the proposed rule titled ``Medicare 
Program; Revisions to Payment Policies Under the Physician Fee Schedule 
and

[[Page 1906]]

Other Revisions to Part B for CY 2017; Medicare Advantage Pricing Data 
Release; Medicare Advantage and Part D Medical Loss Ratio Data Release; 
Medicare Advantage Provider Network Requirements; Expansion of Medicare 
Diabetes Prevention Program Model'' (81 FR 46162), which appeared in 
the Federal Register on July 15, 2016 (hereinafter referred to as the 
CY 2017 PFS proposed rule). In that proposed rule, we stated that the 
release of Part C and Part D MLR data could lead to research into how 
managed care in the Medicare population differs from and is similar to 
managed care in other populations (such as the individual and group 
markets) where MLR data is also released publicly, and could inform 
future administration of these programs (81 FR 46396). We further 
stated that the release of this data would promote accountability in 
the MA and Part D programs, by making MLR information publicly 
available for use by beneficiaries who are making enrollment choices 
and by allowing the public to see whether and how privately-operated MA 
and Part D plans administer Medicare--and supplemental--benefits in an 
effective and efficient manner (81 FR 46397). Notably, in the final 
rule titled ``Medicare Program; Revisions to Payment Policies Under the 
Physician Fee Schedule and Other Revisions to Part B for CY 2017; 
Medicare Advantage Bid Pricing Data Release; Medicare Advantage and 
Part D Medical Loss Ratio Data Release; Medicare Advantage Provider 
Network Requirements; Expansion of Medicare Diabetes Prevention Program 
Model; Medicare Shared Savings Program Requirements'' (81 FR 80170), 
which appeared in the November 15, 2016 Federal Register (hereinafter 
referred to as the CY 2017 PFS final rule), in response to comments 
that requested that CMS release only the MLR percentage for a contract, 
CMS expressly rejected that approach because releasing only the minimum 
amount of MLR data for MA and Part D contracts would not align with 
CMS' release of the detailed MLR data submitted by commercial plans 
(see 81 FR 80439). However, when we amended Sec. Sec.  422.2460 and 
423.2460 to scale back the MLR reporting requirements starting with CY 
2018 MLR reporting, we did not indicate that we had subsequently 
concluded that MLR data would not provide this value to the public, nor 
did we acknowledge that a direct consequence of CMS ending the detailed 
MLR reporting requirements, was that our release of Medicare MLR data 
would no longer align with the release of commercial MLR data, as we 
would only be releasing the MLR percentage and remittance amount (if 
any) for MA and Part D contracts, starting with MLR data submitted for 
CY 2018. Given this background, in proposing to reinstate the detailed 
MLR reporting requirements, we believe it is appropriate that we 
reaffirm our position that the public release of Part C and Part D MLR 
data provides value to the public both by increasing market 
transparency and improving beneficiary choice. We believe that the 
value in CMS releasing to the public detailed MLR data in accordance 
with Sec. Sec.  422.2490 and 423.2490, and in alignment with the 
disclosure of commercial MLR data, provides further support for our 
proposal to require MA organizations and Part D sponsors to submit such 
detailed data to us on an annual basis, starting with MLR reporting for 
CY 2023.
3. Proposed Changes to Medicare MLR Reporting Regulations, Data 
Collection Instrument, and Regulations Authorizing Release of Part C 
MLR Data (Sec. Sec.  422.2460, 422.2490, and 423.2460)
    As noted throughout this section of this proposed rule, we are 
proposing to reinstate the MLR reporting requirements that were in 
effect for CYs 2014 through 2017, with some modifications. Our proposed 
revisions to the regulation text would amend paragraph (a) of 
Sec. Sec.  422.2460 and 423.2460 so that they are essentially as they 
were prior to the elimination of the detailed MLR reporting 
requirements as finalized in the April 2018 final rule. However, we 
propose to further amend Sec.  422.2460(a) so that the regulation text 
explicitly provides that the MLR report submitted to CMS includes 
amounts paid for incurred claims for covered services (both Medicare 
benefits and supplemental benefits) and prescription drugs.
    Under our proposed amendments, paragraph (a) of Sec.  422.2460 
would state that, except as provided in paragraph (b), for each 
contract year, each MA organization must submit to CMS, in a timeframe 
and manner that we specify, a report that includes the data needed to 
calculate and verify the MLR and remittance amount, if any, for each 
contract, including the amount of incurred claims for Medicare-covered 
benefits, supplemental benefits, and prescription drugs; expenditures 
on quality improving activities; non-claims costs; taxes; licensing and 
regulatory fees; total revenue; and any remittance owed to CMS under 
Sec.  422.2410. We propose similar amendments to paragraph (a) of Sec.  
423.2460, except Sec.  423.2460(a) as proposed would refer to 
``incurred claims for covered drugs,'' would omit any mention of 
``covered services (both Medicare-covered benefits and supplemental 
benefits),'' and would refer to the remittance owed to CMS under Sec.  
423.2410. In addition, we propose to revise paragraph (b) of both 
Sec. Sec.  422.2460 and 423.2460 to specify that the limited MLR data 
collection requirements under that paragraph only apply to MLR 
reporting for CYs 2018 through 2022.
    In connection with our proposal to reinstate the detailed MLR 
reporting requirements, starting with MLR reporting for CY 2023, we 
intend to require MA organizations and Part D sponsors to submit their 
MLR data to CMS using the MLR Reporting Tool that was used to report 
MLR data for CYs 2014 through 2017. In the years since CMS discontinued 
development of the MLR Reporting Tool, we have received multiple 
requests to continue updating and making this software publicly 
available so that it can be used as an aid for calculating MLRs in 
accordance with the current regulations and guidance. We agree that the 
use of CMS-developed MLR reporting software will help MA organizations 
and Part D sponsors to calculate their MLRs accurately. Although the 
MLR reporting software is unable to prevent all errors that might cause 
MLRs to be calculated incorrectly, particularly errors resulting from 
users entering erroneous data, we believe that MLR calculation errors 
are less likely to occur, and less likely to go unnoticed when they do 
occur, when MA organizations and Part D sponsors input the data 
elements for the MLR calculation into a standardized data collection 
tool that performs the mathematical operations to compute the MLR, 
including any applicable credibility adjustment, and contains built-in 
validation checks. In addition, we believe that we can further improve 
the usefulness of the software if MA organizations and Part D sponsors 
also submit to CMS the information entered into the MLR Reporting Tool 
and used to calculate the MLR for a contract. As part of our desk 
review process, we generate reports that identify specific issues 
flagged during desk reviews and whether any corrections to the reported 
data were necessary, which we can analyze to identify areas where we 
can improve the reporting guidance and validations in order to prevent 
errors in MLR submissions. As the agency responsible for developing the 
requirements for calculating and reporting MLR data, receiving and 
processing MLR data submissions, and

[[Page 1907]]

identifying compliance issues, we believe that CMS is uniquely 
positioned to use feedback generated through the submission and review 
of MLR data to learn about the various types of errors that may affect 
MA organizations' and Part D sponsors' MLR calculations, and to make 
changes both in our guidance and in the data collection tool itself 
that can prevent or steer MA organizations and Part D sponsors away 
from making certain errors that are known to have affected the MLR 
calculations of other MA organizations and Part D sponsors.
    If our proposal to amend our regulations to require reporting of 
detailed MLR data is finalized, we intend to make three types of 
changes to the MLR Reporting Tool, which we list below:
    First, we will revise the MLR Reporting Tool's formulas to 
incorporate changes to the MLR calculation that have been finalized 
since CMS stopped developing the MLR Reporting Tool after CY 2017 MLR 
Reports were submitted. These include changes in the treatment of fraud 
reduction expenses to remove the cap on these amounts. We will add 
categories for fraud reduction expenses and medication therapy 
management programs in the section for Activities that Improve 
Healthcare Quality, consistent with changes in the April 2018 final 
rule that redefined these categories of expenditures as quality 
improvement activities (83 FR 16670 through 16673).
    Second, we will separate out certain items that are currently 
consolidated into or otherwise accounted for in existing lines of the 
MLR Reporting Tool. Thus, we intend to separate out low-income cost-
sharing subsidy amounts, which were previously subtracted from the MLR 
numerator and excluded from the denominator, into an information-only 
line in the MLR Reporting Tool's numerator section, which will serve as 
a reminder to Part D sponsors that this amount needs to be subtracted 
from the numerator, and which we believe will provide more 
accountability in ensuring this amount has been accurately determined.
    Third, we will separate out the current line for claims incurred 
during the contract year covered by the MLR Report into separate lines 
for benefits covered by Medicare Parts A and B, certain additional 
supplemental benefits (that is, benefits not covered by Parts A, B, or 
D and meeting the criteria in Sec.  422.100(c)(2), but excluding 
supplemental benefits that extend or reduce the cost sharing for items 
and services covered under Parts A and B), and Part D prescription drug 
benefits. As noted previously, in the CY 2017 PFS proposed rule, we 
explained that we believed the public release of Part C and Part D MLR 
data would allow the public to see whether and how privately-operated 
MA and Part D plans administer Medicare--and supplemental--benefits in 
an effective and efficient manner (see 81 FR 46396 and 46397). To date, 
CMS has not separated out Medicare-covered and supplemental benefits 
into separate lines of the MLR Reporting Tool.
    We intend to require MA organizations to report all expenditures 
for Medicare-covered benefits, including extended A/B coverage (by 
which we mean, for example, coverage of additional days during an 
inpatient stay) and cost-sharing reductions (by which we mean the value 
of the difference between the cost sharing under Medicare FFS and the 
plan's cost sharing), on the same line of the MLR Reporting Tool, based 
on our assumption that it would be exceedingly difficult for MA 
organizations to separately identify and track spending on extended 
coverage of original Medicare benefits and cost-sharing reductions. We 
solicit comment on whether this is a reasonable assumption and whether 
the MLR Reporting Tool should instead mirror how MA bids are submitted 
under Sec.  422.254(b).
    Regarding additional supplemental benefits (supplemental benefits 
meeting the criteria in Sec.  422.100(c)(2) but excluding supplemental 
benefits that extend or reduce the cost sharing for items and services 
covered under Parts A and B), we intend to have MA organizations report 
these expenditures on multiple lines of the MLR Reporting Tool, which 
would represent different types or categories of supplemental benefits. 
Requiring MA organizations to account for their supplemental benefit 
expenditures by benefit type or benefit category will provide more 
transparency into how the MLR is being calculated, and it will assist 
CMS in verifying the accuracy of the MLR calculation, particularly with 
respect to expenditures related to categories of supplemental benefits 
that MA organizations must already separately report to CMS for 
purposes of bid development. In addition, we believe that the public 
release of information on supplemental benefit spending by benefit type 
or category may be helpful to beneficiaries who wish to make their 
enrollment decisions based on a comparison of the relative value of the 
supplemental benefits actually provided by different MA organizations. 
We are not proposing to require separate reporting of Part D 
supplemental benefit expenditures (that is, they will continue to be 
reported combined with other Part D expenditures).
    In developing these additional supplemental benefit categories, we 
recognize that requiring MA organizations to separately report 
expenditures that they might not already be separately tracking, or 
that they are tracking using categories other than the ones listed in 
the MLR Reporting Tool, could create an additional burden. Accordingly, 
where different supplemental benefits are conventionally regarded as 
falling into the same category of benefit offering (for example, a 
comprehensive dental benefit might include both extractions and dental 
diagnostic services), although these can be treated as separate benefit 
offerings in the PBP, we grouped those benefits together under the same 
category (for example, ``Dental'').
    Based on these considerations, we intend to expand the MLR 
reporting requirements beyond what was required under the detailed MLR 
reporting requirements that were in effect for CYs 2014 through 2017, 
to include expenditures related to the following categories of 
supplemental benefits:

 Dental
 Vision
 Hearing
 Transportation
 Fitness Benefit
 Worldwide Coverage/Visitor Travel
 Over the Counter (OTC) Items
 Remote Access Technologies
 Meals
 Routine Foot Care
 Out-of-Network Services
 Acupuncture Treatments
 Chiropractic Care
 Personal Emergency Response System (PRS)
 Health Education
 Smoking and Tobacco Cessation Counseling
 All Other Primarily Health Related Supplemental Benefits
 Non-Primarily Health Related Items and Services that are 
Special Supplemental Benefits for the Chronically Ill (SSBCI) (as 
defined in Sec.  422.102(f))

    We believe that expenditures for dental, vision, and hearing should 
be separately reported because, in addition to being among the most 
widely-offered types of supplemental benefits, the amounts reported in 
the MLR Reporting Tool for each of those benefit types could be 
compared to the expenditures for each of those benefit types that are 
included in the base period experience section and the expected 
expenditures in the projected section of the Bid Pricing Tool (BPT). We 
believe reporting

[[Page 1908]]

expenditures related to the additional types and categories of 
supplemental benefits previously listed will increase accountability 
for the accuracy of the amounts used in the MLR calculation, and CMS 
will be able to analyze the reported data for indicators of potential 
inaccuracies, such as by flagging outliers for follow-up inquiries.
    In compiling the previous list of supplemental benefit types and 
categories, we took into consideration the percentage of MA plans that 
offer each type of supplemental benefit in the most recent year for 
which data on plan benefit packages is available (that is, CY 2022), so 
that the lines we add to the MLR Reporting Tool are more likely to 
allow for comparison of MA organizations' expenditures on types of 
supplemental benefits that are widely offered. In addition, in deciding 
whether to require separate reporting of the expenditures for a 
particular supplemental benefit type, we considered the percentage of 
contracts that currently offer that supplemental benefit under just one 
plan, as we believe expenditures associated with benefits offered under 
only one plan under a contract would constitute plan-level data, which 
CMS proposes to exclude from public release of MLR data consistent with 
the exclusions for MLR data reported at the plan level and information 
submitted for contracts consisting of a single plan (see Sec.  
422.2490(b)(2)). Based on our review of the percentage of plans 
offering each type of supplemental benefit, and the percentage that are 
offered under only one plan under a contract, we are not proposing to 
require separate reporting of expenditures for supplemental benefit 
types or categories offered by less than 10 percent of all MA plans in 
2021. The exception is SSBCI that are not primarily health related, 
which we include because we believe this information will help us 
assess the impact of our 2021 rule change that allows all amounts paid 
for covered services to be included in the MLR numerator as incurred 
claims (prior to this rule change, only amounts paid ``to providers''--
which is defined in Sec.  422.2 in terms of the provision of healthcare 
items and services--for covered services could be included in incurred 
claims, which would have excluded, for example, pest control).
    We solicit comment on whether the list of supplemental benefit 
types and categories would be appropriate breakouts for separating out 
supplemental benefit expenditures in the MLR Reporting Tool. We are 
interested in feedback that addresses whether we should increase or 
decrease the number of types or categories of supplemental benefits, as 
well as suggestions for alternative categories or for consolidating the 
above benefit types or categories into larger categories.
    As the preceding discussion suggests, we intend to use our 
authority under Sec. Sec.  422.2490 and 423.2490 to release to the 
public the Part C and Part D MLR data we propose to collect, including 
the additional data we propose to collect on supplemental benefit 
expenditures, to the same extent that we released the information we 
formerly collected under the MLR reporting requirements in effect for 
CYs 2014 through 2017. Consistent with Sec. Sec.  422.2490(c) and 
423.2490(c), the release of the MLR data we propose to collect for a 
contract year will occur no sooner than 18 months after the end of the 
applicable contract year, and will be subject to the exclusions in 
Sec. Sec.  422.2490(b) and 423.2490(b). As previously noted, we propose 
to amend Sec.  422.2490(b)(2) by adding new paragraph (b)(2)(ii), which 
would exclude from release data on amounts that are reported as 
expenditures for a specific type of supplemental benefit, where the 
entire amount that is reported represents costs incurred by the only 
plan under the contract that offers that benefit. For example, if only 
one plan under a contract offers Dental X-rays as a supplemental 
benefit, and expenditures for that benefit are the only amounts 
reported on that line of the MLR Reporting Tool, we would exclude the 
entire amount reported on that line from our public data release. 
However, if only one plan under a contract covers Dental X-rays, and 
another plan under that same contract is the only plan under the 
contract that covers Extractions, expenditures for both benefits would 
be reported in the Dental line in the MLR Reporting Tool, and that 
combined amount (assuming both plans had expenditures in the Dental 
category) would not be excluded from our public data release. We 
believe data regarding supplemental benefit expenditures is only 
sensitive to the extent that the data reveals plan-level expenditures 
for a specific benefit offered under a single plan, and that these 
concerns do not exist when expenditures for multiple types of 
supplemental benefits or from multiple plans are included in the same 
line of the MLR Reporting Tool. We solicit comment on this proposed 
exclusion, including any suggestions for how we would implement this 
exclusion (for example, by adding check boxes next to the applicable 
lines in the MLR Reporting Tool, where users would add a check mark if 
their expenditures for the supplemental benefit type or category in the 
line by the checkbox represented expenditures for a single plan and 
single benefit type), and whether additional exclusions should be added 
to our MLR data release regulations. We solicit comment on whether 
there is additional sensitivity around expenditures for supplemental 
benefits generally or for any types of supplemental benefits in 
particular, such that public release of data concerning those 
expenditures would be harmful.
4. Proposed Technical Change to MLR Reporting Regulations (Sec. Sec.  
422.2460 and 423.2460)
    In addition to our proposal to reinstate the detailed MLR reporting 
requirements that were in effect for CYs 2014 through 2017, with some 
modifications, and to add new data fields to our MLR Reporting Tool as 
described in the previous section of this preamble, we propose to make 
a clarifying amendment to our MLR reporting regulations.
    Currently, Sec. Sec.  422.2460(d) and 423.2460(d) state that the 
MLR is reported once, and is not reopened as a result of any payment 
reconciliation process. We propose to amend this paragraph to note that 
it is subject to an exception in new paragraph (e), which as proposed 
would provide that, with respect to an MA organization (in the case of 
proposed Sec.  422.2460(e)) or Part D sponsor (in the case of proposed 
Sec.  423.2460(e)) that has already submitted to CMS the MLR report or 
MLR data submission for a contract for a contract year, paragraph (d) 
does not prohibit resubmission of the MLR report or MLR data for the 
purpose of correcting the prior MLR report or data submission. Proposed 
paragraph (e) would also provide that such resubmission must be 
authorized or directed by CMS, and upon receipt and acceptance by CMS, 
will be regarded as the contract's MLR report or data submission for 
the contract year for purposes of part 422, subpart X, and part 423, 
subpart X.
    We characterize this as a clarifying amendment, as we believe it is 
clear from the discussion in the May 2013 Medicare MLR final rule that 
the provision stating that the MLR will be reported once, and will not 
be reopened as a result of any payment reconciliation process, was 
intended to codify the policy decision that the MLR for a contract year 
should be based on the contract year revenue figure available at the 
time of reporting, and should not be subject to change if the contract 
year

[[Page 1909]]

revenues increase or decrease through adjustments that take place in a 
future year. We note that the discussion of this policy appears in both 
the proposed and final rules under the heading ``Projection of Net 
Total Revenue'' (78 FR 12435; 78 FR 31292). The MLR final rule 
discusses how our policy not to reopen the MLR due to any payment 
reconciliation process is consistent with our view that the MLR should 
reflect how an MA organization or Part D plan sponsor decided to 
apportion the revenue it actually received for the contract year 
between patient care and quality improvement and other costs (78 FR 
31293). The Medicare MLR final rule explains that we assume that MA 
organizations and Part D plan sponsors likely do not make their 
decisions about how to use the funds that are available to them based 
on an assumption that their revenue will be reduced or increased in a 
future year as a result of a future audit or reconciliation that 
changes the final Medicare payment amount. We believe that taking such 
future revenue adjustments into account would not be useful for 
assessing how a plan chose to allocate its available revenues.
    In addition to our remarks in the 2013 Medicare MLR proposed and 
final rules, we believe it is clear based on other provisions in our 
MLR regulations that we have never intended to prohibit ourselves from 
collecting, or taking into account, additional or corrected MLR data 
that is submitted to address deficiencies or inaccuracies in the annual 
MLR submission required under Sec. Sec.  422.2460 and 423.2460. For 
example, when MLR data submitted under Sec.  422.2460 (for MA 
contracts) or Sec.  423.2460 (for Part D contracts), calculations, or 
any other MLR submission required under our MLR regulations is found to 
be materially incorrect or fraudulent, under Sec. Sec.  422.2480(d) and 
423.2480(d), CMS is required to recoup the appropriate remittance 
amount. It would be unduly burdensome and time-consuming for both CMS 
and the relevant MA organization or Part D sponsor if, in lieu of 
requiring the MA organization or Part D sponsor to correct its MLR 
submission, CMS had to collect the MA organization's or Part D 
sponsor's relevant financial records, contracts, and other types of 
supporting documentation so the agency could calculate the correct MLR 
for a contract. That being the case, if CMS could not require the 
submission of corrected MLR data when deficiencies are found, whether 
by CMS or by the MA organization or Part D sponsor, CMS' ability to 
enforce the statutory MLR sanctions (codified in our regulations at 
Sec. Sec.  422.2410(c) through (d) and 423.2410(c) through (d)) would 
be undermined. In addition, because our MLR data release regulations at 
Sec. Sec.  422.2490 and 423.2490 provide that CMS releases to the 
public the data collected under Sec. Sec.  422.2460 and 423.2460, if 
CMS could not require or allow resubmission of MLR data submitted under 
those regulations in order to correct errors in the original filing, it 
would be necessary for CMS to either release data that is known to 
contain errors, which could mislead beneficiaries who wish to use the 
MLR data to assess the relative value of Medicare health and drug 
plans, or to remove the erroneous data, which would create gaps in the 
dataset and limit the usefulness of MLR data as a resource for 
facilitating public evaluation of the MA and Part D programs (see 81 FR 
46396 and 46397).
    The proposed amendments to Sec. Sec.  422.2460 and 423.2460 are 
consistent with our longstanding practice, which dates back to when CMS 
first began collecting Part C and Part D MLR data (for CY 2014) in 
December 2015, of allowing MA organizations and Part D sponsors to 
resubmit their MLR Data Forms for a contract year in order to correct 
errors and omissions in the original MLR filing without treating that 
resubmission as a reporting of the MLR for purposes of Sec. Sec.  
422.2460(d) and 423.2460(d). To date, CMS has accepted resubmission of 
MLR data submitted for a contract year without penalty up until the 
point when we collect remittances for contracts that have failed to 
meet the minimum MLR requirement for that contract year. CMS has 
typically collected remittances for a contract year through an 
adjustment to MA organizations' and Part D sponsors' monthly payments 
for July in the year that is 2 years after the contract year that is 
the subject of the MLR filing (for example, remittances based on CY 
2015 MLR reporting were collected in July 2017). We have also required 
that MA organizations and Part D sponsors resubmit MLR data if it is 
determined that the original MLR submission contained errors that 
affected the calculation of the MLR or remittance amount after this 
date, although in such cases CMS reserves the right to issue sanctions 
as authorized by Sec. Sec.  422.2480(d)(3) and 423.2480(d)(3). In 
deciding whether to issue sanctions, we will consider factors such as 
whether the error in the MLR filing was self-disclosed by the MA 
organization or Part D sponsor, whether the error appears to be the 
result of intentional misrepresentation, and whether any beneficiary 
harm (including disruptions to enrollment) occurred as a result of the 
error.

H. Pharmacy Price Concessions in the Negotiated Price (Sec.  423.100)

1. Introduction
    Under Medicare Part D, Medicare makes partially capitated payments 
to private insurers, also known as Part D sponsors, for covering 
prescription drug benefits for Medicare beneficiaries. Often, the Part 
D sponsor or its pharmacy benefit manager (PBM) receives compensation 
after the point-of-sale that serves to lower the final net amount paid 
by the sponsor to the pharmacy for the drug. Under Medicare Part D, 
this post point-of-sale compensation is called Direct and Indirect 
Remuneration (DIR) and is factored into CMS's calculation of final 
Medicare payments to Part D plans. DIR includes rebates from 
manufacturers, administrative fees above fair market value, price 
concessions for administrative services, legal settlements affecting 
Part D drug costs, pharmacy price concessions, drug costs related risk-
sharing settlements, or other price concessions or similar benefits 
offered to some or all purchasers from any source (including 
manufacturers, pharmacies, enrollees, or any other person) that would 
serve to decrease the costs incurred under the Part D plan (see Sec.  
423.308).

[[Page 1910]]

    Total DIR reported by Part D sponsors has been growing 
significantly in recent years. The data Part D sponsors submit to CMS 
as part of the annual reporting of DIR \134\ show that pharmacy price 
concessions (generally referring to all forms of discounts, direct or 
indirect subsidies, or rebates that a pharmacy pays to a Part D sponsor 
to reduce the costs incurred under Part D plans by Part D sponsors), 
net of all pharmacy incentive payments, have grown faster than any 
other category of DIR \135\ received by sponsors and PBMs. This means 
that pharmacy price concessions now account for a larger share than 
ever before of reported DIR and a larger share of total gross drug 
costs in the Part D program. In 2020, pharmacy price concessions 
accounted for about 4.8 percent of total Part D gross drug costs ($9.5 
billion), up from 0.01 percent ($8.9 million) in 2010. As shown in 
Table 3, the growth in pharmacy price concessions from 2010 to 2020 has 
been a continuous upward trend with the exception of 2011.
---------------------------------------------------------------------------

    \134\ CMS collects DIR data under collection approved under OMB 
control number 0938-0964 (CMS-10174) (``Collection of Prescription 
Drug Event Data from Contracted Part D Providers for Payment''). CMS 
does not release publicly the DIR data that we collect. The one 
exception was a highly summarized release of certain 2014 DIR data 
related to manufacturer rebates: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/PartD_Rebates.
    \135\ Sponsors report all DIR to CMS annually by category at the 
plan level. DIR categories include: Manufacturer rebates, 
administrative fees above fair market value, price concessions for 
administrative services, legal settlements affecting Part D drug 
costs, pharmacy price concessions, drug costs related risk-sharing 
settlements, etc.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP12JA22.006

BILLING CODE 4120-01-C
    The data show that pharmacy price concessions, net of all pharmacy 
incentive payments, grew more than 107,400 percent between 2010 and 
2020. The data also show that much of this growth occurred after 2012, 
when the use by Part D sponsors of performance-based payment 
arrangements with pharmacies became increasingly prevalent. Part D 
sponsors and their contracted PBMs have been increasingly successful in 
recent years in negotiating price concessions from network pharmacies. 
Such price concessions are negotiated between pharmacies and sponsors 
or their PBMs, independent of CMS, and are often tied to the pharmacy's 
performance on various measures defined by the sponsor or its PBM. 
Performance-based pharmacy price concessions, net of all pharmacy 
incentive payments, increased, on average, nearly 170 percent per year 
between 2012 and 2020 and now comprise the second largest category of 
DIR received by sponsors and PBMs, behind only manufacturer rebates.
    While manufacturer rebates (a non-pharmacy price concession) 
account for the largest category of DIR, given the large growth in 
pharmacy price concessions that has resulted from the increased use of 
performance-based pharmacy payment arrangements, CMS is focusing on 
policy proposals in this section that would be applicable to pharmacy 
price concessions, and not non-pharmacy price concessions. Further, 
section 90006 of the Infrastructure Investment and Jobs Act (Pub. L. 
117-58, November 15, 2021) prohibits the Secretary from implementing, 
administering, or enforcing the provisions of the final rule

[[Page 1911]]

published by the Office of the Inspector General of the Department of 
Health and Human Services on November 30, 2020, and titled ``Fraud and 
Abuse; Removal of Safe Harbor Protection for Rebates Involving 
Prescription Pharmaceuticals and Creation of New Safe Harbor Protection 
for Certain Point-of-Sale Reductions in Price on Prescription 
Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees'' (85 
FR 76666) (hereinafter referred to as the rebate rule) prior to January 
1, 2026. While CMS has independent statutory authority, pursuant to 
section 1860D-2(d)(1)(B) of the Act, to regulate the application of 
non-pharmacy price concessions to negotiated price, given the existing 
moratorium on implementation of the rebate rule and the differences 
between performance-based pharmacy payment arrangements and non-
pharmacy price concessions, we are following an incremental approach 
and only proposing policies related to pharmacy price concessions at 
this time.
    The negotiated price is the primary basis by which the Part D 
benefit is adjudicated, as it is used to determine plan, beneficiary, 
manufacturer (in the coverage gap), and government cost obligations 
during the course of the payment year, subject to final reconciliation 
following the end of the coverage year. Under the current definition of 
``negotiated prices'' at Sec.  423.100, negotiated prices must include 
all price concessions from network pharmacies except those that cannot 
reasonably be determined at the point-of-sale. However, because 
performance adjustments typically occur after the point-of-sale, they 
are not included in the price of a drug at the point-of-sale.
    Through comments received from the pharmacy industry in response to 
our Request for Information on pharmacy price concessions (included in 
the proposed rule titled ``Medicare Program; Contract Year 2019 Policy 
and Technical Changes to the Medicare Advantage, Medicare Cost Plan, 
Medicare Fee-for-Service, the Medicare Prescription Drug Benefit 
Programs, and the PACE Program'' (82 FR 56419 through 56428), which 
appeared in the Federal Register on November 28, 2017 (hereinafter 
referred to as the November 2017 proposed rule)), and our solicitation 
for comments on the potential policy approach for including pharmacy 
price concessions in the negotiated price discussed in the proposed 
rule titled ``Modernizing Part D and Medicare Advantage To Lower Drug 
Prices and Reduce Out-of-Pocket Expenses'' (83 FR 62174 through 62180), 
which appeared in the Federal Register on November 30, 2018 
(hereinafter referred to as the November 2018 proposed rule), and 
sponsor-reported DIR data, we further understand that the share of 
pharmacies' reimbursements that is contingent upon their performance 
under such arrangements has grown steadily each year. Further, sponsors 
and PBMs have been recouping increasing sums from network pharmacies 
after the point-of-sale (pharmacy price concessions) for ``poor 
performance,'' sums that are far greater than those paid to network 
pharmacies after the point-of-sale (pharmacy incentive payments) for 
``high performance.'' When pharmacy price concessions received by Part 
D sponsors are not reflected in lower drug prices at the point-of-sale 
and are instead used to reduce plan liability, beneficiaries generally 
see lower premiums, but they do not benefit through a reduction in the 
amount they must pay in cost-sharing. Thus, beneficiaries who utilize 
drugs end up paying a larger share of the actual cost of a drug. 
Moreover, when the point-of-sale price of a drug that a Part D sponsor 
reports on a prescription drug event (PDE) record as the negotiated 
price does not include such discounts, the negotiated price of each 
individual prescription is rendered less transparent and less 
representative of the actual cost of the drug for the sponsor.
    President Biden's Executive Order (E.O.) 14036, ``Promoting 
Competition in the American Economy'' (86 FR 36987), section 5 
(``Further Agency Responsibilities''), called for agencies to consider 
how regulations could be used to improve and promote competition 
throughout the prescription drug industry. Because variation in the 
treatment of pharmacy price concessions by Part D sponsors may have a 
negative effect on the competitive balance under the Medicare Part D 
program, and given the programmatic impacts laid out above and the 
charge from the E.O., CMS is proposing changes that would standardize 
how Part D sponsors apply pharmacy price concessions to negotiated 
prices at the point-of-sale.
    At the time the Part D program was established, we believed, as 
discussed in the January 2005 final rule (70 FR 4244), that market 
competition would encourage Part D sponsors to pass through to 
beneficiaries at the point-of-sale a high percentage of the price 
concessions they received, and that establishing a minimum threshold 
for the price concessions to be applied at the point-of-sale would only 
serve to undercut these market forces. However, actual Part D program 
experience has not matched expectations in this regard. In recent 
years, less than 2 percent of plans have passed through any price 
concessions to beneficiaries at the point-of-sale. We now understand 
that sponsors may face market incentives to not apply price concessions 
at the point-of-sale because of the advantages that accrue to sponsors 
in terms of lower premiums (also an advantage for beneficiaries). 
Pharmacy price concessions reduce plan costs, and having the 
concessions not be applied at the point-of-sale reduces plan costs and 
plan premiums at the expense of the beneficiary having lower cost 
sharing at the point-of-sale, thus shifting some of the net costs to 
the beneficiary via higher cost sharing. We believe that Part D 
sponsors are incentivized to have lower premiums versus lower cost 
sharing because anecdotal evidence suggests beneficiaries focus more on 
premiums instead of cost sharing when choosing plans.
    For this reason, as part of the November 2017 proposed rule, we 
published a ``Request for Information Regarding the Application of 
Manufacturer Rebates and Pharmacy Price Concessions to Drug Prices at 
the Point of Sale'' (82 FR 56419 through 56428). We solicited comment 
on whether CMS should require that the negotiated price at the point-
of-sale for a covered Part D drug must include all price concessions 
that the Part D sponsor could potentially collect from a network 
pharmacy for any individual claim for that drug. Of the many timely 
comments received, the majority were from pharmacies, pharmacy 
associations, and beneficiary advocacy groups that supported the 
adoption of such a requirement claiming that it would: (1) Lower 
beneficiary out-of-pocket drug costs (especially critical for 
beneficiaries who utilize high cost drugs); (2) stabilize the operating 
environment for pharmacies (by creating greater transparency and 
allegedly making the minimum reimbursement on a per-claim level more 
predictable); and (3) standardize the way in which plan sponsors and 
their PBMs treat pharmacy price concessions. Some commenters--mostly 
Part D sponsors and PBMs--were against such a policy, claiming that it 
would limit their ability to incentivize quality improvement from 
pharmacies. In the November 2018 proposed rule, we solicited comment on 
a potential policy approach under which all pharmacy price concessions 
received by a plan sponsor for a covered Part D drug, including 
contingent price

