[Federal Register Volume 87, Number 89 (Monday, May 9, 2022)]
[Rules and Regulations]
[Pages 27704-27902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09375]



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Vol. 87

Monday,

No. 89

May 9, 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 417, 422, and 423





Medicare Program; Contract Year 2023 Policy and Technical Changes to 
the Medicare Advantage and Medicare Prescription Drug Benefit Programs; 
Policy and Regulatory Revisions in Response to the COVID-19 Public 
Health Emergency; Additional Policy and Regulatory Revisions in 
Response to the COVID-19 Public Health Emergency; Final Rule

  Federal Register / Vol. 87 , No. 89 / Monday, May 9, 2022 / Rules and 
Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, and 423

[CMS-4192-F, CMS-1744-F, and CMS-3401-F]
RIN 0938-AU30, 0938-AU31, and 0938-AU33


Medicare Program; Contract Year 2023 Policy and Technical Changes 
to the Medicare Advantage and Medicare Prescription Drug Benefit 
Programs; Policy and Regulatory Revisions in Response to the COVID-19 
Public Health Emergency; Additional Policy and Regulatory Revisions in 
Response to the COVID-19 Public Health Emergency

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

ACTION: Final rule.

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SUMMARY: This final rule will revise 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 final rule 
will also revise regulations related to dual eligible special needs 
plans (D-SNPs), other special needs plans, and cost contract plans. 
This final rule finalizes certain 2021 and 2022 Star Ratings provisions 
that were included in two interim final rules with comment period (IFC) 
that CMS issued on April 6, 2020, and September 2, 2020; other policies 
from those interim final rules will be addressed in other rulemakings.

DATES: 
    Effective dates: These regulations are effective on June 28, 2022, 
except for amendatory instructions 27 and 36 (regarding the definition 
of ``negotiated price'' at Sec. Sec.  423.100 and 423.2305), which are 
effective January 1, 2024.
    Applicability dates: The applicability date of the provisions in 
this rule is January 1, 2023, except as explained in SUPPLEMENTARY 
INFORMATION.

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.
    [email protected]--Part D Pharmacy Price Concession 
Issues.
    [email protected]--MLR Issues.

SUPPLEMENTARY INFORMATION: 

Acronyms

ACC Automated Criteria Check
AHC Accountable Health Communities
AKS Anti-kickback Statute
ANOC Annual Notice of Change
ARB At-Risk Beneficiaries
BBA Bipartisan Budget Act
CAHPS Consumer Assessment of Healthcare Providers and Systems
CAI Categorical Adjustment Index
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
EGWP Employer Group Waiver Plan
EOC Evidence of Coverage
FAI Financial Alignment Initiative
FDR First-Tier Downstream and Related Entity
FFS Fee-for-Service
FIDE SNP Fully Integrated Dual Eligible Special Needs Plan
FQHC Federally Qualified Health Center
HEDIS Healthcare Effectiveness Data and Information Set
HHS Department of Health and Human Services
HIDE SNP Highly Integrated Dual Eligible Special Needs Plan
HIPAA Health Insurance Portability and Accountability Act of 1996
HOS Health Outcomes Survey
HPMS Health Plan Management System
HRA Health Risk Assessment
HSD Health Service Delivery
ICR Information Collection Requirement
IRE Independent Review Entity
I-SNP Institutional Special Needs Plan
LOI Letter of Intent
LTSS Long Term Services and Supports
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
MMCO Medicare-Medicaid Coordination Office
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
PAHP Prepaid Ambulatory Health Plan
PBP Plan Benefit Package
PDE Prescription Drug Event
PDP Prescription Drug Plan
PHE Public Health Emergency
PIHP Prepaid Inpatient Health Plan
PRA Paperwork Reduction Act
RFI Request for Information
RFA Regulatory Flexibilities Act
RHC Rural Health Clinic
SAE Service Area Expansion
SB Summary of Benefits
SDOH Social Determinants of Health
SHIP State Health Insurance Assistance Program
SNP Special Needs Plan
SSA Social Security Administration
SSBCI Special Supplemental Benefits for the Chronically Ill
TPMO Third-Party Marketing Organization

    Additional information regarding the applicability dates: The Star 
Ratings provision at Sec.  422.166(i)(12) is applicable to the 
calculation of the 2023 Star Ratings released in October, 2022, as 
discussed in section II.D.2. of this final rule. The definition of 
``fully integrated dual eligible special needs plans (FIDE SNP)'' in 
Sec.  422.2 at paragraphs (2)(i) and (iii) through (v), (5), and (6) as 
discussed in section II.A.5 of this final rule are applicable beginning 
January 1, 2025. The definition of ``highly integrated dual eligible 
special needs plans'' in Sec.  422.2 at paragraph (3), as discussed in 
section II.A.5.f. of this final rule, is applicable beginning January 
1, 2025. The applicability date of the requirements at Sec.  422.101, 
as discussed in section II.A.4. of this final rule, is January 1, 2024. 
The requirements at Sec.  423.100, as discussed in section II.H. of 
this final rule, are applicable beginning on January 1, 2024.

I. Executive Summary

A. Purpose

    Over 29 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 23 million 
individuals receive Part D coverage through standalone Part D plans. 
The primary purpose of this final rule is to

[[Page 27705]]

implement changes to the MA and Part D programs. This final rule 
implements 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 final rule also revises 
regulations related to dual eligible special needs plans (D-SNPs), 
other special needs plans, and Medicare cost contract plans.

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\ Through this final rule, we require that any MA 
organization offering a D-SNP establish one or more enrollee advisory 
committees in each State to solicit direct input on enrollee 
experiences. We also establish that the committee must 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. Public comments on our proposal reinforced our 
belief 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 the 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. Building on CMS's experience with other programs and model 
tests, and with broad support from public commenters, we are finalizing 
a requirement that all SNPs include one or more questions from a list 
of screening instruments specified in sub-regulatory guidance on 
housing stability, food security, and access to transportation as part 
of their health risk assessments (HRAs). However, based on public 
comments, we are not finalizing our proposal that all SNPs use the same 
specific standardized questions.
    Our final rule will 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 will better equip the MA organizations offering these SNPs to 
meet the needs of their members. Our final rule will also equip these 
MA organizations with person-level information that will help them 
better connect people to covered services, social service 
organizations, and public programs that can help resolve housing 
instability, food insecurity, or transportation challenges.
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 proposed 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 increase integration for these types of D-SNPs.
    In this final rule, we are requiring, for 2025 and subsequent 
years, that all FIDE SNPs have exclusively aligned enrollment, as 
defined in Sec.  422.2, and cover Medicare cost-sharing and three 
specific categories of Medicaid benefits: Home health services (as 
defined in Sec.  440.70), medical supplies, equipment, and appliances 
(as described in Sec.  440.70(b)(3)), and behavioral health services 
through a capitated contract between the State Medicaid agency and the 
Medicaid managed care organization that is the same legal entity as the 
MA organization that offers the FIDE SNP. In addition, we are requiring 
that, for plan year 2025 and subsequent years, each HIDE SNP have a 
service area that completely overlaps the service area of the 
affiliated Medicaid managed care plan with the capitated contract with 
the State. Consistent with existing policy outlined in sub-regulatory 
guidance, this final rule also codifies specific, limited carve-outs of 
the Medicaid long-term services and supports and Medicaid behavioral 
health services covered under the Medicaid capitated contract 
affiliated with FIDE SNPs and HIDE SNPs.
    We believe these policies 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. In this final rule we 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) use certain 
integrated materials and notices for enrollees. Where States choose 
this opportunity, it will help individuals better understand their 
coverage. Because Star Ratings are assigned at the contract level, this 
final rule will also provide a mechanism to provide States 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 codify 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 will improve Federal and State oversight of certain D-SNPs 
(and their affiliated Medicaid managed care plans) through greater 
information-sharing among government regulators.

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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 increased State payments of 
Medicare cost-sharing and disadvantages providers serving dually 
eligible individuals in MA plans. In this final rule we 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) must be 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 (including cost-sharing that 
remains unpaid because of State limits on the amounts paid for Medicare 
cost-sharing and dually eligible individuals' exemption from Medicare 
cost-sharing). The change will result in more equitable payment for MA 
providers serving dually eligible beneficiaries. We project that our 
requirement as finalized will result in increased bid costs for the 
MOOP for some MA plans. A portion of those higher bid costs will 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 Federal 10-
year cost estimate for the finalized requirement is $614.8 million.
6. Special Requirements During a Disaster or Emergency for Medicare 
Advantage Plans (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 specific depending on the type or scope 
of the disaster or emergency, while other situations, like the 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. In this final rule, we clarify the period 
of time during which MA organizations must comply with the special 
requirements. Under this final rule, MA organizations must ensure 
access for enrollees to covered services throughout the disaster or 
emergency period, including when the end date is unclear and the period 
renews several times, so long as there is a disruption of access to 
healthcare.
7. Amend MA Network Adequacy Rules by Requiring a Compliant Network at 
Application (Sec.  422.116)
    We proposed 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 will 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 1 year ahead of 
the beginning of the contract as the proposed change for network 
adequacy rules will require. Therefore, the final rule 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 will no longer apply and MA 
organizations will need to meet full compliance.
    We are finalizing our proposal, with one modification; to allow 
applicants to utilize Letters of Intent (LOIs) to meet network 
standards in counties and specialty types as needed. Once the contract 
is operational, MA organizations must have signed contracts with 
providers and facilities to be in full compliance.
8. Part C and Part D Quality Rating System
    Due to the scope and duration of the COVID-19 PHE, we adopted a 
technical change to the 2022 Star Ratings methodology for extreme and 
uncontrollable circumstances in the ``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'' 
published in the Federal Register and effective on September 2, 2020 
(hereafter referred to as the ``September 2nd COVID-19 IFC''),\2\ (CMS-
3401-IFC; 85 FR 54820) at 42 CFR 422.166(i)(11) to make it possible for 
us to calculate 2022 Star Ratings for MA contracts. We proposed 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 
(87 FR 1842, January 12, 2022). 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. We are therefore finalizing Sec.  422.166(i)(12) 
without modification. In this final rule, we also respond to comments 
we received on the Medicare Advantage and Part D Star Ratings 
provisions in the interim final rules titled ``Medicare and Medicaid 
Programs; Policy and Regulatory Revisions in Response to the COVID-19 
Public Health Emergency'' published in the Federal Register on April 6, 
2020,

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with a March 31, 2020 effective date (hereafter referred to as the 
``March 31st COVID-19 IFC'') \3\ (85 FR 19230) and the September 2nd 
COVID-19 IFC. As detailed in sections II.D.3. and II.D.4. of this final 
rule, we are finalizing most of the Star Ratings provisions from the 
March 31st COVID-19 IFC and the September 2nd COVID-19 IFC, but we are 
not finalizing several Star Ratings provisions in those interim final 
rules, regarding circumstances that did not happen, because they are 
moot. CMS will address other provisions from the interim final rules in 
other rulemakings.
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    \2\ www.federalregister.gov/documents/2020/09/02/2020-19150/medicare-and-medicaid-programs-clinical-laboratory-improvement-amendments-clia-and-patient.
    \3\ www.federalregister.gov/documents/2020/04/06/2020-06990/medicare-and-medicaid-programs-policy-and-regulatory-revisions-in-response-to-the-covid-19-public.
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9. Past Performance Methodology to Better Hold Plans Accountable for 
Violating CMS Rules (Sec. Sec.  422.502 and 422.503)
    In a 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 a new contract 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. In this final rule, we 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 
third-party marketing organizations (TPMOs) and has received feedback 
from beneficiary advocates and stakeholders concerned about the 
marketing practices of 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 is 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 this final rule, we will address the 
concerns with TPMOs by means of the following three updates to the 
communications and marketing requirements under 42 CFR parts 422 and 
423, subpart V: (1) We 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 add a new disclaimer that 
will be required when TPMOs market MA plans/Part D products (Sec. Sec.  
422.2267(e) and 423.2267(e)); and (3) we update 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 (FDR).
    CMS' January 2021 final rule, entitled ``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) 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 Affordable Care Act. In the months since the publication of this 
rule, CMS gained additional insight regarding the void created by the 
lack of these 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, in this final rule we are finalizing a 
requirement that MA and Part D plans create a multi-language insert 
that will inform the reader, in the top fifteen languages used in the 
U.S., as well as any additional non-English language that is the 
primary language of at least 5 percent of the individuals in a plan 
benefit package service area, 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. As part of the finalized requirement, plans will be required 
to include 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). We further note 
that existing statutes, including Section 504 of the Rehabilitation Act 
and 1557 of the Affordable Care Act, require the provision of any 
auxiliary aids and services required for effective communication for 
individuals with disabilities at no cost to the individual.
    Finally, in this final rule we are 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 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, the new MLR reporting 
templates will require 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. Sec.  423.100 and 423.2305)
    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 
proposed to eliminate this exception for contingent pharmacy price 
concessions (87 FR 1842, January 12, 2022). We proposed 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 proposed to define as the lowest amount a pharmacy 
could

[[Page 27708]]

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 will 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). We proposed to allow plans the flexibility to 
determine how much of the pharmacy price concessions to pass through at 
the point of sale for applicable drugs in the coverage gap phase of the 
benefit. After consideration of the comments, we are modifying our 
proposal to apply the new definition of ``negotiated price'' to all 
phases of the Part D benefit, including the coverage gap phase. We are 
also amending the definition of ``negotiated price'' at Sec.  423.2305 
by revising paragraphs (1) and (2) of the definition of ``negotiated 
price'' for the Coverage Gap Discount Program to be consistent with the 
definition of ``negotiated price'' that we are adopting at Sec.  
423.100 (that is, the lowest possible reimbursement such network entity 
will receive, in total, for a particular drug). This policy takes 
effect 60 days after publication of the final rule and is applicable 
beginning on January 1, 2024. Part D sponsors will need to account for 
these changes in the bids that they submit for contract year 2024.
    In this final rule, we 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 had not yet been defined in the 
Part D statute, Part D regulations, or sub-regulatory guidance. We 
define price concession to include 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.

C. Summary of Costs and Benefits

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BILLING CODE 4120-01-C

D. Background

    We received approximately 6,179 timely pieces of correspondence 
containing one or more comments for the provisions addressed in this 
final rule from the proposed rule titled ``Medicare Program; Contract 
Year 2023 Policy and Technical Changes to the Medicare Advantage and 
Medicare Prescription Drug Benefit Programs'' which appeared in the 
Federal Register on January 12, 2022 (hereafter referred to as the 
January 2022 proposed rule, 87 FR 1842). Comments were submitted by MA 
health plans, Part D sponsors, beneficiaries, MA enrollee and 
beneficiary advocacy groups, trade associations, providers, pharmacies 
and drug companies, States, telehealth and health technology 
organizations, policy research organizations, actuarial and law firms, 
MACPAC, MedPAC, Members of Congress, and other vendor and professional 
associations.
    The proposals we are finalizing in this final rule range from minor 
clarifications to more significant modifications based on the comments 
received. Summaries of the public comments received and our responses 
to those public comments are set forth in the various sections of this 
final rule under the appropriate headings.
    We received an overarching comment related to the proposed rule, 
which we summarize in the following paragraphs:
    Comment: A commenter expressed a concern about the timing of the 
provisions included in the proposed rule related to the deadline for 
bid submissions, especially related to proposals with contract year 
2023 effective dates. The commenter noted that several proposals would 
require operational and technical changes for MA organizations as well 
as additional resource allocations, and, as such, welcomed additional 
time for implementation. The commenter suggested it could better align 
and collaborate with CMS in the future if given more time to fully 
understand and implement proposed changes.
    Response: We understand and appreciate the commenter's concerns and 
MA organizations and Part D sponsors' willingness to work to meet the 
implementation date timeframes. In response to comments, we are 
modifying the date on which some of the new and amended regulations in 
this final rule become applicable. We describe these modifications in 
further detail in the respective sections of the rule.
    We also note that some of the public comments received for the 
provisions implemented in this final rule were outside of the scope of 
the proposed rule. As such, these out-of-scope public comments are not 
addressed in this final rule. The following paragraphs summarize the 
out-of-scope public comments.
    A commenter noted that long-term care provider-led institutional 
special needs plans (I-SNPs) offer a strong additional solution to 
States in integrated efforts, especially for long-term care services 
uses with complex, high risk needs.
    We received a few comments related to D-SNP look-alikes, which are 
addressed at Sec.  422.514(d). A commenter requested that CMS consider 
reducing the threshold for a D-SNP look-alike from the current 80 
percent of dually eligible individuals enrolled to 50 percent and 
requiring the Medicare program to inform individuals that they are 
enrolling in a non-integrated model where an integrated model exists. 
Without such action, this commenter expressed that D-SNP look-alikes 
could undermine progress on integration,

[[Page 27713]]

leading to the erosion of D-SNP enrollment over time and additional 
beneficiary confusion. Another commenter requested that CMS reconsider 
its current policy for States without a D-SNP option for partial-
benefit dually eligible individuals by either allowing these 
individuals to enroll in FIDE SNPs or excluding them from the 80-
percent threshold calculation used to determine D-SNP look-alikes in 
these States.
    A few commenters encouraged CMS to consider applying other MMP 
design elements to D-SNPs. These included extending contract management 
teams to HIDE SNPs and FIDE-SNPs, D-SNPs with exclusively aligned 
enrollment, and/or D-SNPs with a meaningful proportion of enrollees who 
receive Medicaid benefits from a managed care plan affiliated with the 
D-SNP; requiring D-SNPs to develop single case agreement policies to 
enable enrollees to see out-of-network providers; applying MMP program 
audit rules and protocols to D-SNPs with exclusively aligned 
enrollment; and allowing beneficiaries to enroll in integrated plans on 
a monthly basis rather than the roughly quarterly enrollment 
opportunities under MA.
    MACPAC noted that while the provisions in the proposed rule promote 
integration in existing products, they do not necessarily increase the 
availability of integrated models or enrollment in integrated plans and 
urged CMS to look for ways to expand policies to promote integration 
beyond D-SNPs with exclusively aligned enrollment in future rulemaking.
    A commenter encouraged CMS to reconsider its approach to setting 
separate requirements for D-SNPs and Medicaid managed care plans and to 
align Federal regulations for FIDE SNPs with those that already exist 
for Medicaid managed care.
    A commenter recommended that CMS take steps to reduce limitations 
on data sharing between plans and States and provide additional 
guidance on creating a standardized and electronic method to integrate 
information in model materials.
    A few commenters recommended that CMS take steps to ensure that 
quality measurement is appropriately targeted to the populations served 
by each product and that measurement and related financial incentives 
do not disproportionately penalize D-SNPs for serving populations with 
greater risk factors. Other commenters urged CMS to require all States 
to adopt standardized, disability-informed quality measurement tools so 
that measures are collected and reported in a uniform format.
    A few commenters expressed concern related to quality measurement 
for D-SNPs more broadly. A commenter stated that because of the 
challenges inherent to serving younger dually eligible beneficiaries 
with disabilities who represent the most complex and at-risk Medicare 
members with the most social risk factors, plans serving this 
population have less quality bonus funding available to support 
supplemental benefits tailored to the population.
    A commenter suggested CMS consider revising the requirement that 
the D-SNP and Medicaid managed care plan contract holder must be the 
same legal entity in order to qualify as a FIDE SNP; instead, the 
commenter recommended using the same requirement that is used for HIDE 
SNPs that the contract holder is the same parent organization or 
another entity that is owned and controlled by its parent organization.
    A few commenters requested CMS consider additional financial 
policies. A commenter encouraged CMS to require States to ensure that 
the capitated payments for HIDE SNPs and FIDE SNPs are documented in 
the State Medicaid agency contract. Another commenter noted that the 
existing risk adjustment methodology is not sensitive to pick up all of 
the nuances for D-SNPs that largely serve populations with more complex 
care. A commenter requested that CMS consider clarifying elements of 
the cost-sharing billing process during an enrollee's Medicare deeming 
period, including prohibiting Medicare cost-sharing being billed to 
dually eligible individuals during the Medicare deeming period.
    A commenter requested guidance on how to handle cost-sharing for 
supplemental benefits that may overlap with what is provided by 
Medicaid.
    A commenter expressed concern regarding the complaint resolution 
process for dually eligible individuals, noting that it is fragmented 
and confusing when some issues are handled by State Medicaid agencies 
or plans while others are handled by CMS or MA plans. The commenter 
noted that ``no wrong door'' policies for enrollee concerns are 
critical to ensuring complaints are addressed.
    A commenter urged CMS to consider the limited availability of 
transportation options in rural communities when finalizing the 
proposed rule.
    A commenter expressed interest in additional research to better 
understand fluctuations within dual eligibility and what may cause a 
partial-benefit dually eligible individual to become a full-benefit 
dually eligible individual and encouraged CMS to assess whether 
integrated models can help prevent partial-benefit dual eligible 
individuals from necessitating full-benefit status.
    A commenter suggested that another approach to improving integrated 
care is to establish a single program that would provide dually 
eligible beneficiaries with their medical, long-term care, behavioral, 
and social needs. They further suggested the program allow States to 
contract with the administering entities, which would bear two-sided 
risk to ensure accountability and eliminate incentives for cost-
shifting.
    A commenter expressed concerns about the MA program overall, 
including inadequate care provided to MA enrollees, low payments to 
providers, and high MA payment rates compared to the original Medicare 
fee-for-service (FFS) program.
    CMS received a number of comments regarding extending the COVID-19 
disaster adjustments that all contracts received for the 2022 Star 
Ratings for measures other than HEDIS-HOS measures and reducing the 
weight applied to the patient experience/complaints and access measures 
for the 2023 Star Ratings.
    CMS received many comments regarding network adequacy requirements 
and policies that are outside of the scope of this rule. Some 
commenters indicated that CMS should consider reinstating previous 
network adequacy standards including returning to the 90 percent rate 
of beneficiary requirements within time and distance standards for 
micro, rural and counties with extreme access considerations, as well 
as including dialysis facilities as a specialty type evaluated for 
network adequacy under Sec.  422.116(b). Many commenters recommended 
that CMS add criteria to our current network adequacy standards. For 
example, commenters recommended that CMS add new provider and facility 
specialty types, including sub-specialty types, to our list of those 
which are evaluated for network adequacy standards under Sec.  
422.116(b). Some commenters suggested that CMS increase the frequency 
in which network adequacy formal reviews are conducted or align the 
triennial network adequacy review timelines with the application 
timeline. A commenter suggested that CMS integrate network adequacy 
into Star Ratings measures. A few commenters suggested that CMS 
consider how increased use of telehealth-provided services will impact 
network adequacy, and that CMS should consider expanding the telehealth 
credit in certain county types such as rural

[[Page 27714]]

counties. A few commenters recommended CMS establish policies to 
enhance information available in MA plan network directories. A 
commenter suggested that CMS consider changes and improvements to the 
network adequacy exceptions and criteria process. A commenter provided 
recommendations regarding how network adequacy standards should 
recognize and address the unique needs of enrollees in I-SNPs. A 
commenter recommended CMS develop network standards specific to the D-
SNP population. Additional topics out of scope of this rule include 
requests to update timelines for release of the Reference and Sample 
Beneficiary Files, make MA organizations' network adequacy review data 
publicly available, and limit organization's ability to make changes to 
network providers throughout the contract year.
    CMS received some comments regarding special requirements during 
emergency and disasters that are out of scope for this rule. A 
commenter asked CMS to provide guidance about online or point-of-sale 
processing of Part B out-of-network claims during a disaster or 
emergency. Another commenter expressed concerns that these requirements 
do not apply to Part D drugs.
    A commenter suggested that we take a more holistic approach to past 
performance. The commenter suggested we review all contracts for past 
performance and not just applicants.
    We received several out-of-scope comments related to the provision 
on applying all pharmacy price concessions to the negotiated price at 
the point of sale. A few commenters urged CMS to address pharmacy 
benefit managers' (PBMs') formularies, specifically the preference for 
brand medications over generics due to the rebates and with respect to 
the use of biosimilars as they launch. Many commenters asked that CMS 
address the ``reasonable and relevant'' contracting terms and 
conditions between MA organizations/plan sponsors and pharmacies. A few 
commenters expressed concern with vertical integration of PBMs and 
pharmacies. A few commenters were concerned about the costs of COVID-19 
tests and treatments. Some commenters stated that CMS should not make 
the changes associated with this Pharmacy Price Concessions rule when 
it should instead be working to wind down or officially incorporate 
policies put in place during the COVID-19 PHE. Some commenters stated 
that the proposal failed to address the root cause of high drug prices 
and offered recommendations for regulating the pharmaceutical industry. 
A few commenters stated that PBMs should not set drug prices and 
encouraged CMS to make sweeping reforms including a patient bill of 
rights and a pharmacy bill of rights. A few commenters stated that PBMs 
cannot engage in sub-capitation arrangements that require pharmacies to 
bear risk. Some commenters requested CMS re-evaluate its policy on U.S. 
Food and Drug Administration (FDA)-approved anti-obesity medications. 
Other commenters recommended that CMS do more to improve access to the 
Part D Low-Income Subsidy (LIS) program, noting the program's 
importance to improving health equity and the nearly three million 
beneficiaries who are eligible for the program but not enrolled. This 
commenter also requested that CMS track and report on the number of 
complaints received regarding Part D plans charging individuals 
enrolled in the full LIS program the higher plan copayment rather than 
the established LIS copayment.
    Unless otherwise noted, cites to regulations are to title 42 of the 
CFR.

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

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.\4\
---------------------------------------------------------------------------

    \4\ 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.
---------------------------------------------------------------------------

    ``Integrated care'' refers to delivery system and financing 
approaches that--
     Maximize person-centered\5\ coordination of Medicare and 
Medicaid services, across primary, acute, long-term, behavioral, and 
social domains;
---------------------------------------------------------------------------

    \5\ ``Person-centered care'' typically refers to focusing care 
on the needs of the individual and ensuring that a person's 
individual preferences, needs, and values guide care decisions. This 
is in contrast to approaches to care in which the specific diagnosis 
or illness drives care and treatment decisions. See the National 
Center on Advancing Person-Centered Practices and Systems for 
additional information: https://ncapps.acl.gov/home.html.
---------------------------------------------------------------------------

     Mitigate cost-shifting incentives, including total-cost-
of-care accountability across Medicare and Medicaid; and
     Create seamless experiences for beneficiaries.
    We described at 87 FR 1849 through 1850 of the proposed rule 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. 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.\6\
---------------------------------------------------------------------------

    \6\ CMS Medicare-Medicaid Coordination Office FY 2020 Report to 
Congress, available at: https://www.cms.gov/files/document/reporttocongressmmco.pdf.
---------------------------------------------------------------------------

    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 managed care 
organization (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.
    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.

[[Page 27715]]

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.
    At 87 FR 1850 of the proposed rule, we described recent MA/Part D 
rulemaking to enhance D-SNPs. 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. We 
are working to improve and increase options for more integrated care in 
a variety of ways, including through D-SNPs.
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 \7\ 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 2022, 
approximately 4.0 million dually eligible individuals (more than 1 of 
every 4 dually eligible individuals) were enrolled in 729 D-SNPs.\8\
---------------------------------------------------------------------------

    \7\ ``Care coordination'' typically refers to the managing of 
care and sharing of information among medical and non-medical 
providers and supports across the spectrum primary, acute, 
behavioral health, long-term services and supports. See, for 
example, https://www.ahrq.gov/ncepcr/care/coordination.html, and 
Barth, S., Silow-Carroll, S., Reagan, Russell, M., Simmons, T. 
(2019) Care Coordination in Integrated Care Programs Serving Dually 
Eligible Beneficiaries--Health Plan Standards, Challenges and 
Evolving Approaches. Report to the Medicaid and CHIP Payment and 
Access Commission. https://www.macpac.gov/wp-content/uploads/2019/03/Care-Coordination-in-Integrated-Care-Programs-Serving-Dually-Eligible-Beneficiaries.pdf.
    \8\ 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.
---------------------------------------------------------------------------

    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 42 CFR 
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 42 CFR 422.101(f), and 
contracts with State Medicaid agencies as described in section 
1859(f)(3)(D) of the Act and at 42 CFR 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).\9\
---------------------------------------------------------------------------

    \9\ See https://www.govinfo.gov/content/pkg/FR-2019-04-16/pdf/2019-06822.pdf.
---------------------------------------------------------------------------

    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.\10\
---------------------------------------------------------------------------

    \10\ See https://www.govinfo.gov/content/pkg/FR-2020-02-18/pdf/2020-02085.pdf.
---------------------------------------------------------------------------

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. This State-Federal partnership is tested using 
authority under 1115A of the Act (as added by section 3021 of the 
Affordable Care Act) and further described below. 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. Our proposed rule at 87 FR 1851 through 1854 
summarized the key elements offered by MMPs under the capitated model 
demonstrations.
    As discussed in the proposed rule at 87 FR 1851, CMS and States 
partnered with MMPs to create a seamless experience for beneficiaries, 
but MMPs operate as both MA organizations offering Medicare Advantage 
Prescription Drug (MA-PD) plans 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 January 2022, there are 39 MMPs in nine States serving 
approximately 424,000 members.\11\
---------------------------------------------------------------------------

    \11\ MMP enrollment as of January 2022. See CMS Monthly 
Enrollment by Contract Report (January, 2022). Retrieved from 
https://www.cms.gov/research-statistics-data-and-systemsstatistics-trends-and-reportsmcradvpartdenroldatamonthly/enrollment-contract-2022-01.
---------------------------------------------------------------------------

    As summarized at 87 FR 1851 through 1854 in our proposed rule, 
while an independent evaluation of the FAI is still underway, we have 
already gleaned several lessons regarding integrated,

[[Page 27716]]

managed care from the capitated financial alignment model:
     Enrollee participation in governance helps identify and 
address barriers to high-quality, coordinated care;
     Assessment processes are a vehicle for identifying and 
addressing unmet needs, particularly those related to social 
determinants of health;
     Medicare-Medicaid integration correlates with high levels 
of beneficiary satisfaction;
     Carving in Medicaid behavioral health benefits helps 
promote better coordination of behavioral health and physical health 
services;
     Integrated beneficiary communication materials can enhance 
the beneficiary experience;
     Effective joint oversight of integrated managed care 
products is possible;
     Integrated care and joint oversight provide a platform for 
quality improvement;
     There is potential for market distortions in areas with 
multiple options targeting the same population; and
     State investment is critical to successful implementation 
of integrated care either through MMPs or D-SNPs.
    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. We proposed 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 in the proposed rule would incorporate 
certain MMP policies into the regulations governing D-SNPs or, in 
several cases, certain types of D-SNPs. We included a table (87 FR 
1854) summarizing how our proposals relate to MMP policies. Section 
II.A.14 of this final rule includes an updated version of that table to 
reflect the policies adopted in this final rule.
    Comment: Several commenters, including MACPAC, described the 
challenges dually eligible individuals and their providers and families 
experience navigating separate and fragmented Medicare and Medicaid 
delivery systems. A commenter noted suboptimal care coordination can 
compromise patient care and increase overall program spending. A 
commenter noted younger dually eligible individuals face health 
inequities caused by institutional racism and other systematic 
disadvantages. A few commenters encouraged full integration and MACPAC 
cited recent Bipartisan Policy Center reports \12\ urging full 
integration of Medicare and Medicaid services for all full-benefit 
dually eligible individuals. Another commenter emphasized that coverage 
of medical, behavioral health, and long-term services and supports 
should be aligned and integrated care should be grounded in the 
diversity of dually eligible enrollees, tailored to individuals' needs 
and preferences, prioritize care coordination, simplify eligibility and 
enrollment processes, minimize administrative burdens, and honor 
enrollee choice of plan and providers.
---------------------------------------------------------------------------

    \12\ Bipartisan Policy Center, Guaranteeing Integrated Care for 
Dual Eligible Individuals (2021) and A Pathway to Full Integration 
of Care for Medicare-Medicaid Beneficiaries (2020).
---------------------------------------------------------------------------

    Response: We appreciate the comments and we agree that a fragmented 
delivery system raises major issues, as we discussed in the proposed 
rule (87 FR 1849 through 1850). We are committed to maximizing 
opportunities for integration through the proposals finalized in this 
rule and will continue to explore additional ways to better align the 
Medicare and Medicaid programs in the future. We acknowledge the 
comment about dually eligible individuals experiencing health 
inequities caused by institutional racism and other systematic 
disadvantages. Addressing such inequity is a major focus of CMS and 
other Federal agencies, based in part on Executive Order 13985 on 
Advancing Racial Equity and Support for Underserved Communities Through 
the Federal Government (January 20, 2021).
    Comment: Numerous commenters supported the overall focus of the 
proposals to better integrate Medicare and Medicaid services, 
incrementally strengthen and improve integration for D-SNPs, advance 
health equity, and improve the beneficiary experience for older adults 
and people with disabilities. A few commenters indicated these 
proposals improve the potential for D-SNPs to provide person-centered 
care and support enrollees to remain independent and manage their 
health and daily activities. A few commenters indicated the proposals 
provide States with greater D-SNP coordination and oversight 
opportunities.
    A few commenters believed the proposals would tighten and clarify 
requirements for D-SNPs. A commenter indicated the proposals would help 
simplify D-SNP offerings, and another commenter noted support for the 
proposed rule's goal of strengthening consumer protections to ensure 
dually eligible individuals have access to accurate and accessible 
information about health plan choices and benefits. A few commenters 
believed the proposals would help engage enrollees in designing and 
participating in care. Another commenter indicated the proposals offer 
the potential for both administrative and clinical integration at the 
plan level.
    A commenter encouraged CMS to couple implementation of the final 
rule with guardrails to mitigate against potential unintended 
consequences. Another commenter encouraged CMS to quickly adopt 
regulations that reflect stakeholder recommendations in light of the 
rapid growth of D-SNPs.
    Several commenters expressed support for the package of D-SNP 
proposals as useful incremental steps toward furthering integrated care 
via D-SNPs. A commenter encouraged CMS to consider how steps taken now 
build towards a broader long-term vision for integrated care. Another 
commenter acknowledged that CMS did not want to be prescriptive but 
encouraged CMS to provide sufficient detail with regard to the array of 
D-SNP proposals when finalizing the rule given the recent growth in the 
D-SNP landscape.
    Response: We appreciate the widespread support for our proposals. 
As discussed in the proposed rule (87 FR 1850), these proposals build 
on two recent MA/Part D rulemakings and our experiences with MMP 
policies. We believe this final rule will further 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.
    As we discuss later in this section under specific proposals, we 
will provide technical assistance, monitor implementation of the 
finalized provisions, and consider future rulemaking as needed to 
address any identified areas of concern. For example, information from 
CMS audits will help us monitor the extent to which MA organizations 
are meeting the enrollee advisory committee requirements at Sec.  
422.107(f), and we may consider more prescriptive requirements, as 
needed, based on implementation experience.
    We acknowledge the request for additional detail related to some of 
the D-SNP proposals. As we discuss in response to comments on specific

[[Page 27717]]

proposals later in this section, we aim to strike a balance between 
providing MA organizations with flexibility in implementing various 
finalized requirements versus being more prescriptive. We explain our 
rationale further in responses to comments, including related to 
requirements for enrollee advisory committees at Sec.  422.107(e), SDOH 
questions in SNP HRAs at Sec.  422.101(f)(1)(i), and limited carve-outs 
of Medicaid behavioral health services and long-term services and 
supports (LTSS) at Sec.  422.107(g) and (h).
    Comment: A number of commenters commended CMS for applying lessons 
learned from MMPs to D-SNPs and providing a long-term strategy for D-
SNPs as an integrated plan option. A few commenters stated that the MMP 
demonstrations created a gold standard for integrated care and have 
given beneficiaries avenues for providing input on plan operations 
though beneficiary advisory committees; enhanced the beneficiary 
experience through integrated communications materials; scaled up 
person-centered care planning and care coordination including 
effectively combining medical and behavioral health benefits; and 
delivered a platform for incentivizing innovation and investment to 
improve quality of care for dually eligible individuals. Several 
commenters noted the achievements of particular States and MMPs in the 
FAI and expressed appreciation for the CMS goal of establishing a more 
permanent mechanism to sustain integrated programs beyond the 
demonstrations.
    MACPAC expressed support for CMS for proposals to promote 
integration by applying features of the MMPs operating under the FAI to 
D-SNPs. MedPAC encouraged CMS to extend some of the proposals that 
promote integration to HIDE SNPs too. A few commenters acknowledged the 
role of nonmedical benefits in providing care to complex populations 
and expressed appreciation for flexibilities in payment and benefit 
design.
    Response: We thank the commenters for the support for the proposals 
that incorporate many of the early lessons learned from the MMP 
experience into the broader MA program. We believe doing so will 
improve experiences for dually eligible individuals.
    Comment: A few commenters expressed support for the work of the CMS 
Medicare-Medicaid Coordination Office (MMCO) to improve care for dually 
eligible individuals, address needs around integration of care, focus 
on social determinants of health, and promote equity, while another 
commenter noted appreciation for MMCO efforts to lower health care 
costs for beneficiaries, States, and Federal Government.
    Response: We thank commenters for their support.
    Comment: Several commenters noted that Federal support would be an 
important component to helping States implement the necessary changes 
and to facilitate further integration of D-SNPs. These commenters noted 
that State officials often struggle with competing priorities, limited 
Medicare knowledge, and limited staff capacity to develop and implement 
integrated care initiatives for dually eligible individuals relative to 
their other responsibilities. A few commenters acknowledged the wide 
range of technical assistance that CMS has provided to date to help 
navigate the complexities of the policy environment and expand State 
ability to integrate and encouraged CMS to continue to bolster these 
resources for States should the proposals in this rule become final. 
Other commenters recommended that States would need additional Federal 
funding to enhance State capacity and to further incentivize 
integration.
    Response: We thank the commenters for this feedback and agree that 
States are an important partner in implementing many of the D-SNP 
proposals in this rule. We are committed to continue working closely 
with States to support their integration efforts and intend to utilize 
and build from the technical assistance resources we already have in 
place, including the Integrated Care Resource Center (see https://integratedcareresourcecenter.com).
    Comment: A few commenters noted the importance of robust oversight 
to ensure that policies do not lead to higher spending without actually 
benefiting people with Medicare and supported the increased oversight 
of D-SNPs contained within the proposed rule. A commenter expressed 
concern as to whether there was sufficient demographic data, especially 
on disability and on social, racial, and economic status, or data on MA 
supplemental benefit spending, access, and eligibility for such 
oversight. Another commenter expressed concern that the Federal 
Government lacks the capacity to conduct adequate oversight without 
sharing responsibility with States.
    Response: We thank the commenters for these comments. We agree that 
oversight is an important component of providing person-centered, high 
quality care and will continue to work with stakeholders to ensure 
integrated programs do just that. We will consider opportunities for 
improving the types and quality of available data necessary to support 
such oversight in the future. We address issues related to expenditure 
data on MA supplemental benefits as part of MLR reporting in section 
II.G of this final rule.
    Comment: A few commenters supported the focus on the D-SNP model 
for deepening integration, pointing out the widespread availability and 
growing enrollment in D-SNPs and the ongoing investments by plans and 
States in supporting infrastructure. The commenter indicated the 
provisions included in the proposed rule were a logical alternative to 
other more radical integration proposals. A commenter specifically 
appreciated CMS's focus on the experience of D-SNP enrollees given the 
large number of enrollees in D-SNPs in certain States and the health 
care needs of these individuals.
    Response: We thank the commenters for this feedback. As we 
discussed in the proposed rule at 87 FR 1888, the integrated care 
landscape has changed substantially over the last 10 years. Key changes 
include Congress making D-SNPs permanent, establishing new minimum 
integration standards, and directing the establishment of unified 
appeals and grievance procedures. 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 LTSS. These changes make D-SNPs an 
attractive vehicle for integration for dually eligible individuals.
    Comment: A few commenters stated that the proposals do not go far 
enough to further integrated care. A commenter stated that the proposed 
changes do not address the main factors that determine long-term 
beneficiary satisfaction with integrated care, such as access to 
providers, easily understood marketing or other materials to help 
inform beneficiaries of their choices, and access to supplemental 
benefits. Another commenter stated that while the proposed policy 
changes promote integration in existing products, they do not 
necessarily increase the availability of integrated models or 
enrollment in integrated plans.
    Response: We appreciate the feedback from these commenters. We 
believe several of our proposals address factors that determine 
beneficiary satisfaction--see, for example, our proposal at Sec.  
422.107(e) related to using specified integrated materials--but we 
appreciate that there remain many other

[[Page 27718]]

opportunities to improve experiences for dually eligible beneficiaries. 
We will consider whether there are additional opportunities to address 
these issues in the future.
    Comment: A few commenters supported the overall effort to promote 
care integration for dually eligible individuals but expressed concern 
about the potential for increased administrative burden for State 
Medicaid agencies, disruptions in care for members, and other 
operational challenges. A commenter expressed concern that some of the 
proposals would significantly curtail States' ability to customize 
programs that meet the specific needs of their State programs and 
constituents. Another commenter noted that the proposals are likely to 
be most impactful for States that are relatively far along in their 
integrated care strategies and recommended CMS continue its efforts 
through the Medicare-Medicaid Coordination Office and the Integrated 
Care Resource Center to promote integration for States newer to this 
policy area. A commenter was concerned that the operational aspects of 
some of the provisions would disadvantage new entrants to the MA 
market, particularly those that target underserved populations. Another 
commenter emphasized that CMS has an opportunity to ensure States do 
not use the proposed changes to hinder new market entrants who may 
offer more and better service to beneficiaries.
    Response: We thank the commenters for these comments and 
acknowledge the concerns they raise. It is important to note that none 
of the provisions in the proposed rule would impose new requirements on 
States; rather, States may choose whether or not to take advantage of 
any of the proposals finalized here. We are committed to continue 
working closely with States to support their integration efforts, 
regardless of how far along they are, and intend to utilize and build 
from the technical assistance resources we already have in place, 
including the Integrated Care Resource Center. While some proposals 
would impose new requirements of D-SNPs, we think on balance, the 
advantages of increasing the overall level of integration outweigh the 
potential downsides.
    Comment: A commenter recommended allowing MA organizations to offer 
D-SNPs without holding a Medicaid contract either directly or between 
the parent company and the State Medicaid agency.
    Response: We note that while State contracting policies may have 
prevented sponsors from offering D-SNPs in some markets, section 
1859(f)(3)(D) of the Act requires a D-SNP to have a contract with the 
applicable State Medicaid agency. States are authorized to determine 
which D-SNPs they will contract with, as described in section 164 of 
the Medicare Improvement for Patients and Providers Act (MIPPA) (Pub. 
L. 110-274), which amended section 1859(f) of the Act to add the 
requirement for D-SNPs to have a contract with the State.
    Comment: A commenter recommended that CMS further define terms such 
as care coordination, person-centered care, and integrated care. This 
commenter believes further definition of these terms is important to 
gain trust among dually eligible individuals, especially those between 
the ages of 21 and 65 years old.
    Response: An important theme of our proposals is to improve 
experiences for dually eligible beneficiaries who are enrolled in D-
SNPs. As part of that, we aim to streamline and simplify operations, 
including the terminology we use. We appreciate these suggestions and 
will consider them for the future. We believe that the terms care 
coordination, person-centered care, and integrated care are 
sufficiently clear in this final rule that additional regulatory 
definitions are not necessary.
3. Enrollee Participation in Plan Governance (Sec.  422.107)
    We believe managed care plans derive significant value from 
engaging enrollees in defining, designing, participating in, and 
assessing their care systems.\13\ 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.\14\ As described at 87 FR 1855 through 1856 of the 
proposed rule, Federal regulations for other programs, such as the 
Programs of All-Inclusive Care for the Elderly (PACE) and Medicaid 
managed care plans that cover LTSS include requirements for stakeholder 
engagement and committees, including input from beneficiaries.
---------------------------------------------------------------------------

    \13\ 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.
    \14\ 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.
---------------------------------------------------------------------------

    As required by the three-way contracts between CMS, States, and 
MMPs, all MMPs established enrollee advisory committees. As described 
at 87 FR 1854 through 1855 of the proposed rule, 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.
    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 proposed 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 proposed 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 proposed 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 contract 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

[[Page 27719]]

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 and that this requirement is therefore necessary and 
appropriate.
    While we described 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 noted 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 to have a member advisory committee when LTSS are covered under a 
Medicaid managed care plan's contract.
    First, we proposed 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. 
As proposed, 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 proposed 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. At 87 FR 1856 of the proposed 
rule, we explained that, by using the phrase ``representative sample'' 
in the regulation text, we intended that D-SNPs 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. For MA organizations 
that offer separate D-SNPs serving full-benefit dually eligible 
individuals and partial-benefit dually eligible individuals in the same 
State, we explained that our proposal would provide flexibility for MA 
organizations to solicit enrollee input through one or more committees 
where separate committees might represent specific eligibility groups.
    Finally, we proposed 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). Our proposal did not 
specify other responsibilities or obligations for the committee, but we 
encouraged D-SNPs to solicit input from enrollees on other topics would 
be part of the committee's responsibilities.
    At 87 FR 1857 of the proposed rule, we described how our proposal 
would relate to the requirement at Sec.  438.110 for Medicaid managed 
care plans that cover long-term services and supports and how some 
organizations may satisfy our proposed requirement at Sec.  438.110 
with the same advisory committee.
    Citing our belief that D-SNPs should work with enrollees and their 
representatives to establish the most effective and efficient process 
for enrollee engagement, we did not 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. However, we solicited comments on 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 committee 
responsibilities, additional committee topics, and whether we should 
limit the enrollee advisory committee proposed at Sec.  422.107(f) to a 
subset of D-SNPs. We also solicited 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. We noted that, if our proposal were finalized, we would 
update the CMS audit protocols for D-SNPs to request documentation of 
enrollee advisory committee meetings.
    Comment: Numerous commenters expressed strong support for our 
proposal to require that an MA organization offering one or more D-
SNP(s) in a State have one or more enrollee advisory committees that 
serve the D-SNP(s) offered by the MA organization in that State. Many 
of these commenters noted direct input from enrollees helps to improve 
plan quality, operations, and care coordination to better serve its 
enrollees and can help advance health equity among dually eligible 
individuals. A number of commenters stated that their support for our 
proposal was informed by their experience with enrollee advisory 
committees implemented by MMPs, Medicaid managed care plans, and D-
SNPs. Numerous commenters suggested that engagement of enrollees 
representing the diversity of the dually eligible population in a State 
is essential to providing meaningful person-centered care and 
effectively coordinating and integrating care across Medicare and 
Medicaid services in a manner that reflects individual's needs and 
preferences. A commenter shared their experience implementing D-SNP 
enrollee advisory committees, noting these committees are a chance to 
build trust with enrollees, improve plan processes, address health 
equity barriers, and empower enrollees as active contributors and co-
designers of programs and policies. Some commenters appreciated that 
our proposal builds on existing Federal regulations that require 
enrollee advisory processes among Medicaid LTSS managed care plans and 
PACE and similar requirements for MMPs, which would create fewer 
differences for State staff managing multiple integration efforts and 
preserve flexibility in the design of these committees. MACPAC 
expressed its support for the proposal and welcomes CMS modeling the 
structure after the MMP committees to include beneficiaries, families, 
and other caregivers. Some commenters viewed the proposed committee 
requirement as an opportunity for States to cross-pollinate committee 
input and activities across D-SNPs that operate in their State. Other 
commenters appreciated the proposed requirement for the committee to 
encompass a representative sample of D-SNP enrollees within a State and 
noted that, because of this requirement, plans constructing these 
committees would take efforts to recruit participants from the diverse 
backgrounds of their enrollees.
    Response: We appreciate the widespread support we received for our 
proposal. These comments bolster our belief that the establishment and 
maintenance of an enrollee advisory

[[Page 27720]]

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. We agree that the requirement that D-SNPs include a 
reasonably representative sample of members will incentivize them to 
consider diversity when recruiting for their enrollee advisory 
committees.
    Comment: A commenter applauded CMS's effort to create more 
mechanisms for enrollee input in plan operations and consult enrollees 
on issues related to health equity. But, this commenter believed 
requiring each SNP to establish and maintain a separate advisory 
committee could be redundant and duplicative with existing efforts. The 
commenter offered the example that, in many regions, coalitions or 
community groups already exist that can provide input on enrollee needs 
and stated that in some cases the existing coalitions or community 
groups are already prepared to inform plans about the challenges that 
impact their enrollees. This commenter recommended that CMS require all 
SNPs to have a mechanism to obtain diverse and representative enrollee 
input on plan policy and operations rather than requiring all D-SNPs to 
use the specific mechanism of enrollee advisory committees. Further, 
the commenter suggested that where community groups do not already 
exist, plans could then establish their own enrollee advisory 
committees.
    Response: We thank the commenter for this perspective. We would 
like to take the opportunity to clarify that our proposal would not 
apply to all SNPs but MA organizations with one or more D-SNPs in a 
State. While C-SNPs and I-SNPs could benefit from enrollee advisory 
committees and the type of engagement described by the commenter, and 
we encourage them to do so, we are not requiring it at this time. Our 
experience with such committees has been concentrated on plans 
exclusively or mainly enrolling dually eligible individuals, so we have 
chosen to apply this requirement to D-SNPs. Based on the D-SNP 
experience with such committees, we may consider future rulemaking to 
consider such a requirement for C-SNPs and I-SNPs.
    We recognize that coalitions and groups serving local communities 
can offer helpful perspectives to MA organizations and D-SNPs and our 
proposal does not preclude MA organizations and D-SNPs from engaging 
with other parties to gather feedback. But, 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, which is 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.
    Comment: Several commenters requested technical assistance for MA 
organizations and D-SNPs to help establish the proposed enrollee 
advisory committees. A few of these commenters stated that establishing 
robust enrollee advisory committees can be challenging. A commenter 
emphasized that the existence of an advisory committee is not itself a 
demonstration of enrollee input, but that these committees must be 
intentionally designed, integrated into overall program structures to 
be considered true enrollee engagement, and have decision-making 
authority. Another commenter requested that CMS provide technical 
assistance and guidance documents and/or training to plans, States, and 
consumer advocates on effective and standardized practices for these 
committees. A commenter suggested CMS leverage two existing resources 
on the topic of consumer engagement in enrollee advisory committees as 
technical assistance for plans regarding how to build a meaningful 
advisory committee.\15\
---------------------------------------------------------------------------

    \15\ Community Catalyst, ``Meaningful Consumer Engagement: A 
Toolkit for Plans, Provider Groups and Communities,'' March 2014. 
Retrieved from http://www.advancingstates.org/hcbs/article/meaningful-consumer-engagement-toolkit-plans-provider-groups-and-communities; and Community Catalyst, ``Supporting Meaningful 
Engagement through Community Advisory Councils,'' August 2020. 
Retrieved from: https://www.healthinnovation.org/resources/publications/supporting-meaningful-engagement-through-community-advisory-councils.
---------------------------------------------------------------------------

    Response: We welcome this feedback and agree that technical 
assistance to support the design and implementation of enrollee 
advisory committees is important. CMS's contractor Resources for 
Integrated Care partnered with Community Catalyst, a non-profit 
advocacy organization, and offered a series of webinars and other 
written technical assistance to help enhance MMPs' operationalization 
of these committees in 2019.\16\ In the proposed rule at 87 FR 1855, we 
outlined some of the best practices leading to successful enrollee 
advisory committees. We also noted in the proposed rule (87 FR 1888) 
that 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--
---------------------------------------------------------------------------

    \16\ Resources for Integrated Care and Community Catalyst, 
``Member Engagement in Plan Governance Webinar Series'', 2019. 
Retrieved from: https://www.resourcesforintegratedcare.com/article/member-engagement/.
---------------------------------------------------------------------------

     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.
    We expect these topics to also include a focus on enrollee advisory 
committees.
    Comment: We received numerous comments in favor of more 
prescriptive requirements and numerous comments in favor of a less 
prescriptive approach consistent with our proposal.
    Among those in favor of more prescriptive requirements, numerous 
commenters requested that we provide clarification or further 
requirements on selection processes for enrollee advisory committees 
and what we consider to be a reasonably representative sample of the 
population enrolled in the D-SNP. Several commenters suggested that a 
reasonably representative sample should include enrollee 
characteristics such as race, ethnicity, language, disability status, 
sexual orientation and gender identity, receipt of LTSS or behavioral 
health services, geography and service area. A few commenters suggested 
that we establish percentage thresholds, such as a majority of 
committee participants are dually eligible individuals or a majority of 
participants are non-white or non-English speaking. A commenter 
recommended that enrollee advisory committees be composed of a majority 
of participants based on the proportional representation of enrollees 
with lived experiences and demographic identities, including 
disability, while other commenters requested we provide specific

[[Page 27721]]

parameters on how D-SNPs might meet the definition of ``representative 
sample''. Some commenters requested that we specify a minimum number of 
participants for the enrollee advisory committees. A commenter 
recommended that CMS establish a threshold for volume of D-SNP 
enrollees that a single committee could represent, suggesting one 
committee per D-SNP or per a certain number of D-SNP enrollees across 
plans (for example, 20,000). This commenter also recommended that D-
SNPs be required to notify eligible enrollees of the opportunity to 
participate. Another commenter suggested we relax the representative 
sample requirement, as it is difficult for D-SNPs to engage all 
populations enrolled to include representation on advisory committees.
    Another commenter requested that CMS direct MA organizations to 
work with stakeholders, such as patient advocacy groups, to ensure 
enrollee advisory committees include a diverse and comprehensive 
patient population. MACPAC expressed that these committees should be 
developed by plans in partnership with advocates and should be 
representative of the people served by integrated programs. A few 
commenters noted that CMS should require D-SNPs to allow caregivers, 
personal care attendants, interpreters, and others to attend to help 
enrollees participate.
    In making its case for more prescriptive requirements, a commenter 
remarked that an analysis of MMP advisory committees indicates that, 
despite requirements in most States that committee membership reflects 
the diversity of the member body, the lack of guidance on what 
diversity means or how to properly recruit leads to under-
representation of minority enrollees in committees. According to the 
commenter, not defining ``reasonable sample'' of individuals enrolled 
in D-SNPs increases the risk that the committee does not adequately 
represent the D-SNP enrollees.
    Response: We appreciate the commenters' suggestions for additional 
specificity in requirements for establishing enrollee advisory 
committees for MA organizations with one or more D-SNPs in a State. 
Given the variation in State Medicaid program, D-SNPs, and dually 
eligible populations across States and localities and the existence of 
enrollee advisory committees established under Sec.  438.110, we 
continue to believe that D-SNPs should work with enrollees and their 
representatives to establish the most effective and efficient process 
for enrollee engagement.
    We appreciate comments regarding the need for more prescriptive 
requirements with respect to enrollee advisory committee diversity, and 
the need to more specifically define a reasonable sample of D-SNP 
enrollment such that committee representation is an accurate reflection 
of overall enrollment. We recognize that a key finding from the 2019 
report ``The Role of Consumer Advisory Councils in the Financial 
Alignment Initiative'' \17\ was the need for improved diversity of 
enrollee advisory committee participation. The first annual report for 
the Massachusetts Financial Alignment Initiative demonstration found 
that attracting and retaining diverse stakeholder participation in the 
Implementation Council was a challenge.\18\ The second annual report 
indicated the Implementation Council was able to recruit additional 
members, and one Implementation Council member noted that ``the 
resulting diversity was both exciting and challenging''.\19\ While we 
are choosing to be nonprescriptive in how a reasonable sample is 
defined for the purposes of our new requirement, we may consider more 
prescriptive requirements based on information regarding how MA 
organizations implement committees and comply with the requirement that 
the D-SNP enrollee committees be reasonably representative of the 
enrolled population. Future technical assistance will include promising 
practices for how plans can build a diverse committee membership.
---------------------------------------------------------------------------

    \17\ Center for Consumer Engagement in Health Innovation, ``An 
Exploration of Consumer Advisory Councils within Medicare-Medicaid 
Plans Participating in the Financial Alignment Initiative'', 2019, 
Retrieved from: https://www.healthinnovation.org/resources/publications/an-exploration-of-consumer-advisory-councils-within-medicare-medicaid-plans.
    \18\ RTI, ``Financial Alignment Initiative Annual Report: One 
Care: MassHealth Plus Medicare, First Annual Report,'' September 
2016 (updated July 2017). Retrieved from: https://innovation.cms.gov/files/reports/fai-ma-firstevalrpt.pdf.
    \19\ RTI, ``Financial Alignment Initiative: Massachusetts One 
Care Second Annual Report,'' April 2019. Retrieved from https://innovation.cms.gov/files/reports/fai-ma-secondevalrpt.pdf.
---------------------------------------------------------------------------

    Comment: We received some comments from organizations requesting 
that we specify how often the enrollee advisory committees must meet. A 
few of these commenters encouraged CMS to establish minimum frequency 
requirements but did not specify a meeting interval. Several commenters 
recommended that we require enrollee advisory committees to meet at 
least twice per year, and a commenter suggested quarterly convenings. A 
few of these commenters expressed concern that, without a minimum 
required frequency, plans would opt for annual meetings, which the 
commenters indicated would have limited value.
    A few commenters encouraged CMS to set training requirements for MA 
organizations and D-SNPs as they establish these committees. A 
commenter emphasized that CMS require D-SNPs to establish a process to 
train D-SNP staff on collecting and incorporating advisory committee 
feedback into plan operations and informing participants how enrollee 
feedback was used. We also received a comment that States should be 
given the authority to specify and require training components as part 
of their contracting with plans.
    Some commenters encouraged CMS to provide more specifics related to 
training for enrollee advisory committee participants. A few of these 
commenters recommended requirements to ensure MA organizations educate 
enrollee advisory committee participants about the responsibilities of 
these committees and ways to meaningfully engage in them, including 
providing an understanding of D-SNP program design and organizational 
structure. A commenter suggested that CMS include a requirement that 
the enrollee advisory committee receives training on key health and 
health care disparity concerns that affect the population served by the 
D-SNP and a robust module be provided on disability inclusion in health 
care, emphasizing intersectional identities. This commenter also 
suggested that D-SNPs provide the committee basic information about the 
right to request reasonable accommodations and policy modifications, an 
overview of the D-SNPs' transparency and accountability mechanisms, and 
local and State agencies and commissions with overlapping 
responsibilities and interests. A few of the commenters suggested that 
CMS create standards for training processes but did not provide further 
details.
    A few commenters suggested that CMS require enrollee advisory 
committees to incorporate other parameters. A commenter recommended 
that enrollees, not State authorities, should lead the committee 
process. Another commenter stated that CMS should consider other 
required feedback mechanisms for enrollee input beyond the proposed 
committee structure, which--in their view--could have a limited number 
of participants or may not include those who have voiced concerns about 
the plan. Another commenter suggested that CMS require MA organizations 
to implement best

[[Page 27722]]

practices to ensure enrollee advisory committee participant retention 
and equity.
    A few commenters urged CMS to issue additional sub-regulatory 
guidance concerning its expectations of MA organizations and D-SNPs in 
establishing these enrollee advisory committees.
    Some commenters suggested specific topics the committee should be 
required to focus on beyond the health equity topic included in the 
proposed rule. A few commenters recommended that the committees focus 
on concerns and priorities of the enrollees themselves. A commenter 
supported additional topics be shared with committee participants for 
their input but did not name any particular topics. Another commenter 
did not specify any additional topics but suggested that the D-SNPs 
provide information to alert the enrollee advisory committee 
participants of the scope of potential topics, such as through a non-
exhaustive list of topics other advisory committees have tackled. A few 
additional commenters identified specific topics for consideration, 
such as medication adherence, D-SNP collection of self-identified 
functional limitation data, and addition of self-identified functional 
limitation data fields to electronic patient records.
    Response: We appreciate the commenters' suggestions for additional 
specificity in requirements for establishing enrollee advisory 
committees. We continue to believe that giving D-SNPs flexibility in 
structuring the enrollee advisory committees will permit D-SNPs--and 
the enrollees participating on the advisory committees--to tailor these 
committees based on the local needs of enrollees. As we stated in the 
proposed rule, 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. 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 are 
not finalizing any additional Federal requirements as to the specific 
frequency, location, format, participant recruiting and training 
methods, or other parameters for these committees beyond certain 
minimum requirements; however, we may consider more prescriptive 
requirements in future rulemaking based on D-SNP experience with 
enrollee advisory committees.
    Comment: Numerous commenters emphasized the importance for 
transparency of these enrollee advisory committees and ensuring D-SNPs 
are held accountable for adhering to established requirements. Several 
commenters suggested that MA organizations create a feedback loop for 
advisory committees to see how their feedback is being considered and 
implemented and to share this information with enrollee advisory 
committee participants. A few commenters welcomed information on how 
CMS would evaluate the effectiveness of the enrollee advisory 
committees, including any expected measurable outcomes, to better 
understand how well the committees are achieving policy goals. Another 
commenter requested that CMS consider whether there may be additional 
Federal and State benefits to compiling the findings of these enrollee 
advisory committees since this information may help inform future 
policy duration for not only MA plans and SNPs but also for the 
original Medicare FFS program.
    Response: We appreciate the request for monitoring of enrollee 
advisory committees against the requirements outlined at Sec.  
422.107(f) and the interest in information gathered through these 
convenings. We are not requiring that MA organizations publicly 
distribute enrollee advisory committee meeting agendas or materials 
since these committees will be addressing challenging topics related to 
plans and their enrollees, including potentially market-sensitive 
information related to potential changes in future plan benefits. We 
are concerned that requiring plans to make these agendas and materials 
publicly available could interfere with committee effectiveness. We 
noted in the proposed rule that, if our proposal were finalized, we 
would update the CMS audit protocols for D-SNPs to request 
documentation of enrollee advisory committee meetings. Information from 
CMS audits will help us monitor the extent to which MA organizations 
are meeting the enrollee advisory committee requirements at Sec.  
422.107(f), and we may consider more prescriptive requirements, as 
needed, based on implementation experience.
    Comment: Numerous commenters supported the flexibility CMS offered 
in the structure of the proposed enrollee advisory committees and urged 
CMS to require a less prescriptive approach to the enrollee advisory 
committees, consistent with the proposed rule. Many of these commenters 
favored a minimum set of requirements to give D-SNPs the flexibility to 
implement and manage enrollee advisory committees that best meet the 
needs of the local population and obtain meaningful input. Several 
commenters stated that the design flexibilities encourage the 
development of enrollee advisory committees to best reflect the 
different types of D-SNPs (that is, fully integrated dual eligible 
(FIDE) SNPs, highly integrated dual eligible (HIDE) SNPs, coordination-
only D-SNPs \20\) currently in place and the complexity of the dually 
eligible populations enrolled, which can differ from one locale to 
another. Some commenters noted that this flexibility would allow plans 
that currently offer D-SNPs in multiple States to build a foundation 
for an advisory committee that can be modeled and then refined to 
address specific needs of populations represented in each committee. 
Several commenters urged CMS not to be prescriptive with enrollee 
advisory committee requirements, especially for plans that already have 
such committees in place. These commenters emphasized that flexible 
enrollee advisory committee requirements would allow plans to build on 
experience and existing enrollee feedback approaches to best reflect 
the nuance and complexity of the D-SNP plans offered and populations 
served by those plans. Other commenters noted that this flexibility 
allows MA organizations already implementing such committees to 
continue existing operations without major changes, and the flexibility 
would allow plans to avoid overlapping or duplicative requirements from 
CMS and States as well as avoid beneficiary confusion. In supporting 
this perspective, a commenter explained that its experience offering 
FIDE SNPs, HIDE SNPs, and coordination-only D-SNPs across multiple 
States suggested wide variation in the specific benefits covered and 
populations served. Another commenter expressed concern that an overly 
prescriptive approach would reduce the flexibility for innovation and 
could stifle some of the positive strides already underway among 
managed care plans.
---------------------------------------------------------------------------

    \20\ Coordination-only D-SNPs are D-SNPs that neither meet the 
FIDE SNP nor HIDE SNP definitions at Sec.  422.2.
---------------------------------------------------------------------------

    Response: We thank the commenters for their perspectives. Based on 
our experience with enrollee advisory committees operated by MMPs and 
PACE, we believe that D-SNPs should work with enrollees and their 
representatives to establish the most effective and efficient process 
for the enrollee advisory committees.