[[Page 1912]]

concessions paid after the point-of-sale, would be included in the 
negotiated price (83 FR 62177). Specifically, we considered adopting a 
new definition for the term ``negotiated price'' at Sec.  423.100, 
which would mean the lowest amount a pharmacy could receive as 
reimbursement for a covered Part D drug under its contract with the 
Part D plan sponsor or the sponsor's intermediary. In the final rule 
titled ``Modernizing Part D and Medicare Advantage to Lower Drug Prices 
and Reduce Out-of-Pocket Expenses,'' which appeared in the Federal 
Register on May 23, 2019 (84 FR 23867), we noted that we received over 
4,000 comments on this potential policy approach, indicated that we 
would continue studying the issue, and left the existing definition of 
``negotiated prices'' in place.
    To address concerns about the lack of transparency in the 
performance measures used to evaluate pharmacy performance, in the 
February 2020 proposed rule (85 FR 9002), we proposed to amend the 
regulatory language at Sec.  423.514(a) to establish a requirement for 
Part D sponsors to disclose to CMS the pharmacy performance measures 
they use to evaluate pharmacy performance, as established in their 
network pharmacy agreements. We explained in the proposed rule that, 
once collected, we would publish the list of pharmacy performance 
measures in order to increase public transparency. In the final rule 
titled, ``Medicare and Medicaid Programs; Contract Year 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 
appeared in the Federal Register on January 19, 2021 (86 FR 5684), we 
finalized the proposed amendment to Sec.  423.514(a), such that, 
starting January 1, 2022, Part D sponsors will be required to disclose 
their pharmacy performance measures to CMS.
    After considering the comments received on the November 2018 
proposed rule, and in light of more recent data indicating that 
pharmacy price concessions have continued to grow at a faster rate than 
any other category of DIR,\136\ effective for contract year 2023, we 
propose to amend Sec.  423.100 to define the term ``negotiated price'' 
to ensure that the prices available to Part D enrollees at the point-
of-sale are inclusive of all pharmacy price concessions. First, we 
propose to delete the current definition of ``negotiated prices'' (in 
the plural) and add a definition of ``negotiated price'' (in the 
singular) to make clear that a negotiated price can be set for each 
covered Part D drug. We believe this approach accommodates the 
different approaches to applying price concessions under sponsor and 
PBM payment arrangements with pharmacies, which may provide for price 
concessions to be applied uniformly as a percentage adjustment to the 
price for all Part D drugs dispensed by a pharmacy or have price 
concessions differ on a drug-by-drug basis. In addition, defining 
``negotiated price'' in the singular is consistent with the regulations 
for the coverage gap discount program, which define the term 
``negotiated price'' at Sec.  423.2305, and it is compatible with our 
existing regulations, which at times refer to the ``negotiated price'' 
for a specific drug rather than ``negotiated prices'' for multiple 
drugs. Second, we propose to define ``negotiated price'' as the lowest 
possible reimbursement a network pharmacy will receive, in total, for a 
particular drug, taking into account all pharmacy price concessions.
---------------------------------------------------------------------------

    \136\ From 2018 to 2020, pharmacy price concessions increased by 
50.4% while all other DIR increased by 23.5%.
---------------------------------------------------------------------------

2. Background
    Section 1860D-2(d)(1) of the Act requires that a Part D sponsor 
provide beneficiaries with access to negotiated prices for covered Part 
D drugs. Under the definition of ``negotiated prices'' at Sec.  
423.100, the negotiated price is the price paid to the network pharmacy 
or other network dispensing provider for a covered Part D drug 
dispensed to a plan enrollee that is reported to CMS at the point-of-
sale by the Part D sponsor. This point-of-sale price is used to 
calculate beneficiary cost-sharing. More broadly, the negotiated price 
is the primary basis by which the Part D benefit is adjudicated, as it 
is used to determine plan, beneficiary, manufacturer (in the coverage 
gap), and government liability during the course of the payment year, 
subject to final reconciliation following the end of the coverage year.
    Under current law, Part D sponsors can, for the most part, choose 
whether to reflect in the negotiated price the various price 
concessions they or their intermediaries receive from all sources, not 
just pharmacies. Specifically, section 1860D-2(d)(1)(B) of the Act 
requires that negotiated prices ``shall take into account negotiated 
price concessions, such as discounts, direct or indirect subsidies, 
rebates, and direct or indirect remunerations, for covered part D drugs 
. . . .'' Part D sponsors are allowed, but generally not required, to 
apply rebates and other price concessions at the point-of-sale to lower 
the price upon which beneficiary cost-sharing is calculated. Under the 
existing definition of negotiated prices at Sec.  423.100, however, 
negotiated prices must include all price concessions from network 
pharmacies that can reasonably be determined at the point-of-sale.
    To date, very few price concessions have been included in the 
negotiated price at the point-of-sale. All pharmacy and other price 
concessions that are not included in the negotiated price must be 
reported to CMS as DIR at the end of the coverage year using the form 
required by CMS for reporting Summary and Detailed DIR (OMB control 
number 0938-0964). These data on price concessions are used in our 
calculation of final plan payments, which, under section 1860D-
2(d)(1)(B) of the Act, are required to be based on costs actually 
incurred by Part D sponsors, net of all applicable DIR. Reinsurance 
payments under section 1860D-15(b) of the Act, and risk sharing 
payments and adjustments under section 1860D-15(e)(2) of the Act are 
also required to be based on costs actually incurred by Part D 
sponsors. In addition, pursuant to section 1860D-2(d)(2) of the Act, 
Part D sponsors are required to disclose the aggregate negotiated price 
concessions made available to the sponsor by a manufacturer which are 
passed through in the form of lower subsidies, lower monthly 
beneficiary prescription drug premiums, and lower prices through 
pharmacies and other dispensers.
    When price concessions are applied to reduce the negotiated price 
at the point-of-sale, some of the concession amount is apportioned to 
reduce beneficiary cost-sharing. In contrast, when price concessions 
are applied after the point-of-sale, as DIR, the majority of the 
concession amount accrues to the plan, and the remainder accrues to the 
government. For further discussion on this matter, please see the CMS 
Fact Sheet from January 19, 2017 ``Medicare Part D Direct and Indirect 
Remuneration,'' found on the CMS website at https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir. As discussed later in this section of this proposed rule, pharmacy 
price concessions applied as DIR can lower plan premiums and increase 
plan revenues, result in cost-shifting to certain beneficiaries (in the 
form of higher cost-sharing) and the government (through higher 
reinsurance and low-income cost-sharing subsidies), and obscure the 
true costs of prescription drugs for consumers and the government.

[[Page 1913]]

a. Premiums and Plan Revenues
    The main benefit to a Part D beneficiary of price concessions 
applied as DIR at the end of the coverage year (and not to the 
negotiated price at the point-of-sale) is a lower plan premium. A 
sponsor must factor into its plan bid an estimate of the expected DIR 
for the upcoming payment year. That is, in the bid the sponsor must 
lower its estimate of plan liability by a share of the projected DIR, 
which has the effect of reducing the price of coverage under the plan. 
Under the current Part D benefit design, applying price concessions 
after the point-of-sale as DIR reduces plan liability (and thus 
premiums) more than applying price concessions at the point-of-sale.
    Therefore, to the extent that plan bids reflect accurate DIR 
estimates, the pharmacy and other price concessions that Part D 
sponsors and their PBMs negotiate, but do not include in the negotiated 
price at the point-of-sale, put downward pressure on plan premiums, as 
well as the government's subsidies of those premiums. The average Part 
D basic beneficiary premium grew at an average rate of only about 1 
percent per year between 2010 and 2020 \137\ and the average basic 
premium actually paid by beneficiaries has declined each year since 
2017 as sponsors projected in their bids that DIR growth will outpace 
the growth in projected gross drug costs each year. The average 
Medicare direct subsidy paid by the government to cover a share of the 
cost of coverage under a Part D plan has also declined, by an average 
of 11.7 percent per year between 2010 and 2019, partly for the same 
reason.\138\
---------------------------------------------------------------------------

    \137\ By contrast, during this same period (2010-20), the 
average premium for a single individual in the commercial market 
grew by about 4 percent per year. See Kaiser Family Foundation 2020 
Health Benefits Annual Survey, Page 40, https://Files.kff.org/Attachment/Report-Employer-Health-Benefits-2020-Annual-Survey.pdf.
    \138\ Plan Payment Data, 2010-19, available at https://www.cms.gov/Medicare/Medicare-Advantage/Plan-Payment/Plan-Payment-Data.html.
---------------------------------------------------------------------------

    However, any DIR a sponsor receives that is above the projected 
amount factored into its plan bids increases revenues and contributes 
to plan profits, without necessarily being reflected in lower premiums. 
The risk-sharing construct established under the Part D statute at 
section 1860D-15(e) of the Act allows sponsors to retain as plan profit 
the majority of all plan revenues above the bid-projected amount. Given 
that plan bids, and, thus, plan revenues, are based on cost 
projections, the plan's actual experience may yield unexpected losses 
(when bid-based payments to plans--plan revenues--fall short of actual 
plan costs) or unexpected savings (when plan revenues exceed actual 
plan costs) for Part D sponsors. In order to limit Part D sponsors' 
exposure to unexpected drug expenses and the government's exposure to 
overpayments, Medicare shares risk with sponsors on the drug costs 
covered by their plan bids, using symmetrical risk corridors to cover 
or recoup a share of unexpected losses or savings.
    Under the Part D risk corridors, if a plan's actual drug costs are 
within +/- 5 percent of the drug costs estimated in its bid, the plan 
assumes all of the losses or savings. If its costs are more than 5 
percent above or below its bid, the government assumes a growing share 
of the losses or savings, and the plan assumes the remainder. Any 
unexpected losses or savings that a plan assumes affect its final 
profit margin. Thus, when a plan underestimates the amount of DIR that 
it will receive, any additional amount of DIR constitutes additional 
plan revenues. In the event that overall plan revenues exceed the 
amount projected in the plan sponsor's bid, the sponsor is permitted to 
retain most, if not all, of the excess amount, assuming that the 
sponsor has met the minimum MLR requirement. Our analysis of Part D 
plan payment and cost data indicates that in recent years, DIR amounts 
that Part D sponsors and their PBMs actually received have consistently 
exceeded bid-projected amounts, by an average of 0.6 percent and as 
much as 3 percent as a share of gross drug costs from 2010 to 2020.
    Due to the relative premium and other advantages that price 
concessions applied as DIR, including pharmacy price concessions, offer 
sponsors over lower point-of-sale prices, sponsors can have an 
incentive to opt for higher negotiated prices in exchange for higher 
DIR and, where price concessions are in the form of percentage-based 
fees, to prefer a higher net cost drug over a cheaper alternative. This 
may put upward pressure on Part D program costs and shift costs from 
the Part D sponsor to beneficiaries who utilize drugs in the form of 
higher cost-sharing and to the government through higher reinsurance 
and low-income cost-sharing subsidies.
b. Cost-Shifting
    Beneficiary cost-sharing is generally calculated as a percentage of 
the negotiated price. When pharmacy price concessions and other price 
concessions are not reflected in the negotiated price at the point-of-
sale (that is, are applied instead as DIR at the end of the coverage 
year), beneficiary cost-sharing increases, covering a larger share of 
the actual cost of a drug. Although this is especially true when a Part 
D drug is subject to coinsurance, it is also true when a drug is 
subject to a copayment because Part D rules require that the copayment 
amount be at least actuarially equivalent to the coinsurance required 
under the defined standard benefit design. For more than half of Part D 
beneficiaries who utilize drugs and thus incur cost-sharing expenses, 
this means, on average, higher overall out-of-pocket costs, even after 
accounting for the premium savings tied to higher DIR. For the millions 
of low-income beneficiaries whose out-of-pocket costs are subsidized by 
Medicare through the low-income cost-sharing subsidy, those higher 
costs are borne by the government. See the lowest possible 
reimbursement example later in this section of this proposed rule for 
an example of the effect the proposed change to the definition of 
negotiated price would have on the determination of beneficiary cost-
sharing.
    This potential for cost shifting to beneficiaries grows 
increasingly pronounced as pharmacy price concessions increase as a 
percentage of gross drug costs and continue to be applied outside of 
the negotiated price. Numerous research studies suggest that higher 
cost-sharing can impede beneficiary access to necessary medications, 
which leads to poorer health outcomes and higher medical care costs for 
beneficiaries and Medicare overall.\139\ \140\ \141\ Moreover, higher 
cost sharing can negatively impact all beneficiaries, not just those 
who are low income. While most low-income beneficiaries are insulated 
from this cost-shifting due to statutorily limited copayments, low-
income subsidy (LIS) Level 4 beneficiaries pay 15 percent coinsurance 
in the initial coverage limit, which in an environment where the 
negotiated price does not include all pharmacy price concessions could 
be cost-prohibitive for this population. Additionally, those 
beneficiaries who narrowly miss the LIS eligibility criteria are 
particularly vulnerable to such cost shifting. Given this, we believe 
it is

[[Page 1914]]

important to weigh the effects of current Part D policies, and the 
trade-offs between higher cost-sharing versus lower plan premiums, on 
beneficiaries' access to affordable prescription drugs.
---------------------------------------------------------------------------

    \139\ Michele Heisler et al., ``The Health Effects of 
Restricting Prescription Medication Use Because of Cost,'' Med Care, 
2004 Jul;42(7):626-634, available at https://www.ncbi.nlm.nih.gov/pubmed/15213486.
    \140\ Peter Bach, ``Limits on Medicare's Ability to Control 
Rising Spending on Cancer Drugs,'' New England Journal of Medicine 
2009, 360:626-633, available at https://www.nejm.org/doi/full/10.1056/NEJMhpr0807774.
    \141\ Sonya Blesser Streeter et al., ``Patient and Plan 
Characteristics Affecting Abandonment of Oral Oncolytic 
Prescriptions,'' Journal of Oncology Practice 2011, 7(3S):46s-51s, 
available at http://ascopubs.org/doi/full/10.1200/jop.2011.000316.
---------------------------------------------------------------------------

    Finally, beneficiaries progress through the four phases of the Part 
D benefit as their total gross drug costs and cost-sharing obligations 
increase. Because both of these values are calculated based on the 
negotiated prices reported at the point-of-sale, when pharmacy price 
concessions are not applied at the point-of-sale, the higher negotiated 
prices result in more rapid movement of Part D beneficiaries through 
the Part D benefit phases. This, in turn, shifts more of the total drug 
spend into the catastrophic phase, where Medicare liability is at 80 
percent (paid as reinsurance) and plan liability is at 15 percent 
(which is much lower than the 75 percent plan liability for drugs in 
the initial phase and generic drugs in the coverage gap phase; plan 
liability with respect to ``applicable drugs'' in the coverage gap 
phase is 5 percent). With such cost-shifting to the government under 
current rules, Part D sponsors may have weak incentives, and, in some 
cases no incentive, to lower prices at the point-of-sale. See the 
Regulatory Impact Analysis in section V.D.8. of this proposed rule for 
a discussion of cost impacts to beneficiaries, the government, and plan 
sponsors of requiring all pharmacy price concessions to be included in 
the negotiated price at the point-of-sale.
c. Transparency and Competition
    The significant growth in pharmacy price concessions in recent 
years and inconsistency in how pharmacy price concessions are treated 
by different Part D sponsors (that is, they are applied to the point-
of-sale price to differing degrees or estimated and factored into plan 
bids with varying degrees of accuracy) has resulted in plans that are 
not consistent with each other with respect to the aggregate share of 
drug costs covered by the plan versus the beneficiary. Moreover, the 
disparate ways that Part D sponsors manage pharmacy price concessions 
reduces transparency of the point of sale cost to the beneficiary and 
can increase beneficiary confusion. For example, a beneficiary facing a 
choice between a plan offering a 10 percent coinsurance tier versus a 
plan offering $50 copay for a given drug, would have difficulty 
assessing the true cost at the point of sale and, as a result, may 
inadvertently select the more costlier option. This undermines 
beneficiaries' ability to make meaningful price comparisons and 
efficient choices when considering the combined cost sharing and 
premiums plans offer when choosing a plan. Second, if a sponsor's bid 
is based on an estimate of net plan liability that is lowered because 
the sponsor has been applying pharmacy price concessions as DIR at the 
end of the coverage year rather than using them to reduce the 
negotiated price at the point-of-sale, it follows that the sponsor may 
be able to submit a lower bid than a competitor that applies pharmacy 
price concessions at the point-of-sale. This lower bid results in a 
lower plan premium, which could allow the sponsor to capture additional 
market share. The competitive advantage accruing to one sponsor over 
another in this scenario stems only from a technical difference in how 
plan costs are reported to CMS. Therefore, the opportunity for 
differential treatment of pharmacy price concessions could result in 
bids that are not comparable and in premiums that are not valid 
indicators of relative plan efficiency.
3. Proposed Changes to the Definition of Negotiated Price (Sec.  
423.100)
    As previously discussed, Part D sponsors and PBMs have been 
recouping increasing sums from network pharmacies after the point-of-
sale in the form of pharmacy price concessions. We addressed concerns 
about these pharmacy payment adjustments when we established the 
existing requirements for negotiated price reporting in the May 2014 
final rule (79 FR 29844). In that rule, we amended the definition of 
``negotiated prices'' at Sec.  423.100 to require Part D sponsors to 
include in the negotiated price at the point-of-sale all pharmacy price 
concessions and incentive payments to pharmacies--with an exception, 
intended to be narrow, that allowed the exclusion of contingent 
pharmacy payment adjustments that cannot reasonably be determined at 
the point-of-sale (the reasonably determined exception). However, when 
we formulated these requirements in 2014, the most recent year for 
which DIR data was available was 2012, and we did not anticipate the 
growth of performance-based pharmacy payment arrangements that we have 
observed in subsequent years.
    We now understand that the reasonably determined exception we 
currently allow applies more broadly than we had initially envisioned 
because of the shift by Part D sponsors and their PBMs towards 
contingent pharmacy payment arrangements. As suggested by numerous 
stakeholders in response to the Request for Information in the November 
2017 proposed rule (82 FR 56419 through 56428), nearly all performance-
based pharmacy payment adjustments may be excluded from the negotiated 
price on the grounds that they cannot reasonably be determined at the 
point-of-sale. Specifically, several stakeholders have suggested to us 
that sponsors apply the reasonably determined exception to all 
performance-based pharmacy payment adjustments. These stakeholders 
assert that the amount of these adjustments, by definition, is 
contingent upon performance measured over a period of time that extends 
beyond the point-of-sale and, thus, cannot be known in full at the 
point-of-sale. Therefore, performance-based pharmacy payment 
adjustments cannot ``reasonably be determined'' at the point-of-sale as 
they cannot be known in full at the point-of-sale. These assertions are 
supported by the information plan sponsors report to CMS as part of the 
annual DIR reports. As a result, the reasonably determined exception 
prevents the current policy from having the intended effect on price 
transparency, consistency (by reducing differential reporting of 
pharmacy payment adjustments by sponsors), and beneficiary costs.
    Given the predominance of the use of performance-contingent 
pharmacy payment arrangements by plan sponsors, we do not believe that 
the existing requirement that pharmacy price concessions be included in 
the negotiated price can be implemented in a manner that achieves the 
goals previously discussed: Meaningful price transparency, consistent 
application of all pharmacy payment concessions by all Part D sponsors, 
and preventing cost-shifting to beneficiaries and taxpayers. Therefore, 
to establish a requirement that accomplishes these goals while better 
reflecting current pharmacy payment arrangements, we propose to delete 
the existing definition of the term ``negotiated prices'' at Sec.  
423.100 and add a definition of the term ``negotiated price'' at Sec.  
423.100 to mean the lowest amount a pharmacy could receive as 
reimbursement for a covered Part D drug under its contract with the 
Part D sponsor or the sponsor's intermediary (that is, the amount the 
pharmacy would receive net of the maximum possible reduction that could 
result from any contingent pharmacy payment arrangement). Specifically, 
as noted previously, we propose to delete the current definition of 
``negotiated prices'' (in the plural) and to add a new definition of 
``negotiated price'' (in the singular) in order to make clear that a 
negotiated price can be set for each covered Part D drug, and the 
amount of

[[Page 1915]]

pharmacy price concessions may differ on a drug-by-drug basis. Our 
proposed definition of negotiated price would specify that the 
negotiated price for a covered Part D drug must include all pharmacy 
price concessions and any dispensing fees, and exclude additional 
contingent amounts (such as incentive fees) if these amounts increase 
prices. Under our proposal, we would not change Part D sponsors' 
ability to pass-through other, non-pharmacy price concessions and other 
direct or indirect remuneration amounts (for example, legal settlement 
amounts and risk-sharing adjustments) to enrollees at the point-of-
sale. These proposed provisions are discussed in the following 
sections.
    Requiring that all pharmacy price concessions be included in the 
negotiated price, as proposed, will lead to more accurate comparability 
of drug prices, Part D bid pricing, and plan premiums. This increased 
level of accuracy should center the beneficiary by allowing them to 
better compare between plans' cost sharing and premiums, so that 
beneficiaries are able to identify the plan that best meets their 
individual needs. Moreover, when negotiated prices and plan premiums 
more accurately reflect relative plan efficiencies, there would not be 
unfair competitive advantages accruing to one sponsor over another 
based on a technical difference in how costs are reported. In short, 
because Part D is a market-based approach to delivering prescription 
drug benefits, and relies on healthy market competition, we believe the 
proposed changes to cost reporting could make the Part D market more 
competitive and efficient by allowing for a more consistent, accurate, 
``apples to apples'' comparison of prices in the market.
a. All Pharmacy Price Concessions
    In this proposed rule, we propose to adopt a new definition of 
``negotiated price'' at Sec.  423.100 that would include all pharmacy 
price concessions received by the plan sponsor for a covered Part D 
drug. The proposed definition would omit the reasonably determined 
exception, meaning that all price concessions from network pharmacies, 
negotiated by Part D sponsors and their contracted PBMs, would have to 
be reflected in the negotiated price that is made available at the 
point-of-sale and reported to CMS on a PDE record, even when such price 
concessions are contingent upon performance by the pharmacy.
    Section 1860D-2(d)(1)(B) of the Act requires that negotiated prices 
``shall take into account negotiated price concessions, such as 
discounts, direct or indirect subsidies, rebates, and direct or 
indirect remunerations, for covered part D drugs . . . .'' We have 
previously interpreted this language to mean that some, but not all, 
price concessions must be applied to the negotiated price (see, for 
example, 70 FR 4244 and 74 FR 1511). Although we continue to believe 
that the prior interpretation of ``take into account'' was permissible, 
we believe that our initial interpretation may have been overly 
definitive with respect to the intended meaning of ``take into 
account.'' We believe that a proper reading of the statute supports 
requiring that all pharmacy price concessions be applied at the point-
of-sale. As proposed, requiring that all pharmacy price concessions be 
applied at the point-of-sale would ensure that negotiated prices ``take 
into account'' at least some price concessions and, therefore, would be 
consistent with and permitted by the plain language of section 1860D-
2(d)(1)(B) of the Act.
    The regulatory change we propose to adopt changes the reporting 
requirements for Part D sponsors; it does not affect what sponsors may 
arrange in their contracts with network pharmacies regarding payment 
adjustments after the point-of-sale. We clarify this point because in 
comments on the solicitation in the November 2018 proposed rule (83 FR 
62179) regarding a potential policy approach under which all pharmacy 
price concessions received by a plan sponsor for a covered Part D drug 
would be included in the negotiated price at the point-of-sale, some 
commenters posited that CMS requiring that all pharmacy price 
concessions be passed through at the point-of-sale, as opposed to being 
reported as DIR, would violate the statutory ``non-interference 
clause,'' at section 1860D-11(i) of the Act, which specifies that ``the 
Secretary . . . may not interfere with the negotiations between drug 
manufacturers and pharmacies and PDP sponsors.'' We disagree. Mandating 
that all pharmacy price concessions be included in the negotiated price 
at the point-of-sale does not interfere with the negotiations between 
plan sponsors, their PBMs, and pharmacies. Contracts between sponsors 
or their PBMs and pharmacies can continue to provide for performance-
based payment adjustments. The requirement that pharmacy price 
concessions be passed through to the point-of-sale price only directly 
impacts the price that is used to determine beneficiary cost-sharing 
and the information that is populated and reported on the PDE record, 
but it does not dictate the amount that is ultimately paid to the 
pharmacy or the timing of payments and adjustments.
b. Lowest Possible Reimbursement
    To effectively capture all pharmacy price concessions at the point-
of-sale consistently across sponsors, we propose to require that the 
negotiated price reflect the lowest possible reimbursement that a 
network pharmacy could receive from a particular Part D sponsor for a 
covered Part D drug. Under this approach, the price reported at the 
point-of-sale would need to include all price concessions that could 
potentially flow from network pharmacies, as well as any dispensing 
fees, but exclude any additional contingent amounts that could flow to 
network pharmacies and thus increase prices over the lowest possible 
reimbursement level, such as incentive fees. That is, if a performance-
based payment arrangement exists between a sponsor and a network 
pharmacy, the point-of-sale price of a drug reported to CMS would need 
to equal the final reimbursement that the network pharmacy would 
receive for that drug under the arrangement if the pharmacy's 
performance score were the lowest possible. If a pharmacy is ultimately 
paid an amount above the lowest possible reimbursement (such as in 
situations where a pharmacy's performance under a performance-based 
arrangement triggers a bonus payment or a smaller penalty than that 
assessed for the lowest level of performance), the difference between 
the negotiated price reported to CMS on the PDE record and the final 
payment to the pharmacy would need to be reported as negative DIR as 
part of the annual report on DIR following the end of the year. For an 
illustration of how negotiated prices would be reported under such an 
approach, see the lowest cost reimbursement example provided later in 
this section of this proposed rule.
    By requiring that sponsors assume the lowest possible pharmacy 
performance when reporting the negotiated price, we would be 
prescribing a standardized way for Part D sponsors to treat the unknown 
(final pharmacy performance) at the point-of-sale under a performance-
based payment arrangement, which many Part D sponsors and PBMs have 
identified as the most substantial operational barrier to including 
such concessions at the point-of-sale. We believe, based on the 
overwhelming support received from commenters on the Request for 
Information in the November 2017 proposed rule and the potential change 
to the definition of negotiated price discussed in the November 2018

[[Page 1916]]

proposed rule, that this is the best approach to achieve our goals, as 
noted previously, of--(1) consistency (standardized reporting of 
negotiated prices and DIR); (2) preventing cost-shifting to 
beneficiaries; and (3) price transparency for beneficiaries, the 
government, and other stakeholders.
    Regarding consistency in reporting, we believe that the proposed 
requirement that the negotiated price reflect the lowest possible 
reimbursement that a network pharmacy could receive from a particular 
Part D sponsor for a covered Part D drug would, if implemented, provide 
a clearer reporting standard for Part D sponsors relative to the 
requirements in place today, which require Part D sponsors to assess 
which types of pharmacy payment adjustments fall under the reasonably 
determined exception. We expect this increased clarity would reduce 
sponsor burden in terms of the resources necessary to ensure 
compliance. Finally, we believe that requiring all pharmacy price 
concessions be included in the negotiated price at the point-of-sale 
would improve the quality of drug pricing information available across 
Part D plans and thus improve market competition and cost efficiency 
under Part D.
    Requiring the negotiated price to reflect the lowest possible 
pharmacy reimbursement as proposed would move the negotiated price 
closer to the final reimbursement for most network pharmacies under 
current pharmacy payment arrangements, and thus closer to the actual 
cost of the drug for the Part D sponsor. We have learned from the DIR 
data reported to CMS and feedback from numerous stakeholders that 
pharmacies rarely receive an incentive payment above the original 
reimbursement rate for a covered claim. We gather that performance 
under most arrangements dictates only the magnitude of the amount by 
which the original reimbursement is reduced, and most pharmacies do not 
achieve performance scores high enough to qualify for a substantial, if 
any, reduction in penalties.
    Finally, we propose that all contingent incentive payments (that 
is, an amount that is paid to the pharmacy instead of a price 
concession from the pharmacy) be excluded from the negotiated price. As 
noted previously, we understand that such incentive payments are rare. 
Furthermore, even in those instances in which a pharmacy may qualify 
for such a payment, including the amount of any contingent incentive 
payments to pharmacies in the negotiated price would make drug prices 
appear higher at a ``high performing'' pharmacy, which receives an 
incentive payment, than at a ``poor performing'' pharmacy, which is 
assessed a penalty, and would also reduce price transparency. This 
pricing differential could create a perverse incentive for 
beneficiaries to choose a ``lower performing'' pharmacy for the 
advantage of a lower price. Additionally, Part D sponsors and their 
intermediaries previously asserted in public comments on the 2017 and 
2018 rules that network pharmacies lose motivation to improve 
performance when all performance-based adjustments are required to be 
reported up-front. Revising the negotiated price definition as proposed 
would mitigate this concern by allowing sponsors and their 
intermediaries to motivate network pharmacies to improve their 
performance with the promise of future incentive payments that would 
increase pharmacy reimbursement from the level of the lowest possible 
reimbursement per claim. Further, we emphasize that the proposed 
changes would not require pharmacies to be paid in a certain way; 
rather we would be requiring standardized reporting to CMS of drug 
prices at the point-of-sale.
c. Lowest Possible Reimbursement Example
    To illustrate how Part D sponsors and their intermediaries would 
report costs under our proposal, we provide the following example. 
Suppose that under a performance-based payment arrangement between a 
Part D sponsor and its network pharmacy, the sponsor will implement one 
of three scenarios: (1) Recoup 5 percent of its total Part D-related 
payments to the pharmacy at the end of the contract year for the 
pharmacy's failure to meet performance standards; (2) recoup no 
payments for average performance; or (3) provide a bonus equal to 1 
percent of total payments to the pharmacy for high performance. For a 
drug that the sponsor has agreed to pay the pharmacy $100 at the point-
of-sale, the pharmacy's final reimbursement under this arrangement 
would be: (1) $95 for poor performance; (2) $100 for average 
performance; or (3) $101 for high performance. Under the current 
definition of negotiated prices, the reported negotiated price is 
likely to be $100, given the reasonably determined exception for 
contingent pharmacy payment adjustments. However, under the proposed 
definition, for all three performance scenarios, the negotiated price 
reported to CMS on the PDE record at the point-of-sale for this drug 
would be $95, or the lowest reimbursement possible under the 
arrangement. Thus, if a plan enrollee were required to pay 25 percent 
coinsurance for this drug, then the enrollee's costs under all 
scenarios would be 25 percent of $95, or $23.75, which is less than the 
$25 the enrollee would pay today (when the negotiated price is likely 
to be reported as $100). Finally, any difference between the reported 
negotiated price and the pharmacy's final reimbursement for this drug 
would be reported as DIR at the end of the coverage year. Under this 
requirement, the sponsor would report $0 as DIR under the poor 
performance scenario ($95 minus $95), -$5 as DIR under the average 
performance scenario ($95 minus $100), and -$6 as DIR under the high-
performance scenario ($95 minus $101), for every covered claim for this 
drug purchased at this pharmacy.
d. Additional Considerations
    In order to implement the proposed change, we would leverage 
existing reporting mechanisms to confirm that sponsors are 
appropriately applying pharmacy price concessions at the point-of-sale. 
Specifically, we would likely use the estimated rebates at point-of-
sale field on the PDE record to also collect the amount of point-of-
sale pharmacy price concessions. We also would likely use fields on the 
Summary and Detailed DIR Reports to collect final pharmacy price 
concession data at the plan and national drug code (NDC) levels. 
Differences between the amounts applied at the point-of-sale and 
amounts actually received, therefore, would become apparent when 
comparing the data collected through those means at the end of the 
coverage year. To implement the proposed change at the point-of-sale, 
Part D sponsors and their PBMs would load revised drug pricing tables 
that reflect the lowest possible reimbursement into their claims 
processing systems that interface with contracted pharmacies.
e. Negotiated Prices of Applicable Drugs in the Coverage Gap
    The negotiated price of an applicable drug is also the basis by 
which manufacturer liability for discounts in the coverage gap is 
determined. Section 1860D-14A(g)(6) of the Act provides that, for 
purposes of the coverage gap discount program, the term ``negotiated 
price'' has the meaning it was given in Sec.  423.100 as in effect as 
of the enactment of the Patient Protection and Affordable Care Act 
(PPACA), except that it excludes any dispensing fee for the applicable 
drug. Under that definition, which is codified in the

[[Page 1917]]

coverage gap discount program regulations at Sec.  423.2305, the 
negotiated price is the amount the Part D sponsor (or its intermediary) 
and the network dispensing pharmacy (or other network dispensing 
provider) have negotiated as the amount such network entity will 
receive, in total, for a covered Part D drug, reduced by those 
discounts, direct or indirect subsidies, rebates, other price 
concessions, and direct or indirect remuneration that the Part D 
sponsor has elected to pass through to Part D enrollees at the point-
of-sale, and net of any dispensing fee or vaccine administration fee 
for the applicable drug.
    In the November 2018 proposed rule (83 FR 62179), we solicited 
comment on whether to require sponsors to include pharmacy price 
concessions in the negotiated price in the coverage gap. Under such an 
approach, the negotiated price of the applicable drug for purposes of 
determining manufacturer coverage gap discounts, would include all 
pharmacy price concessions as in all other phases of the Part D benefit 
under the proposed revision to the definition of negotiated price at 
Sec.  423.100. Because the statutory definition of negotiated price for 
purposes of the coverage gap discount program references price 
concessions that the Part D sponsor has elected to pass through at the 
point-of-sale, we explained that we did not believe it would be 
appropriate to require sponsors to include all price concessions in the 
negotiated price for purposes of the coverage gap discount program. 
However, we indicated our belief that there would be authority under 
the statute to require sponsors to include all pharmacy price 
concessions in the negotiated price for purposes of the coverage gap 
discount program because such concessions necessarily affect the amount 
that the pharmacy receives in total for a particular applicable drug. 
We also noted that pharmacy price concessions account for only a share 
of all price concessions a sponsor might receive. Thus, even if a plan 
sponsor were required to include all pharmacy price concessions in the 
negotiated price of an applicable drug at the point-of-sale, the plan 
sponsor must still make an election as to how much of the overall price 
concessions (including non-pharmacy price concessions) it receives will 
be passed through at the point-of-sale.
    In the November 2018 proposed rule, we also sought comment on an 
alternative approach under which Part D sponsors would determine how 
much of pharmacy price concessions to pass through at the point-of-sale 
for applicable drugs in the coverage gap, and beneficiary, plan, and 
manufacturer liability would be calculated using this alternate 
definition of negotiated price.
    The majority of the comments that addressed the possible inclusion 
of pharmacy price concessions in the negotiated price of applicable 
drugs in the coverage gap expressed support for applying the same 
definition of negotiated price in all phases of the Part D benefit, as 
they believed maintaining the same definition for all phases of the 
benefit would provide more transparency and consistency at the point-
of-sale, minimize beneficiary confusion, and avoid the operational 
challenges of having two different rules for applying pharmacy price 
concessions to applicable drugs in the coverage gap versus other phases 
of the Part D benefit. Some commenters disagreed with our assessment 
that CMS has the legal authority to require that all pharmacy price 
concessions be included in the negotiated price of applicable drugs in 
the coverage gap, as they felt this was at odds with the reference to 
``price concessions that the Part D sponsor had elected to pass-through 
to Part D enrollees at the point-of-sale'' in the regulatory definition 
of ``negotiated price'' at Sec.  423.100 as in effect when the PPACA 
was enacted. Commenters noted that if CMS were to adopt the alternative 
approach under which sponsors would be required to include pharmacy 
price concessions in the negotiated price for applicable drugs in all 
phases of the Part D benefit other than the coverage gap, it would be 
necessary for CMS to issue very specific guidance explaining how to 
operationalize different definitions of ``negotiated price'' for the 
coverage gap versus the non-coverage gap phases of the Part D benefit.
    Although we continue to believe that section 1860D-14A(g)(6) of the 
Act would not preclude us from revising the definition of negotiated 
price at Sec.  423.2305 to require Part D sponsors to apply all 
pharmacy price concessions for applicable drugs at the point-of-sale, 
we are not proposing to adopt such a mandate at this time. As 
demonstrated in the Regulatory Impact Analysis of this proposed rule 
(sections IV.D.8. and IV.E.2.), allowing plans flexibility with respect 
to the treatment of pharmacy price concessions for applicable drugs in 
the coverage gap will moderate increases to beneficiary premiums and 
government costs.
    In summary, under our proposed approach, for non-applicable drugs 
in the coverage gap, and during the non-coverage gap phases of the Part 
D benefit for applicable drugs, claims would be adjudicated using the 
negotiated price determined using the lowest possible reimbursement to 
the pharmacy. In contrast, for applicable drugs during the coverage 
gap, plans would have the flexibility to determine how much of the 
pharmacy price concessions to pass through at the point-of-sale, and 
beneficiary, plan, and manufacturer liability in the coverage gap would 
be calculated using this alternate negotiated price. Based on comments 
we received on the November 2018 proposed rule, we anticipate that if 
CMS adopts the proposed approach, we will need to provide technical or 
operational guidance to Part D sponsors regarding the calculation of 
the gap discount, PDE reporting, and straddle claim processing. We 
solicit comment on whether there are other topics CMS will need to 
address in new guidance if we finalize the proposed approach. We also 
request that commenters with concerns about the feasibility of sponsors 
having two different rules for applying pharmacy price concessions to 
applicable drugs in the coverage gap versus other phases of the Part D 
benefit provide detailed explanations of their concerns, with 
specificity and examples.
    In addition, we solicit comment on whether, as an alternative to 
our proposed approach, we should require that Part D sponsors apply 
pharmacy price concessions to the negotiated price of applicable drugs 
in the coverage gap. As noted above, we believe that such a requirement 
would also be consistent with section 1860D-14A(g)(6) of the Act.
4. Pharmacy Administrative Service Fees
    As noted in the November 2018 proposed rule (83 FR 62179 and 
62180), we are aware that some sponsors and their intermediaries 
believe certain fees charged to network pharmacies--such as ``network 
access fees,'' ``administrative fees,'' ``technical fees,'' and 
``service fees''--represent valid administrative costs and, thus, do 
not believe such fees should be treated as price concessions. However, 
pharmacies and pharmacy organizations report that they do not receive 
anything of value for such administrative service fees other than the 
ability to participate in the Part D plan's pharmacy network.
    Thus, we restate the conclusion we provided in the May 2014 final 
rule (79 FR 29877): When pharmacy administrative service fees take the 
form of deductions from payments to pharmacies for Part D drugs 
dispensed to Part D beneficiaries, they clearly represent charges that 
offset the sponsor's or its intermediary's operating costs under Part 
D. We believe that if

[[Page 1918]]

the sponsor or its intermediary contracting organization wishes to be 
compensated for these services and have those costs treated as 
administrative costs, such costs should be accounted for in the 
administrative costs of the Part D bid. If instead these costs are 
deducted from payments made to pharmacies for purchases of Part D 
drugs, such costs are price concessions and must be treated as such in 
Part D cost reporting. This is the case regardless of whether the 
deductions are calculated on a per-claim basis.
    The regulations governing the Part D program require that price 
concessions be fully disclosed. If not reported at all, these amounts 
would result in another form of so-called PBM spread in which inflated 
prices contain a portion of costs that should be treated as 
administrative costs. That is, even if these amounts did represent 
costs for services rendered by an intermediary organization for the 
sponsor, then these costs would be administrative service costs, not 
drug costs, and should be treated as such. Failure to report these 
costs as administrative costs in the bid would allow a sponsor to 
misrepresent the actual costs necessary to provide the benefit and thus 
to submit a lower bid than necessary to reflect its revenue 
requirements (as required at section 1860D-11(e)(2)(C) of the Act and 
at Sec.  423.272(b)(1) of the regulations) relative to another sponsor 
that accurately reports administrative costs consistent with CMS 
instructions.
5. Defining Price Concession (Sec.  423.100)
    Section 1860D-2(d)(1)(B) of the Act stipulates that the negotiated 
price shall take into account negotiated price concessions, such as 
discounts, direct or indirect subsidies, rebates, and direct or 
indirect remunerations, for covered Part D drugs. Section 1860D-2(d)(2) 
of the Act further requires that Part D sponsors disclose to CMS the 
aggregate negotiated price concessions by manufacturers that are passed 
through in the form of lower subsidies, lower monthly beneficiary 
premiums, and lower prices through pharmacies and other dispensers. 
While ``price concession'' is a term important to the adjudication of 
the Part D program, it has not yet been defined in the Part D statute 
or in Part D regulations and subregulatory guidance. Therefore, to 
avoid confusion among Part D sponsors and other stakeholders of the 
Part D program resulting from inconsistent terminology, we propose to 
add a regulatory definition for the term ``price concession'' at Sec.  
423.100 that is consistent with how that term is used in paragraphs 
(d)(1)(B) and (d)(2) of section 1860D-2 of the Act.
    In considering how to define price concession, we believe it is 
important to define the term in a broadly applicable manner, while 
maintaining clarity. Accordingly, we propose to define price concession 
to include all forms of discounts, direct or indirect subsidies, or 
rebates that serve to reduce the costs incurred under Part D plans by 
Part D sponsors. The proposed definition would note that price 
concessions include but are not limited to discounts, chargebacks, 
rebates, cash discounts, free goods contingent on a purchase agreement, 
coupons, free or reduced-price services, and goods in kind.
    We believe the proposed approach would be consistent with the 
statute, support consistent accounting by Part D sponsors of amounts 
that are price concessions, and ensure that certain forms of discounts 
are not inappropriately excluded from being considered price 
concessions. An alternative would be not to define ``price concession'' 
at all. However, this option would not support consistent accounting of 
amounts that are price concessions among Part D sponsors, which we 
believe is particularly important in light of the proposed change to 
the definition of negotiated price.
    We note that adopting the proposed definition of price concession 
would not affect the way in which price concessions must be accounted 
for by Part D sponsors in calculating costs under a Part D plan. 
Defining the term ``price concession'' as proposed would not require 
the renegotiation of any contractual arrangements between a sponsor and 
its contracted entities. Therefore, the proposed definition of price 
concession has no impact under the federal requirements for Regulatory 
Impact Analyses.

III. Requests for Information

A. Request for Information: Prior Authorization for Hospital Transfers 
to Post-Acute Care Settings During a Public Health Emergency

    We are committed to ensuring that hospitals, post-acute care 
facilities (including long-term care hospitals (LTCHs), inpatient 
rehabilitation facilities (IRFs), and skilled nursing facilities 
(SNFs)), physicians, and MA organizations have the tools necessary to 
provide access to appropriate care to patients without unnecessary 
delay during a public health emergency (PHE). Throughout 2020 during 
the Coronavirus Disease 2019 Public Health Emergency (COVID-19 PHE), we 
consistently issued guidance to address permissible flexibilities for 
MA organizations as part of an ongoing effort to help MA enrollees, and 
the health care systems that serve them, avoid delays and disruptions 
in care. We recognize that any delays or disruptions in care that might 
transpire within the MA program could have a ripple effect and also 
negatively impact the timely provision of appropriate care to patients 
covered under payer systems external to MA (for example, employer-
sponsored insurance). Additionally, we recognize the positive impact 
that payers in general can have through the adoption of flexibilities 
that support hospitals' ability to effectively manage resources when a 
hospital experiences a substantial uptick in hospitalizations.
    As a result of the guidance and clarification that we issued 
throughout 2020, a large proportion of MA organizations opted to relax 
or completely waive their prior authorization requirements with respect 
to patient transfers between hospitals and post-acute care facilities 
during plan year 2020, consistent with our guidance encouraging 
flexibility to ensure access to care. However, as the PHE continued 
into 2021, many MA organizations reinstated prior authorization 
requirements, which some stakeholders reported contributed to capacity 
issues and delays in care within hospital acute care settings. For 
example, one stakeholder reported that only 5 percent of intensive care 
unit (ICU) beds were open in their state during the month of August 
2021, and stated that the scarcity of available beds could be mitigated 
if more MA organizations reinstated waivers on prior authorization 
requirements for patient transfers. Another stakeholder reported that 
it was not uncommon for a hospital to wait up to 3 business days to 
receive a decision from an MA organization for a request for a patient 
transfer--a delay which prevented hospitals from moving patients to the 
next appropriate care setting in a timely manner and forced the 
unnecessary use of acute-care beds. The same stakeholder reported that 
a high rate of initial denials from MA organizations also contributed 
to delays in patient transfer. We acknowledge our responsibility to 
ensure that our programs' policies do not hinder access to care, 
especially during a public health emergency. Therefore, in response to 
these reports and the uptick in COVID-19 hospitalizations across the 
country, we are seeking information from stakeholders in order to 
assess the impact of MA organizations' use of prior authorization or 
other utilization management criteria during certain

[[Page 1919]]

PHEs. Through this request for information (RFI), CMS seeks additional 
information from all affected stakeholders, especially MA 
organizations, hospitals, post-acute care facilities, professional 
associations, states, and patient advocacy groups regarding the effects 
of both the relaxation of and reinstatement of prior authorizations on 
patient transfers during a PHE.
    We remain mindful of the impact the MA program's policies have on 
the health care system as a whole, and strongly encourage MA 
organizations to continuously re-assess the need for flexibilities in 
their utilization management practices. We note that with regard to 
prior authorization and other utilization management practices, we 
permit MA organizations the choice to uniformly waive or relax plan 
prior authorization requirements at any time in order to facilitate 
access to care, even in the absence of a disaster, declaration of a 
state of emergency, or PHE. Generally, MA organizations are required to 
ensure that enrollees are notified of changes in plan rules of this 
type in accordance with Sec.  422.111(d); however, when the provisions 
under Sec.  422.100(m)(1) go into effect during a disaster or emergency 
as they did during the COVID-19 PHE, MA organizations are permitted to 
immediately implement plan changes that benefit enrollees, including a 
waiver of prior authorization requirements, without the 30-day 
notification requirement at Sec.  422.111(d)(3).
    We invite the public to submit comments for consideration as CMS 
assesses the impact of MA organizations' prior authorization 
requirements for patient transfer on a hospital's ability to 
effectively manage resources and provide appropriate and timely care 
during a PHE. The primary objective of this RFI is for us to glean 
information from stakeholders about the effects of MA organizations' 
prior authorization requirements for patient transfers on a hospital's 
ability to furnish the appropriate care to patients in a timely manner 
in the context of a PHE. This is a general RFI related to prior 
authorizations on patient transfers during any PHE. While many 
commenters may choose to provide information in the context of the 
COVID-19 PHE, we welcome and encourage commenters to provide 
information in the context of any PHE.
    Responses to this RFI may include, but are not limited to the 
following:
     The overall impact of both the relaxation and 
reinstatement of prior authorization requirements for patient transfer 
by MA organizations on the provision of appropriate patient care in 
hospital systems.
     The overall impact of both the relaxation and 
reinstatement of prior authorization requirements for patient transfer 
on MA organizations.
     Wait times for receiving a response from an MA 
organization about the authorization of a patient transfer.
     Information pertaining to industry guidelines that are 
used to inform prior authorization, including the extent to which such 
guidelines are evidence-based, the degree of transparency that exists 
for such guidelines, and the extent to which such guidelines are 
standardized.
     With respect to MA organizations, the denial rates and 
associated burden, including rates at which denials are upheld and 
overturned, for prior authorizations for patient transfer from 
hospitals to post-acute care facilities.
     Any consequences of delayed patient transfer from 
hospitals to post-acute care facilities.
     Recommendations for how CMS can accommodate hospital 
systems that face capacity issues through policy changes in the MA 
program.
     Examples of any contrast in a state's policies for payers 
(for example, Medicaid managed care) with respect to prior 
authorizations for patient transfer that do not pertain to MA 
organizations, and the effects of such policies on hospitals systems' 
ability to effectively manage resources.
    We request that all respondents provide complete, clear, and 
concise comments that include, where practicable, data and specific 
examples.

B. Request for Information: Building Behavioral Health Specialties 
Within MA Networks

    CMS is dedicated to ensuring that MA beneficiaries have access to 
provider networks sufficient to provide covered services in accordance 
with our standards described in section 1852(d)(1) of the Act and in 
Sec. Sec.  422.112(a) and 422.114(a)(1). Accordingly, CMS strengthened 
network adequacy rules for MA plans by codifying our network adequacy 
standards at Sec.  422.116 through the June 2020 final rule.
    Currently, we require MA organizations to submit data for 
behavioral health providers, specifically psychiatry (provider-
specialty type) and inpatient psychiatric facility services (facility-
specialty type), using the Health Service Delivery (HSD) tables. The 
HSD tables are submitted to CMS during an organization's formal network 
review and are utilized to demonstrate compliance with network adequacy 
standards. The HSD tables must list every provider and facility with a 
fully executed contract in the organization's network, and are uploaded 
to the Health Plan Management System (HPMS) for an automated review. MA 
plans must have sufficient providers with a certain time and distance 
of 85 or 90 percent of beneficiaries residing the plan's service area, 
depending on the type of counties in the service area, under Sec.  
422.116. We also encouraged plans to provide more choices for enrollees 
to access care using telehealth for certain specialties, including 
psychiatry, through our policy under Sec.  422.116(d)(5), while 
maintaining enrollees' right to access in person care for these 
specialty types. To encourage and account for telehealth providers in 
contracted networks, Sec.  422.116(d)(5) provides MA plans a 10-
percentage point credit towards the percentage of beneficiaries that 
reside within published time and distance standards when the plan 
includes in its network telehealth providers for certain specialties. 
However, despite requiring a minimum number of behavioral health 
providers and encouraging use of telehealth providers, CMS understands 
that MA organizations may experience difficulties when building an 
adequate network of behavioral health providers.
    In order to increase our understanding of issues related to access 
to behavioral health specialties for enrollees in MA plans, we are 
interested in comments from industry stakeholders related to the 
challenges MA organizations face when building an adequate network of 
behavioral health providers for MA plans. Therefore, we invite comment 
from interested stakeholders regarding these issues. Comments for this 
RFI can include, but are not limited to:
     Challenges related to a lack of behavioral health provider 
supply in certain geographic regions for beneficiaries, health plans, 
and other stakeholders;
     Challenges related to accessing behavioral health 
providers for enrollees in MA health plans, including wait times for 
appointments;
     The extent to which a behavioral health network affects a 
beneficiary's decision to enroll in an MA health plan;
     Challenges for behavioral health providers to establish 
contracts with MA health plans;
     Providers' inability or unwillingness to contract with MA 
plans, including issues related to provider reimbursement;
     Opportunities to expand services for the treatment of 
opioid addiction and substance use disorders;
     The overall impact of potential CMS policy changes as it 
relates to

[[Page 1920]]

network adequacy and behavioral health in MA health plans, including in 
rural areas that may have provider shortages;
     Suggestions from industry stakeholders on how to address 
issues with building adequate behavioral health networks within MA 
health plans.

C. Request for Comment on Data Notification Requirements for 
Coordination-Only D-SNPs (Sec.  422.107(d))

    Section 50311(b) of the BBA of 2018 amended section 1859(f) of the 
Act by creating a new paragraph (8)(D)(i)(I) to require that the 
Secretary establish additional integration requirements for D-SNPs' 
contracts with State Medicaid agencies. In the April 2019 final rule, 
we implemented section 1859(f)(8)(D)(i)(I) of the Act by establishing 
at Sec.  422.107(d) that any D-SNP that is not a FIDE SNP or HIDE SNP 
is subject to an additional contracting requirement effective January 
1, 2021. Under this new requirement for the contract that is required 
between the D-SNP and the State Medicaid agency, the D-SNP is required 
to notify the State Medicaid agency, or individuals or entities 
designated by the State Medicaid agency, of hospital and skilled 
nursing facility (SNF) admissions for at least one group of high-risk 
full-benefit dual eligible individuals, as determined by the State 
Medicaid agency.
    These data notification requirements have only been in effect for a 
few months, all of which coincided with the COVID-19 public health 
emergency. Through this proposed rule we invite MA organizations, 
States, and other stakeholders to submit comments on their experience 
implementing the data notification requirements thus far and any 
suggested improvements for CMS consideration in future rulemaking.

D. Collection of Information Requirements

    This proposed rule contains several requests for information. In 
accordance with the implementing regulations of the Paperwork Reduction 
Act of 1995 (PRA), specifically 5 CFR 1320.3(h)(4), this general 
solicitation is exempt from the PRA. Facts or opinions submitted in 
response to general solicitations of comments from the public, 
published in the Federal Register or other publications, regardless of 
the form or format thereof, provided that no person is required to 
supply specific information pertaining to the commenter, other than 
that necessary for self-identification, as a condition of the agency's 
full consideration, are not generally considered information 
collections and therefore not subject to the PRA.
    We note that these RFIs are issued solely for information and 
planning purposes; they do not constitute a Request for Proposals 
(RFPs), applications, proposal abstracts, or quotations. These RFIs do 
not commit the U.S. Government to contract for any supplies or services 
or make a grant award. Further, we are not seeking proposals through 
these RFIs and will not accept unsolicited proposals. Respondents are 
advised that the U.S. Government will not pay for any information or 
administrative costs incurred in response to these RFIs; all costs 
associated with responding to these RFIs will be solely at the 
interested party's expense. We note that not responding to these RFIs 
does not preclude participation in any future procurement, if 
conducted. It is the responsibility of the potential respondents to 
monitor these RFI announcements for additional information pertaining 
to these requests. In addition, we note that we will not respond to 
questions about the policy issues raised in these RFIs.
    We will actively consider all input as we develop future plans and 
policies. We may or may not choose to contact individual respondents. 
Such communications would be for the sole purpose of clarifying 
statements in the respondents' written responses. Contractor support 
personnel may be used to review responses to these RFIs. Responses to 
this notice are not offers and cannot be accepted by the Government to 
form a binding contract or issue a grant. Information obtained as a 
result of these RFIs may be used by the Government for program planning 
on a non-attribution basis. Respondents should not include any 
information that might be considered proprietary or confidential. These 
RFIs should not be construed as a commitment or authorization to incur 
cost for which reimbursement would be required or sought. All 
submissions become U.S. Government property and will not be returned. 
In addition, we may publicly post the public comments received, or a 
summary of those public comments.

IV. 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'' 
requirement is submitted to the Office of Management and Budget (OMB) 
for review and approval. For the purposes of the PRA and this section 
of the preamble, collection of information is defined under 5 CFR 
1320.3(c) of OMB's implementing regulations.
    In order to fairly evaluate whether an information collection 
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.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements.

A. Wage Data

    To derive mean costs, we are using data from the most current U.S. 
Bureau of Labor Statistics' (BLS's) National Occupational Employment 
and Wage Estimates for all salary estimates (https://www.bls.gov/oes/current/oes_nat.htm), which, at the time of drafting of this rule, 
provides May 2020 wages. In this regard, Table 4 presents BLS' mean 
hourly wage along with our estimated cost of fringe benefits and 
overhead (calculated at 100 percent of salary), and our adjusted hourly 
wage.

                          Table 4--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                    Occupation      Mean hourly    benefits and      Adjusted
                Occupation title                       code         wage ($/hr)    overhead ($/   hourly wage ($/
                                                                                        hr)             hr)
----------------------------------------------------------------------------------------------------------------
Business Operation Specialists, All Other.......         13-1198           40.53           40.53           81.06
Compliance Officers.............................         13-1041           36.35           36.35           72.70
Computer and Information Systems Managers.......         11-3021           77.76           77.76          155.52

[[Page 1921]]

 
Lawyer..........................................         23-1011           71.59           71.59          143.18
Software and Web Developers.....................         15-1250           52.86           52.86          105.72
----------------------------------------------------------------------------------------------------------------

    As indicated, we are adjusting our employee hourly wage estimates 
by a factor of 100 percent to account for fringe benefits and overhead 
costs that vary 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.

B. Proposed Information Collection Requirements (ICRs)

    The following ICRs are listed in the order of appearance within 
section II. of this proposed rule.
1. ICRs Regarding Enrollee Participation in Plan Governance (Sec.  
422.107)
    The proposed requirement and burden for D-SNPs to create one or 
more enrollee advisory committees will be submitted to OMB for review 
under control number 0938-TBD (CMS-10799). At this time, the control 
number has yet to be determined, but it will be assigned by OMB upon 
their clearance of this proposed rule's collection of information 
request. OMB will set out an expiration date upon their approval of the 
final rule's collection of information request.
    The proposed requirement and burden for D-SNPs to update audit 
protocols to require documentation of the enrollee advisory committees 
will be submitted to OMB for review under control number 0938-1395 
(CMS-10717).
a. Creating One or More Enrollee Advisory Committees
    At Sec.  422.107(f), we propose that any MA organization offering a 
D-SNP must establish one or more enrollee advisory committees at the 
State level or other service area level in the State to solicit direct 
input on enrollee experiences. We also propose at Sec.  422.107(f) that 
the committee include at least a reasonably representative sample of 
the population enrolled in the dual eligible special needs plan, or 
plans, or other individuals representing those enrollees and solicit 
input from these individuals or their representatives on, among other 
topics, ways to improve access to covered services, coordination of 
services, and health equity for underserved populations.
    The burden of establishing and maintaining an enrollee advisory 
committee is variable due to the flexibilities MA organizations would 
have to implement the proposed requirements. We believe that D-SNPs 
should work with enrollees and their representatives to establish the 
most effective and efficient process for enrollee engagement, and 
therefore, we chose not to propose the specific: (1) Frequency; (2) 
location; (3) format; (4) participant recruiting and training methods; 
(5) number of committees (for example, one committee at the State level 
to serve all of the MA organization's D-SNPs in that State or more than 
one committee); (6) utilization of existing committees which would meet 
the requirements of both Sec. Sec.  438.110 and 422.107(f) (we expect 
this approach to be used by FIDE and HIDE SNPs); (7) use and adoption 
of telecommunications technology; and (8) other parameters. Instead, 
the only requirements proposed in this rule for an MA organization 
offering one or more D-SNPs in a State would be to establish and 
maintain one or more enrollee advisory committees that serve the D-SNPs 
offered by the MA organization and for that committee to solicit input 
on, among other topics, ways to improve access to covered services, 
coordination of services, and health equity for underserved 
populations. The enrollee advisory committee must include at least a 
reasonably representative sample of the population enrolled in the D-
SNP(s), or other individuals representing those enrollees. The enrollee 
advisory committee may also advise managed care plans under title XIX 
of the Act offered by the same parent organization as the MA 
organization offering a D-SNP.
    To determine the burden for MA organizations to establish the 
proposed enrollee advisory committees, we reviewed two estimates from 
similar committees.
    First, the May 2016 final rule (81 FR 27778) estimated it will take 
6 hours annually for a business operations specialist to establish and 
maintain the LTSS member advisory committee requirement codified at 
Sec.  438.110 for Medicaid managed care plans.
    Second, in 2021 we conducted an informal survey of the three South 
Carolina MMPs under the capitated FAI demonstration that are required 
to conduct meetings quarterly and highly value their advisory 
committees. The MMPs surveyed estimated an annual average of 240 hours 
(or 60 hours per meeting) to recruit members and establish and maintain 
the committee. We expect these efforts to include outreach and 
communication to members, developing meeting agendas, scheduling 
participation of presenters, preparing meeting materials, identifying 
meeting location and technology, D-SNP staff attendance at the meeting, 
and disseminating enrollee feedback to D-SNP and MA organization staff.
    Due to the variety of flexibilities in creating the proposed 
enrollee advisory committee, detailed in the opening paragraph of this 
ICR, we expect the average time and annual cost for a MA organization 
to establish and hold an enrollee advisory committee meeting to be 
somewhere between 6 hours estimated for the requirement at Sec.  
438.110 and 240 hours as reported by MMPs. We believe this large 
difference in the time spent comes from two sources: (1) the 
requirement that the committee created by MMPs meet quarterly rather 
than annually and (2) MMPs find value in their committees and have 
invested more staff and resources to recruit enrollees, and prepare for 
and hold meetings. For example, MMPs often provide transportation to 
meetings, refreshments, and nominal incentives for participation, none 
of which is required by the capitated FAI demonstration or this 
proposed rule. We have used a 40-hour estimate and the services of a 
business compliance officer to assess burden with the understanding 
that a wide variety of approaches would probably be used.
    Each MA organization offering one or more D-SNPs in a State would 
decide how to establish an enrollee advisory committee based on the MA 
organization's approach to obtaining maximal input from enrollees 
leading to the highest quality enrollee experience. Because of this 
wide variability, we

[[Page 1922]]

solicit stakeholder comments on our assumptions and burden estimates.
    For purposes of this proposed rule for establishing an enrollee 
advisory committee, we are estimating each MA organization would spend 
40 hours at a cost of $3,242 (40 hr x $81.06/hr for a business 
operation specialist).
    We believe all FIDE SNPs and HIDE SNPs that provide LTSS currently 
have an enrollee advisory committee since they have a Medicaid managed 
care plan that must comply with Sec.  438.110. Of the 596 D-SNP PBPs 
for CY 2021, we estimate 478 do not have a corresponding Medicaid 
managed care plan that provides LTSS. Several of these D-SNP PBPs are 
in the same State and under the same contract, which means only one 
enrollee advisory committee is necessary to meet the proposed 
requirement. Therefore, we estimate MA organizations operating D-SNPs 
will need to establish 260 new enrollee advisory committees.
    Thus, the aggregate minimal annual burden for MA organizations 
operating D-SNPs to meet the proposed requirements of Sec.  422.107(f) 
is 10,400 hours (260 new committees x 40 hr per committee) at a cost of 
$843,024 (10,400 hr x $81.06/hr). As stated above, the proposed 
requirement and burden will be submitted to OMB for review under 
control number 0938-TBD (CMS-10799).
b. Updates to Audit Protocols
    As noted in section II.A.3. of this proposed rule, we anticipate 
updating the CMS SNP Care Coordination audit protocols \142\ for MA 
organizations offering one or more D-SNPs to require documentation, 
such as a committee member list and meeting minutes, of the enrollee 
advisory committee meetings. Currently, control number 0938-1395 (CMS-
10717) estimates the audit protocol and data request burden at 701 
hours per MA organization at an average hourly cost of $87.00/hr, 
totaling $60,987 per MA organization (701 hr x $87.00/hr). We believe 
MA organizations offering D-SNPs would retain a committee member list 
and meeting minutes as part of customary business practices; therefore, 
we do not believe reporting this documentation on the enrollee advisory 
committee would impact our currently approved 701 hr audit protocol 
estimate.
---------------------------------------------------------------------------

    \142\ See https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/ProgramAudits.
---------------------------------------------------------------------------