[[Page 27723]]

Permitting flexibility for the enrollee advisory committees gives MA 
organizations--and enrollees themselves--more opportunity to establish 
committees that best meet the needs of enrollees.
    State Medicaid agencies have broad authority to include more 
prescriptive parameters for enrollee advisory committees in their 
contracts with D-SNPs and could adopt some of the commenters' 
suggestions appropriate to their State through these State Medicaid 
agency contracts. As discussed in the proposed rule at 87 FR 1857, some 
State Medicaid agencies already do this in applying Sec.  438.110.
    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 \21\ 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. We note that compliance with Federal law 
related to accessibility and effective communications for persons with 
disabilities is a requirement under other statutes such as Section 504 
of the Rehabilitation Act. We also clarify that the enrollee advisory 
committees are not meant to preclude MA organizations and D-SNPs from 
gathering enrollee feedback through other means. As we discussed at 87 
FR 1856, our experience with existing requirements for MMPs and PACE 
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.
---------------------------------------------------------------------------

    \21\ Resources for Integrated Care and Community Catalyst, 
``Engaging Members in Plan Governance'', 2019. Retrieved from: 
https://www.resourcesforintegratedcare.com/article/member-engagement/.
---------------------------------------------------------------------------

    Comment: Some commenters requested that CMS clarify what 
documentation we will request as part of CMS audit protocols with 
respect to enrollee advisory committees. Other commenters suggested we 
audit enrollee advisory committees on the accuracy of committee 
representation of the D-SNP enrollee membership, meeting frequency and 
committee feedback to the D-SNP.
    Response: Information requested as part of the CMS audit protocols 
may be similar to that reported by MMPs as part of the reporting 
requirement (for example, dates of meetings held, number of enrollees 
invited, number of enrollees in attendance). As described in section 
IV.B.1.b., prior to implementation of new audit protocols (under OMB 
control number 0938-1395; CMS-10717), we will make them available to 
the public for review and comment under the standard PRA process, which 
includes the publication of 60- and 30-day Federal Register notices.
    Comment: Several commenters questioned whether D-SNPs could 
delegate the facilitation or operation of enrollee advisory committees 
to first tier, downstream, or related entities.
    Response: There is nothing in rule that precludes a D-SNP from 
delegating the facilitation or operation of an enrollee advisory 
committee to a first tier, downstream, or related entity. 
Notwithstanding any relationship(s) that the D-SNP has with first tier, 
downstream and related entities, the MA organization maintains the 
ultimate responsibility for adhering to and otherwise fully complying 
with all terms and conditions of its contract with CMS, per Sec.  
422.504(i). All requirements with respect to the enrollee advisory 
committee are still applicable in the event a D-SNP delegates 
facilitation or operation of the enrollee advisory committee.
    Comment: In addition to D-SNP enrollee advisory committees, some 
commenters recommended CMS require States to create centralized, cross-
plan advisory councils, similar to the implementation councils 
currently in place for the Massachusetts and Rhode Island 
demonstrations under FAI. Commenters suggested these councils be 
comprised of majority of D-SNP enrollees and their caregivers, and 
expressed that such councils could provide additional transparency and 
insight into D-SNP policy and operations. A commenter suggested CMS 
provide Federal funding for these State-level advisory councils, and 
another commenter suggested an implementation council was best 
positioned to liaise and collaborate with other similar health services 
and LTSS/HCBS (home and community-based services) county and State-
level committees including Olmstead committees, Money Follows the 
Person advisory committees, and Medicaid advisory committees.
    Response: While we acknowledge the utility of a centralized 
advisory council, and commend the important work of the Massachusetts 
One Care Implementation Council in particular, we defer to States to 
decide whether to implement broader advisory councils in order to 
solicit feedback more broadly on their Medicaid managed care programs 
and the D-SNPs that operate in the State.
    Comment: A commenter opposed the approach of allowing MA 
organizations to meet the requirements proposed in Sec. Sec.  
422.107(f) and 438.110 through one enrollee advisory committee, 
acknowledging that, although there is overlap in the enrollees served, 
there are important distinctions in the populations and topics relevant 
for each stakeholder group.
    Response: While we appreciate the commenter's perspective that 
there are important distinctions in the populations served, and that 
there may be distinct topics for each group, there may also be 
instances in which populations align and therefore separate enrollee 
advisory councils may be duplicative. We believe the best approach is 
to be nonprescriptive and allow one enrollee advisory committee to 
satisfy both requirements in the instances in which the minimum 
requirements for Sec. Sec.  422.107(f) and 438.110 are both met. States 
may choose to apply distinct requirements via their State Medicaid 
agency contracts and their Medicaid managed care contracts, such that 
plans would need distinct enrollee advisory committees for different 
plan populations.
    Comment: Many commenters suggested we delay the implementation of 
the enrollee advisory committee provision to contract year 2024 or 
suggested a phased-in approach that would require FIDE and HIDE SNPs to 
implement the enrollee advisory committees starting in contract year 
2023, with less integrated D-SNPs implementing in contract year 2024. 
Commenters indicated the need for additional time to develop outreach 
strategies, coordinate with States, and develop reasonable 
representation recruitment strategies. A commenter noted D-SNPs will 
need more than a few months to ensure membership represents the 
different enrollee perspectives impacted by access, infrastructure, 
clinical needs, economic status, and prevalence of social supports.
    Response: While we acknowledge commenters concerns around potential 
operational challenges to establishing and convening an enrollee 
advisory committee, we are nonprescriptive on meeting committee 
frequency, location, format, participant recruitment and training 
methods. For this reason, we do

[[Page 27724]]

not believe a contract year 2023 implementation timeframe is 
unreasonable. Given the implementation timing of this rule, D-SNPs will 
have approximately 6 months prior to the effective date of January 1, 
2023, to develop an enrollee advisory committee, and we are 
nonprescriptive regarding when in calendar year 2023 the committee must 
meet, as well as the number of meetings and meeting frequency. Further, 
the regulation permits use of one committee per State, allowing for D-
SNPs to start with a single committee and develop more nuanced 
committees over time. Additionally, while we have committed to 
providing technical assistance to D-SNPs in this area, a number of 
resources on establishing meaningful enrollee advisory committees are 
currently available via the Resources for Integrated Care.\22\
---------------------------------------------------------------------------

    \22\ Resources for Integrated Care ``Engaging Members in Plan 
Governance'', Retrieved From: https://www.resourcesforintegratedcare.com/article/member-engagement/.
---------------------------------------------------------------------------

    Comment: Numerous commenters requested clarification on how D-SNPs 
could reimburse enrollee advisory committee members for their time and 
expertise, and suggested D-SNPs be able to offer stipends, 
transportation or transportation reimbursement for in-person meetings, 
and food and drink.
    Response: We acknowledge the advantages of reimbursing enrollee 
advisory committee participants for their time and expertise, and prior 
technical assistance in this area \23\ has cited incentives as a best 
practice to recruit and retain enrollee advisory committee members. We 
clarify that enrollee participation in an advisory committee is neither 
a marketing activity nor a personal enrollee health-related activity 
that would fall under Sec.  422.134, so the authorities and limits that 
are specific to those activities under MA regulations would not apply. 
However, MA organizations are prohibited from providing cash, gifts, 
prizes, or other monetary rebates as an inducement for enrollment or 
otherwise by sections 1851 and 1854 of the Act. D-SNPs should ensure 
that any incentives be structured to avoid an inadvertent impact on 
enrollee eligibility for public benefits. In addition, the provision of 
stipends, transportation reimbursement, or anything else of value to D-
SNP enrollees serving on the enrollee advisory committee potentially 
implicates the Federal Anti-kickback Statute (AKS), found in section 
1128B(b) of the Act. Whether any particular arrangement violates the 
AKS would be based on the specific facts and circumstances. D-SNPs must 
ensure that the provision of reimbursement to these members complies 
with the AKS and other applicable law. We will provide future technical 
assistance to D-SNPs on this issue to help avoid unintended 
consequences related to plan compliance or enrollee eligibility for 
public programs.
---------------------------------------------------------------------------

    \23\ Resources for Integrated Care ``Engaging Members in Plan 
Governance'', Retrieved From: https://www.resourcesforintegratedcare.com/article/member-engagement/.
---------------------------------------------------------------------------

    Comment: A number of commenters expressed concerns about 
operationalizing an enrollee advisory council for a D-SNP that has low 
enrollment. Commenters cited concerns about D-SNPs' ability to meet the 
reasonably representative sample if overall plan enrollment is too 
small, particularly for a newly established plan or a plan operating in 
a rural service area. These commenters suggested CMS either set a 
minimum enrollment threshold or allow for advisory committees to cross 
geographies (for example, via multi-State consumer advisory councils). 
A few commenters recommended we set the minimum D-SNP enrollment 
threshold at 1,000 enrollees for the establishment of enrollee advisory 
committees. A commenter requested we consider exempting new plans from 
this requirement, while another recommended small plans be able to meet 
the requirement via focus groups, surveys, or other methods.
    Response: While we appreciate the commenters' recommendations with 
respect to low-enrollment D-SNPs and the challenges low D-SNP 
enrollment might present in operationalizing a consumer advisory 
committee, we do not agree that the reasons cited create a significant 
barrier for MA organizations to meet the new requirement. First, we 
would like to clarify that an 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. 
As proposed and finalized here, an MA organization would be able to 
choose between establishing a single enrollee advisory committee for 
one or more D-SNPs in that State or by establishing multiple committees 
in that State to comply with Sec.  422.107(f). Thus, in situations 
where an MA organization operates more than one D-SNP in a State, the 
MA organization can, unless State Medicaid agency contracts dictate 
otherwise, establish one or more committees that encompass multiple D-
SNPs in a State, which should help to address concerns related to low 
enrollment in any given D-SNP. Second, a number of MMPs that 
participated in FAI had low enrollment (that is, fewer than the 
suggested 1,000 enrollee threshold) and were able to operationalize 
meaningful enrollee advisory committees. Third, we are nonprescriptive 
in this requirement regarding how an MA organization recruits committee 
membership, the timing, frequency or number of advisory meetings an MA 
organization must conduct in a calendar year, and the meeting's format 
(for example, in person or virtual). The reasonably representative 
requirement is also sufficiently flexible that small plans can meet the 
standard. With this level of flexibility, we believe it is reasonable 
for D-SNPs that may have low enrollment to meet the requirements 
finalized at Sec.  422.107(f).
    Comment: Some commenters asked us to clarify or confirm whether D-
SNPs have the flexibility to convene their advisory councils virtually. 
A commenter noted current use of digital platforms, while other 
commenters suggested virtual meetings may encourage greater enrollee 
participation. A few commenters specifically welcomed the flexibility 
in committee format (that is, in-person vs. virtual). A commenter 
explained that while in-person meetings remain the gold-standard for 
engagement, providing flexibility in how a D-SNP advisory committee 
engages with enrollees would help maximize enrollee engagement and 
provide flexibility for the D-SNP to evolve its processes as new 
effective methods become available.
    Response: We are not proposing Federal requirements regarding the 
means by which enrollee advisory committees or committee meetings 
convene (either in-person or virtually). We confirm that MA 
organizations can meet the minimum requirements at Sec.  422.107(f) by 
convening meetings virtually, provided they are not restricted from 
doing so via their State Medicaid agency contract. However, we 
reiterate our encouragement of D-SNPs to adopt identified best 
practices to ensure advisory committee meetings are accessible to all 
enrollees, including where lack of meaningful access to internet 
technology and broadband may limit involvement.
    Comment: In the proposed rule, we solicited comments on whether we 
should limit enrollee advisory committees to a subset of D-SNPs. A few 
commenters agreed that the new requirement should apply to all D-SNPs, 
noting it to be the most comprehensive approach to soliciting feedback 
from dually eligible enrollees,

[[Page 27725]]

while acknowledging some D-SNPs may already have enrollee advisory 
councils that meet the new requirement. A commenter noted that while it 
had encouraged applying enrollee advisory committees to FIDE SNPs in 
the past, it also supported applying this approach more broadly to all 
D-SNPs.
    Response: We appreciate the comments of support and we agree that 
applying an enrollee advisory committee requirement to D-SNPs broadly, 
rather than a subset, is the better mechanism to solicit feedback 
directly from enrollees and assist D-SNPs in identifying and resolving 
emerging issues. We believe applying this requirement to all D-SNPs, 
including those with a low level of integration, is the best approach 
to elevate the voice of dually eligible enrollees across a wider array 
of States and circumstances.
    Comment: To increase transparency, oversight, and accountability, a 
few commenters urged State Medicaid agency participation in D-SNP 
enrollee advisory councils, or to give States access to the proceedings 
and recommendations of the committees on at least a quarterly basis. In 
contrast, a commenter suggested the inclusion of State participation on 
enrollee advisory councils would add unnecessary complexity.
    Response: Nothing in the proposed rule precludes State Medicaid 
agencies from requiring, via the State Medicaid agency contracts 
required by Sec.  422.107, D-SNPs to include State representatives in 
their enrollee advisory council meetings. Additionally, through these 
State Medicaid agency contracts, States could require D-SNPs to provide 
additional reporting on D-SNP advisory councils as a means for 
additional transparency, accountability, and oversight.
    Comment: A few commenters suggested CMS allow MA organizations to 
establish enrollee advisory committees on a regional or multi-State 
basis, to overcome barriers to enrollee participation or when D-SNP 
enrollment is small in any single State. A commenter suggested the MA-
PD's enrollee advisory committee within a State include enrollee 
representatives of the plans' other Medicare products as another means 
to encourage enrollee participation, while another requested to include 
Medicaid-only participants on the advisory committee to meet the 
existing Medicaid managed care advisory requirement at Sec.  438.110.
    Response: Due to the variations in State Medicaid agency contracts 
and Medicaid, we believe there is value in keeping enrollee advisory 
councils specific to a State. This offers operational simplicity to MA 
organizations to meet any State-specific advisory committee 
requirements and would improve the effectiveness of an enrollee 
advisory committee without combining committee membership across 
States, where services, eligibility, and geography could vary greatly. 
While we intend this new requirement to generate feedback based on the 
unique experience of dually eligible enrollees via a D-SNP enrollee 
advisory committee, we recognize that committees may not always be made 
up solely of dually eligible enrollees, as organizations can use a 
single advisory committee to meet the Medicaid managed care advisory 
committee requirement at Sec.  438.110. However, we do not agree that 
the enrollee advisory committee should include representatives from 
Medicare products that do not focus on dually eligible enrollees. In 
meeting the requirement proposed at Sec.  422.107(f), there is nothing 
precluding MA organizations from establishing sub-committee 
arrangements to established enrollee advisory committees. Also, the 
proposed requirement does not preclude non-SNP MA plans from 
establishing separate enrollee advisory committees.
    Comment: Many commenters indicated that the minimum of a single 
Statewide enrollee advisory committee across potentially multiple D-SNP 
products was an insufficient approach in larger States, where D-SNPs 
may have very large enrollment as well as geographically and 
demographically diverse service areas. Commenters noted that a combined 
enrollee advisory council in a large State would dilute the value of 
the committee. A commenter suggested CMS require each D-SNP to 
establish its own committee, and a few commenters requested flexibility 
for States to further direct committee geographic scope, composition, 
and other factors beyond the Federal minimum requirements, including 
the ability to require multiple committees for specific enrollee 
populations. Several other commenters asked CMS to clarify whether 
enrollee advisory committees need to be at the plan benefit package 
(PBP) level. Finally, a commenter expressed that even within a State 
and D-SNP parent organization, many D-SNPs have similar plan names and 
cover different benefits, which could lead to potential enrollee 
confusion if an advisory committee is established Statewide across D-
SNP products.
    Response: The new requirement established at proposed Sec.  
422.107(f) does not preclude States from using their State Medicaid 
agency contracts (as required by Sec.  422.107) to impose more 
prescriptive requirements for D-SNP enrollee advisory committees based 
on D-SNP enrollment, service area geography, or any other 
characteristic. The new proposal does not require D-SNPs to implement 
enrollee advisory committees at the PBP level, although they could 
choose to do so. States could also require each D-SNP to develop its 
own committee, either at the contract or the PBP level. Additionally, 
organizations that operate multiple D-SNPs in a State could elect to 
establish and maintain multiple enrollee advisory committees that best 
represent their eligibility populations (for example, full- or partial-
benefit dually eligible beneficiaries) and/or service areas. We believe 
this regulation sets a floor from which States and D-SNPs may work to 
craft enrollee advisory committees that best meet local population and 
plan needs without committee duplication or significant disruption of 
current enrollee advisory committee operations, as required either by 
States or Sec.  438.110.
    Comment: Many commenters questioned whether D-SNPs could use 
existing plan enrollee advisory committees--either FIDE SNP or 
committees representing Medicaid managed care plans that cover long 
term services and supports--to meet the new proposed requirement at 
Sec.  422.107(f). A few commenters asked us to clarify that one 
enrollee advisory committee could be used to meet the new requirements 
in Sec. Sec.  422.107(f) and 438.110, noting that competing advisory 
committees would be inefficient. Another commenter requested we provide 
clarity on how the proposal should be implemented with respect to LTSS 
and non-LTSS enrollee participants and corresponding council topics. 
Other commenters recommended the use of subcommittees (either D-SNP 
enrollee advisory committees specific to MLTSS or MLTSS advisory 
committee with a subcommittee specific to dually eligible enrollees) as 
a potential means to solicit more precise feedback on unique plan 
subpopulations.
    Response: We acknowledge some D-SNPs, or their affiliated Medicaid 
managed care plans covering LTSS, are currently operating enrollee 
advisory committees to meet existing State requirements; these existing 
committees may satisfy the requirements at Sec.  422.107(f). As we 
noted in the proposed rule, our proposal at Sec.  422.107(f) would 
permit 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

[[Page 27726]]

proposed at Sec.  422.107(f), when all the criteria in both regulations 
are met. However, a State may limit the ability of a D-SNP to use one 
committee to meet both regulatory requirements. Finally, nothing in our 
proposed requirement would preclude the use of subcommittees with 
respect to unique D-SNP subpopulations. As discussed earlier in this 
section, we are nonprescriptive on topics (for example, with respect to 
LTSS) covered by enrollee advisory committees so long as the minimum 
topics specified in the regulation (ways to improve access to covered 
services, coordination of services, and health equity for underserved 
populations) are addressed; however, we encourage D-SNPs and their 
advisory committees to choose topics most relevant to the populations 
served.
    Comment: Numerous commenters requested we encourage or require D-
SNPs to operate their enrollee advisory committees with accessibility, 
accommodations, and communications access in mind for enrollees with 
disabilities, as well as enrollees with limited literacy, limited 
digital literacy, lack of meaningful access to technology and broadband 
and limited English proficiency. Other commenters recommended CMS 
require D-SNPs provide interpretation and accommodation for individuals 
with hearing and vision disabilities and impairments. Another commenter 
recommended CMS require D-SNPs to conduct enrollee advisory committee 
meetings in the preferred language of the region/county, when that 
region's primary language preference is not English. A commenter noted 
the need for committee meeting materials in alternate formats, while 
another commenter urged CMS to require D-SNPs to provide accommodations 
to committee enrollees who lack transportation or access to the 
technology necessary to facilitate robust virtual participation. 
Finally, a commenter recommended that CMS provide parameters regarding 
the importance of D-SNPs facilitating access to enrollee advisory 
committees via training, recruitment, and location and timing of 
meetings that reflect the community and population to create a process 
that allows enrollees to meaningfully participate in the committee.
    Response: We agree with the commenters that it is vitally important 
for MA organizations to facilitate meaningful enrollee access to their 
enrollee advisory committees through accommodations for their 
enrollees' needs in order to achieve a representative sample of 
enrollee perspectives and meaningful feedback from the enrollee 
advisory committees. Although we are choosing to be nonprescriptive on 
meeting frequency, location, format, enrollee recruitment and training 
methods, and other parameters, we encourage D-SNPs to adopt identified 
best practices to ensure advisory committee meetings are accessible for 
all enrollees. Ensuring that the enrollee advisory committee has a 
reasonably representative sample of the covered population should 
include taking steps to ensure access for enrollees with disabilities, 
limited literacy (including limited digital literacy), and lack of 
meaningful access technology and broadband, particularly to the extent 
that these considerations are also relevant to improving access to 
covered services and health equity. Where D-SNPs serve enrollees with 
disabilities, limited literacy or limited English proficiency, we 
expect those characteristics to be reflected in the D-SNP's enrollee 
advisory committee membership. D-SNPs must comply with any applicable 
civil rights law. We note that existing Federal civil rights 
authorities such as Section 504 of the Rehabilitation Act of 1973, HHS' 
implementing regulation at 45 CFR part 84, and Title VI of the Civil 
Rights Act of 1964 and the implementing regulation at 45 CFR part 80 
would likely apply to an MA organization's administrative functions, 
such as enrollee advisory committees. We encourage D-SNPs to also 
consider virtual accessibility and transportation accessibility for in 
person meetings for their enrollee committee membership.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing without modification our proposed requirement for D-SNPs to 
establish and maintain enrollee advisory committees at Sec.  
422.107(f).
4. Standardizing Housing, Food Insecurity, and Transportation Questions 
on Health Risk Assessments (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 reassessments conducted for each individual enrolled in the plan 
are addressed in the individual's 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.\24\ 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 integrated D-SNPs (by which we mean D-SNPs or their 
affiliates under the same parent organization also receiving capitation 
for Medicaid services) may combine their Medicare-required HRA with a 
State Medicaid-required HRA so long as the applicable requirements for 
the HRA under Sec.  422.101(f) are met, to reduce assessment burden (86 
FR 5879).
---------------------------------------------------------------------------

    \24\ 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.
---------------------------------------------------------------------------

    Certain social risk factors can lead to unmet social needs that 
directly influence an individual's physical, psychosocial, and 
functional status.\25\ This is particularly true for food insecurity, 
housing instability, and access to transportation. As summarized in our 
proposal rule at 87 FR 1858, CMS in recent years has addressed social 
risk through the identification and standardization of screening for 
risk factors, including finalizing several standardized patient 
assessment data requirements for post-acute care providers \26\ and 
testing the Accountable

[[Page 27727]]

Health Communities (AHC) model under section 1115A of the Social 
Security Act. The AHC model tests whether systematically screening for 
health-related social needs and referrals to community-based 
organizations will improve health care utilization and reduce costs, 
and includes a CMS Innovation Center-developed AHC Health-Related 
Social Needs (HRSN) Screening Tool.\27\
---------------------------------------------------------------------------

    \25\ 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/.
    \26\ 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.
    \27\ CMS Innovation Center, ``The Accountable Health Communities 
Health-Related Social Needs Screening Tool.'' Retrieved from: 
https://innovation.cms.gov/files/worksheets/ahcm-screeningtool.pdf.
---------------------------------------------------------------------------

    As discussed in the proposed rule at 87 FR 1858 through 1859, 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.\28\ We posited that 
requiring SNPs to include standardized questions about social risk 
factors would be 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 would better enable SNPs to design and 
implement effective models of care.
---------------------------------------------------------------------------

    \28\ 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 proposed 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. We noted that these questions 
would help SNPs gather the necessary information to conduct 
comprehensive risk assessments of each individual's physical, 
psychosocial, and functional needs as required at Sec.  
422.101(f)(1)(i) and would 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 proposed 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 expressed our intent to provide ample 
notice to MA organizations of any changes in the questions over time. 
As discussed in the proposed rule, SNPs would comply with the new 
requirement added to Sec.  422.101(f) by including in their HRAs the 
standardized questions on these topics that we would specify in sub-
regulatory guidance. We described in the proposed rule our intent to, 
at a minimum, align selected questions with the Social Determinants of 
Health (SDOH) Assessment data element \29\ established as part of the 
United States Core Data for Interoperability Standard (USCDI) v2, when 
finalized and where applicable.
---------------------------------------------------------------------------

    \29\ For more information, see: https://www.healthit.gov/isa/taxonomy/term/1801/uscdi-v2.
---------------------------------------------------------------------------

    While we proposed that the regulation text specify that the wording 
of individual questions would be established through sub-regulatory 
guidance, we provided examples in the proposed rule 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 included the transportation question in the post-acute care 
patient/resident instruments \30\ and the housing and food insecurity 
questions from the AHC Model HRSN Screening Tool.\31\
---------------------------------------------------------------------------

    \30\ For more information, see: https://prapare.org/the-prapare-screening-tool.
    \31\ 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.
---------------------------------------------------------------------------

    As discussed in the proposed rule at 87 FR 1859, 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 
HRAs. 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 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 did not propose 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. As explained in the proposed rule at 
87 FR 1859, results of the HRAs would 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. We explained that a 
SNP could demonstrate this in several ways, consistent with its MOC, 
including making referrals to appropriate community partners and taking 
steps to maximize access to covered services that meet the individual's 
needs.
    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 HRAs 
to the State or its designee.) In the proposed rule at 87 FR 1859, we 
explained that, 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).
    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,

[[Page 27728]]

questions in multiple HRAs. As we explained in the proposed rule, we 
believe that the benefit gained by all SNPs having standardized 
information about these social risk factors outweighs this potential 
risk. Where States are interested in requiring assessment questions, we 
recommended that States consider conforming to the standardized 
questions we implement for use under this final rule and, for 
integrated care programs, ensuring that plans do not need to ask the 
same enrollees similar or redundant questions. However, we also 
solicited 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.
    As discussed in the proposed rule at 87 FR 1860, we considered 
several alternatives to our proposal. We considered requiring fewer or 
more assessment questions on additional topics related to social risk 
factors or different combinations of questions, including questions on 
health literacy and social isolation. We considered soliciting comment 
on different examples of questions on housing, food, and transportation 
other than the examples included in the proposed rule. We considered 
simply proposing that all HRAs address certain domains (for example, 
housing), without authorizing CMS to specify the standardized questions 
to be used. We also considered specifying that the new questions only 
apply to certain enrollees and not others. We explained our rationale 
for not including these alternatives in the proposed rule at 87 FR 
1860.
    Finally, due to the processes associated with developing HRA tools, 
approval of MOCs, and MOC implementation, we discussed applying our 
proposed requirement beginning contract year 2024. However, we also 
considered 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 solicited comments on our proposal and these potential alternatives. 
We also solicited comments on when CMS would need to issue sub-
regulatory guidance providing the specific questions to be included in 
the HRAs to ensure that MA organizations would have sufficient time to 
incorporate the required questions.
    We received the following comments on this proposal and respond to 
them below:
    Comment: Most commenters expressed support for our proposal to 
require all SNPs to include questions on housing stability, food 
security, and access to transportation as part of their HRAs. Some 
commenters noted that inclusion of questions on these topics in HRAs 
would improve insight into enrollee needs. Several commenters stated 
that collection of information related to the SDOH can also better 
inform plans of enrollees' challenges and reduce barriers to optimal 
care and quality of life. A few commenters noted the importance of 
SDOH-related information in the development of an individualized, 
person-centered care plan. Some commenters expressed appreciation that 
CMS's proposal acknowledged the influence of the SDOH on health 
outcomes. Several commenters noted that social risk factors have a 
significant impact on health outcomes for the SNP population in 
particular. Several commenters noted that capturing social risk factors 
in SNP HRAs can help plans develop targeted interventions and connect 
enrollees to available supplemental benefits. A commenter believed 
health plans are best suited to collect this information and have the 
necessary resources to connect beneficiaries to social support 
services. Another commenter believed awareness of SDOH information 
improves care and lowers long-term costs. Other commenters noted that 
identifying unmet social needs among SNP enrollees could help reduce 
health disparities and advance health equity. A few commenters stated 
that that answers to HRA questions help capture information on social 
risk factors that is not only useful for individual enrollees, but also 
can be curated for evaluation at the population level in a way that can 
inform policy changes like payment reform. Another commenter believed 
HRA data on social risk factors have the potential to inform SNP 
supplemental benefit design and could be useful for incorporating 
social risk factors into future risk adjustment.
    Response: We appreciate the widespread support for inclusion of 
questions on housing stability, food security, and access to 
transportation as part of SNP HRAs. We agree that requiring SNPs to 
collect information on these topics can allow SNPs to better understand 
enrollees' needs and challenges. As we noted in the proposed rule, 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 also appreciate 
the commenters' support for reducing health disparities and advancing 
health equity more broadly. We agree that better identifying the needs 
of SNP enrollees can be an important first step toward these larger 
goals.
    Comment: A number of commenters expressed support for the three 
question topic areas included in the proposed rule (housing stability, 
food security, and access to transportation). A commenter recommended 
CMS require all three categories be added to the HRAs. A few commenters 
noted these three topics are important indicators of social needs that 
are linked to individual health outcomes. A commenter noted that these 
three risk factors are issues that SNPs are well-positioned to address. 
Another commenter noted they supported the proposal and were already 
implementing an assessment tool that covered these three topics. Other 
commenters expressed support for all three topics, but noted 
transportation in particular. A commenter noted that problems with 
transportation can seriously impact access to care, and that advocates 
and beneficiaries report that these problems are widespread. Another 
commenter noted the importance of transportation for rural populations 
that may need to travel significant distances to providers. A commenter 
stated that SNPs armed with the knowledge that, for example, many of 
their members are experiencing access barriers due to a lack of 
transportation may wish to expand the availability of transportation 
benefits.
    A commenter expressed support for all three proposed topics, but 
noted particular support for the inclusion of one or more questions 
about food security. The commenter believed that requiring screening 
for food insecurity will allow plans to better understand the important 
interplay between food insecurity and chronic illness in their enrollee 
populations, and will better equip plans to connect enrollees to 
critical responsive services such as medically tailored meals.
    Response: We appreciate the support for our proposed HRA question 
topics. As we outlined in the proposed rule, we focused on housing 
stability, food security, and access to transportation because there is 
a large evidence base suggesting they have a particularly significant 
influence on the physical, psychosocial, and functional needs of the 
enrollees. These comments reinforce our belief that these three topics 
are the most important factors for which SNPs should be screening their 
enrollees.
    Comment: Some commenters expressed support for the three topic

[[Page 27729]]

areas included in the proposed rule but recommended that CMS include 
questions on additional topics as well. Several commenters recommended 
adding a question about family and unpaid caregiver support. A 
commenter noted that understanding how much support a SNP member has at 
home--or the caregiving responsibilities they may have--has direct 
connections to health outcomes of SNP enrollees and may provide 
information on the prevalence of family caregivers and the need to 
better support them to help ensure members can continue to live in the 
community. Another commenter believed that addressing this topic and 
expanding supports for caregivers could reduce future reliance on 
Medicaid-funded LTSS and limit growth in LTSS expenditures. A few 
commenters suggested adding questions about caregiver burden in 
particular, noting that early recognition of caregiver burden can lead 
to targeted supports, and a lack of recognition of caregiver burden can 
prompt an emergency department visit or hospitalization. A commenter 
also suggested CMS add an assessment question about symptom burden, 
noting that the SNP assessment can be a powerful opportunity to 
identify poorly managed pain and symptoms and avoid crises like 
potentially preventable emergency department visits. The commenter 
recommended that, at minimum, questions about symptom burden as well as 
caregiver burden be required for SNP enrollees with certain serious 
illnesses, but also believed there are benefits to including those two 
topics in HRAs for all SNP enrollees.
    Another commenter recommended multiple additional domains such as 
such as functional status, frailty, spoken language, and health 
literacy. Several other commenters encouraged CMS to include one or 
more questions on health literacy. A commenter noted that a question 
related to health literacy gets at the individual's ability to 
understand and ask questions about health information they receive, 
which the commenter suggested could have a significant impact on health 
outcomes.
    Some commenters recommended CMS include questions on both health 
literacy and social isolation. A commenter noted that these two health-
related social needs are prevalent among SNP populations and have 
direct impacts on health outcomes and behaviors, and expressed support 
for validated, concise screening tools on these topics, such as the 
Single Item Literacy Screener and AHC Model HRSN Screening Tool. 
Another commenter pointed to research showing that low health literacy 
is associated with nonadherence to treatment plans and puts patients at 
higher risk for hospitalization and mortality, and noted disparities in 
health literacy among different racial and ethnic groups. The commenter 
also believed the COVID-19 pandemic has highlighted weaknesses in the 
social support systems of older adults and at-risk populations, and 
noted that social isolation is associated with increased risk for 
premature mortality and significantly influences physical, mental, and 
cognitive health outcomes. A few commenters suggested CMS include a 
question on social isolation. A commenter recommended CMS include a 
question on social isolation rather than one on access to 
transportation. The commenter believed transportation has not been as 
high on the list of observed needs for SNP enrollees--they noted this 
was perhaps because many SNPs provide transportation as a supplemental 
benefit.
    A few commenters recommended CMS include questions related to 
disability and functional limitations. These commenters believed that 
information related to the SDOH is not enough and that, without 
information on disability status, the assessment is incomplete and will 
perpetuate the disparities it seeks to uncover. Another commenter 
recommended including questions about interpersonal violence and its 
subdomains intimate partner violence and elder abuse, as well as 
utilities insecurity, and noted that the AHC HRSN screening tool 
includes these topics.
    A commenter expressed support for CMS's three proposed topic areas, 
but noted some populations may not have those specific needs depending 
on individual circumstances or geographic location. The commenter 
believed an exclusive focus on these three social needs could miss 
other critical social needs that are more relevant, and noted that the 
relevance of different social needs questions will vary depending on 
individual circumstances, geographic location, populations served, and 
resource availability, among other factors. Another commenter noted 
that once the proposed HRA questions have been implemented 
successfully, CMS could consider adding new questions or expanding to 
other social needs topics, such as social isolation and access to 
telehealth.
    Response: We appreciate the commenters' suggestions and acknowledge 
that the domains these commenters suggested are all important 
indicators of unmet enrollee needs. However, we maintain that the three 
topics we proposed have the strongest currently available evidence base 
\32\ suggesting they have a particularly significant influence on 
health outcomes, and we still value parsimony in establishing new HRA 
requirements. Furthermore, the three topics on which SNP HRAs will be 
required to solicit information align with other efforts in this arena, 
such as the National Committee for Quality Assurance (NCQA) proposed 
Social Need Screening and Intervention HEDIS measure, which measures 
the percent of enrollees who were screened for unmet food, housing, and 
transportation needs, and received a corresponding intervention if they 
screened positive.\33\ As we discuss in more detail later in this 
section, the requirement we are finalizing at Sec.  422.101(f)(1)(i) 
allows SNPs flexibility to include questions from a list of screening 
instruments specified by CMS in sub-regulatory guidance on housing 
stability, food security, and access to transportation. The amendment 
we are finalizing to Sec.  422.101(f)(1)(i) does not preclude SNPs from 
including additional questions in their HRAs as appropriate for their 
enrollee populations. The broad language at section 1859(f)(5)(A) of 
the Act and at Sec.  422.101(f) provide SNPs a great deal of 
flexibility in developing their HRA tools to gather information about 
the unique physical, psychosocial, and functional needs of their 
enrollee populations in order to better meet those needs and coordinate 
care for the specific special needs population enrolled in the plan. 
Additionally, we may consider adding more, specific question topics in 
future rulemaking. We note that current regulations do not contain any 
specific requirements similar to what we are adopting in this rule, and 
we believe it is appropriate to first assess experiences implementing 
the change we are finalizing in this rule before proposing to require 
questions on other topics.
---------------------------------------------------------------------------

    \32\ See, for example, Kushel M.B., Gupta R., Gee L., Haas J.S.. 
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.
    \33\ https://www.ncqa.org/blog/hedis-public-comment-period-is-now-open/.
---------------------------------------------------------------------------

    Comment: Some commenters recommended that CMS require collection of 
patient demographic information as part of the HRA, including a variety 
of factors, such as race, ethnicity, sex, gender, gender identity, 
sexual orientation, language, disability, and others. A few of these 
commenters noted collecting this information is important to 
understanding how demographic

[[Page 27730]]

characteristics interact with each other intersectionally as well as 
with health outcomes, and is important to identifying disparities 
within a plan and in the SNP population more broadly. A commenter noted 
that collecting demographic information should be accompanied by 
quality improvement initiatives to reduce health disparities, such as 
improving a plan's ability to provide primary care in a culturally and 
linguistically appropriate manner. A commenter noted that demographic 
information can help facilitate a culturally sensitive care planning 
process for SNP enrollees. Another commenter expressed support for the 
proposal, but urged CMS to add safeguards to ensure the questions are 
framed and presented, and the answers are received, in respectful and 
culturally competent ways. The commenter encouraged all such questions 
to be posed only by people who have had training to combat implicit 
bias.
    A commenter recommended ensuring that SDOH data standards are 
inclusive so there is not exclusion and further marginalization of 
populations due to limited definitions such as gender being defined as 
binary male or female, excluding individuals of other genders including 
nonbinary, agender, and transgender. Another commenter believed there 
is a need to move beyond individual SDOH factors to incorporate factors 
at the neighborhood, community, and zip code level, such as housing 
discrimination, to identify systematic and institutionalized forms of 
discrimination that may affect health.
    A few commenters recommended that CMS include an option for an 
enrollee to choose not to respond to the proposed HRA questions to 
protect enrollee choice and privacy.
    Response: We appreciate the commenters' input and agree that 
collecting enrollee demographic and other information can provide the 
plan with a more complete picture of the enrollee. We believe that many 
SNPs are already collecting demographic and other information as 
described in the comments, and therefore we have chosen to focus on the 
three topics we proposed for parsimony. The amendment we are finalizing 
at Sec.  422.101 requires SNPs to include one or more questions on 
housing stability, food security, and access to transportation using 
questions from a list of screening instruments specified by CMS in sub-
regulatory guidance. We believe this approach allows SNPs enough 
flexibility to choose questions that are the most appropriate for their 
enrollee populations while still maintaining some of the benefits of 
standardization. We encourage SNPs to ensure HRAs are conducted in a 
culturally sensitive manner. We also clarify that enrollees always have 
the option to refuse to answer an HRA question if they choose.
    Comment: Some commenters suggested CMS require alternative or 
additional questions from those discussed in the proposed rule at 87 FR 
1859 that cover the same three proposed topics or closely related 
topics. A commenter suggested CMS consider the National Comprehensive 
Cancer Network's Distress Thermometer assessment, a well-known 
screening tool among oncology providers, that includes housing, food 
security, and transportation among other topics. Another commenter 
noted examples of questions covering these three topics that are 
required for D-SNPs in the commenter's State. A commenter believed the 
examples in the proposed rule provided a good starting point for the 
subsequent sub-regulatory guidance, but also offered additional 
questions for consideration on topics related to those in the proposed 
rule, including questions about fall risk in the home, barriers to 
shopping for healthy food, and whether lack of access to transportation 
is persistent or infrequent, among other questions. Another commenter 
recommended CMS require SNPs to include in their HRAs questions across 
three specific housing specific domains, not just the proposed topic of 
housing stability: Homelessness, housing instability, and inadequate 
housing, noting that the AHC HRSN screening tool identifies all three 
housing topics. A commenter cautioned CMS against utilizing questions 
from the PAC assessment instruments. The commenter noted the patient 
assessment instruments used in each of the PAC settings are based on a 
``medical'' model designed to determine medical care needs and 
associated resource use, and believed the information collected in the 
PAC assessments is insufficient to address ongoing social or medical 
needs.
    Response: We appreciate the commenter's suggestions. As discussed 
in more detail later in this section, we are finalizing language at 
Sec.  422.101(f)(1)(i) to require SNPs to include one or more questions 
from a list of screening instruments specified by CMS sub-regulatory 
guidance that complies with the Paperwork Reduction Act on housing 
stability, food security, and access to transportation (rather than 
requiring that all SNPs use the same specific standardized questions on 
these topics as proposed). We recognize that a variety of HRA questions 
on these topics could allow SNPs to collect meaningful information on 
their enrollees' needs. The requirement we are finalizing in this rule 
provides SNPs with some flexibility to select the specific questions on 
these topics that are most appropriate for their enrollees from the 
list of screening tools specified by CMS in sub-regulatory guidance. We 
remind SNPs that they may also choose to include additional questions 
that are related to the three required topics, but not exactly the 
same, such as fall risk in the home, for example.
    Comment: A number of commenters expressed concern that the addition 
of the proposed questions to HRAs would make the assessments too long 
and burdensome. Several commenters suggested that CMS limit the number 
of questions SNPs must include in their assessments. A commenter 
recommended CMS limit the number of required questions to one question 
on each of the three proposed domains. A few commenters stated CMS 
should start with just a few questions and/or interoperable codes 
relating to housing, food, and transportation. Other commenters 
believed adding the proposed questions could reduce HRA completion 
rates.
    Response: We appreciate the commenters' perspective on this issue. 
We believe that the potential benefit of SNPs having a more complete 
picture their enrollees' physical, psychosocial, and functional needs 
as required at Sec.  422.101(f)(1)(i) outweighs the potential burden of 
including these questions in an assessment. Furthermore, because the 
requirement we are finalizing allows SNPs some flexibility to choose 
questions on housing stability, food security, and access to 
transportation from a list of screening tools specified by CMS in sub-
regulatory guidance, SNPs can potentially continue using existing 
questions on these topics they already include in their HRAs if they 
are from the CMS-specified list, reducing the potential for 
administrative burden. We anticipate that the list of tools included in 
the CMS sub-regulatory guidance will likely include screening tools 
that are widely used in the industry and that SNPs may already be using 
for their HRAs. We will seek input on the list of screening instruments 
and comply with the Paperwork Reduction Act.
    Comment: A commenter suggested that, instead of questions on the 
three proposed domains, CMS use a one-to-two-question pre-screener that 
asks enrollees their needs or challenges across a wider range of social 
needs (such as social isolation, employment, safety, legal needs, 
assistance with

[[Page 27731]]

utilities, issues with a person's living or home environment, material 
security, and digital access, in addition to housing, food and 
transportation). While the commenter recognized that social needs pre-
screeners have not been widely used or vetted, the commenter believed 
pre-screeners could allow for a more holistic assessment of enrollee 
needs, which can then be followed up by additional questions if needed 
and be used to better inform care.
    Response: We appreciate the commenter's suggestion; however, as the 
commenter noted, this approach has not been widely used or vetted. We 
prefer that SNPs use questions from validated or otherwise widely used 
assessment instruments (including any required by States), because we 
believe they will allow SNPs to collect high-quality, actionable 
information on their enrollees--at the individual level as well as at 
the population level--to more holistically understand the barriers to 
care enrollees face. While we are not familiar with exactly what type 
of questions would be included in such a pre-screener, we do not 
believe that a question that asks enrollees about their needs across 
such a wide range of domains is likely to receive useful responses. 
Because we believe using validated or otherwise widely used assessment 
instruments is important to understanding and addressing enrollee 
needs, we are finalizing a requirement at Sec.  422.101(f)(1)(i) that 
SNPs include one or more questions from a list of screening instruments 
specified by CMS in sub-regulatory guidance on housing stability, food 
security, and access to transportation.
    Comment: A few commenters opposed requiring questions about social 
risk factors as part of SNP HRAs. A commenter recommended CMS give 
health plans the choice to include these questions on their HRAs to 
preserve assessment completion rates. Another commenter suggested CMS 
consider providing a list of standardized optional HRA questions, and 
noted that States could choose to require D-SNPs to include one or more 
optional questions in their HRAs, and individual plans could decide to 
include them as well. The commenter noted that plans using the optional 
questions could provide feedback to CMS on ease of use to help inform a 
future CMS decision about requiring these additional questions.
    Response: We disagree with the recommendation to make questions 
about social risk factors optional for SNPs. We believe it is necessary 
to require SNPs to include questions about housing stability, food 
security, and access to transportation in order to have a more complete 
understanding of enrollees' physical, psychosocial, and functional 
needs. Though we are aware that many SNPs may already be asking their 
enrollees various questions related to SDOH, we want to ensure that, at 
minimum, SNPs are collecting information on these three key topics that 
are among the most influential to an enrollee's health outcomes. We 
remind commenters that SNPs currently have the option to include 
questions about social risk factors on their HRAs; making the proposed 
questions optional would not necessarily expand the screening of SNP 
enrollees for social risk factors from the level of screening that SNPs 
are doing currently.
    Comment: A significant number of commenters expressed support for 
requiring standardized questions on the proposed topics. A commenter 
noted that standardized questions would streamline and facilitate ease 
in reporting, leading to improved data collection and higher quality 
data that more reliably measures impact and progress across 
populations. Another commenter believed that a lack of standardized 
data has impaired the ability of policymakers to fully understand the 
links between social risk factors and health inequities. Other 
commenters believed standardization would better ensure beneficiary 
needs are systematically identified and enable SNPs to develop and 
implement models of care to address those needs.
    Several commenters noted standardized questions could improve SNPs' 
ability to understand prevalence and trends in social risk factors 
among enrollees. Several commenters also noted that standardized 
questions would enhance both SNPs' and CMS's ability to collect, 
analyze, and publicly report disparity- and equity-related data. 
Another commenter noted that developing standards for collecting and 
sharing SDOH-related data can result in actionable insights into 
disparities while improving data sharing across sectors. A commenter 
noted the importance of standardized data on food security in 
particular, stating that the use of standardized screening questions 
would provide data needed to better understand the impact of food 
insecurity and chronic illness across SNPs as a whole. A few commenters 
noted the importance of standardized assessment questions to data 
exchange between SNPs.
    A commenter noted that there is a key need for standardized data on 
SDOH for interoperability purposes, the importance of which has been 
further amplified during the COVID-19 pandemic. A few commenters 
applauded CMS's intent to align the selected HRA questions with the 
SDOH data elements established as part of the USCDI v2. A commenter 
noted, however, there is still clarification needed to make certain the 
USCDI v2 questions would integrate seamlessly with traditional health 
information and result in successful interoperability.
    A few commenters stated that implementing standardized questions 
such as those from the AHC Model screening tool would ensure that plans 
are using screening questions that have been tested for validity and 
reliability and to maximize opportunities to compare data across 
settings. Another commenter stated that SDOH-related information should 
be standardized across plans and Medicare programs to ensure the 
screening tools health plans are utilizing to capture this information 
are uniformly adopted across SNP, MA, Health Exchange and Medicaid 
plans.
    A health plan commenter noted that they are already utilizing 
questions from the AHC HRSN screening tool to assess their enrollees 
and track their needs. The commenter noted that using this standardized 
tool has informed how they invested in internal capabilities and formed 
community partnerships to meet enrollee needs and improve their health. 
A few commenters stated that standardized questions would support 
plans' ability to address enrollee needs directly or to make referrals 
to social service organizations and programs. Another commenter 
believed that SNPs are in a unique position to meet enrollee needs 
because they have the flexibility to create unique benefit packages 
which can get to the root of many of the most important SDOH.
    A commenter noted that they did not have a preference to which 
questions are specified (that is, from which standardized screening 
tool), but they strongly encouraged CMS to include standardized 
questions in sub-regulatory guidance and recommended that CMS 
coordinate with other HHS agencies to require the same set of 
standardized questions.
    A commenter requested that CMS consider standardizing all questions 
on SNP HRAs to increase care coordination. Another commenter suggested 
CMS should provide clear definitions of housing, food, and 
transportation insecurity and word questions in a way to limit any 
ambiguity of the responses to increase the probability that MA plans 
get quantifiable, actionable data. They encourage CMS to reference 
existing tools and assessment questions when developing the 
standardized questions so that there is consistency with

[[Page 27732]]

screening tools already in use by providers and social services 
organizations.
    Response: We appreciate the commenters' support for our proposal to 
require standardized questions, and the commenters' perspective that 
standardizing the collection of information on SNP enrollees' social 
risk factors would improve SNPs' ability to understand their enrollees' 
needs, track those needs over time, and improve interoperability and 
data exchange between plans as well as between plans and CMS, should 
CMS require the SNPs to report this data. We are finalizing an 
amendment at Sec.  422.101(f)(1)(i) to require SNPs to include one or 
more questions from a list of screening instruments specified by CMS in 
sub-regulatory guidance on housing stability, food security, and access 
to transportation in their HRAs. However, we are not finalizing the 
part of our proposal that required SNPs to use specific standardized 
questions identified by CMS. We believe this middle-ground approach 
will retain some of the benefits of standardization while mitigating 
the potential downsides of using standardized questions, such as 
possibly (and unintentionally) limiting the opportunity to adopt 
questions that maximize cultural competence, potential increases in 
administrative burden and cost, and the potential for redundancy in 
States that have similar (but not fully aligned) requirements in their 
Medicaid programs. Requiring questions on the three topics from a CMS-
specified list of screening tools, rather than specific standardized 
questions, will allow SNPs to choose questions from the specified tools 
on these topics that are most relevant to their enrollee populations.
    We considered concerns about the administrative burden associated 
with modifying an HRA, as discussed in response to comments later in 
this section. We recognize that it could be burdensome for a SNP that 
is already asking questions on these topics in its current HRA to 
replace those questions with new ones from a CMS-specified list of 
screening tools. However, we believe that some degree of 
standardization helps ensure that SNPs are using validated questions 
and gathering high-quality, actionable responses from enrollees. 
Therefore, we are finalizing a requirement at Sec.  422.101(f)(1)(i) 
for SNPs to include one or more questions from a list of screening 
instruments specified by CMS in sub-regulatory guidance on housing 
stability, food security, and access to transportation in their HRAs.
    In response to commenters who expressed support for standardization 
because of its potential for improved data collection and exchange, we 
recognize there is a need for greater interoperability in this area. 
Though we are not limiting SNPs to specific questions identified by 
CMS, we are requiring SNPs to use questions from a list of screening 
instruments specified by CMS in sub-regulatory guidance. While this 
provides a measure of flexibility for SNPs, by limiting the scope of 
available questions on these three domains to specified instruments, we 
expect there will be some degree of standardization. We anticipate 
including validated, health IT-enabled assessment tools on the CMS-
specified list in order to maximize opportunities for standardized data 
collection and analysis. We also anticipate our sub-regulatory guidance 
will include screening instruments that have been developed with clear 
definitions of housing stability, food security, and access to 
transportation and that word questions in a way to limit any ambiguity 
of the responses and increase the probability that SNPs gather 
quantifiable, actionable data. As we develop the CMS-specified list in 
sub-regulatory guidance, we will consider existing requirements in 
other HHS programs, and will coordinate with agency partners to 
identify opportunities for burden reduction. In addition, the sub-
regulatory guidance will include the option to use State-required 
Medicaid screening instruments that include questions on these domains.
    In response to the commenter who requested that CMS consider 
standardizing all HRA questions, we note that we do not currently 
require any specific questions on SNP HRAs, and implementing such a 
large-scale requirement is outside the scope of this rulemaking.
    We clarify that this requirement only applies to SNP HRAs, though 
other MA plans are free to include questions on these topics on the 
one-time HRAs they are required to make a best effort to complete 
within 90 days of enrollment under Sec.  422.112(b)(4)(i).
    Comment: Numerous commenters opposed the requirement to include 
standardized questions specified by CMS. A number of commenters 
recommended that CMS instead set more flexible guidelines that allow 
plans to select their own assessment questions, such as requiring 
questions on certain topics rather than dictating the questions 
themselves. Some commenters asked CMS to consider allowing SNPs that 
are already collecting information on the proposed topic areas in their 
HRAs to continue using their existing questions. Another commenter 
believed flexibility to select and customize assessment instruments and 
questions is the best approach to encourage screening for a broad array 
of needs and identifying an enrollee's most salient needs.
    A commenter believed that requiring standardized questions would be 
expensive and cumbersome to change HRA questionnaires to match the CMS-
specified question wording for plans that already actively work with 
SDOH assessment software vendors. Another commenter noted there is 
already a robust data collection environment in this area, and that 
payers and providers may have existing interoperable systems with their 
own definitions and language that encode social needs questions in HRAs 
and electronic health records (EHRs). The commenter believed the CMS 
proposal could require multiple organizations to modify data collection 
and IT systems and have significant spillover impacts into provider 
EHRs. Another commenter believed that prescriptive HRA elements would 
disrupt SNP operations and have an adverse impact on overall HRA 
completion rates. The commenter did not believe that the HRA questions 
themselves must be standardized in order for SNPs to have a more 
complete picture of their enrollees' risk factors.
    A few commenters noted concerns about continuity in HRA data. A 
commenter expressed concern that, in the case of States and SNPs that 
have already been collecting this information, existing and baseline 
data could be lost or marginalized. Another commenter expressed concern 
that changes to their existing HRA would prevent them from doing 
effective historical data analysis.
    Several commenters believed that requiring standardized questions 
would be burdensome for SNP enrollees, citing that enrollees may 
already be answering similar but slightly different questions in other 
assessments, such as in Medicaid programs. A commenter noted that most 
D-SNPs actively work with State partners to simplify data collection 
tools so that beneficiaries do not have to answer multiple questions 
with similar responses, and suggested that this proposal could get in 
the way of that coordination and lead to assessment burden among 
enrollees. A commenter expressed concern that beneficiaries would be 
required to answer multiple related questions solely as a result of 
this requirement.
    Other commenters believed SNPs should be able to continue using 
their own assessment questions on topics

[[Page 27733]]

related to social risk factors because they tailored them to their 
specific enrollee populations and developed them over time to obtain 
more detailed information from enrollees. A commenter believed that 
standardized questions can lead to enrollees not feeling comfortable 
sharing information. Another commenter believed that CMS's proposal 
would prevent organizations from using validated questions they have 
determined work best to elicit information that is most effective in 
developing individualized plans of care for their enrollees. Another 
commenter believed plans are in the best position to review and revise 
their current HRAs to ensure collection of information and avoid 
overlap or unnecessary burden on enrollees.
    A few commenters expressed concern about standardized assessment 
questions needing to be translated. A commenter stated that 
expectations of enrollees may differ in certain SNP service areas due 
to a range of cultural, linguistic, social, geographic, and economic 
factors, and believed that CMS should consider giving plans flexibility 
so that information on housing stability, food security, and access to 
transportation can be sought in a manner that is culturally and 
linguistically appropriate.
    Response: We appreciate the commenters' concerns about requiring 
standardized questions in SNP HRAs. We recognize the challenge that 
CMS-specified standardized questions can pose to SNPs in terms of plan 
administrative burden and to enrollees in terms of potentially being 
asked multiple similar questions, and we acknowledge the commenters' 
perspective that SNPs are best-suited to develop questions that are 
most appropriate to their specific enrollee populations. We are also 
particularly sensitive to concerns about cultural and linguistic 
competence in HRAs. We agree with the commenter who stated that 
enrollee expectations may differ in different SNP service areas, and 
understand that an assessment question that is appropriate for one 
group of enrollees may be irrelevant or insensitive to another group. 
As discussed earlier in this section, we believe that the downsides of 
requiring specific standardized questions, including the potential 
administrative burden and duplication of existing efforts, outweigh the 
potential benefits of requiring specific standardized questions. 
However, we believe some degree of standardization helps ensure that 
SNPs are collecting high-quality, actionable responses from enrollees. 
We also believe using questions from a CMS-specified list of screening 
instruments increases the likelihood of SNP HRA data being shared in a 
meaningful way because the answers can be comparable across populations 
that are using the same questions. Therefore, we are finalizing 
language at Sec.  422.101(f)(1)(i) that requires SNPs to include one or 
more questions from a list of screening tools specified by CMS in sub-
regulatory guidance on housing stability, food security, and access to 
transportation in their HRAs. The sub-regulatory guidance will include 
the option to use State-required Medicaid screening instruments that 
include questions on these domains. We believe the requirement we are 
finalizing allows SNPs enough flexibility to choose questions that are 
appropriate for their enrollee population, given that they will be able 
to choose from a CMS-specified list of assessment tools. We also 
believe the requirement we are finalizing addresses commenters' 
concerns about the need to make burdensome changes to information 
technology (IT) and EHR systems to utilize CMS-specified standardized 
questions. We aim to include validated, widely available screening 
tools in our sub-regulatory guidance, similar to the tools included in 
the proposed NCQA Social Need Screening and Intervention HEDIS measure. 
We believe many plans may already be using questions from one or more 
of these types of screening tools. As a result, relative to our 
proposal, we believe there will be less need for systems, IT, and EHR 
changes.
    Comment: Many commenters expressed concern that requiring 
standardized HRA questions would lead to duplication of efforts, given 
existing State and provider SDOH assessment requirements. A commenter 
noted that plans, providers, and States have been using a variety of 
different screening tools for years that focus on similar SDOH domains 
but with questions that may differ slightly. A few commenters stated 
they did not fully support the proposal because many providers are 
duplicating this work at the clinic level. A commenter cited work that 
has gone into building SDOH screening and navigation into provider 
offices. Another commenter noted that it is important to continue to 
have flexibility for providers to pursue more in-depth screening in the 
clinical setting as they deem appropriate.
    A number of commenters noted concerns about how the SNP HRA 
requirement might overlap with existing efforts, particularly at the 
State level. A few commenters stated that dually eligible individuals 
may be asked similar, but not identical, questions in Medicaid managed 
care and in statewide D-SNP HRAs, and believed that the proposal to 
require standardized questions could therefore be challenging to 
implement. A commenter believed most D-SNPs already incorporate 
questions addressing social risk factors into their HRAs and actively 
work with State partners to simplify data collection tools and ensure 
the process is not burdensome for beneficiaries. A commenter 
recommended CMS give SNPs a menu of potential questions to include in 
their HRAs to potentially reduce overlap with other assessments. A few 
other commenters believed States should work with CMS on the 
development of standardized HRA questions and that CMS's rules should 
allow States to require alternative, standardized, State-specific HRA 
questions in addition to those CMS may specify in sub-regulatory 
guidance. The commenter believed this would improve alignment across 
each State's Medicaid program and reduce duplication for enrollees. 
Another commenter expressed support for standardization, but 
recommended that CMS allow for exemptions in cases where a State 
already requires assessments for social risk factors for Medicaid 
beneficiaries through other means, such as Health Homes and other 
Medicaid programs. The commenter noted that, in cases where community-
based organizations are conducting care coordination activities such as 
assessments, standard measures and systems for collection can create a 
barrier due to the cost of systems, including updates or changes to 
existing systems, to support standardized data collection. A commenter 
believed that States would like to retain the right to modify D-SNP HRA 
questions to complement Medicaid assessment questions through the State 
Medicaid agency contract with D-SNPs required by Sec.  422.107, and 
expressed uncertainty about whether that option would remain available 
under CMS's proposal.
    Another commenter recommended CMS consider how to use information 
on social risk factors that is already being collected by different 
providers to populate a SNP enrollee's HRA when the information came 
directly from the enrollee within a given timeframe, rather than asking 
the enrollee to answer multiple similar questions.
    A few commenters suggested CMS allow health plans to leverage 
community or provider organizations to complete these assessments. A 
commenter believed HRAs have a greater likelihood of being completed 
when conducted in the community

[[Page 27734]]

rather than by a health plan. Another commenter supported requiring 
standardized questions as outlined in the proposed rule, but encouraged 
flexibility in how the information would be gathered. The commenter 
noted they already require the same information as part of their 
State's comprehensive LTSS assessments.
    Response: We thank the commenters for their input on how we can 
best minimize assessment burden while ensuring SNPs and States are 
capturing actionable information on these three social risk factors. 
SNPs can choose to utilize community-based organizations or other 
entities as subcontractors to conduct HRAs or portions of an HRA, and 
we have seen successful examples of this both with SNPs and MMPs. SNPs 
and MMPs are responsible for ensuring that their subcontractors meet 
all CMS care coordination requirements. As described in Medicare Part C 
Plan Technical Specifications for D-SNPs, CMS will accept a Medicaid 
HRA that is performed within 90 days before or after the effective date 
of Medicare enrollment as meeting the Part C obligation to perform an 
HRA, provided that the requirements in Sec.  422.101(f)(1)(i) are met. 
We appreciate the commenters' concerns about duplication of efforts. We 
recognize that some SNPs, particularly D-SNPs, may already include 
questions related to housing stability, food security, and access to 
transportation on their HRAs to meet State requirements for assessing 
social risk factors. We also recognize that States may require D-SNPs 
to use particular assessment tools or questions on these topics to 
align with other State Medicaid initiatives or priorities, and that 
requiring SNPs to also include similar but not identical CMS-specified 
questions could result in redundant assessment questions that do not 
necessarily add to SNPs' knowledge of their enrollees' needs. When 
considered in combination with other concerns we discuss earlier in 
this section, we believe the potential downsides of requiring specific 
standardized questions--including potential redundancy and duplication 
of effort--outweigh the potential benefits of requiring all SNPs to use 
the same standardized questions. However, we maintain that some level 
of standardization is necessary to ensure SNPs are using validated 
questions and collecting reliable, actionable responses from enrollees. 
Therefore, we are finalizing language at Sec.  422.101(f)(1)(i) that 
requires SNPs to include one or more questions on housing stability, 
food security, and access to transportation from a list of screening 
tools specified by CMS in sub-regulatory guidance in their HRAs but 
does not require SNPs to adopt standardized questions on these topics. 
We will consider State requirements in establishing the list of 
screening tools in sub-regulatory guidance. As a result, the sub-
regulatory guidance will include the option to use any State-required 
Medicaid screening instruments that include questions on these domains. 
This modification to our proposal will allow SNPs to continue to use 
questions on social risk factors that States may already require and 
will prevent duplication of efforts.
    Comment: Some commenters recommended CMS consider the use of 
standardized coding of responses rather than standardized responses. A 
commenter noted that with standardized data elements, assessment 
information would be interoperable to help plans, providers, States, 
and community-based organizations collectively identify and address 
social needs. Several commenters noted that standardized data elements 
would allow CMS to collect the assessment data and suggested that CMS 
specify a permissible set of SDOH screening tools to ensure the use of 
person-centered and validated tools without mandating specific 
standardized questions. A few of these commenters noted that requiring 
standardized data elements rather than standardized questions would be 
easier for SNPs to implement, potentially allowing them to continue to 
use their existing HRA questions that cover housing stability, food 
security, and access to transportation. A commenter noted this would 
allow SNPs to ensure HRA questions are culturally appropriate when 
translated across the many languages that SNP enrollees speak. The 
commenter also stated standardized coding would give plans the 
flexibility to ask questions in a way that accommodates the specific 
communication needs of enrollees, such as individuals with intellectual 
disabilities.
    A commenter suggested CMS look to the Gravity Project for 
standardized value sets, interoperable codes, and HL7 technical 
standards to document standardized data on social needs. The commenter 
noted interoperable codes could include codes from ICD-10 Z codes, 
LOINC codes, and/or SNOMED code sets, among others.
    Response: We appreciate the commenters' suggestions and will 
consider them as we develop the list of specified screening instruments 
in sub-regulatory guidance. We aim for SNPs to utilize questions from 
assessment tools that have the capability to facilitate data exchange 
as well as systematic analysis of prevalence and trends in their 
enrollees' social risk factors.
    Comment: A commenter suggested that CMS create a standardized data 
submission tool to collect social risk factor-related data in a way 
most compatible to how the MA plans currently collect and report that 
data. The commenter expressed concern that requiring a standardized 
reporting format would cause MA organizations already actively 
collecting this data to undertake a potentially costly adjustment to 
their HRA operations. Another commenter stated health plans 
consistently identify the lack of standardization in SDOH data 
definitions and lack of harmony in scaling and scoring between 
assessment instruments as challenges. The commenter noted that 
requiring a specific instrument across settings and providers could 
solve this issue, but noted that another solution would be to allow for 
multiple screening instruments where items and scoring are cross-walked 
to create a universal scale. Several commenters recommended CMS allow 
SNPs to capture the required SDOH data using their own methods, 
including but not limited to HRAs, then crosswalk the data to CMS-
specified data elements in order to report it to CMS. A few commenters 
specifically recommended that CMS work with experts to conduct a cross-
walk of SDOH risk factor items from validated instruments and then 
create an acceptable equivalence to harmonize, calibrate and connect 
the items, scaling, scores, and findings from the various instruments 
to one standardized universal scale for each SDOH risk item. A 
commenter believed multiple data sources would be able to feed into the 
SDOH data that CMS could collect.
    Response: We thank the commenters for these suggestions. We remind 
the commenters that CMS does not currently collect information related 
to social risk factors from SNPs. CMS currently only collects 
information regarding the number of initial and annual HRAs conducted 
as part of the Medicare Part C Reporting Requirements and reviews a 
sample of HRAs conducted by SNPs during audits. We will consider this 
feedback as we continue to consider whether, how, and when we would 
have SNPs report data to CMS.
    Comment: A commenter believed that focusing on the annual HRA only 
as a source of information on enrollees' social risk factors would miss 
opportunities to better understand enrollee needs and would have 
limited

[[Page 27735]]

impact. A commenter noted that allowing SNPs to capture SDOH data 
outside of the HRA process would be sensitive to the personal nature of 
questions about social risk factors and allow the care team member the 
enrollee trusts the most to ask the questions. Another commenter 
believed CMS should allow collection of social risk factor information 
through HRAs or through other screening processes, and that CMS should 
require use of that social risk factor data in risk assessment and 
navigation to supports.
    A commenter suggested that, instead of requiring plans to 
incorporate specific questions in their HRAs, CMS could require plans 
to include a minimum number of social needs-related questions in their 
HRAs, the SNP Model of Care, or as part of the Managed Care Manual 
Chapter 5 requirements. The commenter believed this alternative 
approach would fulfill the intent of the proposed requirement while 
providing plans the flexibility to leverage existing social risk factor 
questions they have already incorporated into their HRAs, minimizing 
the need for edits to existing HRAs.
    Response: We appreciate SNPs' efforts to address their enrollees' 
unmet needs through their models of care, quality improvement projects, 
and various touchpoints with enrollees. We clarify that the new 
requirement at Sec.  422.101(f)(1)(i) does not say that SNPs are to use 
the HRA as the only source of information on enrollee social risk 
factors. In addition to HRAs, we encourage SNPs to use sources of 
information outside of the HRA process in order to ensure that SNPs 
have a complete picture of an enrollee's physical, psychosocial, 
functional, and social needs and their personal goals. This can 
include, but is not limited to, interactions between enrollees and 
providers, care coordinators, other members of the integrated care 
team, or community-based organizations. This information can assist 
with the development of and any updates to an enrollee's individualized 
care plan. Though SNPs may use a variety of sources of information to 
better understand their enrollees' needs, we are finalizing a 
requirement for SNP HRAs to include questions from a list of CMS-
specified screening tools about housing stability, food security, and 
access to transportation because all SNPs are required at Sec.  
422.101(f)(1)(i) to conduct a comprehensive HRA. Making this 
requirement part of the HRA ensures all SNPs are universally collecting 
this information, at minimum, in their assessments, regardless of any 
other sources of information on enrollee social risk factors they may 
use. As described elsewhere in this section, we have considered 
commenters' perspectives in coming to a final decision regarding a 
requirement to use CMS-specified standardized questions, and are 
instead finalizing language at Sec.  422.101(f)(1)(i) that requires 
SNPs to include questions from a list of screening tools specified by 
CMS in sub-regulatory guidance on housing stability, food security, and 
access to transportation in their HRAs.
    Comment: Many commenters recommended CMS gather further input from 
stakeholders, including enrollees, plans, SDOH assessment tool 
developers, and providers, to develop the proposed standardized HRA 
questions before releasing sub-regulatory guidance. A few commenters 
suggested CMS convene a technical expert panel to consider research on 
the comparative effectiveness of existing social needs screening tools 
and to develop and test a social needs pre-screener. A commenter noted 
that the complexity of capturing social needs requires a thoughtful and 
multifaceted understanding of enrollee populations. Another commenter 
recommended CMS conduct a landscape review and align requirements to 
build off of what plans have already accomplished. A commenter 
suggested CMS initially gather information on one or two questions per 
SDOH topic so that plans can begin to incorporate standardized 
questions into their HRAs while continuing to use most of their own 
already-tested questions with enrollees. Another commenter believed CMS 
should not dictate specific questions without going through a consensus 
process for measure development, such as the National Quality Forum, 
and noted that SNPs should be able to incorporate CMS's required 
questions into their existing assessment tools.
    A commenter urged CMS to seek provider feedback on the wording of 
standardized HRA questions. Several commenters suggested CMS 
incorporate direct enrollee input into any required HRA questions to 
ensure they are understandable and relevant to the intended audience. A 
commenter offered to provide CMS input into the development of the 
standardized questions that would work well across diverse enrollee 
populations. A commenter believed enrollees should have opportunities 
for feedback and oversight not only on screening questions, but also on 
any navigation and referral system a plan may use to meet the needs 
enrollees identify. Another commenter stated that CMS should not rush 
to use questions that collect questionable, unreliable, or inconsistent 
data.
    Response: We thank the commenters for their suggestions. We agree 
that the complexity of capturing social needs requires a thoughtful and 
multifaceted understanding of enrollee populations. We are not 
finalizing the proposed requirement that SNPs use standardized 
questions specified by CMS on these topics. Instead, we are finalizing 
a requirement that SNPs use questions on these topics from a list of 
screening tools specified by CMS in sub-regulatory guidance. In 
developing this sub-regulatory guidance, we will consider the extensive 
work that health plans, the Federal Government, tool developers, and 
other stakeholders have already done to research and validate screening 
instruments. We clarify that we did not propose to create new measures, 
nor did we intend to require that SNPs adopt new assessment tools 
wholesale. Rather, we proposed to require SNPs to incorporate CMS-
specified standardized questions about housing stability, food 
security, and access to transportation into their HRAs; we had intended 
that existing standardized questions, from existing validated 
assessment tools, would be specified by CMS for use by SNPs. Although 
we are not finalizing a requirement for SNPs to use CMS-specified 
standardized questions, we are finalizing a requirement that SNPs use 
questions from a list of screening instruments specified by CMS in sub-
regulatory guidance. We anticipate this list will include validated, 
widely used assessment tools that include questions on housing 
stability, food security, and access to transportation.
    Comment: Several commenters supported CMS's proposal to apply this 
HRA requirement across all SNPs. A commenter noted that all SNP 
enrollees are at elevated risk of experiencing health-related social 
needs. A few commenters recommended that CMS apply a requirement to 
screen beneficiaries for social risk factors beyond SNPs. A commenter 
suggested that CMS consider how to encourage all MA plans to screen 
beneficiaries for social risk. Another commenter encouraged an even 
greater expansion of this type of data collection across the Medicare 
program, noting that data collection by MA plans could provide a model 
for other providers in better understanding gaps in health equity 
especially given that racial minorities make up a larger percentage of 
MA enrollees than Original Medicare enrollees. Other commenters 
recommended that CMS work to implement social risk screening

[[Page 27736]]

consistently across both the Medicare and Medicaid programs.
    Response: We appreciate the commenters' support and suggestions for 
expanding our proposed requirement beyond SNPs. We agree that greater 
prevalence of screening for social risk factors can help providers 
better understand health disparities for all MA enrollees and will 
consider future rulemaking on this subject. In this final rule, we are 
limiting the new requirement to include questions on housing stability, 
food security, and access to transportation on HRAs to SNPs because we 
believe SNP enrollees are more likely than other MA enrollees to have 
particular challenges with unmet social needs.
    Comment: A commenter encouraged CMS to consider excluding 
institutional special needs plans (I-SNPs) from the requirement to 
include questions on housing stability, food security, and access to 
transportation in SNP HRAs. The commenter noted that all I-SNP 
enrollees reside in nursing facilities, which provide housing, meals, 
and transportation. The commenter also noted that nursing facilities 
are required to conduct minimum data set assessments and meet other 
requirements, and believed that requiring I-SNPs to assess enrollees 
for social risk factors would add administrative burden for the plan 
and potential confusion for enrollees with no apparent benefit. Another 
commenter believed that the proposal to include questions about housing 
stability in SNP HRAs was equally important to enrollees who reside in 
congregate housing as those who live in the community. The commenter 
noted that some residents of congregate housing may be spending down 
resources and believed it would be helpful to understand if an 
individual's current housing arrangements are precarious, potentially 
allowing a plan to connect them with needed services or resources.
    Response: We disagree that assessing nursing facility residents for 
social risk factors in HRAs provides no apparent benefit. An enrollee 
residing in a nursing facility or other congregate housing setting can 
have concerns about the stability of their living situation. And, as we 
noted in the proposed rule preamble at 87 FR 1860, people may move 
between settings, including from an institutional placement to the 
community. In addition, I-SNPs may enroll individuals living in the 
community who require an institutional level of care, for whom housing 
stability could be of particular concern. I-SNPs, like other SNPs, are 
required at Sec.  422.101(f)(1)(i) to conduct an initial as well as 
annual comprehensive HRA. We believe that the benefit of better 
understanding enrollee needs outweighs any potential burden of adding a 
few questions to the required assessment. However, we recognize that 
the types of questions that may be relevant for community-dwelling SNP 
enrollees may be less relevant for I-SNP enrollees who reside in a 
nursing facility. Therefore, we are allowing some flexibility for SNPs 
by finalizing regulatory language at Sec.  422.101(f)(1)(i) which 
requires SNPs to include questions from a list of CMS-specified 
screening instruments on these three topics in the initial and annual 
HRA.
    Comment: Numerous commenters provided feedback on the timing for 
enforcement of the proposal. A few commenters recommended requiring HRA 
questions on social risk factors as quickly as possibly rather than 
delaying until contract year 2025. A commenter noted that the three 
proposed question topics are already well-developed in 2022 and 
believed the questions are too important to delay beyond 2024. Other 
commenters expressed support for implementing the requirement in 
contract year 2024. Several commenters recommended CMS consider 
delaying implementation beyond 2024. A commenter requested that CMS 
make the effective date no earlier than 2025 to allow time for plans to 
design, test, evaluate, and operationalize the requirements. Another 
commenter recommended CMS provide sub-regulatory guidance on the 
specific standardized questions at least one year in advance of the 
required implementation to allow SNPs time for IT, system, and process 
changes. A few commenters suggested that CMS consider allowing 
flexibility in the time granted to implement standardized questions. 
Other commenters urged CMS to effectively communicate their 
requirements and implementation timeframe to States to allow time for 
States to remove any overlapping assessment requirements.
    Some commenters stated they were supportive of a 2024 effective 
date only if CMS did not require standardized questions, and noted 
that, if CMS did require standardized questions, they requested an 
effective date no earlier than 2025 to allow SNPs sufficient time for 
implementation. A few of these commenters believed the implementation 
timeline should depend on the scope and complexity of the questions CMS 
ultimately requires.
    A commenter encouraged CMS to give plans at least six months' 
notice of final requirements before the implementation date. A 
commenter noted that any change of assessment questions could have 
implications for EHR vendors that would need to implement such changes 
within an 18- to 24-month cycle. A plan commenter stated they would 
require 90 days to implement additional HRA questions.
    Response: We appreciate the commenters' input on the implementation 
timeline for our proposal. We are finalizing a requirement at Sec.  
422.101(f)(1)(i) that SNPs must include questions from a list of 
screening instruments specified by CMS in sub-regulatory guidance on 
housing stability, food insecurity, and access to transportation 
beginning contract year 2024. We will ensure compliance with the 
Paperwork Reduction Act as we strive to post the sub-regulatory 
guidance by the end of 2022. This would leave more than a year from 
publication of this final rule for SNPs to come into compliance. The 
comments we received suggested that many SNPs already include questions 
on these topics in their HRAs. We believe many of the SNPs that are 
already including questions on these topics are using certain 
validated, widely available screening instruments. In our sub-
regulatory guidance, we anticipate including validated tools that are 
already widely in use. Because we believe many SNPs are already using 
these types of screening tools, and because we are not requiring the 
use of specific standardized questions, we believe it is reasonable for 
SNPs to implement this requirement in contract year 2024.
    Comment: Many commenters expressed concern about SNPs' 
responsibility to address social risk factors identified through the 
HRA. Several commenters noted that the HRA should be used to inform the 
enrollee's individualized care plan as well as to connect enrollees to 
covered services and community resources. A commenter noted that 
developing the enrollee's plan of care invites the SNP to form 
community partnerships that will allow them to address enrollee needs. 
The commenter believed these partnerships were crucial to reducing 
health disparities. Another commenter believed that assessments must be 
paired with strong connections to community-based organizations, 
including innovative approaches to payment for these organizations.
    A number of commenters recommended CMS take steps to ensure SNPs 
are acting on the information they receive in HRAs. A commenter 
encouraged CMS oversight to ensure that HRA results are included in

[[Page 27737]]

enrollees' individualized plan of care. Another commenter believed CMS 
should emphasize that HRA questions related to social risk factors 
would help inform, but not direct, a provider's plan of care. A 
commenter expressed concern with CMS's statement, described at 87 FR 
1859, that CMS would not be explicitly requiring that SNPs be 
accountable for resolving all risks identified in the HRA questions. 
The commenter believed CMS should require this type of accountability 
for SNPs. A few commenters requested CMS consider going beyond 
requiring HRA questions and work with plans to ensure that plans are 
not only assessing and referring enrollees to services, but also 
confirming that needed social services have been received. A commenter 
believed there needs to be a clear level of understanding of who is 
responsible for connecting a patient to services, and that there is 
potential for doing more harm than good by frequently asking enrollees 
about their social risk factors but not addressing them. A few 
commenters believed that screening without a strong referral and 
navigation system is ineffective, disrespectful, and unethical, and it 
can undermine enrollee trust in providers. Another commenter suggested 
that assessments for social risk factors be conducted on a monthly 
basis and even more frequently based on an enrollee's needs.
    A few commenters urged CMS to consider how it can encourage and 
support plans to use data collected in HRAs in meaningful ways, and 
what guidance and resources it can provide plans on meeting enrollees' 
social needs. Another commenter urged CMS to establish oversight 
mechanisms and standards to ensure that SNPs have systems in place to 
assist enrollees based on the needs identified in the HRA. A commenter 
encouraged CMS to track HRA data to identify trends and potentially 
compare to the supplemental benefit offerings and utilization. Another 
commenter urged CMS to provide not just standardized questions but also 
guidance around framing, an explanation of why the questions are being 
asked, and expectation setting about how the information will be used 
to ensure it is maximally actionable.
    Other commenters expressed concern about increasing demand for 
community-based services. A commenter noted that, even with services in 
place, enrollees may face access challenges, especially in rural areas. 
Another commenter believed that increasing screening for social risk 
factors would create more demand for an already-taxed community-based 
services infrastructure, which would inadvertently create new or 
exacerbate existing health disparities. The commenter recommended CMS 
work with the Administration for Community Living to continue to build 
community-based organizations' capacity to partner with health plans. 
The commenter also recommended CMS encourage financial investments in 
the community-based services infrastructure through value-based 
payments and flexible spending arrangements.
    Response: We thank the commenters for their perspective on this 
issue. We agree that it is important for SNPs to not only assess their 
enrollees for social risk factors, but also connect them to needed 
services based on enrollee goals and preferences, whether such services 
are plan-covered benefits or referrals to community resources. We 
believe requiring all SNPs to include questions on enrollees' housing 
stability, food security, and access to transportation will help inform 
the comprehensive individualized plan of care required at Sec.  
422.101(f)(1)(ii); these individualized plans of care identify goals 
developed with the enrollee and measurable outcomes as well as describe 
specific services and benefits. At 87 FR 1859 in the proposed rule, we 
provided several examples of the ways in which SNPs could consult with 
enrollees about their unmet social needs as part of the development of 
individualized care plans, such as making a referral to an appropriate 
community partner. We appreciate the need for additional technical 
assistance on addressing the social needs of enrollees and will 
consider it in the future.
    Comment: A commenter stated it is important to understand how the 
SDOH data that is collected through the new required questions is going 
to be used, including what the proposed output would be if those data 
elements are required to be reported to CMS.
    Response: We clarify that the SDOH data collected as part of an HRA 
would be used to inform a SNP enrollee's individualized care plan based 
on the enrollee's goals. The language we are finalizing at Sec.  
422.101(f)(1)(i) does not require SNPs to submit HRA data to CMS. 
However, as we outlined in the proposed rule at 87 FR 1859, we continue 
to consider whether, how, and when we could have SNPs report this data 
to CMS under other regulations. If SNPs do submit this data to CMS in 
the future, we believe having such information could help us better 
understand the prevalence and trends in certain social risk factors 
across SNPs and consider ways to support SNPs in improving enrollee 
outcomes.
    Comment: Several commenters suggested that CMS clarify that SNPs 
are not responsible for addressing all enrollee social risk factors 
identified during the HRA. A commenter requested clarification on 
whether CMS's expectation would be that these questions trigger care 
management outreach. Another commenter noted that plans often do not 
have the ability to address all the systemic barriers to achieving 
optimal health outcomes that may be identified in the HRA. A few 
commenters believed addressing social risk factors requires resources 
beyond what a SNP can offer, or may lie outside a SNP's control. A 
commenter believed that an organization's ability to address enrollee 
social needs depends on many factors, such as geographic location and 
resource availability in their communities, among others. Another 
commenter believed HRA questions about social risk factors could cause 
enrollee confusion, noting that an enrollee who indicates they are 
struggling to afford their rent may expect a health plan to provide a 
solution--perhaps a referral to a community housing resource--but then 
experience frustration and disappointment when a health plan is unable 
to do so.
    A commenter expressed concerns about how SNP auditors may interpret 
this proposed requirement. The commenter believed that program auditors 
have demanded verification that such risks or needs are assessed and 
resolved. The commenter strongly encouraged CMS to include language in 
the SNP audit protocols emphasizing that the focus of this requirement, 
if finalized, is on assessment not resolution.
    Response: We appreciate the commenters' perspectives on this issue. 
As stated at 87 CFR 1859, our proposal regarding the content of the HRA 
would not require SNPs to be accountable for resolving all risks 
identified in these assessment questions. The information gathered in 
the HRAs must be used to inform the development of the individualized 
care plan per Sec.  422.101(f)(1)(i) and (ii). Section 422.101(f)(1)(i) 
requires the SNP to ensure that the results from the initial and annual 
HRAs are addressed in the individualized care plan. Section 
422.101(f)(1)(ii) also provides that the individualized care plan must 
be developed and implemented in consultation with the beneficiary. The 
SNP must take steps to provide the services or connect the enrollee 
with appropriate services in order to accomplish the goals identified 
in the individualized care plan. The SNP can

[[Page 27738]]

take these social risk factors into account in the development and 
implementation of the individualized care plan, even if the SNP is not 
accountable for resolving all social risk factors. For instance, 
knowing that an enrollee is homeless or lacks reliable transportation 
could change how the SNP delivers covered services, such as by helping 
the enrollee find a primary care physician (PCP) that is more 
conveniently located or suggesting that the enrollee utilize a 
Federally Qualified Health Center (FQHC) in order to get multiple 
services delivered at the same time.
    We remind the commenter who expressed concerns about how SNP 
auditors may interpret this proposed requirement that CMS welcomes 
stakeholder feedback on the audit protocols when the collection becomes 
available for public comment under the Paperwork Reduction Act of 1995. 
We also remind commenters of the requirement at Sec.  422.503(b)(4)(vi) 
for MA organizations to adopt and implement an effective compliance 
program to prevent, detect, and correct non-compliance with CMS's 
program requirements, including the requirement at Sec.  
422.101(f)(1)(ii) that SNPs must develop and implement an 
individualized care plan.
    Comment: Some commenters provided feedback on CMS's intent to 
provide the specific HRA questions through sub-regulatory guidance. 
Several commenters indicated they were supportive of this approach. A 
commenter agreed that it is important for CMS to retain the discretion 
to modify questions while still providing SNPs with clear requirements. 
Another commenter recommended CMS include a statement in sub-regulatory 
guidance to discourage States from adding their own questions and to 
encourage data sharing. A few commenters encouraged CMS to provide 
additional detail on how SNPs should implement this proposal.
    Other commenters did not support CMS's intent to specify the 
questions in sub-regulatory guidance. A commenter believed this 
information should be standardized across plans and Medicare programs, 
rather than being specified in sub-regulatory guidance applicable to 
SNPs only. Another commenter strongly suggested CMS include any 
questions or specific requirements in regulation text because the 
commenter would like as much time as possible to implement changes, and 
believed the predictability of the regulatory cycle would allow them to 
better plan for policy changes.
    Response: We appreciate the commenters' perspectives on use of sub-
regulatory guidance to specify standardized questions. We believe that 
specifying the topics in regulation while providing additional 
operational detail in sub-regulatory guidance strikes the appropriate 
balance between the need for stability and predictability for plans and 
the need to be able to revise the specific questions to stay aligned 
with similar assessment tools. Although we are not requiring SNPs to 
use specific standardized questions, we believe a degree of 
standardization is necessary to ensure that SNPs are gathering high-
quality, actionable responses from enrollees on their social risk 
factors. We also believe that allowing SNPs to choose questions from a 
list of screening instruments may increase opportunities for alignment 
with other efforts in this area, including NCQA's proposed Social Need 
Screening and Intervention HEDIS measure, as discussed in more detail 
later in this section. Therefore, we are finalizing a requirement at 
Sec.  422.101(f)(1)(i) that SNPs include one or more questions from a 
list of screening instruments specified by CMS in sub-regulatory 
guidance on each of these three topics. We believe the requirement we 
are finalizing addresses commenters' concerns about the lack of 
predictability involved in specifying required HRA questions in sub-
regulatory guidance, since SNPs will be able to choose questions on 
these topics from the list of screening instruments in sub-regulatory 
guidance that best meet the need to assess housing stability, food 
insecurity, and access to transportation for the specific population 
they serve. We intend to issue the first sub-regulatory guidance on 
this issue by the end of 2022 and will revise and update the guidance 
as necessary in the future.
    Comment: A few commenters recommended CMS consider privacy and 
confidentiality as part of this proposal. A commenter strongly urged 
CMS to provide adequate protection for and confidentiality of 
information collected through HRAs, noting that the collection and use 
of SDOH-related information should be held to the highest standard and 
that appropriate oversight and enforcement should restrict 
inappropriate use and access. Another commenter recommended CMS 
maintain high data security standards to ensure the collection of 
demographic information be conducted in a transparent, secure, and 
culturally sensitive manner for the targeted populations in question to 
reduce systemic bias. Another commenter asked for clarification as to 
whether the HRA is intended to be delivered by and stored as part of 
the EHR.
    Response: We appreciate the commenters' concerns for protecting 
enrollee privacy. At a minimum, all MA plans, including the SNPs that 
are subject to this new requirement, must ensure the confidentiality of 
enrollee records under Sec.  422.118 and the Health Insurance 
Portability and Accountability Act (HIPAA) Security and Privacy Rules 
at 45 CFR part 164. Enrollee records that must be protected under Sec.  
422.118 include the information collected as part of health risk 
assessments, and we believe that information gathered through SNP HRAs 
is protected health information (as defined in 45 CFR 160.103) subject 
to protection under HIPAA rules. We agree that information related to 
social risk factors is particularly sensitive and should be handled 
accordingly. We do not intend to specify how SNPs store this 
information. We remind the commenters that CMS does not currently 
collect this type of information from SNPs. Should CMS collect this 
information in the future, we will protect enrollee privacy as we do 
more broadly when handling beneficiary data.
    Comment: Several commenters noted related efforts within and 
outside of CMS that they recommended CMS leverage when determining what 
questions to include in the HRA. A few commenters noted the Social Need 
Screening and Intervention quality measure under development from NCQA. 
Several others noted the work of the Gravity Project, supported by the 
Office of the National Coordinator for Health Information Technology, 
including the USCDI v2. A commenter strongly encouraged alignment with 
USCDI v2. A few commenters supported leveraging and aligning with the 
work of the Gravity Project, as well as ensuring alignment with other 
programs. A commenter noted CMS's proposal is consistent with the 
February 1, 2022 National Quality Forum Measure Applications 
Partnership recommendations to CMS for screening for social drivers of 
health and public data on those screening positive for social drivers 
of health. Another commenter cited a proposal for a similar quality 
measure for use in the Merit-Based Incentive Payment System for 
physicians and Inpatient Quality Reporting program for hospitals. A 
commenter also encouraged an approach that utilizes publicly available 
tools, such as the AHC HRSN screening tool, and does not require use of 
any specific proprietary screening tool.

[[Page 27739]]

    Response: We appreciate the additional information and have been 
closely reviewing other SDOH efforts both within the Federal Government 
and other parts of the industry, including NCQA's proposed new Social 
Need Screening and Intervention HEDIS measure and discussion in the 
contract year (CY) 2023 Rate Announcement about comments received on 
potential future use of that proposed measure in Star Ratings. We 
recognize that there are a number of well-developed validated 
assessment tools with questions on the three proposed topics already in 
use by plans. We agree that our efforts should align with other 
programs. As we discussed in responses to earlier comments, we are 
finalizing a requirement at Sec.  422.101(f)(1)(i) that SNPs must 
include one or more questions from a list of screening instruments 
specified by CMS in sub-regulatory guidance about housing stability, 
food insecurity, and access to transportation in their HRAs, rather 
than requiring specified standardized questions. We believe allowing 
some flexibility for SNPs to choose questions best suited to their 
enrollee populations is important; however, we also believe some degree 
of standardization is necessary to ensure SNPs are collecting high-
quality, actionable responses from enrollees. Furthermore, we believe 
this approach better allows us to align with other programs and SDOH 
efforts and retains the potential for improved data exchange and 
interoperability. For example, in response to the 2023 Advance Notice, 
the vast majority of commenters supported the use of NCQA's proposed 
screening and referral to services for social needs measure in MA Star 
Ratings. We believe our requirement would align well with potential use 
of that measure in Star Ratings. The proposed NCQA measure does not 
require use of a specific tool or questions, but would allow use of 
questions from a list of selected validated assessment instruments, 
similar to the new requirement finalized here at Sec.  
422.101(f)(1)(i). We anticipate our list of screening instruments in 
sub-regulatory guidance will overlap with the list of screening 
instruments NCQA includes in the specifications for its proposed 
measure, which will provide the opportunity for SNPs to align their 
compliance with the new requirement at Sec.  422.101(f)(1)(i) with data 
to be used for the proposed NCQA measure. We believe the result will 
still be an increased ability for interoperable data exchange among 
SNPs.
    Comment: A commenter requested clarification on several aspects of 
our proposal. The commenter questioned whether the HRA questions should 
be included on the initial, reassessment, and transition HRAs and 
whether each plan would be required to include the same questions on 
the HRA or whether it would be up to the individual plan to determine 
wording and how these new question sets fit into other existing 
domains.
    Response: We appreciate the commenter's request for clarity. We 
clarify that the questions should be included in all HRAs used by SNPs. 
On the commenter's request for clarification about question 
standardization, we clarify that our original proposal would have 
required SNPs to use CMS-specified standardized questions. However, as 
discussed earlier in this section, we are instead requiring SNPs to use 
one or more questions from a list of screening instruments specified by 
CMS in sub-regulatory guidance in each of the three required domains. 
However, SNPs can determine how any new questions they add to their HRA 
in order to meet the new requirement fit into their existing assessment 
process.
    Comment: A commenter requested CMS clarify how SDOH-related 
information may be used if an HRA identifies an issue that is not 
identified by a provider and asked how CMS intends to treat that 
information for other MA purposes.
    Response: We thank the commenter for their questions and note that, 
per Sec.  422.101(f)(1), the enrollee's providers should be included as 
part of the interdisciplinary care team (ICT) and the information from 
HRAs should be shared with the ICT as described in the SNP's MOC. As 
discussed in more detail in other comments and responses earlier in 
this section, the individualized plan of care for an enrollee must be 
developed in consultation with the enrollee and the care plan should 
address the results from HRAs. A provider is not required to 
independently identify a social health factor for it to be addressed in 
the care plan. As to the treatment of the information for other MA 
purposes, CMS does not currently intend to collect information about 
the responses on these newly required questions from SNPs. CMS may 
review HRAs and responses in order to determine compliance with the 
regulatory requirement.
    Comment: A commenter encouraged CMS to allow for a wider range of 
providers who can conduct the HRA without the oversight of physicians 
and requested that CMS to continue to allow non-physician clinicians to 
conduct the HRA using telehealth under the supervision of a physician. 
They asked CMS to provide additional resources to community advocates, 
who can facilitate remote provider-patient interactions. A commenter 
suggested that enrollees, especially those with nutrition-related 
chronic conditions, should receive a referral to registered dietician 
nutritionists when food insecurity is identified.
    Response: We thank the commenters and note that Sec.  
422.101(f)(1)(i) does not stipulate that specific plan personnel must 
conduct the HRA. CMS does not require physicians to oversee providers 
or other staff when conducting an HRA and allows SNPs flexibility to 
determine the level of clinical expertise needed to conduct the HRA. 
CMS does not preclude the use of telehealth to conduct HRAs. SNPs must 
conduct their HRA in a manner that is consistent with the plan's 
approved MOC; approval of the MOC is required by Sec.  422.101(f)(3). 
We appreciate the information on community resources for referrals 
provided by commenters and will consider providing additional education 
on resources available to fill enrollee's needs as determined by the 
HRA and ways to support community-based organizations.
    Comment: A commenter urges CMS to require that these standardized 
questions be made available and accessible in the preferred languages 
of the enrollees. They noted that for individuals with limited English 
proficiency, the inability to communicate adequately with providers 
serves as a barrier to accessing care.
    Response: We appreciate the commenter's perspective on this issue. 
In Sec.  422.112(a)(8), we require that MA organizations that offer MA 
coordinated care plans ensure that services are provided in a 
culturally competent manner to all enrollees, including those with 
limited English proficiency or reading skills, and diverse ethnic and 
cultural backgrounds. The HRAs conducted by SNPs are key to developing 
individualized care plans for enrollees and such care plans are the 
foundation for furnishing, coordinating, and managing covered services 
to the special needs individuals who are enrolled in SNPs. Further, 
Sec.  422.2267(a)(2) requires that, for markets with a significant non-
English speaking population, MA organizations translate required 
materials into any non-English language that is the primary language of 
at least five percent of the individuals in a plan benefit package 
(PBP) service area. As HRAs are required by Sec.  422.101(f)(1), SNPs 
are obligated to comply with

[[Page 27740]]

Sec. Sec.  422.112(a)(8) and 422.2267(a)(2) in performing these 
assessments.
    Comment: A commenter requested that CMS review and rewrite the 
technical specifications of the existing SNP care management reporting 
measure. They stated that, as currently written, a plan is required to 
conduct two HRAs (an initial and a reassessment) in the same calendar 
year for members who did not complete an HRA the previous year. They 
believe that the ``doubling up'' of HRAs in the same year can create 
member abrasion.
    Response: This comment is out of scope of this final rule; however, 
we will consider it in future reporting specifications.
    Comment: A few commenters stated that, under current statutory 
authority, SDOH cannot be used as primary targeting criteria for 
Special Supplemental Benefits for the Chronically Ill (SSBCI), just as 
secondary criteria when the three-part eligibility criteria have been 
met. The commenters recommend that CMS provide additional flexibilities 
to equip plans with the ability to address the social needs for which 
standardized data collection is being proposed in this rule. They 
recommend CMS consider allowing plans to use indicators of SDOH need 
outside of low-income subsidy status as primary targeting criteria 
through the Value-Based Insurance Design demonstration under Center for 
Medicare and Medicaid Innovation authority. They stated that this 
demonstration can serve as a pilot for potentially expanding the 
eligibility criteria for SSBCI in the future.
    Response: We appreciate the recommendations for using SDOH data for 
determining eligibility for SSBCI and will consider it in the future. 
With regard to the commenters' recommendation that CMS provide 
additional flexibilities to equip plans with the ability to address 
social needs, we remind the commenter that, as discussed in more detail 
earlier in this section, SNPs must use the information gathered in the 
HRA to inform the development and implementation of the individualized 
care plan, and to ensure that the results of HRAs are addressed in the 
care plan per Sec.  422.101(f)(1)(i) and (ii). We also remind the 
commenters that SNPs are not required to furnish housing, food, or 
transportation services. Changing the scope and criteria for SSBCI is 
outside the scope of this rulemaking.
    Comment: A few commenters requested that CMS explore the potential 
use of standardized SDOH data more broadly in the Medicare Advantage 
program, such as in the Star Ratings program and in the CMS-HCC 
(hierarchical condition category) risk-adjustment model. Another 
commenter noted that the adoption and optimization of EHR 
infrastructure in low-resource settings is vital to increasing 
interoperability, as providers in underserved communities typically 
have outdated systems unable to integrate with other sources. A 
commenter also stated that the software development community is 
missing important guidance that would allow them to promulgate 
consensus-based standards for the exchange of SDOH data with providers 
and community-based organizations. A commenter strongly supported 
efforts to promote greater flexibility and alignment of provider 
payment incentives for care that address social needs and outcomes that 
advance health equity, noting that such measures can include incentives 
to increase provider uptake of evidence-based, high-value, low-cost 
services known to improve patient health outcomes.
    Response: We agree that the use of SDOH data can provide us with a 
better understanding of enrollees. We thank commenters for raising 
these important issues. However, addressing SDOH and social risk 
factors in the context of payment policy, interoperability and EHR 
standards, and quality rating programs is outside the scope of this 
rulemaking. We note that CMS has discussed SDOH and social risk factors 
in other contexts, such as in the CY 2023 Rate Announcement, which 
discussed comments received on MA risk adjustment payment policy and 
use of a health equity index in MA/Part D Star Ratings. We appreciate 
the commenter's perspective on alignment of provider payment incentives 
for care to address social needs, but the topic is outside the scope of 
this rulemaking. Further, CMS is prohibited from requiring MA 
organizations to use particular payment arrangements with their 
contracted providers by section 1854(a)(6)(B) of the Act, but we will 
take these comments into consideration with regard to the Medicare FFS 
program and Innovation Center models.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing a requirement at Sec.  422.101(f)(1)(i) for SNPs to include 
one or more questions from a list of screening instruments specified by 
CMS in sub-regulatory guidance on housing stability, food insecurity, 
and access to transportation in their comprehensive risk assessment 
tool. However, we are not finalizing the proposal that SNPs use 
specific standardized 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. Those choices vary by market, and not 
all dually eligible individuals may qualify for all options, but they 
include Original Medicare with a standalone prescription drug plan, 
non-D-SNP MA plans, FIDE SNPs, HIDE SNPs, coordination-only D-SNPs, and 
Programs of All-Inclusive Care for the Elderly. Those choices can be 
complex and, for some, overwhelming.
    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 proposed several changes to how we 
define FIDE SNPs and HIDE SNPs, citing our belief that they would 
ultimately help to differentiate various types of D-SNPs and clarify 
options for beneficiaries.
    Comment: Numerous commenters expressed support of CMS's proposed 
changes to refine the definitions of FIDE SNPs and HIDE SNPs. MACPAC 
echoed this support and expressed the belief that CMS's proposal 
furthers integration and clarifies the definitions of FIDE SNPs and 
HIDE SNPs. MedPAC supported the proposed changes to the FIDE SNP 
requirements, stating that it believed the changes will help ensure 
that those plans are fully integrated with Medicaid and make it easier 
for beneficiaries to understand how they differ from other, less 
integrated D-SNPs. MedPAC also supported the proposed changes to the 
HIDE SNP requirements as an incremental step towards greater 
integration. Others also believed that CMS's proposal raises the 
standards for integration in SNP products. Several commenters agreed 
that the proposed refinements increase transparency of the options 
available for dually eligible beneficiaries. A commenter appreciated 
that CMS's proposal may encourage more States and health plans to 
provide integrated care for dually eligible individuals. Another 
commenter expressed support that the proposal would allow standards for 
quality measures set to be set more accurately, services provided more 
effectively, and plans held more accountable. A commenter stated that

[[Page 27741]]

Minnesota Medicaid products continued to meet the proposed definitions. 
A commenter urged CMS to require plans to make their status as a FIDE 
SNP or HIDE SNP more transparent to ensure beneficiaries and their 
advocates can understand the level of alignment and integration they 
should expect from their current or potential plan.
    MACPAC cautioned that some States may need support to implement the 
new requirements and that there is some risk that the new requirements 
may lead to fewer FIDE SNP or HIDE SNPs available in the market. MACPAC 
suggested that CMS work closely with States and plans to remove 
barriers to offering FIDE SNPs and HIDE SNPs to make these integrated 
plans more available. Another commenter expressed a similar concern 
that States may choose to have less integrated systems due to limited 
State capacity and challenges with conflicting timelines for Medicaid 
requests for proposal and procurements and for CMS and D-SNP contracts. 
The commenter recommended several proposals to ease the burden for 
States, including CMS developing educational materials on the benefits 
of integrated care and CMS working with Congress to develop formal 
requirements and strategies to integrate care and increase State 
funding. Another commenter suggested that CMS encourage States to use a 
request for proposals process for FIDE SNPs to ensure FIDE SNPs are 
best positioned to support State and CMS goals for integration.
    Response: We appreciate the robust support for our proposed changes 
to the FIDE and HIDE SNP definitions. We agree with commenters that the 
changes to the definitions will ultimately help differentiate the types 
of D-SNPs, clarify options available to beneficiaries, and improve and 
increase integrated coverage options for dually eligible individuals.
    We appreciate the comments about States needing support to take 
actions that make HIDE SNP or FIDE SNP designation attainable for D-
SNPs that operate in the State. CMS will continue to engage with States 
to promote integration, directly as well as by providing education to 
States about this final rule through our technical assistance contract 
with the Integrated Care Resource Center, which provides a range of 
written and live resources targeted to State Medicaid staff, such as 
sample contract language for State Medicaid agency contracts with D-
SNPs, tip sheets describing exclusively aligned enrollment and other 
operational processes that support Medicare and Medicaid integration, 
educational materials and webinars about D-SNPs and highlighting State 
strategies for integrating Medicare and Medicaid, and one-on-one and 
small group technical assistance.
    We acknowledge the suggestion for us to work with Congress on 
requirements and strategies to integrate care and increase State 
funding. While outside the scope of this rulemaking, we will consider 
whether there are additional opportunities to address this in the 
future. A Federal requirement for States to use a request for proposal 
process is outside the scope of this rulemaking, but nothing in this 
rulemaking prohibits States from using a request for proposal process 
to select the FIDE SNPs and affiliated organizations with which the 
State will contract.
    Comment: A commenter recommended that in future rulemaking, CMS 
eliminate the distinction between HIDE SNPs and FIDE SNPs and that all 
D-SNPs in all States be required to meet a standard definition of full 
integration. The commenter also recommended limiting enrollment in full 
integration models, such as FIDE SNPs, to full benefit dual eligible 
individuals to improve integration in those models. Another commenter 
suggested that CMS should establish a glide path for phasing out HIDE 
SNPs to instead support FIDE SNPs. The commenter believes that lower 
tiers of integration are not sufficient to meet the needs of dually 
eligible individuals with disabilities.
    Response: We appreciate the perspective shared by the commenters. 
We believe the distinction between HIDE SNPs and FIDE SNPs is 
meaningful and accounts for variation in State integration strategies, 
and therefore we are retaining HIDE SNPs. To clarify, in proposing that 
all FIDE SNPs have exclusively aligned enrollment, as discussed later 
in this section at II.A.5.a., all FIDE SNPs would be limited to full 
benefit dually eligible individuals beginning in 2025.
    Comment: A few commenters expressed concern about State or Federal 
policies that may result in limiting the number or type of plan 
operating in a given market. A commenter requested that CMS continue to 
allow for HIDE SNPs and coordination-only D-SNPs to operate alongside 
FIDE SNPs required to have exclusively aligned enrollment as it 
promotes quality and value through competition and preserves freedom of 
choice. Another commenter recommended that CMS discourage any 
requirements that limit plan choice to a select few plans, particularly 
if these plans have limited or no experience servicing complex 
populations.
    A few commenters expressed concern about the number of plan choices 
currently available to dually eligible beneficiaries. A commenter noted 
the number of plan choices and related information provided to 
beneficiaries results in a coverage landscape that is overwhelming to 
dually eligible individuals. The commenter further noted that more work 
is needed to increase awareness around integrated options and their 
potential value.
    Response: We thank the commenters for sharing their perspectives. 
While our proposal makes 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, we do not 
believe our proposal will directly limit the number or types of plans 
available for beneficiaries to choose from. We clarify that our 
proposal does not impact the ability for HIDE SNPs and coordination-
only D-SNPs to operate alongside FIDE SNPs.
    Comment: A commenter recommended that CMS revise the requirement 
that the MA organization offering the D-SNP and the Medicaid MCO 
contract holder must be the same legal entity in order to qualify as a 
FIDE SNP because, based on the experience of the commenter, there is no 
difference in a plan's ability to work with the State or integrate care 
for the members based on legal entity or parent organization status.
    Another commenter expressed concern that the current definitions of 
HIDE and FIDE SNPs restrict plans that are operationally fully 
integrated from obtaining a FIDE SNP designation by requiring a 
Medicaid contract within the same legal entity that contracts with CMS 
to operate as a MA plan, while Medicaid contracts for HIDE SNPs only be 
provided by the same parent organization as that offering the MA plan. 
The commenter recommended that CMS amend the definition of FIDE SNPs to 
allow for the Medicaid contracts to be provided by the same parent 
organization that offers the MA plan because, in the commenter's view, 
this level of integration is sufficient to allow for full data sharing 
and coordination of benefits and is in keeping with the spirit of D-SNP 
regulations.
    Response: We appreciate the comments but, because we did not 
propose to change that aspect of the definitions for FIDE SNPs and HIDE 
SNPs, we believe the suggestions are out of the scope this rulemaking. 
We believe that providing coverage of Medicare and Medicaid benefits 
through a single legal entity constitutes the most extensive