    While we do not anticipate any changes to our active time 
estimates, if this proposal is finalized we would revise the SNP Care 
Coordination audit protocol prior to the effective date of the rule to 
provide stakeholders the ability to comment on the contents of the 
document. The CMS-10717 package would be made available to the public 
for review/comment under the standard PRA process which includes the 
publication of 60- and 30-day Federal Register notices and the posting 
of the collection of information documents on our PRA website.
2. ICRs Regarding Standardizing Housing, Food Insecurity, and 
Transportation Questions on Health Risk Assessment (Sec.  422.101)
    The following proposed HRA question changes will be submitted to 
OMB for review under control number 0938-TBD (CMS-10799). At this time, 
the control number has yet to be determined, but it will be assigned by 
OMB upon their clearance of this proposed rule's collection of 
information request. OMB will set out an expiration date upon their 
approval of the final rule's collection of information request.
    The proposed changes to our SNP audit protocols will be submitted 
to OMB for review under control number 0938-1395 (CMS-10717). Subject 
to renewal, the control number is currently set to expire on May 31, 
2024. It was last approved on May 8, 2021, and remains active.
a. Added HRA Questions
    As described in section II.A.4. of this proposed rule, we propose 
requiring that SNPs include specific questions on housing stability, 
food security, and access to transportation specified in sub-regulatory 
guidance as part of their HRAs. This proposal, if finalized, would 
result in SNPs having a more complete picture of the risk factors that 
may inhibit beneficiaries from accessing care and achieving optimal 
health outcomes and independence. We do not believe that collecting 
this information would require any additional efforts from SNPs outside 
of customary updates to the HRA tools. Due to the current requirement 
at Sec.  422.101(f) that the HRA include an assessment of the 
individual's physical, psychosocial, and functional needs, we believe 
that many SNPs are already including questions related to housing 
stability, food security, and access to transportation in their HRA 
tools. Therefore, if this proposal is adopted, most SNPs would revise 
their HRA tools to use our standardized questions. If a SNP is not 
already asking these questions, we do not predict the addition of 
questions on these three topics would lengthen the time to administer a 
typical HRA.
    CMS does not currently collect specific data elements from HRAs for 
all SNP enrollees. By standardizing HRA questions in our proposed rule, 
CMS would be able to collect those specific data elements; however, CMS 
will not be collecting data elements from the HRA as part of this 
collection of information.
    We estimate a one-time burden (over the next three years) for the 
parent organizations offering SNPs to update their HRA tools in their 
care management systems and adopt our standardized questions on housing 
stability, food security, and access to transportation. It is possible 
that we would change the standardized questions in the future, thereby 
making the burden of our proposal more than a one-time burden. However, 
we have no plans at this point to change the standardized questions 
once we establish them. Therefore, we are unable to reliably estimate 
the additional burden in subsequent years.
    We assume that each parent organization with one or more SNPs would 
update the care management system where an enrollee's HRA responses are 
recorded. We believe that it would take a software programmer 3 hours 
at $105.72/hr to update the care management system resulting in a cost 
of $317 (3hr x $105.72/hr) per parent organization. For CY 2021, there 
are 123 parent organizations with a SNP PBP. In aggregate, we estimate 
a one-time burden for updating the HRA tool of 369 hr (123 parent 
organizations x 3 hr) at a cost of $39,011 (369 hr x $105.72/hr). After 
the finalization and implementation of our proposed rule, we will 
reassess the impact of future updates to these HRA questions. As stated 
above, the proposed requirements and burden will be submitted to OMB 
for review under control number 0938-TBD (CMS-10799).
b. Updates to Audit Protocols
    The proposed change to the HRA would also require an update to the 
CMS SNP Care Coordination audit protocols \143\ that ensure the 
completed HRA includes the assessment of housing stability, food 
security, and access to transportation. Currently, audit protocol and 
data request burden are estimated at 701 hours per MA organization at 
an average hourly cost of $84.00/hr, totaling $58,884 per MA 
organization.
---------------------------------------------------------------------------

    \143\ See https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/ProgramAudits.
---------------------------------------------------------------------------

    We do not believe the changes to SNP audit protocols would add more 
time to the 701-hour audit protocol estimate as

[[Page 1923]]

we are adding a confirmation that the SNP's HRA includes the proposed 
changes as part of the SNP Care Coordination Audit protocols.
    While we do not anticipate any changes to our active time 
estimates, if this proposal is finalized, we would revise the audit 
protocol documents prior to the effective date of the rule to provide 
stakeholders the ability to comment on the contents of the document. 
The CMS-10717 package would be made available to the public for review/
comment under the standard PRA process which includes the publication 
of 60- and 30-day Federal Register notices and the posting of the 
collection of information documents on our PRA website.
    As stated in section II.A.4. of this proposed rule, CMS will 
consider collecting data from the SNPs on responses to the specified 
HRA questions. However, we are not proposing such requirements at this 
time. We welcome comment on our assumptions regarding the collection of 
information burden for this proposal.
3. ICRs Related to Refining Definitions for Fully Integrated and Highly 
Integrated D-SNPs (Sec.  422.2)
    The following proposed changes will be submitted to OMB for review 
under control number 0938-TBD2 (CMS-10796). At this time, the control 
number has yet to be determined, but it will be assigned by OMB upon 
their clearance of this proposed rule's collection of information 
request. OMB will set out an expiration date upon their approval of the 
final rule's collection of information request.
    As described in section II.A.5. of this proposed rule, we propose 
several changes to the definitions of FIDE SNPs and HIDE SNPs at Sec.  
422.2 that we believe will ultimately help to differentiate various 
types of D-SNPs and clarify options for beneficiaries and stakeholders. 
Our proposal for the FIDE SNP definition requires these plans to have 
exclusively aligned enrollment, cover Medicare cost-sharing, and cover 
the Medicaid benefits of home health, DME, and behavioral health 
through a capitated contract with the State Medicaid agency. We propose 
to require that each FIDE SNP's and HIDE SNP's capitated contract with 
the State Medicaid agency apply to the entire service area for the D-
SNP for plan year 2025 and subsequent years. We also propose to codify 
existing policy outlined in sub-regulatory guidance to permit, subject 
to CMS approval, specific limited benefit carve-outs for FIDE SNPs and 
HIDE SNPs through the State Medicaid agency contract submission 
process.
    Due to the proposed changes in the definition of FIDE SNP and HIDE 
SNP, a D-SNP may need to update its contract with the State Medicaid 
agency to come into compliance with the proposed changes at Sec.  
422.2. The currently approved annual burden estimate for updating the 
State Medicaid agency contract is 30 hours per D-SNP as described in 
OMB control number 0938-0753 (CMS-R-267). While the proposed changes 
may result in a one-time change to the contract, we believe the changes 
to the contract language would be relatively minor (even though the 
changes are substantive in nature) and part of routine updates to 
contracts such as changes of dates. We also believe that the contract 
changes would be subsumed in the 30-hour burden estimate for updating 
the contract annually. Therefore, we do not estimate our proposed 
changes to these definitions at Sec.  422.2 would impact our currently 
approved annual 30 hr contracting burden estimate for D-SNPs.
    The proposed changes to the FIDE SNP and HIDE SNP definitions may 
change how D-SNPs attest when submitting their State Medicaid agency 
contract to CMS. The burden is currently estimated under OMB control 
number 0938-0935 (CMS-10237). We do not estimate D-SNPs would 
experience an increase in their per response time or effort to submit 
the State Medicaid agency contract to CMS.
    However, if proposed changes to the FIDE and HIDE definitions are 
finalized, then we would update the content of the collection of 
information to reflect the changes to Sec.  422.2. If this proposal is 
finalized, we would revise the 5.11 D-SNP State Medicaid Agency 
Contract Matrix and 5.12 D-SNP State Medicaid Agency Contract Matrix 
documents connected to control number 0938-0935 (CMS-10237) and move 
these documents to control number 0938-TBD2 (CMS-10796). We believe 
including these forms in a separate OMB control number 0938-TBD2 (CMS-
10796) exclusively for the D-SNP State Medicaid agency contracts is 
more operationally consistent with the collection of information 
required from MA organizations.
a. Service Area Overlap Between HIDE SNPs and Companion Medicaid Plans
    Besides the updates to the documents currently under control number 
0938-0935 (CMS-10237) described in this section, section II.A.5.f. of 
this proposed rule would require the service area of a FIDE SNP or HIDE 
SNP to overlap with companion Medicaid plans; therefore, the 20 HIDE 
SNPs that have service area gaps with their affiliated MCOs would make 
a business decision regarding how to comply with the requirement in 
addition to updating the State Medicaid agency contract with the D-SNP. 
We believe that only one-third of the 20 impacted D-SNPs, or 7 D-SNPs, 
would choose to remain a HIDE SNP. The remaining 13 D-SNPs would 
contract with the State as a non-HIDE D-SNP and not incur additional 
burden.
    A D-SNP that wishes to remain a HIDE SNP would submit a new D-SNP 
PBP for the service area that does not overlap with the D-SNP's 
companion Medicaid plan during the annual bid submission process (OMB 
control number 0938-0763 (CMS-R-262)). Also, under the annual bid 
submission process, the existing HIDE SNP would reduce their MA service 
area to that which overlaps with the companion Medicaid plan.
    The currently approved annual burden estimate for D-SNPs to update 
PBPs is 35.75 hours per MA contract as described in OMB control number 
0938-0763 (CMS-R-262). We do not estimate D-SNPs would experience an 
increase in their response time or effort to submit the bid to CMS.
    Alternatively, to remain a HIDE SNP, the MA organization can work 
with the State Medicaid agency to expand the service area of the 
companion Medicaid plan to align with the D-SNP service area. However, 
State Medicaid procurement time frames and contracting strategies may 
not provide the 20 D-SNPs impacted by the proposed the opportunity to 
expand the service area of the companion Medicaid plan in CY2025.
    In section II.A.5.f. of this proposed rule, we discuss alternatives 
to the proposed changes to the FIDE SNP and HIDE SNP definitions 
regarding service area overlap with the companion Medicaid plan. For 
example, we are considering requiring a minimum level of service area 
overlap for the FIDE SNP or HIDE SNP and the companion Medicaid plans 
rather than full overlap. We request comment on how these alternatives 
may change the estimates for impacted D-SNPs if they were finalized.
4. ICRs Related to Additional Opportunities for Integration Through 
State Medicaid Agency Contracts (Sec.  422.107)
    As described in section II.A.6. of this proposed rule, we propose 
to add a new paragraph (e) at Sec.  422.107 to describe conditions 
through which States may require certain contract terms for D-SNPs and 
how CMS would facilitate

[[Page 1924]]

compliance with those contract terms. Proposed paragraph (e)(1) would 
allow States, through the State Medicaid agency contract with D-SNPs, 
to require that certain D-SNPs with exclusively aligned enrollment (a) 
establish MA contracts that only include one or more D-SNPs within a 
State, and (b) integrate materials and notices for enrollees. A more 
detailed discussion of the proposed requirements and associated burden 
follows:
a. State Medicaid Agency Contract Requirements
    The following proposed changes will be submitted to OMB for review 
under control number 0938-TBD2 (CMS-10796). At this time, the control 
number has yet to be determined, but it will be assigned by OMB upon 
their clearance of this proposed rule's collection of information 
request. OMB will set out an expiration date upon their approval of the 
final rule's collection of information request.
    For States that opt to require the contract requirements at 
proposed Sec.  422.107(e), States and plans would be required to modify 
the existing State Medicaid agency contract. These modifications would 
document the D-SNP's responsibility to only enroll dually eligible 
individuals who receive coverage of Medicaid benefits from the D-SNP, 
integrate member materials, and request that CMS establish an MA 
contract limited to D-SNPs within the State.
(1) State Burden
    Section 1903(a)(7) of the Act requires the Federal government to 
pay a match rate for administrative expenses. Since cost is split 
between the State Medicaid agency and the Federal government, we split 
in half the total costs, half of which the States incur and half of 
which the Federal government incurs, associated with administering the 
Medicaid program. The Federal government's cost is presented in the RIA 
section of this rule (see section V.D.3).
    For each State Medicaid agency, it would take a total of 24 hours 
at $143.18/hr for State staff to update the State Medicaid agency's 
contract with the D-SNPs in its market to address the changes in this 
proposed rule. This estimate includes the cost to negotiate with the D-
SNPs on contract changes and engage with CMS to ensure contract changes 
meet the proposed requirements at Sec.  422.107(e).
    Based on our experience, we expect that each State Medicaid agency 
will establish uniform contracting requirements for all D-SNPs 
operating in their market. We are uncertain of the exact number of 
States that would opt to require these proposed contract changes over 
the course of the first 3 years after the effective date (contract 
years 2025 to 2027). Based on our previous work with States as part of 
the capitated FAI demonstration and implementing the D-SNP integrations 
requirements established by the BBA of 2018, we estimate as few as five 
and as many as 20 States may opt to make these changes in their 
contracts with D-SNPs and their administration of their programs. Based 
on the number of States currently collaborating with CMS on Medicare 
and Medicaid integration and the States likely to transition from MMP-
based to D-SNP-based integrated care approaches, we believe there will 
be 12 states that implement this rule in the first 3 years. We further 
expect these 12 States to implement this one-time change during the 
first year it is effective.
    Section 1903(a)(7) of the Act requires the Federal government to 
pay half the States' administrative costs. Therefore, for purposes of 
the COI we interpret that the states will incur costs for only 12 hours 
(0.5 x 24 hours); the other 12 hours of work are paid for by the 
Federal government and therefore we account for these other 12 hours in 
the RIA. This division of the 24 hours into two 12-hour parts is also 
consistent with COI requirements that aggregate amounts reflect hour 
and wage/hr burden. Thus, the cost to each State would be $1,718 per 
State (1 State x 12 hr x $143.18/hr). The aggregate burden to 12 States 
would be 144 hours (12 States x 12 hours/State) at an aggregate one-
time cost of $20,618 (144 hr x $143.18/hr). After this first-year one-
time requirement is satisfied, and given the uncertainty involved in 
estimating State behavior, we are estimating zero burden in subsequent 
years on States.
    As mentioned previously, the other half of the burden will be 
presented in the RIA.
(2) MA Organization Burden
    For the initial year, we expect each affected D-SNP would take 8 
hours at $143.18/hr for a lawyer to update the contract with the State 
Medicaid agency to reflect the revised and new provisions proposed in 
this rule at Sec.  422.107(e). Based on our assumptions of States 
likely to opt to require the proposed contract changes, we estimate 
between 40 to 80 MA organizations would be impacted in the first three 
years. Since we are uncertain of which extreme to use, we use the 
average, 60 MA organizations per year. We further expect the updates to 
be done in the first year these regulations are effective. In aggregate 
we estimate a one-time burden of 480 hours (60 MA organizations x 8 hr) 
at a cost of $68,726 (480 hr x $143.18/hr).
b. Limiting Certain Medicare Advantage Contracts to D-SNPs
    The following proposed changes regarding additional Part C 
application respondents will be submitted to OMB for review under 
control number 0938-0935 (CMS-10237). Subject to renewal, the control 
number is currently set to expire on January 31, 2024. It was last 
approved on January 19, 2021 and remains active.
    The following proposed changes regarding additional Part D 
application respondents will be submitted for OMB approval under 
control number 0938-0936 (CMS-10137). Subject to renewal, the control 
number is currently set to expire on July 31, 2024. It was last 
approved on July 27, 2021 and remains active.
    We propose at Sec.  422.107(e) to codify a pathway by which States 
would require and CMS would permit MA organizations--through the 
existing MA application process--to establish MA contracts that only 
include one or more D-SNPs with exclusively aligned enrollment within a 
State. This action would allow dually eligible individuals to ascertain 
the full quality performance of a D-SNP and better equip States to work 
with their D-SNPs to improve health equity.
    We note that creating a new D-SNP-only contract would have several 
downstream collection of information impacts for an MA organization 
that are captured under the two aforementioned control numbers, the 
most immediate of which is the MA organization would need to complete a 
new application for Parts C and D.
    Our estimate is that 60 D-SNPs will be impacted by our proposed 
changes to Sec.  422.107(e). Currently, 32 percent of D-SNPs are in D-
SNP-only contracts; \144\ therefore, we estimate that 19 of the 60 D-
SNPs (60 D-SNPs x 0.32) impacted would already have a D-SNP-only 
contract and not need to submit a new Part C and D application. The 
remaining 41 D-SNPs (60--19 D-SNPs) would need to submit both a new 
Part C and a new Part D application.
---------------------------------------------------------------------------

    \144\ HPMS, Contract Management Reports 2020, SNP Type and 
Subtype Report, August 7, 2020.
---------------------------------------------------------------------------

    The burden for an initial Part C application for a SNP is currently 
approved by OMB under control number 0938-0935 (CMS-10237) at 10 hours 
at $72.70/hr for a compliance officer to review instructions and 
complete the proposal (including

[[Page 1925]]

submission) at a cost of $727 per contract (10 hr x $72.70/hr). Under 
this proposed rule, the currently approved burden for one-time Part C 
applications would increase by 410 hours (10 hr x 41 D-SNPs) and 
$29,807 (410 hr x $72.70/hr).
    The burden for an initial Part D application for an MA-PD plan is 
currently approved by OMB under control number 0938-0936 (CMS-10137) at 
6.41 hours for a compliance officer to review instructions and complete 
the proposal (including submission) at a cost of $466 per contract 
(6.41 hr x $72.70/hr). The aggregate one-time burden for 41 D-SNPs to 
complete an initial Part D application for an MA-PD plan is 263 hours 
(6.41 hr x 41 affected D-SNPs) at a cost of $19,120 (263 hr x 72.70/
hr).
    We acknowledge there may be additional downstream collection of 
information impacts for new contracts related to Part C and D reporting 
and CMS monitoring at the contract level. For example, MA organizations 
would experience additional reporting to CMS, calculation of HEDIS 
measures, and administration of HOS and CAHPS surveys. We are uncertain 
of the extent of the additional burden incurred for reporting as a 
separate contract. We request comments on these impacts for a new 
contract under an already existing MA organization and if they should 
be included in our estimates.
c. Integrated Member Materials
    As described in section II.A.6.b. of this proposed rule, to provide 
a more coordinated beneficiary experience, we propose at Sec.  
422.107(e) to codify a pathway by which States and CMS would 
collaborate to establish model materials when a State chooses to 
require through its State Medicaid agency contract that certain D-SNPs 
use an integrated SB, Formulary, and combined Provider and Pharmacy 
Directory. Proposed Sec.  422.107(e)(1)(ii) establishes factual 
circumstances that would commit CMS to certain actions under paragraphs 
(e)(2) and (3).
    We do not estimate any additional burden for States or plans to 
implement integrated member materials at proposed Sec.  422.107(e) due 
to existing State efforts to work with Medicaid managed care plans to 
comply with information requirements at Sec.  438.10 and to work with 
D-SNPs to populate Medicaid benefits for Medicare member materials. 
Since requirements imposed on the Federal government are not subject to 
the PRA, we describe costs to the Federal government's burden to 
develop integrated member materials in section V.D.3.a. of this 
preamble.
5. ICRs Related to Definition of Applicable Integrated Plan Subject to 
Unified Appeals and Grievances Procedures (Sec.  422.561)
    The following proposed changes would be submitted to OMB for review 
under control number 0938-TBD2 (CMS-10796). At this time, the control 
number has yet to be determined, but it will be assigned by OMB upon 
their clearance of this proposed rule's collection of information 
request. OMB will set out an expiration date upon their approval of the 
final rule's collection of information request. In Sec.  422.561, we 
propose to expand the universe of D-SNPs with unified grievance and 
appeals processes by revising the definition of the term ``applicable 
integrated plan,'' which establishes the scope of plans that are 
subject to the requirement to use those unified processes. Unified 
grievance and appeals processes were originally limited to FIDE SNPs 
and HIDE SNPs; however, after our implementation experience, we believe 
that there are models of integrated D-SNPs other than FIDE SNPs and 
HIDE SNPs that are also amenable to the unified grievance and appeals 
processes.
    If finalized, additional D-SNPs would be implementing the unified 
grievance and appeals procedures under Sec. Sec.  422.629 through 
422.634. We anticipate that the D-SNPs impacted by this rule would be 
D-SNPs in California with exclusively aligned enrollment, including 
those plans receiving Cal MediConnect members at the end of the 
California capitated FAI demonstration.
    Consistent with our currently approved burden estimates, we 
continue to estimate a one-time burden for each new applicable 
integrated plan to update its policies and procedures to reflect the 
new integrated organization determination and grievance procedures 
under Sec.  422.629. We anticipate this task would take a business 
operation specialist 8 hours at $81.06/hr. In aggregate, we estimate a 
one-time burden of 104 hours (8 hr x 13 D-SNPs) at a cost of $8,430 
(104 hr x $81.06/hr).
    While new D-SNPs would use the CMS-10716 denial notice at OMB 
control number 0938-1386 rather than the CMS-10003 MA denial notice 
under OMB control number 0938-0829, neither of the notices nor burden 
estimates would be revised as a result of this rule's proposal. As 
indicated above, the rule's proposed changes will be submitted to OMB 
under control number 0938- TBD2 (CMS-10796).
    The CMS-10716 denial notice required under Sec.  422.631(d)(1) 
includes information about the determination, as well as information 
about the enrollee's appeal rights for both Medicare and Medicaid 
covered benefits. Though integrating information on Medicare and 
Medicaid appeal rights would be a new requirement for the impacted D-
SNPs, we note that the timeframe for sending a notice and the content 
of the notice are largely the same as the current requirements in 
Medicaid (Sec.  438.404(b)) and MA (Sec.  422.572(e)); therefore, 
impacted D-SNPs are not incurring additional burden to send the 
notification. Setting out such burden would be duplicative.
6. ICRs Related to Attainment of the Maximum Out-of-Pocket (MOOP) Limit 
(Sec. Sec.  422.100 and 422.101)
    As described in section II.A.12. of this proposed rule, we are 
proposing a revision to which costs accumulate toward the MOOP limit 
for dually eligible enrollees with cost-sharing protections under Sec.  
422.101 for MA regional plans and Sec.  422.100(f)(4) and (5) for all 
other MA plans. CMS proposes that all costs for Medicare Parts A and B 
services accrued under the plan benefit package, including cost-sharing 
paid by any applicable secondary or supplemental insurance (such as 
through Medicaid, employer(s), and commercial insurance) and any cost-
sharing that remains unpaid because of limits on Medicaid liability for 
Medicare cost-sharing under lesser-of policy and the cost-sharing 
protections afforded certain dually eligible individuals, is counted 
towards the MOOP limit. This would ensure that once an enrollee, 
including a dually eligible individual with cost-sharing protections, 
has accrued cost-sharing (deductibles, coinsurance, or copays) that 
reaches the MOOP limit, the MA plan must pay 100 percent of the cost of 
covered Medicare Part A and Part B services. MA plans are currently 
tracking all costs accrued as part of preparing to submit an accurate 
plan benefit package bid (OMB control number 0938-0763 (CMS-R-262)); 
therefore, this proposal does not add additional requirements or 
burden.
    This proposal would update current guidance governing MA 
organization bid requirements, which are captured under our active OMB 
control number 0938-0763 (CMS-R-262). We do not believe there is 
additional material burden resulting to plans that would arise from the 
proposed changes. As such, non-PRA related burden can be found in 
section V.D.4 of this preamble.

[[Page 1926]]

7. ICRs Related to Network Adequacy (Sec.  422.116(a)(i)(ii) and 
(d)(7))
    The following proposed changes, although carrying no burden, will 
be submitted to OMB for review under control number 0938-1346 (CMS-
10636).
    In this rule we propose to require compliance with CMS' network 
adequacy standards for initial and service area expansion (SAE) 
applicants as part of the MA application process. Therefore, our 
proposal would require that initial and SAE provider networks be 
submitted and reviewed in February instead of June (with plans being 
reviewed for the triennial review).
    Consequently, the number of reviews and the amount of work is the 
same; rather, it is being re-distributed.
8. ICRs Related to the Disclaimer for Preferred Pharmacy (Sec.  
423.2267(e)(40))
    The following proposed disclaimer changes carry no burden. Section 
423.2267(e)(40) would require Part D sponsors to insert CMS standard 
disclaimer on materials that mention preferred pharmacies. The burden 
associated with this requirement would be the time and effort to copy 
the disclaimer on plan documents during document creation. While these 
requirements are subject to the PRA, we believe the associated burden 
is exempt from the PRA in accordance with 5 CFR 1320.3(c)(2). We 
believe that the time, effort, and financial resources to comply with 
the information collection requirements would be incurred by persons in 
the normal course of their activities and therefore considered to be 
usual and customary business practice.
    This disclaimer is currently described in CMS's sub-regulatory 
guidance, the MCMG, and would be codified in this proposed regulation. 
The disclaimer provides an important safeguard to Medicare 
beneficiaries enrolled in a Part D plan that only provide access to 
preferred cost sharing through a limited number of pharmacies by 
alerting them that the preferred costs may not be available at the 
pharmacy they use, as well as providing information on how to access 
the list of pharmacies offering prescription drugs as a preferred cost 
in the beneficiary's area.
9. ICRs Related to Member Identification Cards (Sec. Sec.  
422.2267(e)(30) and 423.2267(e)(32))
    The following proposed changes carry no burden. Although subject to 
PRA, Member Identification Cards are exempt since the issuance of 
Medicare Identification Cards is a normal and customary practice 
throughout the insurance industry. Health plans, whether commercial, 
through Medicare or Medicaid, or Original Fee-For-Service issue cards 
that inform providers of the enrollees insurance. Based on the 
exemption we will not be submitting this to OMB for review.
    This proposal is a codification of previously issued sub-regulatory 
guidance in the MCMG defining standards for member identification cards 
issued by MA plans and Part D plan sponsors.
    CMS created this subregulatory guidance to reduce Medicare 
beneficiary confusion through bringing consistency to member ID card 
requirements by applying standards so that ID cards from plan to plan 
contained the same information in the same locations.
    The member identification card standard provided in the previously 
issued sub-regulatory guidance was created using an industry standard 
for ID cards; these industry standards reflected best practices and 
consequently plans found the previously issued sub-regulatory guidance 
implementable with minimal burden. Because of the minimal burden, plans 
would have no incentive to avoid using them. Additionally, we have 
received no enrollee complaints on member cards since issuing the sub-
regulatory guidance.
    Because of the reasons listed previously, we believe plans are 
following the standards described in this subregulatory guidance and 
therefore no further burden is imposed by codifying these standards in 
regulation.
10. ICRs Related to the Creation of a One-Page Multilanguage Insert 
(Sec. Sec.  422.2267(e)(31) and 423.2267(e)(33))
    The following proposed changes would be submitted to OMB for review 
under control number 0938-TBD2 (CMS-10802). At this time, the control 
number has yet to be determined, but it will be assigned by OMB upon 
their clearance of this proposed rule's collection of information 
request. OMB will set out an expiration date upon their approval of the 
final rule's collection of information request. This provision requires 
that plans add in their postings or mailings of CMS required materials 
a one-page document written in the top 15 non-English languages in the 
U.S. informing enrollees that interpreter services are available at no 
cost.
    We previously required plans to provide this document to enrollees. 
However, based on section 1557 of the Affordable Care Act, the Office 
for Civil Rights (OCR) created their own version. Because of the 
inherent duplication between CMS' MLI requirement and OCR's 
requirement, CMS issued an HPMS email on August 25, 2016, that removed 
the MLI requirement. OCR later vacated their requirement, leaving a 
gap. Consequently, we are proposing to require that MA plans and Part D 
plan sponsors provide the one-page document.
    In estimating the burden of this one-page document we assume plans 
have retained their templates consistent with the record retention 
requirements at Sec.  422.504(e)(4). Consequently, there is no burden 
to create the template, as plans will either use their existing 
templates or a template that will be provided by CMS to new plans based 
on the previously created MLI without change.
    The cost of placing an extra page on the plan's web page is 
incurred by plans as part of their normal course of fluctuating 
business activities and hence excluded from the PRA (5 CFR 
1320.3(b)(2)). For those beneficiaries who request a paper copy, the 
proposed regulations require sending it with other CMS required 
materials (Sec. Sec.  422.2267(e) and 423.2267(e)). We believe it is 
reasonable to assume that adding one page (at 0.1696 ounces) to a bulk 
mailing cost is de minimis and therefore does not create additional 
postage costs.
    Similar estimates have been made in previous final rules where we 
identified the major burden as paper and toner. We have checked the 
following assumptions of cost and beneficiary interest in receiving 
paper copies found in the April 2018 final rule (83 FR 16695), and 
found them to still be reliable for the purpose of this proposed rule.
    A 10-ream box (of 5,000 sheets) of paper costs approximately $50. 
Hence the cost per sheet is $50/5,000 sheets = $0.01 per page.
    Standard toner cartridges which last for about 10,000 pages also 
cost $50. Hence the cost per sheet is $50/10,000 = $0.005 per page.
    Thus, the total paper and toner cost is $0.015 per page.
    As of September 2021, there are 52 million beneficiaries enrolled 
in MA PD or stand-alone PDP plans.\145\
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    \145\ https://www.cms.gov/research-statistics-data-and-systemsstatistics-trends-and-reportsmcradvpartdenroldatamonthly/contract-summary-2021-09.
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    Of these 52 million beneficiaries we estimate that two fifths or 
20,800,000 beneficiaries (52 million beneficiaries x 0.40) will request 
paper copies.
    It follows that the aggregate cost of providing one extra sheet of 
paper is

[[Page 1927]]

$312,000 (20,800,000 enrollees x $0.015/sheet).
    There is no labor cost. Had we assumed that each extra sheet will 
incur postage costs we would have to add about $43,333 (52 million 
enrollees x \2/5\ requesting paper copies x \1/6\ once per sheet x \1/
16\ ounces per pound x $0.20/pound). However, it is not clear the 
extent to which every sheet will bear a cost. We solicit stakeholder 
input on all assumptions including the estimate that 40 percent of 
enrollees request paper copies and that the major costs are paper and 
toner.
11. ICRs Related to Third-Party Marketing Organizations (TPMOs) Agent 
(Sec. Sec.  422.2260, 422.2267(e)(41), 422.2274(g), 423.2260, 
423.2267(e)(41), and 423.2274(g))
    The following proposed disclaimer changes carry no burden submitted 
to OMB for review. Sections 422.2260, 422.2267(e)(41), 422.2274(g), 
423.2260, 423.2267(e)(41), and 423.2275(g) would require MA 
organizations and Part D sponsors to insert CMS standard disclaimer on 
materials created by Third Party Marketing Organizations and would 
require MA organizations and Part D sponsor update training materials. 
The burden associated with this requirement would be the time and 
effort to copy the disclaimer on marketing materials during document 
creation. While these requirements are subject to the PRA, we believe 
the associated burden is exempt from the PRA in accordance with 5 CFR 
1320.3(c)(2). We believe that the time, effort, and financial resources 
to comply with the information collection requirements would be 
incurred by persons in the normal course of their activities and 
therefore considered to be usual and customary business practice.
    The major cost associated with these requirements is the burden of 
updating policies and training. We note that many TPMOs such as field 
marketing organizations (FMOs), or other companies that a plan uses for 
marketing, lead generation, and enrollment functions already perform 
similar training in order to ensure compliance with their FDR 
requirements.
    We estimate that it would take a business operation specialist 2 
hours at $81.06/hr for a one-time update of procedures and training at 
a cost of $162 ($81.06/hr x 2 hr) per contract. In aggregate the one-
time burden for 961 current contracts is 1,922 hours (2 hr x 961 
contracts) at a cost of $155,797 (1,922 hr x $81.06/hr).
    The major update is procedures and training. The burden of adding 
just one itm to the required disclosures is not being estimated since 
it is part of the normal varying disclosures done and as such is exempt 
from the PRA (5 CFR 1320.3(b)(2)).
12. ICRs Related to the Medicare MLR Reporting Requirements (Sec. Sec.  
422.2460 and 423.2460)
    The proposed changes to the Medicare MLR Reporting Requirements 
will be submitted to OMB for review under control number 0938-1232 
(CMS-10476).
    In section II.G.2. of this proposed rule, we note that under 
current Sec. Sec.  422.2460 and 423.2460, for each contract year, MA 
organizations and Part D sponsors must report to CMS only the MLR and 
the amount of any remittance owed to us for each contract with credible 
or partially credible experience. For each non-credible contract, MA 
organizations and Part D sponsors are required to report only that the 
contract is non-credible. In this rule, our proposed amendments to 
Sec. Sec.  422.2460 and 423.2460 would increase the MLR reporting 
burden by requiring that MA organizations and Part D sponsors report, 
for each contract year, the data needed to calculate and verify the MLR 
and remittance amount, if any, for each contract, such as the amount of 
incurred claims for Medicare-covered benefits, supplemental benefits, 
and prescription drugs; expenditures on quality improving activities; 
non-claims costs; taxes; licensing and regulatory fees; total revenue; 
and any remittance owed to CMS under Sec.  422.2410 or Sec.  423.2410.
    Our analysis of the estimated administrative burden related to the 
MLR reporting requirements is based on the average number of MA and 
Part D contracts subject to the reporting requirements for each 
contract year. For contract years (CYs) 2014 to 2020, the average 
number of such contracts is 601. The total number of MA and Part D 
contracts is relatively stable year over year.
    Another amount used in our calculations is the total number of 
hours spent on administrative work related to the Medicare MLR 
requirements that applied with respect to MLR reporting for contract 
years CY 2014 through CY 2017. In the information collection request 
that was previously approved by OMB under 0938-1232 (CMS-10476), CMS 
estimated that, on average, MA organizations and Part D sponsors would 
spend 47 hours per contract on administrative work related to Medicare 
MLR reporting, including: Collecting data, populating the MLR reporting 
forms, conducting internal review, submitting the reports to the 
Secretary, and conducting internal audits. This 47-hour figure was also 
used in the final rule titled ``Medicare Program; Contract Year 2019 
Policy and Technical Changes to the Medicare Advantage, Medicare Cost 
Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit 
Programs, and the PACE Program'' (83 FR 16701), which appeared in the 
Federal Register on April 16, 2018 (hereinafter referred to as the 
April 2018 final rule), and revised the MLR reporting requirements that 
apply with respect to MLR reporting for CY 2018 and subsequent contract 
years, and it will be used in this proposed rule.
    In calculating burden, we contrast the proposed requirements with 
those in the April 2018 final rule, which revised the MLR reporting 
requirements for all MA and Part D contracts, and the June 2020 final 
rule (84 FR 33796, 33850), which added a deductible-based adjustment to 
the MLR calculation for MA medical savings account (MSA) contracts. In 
reviewing the April 2018 final rule, we identified an overestimation in 
the calculations.
    To explain the overestimation and to account for it in our burden 
calculation for this proposed rule, we present three tables: One table 
for the estimates of hourly burden per contract included in the April 
2018 final rule, which established the current MLR reporting 
requirements (Table 5); a second table for our revised estimates of 
hourly burden in the April 2018 final rule (Table 6); and a third table 
for our estimates of the hourly burden of the proposed changes to the 
MLR reporting requirements. Having the calculated hourly burden per 
contract, we can then estimate dollar burden per contract and also 
aggregate hourly and dollar burden per contract.
    We believe that presenting these 3 tables will aid the reader in 
navigating a set of calculations that are complicated by (1) the 
contrast between the burden estimate for the current MLR reporting 
requirements, as published in the April 2018 final rule, and our 
revised burden estimate for the current reporting requirements, which 
we provide here, and (2) the contrast between our revised burden 
estimate for the current reporting requirements and our burden estimate 
for the proposed reporting requirements. To provide further clarity, we 
number each row in the tables with a row ID so that appropriate 
narrative can be tied to overall calculation. For this reason, we 
initially focus on hourly burden. Once the hourly burden of this 
proposed rule is established, we calculate the per