[[Page 27742]]

level of integration, with the greatest potential for holistic and 
person-centered care coordination, integrated appeals and grievances, 
comprehensive beneficiary communication materials, and quality 
improvement. However, we will consider these comments in future 
rulemaking.
    Comment: A few commenters encouraged CMS to strengthen its 
oversight on State Medicaid rate setting to ensure that Medicaid rates 
for the MCO contracts held by FIDE SNPs are adequate and appropriately 
reflect the scope of the Medicaid services covered. A commenter noted 
that in some cases a capitated contract with a State Medicaid agency is 
held by a D-SNP's parent company or sister company, while in other 
cases the D-SNP entity itself may hold the contract. The commenter 
stated that, in the latter situation, Medicaid rules are not clear 
about the application of the Medicaid actuarial soundness requirements 
at 42 CFR 438.4 to the Medicaid benefits covered by those capitated 
contracts. Specifically, 42 CFR 438.4 applies to MCOs with 
comprehensive Medicaid contracts, prepaid inpatient health plans, and 
prepaid ambulatory health plans. The commenter noted that neither that 
rule nor the current CMS Medicaid Managed Care Rate Development Guide 
refer to D-SNPs or provide guidance on the applicability of Medicaid 
actuarial soundness standards to Medicaid services provided by D-SNPs. 
The commenter therefore requests that CMS formally clarify that 
capitation rates developed pursuant to State Medicaid agency contracts 
with D-SNPs are subject to the actuarial soundness requirements of 42 
CFR 438.4.
    Response: We appreciate the commenter's perspective on this issue. 
We clarify that the phrase ``capitated contract with the State Medicaid 
agency'' may be a Medicaid managed care contract for coverage of 
Medicaid benefits by a Medicaid MCO, or, for a HIDE SNP, a prepaid 
inpatient health plan (PIHP) or prepaid ambulatory health plan (PAHP), 
depending on the scope of coverage of Medicaid services. All MCO, PIHP, 
and PAHP contracts are subject to the actuarial soundness requirements 
of 42 CFR 438.4. When the same legal entity as the MA organization that 
offers the D-SNP has the contract for coverage on a risk basis for 
Medicaid benefits--that is, when there is a capitated contract between 
the D-SNP and the State Medicaid agency--that contract may be an MCO, 
PIHP, or PAHP contract depending on the scope of benefits covered; in 
such cases, all of the applicable 42 CFR part 438 requirements for the 
MCO, PIHP, or PAHP contract, including the requirement for actuarially 
sound capitation rates, must be met. For example, Medicaid PIHPs and 
PAHPs can serve as the affiliated Medicaid managed care plan for 
delivery of Medicaid behavioral health or LTSS for HIDE SNPs.
a. Exclusively Aligned Enrollment for FIDE SNPs
    Section 422.2 defines the term ``fully integrated dual eligible 
special needs plan''. 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 MCO contract under section 1903(m) of the Act 
with a State Medicaid agency, (ii) under the capitated Medicaid managed 
care contract (that is, the MCO 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 (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. An MA plan designated as a FIDE SNP 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). Section 422.2 also defines the term ``aligned enrollment'' 
as referring to when full-benefit dually eligible individuals who are 
enrolled in a D-SNP also receive 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. As 
discussed on 87 FR 1861, it facilitates the use of integrated 
beneficiary communication materials and clarifies overall 
accountability for outcomes and coordination of care. FIDE SNPs and 
HIDE SNPs with exclusively aligned enrollment are applicable integrated 
plans subject to the requirement to use (beginning January 1, 2021) 
unified grievance and appeals procedures for both Medicare and Medicaid 
benefits.
    As explained at 87 FR 1861, 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.
    We proposed to amend the definition of ``fully integrated dual 
eligible special needs plan'' at Sec.  422.2 with a new paragraph (5) 
to require, for 2025 and subsequent years, that all FIDE SNPs have 
exclusively aligned enrollment. Requiring all FIDE SNPs to have 
exclusively aligned enrollment would allow all enrollees to have their 
Medicare and Medicaid benefits under the FIDE SNP and affiliated 
Medicaid MCO explained clearly, which is made more difficult when some 
enrollees are, but others are not, also enrolled in the affiliated 
Medicaid MCO. Our proposed change would promote 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 enrollees do not receive 
their Medicaid benefits from the same organization.
    Under our proposed definition, all FIDE SNPs would, by virtue of 
the same legal entity holding the MA and the Medicaid MCO contracts, 
(1) be capitated for Medicaid services, with some permissible 
exceptions proposed at Sec. 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.
    As discussed in the proposed rule, absent a State Medicaid policy 
change in select States, our proposal would result in 12 current D-SNPs 
losing FIDE SNP status. However, our proposal would not prohibit those 
States and plans from operating as they currently

[[Page 27743]]

do but would simply mean that the affected plans would be HIDE SNPs 
rather than FIDE SNPs beginning January 1, 2025, and a consequence of 
this would be that the MA plans would not qualify for the frailty 
adjustment, as described in Sec.  422.308(c)(4). States may also choose 
to require, through their State Medicaid agency contracts under Sec.  
422.107, that MA organizations create separate MA 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 proposed in section 
II.A.6.a. of the proposed rule to redesignate from Sec.  422.530(c)(4) 
without substantive change, for such enrollment transitions.
    Finally, because the definition of aligned enrollment is specific 
to full-benefit dually eligible individuals, our proposal would also 
mean that D-SNPs enrolling new or continuing the enrollment of partial-
benefit dually eligible individuals could not achieve FIDE SNP 
designation beginning in 2025. As discussed at 87 FR 1861 through 1862, 
we do not believe this would have any meaningful impact for plans 
currently operating as FIDE SNPs. Further we believe that the benefits 
to be achieved with FIDE SNPs having exclusively aligned enrollment for 
Medicare beneficiaries eligible for full Medicaid benefits, and the 
associated greater levels of integration in the provision and coverage 
of benefits and plan administration outweigh the potential negative 
effects of excluding partial-benefit dually eligible individuals. 
Partial-benefit dually eligible individuals would be limited to 
enrollment in HIDE SNPs, coordination-only D-SNPs, other MA plans, or 
the original Medicare FFS program.
    Comment: Many commenters supported the proposal and noted that 
exclusively aligned enrollment advances full integration, strengthens 
care coordination between Medicare and Medicaid, improves enrollee 
communications, and better allows the FIDE SNP to unify processes that 
improve the beneficiary experience, such as through a single set of 
member materials and a unified appeals and grievances process. MACPAC 
commented that the proposal is consistent with its desire to move more 
States toward exclusively aligned enrollment. A few commenters 
expressed that FIDE SNPs should represent the highest level of 
integration and that this change would help clarify the currently 
confusing levels of integration among D-SNP categories.
    In supporting the requirement for FIDE SNPs to have exclusively 
aligned enrollment, other commenters expressed that the current FIDE 
SNP structure is not designed to address the needs of enrollees who 
receive Medicaid services through fee-for-service or a misaligned 
Medicaid MCO. In these cases, commenters noted that a current FIDE SNP 
might be required to coordinate with different Medicaid MCOs or 
Medicaid fee-for-service and that lack of exclusively aligned 
enrollment is inconsistent with the otherwise-integrated FIDE SNP 
model. A commenter indicated including beneficiaries in FIDE SNPs who 
receive their Medicaid services elsewhere diverts plan resources, and 
another commenter indicated it does not afford a meaningfully 
integrated experience for enrollees, providers, or payers.
    A few commenters indicated that exclusively aligned enrollment 
enabled plans and providers to develop and implement care models that 
are payer-agnostic, and a commenter indicated a FIDE SNP may enable a 
provider to submit a single claim for all services and cost-sharing.
    Some commenters expressed appreciation for CMS's proposal to 
provide a crosswalk exception that would allow current FIDE SNPs that 
operate in States that do not require exclusively aligned enrollment to 
create separate PBPs for aligned and unaligned enrollees to maintain 
access to the frailty adjustment for aligned enrollees. Several 
commenters asked CMS to provide more detail on how this crosswalk would 
be initiated and approved.
    A commenter agreed with CMS's analysis that making exclusively 
aligned enrollment a criterion for FIDE SNP status would cause minimal 
disruption to existing arrangements and leave ample fallback options 
for HIDE SNP status for the small number of plans that would be 
impacted by this change.
    Response: We appreciate the widespread support for requiring 
exclusively aligned enrollment for FIDE SNPs. We agree that this 
proposed requirement would encourage a deeper level of integration of 
Medicare and Medicaid, improve beneficiary communications about covered 
Medicare and Medicaid benefits and services, and promote unified 
appeals and grievances. As we noted in the proposed rule at 87 FR 1861, 
we believe our proposal would clarify overall accountability for 
outcomes and coordination of care. We appreciate that it could also 
reduce provider administrative burden for contracting with FIDE SNPs. 
We agree that transitioning to HIDE SNP status is an option for 
existing FIDE SNPs in States where exclusively aligned enrollment is 
not in place by 2025 and that a small number of existing plans would be 
impacted by this change.
    We clarify that the crosswalk exception being redesignated in this 
final rule to Sec.  422.530(c)(4)(i) is available under current law. 
This crosswalk exception is available when a renewing D-SNP has another 
new or renewing D-SNP and the two D-SNPs are offered to different 
populations; the crosswalk exception permits within-contract movement 
of the enrollees who are no longer eligible for their current D-SNP 
into the other new or renewing D-SNP offered by the same MA 
organization if the enrollees meet the eligibility criteria for the new 
or renewing D-SNP and CMS determines the movement is in the best 
interest of the enrollees in order to promote access to and continuity 
of care for enrollees relative to the absence of a crosswalk exception. 
This existing crosswalk exception may be available to implement a 
State's requirement to separate exclusively aligned enrollment from 
unaligned enrollment in separate PBPs. Our proposal was only to 
redesignate the regulatory provision to a different paragraph. When we 
issue the additional information on timelines and procedures for 
requesting crosswalks and crosswalk exceptions in sub-regulatory 
guidance, we intend to consider current timeframes and procedures for 
submission of applications, bids, and other required material to CMS, 
in addition to the need for MA organizations to make business decisions 
in a timely manner.
    Comment: Several commenters opposed our proposal. A few commenters 
indicated that finalizing the proposal would limit the ability of 
States that exclude coverage of certain Medicaid benefits from their 
Medicaid MCO contracts (that is, States with Medicaid carve-outs) from 
pursuing more integrated models, may require modification of State-
specific Medicaid processes for managed care enrollment, and could 
restrict enrollee choice in coverage. Another commenter discouraged any 
requirements that limit FIDE SNP offerings to Medicaid managed care 
organizations with contracts under section 1903(m) of the Act. Another 
commenter noted that a

[[Page 27744]]

State Medicaid agency decision not to facilitate exclusively aligned 
enrollment could lead to loss of FIDE designation and impact the 
frailty adjustment for an MA organization.
    Another commenter expressed concern that the proposal limits plan 
choice where a beneficiary wanted to maintain access to a trusted 
provider or case manager in one Medicaid plan, while selecting an 
alternative Medicare plan based on supplemental benefits.
    MACPAC recognized potential burden on States with FIDE SNPs that do 
not have exclusively aligned enrollment (Arizona, Pennsylvania, and 
Virginia) to make this adjustment and suggested CMS work with States to 
ensure there is a glidepath for these States. A commenter encouraged 
CMS to ensure that unaligned individuals and impacted providers in FIDE 
SNPs receive notices and counseling about the change and have access to 
continuity of care protections in Medicaid.
    Response: We thank the commenters. We agree that requiring FIDE 
SNPs to have exclusively aligned enrollment would, in the absence of 
State policy changes, impact 12 existing FIDE SNPs in a few States (we 
identified Arizona, Pennsylvania, and Virginia in the proposed rule). 
States may also choose to require--through their State Medicaid agency 
contracts under Sec.  422.107--that MA organizations create separate 
plan benefit packages, with one for exclusively aligned enrollment and 
the other for unaligned enrollment, which would allow the organization 
to maintain FIDE SNP status for a share of the existing FIDE SNP 
enrollment, as discussed at 87 FR 1861. As discussed in the proposed 
rule, these affected plans would be designated as HIDE SNP, rather than 
FIDE SNPs, beginning January 1, 2025, if the plans were unable to meet 
the new FIDE SNP requirements, and as such, we disagree that the 
proposal would limit States pursuing integrated care options, restrict 
member choice, or restrict the ability of States to facilitate access 
to D-SNPs. States and MA organizations may continue to use other 
structures for D-SNPs where enrollment is not exclusively aligned; 
those other plans, however, would not be FIDE SNPs.
    Unaligned beneficiaries transitioned to a separate PBP would 
receive that information in the Annual Notice of Changes. We do not 
anticipate all beneficiaries will be disenrolled from existing FIDE 
SNPs that do not have exclusively aligned enrollment since an existing 
FIDE SNP could become a HIDE SNP or create separate PBPs, with one for 
exclusively aligned enrollment and the other for unaligned enrollment. 
In cases where an MA organization does transition unaligned 
beneficiaries to a separate PBP, we do not expect transitioning 
beneficiaries to encounter issues accessing providers since, in our 
experience, MA organizations tend to have the same provider networks 
across PBPs with overlapping service areas under the same contract. For 
these reasons, we disagree that we should require additional 
notification to enrollees in the affected plans.
    The proposed rule did not ease the requirement in Sec.  422.2 that 
FIDE SNPs provide coverage of comprehensive Medicaid benefits under a 
capitated contract between a Medicaid MCO and the State Medicaid agency 
under section 1903(m) of the Act. States may contract with HIDE SNPs 
and coordination-only D-SNPs if their Medicaid contracting strategies 
are not consistent with the new FIDE SNP requirements. We seek to move 
FIDE SNPs toward greater integration in the provision of Medicare and 
Medicaid benefits but this final rule does not eliminate less 
integrated approaches for other types of D-SNPs. We believe the 
benefits of exclusively aligned enrollment, including simplifying 
enrollee communication, allowing Medicare and Medicaid benefits to be 
explained more clearly, and unified appeal and grievance processes will 
differentiate FIDE SNPs from other plans. It will simplify the ways we, 
States, and benefit counselors communicate about FIDE SNPs by 
eliminating some of the confusing scenarios related to unaligned 
enrollment, as described in 87 FR 1861 of the proposed rule, and will 
allow FIDE SNPs to consistently and more clearly be the most integrated 
D-SNP option in the market. Exclusively aligned enrollment lays the 
groundwork for further integration of Medicare and Medicaid, giving 
States and plans the ability to improve the beneficiary experience such 
as through access to integrated beneficiary communication materials 
that describe available benefits, improve the enrollee experience, and 
decrease confusion by providing a simplified set of beneficiary 
materials.
    Comment: A commenter recommended enrollee communications clearly 
articulate the features of integration and be communicated by a neutral 
party to support enrollee choice among coverage options. Another 
commenter asked CMS to assist States in understanding marketing 
materials.
    Response: We appreciate the comments and we noted in the proposed 
rule that we believe the proposed changes to how we define FIDE SNP and 
HIDE SNP will help differentiate the types of D-SNPs and clarify 
options for beneficiaries. We will continue to work with States, plans, 
advocates, beneficiaries, and providers to improve model MA plan 
materials that describe D-SNPs and ensure that the features enabled by 
exclusively aligned enrollment are clearly communicated to 
beneficiaries. We will also continue to work with States to help them 
develop State materials and educate State Health Insurance Assistance 
Program (SHIP) counselors and Medicaid choice counselors to assist 
beneficiaries in understanding their coverage options. States may also 
want to leverage their beneficiary support systems as described in 
Sec.  438.71.
    Comment: A commenter noted the Massachusetts Senior Care Options D-
SNPs and MMPs also limit enrollment in the Medicaid managed care plan 
to those members enrolled for Medicare, explaining that it 
substantially improves integration for all enrollees.
    Response: We appreciate the commenter's perspective on this issue 
and we agree with the commenter that Massachusetts has achieved a high 
level of integration through Senior Care Options and One Care. We did 
not propose regulations limiting enrollment in the Medicaid managed 
care plan. As proposed and finalized, the amendments to the definition 
of FIDE SNP do not require that the State limit enrollment in the 
capitated Medicaid MCO to only those enrollees in the FIDE SNP for 
Medicare. Rather, this amendment limits the FIDE SNP designation to D-
SNPs with State contracts requiring exclusively aligned enrollment. 
However, our proposal to require all FIDE SNPs to have exclusively 
aligned enrollment would not preclude a State from choosing to 
replicate Massachusetts' approach.
    Comment: Another commenter encouraged CMS to continue to allow HIDE 
SNPs and coordination-only D-SNPs to operate alongside FIDE SNPs.
    Response: We thank the commenter and clarify that the proposal 
would not restrict a State from allowing HIDE SNPs and coordination-
only D-SNPs to operate in the same market as FIDE SNPs.
    Comment: Several commenters supported the January 1, 2025, proposed 
effective date of this provision, while several other commenters 
suggested a delay to 2025 was not required, particularly for newly 
qualifying FIDE SNPs. Another commenter acknowledged the benefits of 
full alignment but noted implementation would require plan operational, 
policy, and system changes that would be

[[Page 27745]]

burdensome to implement by contract year 2025.
    Response: We thank the commenters for their perspectives on the 
January 1, 2025 effective date. We believe there is sufficient time for 
FIDE SNPs to implement exclusively aligned enrollment for January 1, 
2025. Through the Integrated Care Resource Center and CMS Medicare-
Medicaid Coordination Office, we will provide technical assistance to 
States and plans interested in facilitating exclusively aligned 
enrollment and we are actively planning for upcoming technical 
assistance opportunities. We reiterate that MA organizations that are 
not interested in offering FIDE SNPs that meet the new requirements 
applicable beginning January 1, 2025 are not required by the changes 
finalized in this rule to do so because such MA organizations may offer 
coordination-only D-SNPs or HIDE SNPs that are subject to lower 
integration standards. The new requirement for exclusively aligned 
enrollment applies only to FIDE SNPs.
    Comment: A commenter requested that the crosswalk option not be 
limited to States requiring or requesting exclusively aligned 
enrollment, but that the crosswalk option also include MA plan-
initiated implementation of exclusively aligned FIDE SNPs and the 
creation of separate MA contracts.
    Response: While we appreciate the request for MA organizations to 
initiate separate contracts in order to facilitate exclusively aligned 
enrollment, we clarify that under Sec.  422.107(e) the separate 
contract would only be provided after CMS receives a request from a 
State. Section II.A.6.a. of this final rule discusses the proposal 
regarding Sec.  422.107(e) and the corresponding crosswalk exception in 
more detail. The existing crosswalk exception at Sec.  422.530(c)(4)(i) 
(redesignated in this final rule) is not limited to situations where a 
State has required or requested exclusively aligned enrollment but is 
limited to specific situations described in the regulation text where a 
renewing D-SNP has another new or renewing D-SNP under the same overall 
contract and the two D-SNPs are offered to different populations. In 
such instances, enrollees who are no longer eligible for their current 
D-SNP may be crosswalked into the other D-SNP.
    Comment: A few commenters expressed support for the proposal to 
limit FIDE SNP enrollment to full-benefit dually eligible individuals 
and allow separate D-SNP PBPs for partial-benefit dual eligible 
individuals. A few commenters indicated that partial-benefit dually 
eligible individuals' characteristics are similar to full-benefit 
dually eligible individuals and that partial-benefit enrollees can 
benefit from access to stronger care coordination models not generally 
available in non-SNP MA organizations. The commenter believed this 
provision would allow the necessary distinctions in communications and 
enrollee materials describing access to Medicaid benefits for partial-
benefit dually eligible enrollees compared to full-benefit dually 
eligible enrollees. A few commenters noted that separate PBPs based on 
whether enrollees are eligible for partial Medicaid benefits or full 
Medicaid benefits allows for targeting supplemental benefits to 
partial-benefit dually eligible individuals, and a commenter indicated 
it could potentially lead to some financial incentives for States to 
support D-SNP enrollment and possible shared savings opportunities.
    Another commenter indicated any additional burden these changes may 
place on FIDE SNPs is preferable to disallowing enrollment of partial-
benefit dually eligible individuals in D-SNPs as some policy makers 
have advocated and are far less restrictive than some other integration 
legislative proposals that have been promoted.
    A few commenters expressed the proposal may create additional 
administrative burden for States, plans, and CMS for oversight and 
another commenter indicated that States may not have experience or 
processes to track PBPs, particularly when States may have a single 
MLTSS contract with a comprehensive benefit package with all enrollees 
included. The commenter indicated that having separate MA PBPs could 
create the need for additional Medicaid MCO contracts and additional 
rate-setting and contract review burdens both internally and with CMS. 
Another commenter asked CMS to provide technical assistance to States 
on procurement timing, contract support, full- and partial-benefit 
dually eligible individuals and applicability of unified appeals and 
grievances, and to encourage the use of crosswalks into PBPs for 
partial-benefit dually eligible individuals.
    Response: We thank the commenters for the feedback. We noted at 87 
FR 1861 through 1862 of the proposed rule that for contract year 2021, 
no FIDE SNPs enrolled partial-benefit dually eligible individuals. As 
such, we do not believe the preclusion of enrollment into FIDE SNPs by 
partial-benefit dually eligible individuals places additional burden on 
States, MA plans, or CMS for oversight or necessitates any new 
notifications to beneficiaries. We intend to provide education and 
outreach to States about changes codified in this final rule. To the 
extent that this new requirement for exclusively aligned enrollment for 
FIDE SNPs causes concerns for MA organizations or States that wish to 
have a single PBP for all dually eligible individuals, HIDE SNPs and 
coordination-only D-SNPs remain an option.
    Comment: Several commenters recommended CMS provide training and 
technical assistance around exclusively aligned enrollment and its 
processes to States, plans, benefits counselors, and community 
partners. A few commenters asked CMS to provide more information and 
education to States and plans about operationalizing crosswalks to 
separate FIDE SNP PBPs with aligned enrollment with a companion 
Medicaid managed care plan from unaligned enrollment, as well as to 
separate PBPs for partial-benefit dually eligible individuals. A 
commenter recommended an intentional effort to ensure that dually 
eligible individuals, including those with limited English proficiency, 
understand how their enrollment works. The commenter recommended 
Community Catalyst's publication, ``Person-Centered Enrollment 
Strategies for Integrated Care Toolkit,'' for additional details on 
creating person-centered enrollment practices.
    Response: We thank the commenters and agree that it is important 
for CMS to provide education and technical assistance to MA 
organizations in operationalizing provisions codified in this rule. In 
particular, we are working closely with California Department of Health 
Care Services to develop their exclusively aligned enrollment policies 
and procedures for 2023 and we will offer similar support to other 
interested States, regardless whether the use of exclusively aligned 
enrollment or FIDE SNPs is tied to transition out of a FAI 
demonstration or part of efforts to increase integration for dually 
eligible individuals.
    Comment: Some commenters encouraged CMS to consider extending the 
requirement for exclusively aligned enrollment to HIDE SNPs, expressing 
that the rationale for exclusively aligned enrollment for FIDE SNPs is 
applicable to HIDE SNPs. MedPAC recommended requiring that HIDE SNPs 
have exclusively aligned enrollment, noting integration would depend on 
States and plan sponsors, who could either adopt exclusively aligned 
enrollment so the existing HIDE SNPs could continue to keep that 
designation or instead let those plans meet the lower coordination-only 
D-SNP standard for

[[Page 27746]]

integration. Further, MedPAC noted the use of exclusively aligned 
enrollment would also entail some disruption for full-benefit dually 
eligible beneficiaries who are enrolled in HIDE SNPs but have 
misaligned enrollment, as well as for any partial-benefit dually 
eligible individuals who are now enrolled in a HIDE SNP. MedPAC went on 
to state that requiring HIDE SNPs to use exclusively aligned enrollment 
could enable CMS to implement a range of policies that promote 
integration (such as requiring more D-SNPs to have Medicaid contracts 
to cover Medicare cost-sharing, integrated member materials, and a 
unified process for handling appeals and grievances) on a wider scale.
    Also, a commenter stated opposition to extending exclusively 
aligned enrollment to HIDE SNPs.
    Response: We appreciate the support for requiring exclusively 
aligned enrollment for both FIDE SNP and HIDE SNP. However, applying 
this requirement to HIDE SNPs is outside of the scope of this 
rulemaking. Further, additional factors, such as the potential burden 
and our goal of adopting requirements to more readily distinguish FIDE 
SNPs and HIDE SNPs, warrant continued consideration of this policy. We 
will consider these comments for future rulemaking.
    Comment: A commenter requested CMS require matching Medicare and 
Medicaid effective dates for enrollment and disenrollment into FIDE and 
HIDE SNPs, leverage CMS mechanisms that can promote alignment, and 
provide technical assistance and encouragement to States to adjust 
their processes to ensure matching effective dates.
    Response: We appreciate the commenter's perspective and agree that 
an important component of exclusively aligned enrollment is aligning 
the Medicare and Medicaid effective dates. There are operational 
challenges for aligning the timing of Medicaid and Medicare enrollment 
and disenrollment processes. States may have annual enrollment periods 
or continuous enrollment and many establish a mid-to-late month cutoff 
date for processing enrollments into Medicaid managed care plans. 
Medicare Advantage plans are required to utilize various election 
periods described at 42 CFR 422.62 and often must accept enrollments 
through the end of the month. We will work with States to support 
operationalizing exclusively aligned enrollment to maximize the ability 
to align enrollment and disenrollment dates. We plan to make available 
both written resources and technical assistance events promoting best 
practices that highlight States that successfully facilitate 
exclusively aligned enrollment, as well as offer direct State-specific 
technical assistance through the Integrated Care Resource Center. To 
maximize flexibility for States that newly implement exclusively 
aligned enrollment, we decline to codify in regulation the requirement 
that the effective dates are matching. However, we will monitor where 
there are misaligned effective dates upon implementation of this rule, 
and we will strive to provide technical assistance and share promising 
practices.
    Comment: A commenter recommended that CMS, instead of finalizing 
the proposal, provide guidance and incentives to States to transition 
to exclusively aligned enrollment, such as adopting a shared savings 
component for FIDE SNPs, noting shared savings was used as an incentive 
to encourage States to participate in FAI. The commenter further 
recommended CMS consider a request for information to identify 
potential options and guardrails to address benefits, access, and 
quality.
    Response: We appreciate the comment. CMS will continue to provide 
guidance and support to States that transition to exclusively aligned 
enrollment for FIDE SNPs, leveraging promising practices from States 
that already implement it, such as Idaho, Massachusetts, Minnesota, New 
Jersey, and New York. We decline to accept the commenter's 
recommendation to collect information in lieu of finalizing our 
proposal to amend the requirements for FIDE SNPs but instead will 
finalize as proposed. We intend to concurrently continue to collect 
promising practices and feedback and share it with States and plans. 
Finally, we note that payment requirements for MA plans are set by 
section 1853 of the Act so we have limited ability outside of the 
context of a demonstration or test of a payment model under section 
1115A of the Act to change payment parameters in the MA program.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing without modification our proposed amendment to the 
definition of FIDE SNP at Sec.  422.2 with a new paragraph (5) to 
require FIDE SNPs, beginning January 1, 2025, to have exclusively 
aligned enrollment.
b. Capitation for Medicare Cost-Sharing for FIDE SNPs and Solicitation 
of Comments for Applying to Other D-SNPs
    We proposed 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 qualified Medicare beneficiaries (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. This proposal would cover Medicare cost-sharing in the form 
of coinsurance, copayments, or deductibles for Medicare Part A and Part 
B benefits covered by the FIDE SNP. 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.
    We proposed this change only for FIDE SNPs because FIDE SNPs are 
the only type of D-SNP that must have capitated Medicaid contracts for 
coverage of 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 discussed in section 
II.A.5.a. of this final 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. As 
reflected in paragraph (1) of the definition of FIDE SNPs at Sec.  
422.2, the MA organization offering a FIDE SNP is also a Medicaid MCO 
with a contract under section 1903(m) of the Act, which must be a 
Medicaid managed care comprehensive risk contract as defined in Sec.  
438.2. In order to satisfy the new requirement, we proposed for FIDE 
SNPs, the Medicaid MCO contract will include capitated coverage of the 
Medicare cost-sharing for Medicare Part A and Part B benefits. (Like 
all MA plans, the FIDE SNP will cover Medicare Part A and Part B 
benefits, subject to limited exclusions for hospice, certain new 
benefits, and costs of acquisition of kidneys for transplant.) We 
expect the single legal entity to process and pay claims to the extent 
there is coverage under its MA contract and its Medicaid managed care

[[Page 27747]]

contract without the need for additional claims filing by providers. In 
this way, the additions we proposed 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.
    As discussed in the proposed rule (87 FR 1863), this policy does 
not include Medicare Parts A and B premiums in the requirement for FIDE 
SNPs to cover Medicare cost-sharing. The State Medicaid agency would 
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.
    We received the following comments on this proposal and respond to 
them below:
    Comment: All commenters supported the requirement of FIDE SNPs to 
cover Medicare cost-sharing for both QMB and non-QMB full-benefit 
dually eligible FIDE SNP enrollees as part of the FIDE SNP's coverage 
of Medicaid-covered primary and acute care services.
    Response: We thank commenters for their support for our proposal.
    Comment: A commenter supported the proposal but requested that CMS 
delay the applicability date of this provision to allow adequate time 
to implement in Tennessee where the capitated contracts do not 
currently include Medicare cost-sharing.
    Response: In the proposed rule (87 FR 1863), we stated our belief 
that all FIDE SNPs already receive Medicaid capitation for Medicare 
cost-sharing consistent with our proposal. Therefore, we assumed no 
impact on current FIDE SNPs and did not believe there was any reason to 
delay the implementation of this new requirement. However, comments and 
our subsequent analysis illustrate that, in contrast to our assertion 
in the proposed rule, FIDE SNPs in one State (Tennessee) do not 
currently cover Medicare cost-sharing. As a result, we anticipate that 
there will be a need for the State and those FIDE SNPs to implement 
changes to come into compliance with this new requirement. Therefore, 
we are finalizing a change to make this provision applicable beginning 
in 2025.
    Comment: A commenter encouraged CMS to ensure that capitation rates 
adequately and appropriately reflect the scope of services covered.
    Response: We appreciate the opportunity to clarify that the 
requirements that apply to Medicaid capitation rates, including 
actuarial soundness requirements at 42 CFR 438.4, are applicable to 
Medicaid capitation rates developed for the affiliated Medicaid MCO for 
a FIDE SNP. As reflected in paragraph (1) of the definition of FIDE 
SNPs at Sec.  422.2, the MA organization offering a FIDE SNP is also a 
Medicaid MCO with a contract under section 1903(m) of the Act, which 
must be a Medicaid managed care comprehensive risk contract as defined 
in Sec.  438.2. As required by section 1903(m)(2)(A) of the Act and 
Sec.  438.4, capitation rates for MCO contracts must be actuarially 
sound, meaning that the rates are projected to provide for all 
reasonable, appropriate, and attainable costs for the enrolled 
population that are required under the terms of the contract. CMS 
reviews such rates under Medicaid managed care regulations in 42 CFR 
part 438. We anticipate that capitated coverage of the Medicare cost-
sharing for Medicare Part A and Part B benefits that will be required 
for FIDE SNPs will be included in the MCO contract that the single 
legal entity offering both the FIDE SNP and the MCO must have with the 
State. As such, the requirement for actuarially sound capitation rates 
will apply.
    Comment: The commenter requested clarification whether this 
proposal is limited to covering Medicare cost-sharing for ``primary 
care and acute care'' and excluded providers and suppliers of other 
services (for example, pharmacists providing Part B drugs, DME 
suppliers, etc.) and, if the exclusion is intentional, why other 
providers and suppliers should be excluded.
    Response: Thank you for the opportunity to clarify our proposal. 
The reference in paragraph (2)(i) of the FIDE SNP definition 
encompasses Medicare cost-sharing for all Medicare Part A and B 
services, including Part B drugs and DME to the extent the Medicaid 
program covers Medicare cost-sharing for full-benefit dually eligible 
individuals. We clarify here that in using the definition in section 
1905(p)(3)(B) of the Act without regard to the limitation of that 
definition to QMB dually eligible beneficiaries, we are not requiring 
that a State expand the categories of full-benefit dually eligible 
beneficiaries for whom the State covers all Medicare cost-sharing in 
order to contract with a FIDE SNP.
    Comment: A commenter asked if the Medicare cost-sharing for non-QMB 
dually eligible beneficiaries would be the financial obligation of the 
FIDE SNP and not included in the calculation of the State's capitated 
Medicare cost-sharing payment.
    Response: Under this proposal, the FIDE SNP would cover Medicare 
cost-sharing, which includes coinsurance, copayments, or deductibles 
for Medicare Part A and Part B benefits covered by the FIDE SNP, for 
all enrollees of the FIDE SNP beginning January 1, 2025. As detailed in 
section B.5.a of this rule, FIDE SNPs must have exclusively aligned 
enrollment beginning January 1, 2025, FIDE SNPs will only enroll full-
benefit dually eligible individuals, which can include non-QMB full-
benefit dually eligible beneficiaries, and cover Medicare cost-sharing 
for these enrollees beginning January 1, 2025.
    For full-benefit QMB dually eligible individuals (that is, QMB+ 
beneficiaries), ``Medicare cost-sharing'' includes costs incurred with 
respect to dually eligible individuals in the QMB program ``without 
regard to whether the costs incurred were for items and services for 
which medical assistance [Medicaid] is otherwise available under the 
plan'' as described in section 1905(p)(3) of the Act. Therefore, under 
the new requirement we are finalizing here, the FIDE SNP capitated 
contract with the State must include State payment of Medicare cost-
sharing for full-benefit QMB dually eligible beneficiaries. States may 
elect to extend coverage of Medicare cost-sharing, including 
coinsurance, for Medicare beneficiaries eligible for full Medicaid 
benefits who are not QMBs, (such as SLMB+ beneficiaries), as specified 
in the Medicaid State plan. For non-QMB full-benefit dually eligible 
beneficiaries, the FIDE SNP capitated contract with the State must 
include State payment of all Medicare cost-sharing when the State has 
elected to extend such coverage for these individuals. Absent such an 
election, the FIDE SNP's affiliated Medicaid MCO capitated contract 
must cover Medicare cost-sharing for these non-QMB full benefit dually 
eligible individuals only for services covered under the State plan. In 
this last circumstance, the State might adjust the capitation rate paid 
under the Medicaid MCO contract to reflect coverage of Medicare cost-
sharing for non-QMB full-benefit dually eligible individuals only for 
those services, such as inpatient hospitalization, that are also 
covered under the Medicaid State plan. In our experience, however, 
States do not adjust the capitation rate for Medicare cost-sharing for 
a FIDE SNP's full-benefit dually eligible enrollees to account for 
those few Medicare-covered services not covered under the Medicaid 
State plan because the difference in per

[[Page 27748]]

member per month costs is not significant.
    Comment: A commenter asked how the State coverage of cost-sharing 
occurs in situations where a FIDE SNP makes alternate payment 
arrangements with providers (for example, if a FIDE SNP capitates per 
patient per month payments, quality bonuses, or within a network with 
salaried providers and facilities directly owned by the plan).
    Response: When the State contract with the Medicaid MCO affiliated 
with a FIDE SNP capitates for Medicaid payment of Medicare cost-
sharing, providers no longer bill the State Medicaid agency for 
Medicare cost-sharing; the FIDE SNP assumes responsibility for making 
these payments. As proposed and finalized, the requirement for FIDE 
SNPs to cover the Medicaid payment of Medicare cost-sharing for their 
enrollees under the capitated contract between the Medicaid MCO 
affiliated with the FIDE SNP and the State does not dictate the 
particular payment amounts for covered services. Nor does this final 
policy address all operational details for identifying Medicare cost-
sharing obligations for specific services in the context of specific 
provider payment arrangements. This new provision only requires that 
the FIDE SNP's coverage of Medicaid benefits include the Medicare cost-
sharing otherwise applicable for Medicare Part A and B benefits for the 
FIDE SNP's enrollees, which will result in the FIDE SNP's payment to a 
provider including the FIDE SNP's coverage of the service and any 
Medicaid-covered Medicare cost-sharing amount.
    CMS does not interfere in the negotiations between MA organizations 
and their contracted providers and does not directly participate in the 
negotiations between FIDE SNPs and States regarding the capitation 
amount paid for FIDE SNP's Medicaid coverage (other than to assure that 
Medicaid managed care requirements for actuarially sound rates in 
Sec. Sec.  438.4 through 438.7 are met). CMS will not be in a position, 
nor have the responsibility, to assess payment methodologies for how 
the FIDE SNP pays the covered Medicare cost-sharing amounts to their 
contracted providers or whether those payments are equivalent to 
comparable payments through Medicare and Medicaid FFS. States can 
require use of particular payment methodologies for certain providers, 
such as primary care, mental health, and other high value providers, 
through contracts with D-SNPs to ensure sufficient access and quality 
of care meets the needs of D-SNP members. In addition, Medicaid managed 
care regulations permit States to direct Medicaid managed care plans to 
use certain payment arrangements in connection with Medicaid coverage 
provided certain requirements are met at Sec.  438.6(c). Finally, as 
previously noted in this rule, we review Medicaid capitation rates to 
ensure they are actuarially sound.
    Comment: A commenter requested CMS consider clarifying elements of 
the Medicare cost-sharing billing process during a beneficiary's 
Medicare deeming period to prohibit MA providers from billing Medicare 
cost-sharing to dually eligible beneficiaries during the Medicare 
deeming period in order to strengthen balance billing protections for 
dually eligible beneficiaries.
    Response: We share the commenter's concern about the billing of 
Medicare cost-sharing during the deeming period when a D-SNP enrollee 
has lost Medicaid eligibility. However, the loss of Medicaid 
eligibility also means that the prohibition on providers billing the 
beneficiary for Medicare cost-sharing has also been lost, since the 
individual is no longer dually eligible for Medicare and Medicaid. We 
will take this comment into consideration as we work to develop ways to 
protect individuals from undue expenses and potential access to care 
barriers during the deeming period. Although these individuals have 
lost eligibility for Medicaid, they almost always still have very low 
income, very few resources, and substantial health care needs.
    Comment: A commenter requested clarification on how best to apply 
this requirement in instances where the HIDE SNP or FIDE SNP includes 
language on capitation for Medicare cost-sharing in the plan's contract 
with the State, but the State is not paying the plan for the Medicare 
cost-sharing in accordance with the contract language.
    Response: As proposed and finalized, capitated coverage of the 
Medicare cost-sharing for Medicare Part A and Part B benefits that will 
be required for FIDE SNPs will be included in the Medicaid MCO contract 
that the single legal entity offering both the FIDE SNP and the 
Medicaid MCO must have with the State. Future contract disputes 
regarding the implementation of State capitated payment for Medicare 
cost-sharing to a FIDE SNP should be addressed per the Medicaid MCO 
contract language for dispute resolution. The requirement for capitated 
coverage of Medicare cost-sharing does not extend to HIDE SNPs; 
however, States and HIDE SNPs (and other MA plans) are free to 
negotiate capitated arrangements for facilitating Medicaid coverage of 
Medicare cost-sharing for dually eligible individuals.
    We appreciate the support for our efforts. We are finalizing our 
proposed revisions for paragraph (2)(i) of the definition of a FIDE SNP 
at Sec.  422.2 with a delay in the applicability date until the 2025 
plan year for the requirement that FIDE SNPs cover Medicare cost-
sharing in their capitated contracts with State Medicaid agencies.
    In the proposed rule (87 FR 1862 through 1863) we also solicited 
feedback on the feasibility, implementation, estimated time to enact, 
and impact of requiring all D-SNPs to have contracts with State 
Medicaid agencies for capitated coverage of Medicare cost-sharing to 
inform future rulemaking. We received many comments in response to our 
request for information. All comments supported the benefits to 
requiring capitated Medicare cost-sharing for all D-SNPs, however 
commenters expressed substantial concerns regarding the implementation 
of such a policy and how to determine if such a policy achieves the 
purpose of improving provider access for dually eligible individuals. 
Commenters provided suggestions regarding implementation timeline, 
development of resources, and technical assistance.
    As we discussed in the proposed rule, we also considered proposing 
a requirement for State Medicaid data exchanges 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. To allow more time for us to consider the operational 
challenges for States, we did not propose a requirement. We solicited 
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. We received a number of comments in response to our 
request for information on the pros and cons of requiring State 
Medicaid data exchanges of Medicaid FFS program and Medicaid managed 
care plan enrollment data with D-SNPs. All commenters agreed with CMS's 
assessment of the importance of this data to enable better coordination 
between D-SNPs and the Medicaid FFS program or Medicaid managed care 
plan for dually eligible beneficiaries that are not in aligned plans. 
Many commenters suggested a technical expert panel of States and plans 
to develop the concept and identify considerations, obstacles,

[[Page 27749]]

and implementation timeline for the described data exchange. Finally, 
we received a couple comments that were concerned with the uniformity 
of individual State Medicaid data exchanges, and a commenter suggested 
leveraging the State MMA File Exchange \34\ as a better alternative for 
sharing the Medicaid FFS program and Medicaid managed care plan 
enrollment data.
---------------------------------------------------------------------------

    \34\ Since 2005, State Medicaid agencies have been submitting 
files at least monthly to CMS to identify all dually eligible 
beneficiaries in each State. This includes full-benefit dually 
eligible individuals and partial-benefit dually eligible 
individuals. The file is called the ``MMA File'' (after the Medicare 
Prescription Drug Improvement and Modernization Act of 2003), or 
State Phasedown File. See here for more information.
---------------------------------------------------------------------------

    We appreciate the support for our efforts to raise this issue and 
will consider comments and suggestions received for future rulemaking, 
technical assistance, and related work.
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 benefits and services, consistent with State policy.
    As discussed in more detail in the proposed rule (87 FR 1864), 
despite discussion in the April 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. Over the years, CMS has 
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.
    As discussed in the January 2022 proposed rule (87 FR 1863 through 
1864), 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. We proposed 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 
proposals 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), included flexibility for approval of some limited carve-outs of 
LTSS and behavioral health services.
    As described in the proposed rule (87 FR 1864), we proposed that 
the updates to the FIDE SNP definition at Sec.  422.2 would mean that 
all Medicaid benefits in these categories would be covered by the MCO 
that is affiliated with the FIDE SNP, to the extent Medicaid coverage 
of such benefits is available to individuals eligible to enroll in the 
FIDE SNP, and we did not propose any exceptions. Because the same legal 
entity must have the MA contract with CMS for the D-SNP and the 
Medicaid MCO contract with the State, and the enrollment in the FIDE 
SNP must be limited to dually eligible individuals who are also 
enrolled in the MCO, this entity is functionally all the FIDE SNP.
    Comment: Several commenters supported CMS's proposed clarification 
of the services that must be covered by a FIDE SNP through a capitated 
contract with the State Medicaid agency. Other commenters supported 
CMS's proposed changes to the FIDE SNP requirements and believed that 
they would help ensure that FIDE SNPs are fully integrated with 
Medicaid. Several commenters expressed that the proposed changes would 
make it easier for beneficiaries to understand how FIDE SNPs differ 
from other, less integrated D-SNPs. A commenter stated that all full 
benefit dually eligible individuals should have access to fully 
integrated care, which should include one benefit package that 
encompasses all Medicare- and Medicaid-covered services, including 
primary and acute care benefits, behavioral health, LTSS and dental 
benefits. A commenter supported CMS's proposal because they experienced 
firsthand in the Financial Alignment Initiative how Medicare-Medicaid 
integration greatly benefits enrollees, providers, and payers. Another 
commenter believed that providers would experience lower administrative 
burden when contracting with FIDE SNPs that provide comprehensive 
coverage of all the services described in our proposal. A commenter 
supported CMS's proposal because it accounts for variations in State 
Medicaid programs, honors beneficiary choice, and promotes quality and 
value through competition.
    Response: We appreciate the widespread support for our proposal to 
clarify the scope of Medicaid-covered services that must be covered by 
the affiliated Medicaid MCO for a D-SNP to be a FIDE SNP. We agree that 
the proposed changes will help ensure fuller integration of benefits 
for FIDE SNP enrollees. We also agree that the proposal will improve 
stakeholder understanding of how integrated plan options differ and 
improve clarity of what those plans cover.
    Comment: A commenter believed that the proposed changes to the 
definition of a FIDE SNP would negatively impact Medicaid programs in a 
number of States because some plans currently designated as FIDE SNPs 
would no longer be considered FIDE SNPs. Another commenter opposed 
CMS's proposal because they believed that the proposal would discourage 
States wishing to pursue further integration from doing so as it may 
not align with the State's other Medicaid contracting priorities. The 
commenter noted that Pennsylvania, Virginia, and Arizona have made the 
decision to permit D-

[[Page 27750]]

SNPs other than those that have MLTSS contracts to operate in the 
State.
    Response: We acknowledge the comments and recognize the concern 
that some current FIDE SNPs may no longer meet the requirements to be a 
FIDE SNP. As we described at 87 FR 1865 through 1866, our analysis 
found that if our proposed changes went into effect, relatively few 
FIDE SNPs would lose FIDE SNP distinction. D-SNPs that do not meet the 
proposed FIDE SNP definition at Sec.  422.2 may still meet the HIDE SNP 
definition at Sec.  422.2, which we are also updating in this 
rulemaking. In addition, coordination-only D-SNPs remain permissible, 
which means that States have flexibility in permitting various types of 
D-SNPs with different levels of integration and coordination with the 
States' Medicaid managed care programs. We believe the benefits of our 
proposed changes outweigh the benefit of continuing to allow FIDE SNP 
designation for plans that do not have the level of integration 
achieved by the same legal entity covering Medicare Part A and Part B 
benefits (subject to limited exclusions required by the Medicare 
statute) and comprehensive Medicaid benefits as outlined in our 
proposal. Further, we acknowledge that States may take different 
pathways toward integrated care, and we believe the proposed change 
preserves flexibility for States.
    Comment: A commenter requested clarification on how States would 
conform to the changes to the FIDE SNP definition. Another commenter 
requested clarification on what would happen if a State refused to 
clarify their State Medicaid agency contract. The commenter also 
requested clarification on how and whether dental benefits would be 
considered under this proposal as some State Medicaid programs cover 
limited dental benefits.
    Response: We appreciate the requests for clarification. As proposed 
and finalized, the amendments to paragraph (2) of the definition of 
FIDE SNP will require the Medicaid MCO affiliated with the FIDE SNP to 
cover specified Medicaid benefits under a capitated contract under 
section 1903(m) of the Act. For contract year 2023 and 2024, the 
required Medicaid-covered benefits are all primary and acute care 
benefits and long-term services and supports, including coverage of 
nursing facility services for a period of at least 180 days during the 
coverage year, which is consistent with the current regulation and 
practice (because we currently permit a complete carve-out of Medicaid 
behavioral health benefits). Beginning with contract year 2025, the 
required Medicaid-covered benefits are all primary and acute care 
benefits (including Medicare cost-sharing for Medicare Part A and Part 
B benefits), long-term services and supports, including coverage of 
nursing facility services for a period of at least 180 days during the 
coverage year, Medicaid home health (as defined in Sec.  440.70), 
medical supplies, equipment, and appliances (as described in Sec.  
440.70(b)(3)), and Medicaid behavioral health services. We expect that 
States that wish to have FIDE SNPs operate in their State will review 
and, as necessary, update their MCO Medicaid managed care contracts to 
include this full scope of services for the necessary time periods.
    If the FIDE SNP's MCO contract with the State Medicaid agency does 
not cover the required scope of Medicaid benefits, the MA organization 
could still offer a HIDE SNP, as defined at Sec.  422.2, or a 
coordination-only D-SNP. Under the proposed regulation, CMS is not 
requiring the FIDE SNP to cover Medicaid dental benefits in order to 
meet the definition of FIDE SNP, but States may choose to include 
dental benefits in their Medicaid MCO contract with a FIDE SNP.
    Comment: A commenter urged CMS to exercise the appropriate 
oversight to ensure that D-SNP enrollees have access to the full range 
of Medicare benefits for which they are eligible, and that D-SNPs 
adhere to Medicare requirements for access to medically necessary 
services. The commenter stated that MA plans have limited understanding 
of Medicare benefit and coverage criteria, leading to inappropriate 
denials of medically necessary care for vulnerable enrollees. The 
commenter urged CMS to (1) develop and implement a regulatory mechanism 
to ensure plan compliance with MA requirements, and (2) allow State 
Medicaid agencies greater authority over the operations of D-SNPs on 
the level of care determinations and access to medically necessary 
services, for example, by including certain reporting requirements in 
State contracts and using that information in public reporting and when 
establishing ongoing agreements.
    Response: We appreciate the comment. CMS conducts regular program 
audits of MA plans to assess compliance with Medicare Advantage 
requirements, which include coverage of almost all Medicare Part A and 
Part B benefits. As discussed in the proposed rule (87 FR 1869), 
section 164(c)(4) of MIPPA does not require a State to enter into a 
contract with an MA organization with respect to a D-SNP (as described 
in section 1859(b)(6)(B)(ii) of the Act), 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. States have broad authority to 
include specific requirements for D-SNPs in their State Medicaid agency 
contracts (and some States currently do so). We believe that State 
Medicaid agencies have sufficient oversight authority over the 
operations of D-SNP plans and flexibility to allow States to require 
that MA organizations provide reports to the States under the State 
Medicaid agency contracts so long as such reports and information 
sharing, and/or specific performance standards are consistent with 
applicable law and do not violate 42 CFR part 422 requirements. In the 
proposed rule (87 FR 1869 through 1870), we gave examples of States 
that require specific care coordination or data sharing activities in 
their contracts with D-SNPs.
(2) Requiring FIDE SNPs To Cover 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 proposed 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 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. As described in the proposed rule (87 FR 
1864), we proposed that this requirement would mean that all primary 
and acute care services, including the Medicare cost-sharing covered by 
the State Medicaid program (as discussed and finalized for 2025 in 
section II.A.5.b. of this final 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 did not propose any exceptions or 
mechanism for carving out coverage of primary and acute care. However, 
we did clarify 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 solicited comment 
on whether we should allow for specific carve-outs of some of these 
benefits and services. We welcomed specific

[[Page 27751]]

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 requested that comments include the reason 
for the existing and proposed future carve-outs.
    Comment: Several commenters supported CMS's proposed requirement 
that all primary and acute care benefits must be covered by FIDE SNPs 
through a capitated contract with the State Medicaid agency.
    Response: We thank the commenters for their support.
    Comment: A commenter expressed support and agreement with CMS that 
Medicaid non-emergency medical transportation, while a critical 
service, should not be considered a primary or acute care service for 
the purpose of this definition. Other commenters expressed concern 
about excluding Medicaid NEMT from the services that must be included 
in a FIDE SNP's contract with a State. A commenter acknowledged that 
many States cover NEMT benefit through Statewide contracts with an NEMT 
provider, but believed that in many States NEMT does not work well for 
beneficiaries, and coordination with doctors and other service 
providers has been poor. The commenter believed integrating NEMT, if 
done well, should be able to help address some of those current 
deficiencies. Other commenters noted that NEMT is vital to ensure 
dually eligible individuals with transportation barriers have access to 
the care they need. These commenters cited a preliminary study on NEMT 
access in the MA program which shows that the use of an NEMT benefit in 
MA plans is correlated with an average 1.5 times more primary care 
physician visits than for those beneficiaries who didn't use the 
benefit.
    Response: We appreciate the comments on the inclusion of NEMT. We 
acknowledge that NEMT is a critical service for dually eligible 
individuals. We note that our proposal does not preclude States from 
including NEMT in their contracts with D-SNPs or their Medicaid managed 
care plans. However, we continue to believe that it is not a primary or 
acute care service and therefore, NEMT is not required to be included 
in the Medicaid capitated contract that is necessary for FIDE SNP 
designation.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, including 
those in section II.A.5.b., we are finalizing our proposed revisions 
for paragraph (2)(i) of the definition of a FIDE SNP at Sec.  422.2 
with a delay in applicability date until the 2025 plan year for the 
requirement that FIDE SNPs cover Medicare cost-sharing in their 
capitated contracts with State Medicaid agencies.
(3) Requiring FIDE SNPs To Cover Medicaid Behavioral Health Services
    We described at 87 FR 1865 the need for and importance of 
behavioral health services among dually eligible individuals. 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 through 15707). We believe that a 
revision to that policy is appropriate and proposed 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 proposed the 
2025 date to allow time for MA organizations and States to adapt to our 
proposal. In addition, we proposed (as discussed in section II.A.5.e. 
of this final rule) an amendment to Sec.  422.107 to add a new 
paragraph (h) to adopt a standard for limited exclusions from the scope 
of Medicaid benefits coverage by FIDE SNPs and HIDE SNPs of certain 
behavioral health services.
    Restricting FIDE SNP designation to D-SNPs that cover Medicaid 
behavioral health services, as well as other benefits, under a 
capitated Medicaid MCO contract with the State Medicaid agency 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. Second, 
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.\35\ 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. As we discussed at 87 
FR 1865 through 1866, 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. 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. 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.
---------------------------------------------------------------------------

    \35\ 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-andPhysical-Health-Services-in-Medicaid.pdf.
---------------------------------------------------------------------------