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contract and aggregate hourly and dollar burden.
    In the April 2018 final rule (83 FR 16701), we estimated that it 
would take an MA organization or Part D sponsor 11.5 hours to complete 
the MLR reporting form that was used to collect MLR data for CYs 2014 
through 2017. We explained that we developed this estimate by 
considering the amount of time it would take an MA organization or Part 
D sponsor to complete each of the following tasks:
     Review the MLR report filing instructions and external 
materials referenced therein and to input all figures and plan-level 
data in accordance with the instructions.
     Draft narrative descriptions of methodologies used to 
allocate expenses.
     Perform an internal review of the MLR report form prior to 
submission.
     Upload and submit the MLR report and attestation.
     Correct or provide explanations for any suspected errors 
or omissions discovered by CMS or our contractor during initial review 
of the submitted MLR report.
    The calculations for hourly burden per contract that were included 
in the April 2018 final are summarized in Table 5.
[GRAPHIC] [TIFF OMITTED] TP12JA22.007

    The following explanations apply to the rows in Table 5:
    Row(1): The 47-hour figure, as explained in the opening paragraphs 
of this ICR, is CMS' estimate for the total amount of time MA 
organizations and Part D sponsors would spend per contract on 
administrative work related to Medicare MLR reporting when the MLR was 
reported using the MLR form for CYs 2014 through 2017, including: 
Collecting data, populating the MLR reporting form, conducting internal 
review, submitting the report to the Secretary, and conducting internal 
audits.
    Row (2): The 11.5-hour burden is the portion of the burden in Row 
(1) that the April 2018 final rule assumed was associated with 
completing the MLR form used for CYs 2014 through 2017. This burden is 
discussed in the paragraph immediately preceding Table 5.
    Row (3): 35.5 hours, the administrative burden associated with the 
MLR requirements, excluding the April 2018 final rule's estimate of the 
burden for completing and submitting the MLR form used for CYs 2014 
through 2017. This number represents the difference between total per 
contract burden, 47 hours, and the form burden per contract, 11.5 
hours.
    Row (4): Estimated burden to complete the current MLR data form, 
which is vastly simplified and is estimated to take only a half-hour to 
complete.
    Row (5): The total burden per contract, as written in the 2018 and 
2020 rule, and as adjusted for the current number of contracts is 36.00 
(35.5 hours non-form burden + 0.5 hours current form burden).
    After further consideration, we believe that the April 2018 final 
rule overstated the burden of completing the detailed MLR reporting 
form because it did not take into account the number of MA 
organizations and Part D sponsors that were actually required to 
provide explanations for suspected errors or omissions discovered by 
CMS or our contractor during initial review of the submitted MLR 
report. Unlike the first four tasks previously listed (the first four 
of the bullets immediately listed prior to Table 5), the need to 
correct or provide explanations for errors and omissions discovered by 
CMS or our contractor during desk reviews and estimated at 11.5 hours 
(row (2)) was not applicable to all plans when our detailed MLR data 
reporting requirements were in effect.
    Based on the percentage of contracts per CY (for CYs 2014 through 
2017) for which the annual MLR filing was flagged for potential errors 
during desk reviews, the number of MA organizations and Part D sponsors 
that were required to correct or explain suspected errors during desk 
reviews, and a review of the correspondence between such organizations 
or sponsors and CMS or our contractor, we estimate the last task 
previously listed (to correct or provide explanations for suspected 
errors or omissions flagged in desk reviews) would take an MA 
organization or Part D sponsor an average of 3 hours per affected 
contract, depending on the number and complexity of issues that

[[Page 1929]]

required additional explanation, whether the MA organization or Part D 
sponsor had to recalculate any of the figures included in its original 
MLR submission, and whether the MA organization or Part D sponsor had 
to submit a corrected MLR Report to address any of the errors or 
omissions in its original submission.
    This refinement to our prior 11.5-hour time estimate does not 
affect our estimate that MA organizations and Part D sponsors spent 47 
hours per contract on administrative work under the MLR reporting 
requirements in effect for CYs 2014 through 2017 (Row (1) in Table 5). 
Instead, it causes the estimated time to complete the detailed MLR 
reporting form to decrease from 11.5 hours to 10.75 hours (Row (2) in 
Table 5 and Row (7) in Table 6), with the remaining administrative 
tasks now estimated as taking the other 36.25 hours (47 hours-10.75 
hours). (Row (8) in Table 6). Table 6 presents a revision of Table 5 
with the primary change being replacing 11.5 (Row (2) in Table 5) with 
10.75 (row (7) in Table 6), with the other rows following by 
computation. Table 6 also differs from Table 5 is the addition of the 
per contract burden of calculation of the MSA deductible factor. This 
is explained in the narrative to Table 6.
[GRAPHIC] [TIFF OMITTED] TP12JA22.008

    We now explain row (10), calculation of the deductible factor. In 
the June 2020 final rule, CMS estimated that it would take 5 minutes 
(\1/12\ hour) to calculate and verify the deductible factor for an MSA 
contract. At the time of the 2020 rule, there were 8 MSA contracts. As 
of 2021, there are only 4 MSA contracts. However, the calculations 
presented in Table 6 are per contract, not aggregate. Thus, the hourly 
burden for calculation of the MSA deductible factor adjusted for the 
number of current contracts is 0.00055 hours (\1/12\ hour per contract 
x 4 MSA contracts divided by 601 total contracts). We round to 5 
decimal places because if we had rounded to two decimal places the 
burden would be 0. This burden is eliminated under the current proposal 
because the software tool that will be used to report the detailed MLR 
data that CMS proposes will now calculate and apply the deductible 
factor, making it unnecessary for MA organizations to perform this 
calculation. The sole purpose of discussing this burden here is to 
illustrate the flow of logic in determining hourly burden as written in 
the previous rules.
    This proposed rule introduces three items affecting per contract 
hourly burden. First, as noted in section II.G.3. of this proposed 
rule, if the proposed changes to the MLR reporting requirements are 
finalized, CMS expects to resume development of the MLR reporting 
software, and to update the data collection fields and built-in 
formulas so that the MLR reporting software calculates the MLR 
consistent with all amendments to the MLR regulations that CMS has 
finalized since CY 2017. In making these updates, CMS would revise the 
programming of the MLR reporting software so that it automatically 
calculates and applies the appropriate deductible factor for MA MSA 
contracts, as determined under Sec.  422.2440. Because MA organizations 
would no longer be responsible for calculating the deductible factor, 
the burden associated with performing that calculation would be 
eliminated.
    Second, as discussed in section II.G.2. of this proposed rule, CMS 
proposes to reinstate the detailed MLR reporting requirements in effect 
for CYs 2014 through 2017.
    Third, we propose to require that MA organizations provide more 
detailed information on the portion of the incurred claims component of 
the MLR numerator that represents expenditures for supplemental 
benefits. As discussed

[[Page 1930]]

in section II.G.3. of this proposed rule, to collect this information, 
we intend to add 18 additional fields to the MLR Report template in 
which MA organizations would enter their total expenditures for 
different types or categories of supplemental benefits. We also 
anticipate adding narrative fields in which users would describe the 
methodologies used to allocate supplemental benefit expenditures.
    In total, we estimate that the addition of these fields, as well as 
an information-only field in which MA organizations and Part D sponsors 
would enter the low-income cost sharing subsidy amount that they 
deducted when calculating the amount of prescription drug costs to 
include in the MLR report, would increase the number of fields that 
would require user input and validation by approximately one-third, or 
33.3 percent. We believe this increase would cause a proportional 
increase in the amount of time needed both to complete and submit the 
MLR Report to CMS, and to perform the data collection activities that 
make up the remaining portion of the 47 hours per contract that we 
previously estimated MA organizations and Part D sponsors would spend 
on administrative work related to the MLR reporting requirements.
    However, because the new supplemental benefits fields do not affect 
the MLR reporting burden for sponsors of standalone Part D contracts, 
we calculate the MLR reporting burden separately for MA contracts and 
standalone Part D contracts. Thus, we estimate the burden to stand-
alone Part D contracts would only increase 5 percent.
    To aggregate this increase on a per-contract level, we take a 
weighted average of the 33 percent increase and the 5 percent increase. 
The weights correspond to the percentage of contracts that represent MA 
contracts (about 89 percent) and standalone Part D contracts (about 11 
percent). This aggregate net increase per contract is 29.92 percent 
(89% x 33% + 11% x 5%). The computations are presented in Table 7. As 
previously indicated, it is simpler to use one aggregate figure (29.92 
percent) for all contracts rather than estimate each contract type 
separately and then adding them together.
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TP12JA22.010

    Table 8 incorporates these three proposed changes--removing the 
deductible factor calculation burden, reinstating the form used for MLR 
reporting for CYs 2014 through 2017, and increasing the fields in the 
form--to arrive at a final hourly burden per contract, and then 
calculates dollar burden per contract as well as aggregate burden 
(hourly and dollar) for all contracts. The rows of Table 8 are 
explained in the narrative following the table. The following presents 
explanations of the rows in Table 8.
     Rows (15)-(17) are identical to rows (6)-(8). This 
provides the per-contract administrative hours on non-form items 
connected with the MLR provisions before adding the form-related 
burdens.
     Row (18): The 0.5 hours in Row (9) is replaced by the 
10.75 hours in Row (16) since this proposed rule requires returning to 
the detailed form used for MLR reporting for CYs 2014 through 2017 
whose cost is estimated in Row (7).
     Row (19): Row (10), the time for calculation of the MSA 
deductible factor, is replaced with 0 hours, since the proposal would 
entail having CMS-developed software automatically calculate and apply 
the deductible factor.
     Row (20): The total hourly burden per contract, 47 hours, 
reflecting returning to the detailed form used for CY 2014 through 2017 
MLR reporting and removal of calculation of the MSA deductible factor 
(but not yet reflecting additional fields) is obtained by adding 10.75 
(form burden) + 36.25 (non-form burden), (Rows (17) and (18)).
     Row (21): The total hourly burden per contract, 61.1 hours 
under the current proposal, is obtained by increasing the 47 hours (Row 
(20)) by 29.92 percent, which is the weighted effect of adding new 
fields (Row (14)). (61.1 = 47 + 29.92 percent x 47).
     Row (22): The current contract burden of 36.75055 hours is 
obtained from Row (11). The five decimal places assure that the effect 
of the provision on MSAs is not removed.
     Row (23): The average increase in burden (hours) due to 
the proposed regulation of 24.34945 is obtained by subtracting from the 
total burden under the proposed regulation of 61.1 hours on Row (21) 
the current burden of 36.75055 hours on Row (22).
     Row (24): The $155.52/hr wage is obtained from the wage 
table.
     Row (25): The increased contract burden ($) $3,787 on Row 
(25) is obtained by multiplying the average increase in burden (hours) 
of 24.34945 on Row (23) by the wages per hour ($155.52) on Row (24).

[[Page 1932]]

     Row (26): The total number of contracts is presented in 
the opening paragraphs of this ICR.
     Row (27): The aggregate increase in burden (hours) across 
all contracts of 14,634 is obtained by multiplying the 601 contracts 
(Row (26)) by the per contract increase in burden (hours) of 24.34945 
on Row (23).
     Row (28): The aggregate increase in burden ($) across all 
contracts, $2,275,880, is obtained by multiplying the increase in 
burden (hours) of 14,634 on Row (27) by the wages per hour on Row (24).
    We estimate that MA organizations and Part D sponsors will incur 
minimal one-time start-up costs associated with developing processes 
for capturing the necessary data, as they should already have been 
allocating their expenses by line of business and contract in order to 
comply with our current regulations regarding the calculation of the 
MLR, and they should already have been tracking their supplemental 
benefit expenditures for purposes of bid development. We estimate that 
MA organizations and Part D sponsors will incur ongoing annual costs 
relating to data collection, populating the MLR reporting form, 
conducting an internal review, submitting the MLR reports to the 
Secretary, and conducting internal audits.
    Table 9 summarizes the relevant calculations in traditional COI 
format as one combined line item.
[GRAPHIC] [TIFF OMITTED] TP12JA22.011

    The average burden per contract as given on Row (25) of Table 8 is 
$3,787. We note that this is a weighted average. Stakeholders may be 
interested in a more careful analysis based on contract type. We do 
this for 3 types of contracts.
    MA MSA contracts have reduced burden since the new software 
automatically calculates the deductible factor and uses that to adjust 
the applicable credibility factor, relieving them of the need to 
perform this calculation and adjustment on their own.
    For each MA contract (including MA-PD and MA MSA contracts), we 
estimate, on average, 25.92 hours of additional burden at an additional 
cost of $4,032. Row (11) (which excludes the burden on Row (10) 
associated with calculating the MSA deductible factor) shows the 
current hour burden to be 36.75 hours. (The removal of the 0.00055 
hours has negligible effect and is appropriate for the majority of 
contracts which are non-MSAs). Row (20) shows that the new burden 
without considering the additional fields is 47 hours. Row (13) shows 
that this would result in 62.67 hours total burden (47 hours x 1.33 due 
to increased fields). Comparing the 62.67 total burden under the 
proposed MLR reporting requirement with the 36.75 hours under the 
current reporting requirements shows an increase in burden of 25.92 
hours (62.67-36.75) at a cost of $4,031 (25.92 hours x $155.52/hr).
    For Part D contracts, we estimate 12.6 additional hours of burden 
at an additional cost of $1,960. As in the preceding analysis for MA 
contracts, Row (11) (which excludes burden on Row (10) associated with 
calculating the MSA deductible factor) shows the current hour burden to 
be 36.75 hours. Row (20) shows that the new burden without taking into 
effect the new fields is 47 hours. Row (12) shows a 5 percent increase 
for new fields for Part D contracts, such that this would result in a 
total burden of 49.35 hours (47 hours + 47 hours x 5 percent). Thus, 
there is an additional hour burden of 12.6 hours (49.35 hours-36.75 
hours) at an additional cost of $1,960 (12.6 hours x $155.52/hr) per 
contract.
 ICRs Related to Pharmacy Price Concessions in the Part D Negotiated 
Price (Sec.  423.100)
    The proposed requirement and burden for Part D Sponsors to 
implement provisions related to pharmacy price concessions, discussed 
below, will be submitted to OMB for review under control number 0938-
0982 (CMS-10174), as needed.
    This provision would require that Part D sponsors apply all 
pharmacy price concessions to the point of sale price in all phases of 
the Part D benefit excluding for applicable drugs dispensed to 
applicable beneficiaries in the coverage gap. Under this proposal, 
beneficiaries would see lower prices at the pharmacy point-of-sale and 
on Plan Finder, beginning immediately in the year the policy would take 
effect, 2023. We anticipate that this proposed change would require 
Part D sponsors to make certain system changes related to the 
calculation of the amounts they report in one or two fields in the PDE 
data collection form. We anticipate that this would cause sponsors to 
incur one-time administrative costs.
    To estimate the administrative costs associated with submission of 
PDE data, we consider the following factors: (1) The number of plan 
sponsors (or sponsors' intermediaries) submitting data; (2) the amount 
of data that must be submitted; and (3) the time required to complete 
the data processing and transmission transactions. This information is 
summarized in Table 10. Throughout the narrative, the row references 
refer to this Table.
    Number of Part D Contracts (Respondents): The average number of 
Part D contracts per year (Row (B)) is 856 (based on 2019-2021 internal 
CMS data).
    PDE Data Submission: The number of prescription drug events (PDE) 
for 2020 is 1.5 billion (Row (C)). The average number of Part D 
contracts for the past 3 years (2019-2021) is 856 (Row (B)). To compute 
the average number of responses per respondent, that is, the number of 
PDEs per contract (D), we divide the average number of PDEs per year 
(Row C) by the average number of contracts (Row B). This computation 
leads to an average of 1,752,336.45 PDEs/contract (Row (D)) (1.5 
billion divided by 856). A similar computation shows that the average 
number of PDEs per Part D enrollee is 30.5 (1.5 billion

[[Page 1933]]

PDE (Row (C)) divided by 49,229,626 enrollees (as of November 2021) 
(Row (A)).
    Time Required to Process Data: The third factor that contributes to 
the burden estimate for submitting PDE data depends upon the time and 
effort necessary to complete data transaction activities. Since our 
regulations require Part D sponsors to submit PDE data to CMS that can 
be linked at the individual level to Medicare Part A and Part B data in 
a form and manner similar to the process provided under Sec.  422.310, 
the data transaction timeframes will be based on risk adjustment and 
prescription drug industry experiences. Moreover, our PDE data 
submission format only supports electronic formats.
    The drug industry's estimated average processing time for 
electronic data submission is 1 hour for 500,000 records (Row F). The 
drug industry further estimates that on average it costs $35.50/hr (for 
2020) to process PDEs (Row E).
    Using these numbers, we can compute individual contract and 
aggregate burden.
    It would take 3.5 hours (Row G) on average for each respondent 
(contract) to process its 1,752,336.45 PDEs at a rate of 500,000 per 
hour (1,752,336.45 PDEs per contract (Row D) divided by 500,000/hr (Row 
(F)). The aggregate hours to process all 1.5 billion claims is 
therefore 2,996 hours (Row H) (3.5 hours/contract Row (G) x 856 
contracts (Row (B)).
    The average cost per contract (Row (I)) is $124.25 (3.5 hours (Row 
G) x $35.50/hr (Row E)). The aggregate one-time cost for all contracts 
is $106,358 (Row J), which can be obtained either by multiplying total 
hours (2,996 (Row (H)) by total contracts (856 (Row (B)) or by 
multiplying the cost per contract ($124.25 (Row I)) by the number of 
contracts (856 (Row B)).
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    C. Summary of Proposed Information Collection Requirements and 
Associated Burden Estimates

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[GRAPHIC] [TIFF OMITTED] TP12JA22.013

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[[Page 1935]]

D. Submission of Comments

    We have submitted a copy of this rule to OMB for its review of the 
rule's proposed information collection requirements and burden. The 
requirements are not effective until they have been approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections previously discussed, please visit CMS's 
website at https://www.cms.gov/RegulationsandGuidance/Legislation/PaperworkReductionActof1995/PRAListing.html, or call the Reports 
Clearance Office at (410) 786-1326.
    We invite public comments on the proposed information collection 
requirements and burden. If you wish to comment, please submit your 
comments electronically as specified in the DATES and ADDRESSES 
sections of this proposed rule and identify the rule (CMS-4192-P) and 
where applicable the ICR's CFR citation, CMS ID number, and OMB control 
number.

V. Regulatory Impact Statement

A. Statement of Need

    This proposed rule would revise the MA and Part D program 
regulations to improve transparency in, and oversight of, these 
programs and to revise regulations to improve the integration of 
Medicare and Medicaid programs for individuals enrolled in dual 
eligible special needs plans (D-SNPs). This proposed rule would also 
revise regulations related to MA and Part D plans, D-SNPs, other 
special needs plans, and cost contract plans. Additional proposed 
revisions would implement changes related to requirements during 
disasters or public emergencies, past performance, MLR reporting, 
pharmacy price concessions, marketing and communications, Star Ratings, 
and network adequacy.
    Through proposals that apply to D-SNPs, we intend to improve 
beneficiary experiences, by amplifying the voices of dually eligible 
individuals in health plan governance and operations by requiring an 
enrollee advisory committee and requiring assessment of certain social 
risk factors. Additionally, our proposals will improve partnership with 
States through better Federal-State collaboration on oversight and 
performance improvement activities and establishing new pathways for 
CMS and States to collaborate to integrate care for dually eligible 
individuals.
    The proposed past performance proposals hold plans more accountable 
for their performance under MA and Part D and protect the best interest 
of the Medicare program by preventing those with poor past performance 
from entering new MA or Part D applications or service area expansions. 
The proposed Star Ratings provisions allow CMS to calculate 2023 Star 
Ratings for three Healthcare Effectiveness Data and Information Set 
measures that are based on the Health Outcomes Survey; due to the 
COVID-19 PHE in place nationwide during 2020, applying the 60 percent 
rule in the current regulations would result in removal of all 
contracts from threshold calculations and CMS would be unable to 
calculate ratings for these three measures.
    Due to a rule change that took effect with CY 2018 MLR reporting, 
MA organizations and Part D sponsors only submit to CMS the MLR 
percentage and amount of any remittance that must be repaid to CMS for 
failure to meet the 85 percent minimum MLR requirement. CMS is 
proposing to change our regulations to reinstate the former requirement 
for MA organizations and Part D sponsors to submit the underlying 
information needed to calculate, and verify the accuracy of, the MLR 
and remittance amount. We believe reinstating this detailed data 
submission requirement and the desk review process will allow us to 
detect errors in the MLR calculation which can result in significant 
losses to the government.
    We are proposing to delete the existing definition of ``negotiated 
prices'' at Sec.  423.100 and to adopt a new definition for the term 
``negotiated price'' at Sec.  423.100, which we are proposing to define 
as the lowest amount a pharmacy could receive as reimbursement for a 
covered Part D drug under its contract with the Part D plan sponsor or 
the sponsor's intermediary (that is, the amount the pharmacy would 
receive net of the maximum negative adjustment that could result from 
any contingent pharmacy payment arrangement and before any additional 
contingent payment amounts, such as incentive fees). To implement the 
proposed change at the point-of-sale, Part D sponsors and their PBMs 
would load revised drug pricing tables reflecting the lowest possible 
reimbursement into their claims processing systems that interface with 
contracted pharmacies. This proposed provision would reduce out-of-
pocket prescription drug costs, improve price transparency and market 
competition under the Part D program.
    We have proposed to clarify our regulations regarding the special 
requirements for disasters and emergencies at Sec.  422.100(m) to 
address stakeholder concerns about the end of a disaster or emergencies 
and to codify previous guidance. We also proposed updates to them to 
allow smoother transitions for enrollees who during a disaster or 
emergency may have been obtaining services from out-of-network 
providers.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with significant regulatory action/s and/or with economically 
significant effects ($100 million or more in any 1 year). Based on our 
estimates, OMB's Office of Information and Regulatory Affairs has 
determined this rulemaking is ``economically significant'' as measured 
by the $100 million threshold. While the total annualized costs for 
this rule are about $3.5 million a year, as indicated in Table 20, the 
net transfers

[[Page 1936]]

from the Trust Fund to enrollees and manufacturers exceed $100 million 
annually. Accordingly, we have prepared a Regulatory Impact Analysis 
that to the best of our ability presents the costs and benefits of the 
rulemaking.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2021, that 
threshold is approximately $158 million. This rule will not mandate on 
an unfunded basis any requirements for State, local, or tribal 
governments nor would it result in expenditures by the private sector 
meeting that threshold in any 1 year.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has federalism 
implications.
    Under Executive Order 13132, this proposed rule will not 
significantly affect the States. It follows the intent and letter of 
the law and does not usurp State authority beyond what the Act 
requires. This rule describes the processes that must be undertaken by 
CMS, the States, and D-SNPs in order to implement and administer the 
requirements of the MA program. In accordance with the provisions of 
Executive Order 12866, this proposed rule was reviewed by OMB.
    If regulations impose administrative costs on reviewers, such as 
the time needed to read and interpret this proposed rule, then we 
should estimate the cost associated with regulatory review. As of 
November 2021, there are 962 contracting organizations with CMS (which 
includes MA, MA-PD, and PDP contracts). Additionally, there are 55 
state Medicaid Agencies, and 300 Medicaid MCOs. We also expect a 
variety of other organizations to review (for example, consumer 
advocacy groups, major PBMs). A reasonable maximal number is 1,500 
total entities who will review this rule. We note that other 
assumptions are possible. We assume each organization will designate 
two people to read the rule.
    Using the BLS wage information for medical and health service 
managers (code 11-9111), we estimate that the cost of reviewing this 
proposed rule is $114.24 per hour, which includes 100 percent increase 
for fringe benefits and overhead costs (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average reading speed, we estimate 
that it will take approximately 8 hours for each person to review this 
entire proposed rule. For each person that reviews this proposed rule, 
the estimated cost is therefore $900 (8 hours x $114.24). Therefore, we 
estimate that the maximum total cost of reviewing this entire proposed 
rule is $2.7 million ($900 x 1,500 entities x 2 reviewers/entity).
    We note that this analysis assumed two readers 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 expect it is more reasonable to estimate review 
time based on the number of contracting organizations because a parent 
organization might have local reviewers assessing potential region-
specific effects from this proposed rule.

C. Regulatory Flexibility Act (RFA)

    Executive Order 13272 requires that HHS thoroughly review rules to 
assess and take appropriate account of their potential impact on small 
business, small governmental jurisdictions, and small organizations (as 
mandated by the RFA). If a proposed rule may have a significant 
economic impact on a substantial number of small entities, then the 
proposed rule must discuss steps taken, including alternatives, to 
minimize burden on small entities. The RFA does not define the terms 
``significant economic impact'' or ``substantial number.'' The Small 
Business Administration (SBA) advises that this absence of statutory 
specificity allows what is ``significant'' or ``substantial'' to vary, 
depending on the problem that is to be addressed in the rulemaking, the 
rule's requirements, and the preliminary assessment of the rule's 
impact. Nevertheless, HHS typically considers a ``significant'' impact 
to be 3 to 5 percent or more of the affected entities' costs or 
revenues.
    For purposes of the RFA, we estimate that many affected payers are 
small entities as that term is used in the RFA, either by being 
nonprofit organizations or by meeting the SBA definition of a small 
business. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and small governmental 
jurisdictions. The North American Industry Classification System 
(NAICS) is used to classify businesses by industry and is used by the 
United States, Canada, and Mexico. While there is no distinction 
between small and large businesses among the NAICS categories, the SBA 
develops size standards for each NAICS category.\146\ Note that the 
most recent update to the NAICS classifications went into effect for 
the 2017 reference year. The latest size standards are for 2019.
---------------------------------------------------------------------------

    \146\ North American Industry Classification System (2017). 
Retrieved from: https://www.census.gov/eos/www/naics/2017NAICS/2017_NAICS_Manual.pdf. https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019.pdf.
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    As can be seen from the Summary of Annual Information Collection 
Requirements and Burden table (Table 11) in section IV.C. of this 
proposed rule, as well as Table 20 of this section, on average, the net 
cost to each plan to implement all provisions is significantly below 
$10,000 (The annualized cost over 10 years of $3.5 million divided by 
the number of contracts, about 1,000, is significantly below $10,000). 
Additionally, not all provisions apply to all plans. We do not believe 
this to be excessive burden even to small entities. Nevertheless, a 
more complete analysis is provided immediately below supporting the 
position that burden is not excessive.
    Although States are also affected by these provisions, States are 
not classified as small entities and in any event the burden as just 
indicated is small.
    The relevant NAICS category is Direct Health and Medical Insurance 
Carriers, NAICS 524114, with a $41.5 million threshold for ``small 
size,'' with 75 percent of insurers having under 500 employees meeting 
the definition of small business.
    MA organizations and Medicaid managed care plans have their costs 
funded by the Federal government or State and therefore there is no 
significant burden. We discuss the details of this in this section. 
This discussion will establish that there is no significant burden to a 
significant number of entities from this proposed rule for these 
provisions.
1. Medicare Advantage
    Each year, MA plans submit a bid for furnishing Part A and B 
benefits and the entire bid amount is paid by the government to the 
plan if the plan's bid is below an administratively set benchmark. If 
the plan's bid exceeds that benchmark, the beneficiary pays the 
difference in the form of a basic premium (note that a small percentage 
of plans bid above the benchmark, whereby enrollees pay a basic 
premium, thus this percentage of plans is not ``significant'' as 
defined by the RFA and as justified below).

[[Page 1937]]

    MA and MA-PD plans can also offer supplemental benefits, that is, 
benefits not covered under Original Medicare (or under Part D). These 
supplemental benefits are paid for through enrollee premiums, extra 
government payments or a combination. Under the statutory payment 
formula, if the bid submitted by a Medicare Advantage plan for 
furnishing Part A and B benefits is lower than the administratively set 
benchmark, the government pays a portion of the difference to the plan 
in the form of a ``beneficiary rebate.'' The rebate must be used to 
provide supplemental benefits (that is, benefits not covered under 
Original Medicare) and/or lower beneficiary Part B or Part D premiums. 
Some examples of these supplemental benefits include vision, dental, 
hearing, fitness and worldwide coverage of emergency and urgently 
needed services.
    To the extent that the government's payments to plans for the bid 
plus the rebate exceeds costs in Original Medicare, those additional 
payments put upward pressure on the Part B premium which is paid by all 
Medicare beneficiaries, including those in Original Medicare who do not 
have the supplemental coverage available in many MA plans.
    Part D plans, including MA-PD plans, submit bids and those amounts 
are paid to plans through a combination of Medicare funds and 
beneficiary premiums. In addition, for enrolled low-income 
beneficiaries Part D plans receive government funds to cover most of 
premium and cost sharing amounts those beneficiaries would otherwise 
pay.
    Thus, the cost of providing services by these insurers is funded by 
a variety of government funding and in some cases by enrollee premiums. 
As a result, MA and Part D plans are not expected to incur burden or 
losses since the private companies' costs are being supported by the 
government and enrolled beneficiaries. This lack of expected burden 
applies to both large and small health plans.
    Small entities that must comply with MA regulations, such as those 
in this proposed rule, are expected to include the costs of compliance 
in their bids, thus avoiding additional burden, since the cost of 
complying with any final rule is funded by payments from the government 
and, if applicable, enrollee premiums.
    For Direct Health and Medical Insurance Carriers, NAICS 524114, MA 
plans estimate their costs for the upcoming 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.
    If an MA plan bids above the benchmark, section 1854 of the Act 
requires the MA plan to charge enrollees a premium for that amount. 
Historically, only two percent of plans bid above the benchmark, and 
they contain roughly one percent of all plan enrollees. The CMS 
threshold for what constitutes a substantial number of small entities 
for purposes of the RFA is 3 to 5 percent. Since the number of plans 
bidding above the benchmark is two percent, this is not considered 
substantial for purposes of the RFA.
    The preceding analysis shows that meeting the direct cost of this 
proposed 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 Federal 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 or other 
supplemental benefits, or to lower the Part B or Part D premiums for 
enrollees. (Supplemental benefits may also partially be paid by 
enrollee premiums.) It would follow that if the provisions of this 
proposed rule cause the MA 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, or higher 
premiums for the health plans' enrollees. However as noted above, the 
number of plans bidding above the benchmark to whom this burden applies 
do not meet the RFA criteria of a significant number of plans.
    It is possible that if the provisions of this rule would otherwise 
cause bids to increase, plans will reduce their profit margins, rather 
than substantially change their benefit package. This may be in part 
due to market forces; a plan lowering supplemental benefits even for 1 
year may lose its enrollees to competing plans that offer these 
supplemental benefits. Thus, it can be advantageous to the plan to 
temporarily reduce profit margins, rather than reduce supplemental 
benefits.
2. Medicaid
    We include Medicaid in this section since it is relevant to the 
proposed change to the applicable integrated plan (AIP) definition at 
Sec.  422.561. At Sec.  422.561, we propose to expand the universe of 
D-SNPs that are required to have unified grievance and appeals 
processes by revising the definition of an applicable integrated plan. 
Section 50311(b) of the BBA of 2018 amended section 1859(f)(8)(B) of 
the Act to direct establishment of procedures, to the extent feasible, 
unifying Medicare and Medicaid grievances and appeals. The April 2019 
final rule introduced the concept of applicable integrated plans, which 
we defined as FIDE SNPs and HIDE SNPs whose Medicare and Medicaid 
enrollment is exclusively aligned (meaning State policy limits a D-
SNP's enrollment to those whose Medicare and Medicaid enrollment is 
aligned as defined in Sec.  422.2) and the companion Medicaid MCOs for 
those D-SNPs, thereby making it feasible for these plans to implement 
unified grievance and appeals processes. We believe that unified 
grievance and appeals procedures are feasible for the additional D-
SNPs. While we are not imposing new Medicaid requirements, the proposed 
AIP definition change would expand the universe of Medicaid managed 
plans subject to the unified appeals and grievances provisions codified 
in the April 2019 final rule. However, the burden imposed by this 
proposed rule on Medicaid managed care plans is the one-time 
requirement to update their grievance and appeals procedures, which as 
estimated in Table 11, is a one-time cost of $8,430. Consequently, the 
Secretary has determined that this proposed rule will not have a 
significant impact on Medicaid managed care plans.
    Therefore, the Secretary has certified that this proposed rule will 
not have a significant economic impact on a substantial number of small 
entities. Based on the above, we conclude that the requirements of the 
RFA have been met by this proposed rule.
3. Rural Hospitals
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
rule however is directed to plans and enrollees. Providers

[[Page 1938]]

including hospitals receive the contracted rate or at least the 
original Medicare rate depending on whether the providers are 
contracted or not. Consequently, the Secretary has certified that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities.

D. Anticipated Effects

1. Enrollee Participation in Plan Governance (Sec.  422.107)
    As described in section II.A.3. of this proposed rule, at Sec.  
422.107(f), we propose that any MA organization offering a D-SNP must 
establish one or more enrollee advisory committees at the State level 
or other service area level in the State to solicit direct input on 
enrollee experiences. We also propose at Sec.  422.107(f) that the 
committee include a reasonably representative sample of individuals 
enrolled in the D-SNP(s) and solicit input on, among other topics, ways 
to improve access to covered services, coordination of services, and 
health equity for underserved populations. This proposal intends to 
ensure enrollees are engaged in defining, designing, participating in, 
and assessing their care systems. Section IV.B.1. presents the 
collection of information burden for this provision.
    To support D-SNPs in establishing enrollee advisory committees that 
meet the objective of this proposed rule in achieving high-quality, 
comprehensive, and coordinated care for dually eligible individuals, 
CMS would provide technical assistance to D-SNPs to share engagement 
strategies and other best practices. CMS can leverage the body of 
technical assistance developed for MMPs. For example, the CMS 
contractor Resources for Integrated Care partnered with Community 
Catalyst, a non-profit advocacy organization, to offer a series of 
webinars and other written technical assistance to help enhance MMPs' 
operationalization of these committees.\147\ CMS will be able to 
realize efficiencies by repurposing and building on these resources. 
Based on the existing technical assistance contracts held by CMS, we 
estimate an annual cost to the federal government of $15,000.
---------------------------------------------------------------------------

    \147\ Resources for Integrated Care and Community Catalyst, 
``Member Engagement in Plan Governance Webinar Series'', 2019. 
Retrieved from: https://www.resourcesforintegratedcare.com/concepts/member_engagement.
---------------------------------------------------------------------------

2. Refining Definitions for Fully Integrated and Highly Integrated D-
SNPs (Sec.  422.2)
    We have presented a discussion of collection of information burden 
associated with this provision in section IV.B.3. of this proposed 
rule. In this section, we describe the impacts of our proposed 
definition changes of: (1) Requiring exclusively aligned enrollment for 
FIDE SNPs; (2) capitation of Medicare cost-sharing; (3) clarifying the 
scope of services covered by a FIDE or HIDE; (4) Medicaid carve-outs; 
and (5) requiring service area overlap with the corresponding Medicaid 
plan. We anticipate all proposed changes to the definition of FIDE SNP 
and HIDE SNP will result in additional time for CMS staff to review D-
SNPs' contracts with State Medicaid agencies. We estimate that a GS 
level 13, step 5 (GS-13-5), employee will take an additional 20 minutes 
per State to confirm the contract meets the updated definitions. For CY 
2022, 21 States have FIDE SNPs, HIDE SNPs, or both. Therefore, we 
estimate that the proposed rule would result in 7 hours (20 minutes x 
21 State contracts) of additional work for a GS-13-5 Federal employee. 
The 2021 hourly wage for a GS-13-5 Federal employee for the Baltimore 
Washington Area, which is close to the average hourly wage over all 
localities, is $56.31.\148\ We allow 100 percent for fringe benefits 
and overtime, increasing the hourly wage to $112.62. Thus, the expected 
additional annual cost for reviewing the contract is $788.
---------------------------------------------------------------------------

    \148\ See the locality pay tables for 2021 at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2021/general-schedule/.
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a. Exclusively Aligned Enrollment for FIDE SNPs
    Under the proposal to require exclusively aligned enrollment for 
FIDE SNPs described in section II.A.5.a. of this proposed rule, we note 
that 12 D-SNPs may lose FIDE SNP status and no longer qualify for the 
frailty adjustment described in section 1853(a) of the Act and the 
regulation at Sec.  422.308(c)(4). Of these 12 FIDE SNPs, six are 
currently receiving the frailty adjustment. We believe that these six 
FIDE SNPs are likely to have exclusively aligned enrollment by CY 2025 
as only a small fraction of their current enrollment is currently 
unaligned and there are multiple options through which MA organizations 
can meet the proposed requirement. Therefore, we do not believe the 
proposal will result in a significant reduction of Medicare payments 
from FIDE SNPs losing the frailty adjustment.
b. Capitation for Medicare Cost-Sharing for FIDE SNPs
    We do not anticipate any cost transfers from the State to FIDE SNPs 
resulting from the proposals at Sec.  422.2 to require that the 
capitated contract with the State Medicaid agency for a FIDE SNP must 
include coverage of Medicare cost-sharing (that is, payment by Medicaid 
of Medicare cost-sharing for the dually eligible individual), where 
applicable, and Medicaid behavioral health services. Currently, all 69 
FIDE SNPs include coverage of Medicare cost-sharing in their capitated 
contracts with the State Medicaid agency.\149\ As noted in section 
II.A.5.b. of this proposed rule, most FIDE SNPs already include 
Medicaid behavioral health benefits in their capitated contracts with 
the State Medicaid agency. The remaining FIDE SNPs in California and 
Pennsylvania that do not currently cover Medicaid behavioral health 
benefits would likely become HIDE SNPs under the definition proposed at 
Sec.  422.2. These impacted D-SNPs would not experience a direct impact 
on costs when becoming a HIDE SNP as benefits covered by the impacted 
D-SNP would not change. Nor would impacted D-SNPs experience a change 
to revenue, as none of the impacted D-SNPs receive the frailty 
adjustment.
---------------------------------------------------------------------------

    \149\ CMS Special Needs Plan Comprehensive Report, January 2021. 
Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Special-
Needs-Plan-SNP-
Data#:~:text=Special%20Needs%20Plan%20%28SNP%29%20Data%20%20%20,%20%2
02021-03%20%206%20more%20rows%20.
---------------------------------------------------------------------------

3. Additional Opportunities for Integration Through State Medicaid 
Agency Contracts (Sec.  422.107)
    As described in section II.A.6. of this proposed rule, we propose a 
new paragraph (e) at Sec.  422.107 to describe conditions through which 
States may require certain contract terms for D-SNPs and how CMS would 
facilitate compliance with those contract terms. This proposal allows 
States to further promote integration using the State Medicaid agency 
contract with D-SNPs, with the goal of improving beneficiary 
experiences and health plan oversight. Proposed paragraph (e)(1) 
applies only for State Medicaid agency contracts through which the 
State requires exclusively alignment enrollment, as defined in Sec.  
422.2, and establishes that States may choose to require and CMS would 
permit MA organizations--through the existing MA application process--
to establish MA contracts that only include one or more State-specific 
D-SNPs and require that all such D-SNPs use integrated member 
materials.

[[Page 1939]]

a. State Medicaid Agency Contract Requirements
    Section IV.B.4. of this proposed rule describes the total cost for 
the State to update the State Medicaid agency's contract with the D-
SNPs in its market to address the changes in this proposed rule and 
consult with CMS to ensure contract changes meet the proposed 
requirements at Sec.  422.107(e). Half of the cost ($20,618) could be 
claimed by the State as Federal financial participation for 
administrative costs of the Medicaid program, born by the Federal 
government. In addition to updating the State Medicaid agency contract, 
a State choosing to further integration through proposed Sec.  
422.107(e) would need to determine readiness and make changes to State 
policy. The State's time and cost for adopting this proposed rule would 
depend on the State's current level of integration. For example, 11 
States currently have a policy for exclusively aligned enrollment, and 
Massachusetts, New Jersey, and New York have worked with CMS to 
integrate some member materials. These States that have taken steps 
toward integration may use less time and resources to take advantage of 
the new processes proposed at Sec.  422.107(e) than States just 
beginning to integrate Medicare and Medicaid using D-SNPs. Given the 
uncertainty involved in estimating State behavior and levels of 
existing integration, we are not estimating any additional burden 
outside of updating the State Medicaid agency contract with D-SNPs. We 
request comment on what State resources are needed to use the pathway 
for requiring or achieving higher integration and collaboration with 
CMS as described in proposed Sec.  422.107(e) in a State with limited 
D-SNP integration (for example, a State with no FIDE SNPs or HIDE 
SNPs).
b. Limiting Certain MA Contracts to D-SNPs
    We propose at Sec.  422.107(e) to codify a pathway that would 
result, in certain circumstances, in contracts that only include one or 
more D-SNPs with exclusively aligned enrollment within a State. Because 
Star Ratings are reported at the contract level, having a contract with 
only the D-SNPs in a particular State would allow dually eligible 
individuals in that State to ascertain the full quality performance of 
a D-SNP and better equip States to work with their D-SNPs to improve 
health equity.
    We describe the collection of information burden for MA 
organizations resulting from establishing a D-SNP-only contract in 
section IV.B.4.b. of this proposed rule. However, the additional Part C 
and D applications necessary to create separate contracts covering only 
D-SNPs in a particular state also result in additional Federal costs. 
While the collection of information packages lay out the Federal burden 
to process Part C and D applications, they do not list out the cost per 
contract application. We estimate the additional contract submissions 
for D-SNP only contracts would at most cost an additional $50,000 in 
labor burden for the Federal government annually.
    We note impacted D-SNP contracts may have changes to their quality 
bonus payments (QBP), as the new contract's payment will initially be 
calculated from the parent organization's enrollment-weighted average 
quality rating and eventually only on the performance under the new 
contract. We are unable to predict if QBPs will increase or decrease 
for these MA organizations due to separating D-SNPs from the original 
contracts into separate contracts.
c. Integrated Member Materials
    As described in section II.A.6.b. of this proposed rule, to provide 
a more coordinated beneficiary experience, we propose at Sec.  
422.107(e) to codify a pathway by which States and CMS would 
collaborate to establish model materials when a State chooses to 
require through its State Medicaid agency contract that certain D-SNPs 
use an integrated SB, Formulary, and combined Provider and Pharmacy 
Directory. Proposed Sec.  422.107(e)(1) establishes factual 
circumstances that would commit CMS to certain actions under paragraphs 
(e)(2) and (3).
    In section IV.B.4.c. of this proposed rule, we note that we do not 
intend through this proposal to significantly change timelines for D-
SNPs to prepare materials, nor do we intend to mandate that States 
require D-SNPs to use integrated materials. We do not estimate any 
additional costs for States or plans to implement integrated member 
materials as proposed at Sec.  422.107(e) due to existing State efforts 
to work with Medicaid managed care plans to comply with information 
requirements at Sec.  438.10 and to work with D-SNPs to populate 
Medicaid benefits for Medicare member materials. Our proposal, if 
finalized, would simply assure interested States that, under the 
conditions of proposed paragraph (e), CMS would do its part to make it 
possible for D-SNPs to comply with State Medicaid agency contract terms 
for D-SNP-only contracts and integrated enrollee materials. Further, 
States already work with Medicaid managed care plans to comply with 
information requirements at Sec.  438.10 and to work with D-SNPs to 
populate Medicaid benefits for Medicare member materials. Therefore, we 
do not estimate any additional burden for States or plans to implement 
integrated member materials as proposed at Sec.  422.107(e).
    We anticipate costs to CMS will be similar to past work done to 
collaborate with States to improve the integration and effectiveness of 
beneficiary materials. To test materials, we conducted individual 
interviews with dually eligible individuals and desk reviews by 
contractors, CMS subject matter experts, and advocacy organizations. 
Since 2015, we have tested an integrated EOC, ANOC, SB, Formulary, and 
combined Provider and Pharmacy Directory.
    We estimate that each of the model documents under proposed Sec.  
422.107(e)--the SB, Formulary, and combined Provider and Pharmacy 
Directory--will require 40 hours of work from CMS staff (a GS-13-5 
Federal employee) working at $112.62/hr. The projected cost to the 
Federal government for 120 hours (40 hours x 3 documents) of a GS-13-5 
employee is $13,500.
    In our experience, a desk review from a contractor is approximately 
$10,000 per document and a study of the documents consisting of dually 
eligible individuals interviews costs $25,000 per document. Therefore, 
we anticipate the contractor costs for integrated member materials to 
be $105,000 ($10,000 x 3 documents + $25,000 x 3 documents). Therefore, 
the total cost to the Federal Government of our proposal on integrating 
member materials is $118,500.
d. Joint State/CMS Oversight
    In section II.A.6.c. of this proposed rule, we discuss our 
proposals at Sec.  422.107(e)(3) to better coordinate State and CMS 
monitoring and oversight of D-SNPs that operate under the conditions 
described at proposed paragraph (e)(1). These coordination mechanisms 
include sharing relevant plan information, coordinating program audits, 
and consulting on network exception requests. We cannot estimate the 
cost of uncoordinated State and federal oversight, but we believe this 
provision would result in a reduction in administrative burden for D-
SNPs. States will have the ability to determine what level of resources 
is needed for their related work, and we believe States likely to elect 
to use the pathway described in proposed Sec.  422.107(e) would already 
have resources invested in coordinating care between MCOs and

[[Page 1940]]

D-SNPs and would otherwise make choices that avoid significant 
increases in State burden.
    At paragraph (e)(3)(i), we propose that CMS would grant State 
access to HPMS, or any successor system, to facilitate monitoring and 
oversight for a D-SNP with exclusively aligned enrollment in an MA 
contract that only includes one or more D-SNPs operating within the 
State. Our proposal would require the State officials and employees 
accessing HPMS to comply with applicable laws and CMS policies and 
standards for access to that system, including keeping information 
confidential and maintaining system security. This access would allow 
State users the ability to directly view D-SNP information without 
requiring or asking the D-SNP to send the information to the States and 
would facilitate State-CMS communication on D-SNP performance since 
more people are able to review the data and information. MA 
organizations may benefit when it reduces the need for States to 
separately obtain the same information that is already available in 
HPMS.
    Providing this HPMS access to State users would require HPMS 
contractors to update several modules, including user access and coding 
changes needed to implement the necessary access. HPMS contractors 
estimated that there would be a one-time update costing approximately 
$750,000.
4. Attainment of the Maximum Out-of-Pocket (MOOP) Limit (Sec. Sec.  
422.100 and 422.101)
    As described in section II.A.12. of this proposed rule, CMS 
proposes a revision to which costs are tracked and accumulate toward 
the MOOP limit for dually eligible enrollees in MA plans under Sec.  
422.101 for MA regional plans and Sec.  422.100(f)(4) and (5) for all 
other MA plans. Our proposal would result in MA organizations that, 
under current policy, rarely or never pay cost-sharing above the MOOP 
limit for dually eligible enrollees being held responsible for payment 
of cost-sharing amounts above the MOOP limit. As a result, our proposal 
may lead to an increase in the plan bids relative to the benchmark for 
dually eligible individuals who would receive the same cost-sharing 
protection provided by the MOOP that is now afforded non-dually 
eligible individuals. However, in the short term, as we note above, MA 
organizations may prefer to reduce their profit margins, rather than 
substantially raise their bids and thereby reduce the rebate dollars 
available for supplemental benefits.
    Specifically, CMS proposes that all cost-sharing for Medicare Parts 
A and B services accrued under the plan benefit package, including 
cost-sharing paid by any applicable secondary or supplemental insurance 
(such as through Medicaid, employer(s), and commercial insurance) and 
any cost-sharing that remains unpaid because of limits on Medicaid 
liability for Medicare cost-sharing under the lesser-of policy and the 
cost-sharing protections afforded certain dually eligible individuals, 
is counted towards the MOOP limit. This would ensure that once an 
enrollee, including a dually eligible individual with cost-sharing 
protections, has accrued cost-sharing (deductibles, coinsurance, or 
copays) that reaches the MOOP limit, the MA plan must pay 100 percent 
of the cost of covered Medicare Part A and Part B services. As a 
result, the State Medicaid agency would no longer be responsible for 
any Medicare cost-sharing for the remainder of the year. In addition, 
providers serving dually eligible MA enrollees with Medicare cost-
sharing above the MOOP limit would be fully reimbursed for this cost-
sharing for the remainder of the year. Now, some of that cost-sharing 
is unpaid because of limits on State payment of Medicare cost-sharing 
and prohibitions on collection of Medicare-cost sharing from certain 
dually eligible beneficiaries. We believe this proposed change to the 
cost-sharing that MA organizations must use to determine when the MOOP 
limit has been reached will mitigate existing provider payment 
disincentives related to serving dually eligible MA enrollees. As a 
result, the proposal may improve access to providers, including 
specialists, who currently limit the number of dually eligible MA 
enrollees they serve or decline to contract with D-SNPs. However, we 
are unable to quantify the extent to which any improved access would 
affect utilization of services by dually eligible MA enrollees and 
thereby affect Medicare spending.
    Our proposal would increase the amount of MA organization payments 
to providers serving dually eligible individuals enrolled in MA plans 
after the MOOP limit is reached. As a result, our proposal may lead to 
an increase in the plan bids relative to the benchmark for dually 
eligible individuals who would receive the same cost-sharing protection 
provided by the MOOP that is now afforded non-dually eligible 
individuals.
    To estimate the costs of the proposal, we started with CY2022 bid 
data to estimate the Medicare cost-sharing accrued by dually eligible 
beneficiaries with cost-sharing protections (full benefit dually 
eligible individuals and QMB enrollees) above the mandatory MOOP level 
($7,550 in 2022). We estimated the cost of Medicare cost-sharing above 
this MOOP level to be on average $22.99 per person per month. Then we 
multiplied this amount by 41 percent to reflect the portion of dually 
eligible enrollees in MA organizations that already accrue cost sharing 
towards the MOOP level to arrive at $9.43 as the additional per person 
per month bid cost. Based on projected MA enrollment of dually eligible 
beneficiaries and other factors described in this section, this 
proposal would result in additional payments from MA organizations to 
health care providers serving high cost dually eligible MA enrollees, 
represented in the annual MA bid costs shown in column 2 of Table 12.
    Only a portion of the projected higher MA organization bids for 
MOOP benefits represent higher costs to Medicare. MA rebates are 
calculated as an average of 68 percent of the difference between the 
bids and benchmarks. The additional cost to the Medicare Trust Funds is 
estimated to be the remaining 32 percent increase in bids. After 
reflecting the change in rebates, the per member per month cost to 
Medicare of the proposed policy is 32 percent of $9.43, or $3.
    To project annual costs, we used projected enrollment by dually 
eligible beneficiaries in MA plans, as well as Trustee's Report USPCC 
cost and utilization trends. We also projected annual increases in the 
mandatory MOOP amounts under current regulations. The cost to Medicare 
based on our proposed changes would be partly offset by the savings to 
Medicaid for payment of Medicare cost-sharing over the MOOP limit for 
dually eligible individuals. While some State Medicaid agencies may 
save as much as the projected increase in bid costs per dually eligible 
MA enrollee in their State, the savings from this proposal will likely 
be less for most States. The majority of States have a ``lesser-of'' 
policy, under which the State caps its payment of Medicare cost-sharing 
so that the sum of Medicare payment and cost-sharing does not exceed 
the Medicaid rate for a particular service. We estimate that, based on 
average differences in State Medicaid and Medicare provider contracted 
rates, 39 percent of the costs of MOOP coverage under our proposal 
represents Medicaid savings. Of those savings, 57 percent accrue to the 
Federal government based on the average FMAP rate of 57 percent. Those 
annual savings are shown in column 4 of Table 12.
    Finally, 25 percent of the additional Medicare costs that represent 
Part B

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costs (Part B accounts for 60 percent of the costs of Parts A and B 
benefits provided by Medicare Advantage organizations) are offset by 
beneficiary premiums for Part B, as shown in column 6 of Table 12. The 
total Federal costs of the proposal, net of Federal Medicaid savings 
and the Part B premium offset are shown in column 7 of Table 12.
    We note that there is uncertainty inherent in this analysis. In 
using the bid data, we made some assumptions about the extent to which 
MA organizations are already counting all cost-sharing in the plan 
benefit, including amounts paid by Medicaid programs, towards the MOOP 
limit. In addition, MA organizations may prefer to reduce their gain/
loss margins, rather than substantially change their benefit package, 
when rebates are reduced in the short term. However, our estimate of 
the added bid benefit costs does not assume that MA organizations will 
absorb any portion of these costs by reducing their gain/loss margins.
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    No additional goods or services are being created. Rather, the 
money that States would pay or that would remain unpaid for Parts A and 
B services is now being paid by the plans and hence by the Trust Fund. 
Hence these amounts are considered transfers from the Trust Fund to the 
States.
5. Special Requirements During a Disaster or Emergency (Sec.  
422.100(m))
    We are not scoring the proposed revisions to Sec.  422.100(m) 
Special Requirements during a Disaster or Emergency. As stated in the 
February 12, 2015 final rule (80 FR 7953), we recognize that disasters 
can create unavoidable disruptions and increased costs for MA 
organizations. Our primary goal during a disaster is the provision of 
continued and uninterrupted access to medically necessary plan-covered 
services for all enrollees. Our intention is to facilitate achievement 
of this goal by ensuring that plans facilitate increased access to 
providers from whom enrollees in the disaster area may seek high 
quality services at in-network cost-sharing. We do not believe that 
these temporary and unusual episodes of increased access will 
incentivize enrollees in a negative way or result in significant cost 
increases for affected MA organizations. We believe this is still 
relevant as most of our proposed revisions clarify our current policy. 
More detailed arguments for not scoring are presented below after a 
discussion of the proposal.
    Our proposed amendments to Sec.  422.100(m) include codifying our

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current practice of imposing the special requirements at Sec.  
422.100(m)(1) on MA organizations only when there is a disruption of 
access to health care as stated in the preamble to the February 12, 
2015 final rule (80 FR 7953) and in our responses to inquiries. We 
receive many questions and inquiries during a disaster or emergency so 
we believe this has been fully complied with; because we are clarifying 
through notice and comment rulemaking, these clarifications may result 
in enhanced compliance with this requirement and may contribute to 
reduced costs. Consequently, we do not believe the disruption of access 
proposal has an impact because it is already complied with.
    We also proposed adding a transition period of 30 days between a 
disaster or emergency ending and the end of the special requirements to 
Sec.  422.100(m)(3). We do not believe these provisions would create 
impact. Some MA organizations may already allow flexibilities to 
enrollees following a disaster or emergency, such as a transition 
period to allow additional time for enrollees to return to in-network 
providers. Additionally, many plans have experience with disasters or 
other changes in cost that arise annually. The nature of the business 
cycle shows that plans may experience losses due to disasters or 
emergencies in certain years, which may be offset with profits in the 
following years. Although the cost burden for a longer disaster or 
emergency is different than that for a shorter disaster, our recent 
experience with the COVID-19 PHE shows that CMS is aware of this cost 
burden and as each specific situation develops, is responding with 
certain flexibilities.
    For these reasons, we are not further scoring the special 
requirements during a disaster or emergency provision.
6. Provisions Relating to Past Performance (Sec. Sec.  422.504 and 
423.505)
    We propose to update the past performance measures at 42 CFR 
422.504 and 423.505 in order to better ensure CMS' capacity to limit 
new applications and applications for service area expansions by low 
performers when these new plans and/or service area expansions would 
not be in the best interest of the Medicare program.
     To perform the calculations, we estimate--
    ++ 2 staff at the GS 13-5 level working at $112.62/hr would have to 
perform a total of 24 hours of work (12 hours for each staff); and
    ++ 2 staff at the GS 14-9 level working at $148.74/hr would have to 
perform 10 hours of work.
     To notify plans, we estimate that 1 staff at the GS-13-5 
level working at $112.62/hr will have to perform 3 hours of work.
    The aggregate annual cost to the government is therefore $4,528.
7. Proposed Revisions to the Medical Loss Ratio Reporting Requirements 
(Sec. Sec.  422.2460 and 423.2460)
    Our proposal to reinstate the detailed MLR reporting requirements 
in effect for CYs 2014 through 2017, and to require separate reporting 
of amounts spent on supplemental benefits, would impose additional 
costs on the Federal Government.
    The paperwork burden associated with these provisions, $2.3 
million, is estimated in section IV.B.12. of this proposed rule, and is 
included in the summary table below. There is also additional 
anticipated impact to the Federal Government. Most of the impact will 
arise from projections of future increases or decreases in MLR 
remittances, which are amounts that were originally paid from CMS to MA 
organizations or Part D sponsors, which they have to return to CMS 
(although the remittances go to the Treasury General Fund and not the 
Medicare Trust Funds from which they originated).
    If our proposal to reinstate and add to the detailed MLR reporting 
requirements is finalized, we will pay a contractor to perform desk 
reviews and analyses of the reported data in order to identify 
omissions or suspected inaccuracies and to communicate its findings to 
MA organizations and Part D sponsors in order to resolve potential 
compliance issues. In the Regulatory Impact Analysis for the April 2018 
final rule in which we eliminated the detailed MLR reporting 
requirements, we assumed that by significantly reducing the amount of 
MLR data that MA organizations and Part D sponsors would be required to 
report to CMS annually starting with CY 2018, we had also eliminated 
the need for CMS to continue paying a contractor approximately $390,000 
each year in connection with desk reviews of the detailed MLR reports. 
However, the April 2018 final rule indicated that the entire amount we 
paid to our desk review contractor would no longer be necessary once we 
stopped collecting detailed MLR data on an annual basis. This has not 
been the case, as in the years since we scaled back the reporting 
requirements, we have continued to find value in having our contractor 
perform MLR-related administrative tasks. Prior to CY 2018, the funding 
for these administrative tasks was included in the $390,000 figure that 
the April 2018 final rule identified as representing payment for desk 
reviews only. These administrative tasks include sending reminders to 
MA organizations and Part D Sponsors to submit their MLR data and 
attestations by the applicable deadlines, following up with MA 
organizations and Part D sponsors about their questions regarding their 
MLR submissions, and triaging communications to CMS so that matters 
requiring additional input from us are brought to our attention timely. 
CMS currently pays the contractor approximately $230,000 per year to 
perform these services.
    We anticipate that, if the proposed detailed MLR reporting 
requirements are finalized and CMS resumes conducting desk reviews of 
the detailed MLR data, we will increase the amount that we pay our 
contractor for desk reviews and MLR-related administrative services so 
that the total payment amount is approximately equal to the total 
amount we paid to our contractor for those services prior to the 
elimination of the detailed MLR reporting requirements (that is, 
$390,000). In other words, we expect that we will need to pay our 
contractor an additional $160,000 per year to perform MLR desk reviews 
of the detailed MLR data that CMS is proposing to require MA 
organizations and Part D sponsors to submit to us on an annual basis, 
starting with CY 2023.
    In addition, CMS currently pays a contractor $300,000 each year for 
software development, data management, and technical support related to 
MLR reporting. The Regulatory Impact Analysis for the April 2018 final 
rule estimated that we would be able to reduce this amount by $100,000 
because we would no longer need to maintain and update the MLR 
reporting software with validation features, to receive certain data 
extract files, or to provide support for desk review functionality. 
However, contrary to our expectations, since CY 2018, CMS has continued 
to require technical support related to submission of the MLR Data 
Forms, such that, even without requiring significant updates to the MLR 
reporting software, we have continued to pay a contractor $300,000 for 
data management and technical support services. We anticipate that we 
will continue to pay this amount for software development, data 
management, and technical support related to MLR reporting if the 
proposed changes to the MLR reporting requirements are finalized.
    Table 14 presents expected additional payments (transfers) from MA

[[Page 1943]]

organizations and Part D sponsors to the Treasury arising because they 
are projected to pay more in MLR remittances to the Treasury. These 
additional payments are transfers since no goods or services are being 
created. The impact to the Medicare Trust Funds is $0.
    Based on internal CMS data, the raw average of total remittances 
for CYs 2014-2019 is $153 million. As discussed in section II.G.2. of 
this proposed rule, when CMS collected detailed MLR data pursuant to 
the reporting requirements that were in effect for CYs 2014-2017, the 
desk review contractor frequently detected potential errors or 
omissions in the reported data, which were brought to the attention of 
the MA organization or Part D sponsor that submitted the data, with a 
request to explain or correct the data. This process often resulted in 
the MA organization or Part D sponsor finding it necessary to resubmit 
the contract's MLR Report after revising the figures in the Report or 
attaching supplementary materials to explain details of its expense 
allocation methodology. A summary of the MLR remittances for the 
initial MLR submission versus the final MLR submission for CYs 2014-
2017 can be found in the table below. These 4 years represent the time 
period when detailed MLR data was submitted to CMS and subjected to 
desk reviews.
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    The percent change in MLR remittances increased on average 6.7 
percent between the initial and final MLR submissions during the MLR 
desk review periods for CYs 2014-2017. We anticipate that, if 
finalized, the proposed amendments to Sec. Sec.  422.2460 and 423.2460 
would increase future remittance amounts by an average of 6.7 percent 
due to CMS receiving detailed MLR data and conducting desk reviews of 
the detailed MLR data.
    To estimate the amount of additional remittances under the proposed 
regulations, we evaluated the MLR for those contracts that failed to 
meet the 85 percent minimum MLR requirement for CYs 2016-2019. The MLR 
remittances for CYs 2014 and 2015 were much lower than those for the 
more recent years and so these older years were excluded from the base 
period that is used to project future remittances. For CYs 2016 and 
2017, we examined the MLR prior to desk reviews, or in the Initial MLR 
Submission. For CYs 2018 and 2019, when there were not desk reviews of 
detailed MLR data, we examined the finalized total MLR remittances. The 
average remittances for these years (CYs 2016 and 2017 prior to desk 
reviews and CYs 2018 and 2019) equaled $204.0 million. In order to 
project the increase in remittances for CYs 2023-2032, the $204.0 
million was inflated using estimated enrollment and per capita 
increases based on Tables IV.C1. and IV.C3. of the 2021 Medicare 
Trustees Report, with ordinary inflation (Table II.D1. of the 2021 
Medicare Trustees Report) carved out of the estimates. We continued to 
assume that remittance amounts would increase by 6.7 percent for the 
entire projection period due to the restatement of desk reviews of 
detailed MLR data, after the application of enrollment and per capita 
increases.
    Table 14 is based on data from the Office of the Actuary, some of 
which may be found in the annual Trustees Report. The calculations 
started with a $13.7 million additional cost to MA organizations and 
Part D sponsors in CY 2019 (This amount is not shown in the table which 
is a 10 year table starting from CY 2023). The cost in each successive 
contract year is obtained by adding the MA enrollment increases 
expressed as a percentage in column (2), then adding the average annual 
per capita increase in expenditures, expressed as a percentage in 
column (3), and then dividing by ordinary inflation expressed as a 
percentage column (4). The calculations can be illustrated starting 
with the CY 2023 net cost ($20.3 million) and deriving the $21.5 
million CY 2024 cost. We have $20.3 million *(1 + 3.8%) * (1 + 4.8%)/(1 
+ 2.5%) = $21.5 million.