    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

[[Page 27752]]

discussed at 87 FR 1865, 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.
    Comment: Numerous commenters expressed support for CMS's proposal 
to require FIDE SNPs to cover behavioral health services. Several 
commenters believed the proposal addresses the intent of the BBA of 
2018 to increase Medicare-Medicaid integration. A few commenters stated 
that behavioral health is a critical component of a fully integrated 
model of care and that inclusion of behavioral health is essential to 
providing high-quality, effective care for dually eligible individuals. 
A commenter stated that issues related to behavioral health and 
substance use have been exacerbated due to the COVID-19 pandemic, 
heightening the importance of access to behavioral health and substance 
use disorder treatment. Several commenters believed that strengthening 
access to behavioral health services is a growing concern that merits 
greater attention and that CMS's proposal is an important step in the 
direction toward improving and protecting access to behavioral health 
services. A commenter supported the proposal for FIDE SNPs to cover 
Medicaid behavioral health services along with continued flexibility of 
allowing some limited carve-outs. A commenter encouraged CMS to require 
all D-SNPs--not just FIDE SNPs--to cover Medicaid behavioral health 
services to address misalignment of services for dually eligible 
individuals with behavioral health diagnoses or addition, but the 
commenter recognized the proposal as a glide path toward greater 
integration.
    Response: We appreciate the widespread support for our proposal. We 
agree that requiring FIDE SNPs to cover Medicaid behavioral health 
services as proposed at paragraph (2)(iii) of the definition of FIDE 
SNPs in Sec.  422.2 would improve Medicare-Medicaid integration for 
beneficiaries.
    Comment: A few commenters opposed the proposal because States with 
behavioral health carved out of Medicaid managed care, including 
California, New York and Pennsylvania, would not be permitted to have 
FIDE SNPs if the proposal is finalized. A commenter stated that 
operationalizing this change in Pennsylvania would require legislative 
action, that a multitude of stakeholder groups would oppose the 
proposal, and that the current Commonwealth administration would not 
support the proposal. The commenter noted that there would be no way 
for the current Pennsylvania FIDE SNPs to meet the proposed CMS 
requirements beginning in 2025 to maintain their FIDE SNP status.
    Another commenter noted that all D-SNPs in Oregon are required to 
coordinate with all Medicaid benefits, including dental and behavioral 
health. However, this commenter emphasized that D-SNPs in Oregon would 
not be able to easily achieve FIDE SNP status because of statutory 
carve-outs of LTSS. Several commenters requested clarification from CMS 
to address situations where benefits such as behavioral health or LTSS 
are carved out at a State level, including California and Pennsylvania, 
which prevents D-SNPs from receiving the HIDE SNP and FIDE SNP 
designation despite meeting other criteria. A commenter explained that 
some States believe a specialty behavioral health plan with a focused 
suite of intense services on the highest utilizers to improve outcomes 
among people with serious mental illness is the most effective way to 
decrease health care costs and improve quality. The commenter stated 
that, should D-SNPs in those States lose the ability to receive the 
HIDE SNP and FIDE SNP designation, it would result in the loss of 
flexibilities, such as the frailty adjustment, which could limit the D-
SNPs' ability to provide complete care and supplemental benefits to 
their enrollees. To assist with any implementation of this provision, 
the commenter asked that CMS provide further clarification on the 
effect of this provision in States where a carve-out exists.
    Response: We appreciate the perspective raised by these commenters. 
We recognize that not all States currently include Medicaid behavioral 
health and Medicaid LTSS benefits in their capitated Medicaid 
contracts. We believe the advantages of restricting FIDE SNP 
designation to plans that cover behavioral health and Medicaid LTSS 
benefits in the capitated contract with the State Medicaid agency 
outweigh the advantages of continuing to allow FIDE SNP designation for 
plans that do not cover these benefits. As stated in the proposed rule, 
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. As we discussed in the proposed rule (87 FR 1866), 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. If other States choose to keep behavioral health 
carved out of their SNP contracts, the remaining FIDE SNPs in those 
States would not meet the new requirements for FIDE SNPs that we are 
finalizing in the definition at Sec.  422.2. Such plans may still meet 
the HIDE SNP definition at Sec.  422.2, which we are also revising in 
this rulemaking.
    Comment: Some commenters expressed concern about continuity and 
quality of care with behavioral health being carved into FIDE SNPs. A 
few commenters supported the provision to require FIDE SNPs cover 
behavioral health, but cautioned that CMS should require strong steps 
to avoid disruption in behavioral health care when transitioning 
individuals in the 24 FIDE SNPs that do not currently have behavioral 
health in their contracts. A commenter highlighted the importance of 
consistency, continuity, and ongoing access to trusted providers in 
behavioral health, and that even small disruptions in provider networks 
or changes in procedures to access providers can set back progress for 
affected beneficiaries.
    A commenter urged CMS to consider, when approving carve-ins of 
behavioral health in any D-SNP, the importance of ensuring that the 
move does not degrade the quality of care. The commenter shared the 
following example: Some county systems have experience in behavioral 
health for persons with serious mental illness that is difficult to 
duplicate. In some jurisdictions, carved-out behavioral service 
systems, which serve many individuals who are homeless or in danger of 
homelessness, are closely integrated with housing service providers, 
working together to bring stability to this high need population. This 
commenter stated that, in the States where behavioral services were 
integrated into the FAI demonstrations, the path was often rocky, 
particularly where plan sponsors had little experience in the area.
    Another commenter believed that the agencies with which States 
contract to provide behavioral health services often

[[Page 27753]]

provide inadequate support for individuals needing behavioral health 
treatment facilities and do not assist with finding community 
providers.
    Response: We appreciate the comments and agree that continuity of 
care is important for enrollees receiving behavioral health care 
treatment and the valuable care and supports delivered by behavioral 
health providers who operating outside of FIDE SNPs. However, our 
proposal to require FIDE SNPs to cover Medicaid LTSS and Medicaid 
behavioral health services would not require any enrollees to 
transition from their current D-SNPs, nor would it require a State to 
carve-in behavioral health services. If the 24 FIDE SNPs do not meet 
the proposed FIDE SNP definition at Sec.  422.2 due to a behavioral 
health carve-out in 2025, they may still meet the HIDE SNP definition 
at Sec.  422.2 or the definition of a coordination-only D-SNP; 
therefore, enrollees could remain in these MA plans without disruption. 
In addition, States have the ability to establish linkages between 
behavioral health providers and D-SNPs to facilitate coordination of 
care if the State believes that is preferable to including such 
behavioral health services in the Medicaid MCO contract held by the 
FIDE SNP (or a less comprehensive Medicaid managed care contract held 
by a HIDE SNP). If States decide to carve in behavioral health services 
into FIDE SNPs or other D-SNPs, they can work with the plans and 
providers to ensure existing delivery systems for behavioral health are 
not disrupted.
    While we proposed to allow limited carve-outs from the scope of 
Medicaid LTSS and Medicaid behavioral health services that must be 
covered by FIDE SNPs and HIDE SNP, as discussed in II.A.5.e., we 
clarify that we did not propose to establish requirements related to 
approving a State's decision to include certain services in their 
Medicaid programs. Our proposal, and the provisions finalized on this 
point in this rule, are specific to the minimum standards we believe 
are necessary for an MA plan to be designated as a fully integrated or 
highly integrated special needs plan for dually eligible individuals.
    In addition, if a State newly includes Medicaid LTSS and/or 
Medicaid behavioral health services into its contract with a D-SNP, the 
D-SNPs must ensure continuity of care and integration of services, 
including with community programs and social services, as described at 
Sec.  422.112(b). This requirement applies to all MA plans, including 
all types of D-SNPs.
    Comment: A commenter expressed appreciation for the delayed 
effective date of 2025 but also suggested considering a longer 
timeframe for compliance or additional temporary exclusions from the 
scope of Medicaid coverage required for FIDE SNPs to allow for 
transitions. Another commenter urged CMS to consider allowing an 
extended timeframe beyond 2025 for States that demonstrate commitment 
to integrating behavioral health services in FIDE SNPs to account for 
the State's procurement strategy, demonstrate commitment to developing 
or refining a FIDE SNP model to integrate care for dually eligible 
individuals, or demonstrate a commitment to designing a State-specific 
solution to fully coordinate behavioral health services with all 
Medicare and Medicaid benefits that results in seamless coverage. The 
commenter requested that CMS offer supports to States that currently 
carve out behavioral health but wish to pursue more integrated models 
of care for dually eligible individuals, including technical 
assistance, additional resources for identifying the most appropriate 
pathway for carving behavioral health benefits into FIDE SNPs or more 
generally to Medicaid managed care contracts.
    Response: We thank the commenters and appreciate their 
perspectives. We appreciate that States will have different pathways 
and considerations for including Medicaid behavioral health services in 
the MCO contracts held by FIDE SNPs by 2025, but we do not agree with 
extending the timeline. As we discuss in the proposed rule (87 FR 1865 
through 1866), our review of State Medicaid agency contracts for FIDE 
SNPs in contract year 2021 indicates that States include full coverage 
of Medicaid behavioral health services for most FIDE SNPs (45 of the 69 
FIDE SNPs) and policy changes in New York to be effective in 2023 will 
increase this number. If the remaining FIDE SNPs in California and 
Pennsylvania do not meet the additional requirements we proposed and 
are finalizing as part of the FIDE SNP definition at Sec.  422.2, these 
plans may still meet the requirements to be a HIDE SNP, consistent with 
the revised definition that we proposed and are finalizing in this rule 
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 outweigh the 
benefit of continuing to allow FIDE SNP designation for plans that do 
not cover these benefits.
    We are available to assist States interested in pursuing more 
integrated models of care for dually eligible individuals, and we are 
actively planning for upcoming technical assistance opportunities.
    Comment: A commenter highlighted the benefits of the behavioral 
health carve-out model used in Pennsylvania, in which a wide variety of 
behavioral health services are delivered through a specialized Mental 
Health and Substance Use Disorder provider network. The commenter 
stated that the carve-out model implements evidence-based and promising 
practices in the area of behavioral health, ensures a single point of 
accountability, better utilization management of services, and overall 
better management of costs while ensuring improved outcomes for the 
individuals served.
    The commenter did not agree with CMS's logic that FIDE SNPs have an 
incentive to steer beneficiaries toward behavioral health Medicaid 
covered services for which they are not financially responsible. The 
commenter wrote that, since Medicaid is always the payor of last 
resort, if the service is a covered Medicare service, Medicare would be 
the primary payor.
    The commenter also believes it is possible that changes in the 
health of enrollees or changes in membership over time could change a 
FIDE SNP's population mix to the point that it would impact their 
frailty score and thus make them eligible for the increased revenue 
from the frailty adjustment. The commenter expects this issue 
concerning potential future frailty adjustment payments would create 
pushback from current FIDE SNPs in Pennsylvania if they no longer 
qualify as FIDE SNPs.
    Response: We appreciate that, in Pennsylvania and other States, 
policymakers may prefer to maintain existing delivery systems for 
behavioral health rather than to include those services in the MCO 
contracts held by FIDE SNPs. In those States, current FIDE SNPs would 
be re-designated as HIDE SNPs in 2025 and thus be ineligible for the 
frailty adjustment, even if the level of frailty in those D-SNPs would 
otherwise qualify the plan for frailty adjustment. That is a downside 
to our proposal but we do not believe it outweighs the other benefits 
outlined here of limiting FIDE SNP designation to plans that cover 
Medicaid behavioral health services, subject to minimal exclusions that 
CMS has approved under proposed Sec.  422.107(h) (which is discussed 
and finalized in section II.A.5.e. of this final rule).

[[Page 27754]]

    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed revisions for paragraph (2)(iii) of the 
definition of a FIDE SNP at Sec.  422.2 without modification.
(4) Requiring FIDE SNPs To Cover Medicaid Home Health and Medical 
Supplies, Equipment, and Appliances
    We proposed 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. Two 
categories of Medicaid benefits we proposed to add include home health 
services, as defined in Sec.  440.70, and medical supplies, equipment, 
and appliances, as described in Sec.  440.70(b)(3). We believe that 
FIDE SNPs should be required to cover the Medicaid home health benefits 
and medical supplies, equipment, and appliances (to the full extent 
these benefits are covered by Medicaid) because both 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 medical supplies, equipment, and appliances, 
so we did not expect our proposal to impact any existing FIDE SNPs. 
However, we proposed that this change in the scope of required coverage 
by FIDE SNPs would not apply until 2025 in case there were other 
circumstances of which we were not aware that would necessitate 
additional time to adapt to our proposal.
    As such, we proposed to add new paragraphs (2)(iv) and 2(v) to the 
FIDE SNP definition at Sec.  422.2 to require that the capitated 
contract between the State Medicaid agency and the legal entity that 
offers the FIDE SNP must include Medicaid home health services as 
defined at Sec.  440.70 and Medicaid DME as defined at Sec.  
440.70(b)(3). In this final rule, we are correcting the terminology to 
use the phrase ``medical equipment, supplies, and appliances'' to 
better track the regulation text at Sec.  440.70(b)(3). As described in 
the proposed rule (87 FR 1864), we proposed that this new requirement 
would mean that all Medicaid benefits in these categories would be 
covered by the MCO that is affiliated with the FIDE SNP, to the extent 
Medicaid coverage of such benefits is available to individuals eligible 
to enroll in the FIDE SNP, and we did not propose any exceptions. 
Because the same legal entity must have the MA contract with CMS for 
the D-SNP and the Medicaid MCO contract with the State and the 
enrollment in the FIDE SNP must be limited to dually eligible 
individuals who are also enrolled in the MCO, this entity is 
functionally all the FIDE SNP.
    Comment: A number of commenters expressed support for CMS's 
proposal to require FIDE SNPs to cover Medicaid home health and DME 
under their Medicaid MCO contracts. Several commenters noted that home 
health services and DME are critical services for dually eligible 
individuals. A commenter noted that home health is important because it 
curtails the need for more expensive health care options such as 
emergency room visits, hospital readmissions, and skilled nursing 
facility stays. The commenter also stated that DME benefits are 
important as they can assist with mobility and independence for 
beneficiaries and therefore improve quality of life. Several commenters 
highlighted that beneficiaries have long faced complex barriers to 
acquiring certain DME. A commenter noted that the proposal addresses 
the intent of the BBA of 2018 to increase Medicare-Medicaid 
integration. A commenter expressed their support and noted that D-SNP 
State Medicaid agency contracts in Arizona already conform to CMS's 
proposed definition.
    Several commenters agreed with CMS that 2025 implementation is 
appropriate in case any unforeseen issues arise. A few commenters 
suggested that the requirement for integration of home health and DME 
go into effect immediately rather than waiting until 2025.
    Response: We appreciate the widespread support of our proposal that 
FIDE SNPs must cover Medicaid home health and DME under their Medicaid 
MCO contracts. We agree with commenters who stated that accessing DME 
(that is, medical equipment, supplies, and appliances) can be a 
challenge for beneficiaries, and we believe this proposal is a step 
towards addressing that issue. While a few commenters questioned if it 
is necessary to wait until 2025 to implement the proposal, we believe 
waiting until 2025 to require coverage will allow adequate time to 
adapt to any unforeseen circumstances that may arise and will not cause 
loss of any integration in current FIDE SNPs that already cover 
Medicaid home health services and DME.
    Comment: A commenter stated that States will need to ensure that D-
SNPs understand the details of Medicaid coverage of the required 
services to ensure that enrollees receive the full extent of benefits 
they are currently eligible to receive under Medicaid. This will 
require State oversight and reporting by D-SNPs to the State.
    Response: We thank the commenter. As proposed and finalized, this 
new requirement for FIDE SNPs must be met through the Medicaid MCO 
contract held by the legal entity that offers both the FIDE SNP and the 
Medicaid MCO. We anticipate that the Medicaid MCO contract addresses 
reporting by the entity (as would any Medicaid managed care contract 
whether associated with a HIDE SNP or coordination-only D-SNP or not) 
to the State and oversight by the State over Medicaid benefit delivery 
and administration. Medicaid managed care regulations, such as Sec.  
438.66, require States to monitor their Medicaid managed care programs. 
Further, under current regulation at Sec.  422.107(c)(1), the State 
Medicaid agency contract must document the D-SNP's responsibility to 
coordinate the delivery of Medicaid benefits for its enrollees. States 
and D-SNPs should already be communicating related to Medicaid 
benefits. This communication will be important to successful 
implementation of this final rule.
    Comment: A commenter supported the proposal to require that FIDE 
SNPs cover Medicaid home health services and DME as defined in Sec.  
440.70(b)(3) but recommended a modification. The commenter highlighted 
that the terminology used in Sec.  440.70(b)(3) is ``medical supplies, 
equipment, and appliances suitable for use in any setting in which 
normal life activities take place.'' The commenter recommended that CMS 
require FIDE SNPs to cover ``medical supplies, equipment and 
appliances'' as referenced in that subsection to ensure that the 
regulation is not interpreted to require coverage of only a subset of 
that category of services. The commenter believed that allowing nurse 
practitioners to order and certify Medicare and Medicaid home health 
services, and Medicaid medical supplies, equipment and appliances for 
their patients, as authorized in the CARES Act, has been integral to 
patients receiving medically necessary services in a timely fashion.
    Response: We appreciate the commenter's support and suggestion. We 
believe that it is important to utilize the prevailing Federal 
definitions for Medicaid services and therefore will use the 
terminology in Sec.  440.70(b)(3),

[[Page 27755]]

``medical supplies, equipment, and appliances,'' along with the 
reference to Sec.  440.70(b)(3), in the new paragraph (2)(v) of the 
FIDE SNP definition at Sec.  422.2 to clearly identify the mandatory 
scope of coverage.
    Comment: A commenter stated that the current Puerto Rico D-SNP 
program offered with the local government, Platino, is fully 
coordinated but the D-SNPs do not cover certain LTSS and nursing home 
services because Congress chose not to provide funding to Puerto Rico 
for these Medicaid services. The commenter urged CMS to allow plans in 
Puerto Rico to be eligible as FIDE SNPs and receive the frailty 
adjustment even though those D-SNPs do not cover these benefits.
    Response: We appreciate the comment about Puerto Rico's Medicaid 
program and understand the lack of Medicaid long term care benefits in 
Puerto Rico prevents D-SNPs in Puerto Rico from meeting the FIDE SNP 
requirements. As a result, no D-SNPs in Puerto Rico currently meet the 
requirements to be a FIDE SNP, and this rulemaking does not change 
those circumstances.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing without modification our proposed revisions in paragraph 
(2)(iv) of the definition of FIDE SNP at Sec.  422.2. We are finalizing 
paragraph (2)(v) of the FIDE SNP definition with a technical change to 
clarify that for plan year 2025 and subsequent years, the Medicaid 
capitated contract required for a FIDE SNP must cover medical supplies, 
equipment, and appliances as described in Sec.  440.70(b)(3).
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 proposed to revise 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 final 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 proposed 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 by using the phrase ``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.'' In section II.A.5.e. of this final rule, we also 
discuss our proposal to adopt new provisions in Sec.  422.107 to permit 
limited carve-outs from the required scope of services.
    Later in this section, we describe our proposal to require that the 
capitated Medicaid contract applies in the entire service area for the 
D-SNP in more detail. Otherwise, our proposal was generally a 
reorganization and clarification of the scope of Medicaid benefits that 
must be covered by a HIDE SNP.
    Comment: Numerous commenters supported CMS's proposal for HIDE SNPs 
to be required to cover the vast majority of Medicaid behavioral health 
services or the vast majority of Medicaid LTSS. MACPAC expressed 
support for CMS's proposed changes to the HIDE SNP definition because 
the proposed change would further integration and clarify the 
definitions of these plans. Several other commenters supported the 
proposal and believed that it would further clarify the distinction 
between HIDE SNP and FIDE SNP coverage requirements. A commenter 
expressed support because they believed that there has been a 
significant lack of clarity and comprehension around HIDE SNP 
definitions, and, in general, what can be expected of particular types 
of SNPs. Another commenter expected that the proposal would reduce 
confusion, provide more transparency of State Medicaid agency contract 
review, and allow continued flexibility for D-SNPs to provide either 
LTSS or behavioral health services. Another commenter expressed support 
because CMS's proposal maintains flexibility for States to leverage 
integrated plans even if they cannot meet all the requirements for FIDE 
SNPs.
    Response: We appreciate the numerous comments of support for our 
proposal to revise the definition of HIDE SNPs at Sec.  422.2. We agree 
that these changes, as proposed and finalized in this rule, and in 
conjunction with the proposed changes to Sec.  422.107(g) and (h), will 
clarify the scope of responsibilities for HIDE SNPs, better distinguish 
them from FIDE SNPs and coordination-only D-SNPs, and provide 
flexibility to States in how they use D-SNPs in connection with their 
Medicaid programs.
    Comment: A commenter expressed concern that the proposed revisions 
may not adequately account for variation in State approaches to 
Medicaid managed care. The commenter recommended CMS reconsider 
limiting the HIDE SNP definition to the extent that it would disqualify 
otherwise integrated agreements. The commenter believed the proposed 
changes only serve to complicate administration, particularly if States 
with carve-outs beyond the proposed limits were required to pivot to 
coordination-only agreements to preserve D-SNPs.
    Another commenter recommended that CMS permit a HIDE SNP with a 
Medicaid MCO contract that covers behavioral health services to 
operate, without requiring the contract to include LTSS. The commenter 
also suggested that CMS clarify that a HIDE SNP with a State Medicaid 
agency contract that includes Medicaid services, including behavioral 
health, does not need to also have separate Medicaid MCO contract.
    Response: While we appreciate the commenters' perspectives, we 
believe that the HIDE SNP designation should be consistent with a high 
level of integration in which the vast majority of Medicaid LTSS or the 
vast majority of Medicaid behavioral health services are covered by the 
capitated contract with the State. These proposed changes are 
consistent with our proposal to amend the FIDE SNP definition described 
in section II.A.5.c. to more clearly outline the services integrated D-
SNPs, meaning both FIDE SNPs and HIDE SNPs, must include in their 
contracts with State Medicaid agencies. We clarify that if the MA 
organization offering a D-SNP--or the MA organization's parent 
organization, or another entity that is owned and controlled by its 
parent organization--has a Medicaid managed care contract with the 
State that includes coverage of Medicaid behavioral health benefits but 
excludes coverage of Medicaid LTSS, the MA organization may qualify as 
a HIDE SNP provided other applicable requirements (such as a compliant

[[Page 27756]]

Medicaid State agency contract, as required by Sec.  422.107 and, 
beginning January 1, 2025, minimum service area requirements) are met. 
We further clarify that the HIDE SNP definition, either currently or as 
amended in this final rule, does not require the affiliated Medicaid 
plan to be an MCO contract, it could be a PAHP or PIHP; Medicaid 
managed care regulations in 42 CFR part 438 establish the requirements 
for a managed care contract (that is, a capitated contract) for 
coverage of Medicaid benefits.
    Comment: A few commenters requested clarification on whether these 
provisions limit HIDE SNP enrollments to exclusively aligned 
enrollment. A commenter noted that while they support greater 
clarification around alignment for HIDE SNPs, they recognized the 
challenges of exclusively aligned enrollment and that States may need 
to contract with D-SNPs in ways that promote integration but also allow 
States to design programs that meet their specific needs and fit within 
the parameters of current State benefit offerings. The commenter 
believed additional clarity may be helpful in defining alignment 
options for HIDE SNPs.
    Response: We welcome the opportunity to clarify our proposal. We 
clarify that HIDE SNP plans are not required to have exclusively 
aligned enrollment. Please see the discussion in section II.A.5.f. for 
more detail about our proposal to require the capitated contract in the 
entire service area for the D-SNP.
    Comment: Some commenters requested that CMS apply the frailty 
adjustment to all highly integrated products, including HIDE SNPs. A 
few commenters specifically encouraged CMS to allow HIDE SNPs that 
provide LTSS to be eligible for the frailty adjustment. Several 
commenters noted that there are strong similarities between enrollees 
in HIDE SNPs and FIDE SNPs, and since both plan types serve enrollees 
that are generally frailer than the typical Medicare population, both 
should be eligible to receive higher adjustment payments if they have a 
similar average frailty as the PACE program. A commenter stated that 
allowing HIDE SNPs to receive the frailty adjustment would more 
appropriately apply the frailty adjustment to integrated plans serving 
people dually eligible for both Medicare and Medicaid, while 
acknowledging State contracting differences. A few commenters stated 
that allowing HIDE SNPs to receive the frailty adjustment would make 
the HIDE SNP market more competitive or incentivize further integration 
of plans.
    Response: We appreciate the comments regarding the frailty 
adjustment provided by section 1853(a)(1)(B)(iv) of the Act; however, 
they are beyond the scope of this rulemaking.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed revisions for the definition of a HIDE SNP at 
Sec.  422.2 without modification.
e. Medicaid Carve-Outs and FIDE SNP and HIDE SNP Status
    As discussed earlier, we proposed 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. We also proposed 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 proposed 
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 final 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 permitting exclusions from the scope of 
Medicaid behavioral health and Medicaid LTSS would improve transparency 
for stakeholders and allow us to better enforce our policies to limit 
benefit carve-outs. We did not propose to permit exclusions from 
coverage of Medicaid primary care or acute care for FIDE SNPs.
    Our proposal is consistent with the policy described in a 
memorandum CMS issued in January 2020,\36\ 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 was 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 Medicaid managed care 
policy, applicable statutory provisions, and our implementation of 
those statutory provisions toward the goal of raising the bar on 
integration.
---------------------------------------------------------------------------

    \36\ 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. We currently grant HIDE and FIDE SNP status 
despite Medicaid LTSS carve-outs of limited scope if such carve-outs 
(1) apply to a minority of the full-benefit dually eligible LTSS users 
eligible to enroll in a HIDE or 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 a HIDE or FIDE SNP who use Medicaid 
LTSS. We provided examples of permissible LTSS carve-outs at 87 FR 
1867. D-SNPs can currently obtain the HIDE or FIDE SNP designation with 
limited carve-outs of Medicaid behavioral health services from their 
capitated contracts. A behavioral health service carve-out would be of 
limited scope if such a carve-out (that is, exclusion from coverage by 
the Medicaid managed care plan affiliated with the D-SNP): (1) Applies 
primarily to a minority of the full-benefit dually eligible users of 
behavioral health services eligible to enroll in a HIDE or FIDE 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 a HIDE or FIDE SNP. We specified 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

[[Page 27757]]

Medicaid programs provide to individuals with severe and moderate 
mental illness are covered through the D-SNP (through the MA 
organization's Medicaid managed care capitated contract) or the 
affiliated Medicaid managed care plan (through the Medicaid managed 
care capitated contract with the MA organization's parent organization 
or another entity that is owned or controlled by the parent 
organization). We believe that level of integrated coverage is a 
minimum standard for a D-SNP to be considered highly or fully 
integrated. We provided examples of permissible LTSS carve-outs at 87 
FR 1868.
    We described our intent to administer this proposed regulation 
consistent with our current policy and therefore anticipated little 
disruption to occur because of this proposed change.
    Comment: Numerous commenters supported the codification of 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. Several commenters agreed with CMS that limited or 
narrow carve-outs of LTSS and behavioral health services are essential 
given the wide variation in how States choose to provide those 
services. Another commenter suggested the refined definitions of FIDE 
and HIDE SNPs could encourage States to carve in LTSS for individuals 
who need the services the most. Another commenter recognized that the 
proposed revisions to the HIDE SNP and FIDE SNP definitions are 
intended to enhance the level of integration in such plans.
    Response: We appreciate the widespread support we received for our 
proposal. 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 current implementation 
of those statutory provisions toward the goal of raising the bar on 
integration. Our proposal is consistent with the policy described in a 
memorandum CMS issued in January 2020, and we believe that these 
revisions will improve clarity and avoid misinterpretations of our 
policy that might result from language in the memorandum that differs 
in the allowed carve-outs for Medicaid LTSS and behavioral health 
services. We agree with commenters that monitoring the impact of carve-
outs for impacts on enrollees' access to services and care coordination 
processes is important.
    Comment: A commenter recommended that CMS standardize Medicaid 
benefit carve-out requirements for States implementing a FIDE SNP 
model. The commenter further suggested that CMS set rules for how many 
benefit carve-outs States will be allowed, whether the carve-outs 
include benefits that do not qualify as primary and acute care services 
(for example, non-emergency transportation), and how the carve-outs 
would integrate operationally with the FIDE SNPs if the underlying 
benefit is handled by a delegated vendor.
    Response: We thank the commenter for their perspectives. However, 
we do not believe it is feasible to establish a uniform set of carve-
out limits or a numerical limit on carve-outs due to the variation 
across States. The requirements we are finalizing at Sec.  422.107(g) 
and (h) permit only limited carve-outs from the Medicaid LTSS and 
Medicaid behavioral health services coverage that HIDE SNPs and FIDE 
SNPs must have included in their managed care contract with the State 
Medicaid agency. We will apply this evaluation looking at coverage of 
Medicaid LTSS benefits and/or Medicaid behavioral health services as a 
whole in connection with the scope of coverage in the Medicaid managed 
care contract affiliated with the FIDE SNP or HIDE SNP. While the 
limits in the regulations we are adopting do not equate to or specify 
how many Medicaid LTSS and/or Medicaid behavioral health services 
carve-outs a State may have, it does act as a substantive limit when we 
make determinations that a D-SNP qualifies as a FIDE SNP or HIDE SNP.
    The finalized paragraph (2)(i) of the FIDE SNP definition at Sec.  
422.2 (discussed earlier in sections II.A.5.c. of this final rule) 
requires each FIDE SNP to cover primary and acute care services, 
including Medicare cost-sharing covered by the State Medicaid program 
as of 2025, under the MCO contract between the State and the 
organization that offers the FIDE SNP. We did not propose and are not 
adopting any exceptions or permissible carve-outs for this required 
coverage. We solicited comment on whether we should allow for specific 
carve-outs of some primary and acute care benefits and welcomed 
examples of such benefits that are either currently carved out of FIDE 
SNP capitated contracts with State Medicaid agencies or should be 
carved out. We did not receive any comments in response to this 
solicitation and are finalizing our proposal without modification. We 
stated in section II.A.5.c. that Medicaid NEMT as defined in Sec.  
431.53 is not a primary or acute care service included in the scope of 
this provision, but that goes to identifying the scope of acute and 
primary care services, not establishing permissible carve outs for 
categories of acute and primary care services.
    Comment: Another commenter believed carve-outs interfere with true 
integration but indicated that some Medicaid services may have, 
historically, not been provided appropriately by managed care plans. 
The commenter suggested that a State carve-out may be necessary to 
ensure that enrollees have access to the care they need and recommended 
that CMS work closely with States to determine why certain carve-outs 
exist and what the impact may be on access to care if the carve-outs 
are eliminated. Another commenter stated that the application of a 
carve-out to a minority of enrollees has less of an impact on 
individuals needing Medicaid LTSS services and behavioral health 
services, and several commenters advocated that States should monitor 
the impact of any service carve-out on enrollees and their quality of 
care and life.
    Response: We thank the commenters and appreciate their 
perspectives. We agree that monitoring and oversight of carve-outs is 
important and will work with States to ensure quality of care is not 
compromised and enrollees are educated about changes to the scope of 
benefits available through a HIDE SNP or FIDE SNP, particularly in the 
case of Medicaid LTSS and behavioral health services. We clarify that 
our proposal would not require that States carve in benefits if they 
prefer not to do so because MA program regulations permit a D-SNP to be 
offered without the MA organization (or its parent organization or an 
entity also owned by its parent organization) having a capitated 
contract for coverage of Medicaid behavioral health or LTSS benefits. 
As proposed and finalized, Sec.  422.107(g) and (h) are specific to the 
required scope of coverage of Medicaid benefits by FIDE SNPs and HIDE 
SNPs with regard to behavioral health and LTSS benefits.
    Comment: A commenter provided an example whereby beneficiaries who 
may consider enrolling in plans with carve-outs are notified that the 
integrated services do not include Medicaid LTSS and/or behavioral 
health services to the extent they are carved-out.
    Response: We appreciate this comment and example. Per Sec.  
422.2267(e)(5)(ii)(D), all D-SNPs must clearly state which services are 
included in their plan benefit packages, including

[[Page 27758]]

Medicaid benefits, by either including the description in the required 
summary of benefits or putting the description in a separate document 
that is provided to enrollees with the summary of benefits. In 
addition, Sec.  422.111 requires annual disclosures by all MA plans, 
including D-SNPs, of the scope of and rules for coverage under the 
plan.
    Comment: Another commenter supported full integration and described 
experience with State carve-outs of Medicaid behavioral health and LTSS 
services, which the commenter indicated prevents D-SNPs from receiving 
the HIDE SNP and FIDE SNP designation. The commenter suggested 
addressing the needs of the dually eligible population which may 
require specialized programs and tailored methods to support recovery-
oriented systems of care.
    Response: We thank the commenter and agree that addressing the 
needs of the dually eligible population is vital for improving health 
outcomes and is greatly facilitated when the broadest scope of Medicaid 
behavioral health and LTSS services are integrated into HIDE SNP and 
FIDE SNP benefit packages.
    Comment: Several commenters requested guidance and technical 
assistance in various areas. A commenter suggested guidance to States 
to promote interoperability and data sharing between plans specifically 
when a benefit is carved out. Another commenter suggested CMS provide 
guidance to States on how to implement a model of care that allows for 
complete integration.
    Response: We thank the commenters and appreciate these suggestions. 
We anticipate offering technical assistance and providing sub-
regulatory guidance based on this final rule.
    Comment: Several commenters requested clarification on what is 
meant by ``a minority of beneficiaries eligible to enroll'' and ``small 
part of the total scope of services'' as those phrases are used in 
proposed Sec.  422.107(g) and (h). These commenters suggested that CMS 
provide additional examples or further description of the review 
process that would be utilized to make these determinations.
    Response: We appreciate the commenters' desire for additional 
clarification. We believe the examples we provided in the proposed rule 
at 87 FR 1867 through 1868 are instructive of the type of Medicaid LTSS 
and behavioral health carve-outs we would permit under Sec.  422.107(g) 
and (h). We prefer to not inadvertently limit the terms ``minority of 
beneficiaries eligible to enroll'' or ``small part of the total scope 
of services'' by providing additional examples, given the potential 
variation across States. We determine the integration status for MA 
organizations offering D-SNPs through our annual review of State 
Medicaid agency contracts (that is, the contracts between States and D-
SNPs required by Sec.  422.107) in July. As part of that review, we 
will assess the scope of existing or proposed carve-outs against the 
Sec. Sec.  422.2 and 422.107(g) and (h) requirements and determine 
whether a D-SNP meets the FIDE SNP or HIDE SNP designation. Where the 
State Medicaid agency contract is a separate contract from the Medicaid 
MCO contract, we may review the Medicaid MCO contract available on the 
State Medicaid agency's website when that is necessary to our 
evaluation. We strongly encourage States and MA organizations to seek 
technical assistance from CMS as necessary. As the scope of coverage of 
Medicaid benefits must be set in the Medicaid capitated contract with 
the Medicaid managed care plan, we anticipate that States may seek 
technical assistance outside of the timeline for MA organizations to 
submit their State Medicaid agency contracts that are required by Sec.  
422.107(a) through (c).
    Comment: In addition, a commenter suggested CMS clarify what 
happens in certain States that impose caps on Medicaid LTSS eligibility 
resulting in enrollment limits and how this carve-out provision would 
be applied or affected in those cases. This commenter also urged CMS 
take into consideration that, when determining criteria for carve-outs 
in applicable integrated plans, even minor Medicaid carve-outs can 
greatly complicate the unified grievances and appeals process to which 
they are subject, causing more confusion for beneficiaries and 
providers as well. The commenter suggested that CMS educate States 
about these impacts as part of the process.
    Response: We thank the commenter. FIDE SNPs and HIDE SNPs are 
required by this rule to provide the minimum required Medicaid benefits 
to the extent that Medicaid coverage is available to beneficiaries who 
are eligible to enroll in the FIDE SNP or HIDE SNP. So, if the Medicaid 
State plan excludes coverage altogether of certain benefits for certain 
beneficiaries (that is, there is no Medicaid coverage at all, as 
opposed to Medicaid coverage being carved out of a managed care program 
or contract), our regulatory provision will not withhold designation of 
the D-SNP as a FIDE SNP or HIDE SNP solely based on that. Thus, FIDE 
SNPs are required to provide Medicaid LTSS to all who meet the State 
eligibility criteria for LTSS (for example, nursing home level of care) 
but not to all FIDE SNP enrollees, some of whom might not be eligible 
for the Medicaid benefit at all. HIDE SNPs are required to provide 
Medicaid LTSS, and/or Medicaid behavioral health services. To the 
extent Medicaid LTSS is not available to an enrollee because there is 
an enrollment cap or waiting list (for example, such as those related 
to Medicaid home and community-based services waivers), then the 
enrollee has not met the State eligibility criteria and the D-SNP could 
still meet the requirements at proposed Sec.  422.107(g) and (h) to be 
a HIDE or FIDE SNP. Regarding applicable integrated plans, only the 
services covered by the applicable integrated plans are subject to the 
unified appeals and grievances processes. However, all D-SNPs that 
receive an appeal for a carved-out Medicaid services have a 
responsibility to assist the enrollee in the appeals process for that 
service, per Sec.  422.562(a)(5).
    Comment: Several commenters expressed concern that carve-outs may 
lead to disjointed and uncoordinated care and that carve-outs do not 
enhance care coordination. Another commenter indicated that they 
believe the proposal at Sec.  422.107(g) and (h) impinges on State 
autonomy and flexibility.
    Response: We appreciate the commenters' concerns and we acknowledge 
the commenters' perspective on this issue. However, we believe that the 
requirements proposed at Sec.  422.107(g) and (h) strike an appropriate 
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, 
while permitting State flexibility.
    Comment: A commenter expressed concerns regarding the carve-out 
examples provided by CMS. Specifically, the commenter questioned use of 
substance abuse treatment, rural health clinic (RHC) and FQHC services 
as examples of permissible carve-outs, and requested feedback on 
whether the examples provided were appropriate. The commenter opined 
that these services are not limited in scope and should not be included 
as permissible carve-outs. The commenter noted that, according to the 
Substance Abuse and Mental Health Administration, dually eligible 
beneficiaries have a significantly higher rate of behavioral health and 
substance use disorder conditions than the non-dually eligible 
population. The commenter noted that, for many dually eligible 
individuals, RHCs and FQHCs are their primary source of behavioral 
health and

[[Page 27759]]

substance use disorder treatment. Therefore, the commenter requested 
that CMS not include these services as permissible carve-outs.
    Response: We appreciate the comment and agree that the services 
identified are important to dually eligible individuals and care 
coordination would be facilitated if these services were not carved out 
from FIDE SNP or HIDE SNP Medicaid benefits. However, to our knowledge, 
only one State carves out FQHC and RHCs from Medicaid benefits covered 
under the FIDE SNP's or HIDE SNP's MCO contract with the State Medicaid 
agency. That State, Minnesota, has carved out Medicaid FQHC and RHC 
services from the benefits delivered by FIDE SNPs and HIDE SNPs because 
of the complexity in adjudicating Medicaid payments for these provider 
types and services. The State has implemented a data exchange process 
between these providers and the State's FIDE SNPs and HIDE SNPs to 
facilitate care coordination. At least six States carve substance use 
disorder services out from the services delivered by HIDE SNPs and FIDE 
SNPs. We believe the frequency of such carve-outs may be indicative of 
the difficulty in subsuming these services under Medicaid managed care. 
We do not have any information indicating that Medicaid behavioral 
health services or LTSS delivered by FQHCs and RHCs or substance use 
disorder services do not constitute a small part of the total scope of 
such services provided to the majority of beneficiaries eligible to 
enroll in these D-SNPs. Thus, we are finalizing language at Sec.  
422.107(g) and (h) that will continue to allow such limited carve-outs 
of Medicaid LTSS and Medicaid behavioral health services from the 
services covered by FIDE SNPs and HIDE SNPs. We will continue to assess 
whether these specific carve-outs meet our criteria in light of the 
specific facts in a given situation. In addition, we may consider 
future rulemaking to revise the standard in Sec.  422.107(g) and (h) if 
necessary.
    Comment: A commenter agreed with CMS that personal care services 
should not be carved out but also suggested that there could be 
instances where FIDE SNPs and HIDE SNPs do carve out services, such as 
behavioral health and Medicaid LTSS, and integration could still be 
achieved. This commenter provided an example where county personnel 
from the In-Home Supportive Services Program, California's carved-out 
personal care program, participated in care planning meetings with the 
MMP.
    Response: We appreciate the comment and an example of engagement 
between personal care services staff and the MMP under circumstances 
where personal care services are carved out. While we recognize there 
may be other similar examples, as we discussed at 87 FR 1867 through 
1868, our current policy, which we proposed and are finalizing in the 
definitions of FIDE SNP and HIDE SNP in Sec.  422.2 and in Sec.  
422.107(g) and (h), is that FIDE SNP or HIDE SNP designation is not 
available for D-SNPs where the Medicaid coverage has extensive carve-
outs of Medicaid behavioral health and/or Medicaid LTSS benefits. While 
we encourage the use of additional means of coordinating services, we 
do not believe that to be the appropriate standard to use.
    Comment: A commenter requested additional clarification on how CMS 
views Medicaid carve-outs, including how CMS would address 
circumstances where a State's configuration of services and coverage 
differs from CMS's proposed requirements at Sec. Sec.  422.2 and 
422.107(g) and (h) for FIDE SNP and HIDE SNP coverage of Medicaid LTSS 
and Medicaid behavioral health services, as is the case in California. 
This commenter sought clarification of CMS's expectation that the FIDE 
SNP and/or HIDE SNP cover community-based LTSS. Similarly, the 
commenter requests information on CMS's view of behavioral health 
carve-outs in California, where behavioral health services for 
individuals with serious mental illness are the responsibility of the 
county mental health plan.
    Response: Our proposal at Sec.  422.107(g) through (h) does not 
change States' abilities to make decisions about its Medicaid managed 
care program or how services are delivered in Medicaid. Instead, our 
regulations at Sec.  422.107(g) and (h) as well as the revisions to the 
definitions of FIDE SNP and HIDE SNP in Sec.  422.2 limit the HIDE SNP 
and FIDE SNP designation based on the extent of carve-outs or 
exclusions from Medicaid coverage furnished under the Medicaid 
capitated contract required with the D-SNP or an affiliated Medicaid 
managed care plan. The current combination of LTSS and behavioral 
health carve-outs in California precludes most D-SNPs operating in 
California from qualifying for HIDE SNP or FIDE SNP designation.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed provisions at Sec.  422.107(g) through (h) 
without modification.
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 enrollees 
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. We codified the required level of 
integration for D-SNPs in paragraph (4) of the definition of D-SNP at 
Sec.  422.2 in the April 2019 final rule.
    Currently, under Sec.  422.2, a D-SNP can meet the requirements to 
be designated as a FIDE SNP or 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.\37\ For FIDE SNP or HIDE SNP enrollees outside the 
companion Medicaid plan's service area, this lack of alignment does 
little to integrate Medicare and Medicaid benefits as the D-SNP 
enrollee does not have the option to join the companion Medicaid plan. 
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.
---------------------------------------------------------------------------

    \37\ 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.
---------------------------------------------------------------------------

    Under our authority at section 1859(f)(8)(D) of the Act to require 
that all D-SNPs meet certain criteria for Medicare and Medicaid 
integration, we proposed to amend the FIDE SNP definition at Sec.  
422.2 by adding new paragraph (6) and the HIDE SNP definition at Sec.  
422.2 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 D-SNP contract to completely overlap with the 
service area of the Medicaid capitated (that is, managed care) contract 
will facilitate all

[[Page 27760]]

FIDE SNP and HIDE SNP enrollees having access to both Medicare and 
Medicaid benefits from a single parent organization.
    Our proposal addressed an unintended loophole to the minimum D-SNP 
integration criteria we 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 service area (and therefore, 
enrollment) in the same service area as the companion Medicaid plan. We 
do not believe that the existing definitions are consistent with the 
goals and purposes of increasing Medicare-Medicaid 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.
    We did not intend for the proposal 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. We did 
not propose to 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 may have other policy objectives 
better met with larger service areas in their Medicaid managed care 
programs.
    In plan year 2022, all FIDE SNPs met the service area requirement 
being proposed. Most, but not all, HIDE SNPs also met the proposed 
requirement. Of the 219 HIDE SNP plan benefit packages across 18 
States,\38\ only 15 HIDE SNPs in four States had service area gaps with 
their affiliated Medicaid managed care plans, leaving 106,075 enrollees 
in 194 counties with no corresponding Medicaid plan.\39\ As noted in 
our proposed rule, an MA organization impacted by our proposal would 
have several pathways to comply with the change to the definition of 
HIDE SNP at Sec.  422.2. The options include using the crosswalk 
exception currently at Sec.  422.530(c)(4) (which we are redesignating 
as Sec.  422.530(c)(4)(i) in section II.A.6.a. of this final rule) in 
conjunction with dividing an existing FIDE or HIDE SNP into two (or 
more) separate D-SNPs, with the service area of the FIDE or HIDE SNP 
being within the service area of the affiliated Medicaid managed care 
plan. We solicited comment on whether this proposal would likely result 
in additional, unintended disruption for current FIDE SNP and HIDE SNP 
enrollment. We direct readers to the proposed rule, at 87 FR 1869, for 
a more detailed description of our projected impacts on HIDE SNPs and 
options available for MA organizations impacted by this change.
---------------------------------------------------------------------------

    \38\ CMS, SNP Comprehensive report, January 2022. Retrieved at: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Special-Needs-Plan-SNP-Data.
    \39\ Internal analysis based on data from: CMS, Monthly 
Enrollment by Contract, January 2022. 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, January 2022. 
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 2022. Retrieved from: https://www.cms.gov/files/document/smacdsnpintegrationstatusesdatacy2022.xlsx; and service 
area information from State Medicaid agency websites.
---------------------------------------------------------------------------

    We explained in the proposed rule how we were 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. We were 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 did not propose either of these alternative 
approaches because we believed these alternatives would 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.
    Comment: A number of commenters supported of the proposal to 
require FIDE SNPs and HIDE SNPs have capitated contracts with the State 
Medicaid agency covering the entire service area for the D-SNP. A 
commenter noted that existing unaligned service areas for HIDE SNPs 
resulted in confusion among enrollees, providers, and plan staff and 
limited opportunities for integrated notices and appeals. Some 
commenters believed that CMS's proposal would increase Medicare-
Medicaid integration. Several commenters noted CMS's proposal would 
facilitate the ability to offer exclusively aligned enrollment for D-
SNP and the affiliated Medicaid plan. A commenter believed most, if not 
all, beneficiaries enrolled in HIDE SNPs and FIDE SNPs should have 
access to companion Medicaid plans. Another commenter noted that dually 
eligible individuals should be in Medicare and Medicaid plans under one 
parent company. Some commenters stated that CMS's proposal would 
clarify the definitions of FIDE SNPs and HIDE SNPs, and prevent less 
integrated plans from claiming these designations.
    Response: We thank commenters for their support of our proposal. We 
agree that this change to the FIDE SNP and HIDE SNP definitions at 
Sec.  422.2, and therefore in the requirements for these types of D-
SNPs, will improve Medicare-Medicaid integration for dually eligible 
beneficiaries.
    Comment: A commenter supported this proposal at the plan benefit 
package (PBP) level, rather than the contract level, in States where 
Medicare Advantage contracts include non-FIDE and non-HIDE PBPs that 
are D-SNPs. Another commenter supported the proposal and encouraged CMS 
to extend this requirement to all D-SNPs that operate in the same area 
as a Medicaid managed care plan, unless the State requests an 
exception. The commenter believed that when a State has risk contracts 
with managed care plans to provide Medicaid coverage to the dually 
eligible population, D-SNPs should only be permitted to operate if they 
have one of these Medicaid managed care contracts. This commenter 
believed that allowing integrated D-SNPs to compete with non-integrated 
D-SNPs confuses beneficiaries and degrades the definition of a D-SNP.
    Response: We appreciate the support from these commenters. We 
confirm that the service area requirement we proposed and are 
finalizing here applies to FIDE SNPs and HIDE SNPs at the PBP level. 
While we did not accept the recommendation to deny D-SNP MA contracts 
to plans that do not (themselves or through an affiliated entity) have 
a capitated contract for Medicaid benefits with the State Medicaid 
agency in States where such contracts exist, we do note that States can 
choose to execute State Medicaid agency contract only with those D-SNPs 
that also cover Medicaid benefits under Medicaid managed care 
contracts, through a direct contract with the State or through an 
affiliated Medicaid managed care plan. Our final policy

[[Page 27761]]

provides flexibility for States to permit coordination-only D-SNPs.
    Comment: Some commenters opposed the requirement to align the FIDE 
SNP or HIDE SNP service area with the affiliated Medicaid plan service 
area. A few commenters expressed concern that the requirement will 
create significant, unnecessary disruption to existing D-SNP enrollees. 
A commenter believed requiring a Medicaid contract to cover the entire 
HIDE SNPs service area would limit the ability of small or new plans to 
offer a HIDE SNP and this would not be in beneficiaries' best 
interests.
    Response: We appreciate the commenters' concern about the 
disruption to enrollees of FIDE SNPs and HIDE SNPs. We clarify that an 
impacted MA organization can keep operating in the existing service 
area for both the D-SNP and Medicaid plan; the difference would be that 
beginning with plan year 2025, the D-SNP would not qualify for FIDE SNP 
or HIDE SNP designation. Therefore, there is no need for a D-SNP to 
terminate and disrupt the coverage provided to current enrollees. The 
impacted MA organization that is not changing its service area or PBP 
offerings as a result of this rule would be required to update the 
contract with the State Medicaid agency required by Sec.  422.107 to 
include the notification requirement specified at Sec.  422.107(d). We 
note that, based on our review of D-SNP contracts for 2022, no FIDE 
SNPs are impacted by this requirement, and the States with impacted 
HIDE SNPs also offer non-HIDE D-SNPs; therefore, these States have 
established and are experienced with the notification requirement at 
Sec.  422.107(d).
    Comment: Several commenters also noted their concern about how the 
new service area requirement would negatively impact the State Medicaid 
agencies' contracting priorities and their ability to contract with D-
SNPs. A few commenters requested CMS engage with impacted States to 
prevent any potential impacts and beneficiary disruption. A commenter 
requested further analysis and explanation of how the proposal would 
work with current State laws, and requested CMS research why there may 
be regions where a capitated contract does not extend to the entire D-
SNP service area. Another commenter noted States may need some 
flexibility to come into compliance with the requirement and design 
programs and benefit offerings to meet their needs.
    Response: We thank the commenters. However, we do not believe that 
this change will impact the flexibility that States have to use their 
contracts with D-SNPs to design programs that meet the needs of dually 
eligible beneficiaries. States can continue to contract with D-SNPs 
that have an affiliated Medicaid managed care plan in only a portion of 
the service area. While we agree with MACPAC's recommendation that 
States use the State Medicaid agency contracts that are 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,\40\ our proposal only mandates such alignment for HIDE SNP and 
FIDE SNPs with their affiliated Medicaid managed care plans. 
Coordination-only D-SNPs can continue to operate without alignment of 
the service area of the D-SNP with an affiliated Medicaid managed care 
plan. We continue to conduct outreach and technical assistance to 
States to better understand their use of capitated contracts (that is, 
Medicaid managed care contracts under 42 CFR part 438) and their 
Medicare-Medicaid integration goals.
---------------------------------------------------------------------------

    \40\ 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. Retreived at https://www.macpac.gov/wp-content/uploads/2021/06/June-2021-Report-to-Congress-on-Medicaid-and-CHIP.pdf.
---------------------------------------------------------------------------

    Comment: A commenter noted that the proposed changes have already 
been implemented in Arizona. Another commenter expressed concern that 
the requirement would impact the landscape of D-SNPs in Oregon.
    Response: We thank the commenters for offering their perspective. 
In our analysis of FIDE SNP and HIDE SNP service areas,\41\ we 
identified some service areas in which HIDE SNPs in Arizona do not 
offer an affiliated Medicaid plan; however, we believe the impacted 
plans and the State have sufficient time to choose an approach to come 
into compliance (or default to coordination-only D-SNP status) that is 
in line with the State's integration goals. Our analysis also showed 
that HIDE SNPs in Oregon would not be impacted by this proposal because 
each of Oregon's HIDE SNPs' service areas completely overlap with an 
affiliated Medicaid plan. We will reach out to States impacted by this 
change to provide technical assistance in advance of the contract year 
2025 MA bidding cycle.
---------------------------------------------------------------------------

    \41\ 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.
---------------------------------------------------------------------------

    Comment: A few commenters requested that CMS clarify the scope of 
the proposed requirement. A commenter requested clarification on 
whether this provision, or others in the rule, would limit HIDE SNP 
enrollments to exclusively aligned enrollment or otherwise limit HIDE 
SNPs with unaligned enrollment. Another commenter requested 
confirmation that an MA organization that has a Medicaid MCO contract 
that covers the applicable geography and that includes behavioral 
health benefits for dually eligible beneficiaries would be allowed to 
operate HIDE SNPs, even if the MA organization does not have a managed 
long-term services and supports (MLTSS) contract. The commenter also 
requested CMS confirm that an MA organization that offers a HIDE SNP 
that includes Medicaid services (including behavioral health) in the 
State Medicaid agency contract should not need to also have separate 
Medicaid MCO contract. Lastly, the commenter requested CMS clarify that 
an MA organization is not required to also have a general Medicaid MCO 
contract or MLTSS contract to offer a HIDE SNP if the State has 
separate selection process for integrated plans.
    Response: We thank the commenters for their request for clarity on 
the scope of the proposals. We confirm that this provision and others 
being finalized in this rule do not require HIDE SNPs to have 
exclusively aligned enrollment. (The definitional change to require 
exclusively aligned enrollment beginning in 2025 is limited to FIDE 
SNPs.) We also note that in addition to requiring that the capitated 
contract with the State Medicaid agency cover the entire service area 
for the HIDE SNP starting in plan year 2025, the HIDE SNP definition as 
finalized in this rule requires: (1) The capitated contract be between 
the State Medicaid agency and the MA organization, it's parent 
organization, or another entity that is owned and controlled by its 
parent organization; (2) coverage of LTSS or behavioral health 
services. HIDE SNPs are not required to have a capitated contract with 
the State for both behavioral health and LTSS. These capitated 
contracts with the State Medicaid agency are Medicaid managed care risk 
contracts between the State and MA organization offering the HIDE SNP, 
its parent organization, or another entity owned and controlled by the

[[Page 27762]]

parent organization and the Medicaid managed care risk contracts must 
comply with 42 CFR part 438 provisions for Medicaid managed care 
contracts. Therefore, the Medicaid managed care plan that is affiliated 
with a HIDE SNP may be an MCO, a PIHP, or a PAHP, so long as coverage 
of at least Medicaid LTSS or Medicaid behavioral health services is 
included. Under this additional amendment, the D-SNP's service area 
must be completely overlapped by the service area of this affiliated 
Medicaid managed care plan beginning in 2025 in order for the D-SNP to 
be a HIDE SNP; actual enrollment in the HIDE SNP and the affiliated 
Medicaid managed care plan is not required to be aligned. We note that 
some States directly contract with D-SNPs under a single contract that 
meets both the managed care contract requirements under 42 CFR part 438 
and the D-SNP contract requirements under Sec.  422.107, but this is 
not required and a State may use a Medicaid managed care contract under 
part 438 and a separate contract for Sec.  422.107 purposes.
    Comment: A few commenters supported CMS giving impacted MA 
organizations the opportunity to crosswalk enrollees from the existing 
D-SNP that includes the service area outside of the companion Medicaid 
plan service area into a new D-SNP PBP. However, several commenters 
noted creating two different PBPs creates additional burdens for MA 
organizations. A commenter also noted there is additional burden for 
the States to operate and oversee additional D-SNP PBPs.
    Response: We thank the commenters for this feedback and recognize 
that creating a new PBP (that is, a new MA plan) creates additional 
burden for MA organizations. We reiterate that MA organizations do not 
need to change how they operate an impacted HIDE SNP. The HIDE SNP 
would lose its HIDE SNP designation and become a coordination-only D-
SNP, which requires compliance with Sec.  422.107(d). However, the D-
SNP's contract with the State Medicaid agency under Sec.  422.107(a) 
through (c) would likely need to be amended to include the notification 
requirement at Sec.  422.107(d). We believe any burden to the State 
from an additional D-SNP PBP due to the notification requirement at 
Sec.  422.107(d) or other State oversight of D-SNPs would be minimal. 
As noted previously in this section, all States with D-SNPs impacted by 
this provision already have coordination-only D-SNPs in their markets.
    Comment: Some commenters suggested that CMS delay the proposed 2025 
effective date of the requirement for service area overlap. While these 
commenters did not suggest an alternative effective date for this 
provision, they stated that it may take States and current HIDE SNPs 
longer to comply given State legislative and budgetary cycles.
    Response: We recognize the commenters' concerns and acknowledge the 
difficulty with aligning State Medicaid agency and Medicare Advantage 
contracting timelines. However, we decline to make this change. For the 
HIDE SNPs that are not able to align their MA service area with the 
affiliated Medicaid plan's service area for contract year 2025, they 
may be able to continue operating as a non-HIDE D-SNP and regain HIDE 
status once the service areas align. We note, however, that this final 
rule is effective in 2022, more than two years before the beginning of 
2025 when this new service area requirement will apply.
    Comment: Several commenters requested CMS provide guidance to 
impacted States and MA organizations. A few commenters requested CMS 
educate States on how service area alignment impacts integrated care, 
and provide resources to help States address challenges such as 
different Medicaid procurement and D-SNP contract timelines. A 
commenter noted SHIP and MA brokers would also benefit from educational 
resources. Another commenter suggested that CMS educate beneficiaries 
ahead of this change.
    Response: We thank the commenters for their input. We will continue 
to engage with States to understand challenges and priorities in 
establishing Medicare-Medicaid integration to improve beneficiary 
experience and integration options. We will provide education and 
outreach to States about changes in this final rule through the 
Integrated Care Resource Center (see https://www.integratedcareresourcecenter.com/). We are also exploring ways to 
improve awareness of available integrated care options for dually 
eligible beneficiaries.
    Comment: A few commenters did not support the alternatives CMS 
considered to establish a minimum percentage of enrollment or service 
area overlap between the D-SNP and affiliated Medicaid plan. A 
commenter noted that these alternatives would cause confusion and limit 
opportunities for integration. A commenter supported the alternative of 
establishing a minimum percentage of enrollment at 75 percent or 
higher. This commenter noted that this percent would limit the number 
of FIDE SNP or HIDE SNP enrollees who find themselves without access to 
both Medicare and Medicaid benefits from a single parent organization 
but allow FIDE SNPs and HIDE SNPs in areas of the State where the 
companion Medicaid managed care plan may not be able to attract enough 
providers to meet network adequacy standards required by the State.
    Response: We thank these commenters for their input. We acknowledge 
the difficulty for health plans to meet both Medicare and Medicaid 
network adequacy standards in rural areas. We are not finalizing the 
alternative considered of setting a minimum percentage of enrollment as 
we believe requiring FIDE SNPs and HIDE SNPs to have, beginning with 
the 2025 plan year, MA service areas that are entirely covered by the 
service area of the Medicaid capitated contact will create sufficiently 
better coordination of Medicare and Medicaid benefits compared to 
current practice.
    Comment: Some commenters suggested that CMS allow existing HIDE 
SNPs to continue operating as HIDE SNPs and allow beneficiaries to 
choose to remain in unaligned plans. A commenter requested that CMS 
clarify network requirements to ensure alignment between a FIDE SNP's 
Medicare and Medicaid provider network. Another commenter suggested an 
attestation process which would require increasing levels of network 
alignment to maintain HIDE SNP status, similar to an initiative in 
Washington State.
    Response: We thank commenters for their recommendations. We decline 
to accept the recommendation to allow existing HIDE SNPs to operate as 
HIDE SNPs despite not meeting this new requirement because this 
alternative may create greater operational complexity for overseeing 
HIDE SNPs and would fail to meet the objectives that underpinned our 
proposal.
    Regarding network requirements to align the D-SNP's and companion 
Medicaid plan's provider networks, we will consider issuing future 
guidance and rulemaking on this topic. While we recognize the potential 
for improved continuity of care for dually eligible enrollees from 
State initiatives to increase the proportion of Medicaid plan providers 
in the D-SNP network alignment like the example from Washington State, 
this alternative is outside of the scope of this rulemaking.
    After consideration of the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed amendments at Sec.  422.2 to the

[[Page 27763]]

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.
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 for the State to require greater 
integration of Medicare and Medicaid benefits from the D-SNPs that 
operate in the State.
    Even among States that have used the State Medicaid agency contract 
at Sec.  422.107 to promote integration, we believe additional 
opportunities exist to improve beneficiary experiences and health plan 
oversight.
    We proposed 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. 
As discussed in the proposed rule at 87 FR 1870, CMS would take certain 
steps when a State Medicaid agency's contracts with D-SNPs require 
exclusively aligned enrollment and require the D-SNPs to request (from 
CMS) MA contracts that only include one or more State-specific D-SNPs 
and that such D-SNPs use integrated member materials. As discussed 
below and in the proposed rule beginning at 87 FR 1870, 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) described 
steps CMS would take when the conditions of proposed paragraph (e)(1) 
were met.
a. Limiting Certain MA Contracts to D-SNPs
    Special needs plans, including D-SNPs, are currently included as 
separate MA 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. As described in the proposed rule 
at 87 FR 1870, PBPs under a single contract may offer different benefit 
packages and serve multiple populations but still report medical loss 
ratios and certain quality measures at the contract level. While some 
quality measures are collected 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 of the D-SNP distinguished 
from other PBPs in the contract. In addition, there is currently no 
formal pathway for States to coordinate with CMS to require D-SNP PBPs 
to utilize model materials that integrate information regarding 
Medicare and Medicaid coverage.
    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, 
regional preferred provider organization (RPPO), etc.) it seeks to 
offer for all PBPs for the totality of the States, with limited 
exceptions.\42\ 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 and tailoring the 
information provided in member materials to more aptly suit the dually 
eligible population.
---------------------------------------------------------------------------

    \42\ The following memo outlines the policy for CY 2020, 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.
---------------------------------------------------------------------------

    Therefore, we proposed to codify a pathway where if a State 
requires an MA organization to establish a MA contract that only 
includes one or more D-SNPs with exclusively aligned enrollment within 
a State and for that D-SNP to then utilize integrated materials, the MA 
organization may apply for such a contract using the existing MA 
application process. The proposed language at Sec.  422.107(e)(1)(i) 
would give States the flexibility to require an MA organization to 
apply and seek CMS approval for one or more D-SNP-only contracts, which 
would provide more transparency in D-SNP plan performance within 
States. We direct readers to the proposed rule 87 FR 1870 for a more 
detailed explanation of the benefits and challenges of this proposal.
    We described 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. While we would provide States with additional 
information on timelines and procedures in sub-regulatory guidance, we 
would follow the steps consistent with existing timeframes and 
procedures for the submission of applications, bids, and other required 
materials to CMS. Examples of those activities are summarized in the 
proposed rule at 87 FR 1871. Our proposal did not include exemptions or 
changes in the current regulations and process for contract 
applications.
    To avoid any significant beneficiary disruption while implementing 
the proposed change, we proposed a new crosswalk exception (to be 
codified at Sec.  422.503(c)(4)(ii)) to allow MA organizations to 
seamlessly move existing D-SNP enrollees into a 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). To add this new crosswalk exception, we proposed 
redesignating the existing paragraph (c)(4) as new paragraph (c)(4)(i) 
and creating a new paragraph (c)(4)(ii) in Sec.  422.530. Under this 
proposal, the processes used for other crosswalk exceptions (for 
example, the notice to CMS and CMS's review and approval of the 
crosswalk exception) would apply to this new crosswalk exception.
    We solicited comment on limiting certain MA contracts to D-SNPs and 
whether any additional beneficiary protections should apply.
    Comment: Many commenters support this proposal as a step to improve 
quality, transparency, plan performance, and oversight of D-SNPs. 
Several commenters indicated having D-SNP-only contracts established 
under Sec.  422.107(e) would enable a clearer understanding of the 
dually eligible population outcomes and needs in each

[[Page 27764]]

State. MACPAC commented that the proposal aligned with prior work 
highlighting how States can use authority under the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA, Pub. L. 
110-275) to promote integration in their contracts with D-SNPs.
    Response: We thank commenters for their support. We agree that 
having D-SNPs with exclusively aligned enrollment separated into 
distinct contracts will provide greater transparency into plan 
performance and ultimately improve quality for dually eligible 
enrollees.
    Comment: Several commenters expressed support for efforts to 
encourage greater integration; however, they also expressed concerns 
with permitting States to request to CMS that D-SNPs with exclusively 
aligned enrollment be in separate MA contracts. Some commenters were 
concerned that the ability to have D-SNP-only contracts established 
under Sec.  422.107(e) complicates State contracting requirements and 
could create barriers to new market entrants, thereby limiting enrollee 
choice and decreasing competition. A commenter encouraged CMS to ask 
States to implement the provisions of D-SNP-only contracts established 
under Sec.  422.107(e) in a manner that does not discriminate between 
existing and new plans. Another commenter indicated that the proposal 
would create more heterogeneity among States in terms of State 
requirements for integrated plans and for quality assessments that will 
not improve evaluating or comparing plan quality for dually eligible 
individuals, indicating that D-SNPs already provide extensive quality 
information to States and CMS.
    Response: We appreciate the commenters' perspectives on the 
potential impacts of having D-SNP-only contracts established under 
Sec.  422.107(e); however, we do not believe that this proposal would 
cause States to discriminate between new and existing plans. Some 
States already limit market entry by only executing State Medicaid 
agency contracts with organizations with Medicaid MCO contracts or by 
utilizing competitive bidding and procurements to select organizations 
to participate as Medicaid MCOs. Our proposal does not change this 
existing State flexibility. As noted in the proposed rule at 87 FR 
1869, section 164(c)(4) of MIPPA does not obligate a State to contract 
with a D-SNP, and therefore provides States with significant control 
over the availability of D-SNPs in their markets. States have 
flexibility in pursuing D-SNP-only contracts through Sec.  422.107(e), 
but that flexibility is not unlimited. As we proposed and are 
finalizing, this pathway will only be available for D-SNPs that have 
exclusively aligned enrollment (which means that all the D-SNPs' 
enrollees are also enrolled in an affiliated Medicaid MCO) and where 
both a D-SNP-only contract and a minimum set of integrated materials 
are used. We believe in most circumstances it will be most beneficial 
if use of D-SNP-only MA contracts is implemented consistently for all 
D-SNPs with exclusively aligned enrollment within a State so that all 
these D-SNPs are on the same footing and these plan enrollees benefit 
from the use of integrated materials and greater transparency of 
quality ratings.
    We disagree with the commenter that D-SNP-only contracts 
established under Sec.  422.107(e) would not provide States with 
insight on D-SNP quality and performance. Unless a D-SNP is the only 
PBP in a contract, it is not possible to ascertain a complete picture 
of performance on HEDIS, CAHPS, HOS, and Star Ratings. As discussed 
below, the Star Ratings methodology includes both measure-level 
adjustments (where specified by measure stewards) and the CAI to adjust 
disparities in performance caused by social risk factors beyond the MA 
organizations' control.
    Comment: A few commenters requested that CMS revisit the number of 
MA contracts a legal entity can hold or this proposal would limit the 
viability of some D-SNPs. Some commenters expressed concern that 
creating new legal entities is an expensive endeavor, including meeting 
State licensure and capital requirements. These commenters sought 
clarification if separate entities would be needed to enter into the D-
SNP-only contracts established under Sec.  422.107(e).
    Response: We appreciate commenters' concerns regarding the number 
of MA contracts a legal entity can hold and agree that establishing new 
legal entities may be a burden to MA organizations. In the limited 
instance set forth in Sec.  422.107(e), MA organizations with existing 
contracts that are required by the State to separate out the D-SNP with 
exclusively aligned enrollment would not be required to create a new 
legal entity and would be permitted the additional MA contract. CMS has 
authority, at Sec.  422.503(e), to sever specific MA plans from a MA 
contract that covers multiple MA plans. While we have established an 
operational policy of requiring an MA contract to cover all MA plans of 
the same type for the same MA organization, we would create exceptions 
to that policy when Sec.  422.107(e) applies.
    Comment: Some commenters, as further discussed in section 
II.A.6.d., indicated that the proposal sets a framework that provides a 
clearer assessment of financial performance of D-SNPs.
    Response: We thank the commenters for their input related to 
assessment of D-SNPs' financial performance. We agree that having D-
SNP-only contracts established under Sec.  422.107(e) will enhance 
States' and other stakeholder's ability to examine the financial 
performance of D-SNPs.
    Comment: Some commenters noted D-SNP-only contracts established 
under Sec.  422.107(e) would allow for better oversight of network 
adequacy for the dually eligible population.
    Response: We thank commenters for their perspective related to 
oversight of network adequacy for the dually eligible population. We 
agree that having network submissions from D-SNP-only contracts 
established under Sec.  422.107(e) will provide better oversight of 
network adequacy and insight on patterns of care unique to the dually 
eligible population in the covered service areas.
    Comment: Some commenters supported the State flexibility in the 
proposal. A commenter indicated that the flexibility is necessary since 
States are at different points on the D-SNP integration pathway and 
noted that the requirements in the proposal would add duties for both 
State and D-SNP staff. A few commenters from one State indicated 
support for the proposal because current State policy would align with 
the ability to limit D-SNPs to D-SNP-only contracts specific to that 
State. A commenter acknowledged that they are actively considering 
implementing the option for D-SNP contracts established under Sec.  
422.107(e) should the proposal be finalized.
    Response: We thank commenters for their support towards State 
flexibility. We anticipate that different States will implement this 
flexibility at different times as they progress along the pathway 
towards more integration of Medicaid and Medicare through their D-SNP 
contracts and engage with their contracted D-SNPs and CMS on this 
issue.
    Comment: A commenter indicated that while the proposal could 
advance the goal for better alignment, care management, provider 
service and quality monitoring, many States will benefit from 
additional guidance and support to operationalize the proposal. Another 
commenter urged CMS to aid States in making these changes and proposed 
that CMS provide that support

[[Page 27765]]

through grants or enhanced Federal medical assistance percentage (FMAP) 
to address capacity issues. The commenter indicated that one-on-one 
intensive technical assistance and template materials would also be 
needed.
    Response: We thank the commenters for their input. In addition to 
our own direct outreach to States, we will provide education and 
resources to States to support implementation of this rule through the 
Integrated Care Resource Center.\43\ As discussed in the section that 
follows, we will develop template materials (see Integrated Member 
Materials).
---------------------------------------------------------------------------

    \43\ See https://www.integratedcareresourcecenter.com/.
---------------------------------------------------------------------------

    We appreciate the commenter's request that CMS provide support 
through grants or enhanced FMAP to help States develop capacity to 
implement D-SNP-only contracts established under Sec.  422.107(e). We 
will consider ways that CMS can provide support to States to further 
integration but note that there are limits on CMS's ability to issue 
grants or change FMAP levels.
    Comment: A commenter expressed concern that timing of State 
decisions regarding D-SNP-only contracts established under Sec.  
422.107(e) will be unclear and inconsistent across markets, resulting 
in administrative challenges for plans.
    Response: We agree with the commenter that the timing of State 
decisions regarding D-SNP-only contracts may not be consistent. To 
address this potential issue, we established at Sec.  422.107(e)(2) 
that--because the timing of applications, bids, and other contracting 
procedures under Sec. Sec.  422.250 through 422.530 remain applicable--
CMS will work in good faith following receipt of a letter from a State 
Medicaid agency indicating their intent to pursue D-SNP-only contracts 
and the use of integrated materials to implement these provisions for a 
future contract year. We further direct the commenter's attention to 
the proposed timeline discussed in the proposed rule at 87 FR 1871. 
When we issue the additional information on timelines and procedures in 
sub-regulatory guidance, we will consider current MA timeframes and 
procedures for submission of applications, bids and other required 
materials to CMS, in addition to the need for MA organizations to make 
business decisions in a timely manner. We anticipate that efforts to 
achieve D-SNP-only MA contracts in a State may take two years or more, 
depending on current MA and Medicaid managed care contract 
arrangements, such as whether a current D-SNP has exclusively aligned 
enrollment, and the level of effort needed to develop integrated 
enrollee materials.
    Comment: A commenter indicated support for the proposal only where 
the State and the plans agree to have D-SNP-only contracts established 
under Sec.  422.107(e). Another commenter suggested limiting the option 
for D-SNP-only contracts established under Sec.  422.107(e)(1) to those 
States where separate contracts are needed for additional State quality 
programs.
    Response: We appreciate the commenter's support for establishing D-
SNP-only contracts under Sec.  422.107(e) where the State and the plans 
agree to take such steps. We recommend that the State consult with CMS, 
MA organizations, and other stakeholders on whether and how to pursue 
this step toward integration, but we recognize that section 164(c)(4) 
of MIPPA does not obligate a State to contract with a D-SNP, and 
therefore provides the States with significant control over which MA 
organizations offer D-SNPs in their markets. We disagree that the State 
requirements to establish D-SNP-only contracts under Sec.  422.107(e) 
should be limited to circumstances where it is needed for additional 
State quality programs. While State quality programs may be facilitated 
by D-SNP-only contracts under Sec.  422.107(e), there are other 
reasons, including transparency of MLRs and improved State oversight, 
that are also valid reasons for States to require such contracts.
    Comment: A few commenters opposed the proposal indicating it may 
create additional administrative burden. A commenter cited burdens for 
the industry including transitioning enrollees to the new contract, 
providing separate Star Ratings measure support and reporting, managing 
additional HEDIS hybrid sample reviews and supplemental data work 
streams, and administering separate HOS and CAHPS surveys. In addition, 
the commenter noted that providers could be adversely impacted by 
additional HEDIS medical record reviews for hybrid measures and 
supplemental data collection efforts.
    Response: We acknowledge the concerns raised by commenters that 
there may be additional administrative burden for MA organizations and 
providers. We anticipate that there will be impacts shared by CMS, 
States, and MA organizations as discussed in the proposed rule at 87 FR 
1846 and in section V.C.3.b of this final rule; however, we believe the 
benefits from having separate D-SNP-only contracts established under 
Sec.  422.107(e) outweigh these concerns. Further, we do not expect a 
large volume of new contracts would be created in the foreseeable 
future because most States do not meet the prerequisite of requiring 
exclusively aligned enrollment, and among those States that do, some D-
SNPs are already in D-SNP-only contracts.
    Comment: Many commenters expressed concerns regarding quality 
measurement for D-SNP-only contracts established under Sec.  
422.107(e). Citing anticipated smaller enrollment in D-SNP-only 
contracts established under Sec.  422.107(e), many commenters believed 
CMS's proposal could create pervasive issues with small sample sizes, 
which may diminish reportability and reliability of various quality 
measures, thereby producing less visibility into D-SNP performance than 
with the current system. Some commenters were concerned that the 
variability in measure reporting would also affect the reliability of 
Star Ratings. Additionally, many commenters conveyed consternation 
based on their expectation that Star Ratings would be lower for D-SNP-
only contracts established under Sec.  422.107(e) because they would be 
scored against MA contracts with few or no dually eligible enrollees. A 
commenter noted that CMS research has shown a link between the length 
of time a contract has been in place and its Star Ratings performance. 
A few commenters noted that lower Star Ratings could reduce bonus 
payments and therefore rebates and supplemental benefits offered to 
beneficiaries. A commenter noted that lower bonus and rebate dollars 
may make it harder to address disparities. Finally, several commenters 
indicated that the impact to specific components of Star Ratings would 
need to be assessed further, including the Categorical Adjustment Index 
(CAI). A commenter noted that the CAI is insufficient to address 
concerns regarding lower Star Ratings for plans that disproportionately 
serve the most vulnerable populations. Additionally, a commenter 
expressed concern that moving to a separate contract would impact the 
Members Choosing to Leave the Plan measure, and asked CMS to exclude D-
SNP enrollees switching between unaligned and aligned D-SNPs that are 
under the same parent organization.
    Response: It is not clear to us that measure data from D-SNP-only 
contracts established under Sec.  422.107(e) would be unreliable. Under 
the FAI demonstrations, MMPs have not experienced pervasive sample size 
issues, even with lower enrollment relative to broader MA contracts, 
and therefore we do not anticipate

[[Page 27766]]

widespread measurement issues for D-SNP-only contracts established 
under Sec.  422.107(e). We also note that we would work with States 
interested in this opportunity to be sure they understand whether there 
is high risk of sample size problems and possible strategies for 
mitigation. That said, there are methodologies that prevent unreliable 
data from impacting Star Ratings. Star Ratings measures have minimum 
sample size and/or denominator requirements to ensure measure data are 
reliable. Further, to improve stability of cut points and prevent cut 
points from being influenced by outliers, Tukey outlier deletion will 
be implemented beginning with the 2024 Star Ratings. Through the use of 
Tukey outlier deletion, extreme outliers will be removed from measure 
scores prior to clustering to prevent outliers from impacting cut 
points for all contracts.
    We do not believe that a new D-SNP-only contract created under 
Sec.  422.107(e) would likely have lower Star Ratings by virtue solely 
of being a new contract. The lower Star Ratings associated with new 
contracts is likely due to the time MA organizations need to implement 
quality improvement initiatives that impact Star Ratings. Such quality 
improvement initiatives should already be in place for MA contracts 
from which the new D-SNP-only contracts are carved out using the 
process under Sec.  422.107(e). We anticipate that an MA organization 
would continue administrative and operational initiatives that are 
currently in place across multiple plans even if the D-SNP(s) in a 
particular State are placed into a D-SNP-only contract.
    While we understand the concern that D-SNP-only contracts 
established under Sec.  422.107(e) would be scored against MA contracts 
that may have few or no dually eligible enrollees, the Star Ratings 
methodology includes both measure-level adjustments where specified by 
measure stewards and the CAI to adjust for within-contract disparities 
in performance on social risk factors. There are currently 84 D-SNP-
only contracts, and the CAI methodology works as intended in the 
presence of these contracts.\44\ CAI values are assigned to contracts 
based on the contracts' percentage of LIS or dual eligible (DE) (LIS/
DE) beneficiaries and the percentage of beneficiaries with 
disabilities. The percentage of LIS/DE beneficiaries is set to 100 
percent for D-SNP-only contracts.
---------------------------------------------------------------------------

    \44\ See 2022 SNP Landscape Source Files (v_10_26_21) retrieved 
at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn.
---------------------------------------------------------------------------

    We are aware of the commenters' concern that the CAI does not fully 
address the challenge of achieving high Star Ratings for D-SNP-only 
contracts whose ratings are based on comparisons to MA contracts with 
few dually eligible enrollees. We continue to monitor the impact of the 
CAI, particularly to evaluate whether an increase in D-SNP-only 
contracts limits the statistical basis for the within-contract 
performance differences on which it is based, and whether any 
methodological enhancements are necessary. In addition, we refer 
commenters to the CY 2023 Advance Notice (https://www.cms.gov/files/document/2023-advance-notice.pdf https://www.cms.gov/files/document/2023-advance-notice.pdf) and CY 2023 Rate Announcement (https://www.cms.gov/files/document/2023-announcement.pdf) for information 
regarding a health equity index to potentially replace the current 
reward factor. The addition of a health equity index to the Star 
Ratings would need to be proposed through rulemaking.
    Regarding the commenter's concern about the Members Choosing to 
Leave the Plan measure, we note that this measure currently excludes 
enrollees that are affected by a PBP termination. Therefore, we do not 
anticipate a negative impact to this measure when enrollees are 
crosswalked from the non-renewing D-SNP PBP into the new D-SNP-only 
contract established as described in Sec.  422.107(e).
    Comment: In lieu of creating D-SNP-only contracts established under 
Sec.  422.107(e), many commenters suggested that the goals of this 
proposal could be met via other strategies. Many commenters recommended 
that CMS work with plans and States to either create D-SNP reporting 
and quality measures or expand the number of SNP-only measures reported 
at the PBP level. A commenter suggested that CMS require more detailed, 
stratified reporting of Star Ratings measures for D-SNPs. A commenter 
suggested that CMS consider additional reporting requirements in State 
Medicaid contracts, while a few commenters noted that States already 
have the option to require supplemental reporting for their Medicaid 
enrollees. A commenter noted the importance of ensuring that any State-
specific quality measures are collected in a way that does not impose 
additional burden on D-SNPs.
    Response: While we acknowledge that there are other strategies to 
collect quality data regarding D-SNPs other than permitting (or 
requiring) use of D-SNP-only contracts as described in Sec.  
422.107(e), the commenters' suggestions would not fully meet the goal 
of providing States and the public with greater transparency on MA 
quality ratings for D-SNPs. This can only be accomplished through 
separate Star Ratings specific to the performance of D-SNPs within a 
State. Although States may separately collect quality data for D-SNP 
enrollees, those data would not feed into Star Ratings. States also 
would not be able to collect CAHPS or HOS data specific to a D-SNP PBP, 
because the surveys are administered at the contract level. 
Furthermore, separate reporting reinforces unaligned measurement 
systems that exacerbate burden for plans and States, and may cause 
confusion for consumers as they attempt to consider quality information 
from different sources.
    We note that in the CY 2023 Advance Notice and CY 2023 Rate 
Announcement, we discuss confidential stratified reporting of certain 
quality measures by dual eligible status, which will aid MA 
organizations in focusing quality improvement on dually eligible 
enrollees. Such reporting would not, however, feed into Star Ratings at 
this time.
    Comment: A few commenters requested that CMS delay finalizing the 
proposal until a further evaluation can be done to determine all the 
consequences, while another commenter requested that CMS apply this 
provision prospectively for new D-SNP contracts awarded after the 
implementation date rather than requiring existing D-SNP PBPs to 
transition to separate D-SNP-only contracts. A commenter suggested that 
CMS not finalize the proposal at this time and instead monitor impacts 
of the changes occurring in California between 2023 and 2025.
    Response: We acknowledge the commenters' interest in seeking a 
delay to implement this provision. Because of the timing of MA 
applications, bids, and contract execution, the earliest time that a 
separate D-SNP-only contract could be established using the process 
created by Sec.  422.107(e) would be for the 2024 plan year, and then 
only if CMS receives a timely request from a State that is willing to 
meet the criteria set forth in Sec.  422.107(e), the MA organization 
submits a timely notice of intent to apply and subsequent application 
for a D-SNP-only contract for a service area in the State, and the 
State and the MA organization successfully negotiate and execute the 
State Medicaid agency contract required by Sec.  422.107(a) through 
(c). Therefore, we do not

[[Page 27767]]

believe a delay in the implementation of these provisions is necessary. 
Further, we believe that only implementing these provisions for new D-
SNPs would constrain States that desire consistency in their 
contracting and oversight strategies and would preclude CMS, States, MA 
organizations, and other stakeholders from gaining a full understanding 
of plan performance to improve the quality of care and level of 
integration for the dually eligible population within a State.
    Comment: Many commenters indicated that having D-SNP-only contracts 
established under Sec.  422.107(e) would provide a complete picture of 
plan performance in areas like HEDIS, HOS, CAHPS, and Star Ratings. 
Several commenters encouraged transparency on the quality ratings for 
D-SNPs to better reflect experiences unique to the population. They 
noted that separate reporting will enable CMS, States, and plans to 
more fully analyze the data, thereby improving oversight and 
accountability. A commenter indicated that the proposal would provide 
more accurate benchmarks for plans serving dually eligible individuals. 
Another commenter noted that it may also provide insight into whether 
D-SNPs are measured on the right outcomes, and whether different or 
additional measures should be considered. Another commenter noted that 
this change could enable CMS to modify Star Rating criteria in the 
future to specifically account for the unique challenges of providing 
care for D-SNP beneficiaries.
    Response: We thank commenters for their acknowledgement that our 
proposal would provide greater transparency on quality measurement for 
D-SNPs. We believe that separate reporting for D-SNP-only contracts has 
the potential to deliver many benefits, including enhancing oversight 
efforts and creating clearer performance expectations. We agree that 
separate reporting for D-SNP-only contracts will enable CMS to consider 
possible adjustments to the D-SNP measurement strategy in the future.
    Comment: A commenter noted that this proposal would allow potential 
enrollees to compare Star Ratings more accurately across D-SNPs, since 
it would remove the impact of healthier MA membership on the Star 
Ratings for D-SNPs that are operated by plans with significant non-SNP 
MA membership. Another commenter noted that this proposal would allow 
agents and brokers to provide beneficiaries with more accurate plan 
metrics and enable better consumer decision-making.
    Response: We agree with the commenters that separate Star Ratings 
for D-SNP-only contracts will provide valuable insights for consumers 
and the professionals who advise them. We believe that Star Ratings 
that are specific to local D-SNP(s) would be an important tool for 
comparison shopping and enhancing consumer choice.
    Comment: Some commenters expressed concern for unintended 
consequences of assessing D-SNP-only contracts established under Sec.  
422.107(e) separately under the current Star Ratings methodology, and 
urged CMS to undergo a thorough evaluation and analysis on the impact 
of this proposal on Star Ratings. A few commenters asked CMS to 
consider developing modifications that account for differences with MA 
plans, while another commenter asked CMS to account for differences in 
population rather than quality of care provided by plans. A commenter 
wondered if further consideration should be given to comparing D-SNP 
performance exclusively to other D-SNPs when assessing Star Ratings, 
while another commenter contended that separate baselines and cut 
points may need to be created for the D-SNP-only contracts established 
under Sec.  422.107(e). A few commenters referenced discussion in the 
CY 2023 Advance Notice about potential improvements to quality 
measurement to address social risk factors, and encouraged CMS to 
complete that effort before trying to measure D-SNP-only contracts 
established under Sec.  422.107(e). A commenter urged CMS to work with 
plans to identify a long-term and more comprehensive solution to the 
impact of beneficiary demographics and social risk factors on Star 
Ratings. Another commenter suggested that CMS convene a technical 
expert panel to look at options for adjusting Star Ratings for D-SNPs. 
Finally, a commenter suggested that CMS evaluate D-SNPs with a 
different quality payment structure entirely, similar to the strategy 
used for MMPs.
    Response: We are aware that for certain Star Ratings measures, it 
is challenging for most plans to achieve the same outcomes for groups 
with higher rates of disability, functional impairment, or social risk 
factors. This may be due to transportation issues, lower health 
literacy, communication challenges, residential instability, and other 
factors. As noted previously, the Star Ratings methodology includes 
both measure-level adjustments where specified by measure stewards and 
the CAI to adjust for within-contract disparities in performance on 
social risk factors. The CAI is a data-driven approach designed to 
improve the accuracy of performance measurement, while not masking true 
differences in performance between contracts. Many D-SNP contracts do 
well in the Star Ratings with 44 percent of D-SNP-only contracts 
earning 4 or more stars for the 2021 Star Ratings.
    CMS continually seeks to refine the Star Ratings approach, and we 
encourage commenters to review the CY 2023 Advance Notice and CY 2023 
Rate Announcement for information regarding potential new 
methodological enhancements related to expanding stratified reporting 
and developing a health equity index, both of which may help support 
efforts to address disparities in care and advance health equity. 
Substantive changes to the Star Ratings are adopted through the 
rulemaking process, which provides an opportunity for public notice and 
comment before CMS finalizes policy changes for the Star Ratings 
program.
    Regarding the suggestion to create a different quality payment 
structure entirely for D-SNP-only contracts, MA payment requirements 
are set under statute, specifically section 1853 of the Act. We believe 
that Star Ratings are an effective motivator for performance that 
incentivize MA and Part D plans to provide quality care for all 
enrollees, including those that are socially at-risk. Furthermore, 
using the same ratings approach for all contracts helps consumers 
understand and compare quality across plan offerings.
    Comment: A commenter expressed support that D-SNP-only contracts 
established under Sec.  422.107(e) provide a pathway to D-SNP specific 
measurement. However, the commenter noted that combining D-SNP-only 
contracts established under Sec.  422.107(e) with the transition of 
MMPs to D-SNPs would shift which populations are combined in a single 
Medicare contract with aggregated Star Ratings. The commenter 
recommended maintaining the ability to manage and see reporting at the 
product level for each of these distinct offerings to allow States to 
effectively measure and manage both programs.
    Response: We appreciate the commenter's support that D-SNP-only 
contracts established under Sec.  422.107(e) provide a pathway to D-SNP 
specific measurement. Our proposal does not preclude a State from 
requiring separate D-SNP-only contracts under Sec.  422.107(e) for 
separate D-SNP programs serving distinct populations (for example, 
separate integrated care programs for dually eligible enrollees over 
and under age 65). In discussions

[[Page 27768]]

with States considering requiring such separate contracts, we would 
raise the issue with the applicable State(s) whether those contracts 
had sufficient enrollment for the calculation of Star Ratings.
    Comment: Some commenters indicated that if CMS moves forward with 
this proposal, it should remove past performance as a factor in issuing 
the D-SNP-only contracts established under Sec.  422.107(e). A 
commenter noted that low Star Ratings could prevent an organization 
from getting a D-SNP-only contract established under Sec.  422.107(e) 
if CMS finalizes the proposal to include Star Ratings in past 
performance.
    Response: We agree with commenters that MA organizations entering 
into a D-SNP-only contract based on the provisions set forth at Sec.  
422.107(e) should not be included in the past performance analysis as 
described in Sec. Sec.  422.502 and 422.504. MA organizations that 
currently offer D-SNPs with exclusively aligned enrollment would not 
otherwise be seeking to enter into a D-SNP-only contract. We note that 
since the existing regulations at Sec.  422.502(b)(1) provide CMS the 
flexibility of when to deny an application related to past performance 
that no changes are needed.
    Comment: Several commenters, including MACPAC, suggested that CMS 
expand the ability of States to request that CMS allow D-SNP-only 
contracts established under Sec.  422.107(e) beyond those D-SNPs with 
exclusively aligned enrollment. MACPAC and other commenters noted that 
a State's ability to assess quality in D-SNPs is important regardless 
of whether the D-SNP operates with exclusively aligned enrollment. A 
few commenters indicated that in order to ensure disparities between 
dual eligible enrollees are assessed on a level playing field, all D-
SNPs should be in separate contracts from non-D-SNP MA plans. A 
commenter requested that CMS use the process as a template for a wider 
required, not optional, separation of D-SNP contracts in the future.
    Response: We thank commenters for sharing their concerns on the 
parameters of this proposal to only apply to D-SNPs with exclusively 
aligned enrollment; however, we believe starting at this point is an 
incremental step on the integration platform. We will consider future 
rulemaking on whether to expand the ability for States to request to 
CMS separate D-SNP contracts for D-SNPs that do not have exclusively 
aligned enrollment.
    Comment: A few commenters urged CMS to do more to allow for precise 
understanding of the policies, qualities, and obligations of specific 
D-SNPs by requiring separate contracts and public posting of model 
State Medicaid agency contracts. The commenters believe that this would 
improve oversight and allow data to more clearly reflect the outcomes, 
needs, satisfaction, and quality of care for people in D-SNPs.
    Response: We appreciate the commenters' request that CMS require 
separate D-SNP-only contracts and public posting of model State 
Medicaid agency contracts in order to increase transparency about D-SNP 
obligations. We point the commenters to the Integrated Care Resource 
Center for sample language that State Medicaid agencies can use in 
their contracts.\45\ As noted in response to other comments, we may 
also consider opportunities to expand or modify the approach for D-SNP-
only contracts through future rulemaking.
---------------------------------------------------------------------------

    \45\ See https://www.integratedcareresourcecenter.com/resource/sample-language-state-medicaid-agency-contracts-dual-eligible-special-needs-plans.
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    Comment: A few commenters provided feedback regarding the ability 
of the MA organization offering a D-SNP under this proposal to 
crosswalk enrollees to the new D-SNP-only contract established under 
Sec.  422.107(e). Some commenters expressed support for the new 
crosswalk proposed at Sec.  422.530(c)(4)(ii) as it provides a smooth 
process for organizations to retain their enrollees. Some commenters 
expressed concern that moving the impacted enrollees to the new D-SNP-
only contract would require a new enrollee identification card and 
could change bill routing by providers. Another commenter indicated 
that it would be important for plans to demonstrate how they will 
communicate the shift to beneficiaries in plain language and where to 
go for options counseling.
    Response: We agree that these enrollees will need to receive a new 
identification card with the correct information. Our goal is to 
minimize enrollee disruption as we work towards more integrated care 
for the dually eligible population. We will work with States and the D-
SNPs with exclusively aligned enrollment to appropriately communicate 
to the impacted enrollees why they are receiving new identification 
cards.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed provisions at Sec.  422.107(e) regarding the 
creation of D-SNP-only contracts without modification, and we are 
finalizing our provisions at Sec.  422.530(c)(4) with minor edits for 
clarification.
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.\46\ 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 later in this section. We proposed 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. As proposed and 
finalized, a State is only able to elect this if the State has also 
required the D-SNP with exclusively aligned enrollment to also apply 
for and seek CMS approval for a D-SNP-only MA contract. Under this 
rule, the applicable Medicaid managed care and MA requirements and 
standards continue to apply to the integrated materials.
---------------------------------------------------------------------------

    \46\ 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.
---------------------------------------------------------------------------

    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. 
These 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 three years.\47\ CMS creates standardized materials and 
content that MA organizations and Part D sponsors must use in the form 
and manner CMS provides under a separate OMB collection of information 
approval process. CMS model materials and

[[Page 27769]]

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 and required 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.
---------------------------------------------------------------------------

    \47\ Refer to www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995 and www.govinfo.gov/content/pkg/FR-1995-08-29/pdf/95-21235.pdf.
---------------------------------------------------------------------------

    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). Among the materials that Medicaid managed 
care plans must distribute are Enrollee Handbooks, Provider 
Directories, and Formularies.
    As summarized in our proposed rule at 87 FR 1872 through 1873, 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 include the 
Evidence of Coverage (EOC) and the Annual Notice of Changes (ANOC), 
which are standardized communication materials. The required model 
communications materials include the Summary of Benefits (SB), 
Formulary, and Provider and Pharmacy Directories.
    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, would 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.
    In the proposed rule at 87 FR 1873, we described previous studies 
that assessed the effectiveness of integrated required materials for 
beneficiaries in the MMPs in the FAI and the Minnesota Senior Health 
Options (MSHO) plans in the Demonstration to Align Administrative 
Functions for Improvements in Beneficiary Experience. Beneficiaries 
provided positive feedback on the combined materials, as compared to 
separate Medicare and Medicaid materials. In addition, since 2019 CMS 
has worked with States and FIDE SNPs that are not demonstration 
participants to develop and annually update certain integrated 
materials that the States require and issue to plans.
    For the States and FIDE SNPs we have worked with, we typically 
begin development of integrated national templates and State-specific 
models with the SB; a Formulary that contains Medicare Part D, 
Medicaid, and over the counter (OTC) drugs as well as non-drug OTC 
products; and one combined Medicare and Medicaid Provider and Pharmacy 
Directory. As described in our proposed rule, starting with these 
materials has several advantages, including that these materials 
integrate key Medicare and Medicaid information, they are required 
materials but are not standardized and, therefore, are not subject to 
the PRA clearance process, and the 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 would 
contribute to increased understanding of and satisfaction with the 
coverage both programs provide.
    To provide a more coordinated beneficiary experience, we proposed 
at Sec.  422.107(e) to codify a pathway by which, following receipt of 
a letter from a State Medicaid agency indicating their intent to pursue 
D-SNP-only contracts and the use of integrated model materials, CMS 
would coordinate with a State that chooses to require, through its 
State Medicaid agency contract, that a D-SNP with exclusively aligned 
enrollment use an integrated SB, Formulary, and combined Provider and 
Pharmacy Directory. CMS will work with States to ensure these 
integrated materials 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) 
established 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 use 
of 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 for D-SNPs generally and 42 CFR part 438 
and State law for the D-SNP's affiliated Medicaid MCO, 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. 
Additionally, an MA organization would need to apply for a D-SNP-only 
contract consistent with existing timeframes for submission of 
applications, bids, and other required materials to CMS, and in 
accordance with forthcoming sub-regulatory guidance on timelines and 
procedures. Therefore, 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 integrated materials and apply for a D-SNP-only 
contract. We intended 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, and before D-SNP-only contracts are 
finalized.
    We did not intend through this rule to significantly change 
timelines for plans to prepare materials nor did we intend to require 
any State to mandate that D-SNPs use integrated materials. We intended 
for this rule 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)(1).
    We considered including the EOC and ANOC as part of the minimum 
scope of integrated materials identified in Sec.  422.107(e)(1)(ii). We 
explained in the proposed rule at 87 FR 1874 why we did not propose to 
include these alternative materials but solicited comment on whether 
these alternative materials should be included as part of the minimum 
scope of integration for D-SNPs. This rule would not preclude CMS and 
States from collaborating on

[[Page 27770]]

other integrated materials, including an integrated EOC or ANOC. As 
proposed, Sec.  422.107(e) would apply only when a State required 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 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 using, or in conjunction with, the process in 
Sec.  422.107(e). Further, we did not intend to prohibit or foreclose 
the possibility that CMS would work with States on other potential 
integration efforts that are not within the scope of Sec.  
422.107(e)(1).
    Comment: Many commenters expressed support for the proposal 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 Summary of Benefits (SB), Formulary, 
and combined Provider and Pharmacy Directory.
    Numerous commenters stated that the proposed regulation would lead 
to reduced enrollee confusion because integrated materials would 
simplify and more clearly articulate the full scope of benefits across 
Medicare and Medicaid that are available through a given plan. A 
commenter noted that this proposed regulation would also simplify 
information for caregivers and advocates. Other commenters also stated 
that the proposed regulation would improve enrollee quality of and 
access to care and help enrollees understand how plan benefits can work 
together.
    A commenter stated that integrated materials would create 
consistency for beneficiaries when evaluating plan choices. Another 
commenter noted that integrated materials would improve beneficiary 
awareness of integrated care options. A commenter also stated that 
integrated materials would help States and D-SNPs to provide clearer 
explanations of the advantages of integrated care, improve navigation 
of the health care system, and reduce health system fragmentation and 
administrative misalignment. Another commenter stated that the benefit 
of having Medicare and Medicaid plan information integrated into the 
same document is the reduction in mailings, a common request among 
enrollees.
    Other commenters noted that States have successfully partnered with 
CMS to implement integrated materials. A commenter stated that the 
proposed regulation would create a pathway for States to continue to 
integrate materials.
    Response: We appreciate the widespread support we received for our 
proposal to create a pathway for States to require certain D-SNPs with 
exclusively aligned enrollment and D-SNP-only contracts to use 
integrated materials. We concur that the integration of materials will 
increase understanding of available benefits, improve the enrollee 
experience, and decrease confusion by providing a simplified set of 
beneficiary materials.
    Comment: A few commenters recommended that States be required to 
use their authority to standardize materials and ensure consistent 
messaging wherever possible. Other commenters noted their support of 
the flexibility in requiring the use of integrated materials, noting 
that States are at different points of integration, and that CMS's 
proposal would result in additional responsibilities for State and D-
SNP staff.
    Response: We acknowledge the interest in increasing the prevalence 
of integrated materials. However, we decline to require that States 
integrate materials, recognizing that States are at different phases of 
integration, and may have limited resources to devote to integrating 
materials. We concur that States should work to integrate materials 
when feasible and CMS will coordinate with them when possible.
    Comment: A few commenters stated that CMS should provide States 
with clear direction and authority to ensure State-specific policies 
and requirements are included in integrated materials. A commenter 
continued to note that without such State-specific policy and 
requirements, integrated materials may not accurately reflect 
programmatic realities including important beneficiary-facing 
information such as cost-sharing responsibilities and eligibility 
rules.
    Response: We acknowledge the commenters' concerns and, as we 
currently do with D-SNPs and Medicare-Medicaid Plans with integrated 
materials, we will work with States to ensure that, when a State 
requires a D-SNP to have integrated materials under Sec.  422.107(e), 
the integrated materials accurately reflect applicable requirements for 
both Medicare Advantage and Medicaid managed care plans.
    Comment: A few commenters recommended that States and CMS review 
materials in partnership, which is critical to develop comprehensive, 
accurate, and clear materials. Another commenter noted that States will 
need to provide information to D-SNPs and receive information from D-
SNPs to ensure that information is kept up-to-date for materials such 
as integrated Provider Directories and information repositories for 
Medicaid.
    Response: We thank the commenters for raising the importance of 
close collaboration and communication. We agree that coordination 
between CMS, States, and D-SNPs is necessary to ensure effective 
integration of model materials.
    Comment: A commenter noted the operational challenges of 
integrating materials such as the different types of materials CMS and 
the State Medicaid agency require to be provided and differences in 
naming.
    Response: We appreciate the comment and note that this rule focuses 
on materials which are required by both Medicare Advantage and Medicaid 
managed care regulations. We believe that integrating these materials 
will eliminate differences in naming and material formats and simplify 
the information for enrollees.
    Comment: A few commenters noted that unaligned enrollment dates 
complicate efficient and timely distribution of integrated materials 
and suggested that CMS should work with States to implement necessary 
State and Federal changes that support alignment of enrollment dates. 
Another commenter urged CMS to limit its proposal to States where 
effective dates for Medicare and Medicaid plan years are aligned on the 
first day of the month. A commenter noted unaligned enrollment dates 
could cause members to receive duplicative information. The commenter 
also stated that there is no coordination between CMS and the State 
sending enrollment data to plans. They also noted that integrated 
materials can be operationally complex, as many plans automate the 
generation of enrollee materials on different platforms for Medicare 
and Medicaid plans.
    Response: We appreciate the commenters' perspectives on this issue. 
We understand the potential for differences in enrollment dates between 
Medicare Advantage and Medicaid managed care plans and will continue to 
work with States to minimize enrollee disruption. In advance of 
implementation of integrated materials, CMS will discuss with 
participating States any differences in enrollment dates between 
Medicare Advantage and Medicaid managed care plans that may result from 
annual Medicare Advantage enrollment periods or State-specific 
enrollment timelines. Where differences in enrollment dates occur, CMS 
and the State will jointly decide on a strategy to implement integrated 
materials while

[[Page 27771]]

minimizing beneficiary confusion. Per Sec.  422.107(e)(2), CMS will 
continue to work with a State so long as the State chooses to work with 
CMS on integrated materials. We believe that requiring integrated 
materials for enrollees with exclusively aligned enrollment in 
applicable States will help to reduce beneficiary confusion by 
providing one set of materials that combines Medicare and Medicaid 
information instead of two.
    Comment: A commenter requested that CMS consider the challenges 
associated with Medicaid benefit and service carve-outs before 
implementing a requirement for D-SNPs to use integrated materials.
    Response: We acknowledge the commenter's concern. We intend to work 
with States to ensure that the model materials include sufficient 
flexibility in order to adapt the description of benefits when needed.
    Comment: A commenter stated that CMS should require States to 
indicate in their letters of intent that they have support from D-SNP 
partners to require integrated materials. The commenter believes CMS 
should require involvement and cooperation with participating D-SNPs in 
this process. The commenter suggested that CMS outline and require a 
standardized coordinated process across States for including or 
consulting with all plans in a given State with the goal of reaching 
consensus with all participating plans on basic models and changes.
    Response: We thank the commenter for their input and suggestion. We 
intend to raise with States the importance of early and consistent 
collaboration with D-SNPs in advance of implementing any requirement 
for integrated materials. However, we believe the decision of whether 
to include this requirement in the State Medicaid agency contract 
should be left to the State.
    Comment: A commenter stated that model documents for creating 
integrated materials have been invaluable, and especially helpful when 
models are developed for a particular State. These materials have 
State-specific references and data, which allows States to ensure 
enrollees across plans receive the same accurate State-specific 
information. Other commenters urged CMS to establish a consistent, 
standardized format for integrated materials that have been globally 
approved by States, instead of allowing each State to determine for 
itself.
    Response: We appreciate the commenters perspectives on this issue. 
CMS will be creating models based off our experience on the FAI and a 
related demonstration in Minnesota for State use and will also 
collaborate with States to ensure that they appropriately integrate 
Medicare and Medicaid information for beneficiaries.
    Comment: A commenter recommended that CMS should collaborate with 
States to develop a regulatory or other framework that aligns Medicaid 
managed care and D-SNP requirements into one clear set of governing 
rules for integrated materials.
    Response: We thank the commenter for their suggestion and modified 
the regulation text at Sec.  422.107(e)(1)(ii) to require that the 
integrated member materials meet Medicare and Medicaid managed care 
requirements consistent with applicable regulations in parts 422, 423, 
and 438 of the chapter. As we work with States that take advantage of 
the new pathway created by Sec.  422.107(e) and we gain additional 
experience in developing integrated materials with States, we may 
consider future rulemaking to establish integrated disclosure and 
communication materials where the applicable statutory authority 
permits sufficient flexibility.
    Comment: Some commenters expressed concerns or were unsure of the 
timeframe for developing and implementing integrated materials. A 
commenter expressed concern that if a State is working on the State 
Medicaid agency contract during the same timeframe as it is developing 
integrated materials, the State may not have the ability to complete 
both tasks in a competent and thorough manner. A few commenters noted 
that CMS should take into consideration the timeframe of when States 
release their model materials, since State timeframes may differ from 
CMS timeframes. Another commenter recommended that the production 
schedule for integrated notices provide adequate time for use of focus 
groups to ensure that information is communicated effectively and meets 
the real needs of beneficiaries; the focus groups should consist of a 
diverse group of beneficiaries that is representative of each plan's 
demographic mix. A few commenters noted that they have experienced 
State backlogs in reviewing materials. A commenter requested that CMS 
work with the States to ensure State review is timely. Another 
commenter recommended that CMS require States to review plan materials 
within the existing HPMS platform and minimize template versions used 
at the State level. Other commenters believe States do not need to 
review all materials, noting that this can lead to backlogs in 
materials and place additional administrative burden on plans. MACPAC 
stated that States should have the opportunity to review all D-SNP 
integrated materials to ensure accuracy and improve beneficiary 
understanding of integration.
    Response: We thank the commenters for sharing concerns about the 
timeline needed to implement integrated materials. We will work in good 
faith with participating States, following receipt of a letter from a 
State Medicaid agency indicating their intent to pursue D-SNP-only 
contracts and the use of integrated materials, to ensure that 
integrated models are provided to D-SNPs in a timely manner and intend 
to set clear timelines for review with the States. We note that that 
this proposal pertains only to those States that choose to require, 
through their State Medicaid agency contracts, that D-SNPs with 
exclusively aligned enrollment use integrated materials (and that these 
D-SNPs also apply for a D-SNP-only MA contract with CMS). We anticipate 
that there would be operational and administrative steps at CMS and 
each State that would be necessary before a D-SNP could implement 
integrated materials, such as collaboration and coordination by CMS and 
the State to identify potential conflicts between Federal regulatory 
requirements for D-SNPs and Medicaid managed care plans and State law 
and setting up a process for coordinated review and oversight of the 
integrated materials. Additionally, we modified the regulation text at 
Sec.  422.107(e)(1)(ii) to require that the integrated member materials 
meet Medicare and Medicaid managed care requirements consistent with 
applicable regulations in parts 422, 423, and 438 of the chapter; this 
change makes it clearer that Sec.  422.107(e) does not create 
exceptions to other laws that govern the content and timing of 
materials provided to enrollees. Rather, our intent is to create a 
pathway for integrated materials to present all of the required 
information to enrollees in a more understandable and streamlined way.
    CMS will work with the State to create 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 
upon a receipt of a letter of intent regarding the State's inclusion of 
a requirement to use integrated materials and apply for a D-SNP-only 
contract. While these materials will be created based on models that 
have been tested as part of the FAI, we will ensure that the timeline 
accounts for any additional beneficiary testing, as necessary.
    In order to allow sufficient time for the D-SNPs to populate 
required materials with plan-specific

[[Page 27772]]

information, submit applicable materials through HPMS, translate into 
any non-English language of at least five percent of the individuals in 
the service area, and make them available to beneficiaries by the 
required dates, we will aim to work with States to issue to the 
affected D-SNPs the required materials and instructions annually by the 
end of May for the following plan year. While we acknowledge that State 
review of only a subset of materials would save time and reduce 
administrative burden, we disagree with the suggestion to limit State 
review, because we believe that States should determine which 
integrated materials they want to review and then clarify this 
information with applicable D-SNPs.
    Comment: A commenter recommended that CMS pilot this proposal with 
a small subset of plans and States before formalizing this proposal as 
an option for all States. They asked that CMS make this requirement 
effective no earlier than 2024.
    Response: We thank the commenter for their suggestion and note that 
we have been piloting this approach with several States. Since 2019, we 
have worked with Massachusetts and New Jersey to develop and update 
certain integrated materials for FIDE SNPs in each State. For contract 
years 2020 and 2021, we provided high-level assistance to New York as 
the State developed select integrated materials that its exclusively 
aligned D-SNPs and Medicaid managed care plans, called Medicaid 
Advantage Plus plans, could use. We are also working with California to 
develop integrated materials for contract year 2023 for D-SNPs with 
exclusively aligned enrollment. We note that, based on the timeframes 
involved, the regulatory authority adopted in Sec.  422.107(e) will 
apply to integrated materials that D-SNPs create for enrollment dates 
beginning with contract year 2024 if CMS receives a timely request from 
a State that is willing to meet the criteria set forth in Sec.  
422.107(e).
    Comment: A few commenters requested more granular details and 
implementation guidance on this proposal.
    Response: We appreciate the comments and anticipate that there will 
be operational and administrative steps at the CMS and State level 
before a D-SNP could implement integrated materials. D-SNPs required to 
use these integrated materials will receive additional information 
through State Medicaid agency contracts and model materials.
    Comment: A number of commenters requested that CMS pay particular 
attention to linguistic and cultural competence and accessibility for 
people with disabilities. A commenter stated that greater effort is 
needed to ensure the information itself is more understandable to those 
at all levels of health literacy. They suggested that States test 
different messaging with dually eligible individuals, including 
individuals from diverse backgrounds and/or those with limited English 
proficiency, to create understandable materials with consistent 
messaging. They also noted that, to design messaging that resonates 
with dually eligible individuals, States should collaborate with 
community-based organizations and enrollment assisters. Some commenters 
stated that CMS should include a provision that accessibility, cultural 
competency, and translation requirements for integrated model materials 
should follow the standard (either State or Federal) which is more 
favorable to the beneficiary. A commenter recommended that CMS consider 
incorporating infographics, which may be easier for some enrollees to 
understand, into specific model documents. Another commenter noted that 
Provider Directories should be updated at least monthly and be 
available in multiple formats and languages, including American Sign 
Language. The commenter stated that beneficiaries should be able to 
access Provider Directories without submitting an account or policy 
number and should be able to distinguish between providers who are in 
network accepting new patients and providers who are not accepting new 
patients. They also noted that beneficiaries should be able to easily 
search Provider Directories by tier, product, languages spoken by 
provider in addition to languages available by interpreter, disability 
accessibility (accessible examination equipment, dressing room, parking 
etc.) and information about specialty and subspecialty providers.
    Response: We appreciate the commenters' perspective on this issue 
and believe these are important goals. We did not propose and are not 
finalizing any waiver or exclusion from other, generally applicable, MA 
or Part D regulations concerning these mandatory disclosure documents 
from D-SNPs. In addition, as discussed in the proposed rule, the 
regulation at Sec.  438.10 also addresses disclosure requirements for 
Medicaid managed care plans; we did not propose and are not finalizing 
exceptions to that regulation or other generally applicable rules for 
Medicaid managed care plans that apply to these mandatory disclosures 
either. In order to make that clear, we are finalizing a modification 
to the regulation text at Sec.  422.107(e)(1)(ii) to require that the 
integrated model materials meet Medicare and Medicaid managed care 
requirements consistent with applicable regulations in parts 422, 423, 
and 423 of the chapter. Because D-SNPs must cover Part D benefits, they 
are subject to both the MA and Part D requirements when furnishing 
Provider and Pharmacy Directories. We note that Sec. Sec.  
422.2267(a)(2) and 423.2267(a)(2) require translation of required 
materials and content into any non-English language that is the primary 
language of at least 5 percent of the individuals in a plan benefit 
package (PBP) service area. Similarly, Sec.  438.10(d)(3) requires that 
Medicaid managed care contracts make available written materials that 
are critical to obtaining services, including, at a minimum, provider 
directories, enrollee handbooks, appeal and grievance notices, and 
denial and termination notices, in the prevalent non-English languages 
in a Medicaid managed care plan's particular service area. These 
requirements will continue to apply to a D-SNP with exclusively aligned 
enrollment and its affiliated Medicaid MCO when integrated materials 
are used as provided in Sec.  422.107(e).
    In Sec.  422.112(a)(8), we require that MA organizations that offer 
MA coordinated care plans ensure that services are provided in a 
culturally competent manner to all enrollees, including to 
beneficiaries with limited English proficiency or reading skills, and 
diverse ethnic and cultural backgrounds. In addition, Sec.  
422.2267(e)(11)(iv) requires that MA organizations update Provider 
Directories any time the MA organization becomes aware of changes. 
Integrated materials must also meet requirements at Sec.  438.10(h)(3), 
which requires Medicaid managed care plans to update an electronic 
provider directory no later than 30 calendar days after receiving 
updated provider information. We note that States can choose to include 
more stringent requirements for models in their State Medicaid agency 
contracts. We will take the additional recommendations regarding the 
Provider Directory into consideration when creating a model.
    Comment: A commenter requested that CMS amend Sec.  422.629 or 
Sec.  422.630 or both to require D-SNPs to have specific publicly 
published procedures for making reasonable accommodation requests under 
the Americans with Disabilities Act, for D-SNP