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8. Pharmacy Price Concessions in the Part D Negotiated Price (42 CFR 
423.100)
    As discussed in section II.H.3. of this proposed rule, at Sec.  
423.100, we propose to adopt a new definition of ``negotiated price'' 
to include all pharmacy price concessions received by the plan sponsor 
for a covered Part D drug, and to reflect the lowest possible 
reimbursement a network pharmacy will receive, in total, for a 
particular drug. As part of this proposal, we first propose to delete 
the current definition of ``negotiated prices'' (in the plural) and add 
a definition of ``negotiated price'' (in the singular) to make clear 
that a negotiated price can be set for each covered Part D drug, and 
the amount of the pharmacy price concessions may differ on a drug by 
drug basis. Then, we propose a definition of ``negotiated price'' that 
is intended to ensure that the prices available to Part D enrollees at 
the point of sale are inclusive of all pharmacy price concessions. The 
proposed requirement to apply pharmacy price concessions to the 
negotiated price at the point-of-sale would apply in all phases of the 
Part D benefit except with respect to applicable drugs dispensed to 
applicable beneficiaries in the coverage gap.
    Plan sponsors may attempt to mitigate the effects from this change 
by modifying their benefits, such as making more frequent use of copay 
structures rather than coinsurance. There are limits to how much this 
can change, however, given that they must maintain actuarial 
equivalence to the defined standard design, where lower prices would 
result in lower cost sharing.
    The proposal would have several impacts on prescription drug costs 
for government, beneficiaries, Part D sponsors, and manufacturers. 
Tables 15 and 16 summarize these impacts, which are discussed in more 
detail in the narrative that follows. We note that this proposal would 
also have one-time administrative costs for Part D sponsors. This cost 
is discussed in the Collection of Information section of this proposed 
rule.
a. Impact on Prescription Drug Costs for Government, Beneficiaries, 
Part D Sponsors, and Manufacturers
    Table 16 summarizes the 10-year impacts we have modeled for 
requiring that sponsors apply all pharmacy price concessions to the 
negotiated price in all phases of the Part D benefit except for 
applicable drugs in the coverage gap. We estimate a modest potential 
indirect effect on pharmacy payment as a result of pharmacies' 
independent business decisions. Specifically, our estimates assume that 
pharmacies will seek to retain 2 percent of the existing pharmacy price 
concessions they negotiate with plan sponsors and other third parties 
to compensate for pricing risk and differences in cash flow and we 
assume that these business decisions will result in a slight increase 
in pharmacy payments of 0.1-0.2 percent of Part D gross drug cost. We 
solicit comment on the potential indirect impact estimates of the 
pharmacy price concessions provision included in this rule. Table 16 
reflects 10-year row sums of Table 15. For example, the second row of 
Table 15 lists a $33.1 billion savings to beneficiaries. The row header 
references row (I) of Table 15. The sum of the numbers in row (I) of 
Table K4 is $33.1 (1.7+1.9 . . . +5.7 = 33.1). Throughout this 
narrative, quantitative aspects of the discussion may be found in the 
corresponding labeled rows of Table 16.
    Under this proposal, we anticipate that beneficiaries would see 
lower prices at the pharmacy point-of-sale and on Plan Finder for most 
drugs, beginning immediately in the year the proposed change would take 
effect (2023). (This is summarized in Table 16 in the row ``Beneficiary 
Costs'' which reflects a sum of the rows ``Cost sharing'' and 
``Premiums.'' Lower point-of-sale prices would result directly in lower 
cost-sharing costs for non-low-income beneficiaries, and on average we 
expect these cost-sharing decreases

[[Page 1945]]

would exceed the premium increases. While the amounts will vary 
depending on an individual beneficiary's prescriptions, plan sponsor 
benefits, and contractual arrangements, we expect more than half of the 
non-low-income, non-employer group beneficiaries to see lower total 
costs, inclusive of cost-sharing decreases and premium increases. For 
example, a beneficiary who takes no medications will probably see a 
premium increase and no cost-sharing decreases, whereas a beneficiary 
who takes several medications each month is likely to see cost-sharing 
decreases that are greater than the premium increase. For low-income 
beneficiaries, whose out-of-pocket costs are funded through Medicare's 
low-income cost-sharing payments, cost-sharing savings resulting from 
lower point-of-sale prices would accrue to the government.) Plan 
premiums would likely increase as a result of the proposed change to 
the definition of negotiated price--if pharmacy price concessions are 
required to be passed through to beneficiaries at the point of sale as 
proposed, fewer such concessions could be apportioned to reduce plan 
liability in the bid, which would have the effect of increasing the 
cost of coverage under the plan. At the same time, the reduction in 
cost-sharing obligations for the average beneficiary would be large 
enough to lower their overall out-of-pocket costs. The increasing cost 
of coverage under Part D plans as a result of pharmacy price 
concessions being applied at the point of sale as proposed would likely 
have a more significant impact on Government costs, which would 
increase overall due to the significant growth in Medicare's direct 
funding of plan premiums and low-income premium payments.
    Partially offsetting the increase in direct funding and low-income 
premium payment costs for the government would be decreases in 
Medicare's reinsurance and low-income cost-sharing payments. Decreases 
in Medicare's reinsurance payments result when lower negotiated prices 
slow down the progression of beneficiaries through the Part D benefit 
and into the catastrophic phase, and when the Government's 80 percent 
reinsurance payments for allowable drug costs incurred in the 
catastrophic phase are based on lower negotiated prices. Similarly, 
low-income cost-sharing payments would decrease if beneficiary cost-
sharing obligations decline due to the reduction in prices at the point 
of sale. Finally, the slower progression of beneficiaries through the 
Part D benefit would also have the effect of reducing aggregate 
manufacturer gap discount payments as fewer beneficiaries would enter 
the coverage gap phase or progress entirely through it.
    These impacts assume that the proposed definition of ``negotiated 
price'' would apply for all Part D drugs in all phases of the Part D 
benefit, except for applicable drugs in the coverage gap. While this 
exclusion would increase the complexity of the point-of-sale 
transaction, pharmacies and PBMs have experience with similar elements 
of the program today, such as accounting for the coverage gap discount 
program. Given the significance of these amounts to overall premiums 
and their competitive position, we expect that pharmacy price 
concessions after the point of sale will remain in place during the 
coverage gap. The alternative section demonstrates how requiring the 
price concessions in the coverage gap could lead to larger premium 
increases, which would not be desirable for plan sponsors.
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E. Alternative Analysis

    The major drivers of cost and transfers in this rule include the 
MLR and Part D pharmacy price concessions provisions. The aggregate 
impact of each of these over 10 years exceeds $100 million. Alternative 
analysis is provided below for these provisions.
1. Proposed Alternatives Related to the Medical Loss Ratio Reporting 
Requirements (42 CFR 422.2460, 423.2460)
    As an alternative to our proposal to reinstate and add to the 
detailed MLR reporting requirements in effect for CYs 2014-2017, we 
considered continuing to collect minimal MLR data, as required under 
current Sec. Sec.  422.2460 and 423.2460, and to use our authority 
under Sec. Sec.  422.2480 and 423.2480 to require that entities 
selected for MLR audits provide us with more detailed MLR data, and 
with any underlying records that can be used to substantiate amounts 
included in the calculation of each contract's MLR and the amount of 
any remittance owed to CMS. In addition to their primary function as a 
mechanism for obtaining information that can be used to validate 
audited MA organizations' and Part D sponsors' compliance with the 
applicable requirements for calculating and reporting MLR information 
to CMS, we believe that audits are in general well-suited for examining 
matters such as where and how calculation errors occur, and identifying 
areas where we might be able to reduce the incidence of errors through 
revisions to our regulations and guidance. By contrast, desk reviews of 
detailed MLR data are more useful for quickly reviewing large amounts 
of data in order to identify possible errors or omissions that might 
affect the MLR calculation, and for identifying market-wide trends in 
how MA organizations and Part D sponsors might be adjusting their 
expenditures in response to rule or policy changes that affect how MLRs 
are calculated. Given CMS' interest in better understanding how MA 
organizations and Part D sponsors' are calculating their MLRs in 
general, and in flagging areas where calculation errors might be 
impacting the MLR calculation so that they can be addressed promptly, 
we decided that our goals would be better served if we were to require 
MA organizations and Part D sponsors to report detailed MLR data to us 
directly, and to subject that data to desk reviews, rather than to 
attempt to collect the same or similar MLR data using our audit 
authority.
    An additional reason we chose at this time not to rely solely on 
MLR audits to identify errors in MA organizations' and Part D sponsors' 
MLR submissions is that we believe this approach would result in a 
greater burden for the Federal government and cumulatively across all 
MA organizations and Part D sponsors than would the proposed 
reinstatement of the detailed MLR reporting requirements. We note that, 
in the April 2018 final rule, CMS indicated that we did not believe 
that eliminating the detailed MLR reporting requirements would weaken 
MLR compliance oversight, and in connection with this we noted that had 
not changed our authority under Sec.  422.2480 or Sec.  423.2480 to 
conduct selected audit reviews of the data reported under Sec. Sec.  
422.2460 and 423.2460 for purposes of determining that remittance 
amounts under Sec. Sec.  422.2410(b) and 423.2410(b) and sanctions 
under Sec. Sec.  422.2410(c) and (d) and 423.2410(c) and (d) were 
accurately calculated, reported, and applied (73 FR 16675). However, in 
that rule, we did not account for the increased cost to CMS, or the 
additional cumulative burden across all MA organization and Part D 
sponsors, if we were to scale up our MLR audit operations to a 
sufficient degree to perform effective compliance oversight in the 
absence of detailed MLR reporting requirements.
    Based on CMS' historical costs in auditing MLRs, we estimate that 
individual audits would cost the government approximately $71,000 per 
audit. We anticipate that, in order to effectively monitor MLR 
compliance using audits, we would need to audit one-third of MA and 
Part D contracts, or an average of 194 contracts per year, at a cost of 
approximately $13.8 million per year. By contrast, we estimate that the 
proposed reinstatement of the detailed MLR reporting requirements would 
result in a relatively small increase in burden for MA organizations 
and Part D sponsors, as we expect that they would already need to be 
tracking most of the information included in the

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detailed MLR Report template in order to calculate their MLRs in 
accordance with current requirements.
2. Proposed Alternatives Related to Pharmacy Price Concessions in the 
Part D Negotiated Price (Sec.  423.100)
    As discussed in section II.H.3. of this proposed rule, we propose 
to adopt a new definition of ``negotiated price'' to include all 
pharmacy price concessions received by the plan sponsor for a covered 
Part D drug, and to reflect the lowest possible reimbursement a network 
pharmacy will receive, in total, for a particular drug.
    In the analysis provided in section IV.D.8. of this proposed rule, 
we estimate the impact of our proposal to require application of 
pharmacy price concessions to the negotiated price at the point-of-sale 
in all phases of the Part D benefit except with respect to applicable 
drugs in the coverage gap. In this alternative analysis, we consider 
the added impact of requiring application of pharmacy price concessions 
to the negotiated price of applicable drugs in the coverage gap also.
    Table 17 shows the increased savings to enrollees. Ten-year total 
savings to enrollees increase 37 percent from $21.3 billion as 
indicated in Table 16 to $29.1 billion. As explained in the previous 
narratives, the total savings to enrollees accounts for both cost-
sharing savings and expected premium increases.
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    Table 18 shows increased savings to pharmaceutical manufacturers if 
pharmacy price concessions are applied to applicable drugs in the 
coverage gap. As can be seen, savings to manufacturers increase by 23 
percent since as presented in Table 16, the savings are $14.6 billion 
without application in the coverage gap while with application to 
applicable drugs in the coverage gap the savings are $17.9 billion.
[GRAPHIC] [TIFF OMITTED] TP12JA22.020

    Table 19 shows the impact to the Government. The Federal 
expenditures increase 27 percent, from the $40.0 billion presented in 
Table 16 without application in the coverage gap, to $50.7 billion if 
the pharmacy price concessions are applied to the point-of-sale price 
of applicable drugs in the coverage gap. As explained in the narrative 
of section IV.D.8. of this proposed rule, the total Government cost 
reflects four separate components including direct payments, 
reinsurance, low income cost-sharing payments, and low-income premium 
payments. We note, that this $50.7 billion is a transfer. More 
specifically, the identical Rx that was formerly paid for by enrollees 
is now being paid for by the Government.
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F. Accounting Statement and Table

    In accordance with OMB Circular A-4, Table 20 depicts an accounting 
statement summarizing the assessment of the benefits, costs, and 
transfers associated with this regulatory action.
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    Table 20 is based on the summary of costs presented in Tables 21 
and 22. Tables 21 and 22 reflect all costs in both the COI and RIA 
sections. This summary table allocates impact by year and by whether it 
is a cost or transfer (no provisions of this rule have a savings 
impact). In all tables, costs are expressed as positive amounts.
    However, in the transfer row negative numbers correspond to 
payments by the government (which in the provisions of this rule may 
come from the Treasury or Medicare Trust Fund) while positive numbers 
indicate savings. There are 5 transfers in this rule: The MOOP 
provision is a cost to the Medicare Trust Fund (TF) (the corresponding 
gain to States and providers of duals in equal amounts is not shown in 
Tables 21 and 22). The MLR provision is a savings to the Treasury (the 
corresponding loss in equal amount to the plans is not shown in the 
Tables 21 and 22). The pharmacy price concessions provision incurs a 
cost to the Medicare Trust Fund, and savings to enrollees and 
manufacturers. However, there is a small difference between what the 
Trust Fund pays and what beneficiaries and manufacturers gain. The 
difference is due to the assumption that pharmacies will seek to retain 
a small portion of the current DIR to compensate for differences in 
cash flow and pricing risk. Therefore, Tables 21 and 22 list separately 
the impacts on the Trust Fund, the enrollees, and the manufacturers. 
However, the row ``Total transfers from the Trust Fund'' only reflects 
the sum of the Trust Fund payments for the pharmacy price concessions 
provision and the MOOP provision (it does not offset this amount by the 
savings to enrollees and manufacturers) Similarly, Table 20 reflects 
annualized transfers to the Treasury and annualized transfers from the 
Trust Fund for the MOOP and pharmacy price concessions provision but 
these annualized amounts do not reflect the savings to enrollees and 
manufacturers. Thus, complete detailed amounts on all provisions may be 
found in Tables 21 and 22.

[[Page 1950]]

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[[Page 1951]]


[GRAPHIC] [TIFF OMITTED] TP12JA22.024

BILLING CODE 4120-01-C

[[Page 1952]]

F. Conclusion

    The previous analysis, together with the preceding preamble, 
provides an RIA. This rule at an annual cost of $ 3.5 million, during 
the first 10 years after implementation, provides efficiencies and 
improves marketing and communications, past performance measures, Star 
Ratings, network adequacy, medical loss ratio reporting, requirements 
during disasters or public emergencies, D-SNP program, MOOP, as well as 
cost-efficiencies to enrollees for prescription drugs. Additionally, 
there are a variety of transfers to and from the Federal Government 
(the Medicare Trust Fund and the United States Treasury) which in 
aggregate will increase dollar spending by $3.8 to $3.9 billion 
annually. We estimate that this rule generates $2.4 million in 
annualized costs, discounted at 7 percent relative to year 2016, over 
an infinite time horizon.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

VI. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on December 14, 2021.

List of Subjects

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 proposes to amends 42 CFR chapter IV as set forth 
below:

PART 422--MEDICARE ADVANTAGE PROGRAM

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

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

0
2. Section 422.2 is amended by--
0
a. In the definition of ``Fully integrated dual eligible special needs 
plan'':
0
i. Revising paragraphs (2) and (3);
0
ii. Removing the period at the end of paragraph (4) and adding a 
semicolon in its place; and
0
iii. Adding paragraphs (5) and (6); and
0
b. Revising the definition of ``Highly integrated dual eligible special 
needs plan''.
    The revisions and additions read as follows:


Sec.  422.2   Definitions.

* * * * *
    Fully integrated dual eligible special needs plan * * *
    (2) Whose capitated contract with the State Medicaid agency 
requires coverage of the following benefits, to the extent Medicaid 
coverage of such benefits is available to individuals eligible to 
enroll in a fully integrated dual eligible special needs plan (FIDE 
SNP) in the State, except as approved by CMS under Sec.  422.107(g) and 
(h):
    (i) Primary care and acute care, including Medicare cost-sharing as 
defined in section 1905(p)(3)(B), (C), and (D) of the Act, without 
regard to the limitation of that definition to qualified Medicare 
beneficiaries.
    (ii) Long-term services and supports, including coverage of nursing 
facility services for a period of at least 180 days during the plan 
year.
    (iii) For plan year 2025 and subsequent years, behavioral health 
services.
    (iv) For plan year 2025 and subsequent years, home health services 
as defined in Sec.  440.70.
    (v) For plan year 2025 and subsequent years, durable medical 
equipment as defined in Sec.  440.70(b)(3);
    (3) That coordinates the delivery of covered Medicare and Medicaid 
services using aligned care management and specialty care network 
methods for high-risk beneficiaries;
* * * * *
    (5) For plan year 2025 and subsequent years, that has exclusively 
aligned enrollment; and
    (6) For plan year 2025 and subsequent years, whose capitated 
contract with the State Medicaid agency covers the entire service area 
for the dual eligible special needs plan.
* * * * *
    Highly integrated dual eligible special needs plan means a dual 
eligible special needs plan offered by an MA organization that provides 
coverage of Medicaid benefits under a capitated contract that meets the 
following requirements--
    (1) The capitated contract is between the State Medicaid agency 
and--
    (i) The MA organization; or
    (ii) The MA organization's parent organization, or another entity 
that is owned and controlled by its parent organization.
    (2) The capitated contract requires coverage of the following 
benefits, to the extent Medicaid coverage of such benefits is available 
to individuals eligible to enroll in a highly integrated dual eligible 
special needs plan (HIDE SNP) in the State, except as approved by CMS 
under Sec.  422.107(g) or (h):
    (i) Long-term services and supports, including community-based 
long-term services and supports and some days of coverage of nursing 
facility services during the plan year; or
    (ii) Behavioral health services; and
    (3) For plan year 2025 and subsequent years, the capitated contract 
covers the entire service area for the dual eligible special needs 
plan.
* * * * *
0
3. Section 422.100 is amended by--
0
a. Adding paragraphs (f)(4)(i) and (ii) and (f)(5)(iii);
0
b. Revising paragraphs (m)(1) introductory text, (m)(2) introductory 
text, (m)(3) and (4), and (m)(5)(i); and
0
c. Adding paragraph (m)(6).
    The additions and revisions read as follows:


Sec.  422.100   General requirements.

* * * * *
    (f) * * *
    (4) * * *
    (i) Tracking of deductible and catastrophic limits and 
notification. MA plans are required to track the maximum out-of-pocket 
limit described in paragraph (f)(4) of this section based on accrued 
out-of-pocket beneficiary costs for original Medicare covered services, 
and are also required to notify members and health care providers when 
the limit has been reached.
    (ii) [Reserved]
    (5) * * *
    (iii) MA plans are required to track the maximum out-of-pocket 
limit described in paragraph (f)(5) of this section based on accrued 
out-of-pocket beneficiary costs for original Medicare covered services, 
and are also required to notify members and health care providers when 
the limit has been reached.
* * * * *

[[Page 1953]]

    (m) * * *
    (1) Access to covered benefits during disasters or emergencies. 
When a disaster or emergency is declared as described in paragraph 
(m)(2) of this section and there is disruption of access to health care 
as described in paragraph (m)(6) of this section, an MA organization 
offering an MA plan must, until one of the conditions described in 
paragraph (m)(3) of this section occurs, ensure access to covered 
benefits in the following manner:
* * * * *
    (2) Declarations of disasters or emergencies. A declaration of a 
disaster or emergency will identify the geographic area affected by the 
event and may be made as one of the following:
* * * * *
    (3) End of the special requirements for the disaster or emergency. 
An MA organization must continue furnishing access to benefits as 
specified in paragraphs (m)(1)(i) through (iv) of this section for 30 
days after the conditions described in paragraph (m)(3)(i) or (ii) of 
this section occur with respect to all applicable emergencies or after 
the condition described in paragraph (m)(3)(iii) of this section 
occurs, whichever is earlier:
    (i) All sources that declared a disaster or emergency that include 
the service area declare an end.
    (ii) No end date was identified as described in paragraph (m)(3)(i) 
of this section, and all applicable emergencies or disasters declared 
for the area have ended, including through expiration of the 
declaration or any renewal of such declaration.
    (iii) There is no longer a disruption of access to health care as 
defined in paragraph (m)(6) of this section.
    (4) MA plans unable to operate. An MA plan that cannot resume 
normal operations by the end of the disaster or emergency as described 
in paragraph (m)(3)(i) or (ii) of this section must notify CMS.
    (5) * * *
    (i) Indicate the terms and conditions of payment during the 
disaster or emergency for non-contracted providers furnishing benefits 
to plan enrollees residing in the affected service area(s).
* * * * *
    (6) Disruption of access to health care. A disruption of access to 
health care for the purpose of paragraph (m) of this section is an 
interruption or interference throughout the service area such that 
enrollees do not have the ability to access contracted providers or 
contracted providers do not have the ability to provide needed services 
to enrollees resulting in MA plans failing to meet the normal 
prevailing patterns of community health care delivery in the service 
area under Sec.  422.112(a).
0
4. Section 422.101 is amended by--
0
a. In paragraph (d)(4), removing the word ``incurred'' and adding in 
its place the word ``accrued''.
0
b. Revising paragraph (f)(1)(i).
    The revision reads as follows:


Sec.  422.101   Requirements relating to basic benefits.

* * * * *
    (f) * * *
    (1) * * *
    (i) Conduct a comprehensive initial health risk assessment of the 
individual's physical, psychosocial, and functional needs as well as 
annual health risk reassessment, using a comprehensive risk assessment 
tool that CMS may review during oversight activities, and ensure that 
the results from the initial assessment and annual reassessment 
conducted for each individual enrolled in the plan are addressed in the 
individuals' individualized care plan as required under paragraph 
(f)(1)(ii) of this section. Beginning in 2024, the comprehensive risk 
assessment tool must include standardized questions specified by CMS in 
subregulatory guidance as follows:
    (A) One or more questions on housing stability.
    (B) One or more questions on food security.
    (C) One or more questions on access to transportation.
* * * * *
0
5. Section 422.107 is amended by--
0
a. Revising the section heading and paragraphs (c)(6) and (d);
0
b. Redesignating paragraph (e) as paragraph (i); and
0
c. Adding new paragraph (e) and paragraphs (f) through (h).
    The revisions and additions read as follows:


Sec.  422.107   Requirements for dual eligible special needs plans.

* * * * *
    (c) * * *
    (6) The verification of an enrollee's Medicaid eligibility.
* * * * *
    (d) Additional minimum contract requirement. (1) For any dual 
eligible special needs plan that is not a fully integrated or highly 
integrated dual eligible special needs plan, except as specified in 
paragraph (d)(2) of this section, the contract must also stipulate 
that, for the purpose of coordinating Medicare and Medicaid-covered 
services between settings of care, the SNP notifies, or arranges for 
another entity or entities to notify, the State Medicaid agency, 
individuals or entities designated by the State Medicaid agency, or 
both, of hospital and skilled nursing facility admissions for at least 
one group of high-risk full-benefit dual eligible individuals, 
identified by the State Medicaid agency. The State Medicaid agency must 
establish the timeframe(s) and method(s) by which notice is provided. 
In the event that a SNP authorizes another entity or entities to 
perform this notification, the SNP must retain responsibility for 
complying with the requirement in this paragraph (d)(1).
    (2) For a dual eligible special needs plan that, under the terms of 
its contract with the State Medicaid agency, only enrolls beneficiaries 
who are not entitled to full medical assistance under a State plan 
under title XIX of the Act, paragraph (d)(1) of this section does not 
apply if the SNP operates under the same parent organization and in the 
same service area as a dual eligible special needs plan limited to 
beneficiaries with full medical assistance under a State plan under 
title XIX of the Act that meets the requirements at paragraph (d)(1) of 
this section.
    (e) Additional opportunities in certain integrated care programs. 
(1) CMS facilitates operationalization as described in paragraphs 
(e)(2) and (3) of this section if a State Medicaid agency requires MA 
organizations offering dual eligible special needs plans with 
exclusively aligned enrollment to do both of the following:
    (i) Apply for, and seek CMS approval to establish and maintain, one 
or more MA contracts that only include one or more dual eligible 
special needs plans with a service area limited to that State.
    (ii) Use required materials that integrate Medicare and Medicaid 
content, including at a minimum the Summary of Benefits, Formulary, and 
combined Provider and Pharmacy Directory that meets MA requirements 
consistent with Sec.  422.2267(e) and Sec. Sec.  423.2267(e) and 
438.10(h) of this chapter.
    (2) The requirements, processes, and procedures applicable to dual 
eligible special needs plans and the MA program, including for 
applications, bids, and contracting procedures under Sec. Sec.  422.250 
through 422.530, remain applicable. Because implementation of the 
contract provisions described in paragraph (e)(1) of this section may 
require administrative steps that cannot be completed between reviewing 
the contract and the start of the plan year, CMS begins good faith work 
following

[[Page 1954]]

receipt of a letter from the State Medicaid agency indicating intent to 
include the provisions described in paragraph (e)(1) of this section in 
a future contract year and collaborate with CMS on implementation.
    (3) When the conditions of paragraph (e)(1) of this section are 
met--
    (i) Following a State request, CMS grants access for State Medicaid 
agency officials to the Health Plan Management System (HPMS) (or its 
successor) for purposes of oversight and information-sharing related to 
the MA contract(s) described in paragraph (e)(1)(i) of this section, as 
long as State Medicaid agency officials agree to protect the 
proprietary nature of information to which the State Medicaid agency 
may not otherwise have direct access. State access to the Health Plan 
Management System (or its successor) is subject to compliance with HHS 
and CMS policies and standards and with applicable laws in the use of 
HPMS data and the system's functionality. CMS may terminate a State 
official's access to the Health Plan Management System (or its 
successor) if any policy is violated or if information is not 
adequately protected; and
    (ii) CMS coordinates with States on program audits, including 
information-sharing on major audit findings and coordination of audits 
schedules for the D-SNPs subject to paragraph (e)(1) of this section.
    (f) Enrollee advisory committee. Any MA organization offering one 
or more D-SNPs in a State must establish and maintain one or more 
enrollee advisory committees that serve the D-SNPs offered by the MA 
organization in that State.
    (1) The enrollee advisory committee must include at least a 
reasonably representative sample of the population enrolled in the dual 
eligible special needs plan or plans, or other individuals representing 
those enrollees, and solicit input on, among other topics, ways to 
improve access to covered services, coordination of services, and 
health equity for underserved populations.
    (2) The enrollee advisory committee may also advise managed care 
plans that serve D-SNP enrollees under title XIX of the Act offered by 
the same parent organization as the MA organization offering the D-SNP.
    (g) Permissible carve-outs of long-term services and supports for 
FIDE SNPs and HIDE SNPs. A plan meets the FIDE SNP or HIDE SNP 
definition at Sec.  422.2, even if its contract with the State Medicaid 
agency for the provision of services under title XIX of the Act has 
carve-outs of long-term services and supports, as approved by CMS, 
that--
    (1) Apply primarily to a minority of the beneficiaries eligible to 
enroll in the dual eligible special needs plan who use long-term 
services and supports; or
    (2) Constitute a small part of the total scope of long-term 
services and supports provided to the majority of beneficiaries 
eligible to enroll in the dual eligible special needs plan.
    (h) Permissible carve-outs of behavioral health services for FIDE 
SNPs and HIDE SNPs. A plan meets the FIDE SNP or HIDE SNP definition at 
Sec.  422.2, even if its contract with the State Medicaid agency for 
the provision of services under title XIX of the Act has carve-outs of 
behavioral health services, as approved by CMS, that--
    (1) Apply primarily to a minority of the beneficiaries eligible to 
enroll in the dual eligible special needs plan who use behavioral 
health services; or
    (2) Constitute a small part of the total scope of behavioral health 
services provided to the majority of beneficiaries eligible to enroll 
in the dual eligible special needs plan.
* * * * *
0
6. Section 422.116 is amended by revising paragraph (a)(1)(ii) and 
adding paragraph (d)(7) to read as follows:


Sec.  422.116   Network adequacy.

    (a) * * *
    (1) * * *
    (ii) Beginning with contract year 2024, an applicant for a new or 
expanding service area must demonstrate compliance with this section as 
part of its application for a new or expanding service area and CMS may 
deny an application on the basis of an evaluation of the applicant's 
network for the new or expanding service area.
* * * * *
    (d) * * *
    (7) New or expanding service area applicants. Beginning with 
contract year 2024, an applicant for a new or expanding service area 
receives a 10-percentage point credit towards the percentage of 
beneficiaries residing within published time and distance standards for 
the contracted network in the pending service area, at the time of 
application and for the duration of the application review. At the 
beginning of the applicable contract year, this credit no longer 
applies and if the application is approved, the MA organization must be 
in full compliance with this section.
* * * * *
0
7. Section 422.166 is amended by adding paragraph (i)(12) to read as 
follows:


Sec.  422.166   Calculation of Star Ratings.

* * * * *
    (i) * * *
    (12) Special rules for the 2023 Star Ratings only. For the 2023 
Star Ratings only, for measures derived from the Health Outcomes Survey 
only, CMS does not apply the provisions in paragraph (i)(9) or (10) of 
this section and CMS does not exclude the numeric values for affected 
contracts with 60 percent or more of their enrollees in the FEMA-
designated Individual Assistance area at the time of the extreme and 
uncontrollable circumstance from the clustering algorithms or from the 
determination of the performance summary and variance thresholds for 
the Reward Factor.
* * * * *
0
8. Section 422.502 is amended by revising paragraphs (b)(1) 
introductory text and (b)(1)(i) to read as follows:


Sec.  422.502   Evaluation and determination procedures.

* * * * *
    (b) * * *
    (1) Except as provided in paragraphs (b)(2) through (4) of this 
section, if an MA organization fails during the 12 months preceding the 
deadline established by CMS for the submission of contract 
qualification applications to comply with the requirements of the Part 
C program under any current or prior contract with CMS under title 
XVIII of the Act, CMS may deny an application based on the applicant's 
failure to comply with the requirements of the Part C program under any 
current or prior contract with CMS even if the applicant currently 
meets all of the requirements of this part.
    (i) An applicant may be considered to have failed to comply with a 
contract for purposes of an application denial under paragraph (b)(1) 
of this section if during the applicable review period the applicant 
does any of the following:
    (A) Was subject to the imposition of an intermediate sanction under 
subpart O of this part or a determination by CMS to prohibit the 
enrollment of new enrollees in accordance with Sec.  422.2410(c), with 
the exception of a sanction imposed under Sec.  422.752(d).
    (B) Failed to maintain a fiscally sound operation consistent with 
the requirements of Sec.  422.504(b)(14).
    (C) Filed for or is currently in State bankruptcy proceedings.
    (D) Received 2.5 or less on CMS Star Ratings, as identified in 
Sec.  422.166.
    (E) Met or exceeded 13 points for compliance actions.
    (1) CMS determines the number of points each MA organization 
accumulated during the performance

[[Page 1955]]

period for compliance actions based on the following point values:
    (i) Each corrective action plan issued during the performance 
period under Sec.  422.504(m) counts for 6 points.
    (ii) Each warning letter issued during the performance period under 
Sec.  422.504(m) counts for 3 points.
    (iii) Each notice of noncompliance issued during the performance 
period under Sec.  422.504(m) counts for 1 point.
    (2) CMS adds all the point values for each MA organization to 
determine if any organization meets CMS' identified threshold.
* * * * *
0
9. Section 422.503 is amended by revising paragraphs (b)(5)(i) and (ii) 
to read as follows:


Sec.  422.503   General provisions.

* * * * *
    (b) * * *
    (5) * * *
    (i) Not accept, or share a corporate parent organization owning a 
controlling interest in an entity that accepts, new enrollees under a 
section 1876 reasonable cost contract in any area in which it seeks to 
offer an MA plan that is not a dual eligible special needs plan.
    (ii) Not accept, or be either the parent organization owning a 
controlling interest of or subsidiary of an entity that accepts, new 
enrollees under a section 1876 reasonable cost contract in any area in 
which it seeks to offer an MA plan that is not a dual eligible special 
needs plan.
* * * * *
0
10. Section 422.504 is amended by revising paragraph (m) to read as 
follows:


Sec.  422.504   Contract provisions.

* * * * *
    (m) Issuance of compliance actions for failure to comply with the 
terms of the contract. The MA organization acknowledges that CMS may 
take compliance actions as described in this section or intermediate 
sanctions as defined in subpart O of this part.
    (1) CMS may take compliance actions as described in paragraph 
(m)(3) of this section if it determines that the MA organization has 
not complied with the terms of a current or prior Part C contract with 
CMS.
    (i) CMS may determine that an MA organization is out of compliance 
with a Part C requirement when the organization fails to meet 
performance standards articulated in the Part C statutes, regulations 
in this chapter, or guidance.
    (ii) If CMS has not already articulated a measure for determining 
noncompliance, CMS may determine that an MA organization is out of 
compliance when its performance in fulfilling Part C requirements 
represents an outlier relative to the performance of other MA 
organizations.
    (2) CMS bases its decision on whether to issue a compliance action 
and what level of compliance action to take on an assessment of the 
circumstances surrounding the noncompliance, including all of the 
following:
    (i) The nature of the conduct.
    (ii) The degree of culpability of the MA organization.
    (iii) The adverse effect to beneficiaries which resulted or could 
have resulted from the conduct of the MA organization.
    (iv) The history of prior offenses by the MA organization or its 
related entities.
    (v) Whether the noncompliance was self-reported.
    (vi) Other factors which relate to the impact of the underlying 
noncompliance or the lack of the MA organization's oversight of its 
operations that contributed to the noncompliance.
    (3) CMS may take one of three types of compliance actions based on 
the nature of the noncompliance.
    (i) Notice of non-compliance. A notice of non-compliance may be 
issued for any failure to comply with the requirements of the MA 
organization's current or prior Part C contract with CMS, as described 
in paragraph (m)(1) of this section.
    (ii) Warning letter. A warning letter may be issued for serious 
and/or continued non-compliance with the requirements of the MA 
organization's current or prior Part C contract with CMS, as described 
in paragraph (m)(1) of this section and as assessed in accordance with 
paragraph (m)(2) of this section.
    (iii) Corrective action plan. (A) Corrective action plans are 
requested for particularly serious or continued non-compliance with the 
requirements of the MA organization's current or prior Part C contract 
with CMS, as described in paragraph (m)(1) of this section and as 
assessed in accordance with paragraph (m)(2) of this section.
    (B) CMS issues a corrective action plan if CMS determines that the 
MA organization has repeated or not corrected noncompliance identified 
in prior compliance actions, has substantially impacted beneficiaries 
or the program with its noncompliance, or must implement a detailed 
plan to correct the underlying causes of the noncompliance.
* * * * *
0
11. Section 422.530 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  422.530   Plan crosswalks.

* * * * *
    (c) * * *
    (4) When--
    (i) A renewing D-SNP has another new or renewing D-SNP, and the two 
D-SNPs are offered to different populations, enrollees who are no 
longer eligible for their current D-SNP may be moved into the other new 
or renewing D-SNP offered by the same MA organization if they meet the 
eligibility criteria for the new or renewing D-SNP and CMS determines 
it is in the best interest of the enrollees to move to the new or 
renewing D-SNP in order to promote access to and continuity of care for 
enrollees relative to the absence of a crosswalk exception. For the 
crosswalk exception in this paragraph (c)(4), CMS does not permit 
enrollees to be moved between different contracts; or
    (ii) An MA organization creates a new MA contract when required by 
a State as described in Sec.  422.107(e), eligible enrollees may be 
moved from the existing D-SNP that is non-renewing, reducing its 
service area, or has its eligible population newly restricted by a 
State, to a D-SNP offered under the D-SNP-only contract, which must be 
of the same plan type operated by the same parent organization.
* * * * *
0
12. Section 422.561 is amended by revising the definition of 
``Applicable integrated plan'' to read as follows:


Sec.  422.561   Definitions.

* * * * *
    Applicable integrated plan means either of the following:
    (1) Before January 1, 2023. (i) A fully integrated dual eligible 
special needs plan with exclusively aligned enrollment or a highly 
integrated dual eligible special needs plan with exclusively aligned 
enrollment; and
    (ii) The Medicaid managed care organization, as defined in section 
1903(m) of the Act, through which such dual eligible special needs 
plan, its parent organization, or another entity that is owned and 
controlled by its parent organization covers Medicaid services for 
dually eligible individuals enrolled in such dual eligible special 
needs plan and such Medicaid managed care organization.
    (2) On or after January 1, 2023. (i)(A) A fully integrated dual 
eligible special needs plan or highly integrated dual eligible special 
needs plan with exclusively aligned enrollment; and

[[Page 1956]]

    (B) The Medicaid managed care organization, as defined in section 
1903(m) of the Act, through which such dual eligible special needs 
plan, its parent organization, or another entity that is owned and 
controlled by its parent organization covers Medicaid services for 
dually eligible individuals enrolled in such dual eligible special 
needs plan and such Medicaid managed care organization; or
    (ii) A dual eligible special needs plan and affiliated Medicaid 
managed care plan where--
    (A) The dual special needs plan, by State policy has enrollment 
limited to those beneficiaries enrolled in a Medicaid managed care 
organization as described in paragraph (2)(ii)(B) of this definition;
    (B) There is a capitated contract between the MA organization, the 
MA organization's parent organization, or another entity that is owned 
and controlled by its parent organization; and
    (1) A Medicaid agency; or
    (2) A Medicaid managed care organization as defined in section 
1903(m) of the Act that contracts with the Medicaid agency; and
    (C) Through the capitated contract described in paragraph 
(2)(ii)(B) of this definition, Medicaid benefits including primary care 
and acute care, including Medicare cost-sharing as defined in section 
1905(p)(3)(B), (C), and (D) of the Act, without regard to the 
limitation of that definition to qualified Medicare beneficiaries, and 
at a minimum, home health services as defined in Sec.  440.70 of this 
chapter, durable medical equipment as defined in Sec.  440.70(d)(3) of 
this chapter, or nursing facility services are covered for the 
enrollees.
* * * * *
0
13. Section 422.629 is amended by--
0
a. Revising paragraph (d);
0
b. In paragraph (k)(4)(ii), removing the phrase ``integrated 
organization determination decision'' and adding in its place the 
phrase ``integrated reconsideration determination'';
0
c. Revising paragraph (l)(1); and
0
d. Adding paragraph (l)(4).
    The revisions and addition read as follows:


Sec.  422.629   General requirements for applicable integrated plans.

* * * * *
    (d) Evidence. The applicable integrated plan must do the following:
    (1) Provide the enrollee--
    (i) A reasonable opportunity, in person and in writing, to present 
evidence and testimony and make legal and factual arguments for 
integrated grievances, and integrated reconsiderations; and
    (ii) Information on how evidence and testimony should be presented 
to the plan.
    (2) Inform the enrollee of the limited time available for 
presenting evidence sufficiently in advance of the resolution timeframe 
for appeals as specified in this section if the case is being 
considered under an expedited timeframe for the integrated grievance or 
integrated reconsideration.
* * * * *
    (l) * * *
    (1) The following individuals or entities can request an integrated 
grievance, integrated organization determination, and integrated 
reconsideration, and are parties to the case:
    (i) The enrollee.
    (ii) The enrollee's representative, including any person authorized 
under State law.
* * * * *
    (4) The following individuals or entities may request an integrated 
reconsideration and are parties to the case:
    (i) An assignee of the enrollee (that is, a physician or other 
provider who has furnished or intends to furnish a service to the 
enrollee and formally agrees to waive any right to payment from the 
enrollee for that service).
    (ii) Any other provider or entity (other than the applicable 
integrated plan) who has an appealable interest in the proceeding.
0
14. Section 422.631 is amended by adding paragraph (d)(3) to read as 
follows:


Sec.  422.631   Integrated organization determinations.

* * * * *
    (d) * * *
    (3) Timeframe for requests for payment. The applicable integrated 
plan must process requests for payment according to the ``prompt 
payment'' provisions set forth in Sec.  422.520.
* * * * *
0
15. Section 422.633 is amended by revising the section heading and 
paragraphs (e)(1) and (f)(3)(i) introductory text to read as follows:


Sec.  422.633   Integrated reconsiderations.

* * * * *
    (e) * * *
    (1) Applicable integrated plans must accept requests to expedite 
integrated reconsiderations from either of the following:
    (i) An enrollee.
    (ii) A provider, making the request on behalf of an enrollee, that 
is not a request for expedited payment.
* * * * *
    (f) * * *
    (3) * * *
    (i) The applicable integrated plan may extend the timeframe for 
resolving any integrated reconsideration other than those concerning 
Part B drugs by 14 calendar days if--
* * * * *
0
16. Section 422.634 is amended by revising paragraph (d) to read as 
follows:


Sec.  422.634  Effect.

* * * * *
    (d) Services not furnished while the appeal is pending. (1) If an 
applicable integrated plan reverses its decision to deny, limit, or 
delay services that were not furnished while the appeal was pending, 
the applicable integrated plan must authorize or provide the disputed 
services promptly and as expeditiously as the enrollee's health 
condition requires but no later than the earlier of--
    (i) 72 hours from the date it reverses its decision; or
    (ii)(A) With the exception of a Part B drug, 30 calendar days after 
the date the applicable integrated plan receives the request for the 
integrated reconsideration (or no later than upon expiration of an 
extension described in Sec.  422.633(f)); or
    (B) For a Part B drug, 7 calendar days after the date the 
applicable integrated plan receives the request for the integrated 
reconsideration.
    (2) For a Medicaid benefit, if a State fair hearing officer 
reverses an applicable integrated plan's integrated reconsideration 
decision to deny, limit, or delay services that were not furnished 
while the appeal was pending, the applicable integrated plan must 
authorize or provide the disputed services promptly and as 
expeditiously as the enrollee's health condition requires but no later 
than 72 hours from the date it receives notice reversing the 
determination.
    (3) Reversals by the Part C independent review entity, an 
administrative law judge or attorney adjudicator at the Office of 
Medicare Hearings and Appeals, or the Medicare Appeals Council must be 
effectuated under same timelines applicable to other MA plans as 
specified in Sec. Sec.  422.618 and 422.619.
* * * * *
0
17. Section 422.2260 is amended by adding the definition of ``Third-
party marketing organization (TPMO)'' in alphabetical order to read as 
follows:


Sec.  422.2260   Definitions.

* * * * *

[[Page 1957]]

    Third-party marketing organization (TPMO) means organizations who 
are compensated to perform lead generation, marketing, sales, and 
enrollment related functions as a part of the chain of enrollment (the 
steps taken by a beneficiary from becoming aware of an MA plan or plans 
to making an enrollment decision). TPMOs may be a first tier, 
downstream or related entity (FDRs), as defined under Sec.  422.504(i), 
but may also be entities that are not FDRs but provide services to 
customers including an MA plan or an MA plan's FDR.
0
18. Section 422.2265 is amended by adding paragraphs (b)(13) and (14) 
to read as follows:


Sec.  422.2265   Websites.

* * * * *
    (b) * * *
    (13) Instructions on how to appoint a representative including a 
link to the downloadable version of the CMS Appointment of 
Representative Form (CMS Form-1696).
    (14) Enrollment instructions and forms.
* * * * *
0
19. Section 422.2267 is amended by--
0
a. Redesignating paragraphs (e)(30) through (38) as paragraphs (e)(32) 
through (40).
0
b. Adding new paragraphs (e)(30) and (31) and paragraph (e)(41).
    The additions read as follows:


Sec.  422.2267   Required materials and content.

* * * * *
    (e) * * *
    (30) Member ID card. The member ID card is a model communications 
material that plans must provide to enrollees as required under Sec.  
422.111(i). The member ID card--
    (i) Must be provided to new enrollees within ten calendars days 
from receipt of CMS confirmation of enrollment or by last day of month 
prior to effective date, whichever is later;
    (ii) Must include the plan's--
    (A) Website address;
    (B) Customer service number (the member ID card is excluded from 
the hours of operations requirement under Sec.  422.2262(c)(1)(i)); and
    (C) Contract/PBP number;
    (iii) Must include, if issued for a PPO and PFFS plan, the phrase 
``Medicare limiting charges apply.'';
    (iv) May not use a member's Social Security number (SSN), in whole 
or in part;
    (v) Must be updated whenever information on a member's existing 
card changes; in such cases an updated card must be provided to the 
member; and
    (vi) Is excluded from the translation requirement under paragraph 
(a)(2) of this section.
    (31) Multi-language insert (MLI). This is a standardized 
communications material which states, ``We have free interpreter 
services to answer any questions you may have about our health or drug 
plan. To get an interpreter, just call us at [1-xxx-xxx-xxxx]. Someone 
who speaks [language] can help you. This is a free service.'' in the 
following languages: Spanish, Chinese, Tagalog, French, Vietnamese, 
German, Korean, Russian, Arabic, Italian, Portuguese, French Creole, 
Polish, Hindi, and Japanese.
    (i) Additional languages that meet the 5-percent service area 
threshold, as required under paragraph (a)(2) of this section, must be 
added to the MLI used in that service area. A plan may also opt to 
include in the MLI any additional language that do not meet the 5-
percent service area threshold, where it determines that this inclusion 
would be appropriate.
    (ii) The MLI must be provided with all required materials under 
paragraph (e) of this section.
    (iii) The MLI may be included as a part of the required material or 
as a standalone material in conjunction with the required material.
    (iv) When used as a standalone, the MLI may include organization 
name and logo.
    (v) When mailing multiple required materials together, only one MLI 
is required.
    (vi) The MLI may be provided electronically when a required 
material is provided electronically as permitted under paragraph (d)(2) 
of this section.
* * * * *
    (41) Third-party marketing organization disclaimer. This is 
standardized content. The disclaimer consists of the statement ``We do 
not offer every plan available in your area. Any information we provide 
is limited to those plans we do offer in your area. Please contact 
Medicare.gov or 1-800-MEDICARE to get information on all of your 
options.'' The MA organization must ensure that the disclaimer is as 
follows:
    (i) Used by any TPMO, as defined under Sec.  422.2260, that sells 
plans on behalf of more than one MA organization unless the TPMO sells 
all commercially available MA plans in a given service area.
    (ii) Verbally conveyed within the first minute of a sales call.
    (iii) Electronically conveyed when communicating with a beneficiary 
through email, online chat, or other electronic means of communication.
    (iv) Prominently displayed on TPMO websites.
    (v) Included in any marketing materials, including print materials 
and television advertisements, developed, used or distributed by the 
TPMO.
0
20. Section 422.2274 is amended by revising the section heading and 
adding paragraph (g) to read as follows:


Sec.  422.2274   Agent, broker, and other third-party requirements.

* * * * *
    (g) TPMO oversight. In addition to any applicable FDR requirements 
under Sec.  422.504(i), when doing business with a TPMO, either 
directly or indirectly through a downstream entity, MA plans must 
implement the following as a part of their oversight of TPMOs:
    (1) When a TPMO is not otherwise an FDR, the MA organization is 
responsible for ensuring that the TPMO adheres to any requirements that 
apply to the MA plan.
    (2) Contracts, written arrangements, and agreements between the 
TPMO and an MA plan, or between the TPMO and an MA plan's FDR, must 
ensure the TPMO:
    (i) Discloses to the MA organization any subcontracted 
relationships used for marketing, lead generation, and enrollment.
    (ii) Records all calls with beneficiaries in their entirety, 
including the enrollment process.
    (iii) Reports to plans monthly any staff disciplinary actions 
associated with beneficiary interaction to the plan.
    (iv) Uses the TPMO disclaimer as required under Sec.  
422.2267(e)(41).
    (3) Ensure that the TPMO, when conducting lead generating 
activities, either directly or indirectly for an MA organization, must, 
when applicable:
    (i) Disclose to the beneficiary that his or her information will be 
provided to a licensed agent for future contact. This disclosure must 
be provided as follows:
    (A) Verbally when communicating with a beneficiary through 
telephone.
    (B) In writing when communicating with a beneficiary through mail 
or other paper.
    (C) Electronically when communicating with a beneficiary through 
email, online chat, or other electronic messaging platform.
    (ii) Disclose to the beneficiary that he or she is being 
transferred to a licensed agent who can enroll him or her into a new 
plan.
0
21. Section 422.2460 is amended by revising paragraphs (a), (b) 
introductory text, and (d) and adding paragraph (e) to read as follows:

[[Page 1958]]

Sec.  422.2460   Reporting requirements.

    (a) Except as provided in paragraph (b) of this section, for each 
contract year, each MA organization must submit to CMS, in a timeframe 
and manner specified by CMS, a report that includes the data needed by 
the MA organization to calculate and verify the medical loss ratio 
(MLR) and remittance amount, if any, for each contract under this part, 
including the amount of incurred claims for original Medicare covered 
benefits, supplemental benefits, and prescription drugs; total revenue; 
expenditures on quality improving activities; non-claims costs; taxes; 
licensing and regulatory fees; and any remittance owed to CMS under 
Sec.  422.2410.
    (b) For contract years 2018 through 2022, each MA organization must 
submit to CMS, in a timeframe and manner specified by CMS, the 
following information:
* * * * *
    (d) Subject to paragraph (e) of this section, the MLR is reported 
once, and is not reopened as a result of any payment reconciliation 
processes.
    (e) With respect to an MA organization that has already submitted 
to CMS the MLR report or MLR data required under paragraph (a) or (b) 
of this section, respectively, for a contract for a contract year, 
paragraph (d) of this section does not prohibit resubmission of the MLR 
report or MLR data for the purpose of correcting the prior MLR report 
or data submission. Such resubmission must be authorized or directed by 
CMS, and upon receipt and acceptance by CMS, is regarded as the 
contract's MLR report or data submission for the contract year for 
purposes of this subpart.
0
22. Section 422.2490 is amended by redesignating paragraph (b)(2) as 
paragraph (b)(2)(i) and adding paragraph (b)(2)(ii) to read as follows:


Sec.  422.2490   Release of Part C MLR data.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Amounts that are reported as expenditures for a specific type 
of supplemental benefit, where the entire amount that is reported 
represents costs incurred by the only plan under the contract that 
offers that benefit.
* * * * *

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

0
23. 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
24. Section 423.100 is amended by removing the definition of 
``Negotiated prices'' and adding in alphabetical order definitions for 
``Negotiated price'' and ``Price concession'' to read as follows:


Sec.  423.100   Definitions.

* * * * *
    Negotiated price means the price for a covered Part D drug that--
    (1) The Part D sponsor (or other intermediary contracting 
organization) and the network dispensing pharmacy or other network 
dispensing provider have negotiated as the lowest possible 
reimbursement such network entity will receive, in total, for a 
particular drug;
    (2) Meets all of the following:
    (i) Includes all price concessions (as defined in this section) 
from network pharmacies or other network providers;
    (ii) Includes any dispensing fees; and
    (iii) Excludes additional contingent amounts, such as incentive 
fees, if these amounts increase prices; and
    (3) Is reduced by non-pharmacy price concessions and other direct 
or indirect remuneration that the Part D sponsor passes through to Part 
D enrollees at the point of sale.
* * * * *
    Price concession means any form of discount, direct or indirect 
subsidy, or rebate received by the Part D sponsor or its intermediary 
contracting organization from any source that serves to decrease the 
costs incurred under the Part D plan by the Part D sponsor. Examples of 
price concessions include but are not limited to: Discounts, 
chargebacks, rebates, cash discounts, free goods contingent on a 
purchase agreement, coupons, free or reduced-price services, and goods 
in kind.
* * * * *
0
25. Section 423.503 is amended by revising the section heading and 
paragraphs (b)(1) introductory text and (b)(1)(i) to read as follows:


Sec.  423.503   Evaluation and determination procedures.

* * * * *
    (b) * * *
    (1) Except as provided in paragraphs (b)(2) through (4) of this 
section, if a Part D plan sponsor fails during the 12 months preceding 
the deadline established by CMS for the submission of contract 
qualification applications to comply with the requirements of the Part 
D program under any current or prior contract with CMS under title 
XVIII of the Act CMS may deny an application based on the applicant's 
failure to comply with the requirements of the Part D program under any 
current or prior contract with CMS even if the applicant currently 
meets all of the requirements of this part.
    (i) An applicant may be considered to have failed to comply with a 
contract for purposes of an application denial under paragraph (b)(1) 
of this section if during the applicable review period the applicant:
    (A) Was subject to the imposition of an intermediate sanction under 
subpart O of this part, or a determination by CMS to prohibit the 
enrollment of new enrollees under Sec.  423.2410(c).
    (B) Failed to maintain a fiscally sound operation consistent with 
the requirements of Sec.  423.505(b)(23).
    (C) Filed for or is currently under state bankruptcy proceedings.
    (D) Received 2.5 or less on CMS Star Ratings, as identified in 
Sec.  423.186.
    (E) Met or exceeded 13 points for compliance actions.
    (1) CMS determines the number of points each Part D plan sponsor 
accumulated during the performance period for compliance actions based 
on the following point values:
    (i) Each corrective action plan issued during the performance 
period under Sec.  423.505(n) counts for 6 points.
    (ii) Each warning letter issued during the performance period under 
Sec.  423.505(n) counts for 3 points.
    (iii) Each notice of noncompliance issued during the performance 
period under Sec.  423.505(n) counts for 1 point.
    (2) CMS adds all the point values for each Part D plan sponsor to 
determine if any organization meets CMS' identified threshold.
* * * * *
0
26. Section 423.505 is amended by revising paragraph (n) to read as 
follows:


Sec.  423.505   Contract provisions.

* * * * *
    (n) Issuance of compliance actions for failure to comply with the 
terms of the contract. The Part D plan sponsor acknowledges that CMS 
may take compliance actions as described in this section or 
intermediate sanctions as defined in subpart O of this part.
    (1) CMS may take compliance actions as described in paragraph 
(n)(3) of this section if it determines that the Part D plan sponsor 
has not complied with the terms of a current or prior Part D contract 
with CMS.
    (i) CMS may determine that a Part D plans sponsor is out of 
compliance with a Part D requirement when the organization fails to 
meet performance standards articulated in the Part D statutes, 
regulations in this chapter, or guidance.
    (ii) If CMS has not already articulated a measure for determining

[[Page 1959]]

noncompliance, CMS may determine that a Part D plan sponsor is out of 
compliance when its performance in fulfilling Part D requirements 
represents an outlier relative to the performance of other Part D plan 
sponsors.
    (2) CMS bases its decision on whether to issue a compliance action 
and what level of compliance action to take on an assessment of the 
circumstances surrounding the noncompliance, including all of the 
following:
    (i) The nature of the conduct.
    (ii) The degree of culpability of the Part D plan sponsor.
    (iii) The adverse effect to beneficiaries which resulted or could 
have resulted from the conduct of the Part D plan sponsor.
    (iv) The history of prior offenses by the Part D plan sponsor or 
its related entities.
    (v) Whether the noncompliance was self-reported.
    (vi) Other factors which relate to the impact of the underlying 
noncompliance or the lack of the Part D plan sponsor's oversight of its 
operations that contributed to the noncompliance.
    (3) CMS may take one of three types of compliance actions based on 
the nature of the noncompliance.
    (i) Notice of non-compliance. A notice of non-compliance may be 
issued for any failure to comply with the requirements of the Part D 
plan sponsor's current or prior Part D contract with CMS, as described 
in paragraph (n)(1) of this section.
    (ii) Warning letter. A warning letter may be issued for serious 
and/or continued non-compliance with the requirements of the Part D 
plan sponsor's current or prior Part D contract with CMS, as described 
in paragraph (n)(1) of this section and as assessed in accordance with 
paragraph (n)(2) of this section.
    (iii) Corrective action plan. (A) Corrective action plans are 
issued for particularly serious and/or continued non-compliance with 
the requirements of the Part D plan sponsors' current or prior Part D 
contract with CMS, as described in paragraph (n)(1) of this section and 
as assessed in accordance with paragraph (n)(2) of this section.
    (B) CMS issues a corrective action plan if CMS determines that the 
Part D plan sponsor has repeated or not corrected noncompliance 
identified in prior compliance actions, has substantially impacted 
beneficiaries or the program with its noncompliance, and/or must 
implement a detailed plan to correct the underlying causes of the 
noncompliance.
* * * * *
0
27. Section 423.2260 is amended by adding the definition of ``Third-
party marketing organization (TPMO)'' in alphabetical order to read as 
follows:


Sec.  423.2260   Definitions.

* * * * *
    Third-party marketing organization (TPMO) are organizations who are 
compensated to perform lead generation, marketing, sales, and 
enrollment related functions as a part of the chain of enrollment (the 
steps taken by a beneficiary from becoming aware of a Part D plan or 
plans to making an enrollment decision). TPMOs may be a first tier, 
downstream or related entity (FDRs), as defined under Sec.  422.504(i) 
of this chapter, but may also be entities that are not FDRs but provide 
services to customers including an Part D sponsor or an Part D 
sponsor's FDR.
0
28. Section 423.2265 is amended by adding paragraphs (b)(14) and (15) 
to read as follows:


Sec.  423.2265   websites.

* * * * *
    (b) * * *
    (14) Instructions on how to appoint a representative including a 
link to the downloadable version of the CMS Appointment of 
Representative Form (CMS Form-1696).
    (15) Enrollment instructions and forms.
* * * * *
0
29. Section 423.2267 is amended by--
0
a. Redesignating paragraphs (e)(32) through (37) as paragraphs (e)(34) 
through (39); and
0
b. Adding new paragraphs (e)(32) and (33) and paragraphs (e)(40) and 
(41).
    The additions read as follows:


Sec.  423.2267   Required materials and content.

* * * * *
    (e) * * *
    (32) Member ID card. The member ID card is a model communications 
material that plans must provide to enrollees as required under Sec.  
423.128(d)(2). The member ID card--
    (i) Must be provided to new enrollees within 10 calendars days from 
receipt of CMS confirmation of enrollment or by last day of month prior 
to effective date, whichever is later;
    (ii) Must include the Part D sponsor's--
    (A) Website address;
    (B) Customer service number (the Member ID card is excluded from 
the hours of operations requirement under Sec.  423.2262(c)(1)(i)); and
    (C) Contract/PBP number;
    (iii) Must include, if issued for a preferred provider organization 
(PPO) and PFFS plan, the phrase ``Medicare limiting charges apply.'';
    (iv) May not use a member's Social Security number (SSN), in whole 
or in part;
    (v) Must be updated whenever information on a member's existing 
card changes; in such cases an updated card must be provided to the 
member; and
    (vi) Is excluded from the translation requirement under paragraph 
(a)(2) of this section.
    (33) Multi-language insert (MLI). This is a standardized 
communications material which states, ``We have free interpreter 
services to answer any questions you may have about our health or drug 
plan. To get an interpreter, just call us at [1-xxx-xxx-xxxx]. Someone 
who speaks [language] can help you. This is a free service.'' in the 
following languages: Spanish, Chinese, Tagalog, French, Vietnamese, 
German, Korean, Russian, Arabic, Italian, Portuguese, French Creole, 
Polish, Hindi, and Japanese.
    (i) Additional languages that meet the 5-percent service area 
threshold, as required under paragraph (a)(2) of this section, must be 
added to the MLI used in that service area. A plan may also opt to 
include in the MLI any additional language that do not meet the 5-
percent service area threshold, where it determines that this inclusion 
would be appropriate.
    (ii) The MLI must be provided with all required materials under 
paragraph (e) of this section.
    (iii) The MLI may be included as a part of the required material or 
as a standalone material in conjunction with the required material.
    (iv) When used as a standalone, the MLI may include organization 
name and logo.
    (v) When mailing multiple required materials together, only one MLI 
is required.
    (vi) The MLI may be provided electronically when a required 
material is provided electronically as permitted under paragraph (d)(2) 
of this section.
* * * * *
    (40) Limited access to preferred cost sharing pharmacies. This is 
standardized content that must--
    (i) Be used on all materials mentioning preferred pharmacies when 
there is limited access to preferred pharmacies; and
    (ii) Include the following language ``'s pharmacy network includes limited lower-cost, preferred 
pharmacies in . The lower costs advertised in our plan

[[Page 1960]]

materials for these pharmacies may not be available at the pharmacy you 
use. For up-to-date information about our network pharmacies, including 
whether there are any lower-cost preferred pharmacies in your area, 
please call  or consult 
the online pharmacy directory at .''
    (41) Third-party marketing organization disclaimer. This is 
standardized content. The disclaimer consists of the statement ``We do 
not offer every plan available in your area. Any information we provide 
is limited to those plans we do offer in your area. Please contact 
Medicare.gov or 1-800-MEDICARE to get information on all of your 
options.'' The Part D sponsor must ensure that the disclaimer is as 
follows:
    (i) Used by any TPMO, as defined under Sec.  423.2260, that sells 
plans on behalf of more than one Part D sponsor unless the TPMO sells 
all commercially available Part D plans in a given service area.
    (ii) Verbally conveyed within the first minute of a sales call.
    (iii) Electronically conveyed when communicating with a beneficiary 
through email, online chat, or other electronic means of communication.
    (iv) Prominently displayed on TPMO websites.
    (v) Included in any TPMO marketing materials, including print 
materials and television advertising.
0
30. Section 423.2274 is amended by revising the section heading and 
adding paragraph (g) to read as follows:


Sec.  423.2274   Agent, broker, and other third-party requirements.

* * * * *
    (g) TPMO oversight. In addition to any applicable FDR requirements 
under Sec.  423.505(i), when doing business with a TPMO, either 
directly or indirectly through a downstream entity, Part D sponsor must 
implement the following as a part of their oversight of TPMOs:
    (1) When TPMOs is not otherwise an FDR, the Part D sponsor is 
responsible for ensuring that the TPMO adheres to any requirements that 
apply to the Part D sponsor.
    (2) Contracts, written arrangements, and agreements between the 
TPMO and a Part D plan, or between a TPMO and a Part D plan's FDR, must 
ensure the TPMO:
    (i) Discloses to the plan any subcontracted relationships used for 
marketing, lead generation, and enrollment.
    (ii) Record all calls with beneficiaries in their entirety, 
including the enrollment process.
    (iii) Report to plans monthly any staff disciplinary actions 
associated with beneficiary interaction to the plan.
    (iv) Use the TPMO disclaimer as required under Sec.  
423.2267(e)(41).
    (3) Ensure that the TPMO, when conducting lead generating 
activities, either directly or indirectly for a Part D sponsor, must, 
when applicable:
    (i) Disclose to the beneficiary that his or her information will be 
provided to a licensed agent for future contact. This disclosure must 
be provided:
    (A) Verbally when communicating with a beneficiary through 
telephone;
    (B) In writing when communicating with a beneficiary through mail 
or other paper; and
    (C) Electronically when communicating with a beneficiary through 
email, online chat, or other electronic messaging platform.
    (ii) When applicable, disclose to the beneficiary that he or she is 
being transferred to a licensed agent who can enroll him or her into a 
new plan.
0
31. Section 423.2460 is amended by revising paragraphs (a), (b) 
introductory text, and (d) and adding paragraph (e) to read as follows:


Sec.  423.2460   Reporting requirements.

    (a) Except as provided in paragraph (b) of this section, for each 
contract year, each Part D sponsor must submit to CMS, in a timeframe 
and manner specified by CMS, a report that includes the data needed by 
the Part D sponsor to calculate and verify the medical loss ratio (MLR) 
and remittance amount, if any, for each contract under this part, 
including the amount of incurred claims for prescription drugs, total 
revenue, expenditures on quality improving activities, non-claims 
costs, taxes, licensing and regulatory fees, and any remittance owed to 
CMS under Sec.  423.2410.
    (b) For contract years 2018 through 2022, each Part D sponsor must 
submit to CMS, in a timeframe and manner specified by CMS, the 
following information:
* * * * *
    (d) Subject to paragraph (e) of this section, the MLR is reported 
once, and is not reopened as a result of any payment reconciliation 
processes.
    (e) With respect to a Part D sponsor that has already submitted to 
CMS the MLR report or MLR data required under paragraph (a) or (b) of 
this section, respectively, for a contract for a contract year, 
paragraph (d) of this section does not prohibit resubmission of the MLR 
report or MLR data for the purpose of correcting the prior MLR report 
or data submission. Such resubmission must be authorized or directed by 
CMS, and upon receipt and acceptance by CMS, is regarded as the 
contract's MLR report or data submission for the contract year for 
purposes of this subpart.

    Dated: January 4, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-00117 Filed 1-6-22; 4:15 pm]
BILLING CODE 4120-01-P