[[Page 27773]]

consideration of such requests, and procedures for disputing denials of 
reasonable accommodation requests.
    Response: While this comment is not strictly within the scope of 
this final rule, we note that MA plans, including D-SNPs, must comply 
with the applicable Federal civil rights authorities. Section 504 of 
the Rehabilitation Act of 1973 prohibits disability discrimination and 
includes requirements for effective communication for individuals with 
disabilities (45 CFR 84.52), accessibility standards for buildings and 
facilities (45 CFR 84.22 and 84.23), and the filing of grievances and 
complaints (45 CFR 84.61 and 84.7).
    Comment: Some commenters requested that CMS extend this proposal 
beyond only those D-SNPs with exclusively aligned enrollment to those 
without D-SNP-only contracts or to all FIDE and HIDE SNPs. Other 
commenters suggested it apply to all D-SNPs. A commenter noted that 
having to implement separate material development and review processes 
can present operational challenges. A commenter requested that CMS 
define the ``certain D-SNPs'' in the proposal. A few commenters also 
requested that CMS clarify which materials require integration as well 
as which materials, or sections of materials, would require State 
feedback.
    Response: We acknowledge that increased integration of materials 
for D-SNP enrollees and potential enrollees can help to reduce 
confusion and increase satisfaction. However, we proposed and are 
finalizing Sec.  422.107(e) to adopt a pathway for States to require, 
through their State Medicaid agency contract, the use of integrated 
materials (at a minimum, an integrated SB, Formulary, and combined 
Provider and Pharmacy Directory) by D-SNPs with exclusively aligned 
enrollment, where the State is also requiring the D-SNP to apply for 
and request from CMS a D-SNP-only MA contract. By ``certain D-SNPs'' in 
the preamble of the proposed rule, we meant the D-SNPs that meet these 
specific requirements and are in this specific situation. Our proposal 
and final policy are limited to this group of D-SNPs because we believe 
exclusively aligned enrollment and a motivated State partner are both 
critical to effectively integrate materials. We will clarify through 
models and communication with States the sections of materials that 
require State feedback. We continue to work to improve current MA 
models for all D-SNPs, such as the ANOC and EOC, which allow D-SNPs to 
adjust the material to accurately reflect information such as Medicaid 
benefits and cost-sharing.
    Comment: A number of commenters support the inclusion of the ANOC 
and the EOC as part of the minimum scope of integrated materials. 
Several commenters noted that they appreciate the ability to use the 
Member Handbook as the integrated model, noting that the Member 
Handbook is more enrollee-friendly than the EOC. A commenter stated 
that the ANOC provides critical information about the changes that 
beneficiaries need to consider during the Open Enrollment Period. They 
noted that the ANOC is relatively short and most likely to be read by 
the beneficiary. In addition, they stated that it helps to prevent 
surprises and disruptions because of unanticipated changes in coverage 
or providers. Another commenter noted that, since CMS cannot change 
timelines for preparation of materials, CMS should start with the SB, 
Formulary, and combined Provider and Pharmacy Directory and reassess 
integration of ANOCs and EOCs once these first documents are in place, 
except in cases where collaboration on those additional documents 
already exists. They request that as part of the reassessment of the 
ANOC and EOC documents in the PRA process, CMS should facilitate 
allowing D-SNPs to use the Member Handbook format and approach upon 
request and agreement with the State. If this is not possible, they 
request that CMS clarify what additional authorities are needed in 
order to do so.
    Response: We appreciate the commenters' support for integrated 
ANOCs and EOCs. We have determined that we will take an incremental 
approach and finalize Sec.  422.107(e)(1)(ii) as identifying the SB, 
Formulary, and combined Provider and Pharmacy Directory as the minimum 
set of documents to be integrated; these integrated materials must also 
meet Medicare and Medicaid managed care requirements in 42 CFR parts 
422, 423, and 438. However, as stated in the proposed rule (87 FR 
1874), we do not intend to preclude CMS and States from collaborating 
on other integrated materials, including an integrated ANOC or EOC.
    We intend to develop an integrated Member Handbook (also known as 
the EOC) and ANOC for contract year 2024 through the PRA process, which 
will include making the documents available to the public for review 
and comment during the publication of 60- and 30-day Federal Register 
notices. These models will be based off of models that we created for 
the FAI and a related demonstration in Minnesota. We intend to make the 
integrated versions of these models available for States that want to 
collaborate with CMS in furthering the use of integrated materials by 
D-SNPs with exclusively aligned enrollment.
    Comment: A commenter suggested that CMS consider establishing a 
CMS-centralized repository of State information that includes accurate 
State agency addresses, phone numbers, and State Pharmaceutical 
Assistance Program information that MA organizations can access and 
utilize for beneficiary communications such as ANOC and EOC. The 
commenter noted that this State information could be displayed in the 
same way CMS already provides Quality Improvement Organization 
information for each State.
    Response: We thank the commenter for this suggestion and may re-
examine it in the future. However, this comment is not within the scope 
of this rulemaking, as the proposed rule did not discuss a regulatory 
requirement for centralized State information.
    Comment: The commenter suggested that an integrated ID card include 
information on the beneficiary's dual eligibility status, D-SNP type, 
the party that should receive and pay provider claims, and the party 
that is responsible for paying the beneficiary's cost-sharing 
obligations. The commenter stated that this will reduce administrative 
burden and reduce risk that a beneficiary is improperly billed.
    Response: We thank the commenter for this suggestion. While setting 
new standards for the content of an integrated ID card is outside the 
scope of the regulation, we will consider including this information on 
ID cards in the future.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing the provision at Sec.  422.107(e)(ii) with a modification to 
require that the integrated member materials meet Medicare and Medicaid 
managed care requirements consistent with applicable regulations in 42 
CFR parts 422, 423, and 438.
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. This includes requirements imposed at the 
State level that are not identical to Federal minimum standards for 
Medicaid managed care plans in 42 CFR part 438. We explained in the 
proposed rule, at 87 FR 1874, three drawbacks to CMS and States' 
separate infrastructures to

[[Page 27774]]

monitor compliance: (1) State regulators and CMS may be unaware of 
important compliance or performance problems related to the delivery of 
Medicare and Medicaid services; (2) State and CMS officials may pursue 
different performance improvement priorities; and (3) uncoordinated 
oversight by CMS and the States can create inefficiencies for health 
plans. We proposed 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). We received several comments supporting our overall 
approach to provide States an opportunity to collaborate with CMS on 
oversight activities.
    Comment: Many commenters expressed support for State and CMS 
collaboration for joint oversight activities. Several commenters 
believed that improved data exchange and transparency would better 
align the State and CMS's improvement activities for D-SNPs. These 
commenters also noted that joint oversight would help the State and CMS 
establish awareness and appropriate accountability for plan 
performance. A few commenters noted that joint oversight is needed for 
quality of care and providing enrollees with a better integrated care 
experience. Several commenters indicated that increased collaboration 
would help the D-SNPs better manage staff resources in areas where 
there might be duplicative oversight activities. One commenter 
generally supports the opportunities for joint oversight and suggested 
guardrails to ensure that coordinated oversight activities are limited 
to D-SNPs to avoid overreach and promote improved outcomes and 
efficiencies.
    Response: We thank the commenters for their support on our proposed 
rule. We agree that State and CMS collaboration for oversight 
activities of D-SNPs can increase transparency and improve efficiency 
of integrated care for Medicare and Medicaid services.
(1) State Access to the Health Plan Management System
    The CMS Health Plan Management System (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. We proposed in paragraph 
(e)(3)(i) that CMS would grant State access to HPMS 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).
    The proposal would permit approved State Medicaid officials to use 
HPMS for a number of information sharing and oversight activities for 
these D-SNPs. This access would allow State users the ability to 
directly view D-SNP information without requiring the D-SNP to send the 
information separately.
    We proposed that 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. This proposal would not limit CMS's discretion to make 
HPMS accessible in other circumstances not described in our proposal. 
State access authorization 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 solicited 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 final rule.
    Comment: Many commenters expressed support for our proposal to 
grant State access to HPMS to facilitate monitoring and oversight of 
for D-SNPs operating under the specific contract terms required by the 
State that are described in Sec.  422.107(e)(1). Some commenters noted 
that HPMS access is important for better information and oversight of 
D-SNPs. Other commenters noted that providing States with access to 
HPMS will give the State officials important insight into areas such as 
marketing materials, models of care, enrollee complaints, plan 
benefits, formulary, network, and other basic contract information 
without having to ask the D-SNP and as a result will streamline the 
oversight process. A commenter noted that granting certain State 
Medicaid agency officials access to HPMS, which CMS has identified as a 
useful practice, aligns with their recommendation that CMS apply best 
practices from the FAI to FIDE SNPs.
    Response: We appreciate the commenters' support for providing State 
Medicaid officials with HPMS access. We agree that providing States 
with access to these areas of HPMS will improve the coordination and 
oversight of D-SNPs by States and CMS.
    Comment: A commenter supported our proposal to grant States access 
to HPMS and suggested that CMS encourage States to update their State 
Medicaid agency contracts to reflect State access to this information. 
Specifically, the commenter encouraged States to eliminate the 
requirement that plans provide notices of audits since States will now 
be able to get the information through HPMS and will be able to have 
access to audit findings from CMS.
    Response: We appreciate the commenter's perspective on this issue. 
We are not proposing to limit what States can include in their State 
Medicaid agency contracts, which are required by Sec.  422.107(b) for 
all D-SNPs, but we hope that this new pathway for sharing information 
with States that require certain D-SNPs to use certain integrated 
materials and request a D-SNP-only MA contract with CMS will result in 
less burden for sharing information among the States that use this 
pathway, the affected D-SNPs, and CMS.
    Comment: MACPAC and another commenter noted that limiting HPMS 
access to D-SNPs meeting the criteria of Sec.  422.107(e) would mean 
that States would only be able to view information for a small number 
of D-SNPs with exclusively aligned enrollment and requested that CMS 
consider allowing States to view information for all D-SNPs. A 
commenter stated they understood there could be systems complexities 
with allowing States to access information for only a subset of 
enrollees when MA contracts include both D-SNP and non-D-SNP plan 
benefit packages. They suggest that CMS ensure that any language in the 
final rule is flexible enough to allow broader State access to HPMS 
without additional rulemaking. They believe that this was CMS's intent 
based on the language in the proposed rule stating: ``This proposal 
would not limit CMS's discretion to make HPMS accessible in other 
circumstances . . .''
    Response: CMS appreciates the commenters' support for providing 
State Medicaid officials with HPMS access. We will consider other 
options for permitting expanded HPMS access for State Medicaid 
officials over time. Under Sec.  422.107(e), the regulation we proposed 
and are adopting here, access to States is tied to the D-SNP-only 
contracts for D-SNPs with exclusively aligned enrollment that are 
required to use specified integrated enrollee materials.
    Comment: A commenter reiterated the importance of de-identifying 
information that could reveal the identity of the enrollee that has 
made a complaint, to ensure that their privacy

[[Page 27775]]

is upheld and to prevent any actions that could lead to or be perceived 
as enrollee retaliation. Another commenter requested CMS and State 
assurance of appropriate safeguards in place so that State employees 
accessing HPMS assure protection of proprietary information.
    Response: CMS understands the commenters' concerns regarding 
enrollee privacy and the protection of proprietary information. Our 
experience granting States access to HPMS through the FAI and a related 
demonstration in Minnesota suggests that State access is without known 
problematic unintended consequences. In addition, we refer readers to 
our discussion in the proposed rule (87 FR 1874) that State users would 
be 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.
    Comment: A commenter proposed that enrollee complaint information 
be aggregated and stratified and that the information be utilized by 
health plans for quality improvement and performance purposes.
    Response: We appreciate the comment. MA organizations have access 
to all of their enrollee complaints in HPMS and we encourage them to 
utilize the data for quality improvement purposes.
    Comment: A commenter strongly recommend interoperability between 
State monitoring systems and HPMS.
    Response: We appreciate the comment; however, it is outside the 
scope of this rulemaking.
    After consideration of the comments received and for the reasons 
provided in the proposed rule and our responses to comments, we are 
finalizing Sec.  422.107(e)(3)(i) as proposed to provide State Medicaid 
officials with access to HPMS for purposes of oversight of D-SNP 
contracts described in Sec.  422.107(e)(1). We are also finalizing 
Sec.  422.107(e)(1) and (2) as discussed elsewhere in this final rule.
(2) State-CMS Coordination on Program Audits
    We proposed in paragraph (e)(3)(ii) that CMS would coordinate with 
State Medicaid officials on program audits. This coordination would 
include sharing major audit findings for State awareness related to the 
D-SNPs subject to proposed paragraph (e)(1).
    As summarized in the proposed rule at 87 FR 1874 through 1875, we 
believe that there are benefits for CMS, States, and MA organizations 
to increasing coordination in connection with such audits. As proposed, 
CMS would also offer to work with States to attempt to avoid scheduling 
simultaneous State and Federal audits. This process would reduce the 
likelihood 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. While we described examples of how we may coordinate activities 
under the proposal, we did 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).
    Comment: Many commenters expressed support for the proposal for 
CMS-State coordination on program audits. Some commenters noted that 
greater State involvement provides States with valuable information and 
provides a stronger vantage point to determine plan performance. A few 
commenters indicated that program audits are resource intensive and 
plans face administrative burdens and challenges when State and Federal 
audits are concurrent. A commenter noted that when audits are 
concurrent this may decrease the plan's ability to respond 
appropriately and timely to audit inquires.
    Response: CMS appreciates the commenters' support and agrees that 
there are benefits in increasing CMS, State, and MA organization 
coordination.
    Comment: A few commenters recommended additional steps to 
coordinate audits across Medicare and Medicaid. A commenter suggested 
that CMS provide States with additional guidance on current Federal 
audits and NCQA model of care review requirements. The commenter 
believed that this type of coordination would allow regulators to 
consider if one audit could satisfy the requirements for both a Federal 
and State audit. The commenter also urged CMS to consider collaborating 
with States to develop a crosswalk for auditors and plans to reference 
to ensure all audit parameters are clear and not in conflict. Another 
commenter encouraged States to consider what audits have been performed 
by CMS and whenever possible the audits should be linked, deeming the 
D-SNPs that have clean audits as meeting standards. A commenter 
suggested that CMS improve coordination with States for other audit 
types and between audit divisions in CMS. This commenter indicated that 
it would be advantageous to have an increased level of scheduling 
coordination between Federal audit types; for example, between program 
audits and other routine reviews such as the one-third financial audit.
    Response: CMS appreciates the perspectives and recommendations of 
the commenters for additional ways to coordinate audits and will take 
these into consideration for future audit-related work.
    After consideration of the comments received and for the reasons 
provided in the proposed rule and our responses to comments, we are 
finalizing Sec.  422.107(e)(3)(ii) as proposed address how CMS will 
coordinate with States on program audits for the D-SNP contracts 
described in Sec.  422.107(e)(1).
(3) State Input on Provider Network Exceptions
    As described in the proposed rule at 87 FR 1875, CMS expects to use 
existing authority and flexibility as it pertains to the review of MA 
plan provider networks, particularly in CMS's 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.\48\ As discussed in the 
proposed rule at 87 FR 1875, if an MA organization that offers one or 
more D-SNPs seeks an exception to our network adequacy standards in 
Sec.  422.116, State Medicaid officials may be uniquely positioned to 
provide relevant information to CMS. We did not propose 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, the proposed rule outlined how we expect 
this type of engagement between CMS and States to work.
---------------------------------------------------------------------------

    \48\ 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).
---------------------------------------------------------------------------

    When an MA plan fails to meet the network adequacy criteria in 
Sec.  422.116(b) through (e), the MA plan

[[Page 27776]]

may request an exception. 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 what appears to be indicated 
by the data CMS uses to evaluate and set minimum standards for network 
adequacy for MA plans.
    In the proposed rule, CMS proposed 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 final rule). In addition, we described our intent to reach out 
to States to learn if there is any information that would meet the 
requirement at Sec.  422.116(f)(2)(ii) when a MA organization with a D-
SNP contract described in Sec.  422.107(e) submits an exception 
request. CMS may consult 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 
solicited comment on this approach.
    Comment: We received a number of comments expressing support for 
our efforts to consult with States when an 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). A few 
commenters indicated that the States have information that would be 
pertinent to CMS's determinations. Some commenters noted that States 
have a deep knowledge of their local markets and can help CMS determine 
the validity of plans' exception requests. A commenter also suggested 
that States' involvement in the network exception process can highlight 
provider shortages.
    Response: CMS appreciates the commenters' support for our efforts 
to consult with and solicit input from States in these circumstances.
    Comment: A few commenters recommended that we add a provision that 
CMS notify the D-SNP of the consultation with the State so that the D-
SNP is fully informed of additional factors being considered in the 
exception request.
    Response: We appreciate the commenters' interest in having CMS 
notify a D-SNP when CMS consults with or solicits input from a State on 
a specific exception request. We decline to adopt a requirement that 
CMS notify the D-SNP whenever we consult with a State on an exception 
request because it would be too burdensome given the short timeframe we 
take to review all exception requests, in general. The D-SNP will 
ultimately be informed of the basis for CMS's approval or denial of the 
exception request, and we do not believe there is any added benefit to 
the D-SNP knowing about the State outreach during the exception review 
process.
    Comment: A commenter requested that we consider the timeliness in 
receiving responses from the State(s).
    Response: We thank the commenter for their request and note that we 
expect States to respond timely to our requests to engage with CMS and 
to provide us with information that will be relevant to our 
determinations on exception requests submitted by MA organizations with 
D-SNP contracts described in Sec.  422.107(e). To the extent States are 
not willing or able to provide information in a timely fashion, we will 
proceed with the network adequacy determination with the information 
available to us.
    Comment: We received a few comments that did not support the 
proposal for State input of Medicare network exception requests on the 
grounds that States already have network standards in place and may not 
have specific insights into the Medicare requirements.
    Response: We believe the commenters misinterpreted the discussion 
of CMS's authority under Sec.  422.116(f) and our intent to solicit and 
receive input from State Medicaid agencies. Our consultations with 
States in the context of our proposal are limited to exception requests 
to the MA network adequacy standards and do not involve State Medicaid 
network standards. The purpose of the consultation with the State is to 
help CMS gain access to information that may be relevant to our 
determinations on exception requests from MA organizations with D-SNP 
contracts described in Sec.  422.107(e).
    The discussion in the proposed rule on this topic was not a 
proposal, and we are not finalizing any rules or regulations about 
CMS's ability to solicit comment from and consult with a State 
regarding a request from certain MA organizations (specifically, MA 
organizations with a D-SNP-only MA contract described in Sec.  
422.107(e)) for an exception from the MA network adequacy requirements 
in Sec.  422.116. As described in the proposed rule and our responses 
to comments, we intend to solicit comment from and engage with States 
as appropriate and necessary when evaluating requests for exceptions 
from the network adequacy requirements in Sec.  422.116.
d. Comment Solicitation on Financing Issues
    Based on our experience in the FAI, we solicited comments on two 
opportunities to advance financial integration for integrated plans: 
(1) Medicare medical loss ratios (MLRs) that include only D-SNP 
experience and other options to evaluate the financial performance of 
integrated plans; and (2) consideration of the expected impact of 
benefits provided by MA organizations on Medicaid cost and utilization 
in the evaluation of Medicaid actuarial soundness.
    We did not propose new Medicare or Medicaid policies in this 
discussion. Instead, we requested public comments on possible future 
initiatives. In this section of this rule, we summarize our requests 
for comments, comments received, and provide our responses.
    At 86 FR 1870, we proposed 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. Such D-SNPs would still have 
to calculate and report separate Medicare and Medicaid MLRs, and having 
a separate contract for certain D-SNPs would better allow evaluation of 
MLRs and financial performance specific to that D-SNP product. We 
solicited feedback on the extent to which the proposal at Sec.  
422.107(e) would better allow States to evaluate the performance of 
integrated plans.
    In the discussion at 87 FR 1877, we noted that we believe that 
Medicaid managed care capitation rates can be actuarially sound as 
required by Sec.  438.4 when those rates consider the impact of MA 
supplemental benefits and any State-specific requirements for dually 
eligible individuals on the projected costs and utilization of the 
Medicaid benefits covered by the Medicaid managed care capitation 
rates. We solicited feedback on the extent to which this consideration 
of the impact of Medicare-covered benefits on costs and utilization of 
Medicaid services advances integration goals and is consistent with 
actuarial standards of practice. We also requested input on what 
information States, actuaries, and others would need to evaluate 
actuarial soundness under this approach.
    Finally, we solicited feedback on other options related to 
financing for integrated plans CMS should evaluate and consider for 
future rulemaking or sub-regulatory clarification.
    Comment: Several commenters expressed support for approaches to

[[Page 27777]]

MLR reporting that meaningfully improve stakeholders' visibility into 
the financial performance of integrated plans. Some commenters agreed 
that the proposal at Sec.  422.107(e) would provide for MLR results 
exclusive to D-SNPs with exclusively aligned enrollment, thus enhancing 
transparency and relevancy of the MLR data used to assess and oversee 
financial performance for these plans in a way not currently possible. 
A commenter noted stakeholders already collect and analyze Medicare and 
Medicaid financial data and the benefits of the proposal would depend 
on the extent to which CMS facilitated or standardized analysis of MLR 
data in ways not possible today. Finally, a commenter recommended CMS 
explore how MLR calculations can improve services and outcomes for 
dually eligible individuals, especially those enrolled in HIDE and FIDE 
SNPs.
    Response: We thank the commenters for their input and suggestions 
and will take them under advisement for future rulemaking and in 
developing technical assistance for States in analyzing MLR data.
    Comment: Some commenters stated separate Medicaid and Medicare MLR 
requirements create challenges to meeting integration goals, such as 
inhibiting flexibility and not incentivizing integrated care, while 
another commenter stated the inconsistent availability of encounter 
data and lack of framework for allocating cost to Medicare versus 
Medicaid pose significant challenges.
    A commenter objected to CMS ending the FAI capitated financial 
alignment model and expressed that this represents an undesirable move 
away from an integrated MLR, a change they believed would erode 
transparency in medical spending and increase the risk that plans will 
pad allowable administrative costs.
    Response: We thank the commenters for their input and suggestions 
and will take them under advisement for future rulemaking. We address 
other comments on the FAI later in this final rulemaking.
    Comment: Many commenters supported maintaining separate Medicare 
and Medicaid MLR requirements and several commenters expressed 
opposition to any changes. A few commenters expressed uncertainty that 
the benefits of an integrated MLR would outweigh the burden of 
reporting integrated MLR data. A commenter opposed any requirement for 
D-SNPs to report an integrated MLR or any other changes to current D-
SNP financing and infrastructure. Many commenters also noted barriers 
to or concerns with integrated MLR reporting that they believe CMS 
should take into consideration, including misalignments between 
Medicare and Medicaid funding, cost reporting definitions, and program 
requirements; the lack of a standardized methodology for calculating an 
integrated MLR; and the fact that current Medicaid rate development 
guidance does not provide for an integrated MLR to be used in Medicaid 
rate development for an integrated D-SNP. Some commenters indicated 
plans' operational and financial workflows are not currently structured 
to support or yield encounter or financial data of sufficient quality 
to support integrated MLR reporting.
    A few commenters expressed support for integrated MLR reporting. A 
few commenters responded that they do not believe the current MLR 
approach provides sufficient data for State decision making and policy 
development; they instead supported an integrated MLR approach, 
including CMS requiring an integrated MLR for integrated products, as a 
better way to track and oversee plan spending, set actuarially sound 
rates, and establish plan performance targets. Several commenters 
supported States having the flexibility to determine MLR requirements. 
A commenter stated the integrated MLR reports that MMPs submit under 
FAI offer a more complete picture of plan financial performance than 
would otherwise be available. Another commenter acknowledged what while 
there are significant technical and legal hurdles to achieving 
integrated MLR reporting, overcoming these would support data-driven 
decision making and policy. A commenter noted the potential benefit to 
States of CMS's proposed requirement to reinstate the detailed MLR 
reporting requirements under Sec. Sec.  422.2460 and 423.2460 (87 FR 
1902 through 1906) as it may better support States to compare Medicare 
and Medicaid MLR reporting under a D-SNP contract.
    Response: We would like to clarify that we did not propose to 
require an integrated MLR for integrated products; as we stated at 87 
FR 1876, we do not believe we have the statutory authority to include 
Medicaid experience as part of the Medicare MLR requirement. We thank 
the commenters for providing thoughtful input on these issues. We will 
take these comments and concerns into consideration for any future 
guidance on this topic.
    Comment: Several commenters agreed with CMS's interpretation that 
Medicaid managed care capitation rates can be actuarially sound, as 
required by Sec.  438.4, when those rates consider the impact of MA 
supplemental benefits and State-specific requirements for dually 
eligible individuals, as included in the State Medicaid agency 
contract, D-SNP MOC, or MMP contract, on Medicaid costs and 
utilization. A few other commenters did not reference Medicaid 
actuarial soundness requirements but stated that MA supplemental 
benefits and State-specific requirements should be considered in 
setting Medicaid managed care capitation rates or supported States 
having the flexibility to consider the impact of such benefits and 
requirements when setting Medicaid managed care capitation rates. 
Several commenters indicated they expect MA supplemental benefits or 
other State-specific requirements to have minimal impact on the cost 
and utilization of Medicaid benefits. A commenter recommended that 
Medicaid actuaries be required to consider the impact of Medicare costs 
and utilization in Medicaid rate setting.
    A few commenters expressed concern with States considering the 
impact of MA supplemental benefits and other State-specific 
requirements for dually eligible individuals when establishing Medicaid 
managed care capitation rates, citing potential negative impacts 
including: Reductions in Medicaid managed care capitation rates without 
sufficient transparency; Medicaid rates not meeting actuarial soundness 
requirements; and States offering less robust Medicaid benefits by 
substituting these benefits with MA supplemental benefits. A few 
commenters expressed concern about the impact of these Medicaid-rate 
setting considerations on MA market dynamics or beneficiaries' access 
to certain benefits, including: the potential for D-SNPs to be less 
competitive; or for such benefits to only be made available in MA 
plans, resulting in less beneficiary choice. For example, a commenter 
stated that significant expansion of MA supplemental benefits could 
give States less incentive to expand their Medicaid benefit package if 
coverage, such as for dental care, were widely provided in MA plans 
that are available to dually eligible individuals; in such scenario, 
beneficiary choice could be limited if needed dental coverage were only 
available in MA plans. A commenter also expressed concern that for 
integrated products, Medicare financial information alone might suggest 
funds are available to support funding Medicaid benefits, but that 
combined Medicare and Medicaid funding could indicate otherwise, 
limiting an

[[Page 27778]]

integrated plan's ability to fund investments in Medicaid services with 
savings from reduced Medicare acute care utilization. A few commenters 
stated that CMS should also consider the impact of Medicaid benefits in 
lowering Medicare costs and utilization.
    Response: We thank the commenters for providing thoughtful input on 
this issue. We appreciate the support for CMS's interpretation that 
Medicaid managed care capitation rates can be actuarially sound when 
those rates consider the impact of MA supplemental benefits and any 
State-specific requirements on the projected costs and utilization of 
the Medicaid benefits. We thank the commenters for providing input on 
the potential unanticipated impacts of such an approach. We will take 
these comments and concerns into consideration for any future guidance 
on this topic.
    Comment: A number of commenters provided input on the types of 
information States, actuaries, and others would need to evaluate 
actuarial soundness under this approach. A commenter noted that 
Medicaid rate development for programs with enrollment aligned across 
Medicare and Medicaid may currently use a wide variety of information 
that generally meets actuarial soundness needs. However, this commenter 
and a number of others provided feedback on potential implementation 
challenges CMS should consider that could impact States' and actuaries' 
ability to estimate the impact of such supplemental benefits on 
Medicaid costs and utilization. Commenters noted barriers including: 
Timing differences between the MA bidding cycle and Medicaid rate-
setting periods; the lack of uniformity and sameness in supplemental 
benefits across MA plans or within MA plans as a result of MA 
uniformity flexibility or provision of SSBCI; States not having 
sufficient MA bid data that describes supplemental benefits, and the 
lack of a consistent framework for allocating Medicare versus Medicaid 
costs or claims.
    Some commenters encouraged CMS to provide additional guidance to 
ensure consistency in how States and actuaries consider of the impact 
on MA supplemental benefits or State-specific requirements in Medicaid 
managed care rate setting, in areas including: CMS's expectations for 
plan-specific Medicaid rates to account for plan differences in MA 
supplemental benefits; using a historical MA benefits package to 
establish Medicaid rates; and what quantitative support would be 
necessary to support CMS' review of Medicaid rates in these scenarios.
    Response: We appreciate the feedback on the additional information 
States, actuaries and others would need to evaluate actuarial soundness 
under this approach, as well as other potential implementation 
challenges. We also thank the commenters for their input concerning 
what guidance would be useful for States and Medicaid actuaries. We 
will take this input into account as we consider updates to CMS's 
Medicaid Managed Care Rate Development Guide, as well as other avenues 
to provide guidance and technical assistance on this topic.
    Comment: We received many comments on other options related to 
financing for integrated plans. For any future rulemaking, a commenter 
requested CMS collaborate with stakeholders in advance, while another 
commenter requested CMS take into consideration plans' need for 
flexible deadlines and written guidance.
    Many commenters recommended that CMS work with States, managed care 
organizations, and actuaries on opportunities to improve financial 
alignment between Medicare and Medicaid. Other commenters expressed 
interest in CMS sharing best practices, such as how experience from the 
FAI could be applied in the context of a D-SNP or a FIDE SNP, or 
continuing to explore topics related to financial alignment, such as 
curbing incentives for cost shifting, methodologies to value 
supplemental benefits, and investments that target social determinants 
of health. A commenter that believes CMS should increase the level of 
coordination between CMS and States regarding community supports and 
in-lieu-of services that impact Medicare costs and utilization 
requested a new requirement for advance notification of changes in 
community support services.
    A few commenters emphasized their support for CMS examining 
experienced-based rate setting approaches for adoption in integrated 
products outside of FAI, where cost neutrality was required. A 
commenter noted States participating in other aligned approaches may 
want to consider requesting more explicit cost offsets from CMS, such 
as sharing in the Medicare MLR remittances. A few commenters encouraged 
CMS to continue to offer States financial incentives for integration, 
with a commenter suggesting CMS offer States alternative value-adds 
such as access to implementation resources; ongoing increased FFP for 
administrative and IT changes; and improved coordination, quality, 
access, and simplification for beneficiaries.
    Finally, a few commenters disagreed with the degree of emphasis 
they believe is placed on financial savings derived from integrated 
products, arguing CMS should pursue integration because it is an 
alternative to the current fragmented, inefficient system. A commenter 
disagreed with designing integrated approaches under a standard of 
budget neutrality, noting this is a standard to which MA organizations 
and Medicaid capitation payments for D-SNPs are not likewise held. 
Another commenter expressed support for replacing Titles 18 and 19 of 
the SSA to fund integrated services through a single source of 
financing used to fund benefits; this commenter stated this alternative 
model should feature State contracting with administering entities, 
financing mechanisms to ensure accountability and eliminate incentives 
for cost shifting, and required reinvestments of savings into efforts 
to support the population.
    Response: We appreciate the commenters' input and suggestions on 
how to improve financial alignment across the Medicare and Medicaid 
programs and will take them under advisement for future rulemaking.
7. Definition of Applicable Integrated Plan Subject to Unified Appeals 
and Grievances Procedures (Sec.  422.561)
    In Sec.  422.561, we proposed 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 in which 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

[[Page 27779]]

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. 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. Accordingly, we proposed, effective 
January 1, 2023, to expand the definition of the term applicable 
integrated plan to include an additional type of D-SNP and the 
affiliated Medicaid managed care plan subject to the rule.
    We proposed 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. 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 (as defined in Sec.  440.70), Medicaid medical 
supplies, equipment and appliances (as described in Sec.  
440.70(b)(3)), or Medicaid nursing facility services. The affiliated 
Medicaid MCO in which all of the D-SNP's enrollees are also enrolled in 
this scenario would also be included in our proposed expansion of 
applicable integrated plans. As a result, the following arrangements 
would be applicable integrated plans under our proposal, where both 
plans include membership that is fully aligned between the D-SNP and an 
affiliated MCO: (1) A D-SNP and affiliated Medicaid MCO where the D-SNP 
holds a contract with a separate Medicaid MCO to cover all capitated 
managed care benefits in the State and the separate Medicaid MCO holds 
the contract with the State for those benefits (2) a D-SNP and 
affiliated Medicaid MCO where the affiliated Medicaid MCO holds a 
contract with the State for the capitated Medicaid benefits.
    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 proposed 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) would become paragraphs (2)(i)(A) and (B) and apply before 
January 1, 2023. Proposed new paragraph (2) of the definition would 
apply beginning January 1, 2023, and would include the current 
definition and the proposed new category of D-SNPs and affiliated 
Medicaid managed care plans that would qualify as an applicable 
integrated plan.
    Comment: We received numerous comments in support of our proposal 
to expand the unified plan-level appeals and grievance processes to 
cover additional D-SNPs and enrollees where the State Medicaid managed 
care program may have carve-outs of LTSS and behavioral health services 
that prevent the plans from qualifying as FIDE or HIDE SNPs. In support 
of our proposal and covering more enrollees with the unified 
procedures, several commenters noted that the unified processes are 
simpler and easier to navigate for enrollees and will expand access to 
Medicare services while an appeal is pending. A commenter also noted 
that our proposed benefit coverage criteria for affected plans are 
largely areas where overlap is most common, including specifically 
durable medical equipment and home health. Some commenters, while 
supportive of our proposal, encouraged CMS to extend the unified 
processes to additional D-SNPs to cover more enrollees, including D-
SNPs that do not have exclusively aligned enrollment.
    Response: We appreciate the broad support for our proposal to 
expand the definition of applicable integrated plans to encompass more 
plans and cover more enrollees. We agree with those commenters who 
stated that the unified processes are clearer and easier to navigate 
for enrollees and provide additional benefits such as continuing 
Medicare services while an appeal is pending. As we noted in the April 
2019 final rule (CMS-4185-F), we do not think it is feasible to align 
appeals and grievance processes where the D-SNP is not affiliated with 
the Medicaid MCO covering the enrollee's Medicaid benefits. This 
includes a plan where some enrollees are aligned but not all. We will 
continue to monitor for additional opportunities for streamlining and 
clarifying the process for enrollees. We also remind D-SNPs that they 
have obligations under Sec.  422.562(a)(5) to assist enrollees with 
obtaining and appealing Medicaid benefits covered by Medicaid, 
including when those Medicaid benefits are covered by unaffiliated 
Medicaid managed care plans or Medicaid FFS programs, as discussed in 
the April 2019 final rule (84 FR 15723), and that States may include 
additional integration requirements in their State Medicaid agency 
contracts with D-SNPs.
    Comment: Some commenters, while supportive of our proposal, 
requested that CMS delay the implementation date. A commenter also 
asked how CMS would work with States that resist modifying appeals and 
grievance procedures to comply with the rule.
    Response: We acknowledge that plans newly covered by the definition 
of applicable integrated plan will have less than a year to ensure that 
they have appropriate processes in place. However, most of the plans 
that we anticipate will be covered by the revised definition in 2023 
currently operate as MMPs in California, and thus have several years' 
experience operating very similar unified appeals and grievance 
processes. With the transition of Cal MediConnect, we would like for 
enrollees who transition to D-SNPs and MCOs operated by the same parent 
organization to continue to benefit from the unified appeals and 
grievance processes that they have come to know in Cal MediConnect. We 
also note that materials and guidance already exist for applicable 
integrated plans \49\ and the Medicare-Medicaid Coordination Office 
provides technical assistance to States on integration issues. We will 
continue to engage States, plans, and other stakeholders as we 
implement the unified appeals and grievance processes for additional 
plans, particularly in

[[Page 27780]]

California. We are also committed to continuing our work with States to 
gather and disseminate best practice information and to engage 
stakeholders to ensure a successful implementation.
---------------------------------------------------------------------------

    \49\ The Addendum to the Parts C & D Enrollee Grievances, 
Organization/Coverage Determinations, and Appeals Guidance, Coverage 
Decision Letter (Form CMS-10716), Letter about Your Right to Make a 
Fast Complaint, and Appeal Decision Letter can be found at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/D-SNPs.
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    Comment: Some commenters requested clarification, or through their 
comments suggested a need for clarification, with respect to whether 
the applicable integrated plans must have exclusively aligned 
enrollment to be covered under our proposed expansion of the definition 
of applicable integrated plans. A few commenters specifically suggested 
that we apply the applicable plan definition to HIDE SNPs, in addition 
to FIDE SNPs.
    Response: We clarify that only D-SNPs with exclusively aligned 
enrollment, as defined in Sec.  422.2 as those D-SNPs where State 
policy limits enrollment to full-benefit dual eligible individuals also 
covered by the affiliated Medicaid managed care organization, will be 
newly covered by the expanded definition of applicable integrated 
plans. Exclusively aligned enrollment, as a practical matter, generally 
refers to HIDE SNPs and FIDE SNPs. In this rule we are including in the 
definition of applicable integrated plans a subset of D-SNPs that are 
not HIDE SNPs or FIDE SNPs but still share membership with the Medicaid 
MCO. Plans covered under the existing definition of applicable 
integrated plans at Sec.  422.561, meaning FIDE and HIDE SNPs that have 
exclusively aligned enrollment, will continue to be applicable 
integrated plans.
    Comment: Several commenters opposed finalizing our proposal based 
on the misunderstanding that the unified procedures would apply to 
benefits beyond those covered by the D-SNP and Medicaid capitated 
contracts, potentially making the unified processes unworkable for 
plans. A few commenters requested clarification on how Medicaid 
benefits that are carved out of managed care in a State would be 
covered by the unified appeals and grievance process, and suggested 
that CMS facilitate data sharing between States and plans so that plans 
know what Medicaid benefits are covered and what the State requirements 
are for processing Medicaid appeals. A commenter also questioned the 
value of unified appeals and grievance processes that do not cover all 
of an enrollee's benefits due to benefits being carved out of managed 
care in the State.
    Response: The Medicaid benefits covered by the applicable 
integrated plan will be delineated as covered benefits in the Medicaid 
managed care contract that the D-SNP has with the State Medicaid agency 
or other Medicaid MCO. These will be the only Medicaid benefits subject 
to the unified appeals and grievance process. To the extent that the 
Medicaid MCO covering the Medicaid managed care benefits is not the 
same legal entity as the D-SNP, both the Medicaid MCO and the D-SNP 
must collaborate to implement a unified appeals and grievance process 
to cover the enrollees' full capitated Medicaid and Medicare benefits, 
and ensure they are complying with the regulations at Sec. Sec.  
422.629 through 422.634. The appeals and grievances processes for 
Medicaid benefits that are not capitated to the applicable integrated 
plan (that is, the plan is not responsible for covering) remain 
unchanged. For example, if an enrollee appeals the denial of a Medicaid 
service that is carved out, that appeal would continue to be processed 
and decided through the State's appeal process as it is today. 
Similarly, Medicare benefits that are not covered by the D-SNP, 
specifically hospice benefits, acquisition costs of kidneys for 
transplant, and certain new benefits that are the subject of an NCD or 
legislative change in benefits, will not be subject to the unified 
appeal and grievance process. Benefits that are not covered by the D-
SNP or MCO contract will not be covered by the unified grievance and 
appeals procedures. However, we believe that bringing as many benefits 
as the plans cover, under the MA contract and under the capitated 
contract for Medicaid managed care benefits, into the unified 
procedures still benefits the enrollee by providing the enrollee a 
single pathway for appeals and grievances for those overlapping 
benefits, as opposed to separate paths for appeals and grievances based 
on Medicare or Medicaid coverage. We note that, with respect to the 
workability of unified appeals and grievance procedures generally, 95 
applicable integrated plans in eleven states are currently operating, 
and we have heard very few questions or concerns. We also reiterate the 
requirement for all D-SNPs to assist enrollees with obtaining, 
including appealing, access to all Medicaid benefits, including those 
that the plan does not cover, per Sec.  422.562(a)(5).
    Comment: We received a comment requesting that applicable 
integrated plans be permitted to use the MA Integrated Denial Notice 
for ease of plan process and for less enrollee confusion. Another 
commenter raised questions about the impact of the unified processes on 
Part C reporting.
    Response: We decline to allow applicable integrated plans to use 
the Integrated Denial Notice (Form CMS-10003-NDMCP) and note that we 
have issued a specific denial notice for applicable integrated plans, 
the Coverage Decision Letter (Form CMS-10716). The Coverage Decision 
Letter \50\ is tailored to the unified process and appeal rights and 
covers the requirements at Sec.  422.631. It is currently in use by 
existing applicable integrated plans. We have not heard concerns about 
difficulties in using this notice or confusion on the part of 
enrollees. As far as Part C reporting requirements, we can confirm that 
we previously reviewed these requirements and made minor adjustments 
prior to the implementation of the unified appeals and grievance 
processes in 2021.
---------------------------------------------------------------------------

    \50\ The Coverage Decision Letter (Form CMS-10716) can be found 
at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/D-SNPs.
---------------------------------------------------------------------------

    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing the amendment to the definition of applicable integrated 
plans in Sec.  422.561 with slight modifications to increase clarity. 
We are revising the definition to be clearer where there are references 
to other paragraphs within the definition and to clarify in paragraph 
(2)(ii)(C) that, in addition to primary care and acute care (including 
Medicare cost-sharing), the capitated contracts for Medicaid coverage 
must cover at a minimum, one of the following categories of Medicaid 
benefits: Home health services as defined in Sec.  440.70 of the 
chapter, medical supplies, equipment, and appliances as described in 
Sec.  440.70(b)(3) of the chapter, or nursing facility services as 
defined in Sec.  440.155 of the chapter.
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 an HMO or 
competitive medical plan on a reasonable cost basis. By contrast, MA 
plans bear the risk of coverage of Medicare and supplemental benefits 
for their enrollees and are paid risk adjusted capitation by CMS. Cost 
contracts arrange for Medicare services and provide enrollees several 
flexibilities not offered to MA plan enrollees, 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

[[Page 27781]]

network of providers through original Medicare. As of March 2022, 
approximately 184,000 beneficiaries were enrolled in six cost contracts 
offered in nine States.\51\
---------------------------------------------------------------------------

    \51\ Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Enrollment-by-Contract.
---------------------------------------------------------------------------

    We direct readers to the proposed rule, 87 FR 1878, for discussion 
of how Federal statute and regulation restrict cost contracts in 
several ways. We proposed to modify the prohibition at Sec.  
422.503(b)(5) on an entity accepting new enrollees in a cost contract 
plan while offering an MA plan in the same service area applicable to: 
(1) A parent organization owning a controlling interest in a separate 
legal entity accepting new enrollees under a cost contract plan, and 
(2) another separate legal entity owned by the same parent organization 
as the legal entity accepting new enrollees under a cost contract plan.
    As described in our proposed rule, since CMS finalized the policy 
at Sec.  422.503(b)(5), 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.\52\ Three of the seven MA 
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 potential 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.\53\
---------------------------------------------------------------------------

    \52\ See https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/Minnesota.html.
    \53\ 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 enrollees to cost contract plans 
offered under the same parent organization. We direct readers to the 
proposed rule, 87 FR 1878 through 1879, for a more detailed description 
of the data reported by D-SNPs with cost contract plans in Minnesota. 
The data from the Minnesota demonstration showed allowing both a D-SNP 
and a cost contract plan under the same parent organization did not 
result in a substantial number of enrollees moving from the D-SNP to 
the cost contract plan.
    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 would not undermine the policy goals that underlie Sec.  
422.503(b)(5)--that is, prohibiting entities from steering high-cost 
enrollees to their cost contract plans and lower cost enrollees 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. Therefore, we proposed to 
revise paragraph Sec.  422.503(b)(5)(i) and (ii) to allow an MA 
organization to offer a D-SNP and also--
     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.
    In our proposed rule, we solicited comment on the proposed 
exception for D-SNPs and our process for monitoring for unintended 
consequences. We also explained how we were considering more limited 
exceptions to the requirements at Sec.  422.503(b)(5) that may more 
closely fit our policy goal of removing regulatory obstacles to the 
availability of D-SNPs that further Medicare-Medicaid integration. 
Specifically, we were considering limiting the exception to:
     D-SNPs designated as HIDE SNPs, as defined at Sec.  422.2, 
and FIDE SNPs, as defined at Sec.  422.2;
     D-SNPs that only enroll full-benefit dually eligible 
individuals;
     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 did not propose these alternatives, citing our belief that they 
would add complexity to the regulation that we did not believe would be 
necessary to achieve our primary aim of removing regulatory obstacles 
to the availability of D-SNPs that integrate Medicare and Medicaid 
services and improve care for dually eligible individuals. However, we 
solicited 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.
    Comment: A few commenters supported our proposal to allow 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. No commenters opposed the proposal. A few commenters noted 
that the proposal would ensure continuity of care for Minnesota's D-SNP 
enrollees as the Minnesota administrative alignment demonstration 
phases out. A commenter noted that the proposal would reduce potential 
barriers to integrated care for Medicare and Medicaid, allow for the 
expansion of coverage options in other geographies, and ease 
administrative burden on States. Another commenter expressed general 
support for policies that address barriers to integration across 
States, particularly in rural areas, and those that apply best 
practices from demonstrations.
    Response: We thank the commenters for their support of this 
proposal and agree it would reduce barriers to integration of Medicare 
and Medicaid.
    Comment: A commenter expressed support for CMS's close monitoring 
of

[[Page 27782]]

enrollment, should we finalize the proposed regulation.
    Response: We appreciate the commenter's statement. We will monitor 
patterns of dually eligible enrollment and disenrollment in applicable 
cost contract plans and D-SNPs. To the extent we see any pattern that 
suggests that plan sponsors are persuading D-SNP enrollees to move into 
cost contract plans, we would investigate and pursue corrective actions 
or additional rulemaking, potentially removing or restricting the 
exemption finalized in this rule.
    Comment: A commenter suggested that organizations should be 
permitted to offer both a national MA Employer Group Waver Plan (EGWP) 
option and continue to offer an individual cost contract plan in 
certain rural areas of the Midwest with limited Medicare options. The 
commenter posited that cost contract plans and EGWPs would not compete 
for the same beneficiaries since, unlike cost contract plans, EGWPs are 
offered specifically to Medicare-eligible retirees of a particular 
employer.
    Response: We thank the commenter for this suggestion. We note that 
we limited our proposal to D-SNPs operating in the same area as a cost 
contract plan to remove regulatory obstacles to the availability of D-
SNPs that further Medicare-Medicaid integration. Therefore, this 
comment is not strictly within the scope of the rulemaking, as the 
proposed rule does not discuss limitations on EGWPs. Although we are 
not offering an opinion on the merits of the commenter's suggestion, we 
would clarify that EGWPs need not restrict enrollment to the Medicare-
eligible retirees of a particular employer. For example, Chapter 9 of 
the Medicare Managed Care Manual provides that professional or other 
types of group associations with members that do not all have the same 
employer are not precluded from enrolling Medicare beneficiaries in 
EGWPs, provided the members of the association are eligible for 
employment-based health coverage. Further, our regulations do not 
preclude a Medicare beneficiary who would be eligible for an MA EGWP 
from electing to enroll in a different coverage option, like a cost 
plan offered in the area where the beneficiary lives. As a result, it 
is not as clear as the commenter suggests that the concerns underlying 
our original adoption of Sec.  422.503(b)(5) would not apply in the 
context of an EGWP.
    After consideration of the comments and for the reasons provided in 
the proposed rule and our responses to the comments, we are finalizing 
without modification our proposal to allow 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.
9. Requirements To Unify Appeals and Grievances for Applicable 
Integrated Plans (Sec. Sec.  422.629, 422.631, 422.633, and 422.634)
    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 currently defined at Sec.  
422.561 as FIDE SNPs and HIDE SNPs with exclusively aligned enrollment. 
We are finalizing an amendment to the definition of applicable 
integrated plan in section II.A.7. of this final rule, which will add 
new categories of applicable integrated plans beginning January 1, 
2023. Based on our initial implementation experience and feedback from 
stakeholders, we proposed several adjustments, clarifications, and 
corrections to the regulations governing unified appeal and grievance 
procedures at Sec. Sec.  422.629 through 422.634.
    Comment: Numerous commenters expressed general support of our 
proposals for updates to the unified appeals and grievance rules with 
commenters noting the benefits to enrollees of having a single pathway 
for Medicare and Medicaid appeals and grievances, integrated notices, 
and access to continuation of benefits while the appeal is pending for 
Medicare.
    Response: We appreciate the broad support for unified appeals and 
grievance processes and agree that the unified process is simpler and 
provides more protections for enrollees.
    Comment: Several commenters requested that we delay implementation 
of the proposed changes until at least 2024 to give plans more time to 
implement the updates, and to provide more time for CMS to release 
additional guidance and best practices on the unified appeals and 
grievance processes.
    Response: While we acknowledge the commenters' concern, the updates 
we proposed are relatively minor, so we are not delaying the 
implementation date.
    Comment: We received several comments requesting that CMS work with 
States to ensure State-specific requirements are clear and conveyed 
timely, and additional guidance to plans is released. Commenters also 
requested that CMS share best practices and additional materials about 
integrated appeals and grievance processes.
    Response: We appreciate the commenters' request for clarity. We 
will make timely updates to the Addendum to the Parts C & D Enrollee 
Grievances, Organization/Coverage Determinations, and Appeals Guidance 
\54\ to incorporate the updates made in this rule. CMS is also 
committed to continuing to engage States, plans, and other stakeholders 
as we gather and disseminate best practice information, providing 
technical assistance on integration issues as needs arise.
---------------------------------------------------------------------------

    \54\ The Addendum to the Parts C & D Enrollee Grievances, 
Organization/Coverage Determinations, and Appeals Guidance, Coverage 
Decision Letter (Form CMS-10716), Letter about Your Right to Make a 
Fast Complaint, and Appeal Decision Letter can be found at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/D-SNPs.
---------------------------------------------------------------------------

    Comment: Several commenters proposed changes to the existing 
unified and grievance rules. A commenter suggested that CMS revise 
Sec.  422.629(e) to require plans to assist providers in filing 
appeals. A commenter suggested additional information should be 
required to be included in each organization determination, some of 
which is already included (for example, the enrollee's right to get a 
free copy of the information used in making the decision and how to get 
it and how to continue services while and appeal is pending, and 
receiving the notice in alternate formats), and details on the second 
level appeals process (to the Independent Review Entity (IRE) or a 
State fair hearing). A commenter requested that we add additional 
specificity on how plans should consider, approve, and provide for 
appeals of reasonable accommodation requests. A commenter requested 
clarification on how continuation of benefits work while and appeal is 
pending. A commenter requested changes to Sec.  422.633(e)(3) to no 
longer allow circumstances where an enrollee's payment request appeal 
may be expedited. A commenter requested clarification related to the 
language in Sec.  422.633(e)(3) on how a plan should determine if non-
payment will create material life or health consequences and how 
quickly decisions and payments must be processed in these cases.
    Response: We appreciate the commenters' suggestions. We note, 
generally, that these comments are on regulations for which we did not 
propose changes and therefore are

[[Page 27783]]

beyond the scope of this rulemaking. We included an extensive 
discussion of the unified appeals and grievance process in the April 
2019 final rule (84 FR 15727 through 15744) and in the Addendum to the 
Parts C & D Enrollee Grievances, Organization/Coverage Determinations, 
and Appeals Guidance. We direct readers to those documents for 
additional information and explanation of the existing appeals and 
grievance system rules for applicable integrated plans, and how to 
operationalize them.\55\ We also direct commenters to the current model 
notices for applicable integrated plans for reference as to what is 
currently covered in the notices.\56\ We also note that this rule does 
not impact the requirements for applicable integrated plans to continue 
benefits while an appeal is pending (please see the April 2019 final 
rule (84 FR 15737) for more information on how continuation of benefits 
works in the unified process). These continuation of benefits 
requirements will be applied to additional applicable integrated plans 
and their enrollees, per our discussion related to the revised, 
expanded definition of applicable integrated plans in section II.A.7.
---------------------------------------------------------------------------

    \55\ The guidance can be found at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/DSNPs.
    \56\ The Coverage Decision Letter (Form CMS-10716), Letter about 
Your Right to Make a Fast Complaint, and Appeal Decision Letter can 
be found at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/D-SNPs.
---------------------------------------------------------------------------

    We urge commenters to review the April 2019 final rule (84 FR 
15741) for a discussion of expedited payment appeals, which provides 
the rationale for inclusion of the right for an enrollee to request 
one. In addition, with respect to the language in Sec.  422.633(e)(3) 
related to considering whether the standard timeframe could seriously 
jeopardize the enrollee's life, physical or mental health, or ability 
to attain, maintain, or regain maximum function, we note that all MA 
organizations and Medicaid managed care organizations must apply this 
standard today in various contexts of appeals cases, since this 
language also exists in Sec. Sec.  422.566, 422.570, 422.584, 438.210, 
and 438.410.
    Finally, we note that MA plans, including D-SNPs, must comply with 
applicable Federal civil rights authorities. Section 504 of the 
Rehabilitation Act prohibits disability discrimination and includes 
requirements for effective communication for individuals with 
disabilities (45 CFR 84.52), accessibility standards for buildings and 
facilities (45 CFR 84.22, 84.23), and filing of grievances and 
complaints (45 CFR 84.61, 84.7).
a. Providing Enrollees Information on Presenting Evidence and Testimony 
(Sec.  422.629(d))
    We proposed adding additional language to Sec.  422.629(d) to 
codify in regulation a provision from existing sub-regulatory 
guidance.\57\ We proposed 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. In addition, our proposal would 
reorganize Sec.  422.629(d) to improve the readability of the 
provision.
---------------------------------------------------------------------------

    \57\ 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.
---------------------------------------------------------------------------

    Comment: Several commenters requested that CMS clarify when, in the 
appeals process, applicable integrated plans should offer enrollees the 
opportunity to provide live testimony, and how long such testimony 
should be allowed to be.
    Response: We note that the requirement to provide enrollees with an 
opportunity to present evidence and testimony is an existing rule, at 
Sec.  422.629(d). This same requirement to provide an opportunity for 
evidence and testimony also exists in both the Medicaid managed care 
requirements at Sec.  438.406(b)(4) for appeals, and for MA plans at 
Sec.  422.586 for reconsiderations. Our proposed update is to require 
that applicable integrated plans provide enrollees information on how 
to present the evidence and testimony. For the evidence and testimony 
to be meaningful to the plan's decision, it must be accepted prior to 
the plan's decision and taken into account in that decision. The 
regulation does not set forth a specific amount of time that must be 
provided for an enrollee to provide evidence, including testimony, but 
enrollees must be provided a reasonable opportunity and sufficient 
flexibility in terms of what is presented as needed to provide relevant 
information.
    After consideration of the comments and for the reasons provided in 
the proposed rule and our response to the comments, we are finalizing 
this provision as proposed without modification.
b. Technical Correction (Sec.  422.629(k))
    We proposed technical changes to Sec.  422.629(k)(4)(ii) to correct 
a minor error from the April 2019 final rule (84 FR 15835). We proposed 
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) for clarity and consistency in the text.
    We received no comments on this proposal. For the reasons outlined 
in the proposed rule, we are finalizing the proposed change without 
modification.
c. Accommodate State Medicaid Representation Rules (Sec.  422.629(l))
    At Sec.  422.629(l)(1), we proposed adding additional language to 
codify in regulation current sub-regulatory guidance \58\ regarding the 
appointment of a representative. We proposed to add language to clarify 
that an enrollee's representative includes any person authorized under 
State law to accommodate State Medicaid program appointments. We 
proposed to reorganize paragraph (l)(1) as part of this amendment. 
Specifically, we proposed 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 proposed to move the content of current paragraph (l)(1)(ii) that 
deals with rights of assignees to a new Sec.  422.629(l)(4) as 
discussed in section II.A.9.d. of this final rule.
---------------------------------------------------------------------------

    \58\ 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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    Comment: A commenter requested that CMS clarify the types of 
documentation applicable integrated plans should accept, and if the 
documentation requirements would be different depending on whether the 
underlying benefit is covered by Medicaid or Medicare.
    Response: We appreciate the commenters' requests for clarity. 
Applicable integrated plans should treat all appeals and grievances 
subject to the rules at Sec. Sec.  422.629 through 422.634, and 
authorization of representation documentation, the same whether the 
underlying benefit is covered by Medicare, Medicaid, or both. If the 
documentation that the applicable integrated plan receives from a 
representative meets either State Medicaid or Medicare standards for 
representation, the plan should accept the documentation. For example, 
even if the underlying benefit at issue in the

[[Page 27784]]

appeal is covered only by Medicare, and the representation 
documentation meets State Medicaid representation requirements, the 
plan should accept the authorization as sufficient. This is consistent 
with how the appeal processes for applicable integrated plans were 
designed to take into account differences in Medicaid State programs, 
be easily navigable by enrollees, and provide unified procedures and 
processes.
    We did not receive any comments recommending changes to this 
proposal. For the reasons outlined in the proposed rule, we are 
finalizing this provision without modification.
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 to clarify the 
rights of non-contracted providers. We therefore proposed 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 final rule, we proposed 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 proposed 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. In 
paragraph (l)(4)(i), we proposed to 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. In paragraph (l)(4)(ii) we proposed to 
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.
    Comment: A few commenters requested that CMS clarify what an 
appealable interest means and clarify the language in Sec.  
422.629(l)(1)(ii) that provides that ``parties with appealable 
interest'' may appeal.
    Response: We appreciate the commenters' request for clarity and 
note that we did not propose any changes to the language in Sec.  
422.629(l) related to appealable interest (that is, any other provider 
or entity--other than the applicable integrated plan--who has an 
appealable interest). This is existing language in Sec.  422.629(l) and 
in the longstanding MA appeal rules at Sec.  422.574(d). We point 
commenters to the discussion on Sec.  422.574 in the June 1998 final 
rule titled ``Medicare Program; Establishment of the Medicare+Choice 
Program'' (63 FR 35026) which noted that the phrase includes not just 
the enrollee, but also allows other parties to exercise appeal rights 
(excluding the MA organization). As noted in that discussion, parties 
who may have an appealable interest in a case may include certain 
physicians and other providers who are assignees of the enrollee, legal 
representatives of a deceased enrollee's estate, and the broad category 
of any other entity determined to have an appealable interest in the 
proceeding. These parties can continue to have an interest in the 
proceedings throughout each level of an appeal. We decline to add a 
definition for this phrase in this rule. In our proposal we are only 
reorganizing where this language is in Sec.  422.629(1).
    We did not receive any comments recommending changes to this 
proposal. After consideration of the comments and for the reasons 
outlined in our responses, we are finalizing this provision without 
modification.
e. Timelines for Processing Payment Requests (Sec.  422.631)
    In the April 2019 final rule, we neglected to specify how the MA 
``prompt payment'' rules at Sec.  422.520 governing payment of claims 
apply to applicable integrated plans.
    Accordingly, at Sec.  422.631(d), we proposed 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 would mirror the current provision at Sec.  
422.568(c).
    We did not receive any comments recommending changes to this 
proposal. For the reasons provided in the proposed rule, we are 
finalizing the proposed amendment without modification.
f. Clarifying Integrated Reconsideration Request (Sec.  422.633(e) and 
(f))
    We proposed 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. We proposed 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.
    We solicited 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 noted that any changes to this timeframe would impact Sec.  
422.633(f), and the timing 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. We also solicited 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, we proposed 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. We proposed to exclude integrated 
reconsiderations about Part B drugs from the authority for extensions 
in order to be 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.
    Comment: A few commenters requested that CMS add language 
clarifying that when providers are appealing on behalf of enrollees, 
and the services have been rendered and the enrollee is not financially 
responsible, they should not be doing so for purposes of their own 
(provider) reimbursement. A commenter also requested that CMS confirm 
whether enrollees would need to provide a waiver of liability in these 
cases.
    Response: We appreciate the commenters' perspective on this issue, 
but we decline to add further detail in the rule on this issue. If a 
provider is acting on behalf of the beneficiary in the appeals process, 
the provider's motive

[[Page 27785]]

for assisting the enrollee is not relevant; beneficiaries are permitted 
to have a provider act on their behalf consistent with these rules. In 
addition, a non-contract provider may appeal in their own right 
consistent with these rules when a waiver of liability is properly 
filed. If the provider is acting on behalf of the enrollee, the 
enrollee does not need to provide a waiver of liability. A waiver of 
liability would only be provided if the non-participating provider is 
appealing on their own behalf (not on behalf of the enrollee). We 
decline to add the suggested additional detail to the regulation at 
this time.
    After consideration of the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing the amendments to Sec.  422.633(e) and (f) as proposed 
without substantive modification. We are finalizing a grammatical 
revision to paragraph (e)(1)(ii).
g. Timeframes for Service Authorization After a Favorable Decision 
(Sec.  422.634(d))
    We proposed changes, in Sec.  422.634(d), to more clearly describe 
timeframes for authorizing services in all situations where an 
applicable integrated plan's decision is reversed. We proposed 
reorganizing Sec.  422.634(d) to more explicitly address each scenario 
that an applicable integrated plan would face when effectuating a 
reversal. In proposed paragraph (d)(1), we proposed 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 proposed 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.
    We also proposed 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 of a 
favorable appeal decision on coverage of a Part B drug; 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.
    In proposed paragraph (d)(2), for the sake of clarity we proposed 
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 proposed no changes to this 
effectuation timeline.
    Lastly, we proposed to add a new paragraph (d)(3) to require the 
same timelines for an applicable integrated plan to effectuate 
reversals by the Medicare IRE, 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 requested 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.
    Comment: A commenter recommended that Sec.  422.634 more fully 
integrate the Medicare and Medicaid processes, specifically requesting 
that the regulations parallel the integrated process in the 
Massachusetts One Care FAI demonstration since some services are 
covered by both programs. The commenter further noted, as an example, 
that the One Care contract requires the IRE to review both the Medicare 
and MassHealth medical necessity criteria.
    Response: We thank the commenter for this suggestion, but we did 
not propose, and therefore will not finalize, a further integration of 
the appeals process at this time. We leave open the future possibility 
of furthering the integration of the unified appeals and grievance 
process to include the post-plan appeal procedures, as we noted in the 
April 2019 final rule (84 FR 15743). With respect to the unique aspects 
of the One Care demonstration three-way contract, though the IRE cannot 
review Medicaid cases for Medicaid benefits, it does use Medicaid 
medical necessity criteria, along with Medicare criteria, when 
reviewing Medicare supplemental benefit cases under One Care because, 
in the One Care demonstration, Medicare supplemental benefits are 
defined by State Medicaid criteria. Applicable integrated plans are not 
subject to the same requirements in designing and offering MA 
supplemental benefits. We would need to further evaluate whether there 
are any viable scenarios in which the IRE may be required to review any 
particular State's Medicaid coverage criteria in reviewing coverage for 
a Medicare benefit.
    Comment: A commenter requested that CMS clarify whether the 
timeframes in Sec.  422.634 apply to expedited appeal decisions, and 
whether CMS intends to issue further guidance on timelines for 
effectuating reversals after the plan has issued an authorization and 
when the plan seeks next-level review of the initial appeal decision.
    Response: Timeframes for applicable integrated plans to effectuate 
all decisions are covered in Sec.  422.634; this includes effectuation 
after reversal by the applicable integrated plan, the IRE, a State fair 
hearing, or at the Office of Medicare Hearings and Appeals, or the 
Medicare Appeals Council. With the amendments made by this final rule, 
timeframes for effectuation are as follows:
    As expeditiously as the enrollee's health condition requires, but 
no later than:
    1. For a reversal by the applicable integrated plan (reversing its 
integrated organization determination), no later than the earlier of: 
(1) 72 hours from the date it reverses its decision or, (2) 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)). For a Part B drug, 7 calendar days 
after the date the applicable integrated plan receives the request for 
the integrated reconsideration.
    2. For reversals by the IRE, in accordance with MA requirements at 
Sec.  422.618 the applicable integrated plan must, for standard, non-
Part B drug, and non-payment cases, authorize the service under dispute 
within 72 hours from the date it receives notice reversing its 
determination, or provide the service under dispute as expeditiously as 
possible no later than 14 calendar days from that date; for standard 
Part B drug cases, 72 hours from the date it receives notice reversing 
the determination; and payment cases, pay for the service no later than 
30 calendar days from the date it receives notice reversing the 
integrated organization determination; and, in accordance with MA 
requirements at Sec.  422.619, for expedited, non-Part B drug cases, 
authorize or provide the service under dispute as expeditiously as the 
enrollee's health condition requires but no later than 72 hours from 
the date it receives notice reversing the determination, and for 
expedited Part B

[[Page 27786]]

drug cases, authorize or provide the Part B drug no later than 24 hours 
from the date it receives notice reversing the determination.
    3. If a State fair hearing reverses the applicable integrated 
plan's integrated reconsideration regarding a Medicaid benefit not 
furnished while the appeal was pending, the applicable integrated plan 
must provide or authorize the item or service as expeditiously as the 
enrollee's health condition requires but no later than 72 hours from 
the date it receives notice reversing the determination for all cases, 
both standard and expedited, in accordance with Sec.  422.634(d)(2) 
(which is the same timeframe as required under Medicaid regulations at 
Sec.  438.424).
    4. For a reversal by an administrative law judge or attorney 
adjudicator at the Office of Medicare Hearings and Appeals, or the 
Medicare Appeals Council, the applicable integrated plan must 
effectuate a reversal under same timelines applicable to other MA plans 
as specified in Sec. Sec.  422.618 and 422.619.
    With respect to a MA plan's appeal rights, these proposed changes 
do not impact plans' appeal rights, and CMS does not anticipate issuing 
guidance on that topic as a result of this rule. Sections 422.592 and 
422.600 of the MA rules apply to applicable integrated plans that have 
issued an integrated reconsideration that is adverse, in whole or in 
part, to the enrollee with regard to coverage or provision of a 
Medicare benefit. We note that Sec.  422.634(b) addresses adverse 
integrated reconsiderations; this rulemaking does not revise Sec.  
422.634(b). An applicable integrated plan, like all other MA plans, 
must effectuate a decision in favor of the enrollee from the IRE; the 
plan does not have the authority to appeal the decision to an 
administrative law judge.
    After consideration of the comments and for the reasons outlined in 
the proposed rule and our responses to comments, we are finalizing the 
proposed amendment to Sec.  422.634(d) without modification.
10. Technical Update to State Medicaid Agency Contract Requirements 
(Sec.  422.107)
    Section Sec.  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 proposed to strike the reference to 
Medicare in paragraph (c)(6) as 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. 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.\59\
---------------------------------------------------------------------------

    \59\ See https://www.cms.gov/medicare/health-plans/healthplansgeninfo/downloads/mc86c02.pdf.
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    Comment: Several commenters expressed support for this technical 
update as it is a logical simplification of the State Medicaid agency 
contract minimum requirements.
    Response: We thank the commenters for their support of this 
technical update.
    Comment: A few commenters recommended that CMS should not finalize 
this proposal but should retain the contract requirement that a D-SNP 
must verify an enrollee's Medicare eligibility. These commenters 
believed that the existing regulatory text clarifies the State's 
obligation to identify dually eligible individuals and provide MA 
organizations with information that distinguishes between types of dual 
eligibility, such as full-benefit, and partial-benefit dually eligible 
individuals. A few commenters recommend that CMS require States to 
provide a crosswalk or translations to category identifiers, such as 
eligibility for Medicare Savings Programs (MSP), needed to manage 
benefits for enrollees. This would also serve as a tool to better 
understand differences in dual eligibility categories for D-SNPs, 
including partial-benefit dually eligible individuals.
    Response: We thank commenters for raising their concerns. We note 
that we did not propose a change to the contract requirement that the 
D-SNP validate the enrollee's Medicaid eligibility. As noted in our 
proposal, 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. 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.
    We note that Sec.  422.107(c)(2) states that the contract must 
document the categories and criteria for eligibility for dually 
eligible individuals to be enrolled under the SNP, including as 
described in sections 1902(a), 1902(f), 1902(p), and 1905 of the Act. 
Therefore, the D-SNP contracts with States should describe how States 
provide D-SNPs with information needed to enroll dually eligible 
individuals. For example, if a State limits D-SNP enrollment to full-
benefit dually eligible individuals, that State should note in the 
contract with a D-SNP how the D-SNP will determine an enrollee's 
status. We encourage D-SNPs to discuss with States any issues in 
obtaining this information.
    After consideration of the comments we received and for the reasons 
outlined in the proposed rule, we are finalizing our proposed 
amendments to Sec.  422.107(c)(6) to strike the reference to Medicare.
11. Compliance With Notification Requirements for D-SNPs That 
Exclusively Serve Partial-Benefit Dually Eligible Beneficiaries (Sec.  
422.107(d))
    We codified minimum Medicare-Medicaid integration requirements for 
D-SNPs 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) that 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.
    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, which 
enable the MA organizations to more clearly explain and coordinate the 
Medicaid benefits that those enrollees are entitled to receive. 
However, the D-SNP PBPs for 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).
    We proposed to largely codify the guidance issued in January 2020 
\60\ that would allow the partial-benefit-only D-

[[Page 27787]]

SNP to be considered as meeting the integration requirements. We 
proposed 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.
---------------------------------------------------------------------------

    \60\ 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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    As discussed in the proposed rule, 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 D-SNP PBP covering 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 did not 
anticipate any negative impact for beneficiaries or partial-benefit-
only D-SNPs as a result of this rule.
    Comment: Some commenters supported this provision, and no 
commenters opposed it. A few commenters noted the proposal supports 
continued enrollment of partial-benefit dually eligible beneficiaries 
in D-SNPs where they have access to additional care coordination. A 
commenter noted that partial-benefit dually individuals often can 
experience a change in circumstances making them eligible for the full 
Medicaid benefit; this proposal that a plan sponsor also operate a D-
SNP serving full-benefit dually eligible individuals could be helpful 
for care continuity in a transition. Another commenter noted that this 
provision would allow D-SNP sponsors to continue providing supplemental 
benefits to partial-benefit dually eligible enrollees.
    Response: We thank the commenters for their support.
    Comment: A commenter noted CMS should continue to allow States the 
option to authorize an MA organization to offer a D-SNP that enrolls 
only partial-benefit dually eligible individuals, with the inclusion of 
the notification requirement in the State Medicaid agency contract, to 
meet the integration requirements outlined in the BBA of 2018. This 
commenter noted that as States move to more integrated FIDE SNP or HIDE 
SNP models for full-benefit dually eligible individuals, they continue 
to seek opportunities for partial-benefit dually eligible individuals 
that provide the best level of care for this population, including by 
allowing these beneficiaries to remain with carriers that do not have a 
Medicaid contract.
    Response: We appreciate the commenter's concern and confirm that a 
D-SNP that serves partial-benefit dually eligible individuals without a 
corresponding full-benefit-only D-SNP in the same service area would be 
able to continue operating as long as the contract with the State 
Medicaid agency includes the notification requirement at Sec.  
422.107(d)(1).
    Comment: Another commenter questioned whether, if the proposal is 
adopted, States could continue to require MA organizations to submit 
hospital or skilled nursing facility admissions for partial-dually 
eligible enrollees if such a requirement in the State Medicaid agency 
contract.
    Response: We thank the commenter for their question and confirm 
that States remain able to use their contracts with D-SNPs to require 
MA organizations to notify the State Medicaid agency of admissions for 
partial-benefit dually eligible enrollees.
    Comment: A commenter noted that they have concerns about D-SNPs' 
ability to comply with this requirement due to Federal and State health 
information privacy laws regarding the disclosure of particular 
sensitive health information without an individual's consent. The 
commenter requested that CMS provide comprehensive guidance on how D-
SNPs should reconcile the admission notification requirement with the 
limitations presented by 42 CFR part 2 and State health information 
privacy laws, especially as they relate to substance use disorder and 
mental health services. Alternatively, the commenter suggested that CMS 
amend Sec.  422.107(d) to relieve D-SNPs of the obligation to submit 
admission notifications when doing so is not authorized by applicable 
law or would require an enrollee's consent.
    Response: We thank the commenter for expressing their concerns. We 
emphasize that States must implement the notification requirement at 
Sec.  422.107(d) in a way that complies with all applicable State and 
Federal laws. We acknowledge there are limitations to D-SNPs' ability 
to notify States of certain inpatient admissions for high-risk 
enrollees with substance use disorder, as well as to their ability to 
coordinate these individuals' care, absent enrollee consent for the 
disclosure of such information. We encourage D-SNPs to collaborate with 
their States to identify and address concerns regarding compliance with 
other statutes and regulations, including the Health Insurance 
Portability and Accountability Act HIPAA of 1996 and 42 CFR part 2.
    We are still gathering information on the initial implementation of 
the data notification requirement at Sec.  422.107(d). We will use 
feedback received in response to the request for information described 
in section III.C. of this final rule and our work with States and D-
SNPs to update technical guidance and consider any needed changes to 
the regulation.
    Comment: A commenter expressed concern with enrolling partial-
benefit dually eligible individuals in D-SNPs. This commenter noted 
that there has not been an analysis to determine if the supplemental 
benefits offered by some D-SNPs are relevant to partial-benefit dually 
eligible individuals. The commenter urged CMS to undertake such an 
analysis and establish minimum criteria to ensure that D-SNPs have 
relevance and value to partial-benefit dually eligible enrollees.
    Response: We thank the commenter and will consider an analysis on 
the relevance of supplemental benefits to partial-dually eligible 
individuals enrolled in D-SNPs to determine if establishing minimum 
criteria through rulemaking is warranted.
    After consideration of the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
finalizing our proposed amendments to Sec.  422.107(d) to provide that 
partial-benefit-only D-SNPs are not required to meet the notification 
requirement in new Sec.  422.107(d)(1) 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.
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

[[Page 27788]]

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 
catastrophic limit on in-network and out-of-pocket expenditures for 
enrollees in Regional Preferred Provider Organization (RPPO) MA plans. 
In addition, MA Local PPO 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 referred 
to as 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 an 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 the enrollee's progress toward the plan MOOP limit. This 
approach also applies to D-SNPs. Thus, for any D-SNP enrollee, MA plans 
currently have 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.\61\ 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, based on the evidence described below, may 
negatively affect access to Medicare providers for dually eligible 
enrollees.
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    \61\ 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 proposed 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 proposed to amend the regulations 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 proposed 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 affect 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 was not intended to and would 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 the policy, first adopted in the April 2011 final 
rule, permitting MA organizations not to count towards the MOOP limit 
any Medicare cost-sharing amounts paid by Medicaid programs and cost-
sharing that remains unpaid under current law because the enrollee is a 
dually eligible individual. We noted that the specific regulatory 
amendments would have to change if we finalized the MOOP limit 
provisions 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).
    For the reasons discussed in the proposed rule (87 FR 1884), we 
proposed 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 enrollees and must alert both the enrollee 
and the contracted provider(s) if an enrollee has reached the MOOP 
limit. For purposes of this amendment, accrued cost-sharing includes 
all Medicare Parts A and B cost-sharing under the plan, regardless of 
whether the enrollee or another party or entity pays the cost-sharing, 
and regardless whether the cost-sharing is actually paid. Our proposed 
regulation text did not distinguish between cost that is left unpaid 
because the provider is prohibited from collecting cost-sharing from 
certain dually eligible enrollees or for other reasons. As noted in the 
proposed rule, 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. We received 58 comments on the proposal.

[[Page 27789]]

    Comment: We received broad support, including from State Medicaid 
agencies, beneficiary advocacy organizations, and providers of primary, 
specialty, hospital, and long-term services and supports, for our 
proposal to require MA plans to calculate attainment of the MOOP limit 
based on the accrual of cost-sharing in the plan benefit. The reasons 
commenters gave for their support mirror the rationale we provided for 
the proposal in the NPRM.
    Supportive commenters noted the proposal would increase payments to 
providers serving dually eligible MA enrollees with cost-sharing above 
the MOOP limit and thereby mitigate disincentives to serve dually 
eligible MA enrollees and increase provider incentives to join D-SNP 
provider networks. One State commenter noted that the proposal would 
make it more financially sustainable for physicians to serve dually 
eligible MA enrollees. One provider commented that the proposed 
requirement would reduce the amount of bad debt that providers incur 
when MA plan cost-sharing goes unpaid due to the combination of limits 
on State cost-sharing payments and prohibitions on providers collecting 
cost-sharing from certain dual eligible individuals. Another provider 
organization commented that the proposed revision to how attainment of 
the MOOP limit is calculated would capture more dually eligible 
enrollees with very high medical costs and thereby reduce the 
administrative burden on providers of having to seek State payment of 
cost-sharing once the MOOP limit was attained. Numerous commenters 
wrote that they expected the financial benefits to providers from the 
proposal would improve provider access for dually eligible MA 
enrollees.
    Many commenters supportive of our proposal stated that it would 
improve health equity by requiring that dually eligible MA enrollees, 
and the providers who serve them, are treated the same as non-dually 
eligible MA enrollees under the MOOP policy. A commenter noted that the 
proposal would effectively ensure that MA plans face the same liability 
to pay 100 percent of the cost of services over the MOOP limit just as 
they are required to do for non-dually eligible enrollees.
    A number of commenters supported the proposal because they expect 
it would reduce State expenditures by ensuring the MOOP limit for 
dually eligible enrollees would be attained by high cost enrollees, 
thereby limiting State responsibility for payment of cost-sharing. One 
beneficiary advocacy organization wrote that current policy, by 
allowing MA organizations to exclude State paid or unpaid cost-sharing 
by dually eligible enrollees toward attainment of the MOOP limit, 
represented an unfair burden on State budgets.
    Response: We thank the commenters for their support of this 
proposal. In particular, we are grateful for their comments, based on 
their experience serving dually eligible individuals as providers, 
advocates, or State Medicaid agencies, that finalizing the proposal 
would reduce provider disincentives to serve dually eligible MA 
enrollees and potentially improve access to care. We agree with 
commenters that the proposal results in more equitable treatment of 
dually eligible MA enrollees in administration of the MOOP protection.
    Comment: Both MedPAC and MACPAC supported this proposal. MedPAC 
wrote that MA organizations should administer the MOOP limit in a 
consistent manner for all MA enrollees. MedPAC also noted that dually 
eligible beneficiaries may benefit from improved access to care in MA 
plans that change how they administer the MOOP to be consistent with 
the proposed requirement. MACPAC supported the proposal as it would 
ensure that MA organizations rather than States cover cost-sharing for 
dually eligible MA enrollees above the MOOP limit.
    Response: We thank MedPAC and MACPAC for their comments and value 
their expertise on this issue.
    Comment: Many of the opposing comments stated that dually eligible 
enrollees would receive no benefit from the proposal because providers 
in MA plans are already prevented from charging QMBs and full-benefit 
dually eligible individuals for Medicare cost-sharing for Parts A and B 
services. Rather, these commenters stated that the result of 
implementing the proposal would be a reduction in supplemental benefits 
for dually eligible enrollees, particularly enrollees in D-SNPs, as MA 
organizations would have to increase their bids to pay for effectively 
providing a MOOP to dually eligible enrollees and as a result have 
fewer rebate dollars available to fund supplemental benefits. According 
to these commenters, if CMS finalized the proposal, the supplemental 
benefits that MA organizations would have to reduce or eliminate as a 
result would include dental, hearing, vision, transportation, health 
food and meals benefits, over-the-counter medical items, health home 
services and care managers, benefits for individuals with serious 
mental illness, adult day care, tele-physical health, and benefits 
addressing health care disparities and social determinants of health. A 
commenter in particular noted an MA organization had recently added a 
service to address social isolation and, through an Innovation Center 
model,\62\ cash benefits being provided to enrollees in select D-SNPs 
in contract year 2022. Several commenters also wrote that the 
additional cost of implementing the MOOP proposal would make it 
difficult for D-SNPs to offer zero-premium plans as it would reduce 
rebate revenues now used to pay down Part D premiums.
---------------------------------------------------------------------------

    \62\ For information on the Value Based Insurance Design Model, 
see https://innovation.cms.gov/innovation-models/vbid.
---------------------------------------------------------------------------

    Commenters provided a range of estimates for the increases in bid 
costs and rebate reductions that would flow from implementation of the 
proposal. A commenter cited analysis estimating that the additional 
cost for Part A and B benefits for D-SNPs if implemented in 2022 would 
be $23.90 per member per month or a 2.3 percent increase in plan bids. 
A commenter estimated that its per member costs would be 20 to 25 
percent higher than this estimate, while another commenter stated this 
level additional costs would be shouldered by all D-SNPs. Another D-SNP 
sponsor projected the proposal would reduce by half the available funds 
for supplemental benefits. A commenter estimated the added cost could 
be as high as 2 percent of plan revenue. Another commenter cited the 
cost of the MOOP proposal estimated in the proposed rule. Some 
commenters noted that smaller, regional D-SNPs would be less able to 
absorb these added bid costs than larger MA organizations.
    Response: We recognize that implementation of this proposal would 
raise MA bids for basic benefits, especially for D-SNPs and other MA 
plans with a high percentage of dually eligible enrollees, and thereby 
potentially reduce rebates available for a range of supplemental 
benefits to the extent MA organizations are unable or unwilling to 
reduce profit margins or other costs to account for the added MA plan 
costs for services provided after an enrollee meets the MOOP limit. 
Along with many of the commenters who supported our proposal, we 
appreciate the value to dually eligible enrollees of certain 
supplemental benefits offered through D-SNPs and other MA plans. We 
disagree that the MOOP proposal provides no benefit to dually eligible 
enrollees. We address the potential benefit to improved provider access 
later in this rule.
    In the proposed rule, using contract year 2022 bid data to estimate 
the Medicare cost-sharing accrued by dually

[[Page 27790]]

eligible beneficiaries with cost-sharing protections (full-benefit 
dually eligible 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 member per month. This 
estimate is very similar to the $23.90 estimate provided by an analysis 
cited, but not provided, by several commenters. Both estimates are 
based on D-SNP bid data, and as such already reflect the higher medical 
costs of dually eligible enrollees.
    We believe that for most MA organizations, most (if not all) of the 
added costs for implementation of the MOOP proposal could be absorbed 
by reductions in plan profit margins and still allow MA organizations 
to achieve D-SNP profit margins that are comparable to the overall MA 
profit margins. According to MedPAC, D-SNPs had average profit margins 
of 7.8 percent for the 2019 contract year, while the overall MA plan 
profit margin averaged 4.5 percent.\63\ A 2 percent increase in bid 
costs represents a less-than-two percent increase in revenue, as plan 
revenue also includes rebate dollars and increases due to risk 
adjustment of MA payments. Thus, based on recent years of experience, a 
2 percent increase in bid costs could be fully absorbed in D-SNP profit 
margins while still allowing average D-SNP profit margins to exceed 
average MA plan margins.
---------------------------------------------------------------------------

    \63\ See chapter 12 of Medicare Payment Advisory Committee, 
March 2021 Report to the Congress: The Medicare Advantage Program: 
Status Report. Retrieved from: https://www.medpac.gov/wp-content/uploads/2021/10/mar21_medpac_report_ch12_sec.pdf.
---------------------------------------------------------------------------

    We recognize that MA organizations with smaller D-SNP margins, 
including some regional and nonprofit organizations, may have more 
difficulty absorbing the full costs of the proposal by reducing 
margins. MedPAC noted that nonprofit D-SNPs had lower average 2019 
gain/loss (profit) margins of 2.5 percent (still higher than the 
overall nonprofit MA margin of 0.9 percent).\64\ Although we value the 
participation of these organizations in the D-SNP program, we believe 
that the benefits of our proposal outweigh the downsides, including the 
differential difficulty that smaller, nonprofit MA organizations may 
face to come into compliance. Such organizations also have less revenue 
to comply with a range of MA requirements, including provision of the 
Part A and B benefit, yet we do not differentiate between the types of 
MA organizations in requiring delivery of such benefits. In sum, we are 
not convinced that the added bid costs attributable to the proposal 
would necessarily translate into reductions in valuable supplemental 
benefits for dually eligible enrollees. We also do not believe the 
costs of implementing the MOOP proposal would jeopardize the ability to 
pay down Part D premiums and offer zero-premium plans. For contract 
years 2021 and 2022, D-SNPs allocated an average of $7.50 per member 
per month to pay down the Part D premium to the amounts covered by the 
Part D Low Income Premium Subsidy, amounts that we believe D-SNPs would 
be able to continue to allocate as they implement this proposal. 
Finally, since promulgation of our proposed rule, we issued a final 
rule with comment period to finalize regulations regarding the MA MOOP 
and cost-sharing limits for Medicare Parts A and B services titled 
``Medicare Program; Maximum Out-of-Pocket (MOOP) Limits and Service 
Category Cost-Sharing Standards'' (CMS-4190-FC4; 87 FR 22290, April 14, 
2022) (``MOOP April 2022 final rule''), which will raise the in-network 
mandatory MOOP limit to $8,300 starting in 2023. This regulatory change 
will reduce the costs of this proposal to D-SNPs and other MA plans 
that adopt the mandatory MOOP limit.
---------------------------------------------------------------------------

    \64\ Ibid.
---------------------------------------------------------------------------

    Comment: Many commenters opposing this proposal disagreed with CMS 
that its implementation would improve access to providers in D-SNPs and 
other MA plans and noted that CMS had provided no evidence of dually 
eligible MA enrollees having problems with access to providers. A 
commenter cited data from the Medicare Current Beneficiary Survey that 
showed that a higher percentage of dually eligible MA enrollees than 
dually eligible individuals in Original Medicare had a usual source of 
care (91 percent compared to 86 percent). Other commenters believed 
that, because D-SNPs and other MA plans must meet CMS provider network 
access requirements, CMS's concerns about dually eligible enrollees' 
access to care were misplaced. Another commenter opined that, to the 
extent that there are problems with access to specialists for dually 
eligible MA enrollees, the reasons underlying such access problems are 
more complicated than whether MA plans pay providers 100 percent of the 
cost of services above the MOOP level, as they do for non-dually 
eligible enrollees.
    Response: We thank the commenters for their input. We recognize 
that D-SNPs and other MA plans must meet CMS network requirements but 
note that the number of providers who are participating in Original 
Medicare is much larger than the number of providers in the network 
typical of MA plans, and the access problems facing dually eligible 
individuals in Original Medicare in States where lesser-of policies 
limit payment of Medicare cost-sharing are well established.\65\ 
According to one study, the reductions in Medicare cost-sharing under 
these policies decreased the odds that a dually eligible individual 
would have an outpatient physician visit or mental health treatment 
visit in comparison to non-dually eligible Medicare beneficiaries.\66\ 
MACPAC found that, relative to non-dually eligible Medicare 
beneficiaries, lower payment of cost-sharing correlated with a 
decreased likelihood of evaluation and management visits, use of 
outpatient psychotherapy, and increased likelihood of using a safety 
net provider such as an FQHC or rural health clinic.\67\ A third study 
found decreased use of outpatient services among QMB-only beneficiaries 
and decreased utilization of office evaluation and management services 
and hospital outpatient services among QMB-plus beneficiaries compared 
to non-dually eligible Medicare beneficiaries.\68\ Although these 
studies all draw from Medicare FFS data, they establish that Federal 
and State policies on coverage of Medicare cost-sharing, and the 
amounts paid providers for Medicare cost-sharing, impact access to care 
for dually eligible individuals. Our current policy on attainment of 
the MOOP limit allows for a disparity in MA plan payment of cost-
sharing for dually eligible compared to non-dually eligible MA 
enrollees. We believe that, to the extent that D-SNPs and other MA 
plans replicate the Medicare FFS structure, including by effectively 
never providing a MOOP above which the MA organization pays 100 percent 
of costs, that similar differences in access

[[Page 27791]]

between dually eligible and non-dually eligible would be replicated in 
MA plans, and especially in D-SNPs that largely replicate Original 
Medicare in their plan benefits. We are under no illusion that 
implementation of our MOOP proposal would eliminate all access barriers 
facing dually eligible MA enrollees, but, to the extent it provides 
greater parity in plan benefits between dually eligible and non-dually 
eligible MA enrollees, we are confident that it would at least 
incrementally improve dually eligible MA enrollees' access to care. As 
previously noted in this rule, a range of providers commented that they 
expected parity in payment over the MOOP limit between non-dually 
eligible MA enrollees and dually eligible MA enrollees would improve 
access to care.
---------------------------------------------------------------------------

    \65\ See https://www.kff.org/medicare/report/medicare-advantage-how-robust-are-plans-physician-networks/ MA plan networks on average 
include 46 percent of physicians in a county, with lower averages 
for some specialists, such as oncologists, and for ``narrow-
network'' plans. By contrast, 97 percent of physicians participate 
in Original Medicare. See: https://www.kff.org/medicare/issue-brief/how-many-physicians-have-opted-out-of-the-medicare-program/.
    \66\ https://www.rti.org/sites/default/files/resources/StatePaymentLimits.pdf.
    \67\ https://www.macpac.gov/publication/effect-of-state-medicaid-payment-policies-for-medicare-cost-sharing-on-access-to-care-for-dual-eligibles/.
    \68\ https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/Downloads/Access_to_Care_Issues_Among_Qualified_Medicare_Beneficiaries.pdf.
---------------------------------------------------------------------------

    Because of the strong evidence, cited above, of access challenges 
for dually eligible beneficiaries (relative to non-dually eligible 
beneficiaries) in Original Medicare, we are unpersuaded by the MCBS 
data showing a four percentage point differential between dually 
eligible MA enrollees who have a usual source of care and their 
counterparts in Original Medicare. We think the more salient comparison 
for access to care is between dually eligible and non-dually eligible 
MA enrollees. We acknowledge that the body of evidence directly 
comparing access to care in MA between the two cohorts is limited. This 
is because one important source of data on this issue, the self-
reported beneficiary experience measures in the MA CAHPS surveys, is 
reported at the contract level and thereby often comingles data on D-
SNP performance within larger contracts that include non-D-SNP MA plans 
as well. We are finalizing a policy that can begin to address the scope 
of available quality measurement data in section II.A.6.a. in this 
final rule in our discussion of D-SNP-only contracts under proposed 
Sec.  422.107(e). We note, however, that in the 2022 Star Ratings, 14 
percent of the universe of D-SNP-only MA contracts had a low star 
rating--one or two stars--compared to 10 percent of MA contracts with 
no D-SNP enrollment on the CAHPS measure C18--Getting Appointments and 
Care Quickly. Fifty percent of MA contracts with 100 percent D-SNP 
enrollment had high star ratings on this measure--4 or 5 stars--but 65 
percent of contracts with no D-SNP enrollment had high star ratings on 
this measure. Although imperfect, this data substantiates our concerns 
that access to and availability of healthcare for dually eligible 
individuals in D-SNPs is less than that for MA enrollees who are not 
dually eligible. These concerns support finalizing this provision as 
proposed.
    Comment: A commenter wrote that implementation of this proposal 
would have a significant impact on D-SNP enrollees, who constitute 35 
percent of Medicare beneficiaries in Puerto Rico, and would result in 
higher premiums and/or reductions in supplemental benefits such as 
dental coverage and other benefits that address social barriers to 
health.
    Response: We appreciate the commenter drawing our attention to the 
issues affecting D-SNP enrollees in Puerto Rico but do not agree with 
this assessment of the potential impact to these enrollees. All Puerto 
Rico D-SNPs, in the Platino contracts they sign with ASES (Puerto 
Rico's Medicaid agency), certify that they have no cost-sharing for 
Medicare Parts A and B services. Unlike States, Puerto Rico does not 
have a QMB program under which the State pays Medicare cost-sharing for 
Medicare services provided by these D-SNPs or that provides protections 
against providers billing for unpaid Medicare cost-sharing under the D-
SNP benefit. That means the full cost of Medicare services, both before 
and after attainment of the MOOP limit, is already paid by the D-SNPs 
and funded by a combination of Medicare bid and rebate payments for the 
D-SNP bids and payments from ASES. Therefore, we do not believe this 
proposal will have an impact on the Puerto Rico D-SNPs' costs for 
covering Medicare services.
    Comment: A commenter noted that there would be minimal to no impact 
on its provider payments above the MOOP limit because the D-SNP does 
not charge cost-sharing and pays providers a set percentage of the 
Medicare fee schedule regardless of the claim. Another commenter stated 
that FIDE SNPs with a negotiated single fee schedule for providers 
would also see no impact on provider payments under the MOOP provision.
    Response: We thank the commenters for this analysis as it provides 
an opportunity to better explain our proposal. FIDE SNPs and other D-
SNPs that are capitated by the State for Medicare cost-sharing for all 
their full-benefit dually eligible QMB members have the ability to 
negotiate a single fee schedule for providers that encompasses both the 
Medicare and Medicaid responsibility for any claim. If implementation 
of the proposal has no impact on these D-SNPs' payments to providers 
above the MOOP, then there should be no increase in these D-SNPs' bids 
unless there is a reduction in the capitation rate that the Medicaid 
agency pays for coverage of Medicare cost-sharing and MA organizations 
must make up the difference in their bids. We note that less than one 
third of total D-SNP enrollment are in D-SNPs with exclusively aligned 
enrollment that are capitated by the State Medicaid agency for Medicaid 
payment of cost-sharing for Medicare Part A and B benefits, and a 
smaller proportion still of dually eligible enrollees in all MA plans 
are in such D-SNPs. We do not know, however, whether all these D-SNPs 
with exclusively aligned enrollees negotiate a single fee schedule for 
Medicare services encompassing both Medicare and Medicaid payments.
    Comment: A few commenters believed implementation of the proposal 
would have a negative impact on MA organizations' ability to negotiate 
value-based payment arrangements with providers or implement State-
directed value-based payment initiatives in connection with Medicaid 
managed care contracts also held by the MA organizations. Another 
commenter wrote that the MOOP provision would incentivize providers to 
run unnecessary tests and procedures to speed their patients' progress 
toward the MOOP limit, after which the providers would receive full 
payment from the MA plan for the care they provide. A separate 
commenter stated that the chief beneficiaries of the proposal would be 
dialysis providers that have a duopoly on dialysis clinics and 
providers of Part B drugs and CMS should determine which providers 
would benefit from the MOOP proposal and whether access to these 
providers would be improved.
    Response: We thank commenters for this input but do not find it 
persuasive. We do not believe changes to the calculation of the MOOP to 
take into account the particular cost-sharing circumstances for dually 
eligible enrollees and making effective the requirement that MA plans 
pay 100 percent of the cost of services above the MOOP limit would in 
any way limit the ability of MA plans to negotiate value-based payment 
structures with their providers. As proposed and finalized, this policy 
would in no way restrict the ability of MA organizations to negotiate 
payment rates with their providers, including the ability to negotiate 
capitated or semi-capitated payment arrangements. Regarding incentives 
for providers to perform unnecessary tests and procedures to advance 
patients towards the MOOP, we expect that MA organizations would employ 
appropriate utilization management and fraud prevention techniques to 
prevent any such provider behavior, both to ensure program integrity 
and for the

[[Page 27792]]

health of their dually eligible enrollees. Lastly, we are not in a 
position to judge whether special classes of providers are deserving of 
the extra payments that may flow to them under this new policy, but do 
not believe the evidence supports the belief that dialysis providers 
and providers of Part B drugs will be the primary recipients of 
additional MA payments above the MOOP limit. Nor does this amendment to 
how costs are counted toward the MOOP impact the relative market power 
of MA organizations and providers in connection with their respective 
ability to negotiate payment arrangements.
    Finally, we note that skilled nursing facilities may also be 
recipients of higher payments for their dually eligible patients that 
have exceeded the MOOP limit. These higher payments may reduce SNF 
incentives to encourage their patients to disenroll from their MA plan, 
despite the prohibition on such provider interference with beneficiary 
plan choice, a practice described to CMS in anecdotal reports.\69\ To 
the extent dually eligible enrollees remain in their MA plan, 
particularly in FIDE SNPs, after a SNF admission, the MA organization 
would be better able to participate in discharge planning and ensure 
the individual has the appropriate supports to return to the community.
---------------------------------------------------------------------------

    \69\ https://www.cms.gov/files/document/ltcfdisenrollmentmemo.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters objected to the proposal, citing their 
belief that it would use Medicare funds to subsidize Medicaid, by 
requiring MA organizations to pay 100 percent of the costs of care 
after cost-sharing in the plan benefit had accrued to reach the MOOP 
limit, substituting Medicare dollars in the form of MA capitation 
payment for the state Medicaid dollars that now continue to pay cost-
sharing for dually eligible enrollees with no effective limit provided 
by the MOOP.
    Response: We disagree that the provision constitutes an 
inappropriate subsidization of Medicaid by Medicare. Any policy that 
impacts Medicare coverage of services or payment rates for which 
Medicaid is responsible to pay dually eligible individuals' cost-
sharing necessarily has the impact of increasing or decreasing the 
amount of cost-sharing paid by Medicaid. The fact that this proposed 
Medicare policy does result in significant savings to States should not 
by itself constitute a reason not to pursue it.
    Comment: A commenter disagreed with the concern we expressed in the 
proposed rule that the current policy may not be fully consistent with 
section 1902(a)(25)(G) of the Act by allowing MA organizations to 
calculate attainment of the MOOP limit differently for non-dually 
eligible beneficiaries, for whom MA organizations accrue all cost-
sharing in the plan benefit towards the MOOP limit, from dually 
eligible enrollees, for whom no cost-sharing in the plan benefit, 
whether paid by the State or unpaid because of prohibitions on 
collection of such cost-sharing, counts toward attainment of the MOOP. 
As the commenter notes, section 1902(a)(25) of the Act requires 
Medicaid State plans to prohibit any insurer from taking into account 
that an individual the insurer covers is eligible for or receives 
assistance from Medicaid. The commenter acknowledges that the current 
policy does allow MA organizations to take into account dually eligible 
enrollees' receipt of Medicaid assistance by disregarding any the cost-
sharing actually paid by the State. However, the commenter stated that 
dually eligible enrollees' cost-sharing is similarly not counted 
towards attainment of the MOOP, not because of the enrollee's 
eligibility for Medicare, but because it is in fact not owed by the 
enrollee or ever paid, in contrast to other MA enrollees who typically 
are billed for cost-sharing and pay those bills. The commenter 
suggested that CMS's proposal was internally inconsistent by requiring 
MA plans to count towards the MOOP limit cost-sharing that remains 
unpaid because the enrollee is also eligible for Medicaid, which 
requires the MA plan to take into consideration Medicaid eligibility in 
a way that is not aligned with section 1902(a)(25) of the Act. The 
commenter also suggested, if CMS should change the basis on which MA 
plans calculate attainment of the MOOP limit, the agency should only 
require MA organizations to count amounts the State actually pays in 
cost-sharing toward attainment of the MOOP.
    Response: We appreciate the commenter's acknowledgement that MA 
organizations' disregard of Medicaid cost-sharing does in fact ``take 
into account'' their enrollees' receipt of Medicaid benefits in 
administration of the MOOP limit. We do not agree that the disregard of 
cost-sharing that is unpaid because of the protection afforded dually 
eligible beneficiaries does not similarly raise concerns about section 
1902(a)(25)(G) of the Act, which also requires the State plan to 
prohibit insurers' administration of plan benefits because of an 
individual's eligibility for Medicaid. As the commenter recognizes, the 
protection against being billed Medicare cost-sharing is conferred on 
the individual by virtue of their eligibility for QMB or full Medicaid 
benefits. Further, disregarding unpaid cost-sharing in calculating 
attainment of the MOOP has the effect of delaying attainment of the 
MOOP and shifting costs onto Medicaid that would not be borne by non-
Medicaid enrollees, which is the very scenario that section 
1902(a)(25)(G) is designed to prevent. For this reason, we disagree 
with the alternative suggested to have MA organizations count only 
Medicaid-paid amounts toward the MOOP limit. This would undermine the 
goal of providing the same plan benefit under the MOOP policy for both 
dually eligible and non-dually eligible MA enrollees; the limits of 
State cost-sharing payments under lesser-of policies would mean that 
the effective MOOP limit for dually eligible MA enrollees in most 
States would be much higher than for non-dually eligible MA enrollees. 
Finally, we note that, while it is true that MA beneficiaries typically 
do pay their MA cost-sharing, it is also true that dually eligible 
beneficiaries, despite the prohibition against providers billing them 
for cost-sharing, do get billed and do pay such cost-sharing.\70\ The 
current policy, under which MA organizations assume no dually eligible 
enrollee pays cost-sharing, might not result in counting these 
vulnerable beneficiaries' payment of improperly billed cost-sharing 
toward the MOOP limit.
---------------------------------------------------------------------------

    \70\ See: https://www.cms.gov/sites/default/files/repo-new/42/Access_To_Care_Issues_Among_Qualified_Medicare_Beneficiaries.pdf.
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    Comment: A few commenters questioned whether CMS's proposal was 
usurping the authority Congress granted States to establish lesser-of 
policies. Other commenters questioned whether, by changing the method 
MA plans must use to calculate the MOOP limit, CMS was superseding the 
authority granted by Congress in MIPPA to establish state Medicaid 
agency contracts with D-SNPs.
    Response: We respectfully disagree with the commenters' assertions 
that this proposal would usurp or supersede authority granted States by 
Congress. Our proposal would not limit State flexibility to establish 
rates, including lesser-of rates, that set limits on state Medicaid 
payment of Medicare cost-sharing. Instead, we proposed requirements for 
the MOOP limits established by MA plans and how cost-sharing is counted 
toward the MOOP limit, particularly with regard to cost-sharing for 
dually eligible enrollees. As Medicare is primary to Medicaid, the 
policy necessarily impacts Medicaid as

[[Page 27793]]

a secondary payer. We are not superseding State authority to establish 
the methods a State requires D-SNPs that operate in the State to employ 
in the administration of Medicaid's responsibility for cost-sharing. 
Again, our proposal is focused on how MA organizations administer the 
MOOP limit, which is a benefit required, under Sec. Sec.  422.100(f) 
and 422.101(d), from MA plans in connection with basic benefits (that 
is, the Medicare Part A and Part B benefits covered by MA plans). The 
authority Congress has granted under section 1859(f) of the Act States 
for their D-SNP contract is not limited to administration of Medicaid 
benefits that D-SNPs are contracted to provide. Such contracts can 
include requirements on D-SNPs relative to the Medicare cost-sharing 
they impose in plan benefits; our proposal does not impinge on or limit 
that authority.
    Comment: A few commenters questioned whether CMS has the legal 
authority to impose a mandatory MOOP limit on any MA plan other than 
regional PPOs, which are the only MA plans that the Part C statute 
specifically requires to have MOOP limits. A commenter wrote that CMS 
instituted a MOOP requirement for all plans on the basis of its 
authority to ensure MA organizations do not design plan benefits to 
discourage enrollment by Medicare beneficiaries with higher costs. The 
commenter notes that CMS provides no evidence that the current policy 
on dually eligible individuals' attainment of the MOOP is discouraging 
enrollment in MA plans or D-SNPs. Moreover, the commenter argues that 
the rationale we provided for this proposal is not the same as the 
rationale underlying the MOOP requirement.
    Response: The overall legal underpinning for the current MOOP 
rules, established through notice-and-comment rulemaking over a decade 
ago, is beyond the scope of this final rule. In adopting the MOOP 
requirements in the April 2010 final rule titled ``Medicare Program; 
Policy and Technical Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs'' (75 FR 19804), CMS also relied on 
its authority in section 1856(b)(1) of the Act to establish standards 
for MA organizations and MA plans and in section 1857(e)(1) of the Act 
to adopt additional terms and conditions for MA contracts that are not 
inconsistent with the Part C statute and that are necessary and 
appropriate for the MA program. CMS's authority under the statute for 
the MA program is not limited to implementing only the specific 
requirements listed in the statute.
    Regarding the assertion that CMS has provided no data to support 
the claim that the current way that some MA organizations calculate 
attainment of the MOOP limit for dually eligible individuals 
substantially discourages enrollment by these individuals, our proposed 
rule makes no such claim to justify our proposal. In addition to the 
responsibility to deny an MA plan design that we determine is likely to 
substantially discourage enrollment by certain beneficiaries, CMS also 
has authority under section 1854(a) of the Act to negotiate MA bids 
similar to the authority given the Office of Personnel Management to 
negotiate health benefits plans under the Federal Employees Health 
Benefits Program, and we are not obligated to accept every bid. CMS 
also has established the authority, under Sec.  422.100(f)(2) to review 
and approve MA benefits and cost-sharing to ensure that MA 
organizations are not designing benefits to discriminate against 
beneficiaries or inhibit access to services. Our MOOP proposal, which 
requires that MA organizations' MOOP limit is administered the same way 
for dually eligible enrollees and non-dually eligible enrollees, is 
consistent with this authority. In addition, by preventing a method of 
adjudicating the MOOP benefit that now results in providers serving 
dually eligible enrollees never receiving the same level of payment as 
providers serving non-dually eligible enrollees, our proposal prevents 
MA organizations from implementing a cost-sharing structure that has 
the potential to inhibit access to services for dually eligible 
enrollees. In addition, Sec.  422.100(d)(2)(i) requires MA 
organizations to offer uniform benefits and level of cost-sharing 
through the plan's service area. This is not the case when the MA 
organization adjudicates attainment of the MOOP one way for non-dually 
eligible beneficiaries (by accruing all cost-sharing in the plan 
benefit) and another way for dually eligible beneficiaries (by accruing 
none of the cost-sharing accrued by dually eligible beneficiaries with 
cost-sharing protections). Similarly, D-SNPs that enroll both dually 
eligible individuals with cost-sharing protections and dually eligible 
individuals whose only Medicaid benefit is payment of their Part B 
premiums, also do not adjudicate the MOOP uniformly. For the dually 
eligible enrollees with cost-sharing protections, none of the cost-
sharing accrues toward the MOOP limit; for the dually eligible 
enrollees without such projections, all of the cost-sharing in the plan 
benefit accrues toward the MOOP limit.
    Finally, we have learned since promulgation of the proposed rule 
that some MA organizations have used the flexibility afforded to MA 
organizations with a lower voluntary plan MOOP to design a benefit with 
higher service-specific cost-sharing, even though the MOOP limit is 
never attained because no cost-sharing in the D-SNP plan benefit counts 
toward the MOOP. For example, some MA organizations have established D-
SNPs with a lower, voluntary MOOP and subsequently raised cost-sharing 
for other Part A and B services above levels that are actuarially 
equivalent to the Original Medicare benefit for those services. These 
MA organizations have raised cost-sharing for services including 
inpatient and mental health hospital stays and imposed cost-sharing for 
home health services. In D-SNPs for which the bid information shows no 
cost associated with payment of cost-sharing above the MOOP limit, 
indicating that the MOOP is almost never attained by enrollees, these 
MA organizations have raised cost-sharing for emergency and post 
stabilization services. We believe this practice is manipulative of our 
benefit review process and has the potential to violate the requirement 
at Sec.  422.254(b)(4) that MA plans provide a benefit that is at least 
actuarially equivalent to Original Medicare. Implementation of our MOOP 
proposal would ensure that the flexibility we allow to raise service-
specific cost-sharing to encourage use of the lower, voluntary MOOP 
would ensure that use of the MOOP limit actually limited cost-sharing 
under the plan benefit.
    Comment: A few commenters stated that they were grateful that the 
proposal did not exclude charitable contributions to cost-sharing from 
applying toward the MOOP limit. A commenter asked CMS to identify what 
beneficiary costs may be waived by providers. Another commenter noted 
that the proposal did not specifically exclude cost-sharing paid by 
pharmaceutical manufacturer patient assistance programs from counting 
as cost-sharing toward the MOOP limit and requested that similar 
pharmaceutical manufacturer assistance count toward the MOOP limit 
employed by Marketplace plans.
    Response: Although it is accurate that charitable contributions to 
MA enrollees' cost-sharing would count toward the MOOP limit for MA 
plans under our proposal, we remind commenters that the reduction or 
waiver of cost-sharing by providers implicates the Federal Anti-
kickback Statute (AKS), found in section 1128B(b) of the Social 
Security Act

[[Page 27794]]

(Act), and the civil monetary penalties provision prohibiting 
inducements to beneficiaries (Beneficiary Inducements CMP), found in 
section 1128A(a)(5) of the Act. Whether any particular arrangement 
violates the AKS or the Beneficiary Inducements CMP would be based on 
the specific facts and circumstances. Similarly, subsidies provided by 
pharmaceutical manufacturer assistance programs that induce the 
purchase of federally reimbursable items, such as drugs paid for by 
Medicare Part B, also implicate the AKS. A subsidy for cost-sharing 
obligations provided by a pharmaceutical manufacturer assistance 
program may implicate the Beneficiary Inducements CMP, if the subsidy 
is likely to influence a Medicare or State health care program 
beneficiary's selection of a particular provider, practitioner, or 
supplier. The comments seeking CMS guidance on what beneficiary costs 
may be waived by providers and seeking to require that pharmaceutical 
manufacturer patient assistance counts toward the MOOP limit used by 
Marketplace plans are out of the scope of this rule.
    Comment: Other comments we received asked for the MA MOOP 
protection to be extended to Part D, that CMS increase payment rates to 
MA plans, that CMS change the cost-sharing applicable to physical 
therapy and that CMS allow hospitals to collect bad debt for unpaid 
cost-sharing under MA plans.
    Response: These comments are outside the scope of this rulemaking.
    Comment: Several commenters asked CMS to prohibit States from using 
lesser-of policies in establishing the amounts paid for Medicare cost-
sharing.
    Response: We do not have the statutory authority to prohibit States 
from using lesser-of policies in establishing the amounts paid for 
Medicare cost-sharing.
    Comment: We received numerous comments concerning how MA 
organizations would operationalize the proposal and how States would 
know when the MOOP limit was attained and should no longer be billed by 
providers for dually eligible MA enrollees' cost-sharing. Several 
commenters questioned how they would obtain information on non-Medicaid 
secondary coverage in accruing cost-sharing toward the MOOP limit. A 
few commenters questioned how the cost-sharing that has accumulated 
toward the MOOP would be transferred to another MA organization if 
enrollees switch plans mid-year. A commenter objected to the proposed 
requirement to notify dually eligible beneficiaries when the MOOP limit 
is reached, stating that it would be confusing to these enrollees 
because they do not themselves owe cost-sharing. The commenter also 
opposed a requirement that MA organizations notify providers that an 
enrollee has reached the MOOP limit because providers have other means 
to access MOOP information.
    Response: We thank the commenters for this input. MA organizations 
would not need to engage in tracking non-Medicaid secondary coverage 
because all cost-sharing, whether or not paid by secondary coverage, 
that is in the plan benefit package for Parts A and B services would 
accumulate toward the MOOP limit. MA organizations can rely entirely on 
the claims for services they receive from providers and accumulate the 
cost-sharing in the plan benefit for those services toward the MOOP 
limit.
    Longstanding CMS guidance, as described at 50.1 of Chapter 4 of the 
Medicare Managed Care Manual, is that when an enrollee switches to 
another plan of the same type (for example, from one HMO to another 
HMO) offered by the same MA organization, their accumulated annual 
contribution toward the annual MOOP limit in the previous plan to date 
is to be counted towards their MOOP limit in the new MA plan. As 
applicable, this transfer of MOOP applies to both in-network and out-
of-network MOOP. The MOOP limit is not now a transferrable benefit when 
a MA enrollee changes to a plan offered by a different MA organization. 
The cost-sharing that counts toward the MOOP limit starts anew with the 
cost-sharing that is incurred or accrued under the new plan offered by 
the different MA organization. Our proposal does not change that.
    We disagree that we should eliminate the requirement to alert 
dually eligible enrollees and providers when enrollees have reached the 
MOOP limit. We note that this requirement is already in Sec.  
422.101(d)(4) (and has been for several years) and was explicitly added 
to Sec.  422.100(f)(4) and (5) in a recent MOOP April 2022 final rule, 
CMS-4190-FC4. Our proposal only changes how attainment of the MOOP 
limit is calculated. We will consider for future rulemaking whether 
there are circumstances where alerting enrollees may be unnecessary. In 
the interim, we believe providing the identical notification to a 
dually eligible beneficiary with cost-sharing protections as is 
provided to a non-dually eligible enrollees has the potential to be 
confusing. The notification to dually eligible enrollees should be 
tailored to their circumstance. If the dually eligible enrollee should 
not ever be charged cost-sharing by MA plan providers, any notification 
alerting these enrollees that they attained the MOOP limit should 
reflect that. Attainment of the MOOP limit can be accurately described 
by telling enrollees they have reached the stage in their benefit when 
their plan will pay all the cost of your care, and that their providers 
no longer need to bill Medicaid.
    We disagree that providers serving dually eligible enrollees should 
not be alerted when the MOOP limit is attained, a requirement that was 
finalized in CMS-4190-FC4 at Sec.  422.100(f)(4) and (f)(5)(iii). 
Alerting providers that the MOOP limit has been attained, that the MA 
organization will cover 100 percent of the cost of services for the 
remainder of the year, and that State Medicaid agencies should no 
longer be billed for Medicare cost-sharing, is essential for 
administration of the MOOP limit. Remittance advice indicating 
attainment of the MOOP limit and the absence of any additional cost-
sharing charges may fulfill the requirement. If providers have accurate 
remittance advice from MA organizations, they will have no claim for 
Medicaid payment of Medicare cost-sharing over the MOOP limit to submit 
for State payment.
    We note that remittance advice to providers serving dually eligible 
MA enrollees with cost-sharing protections under the MA plan--QMBs, 
SLMB+, and other full-benefit dually eligible enrollees--should explain 
that no cost-sharing may be billed whether the enrollee has attained 
the MOOP limit or not.
    Comment: Numerous commenters urged CMS, if we finalize the 
proposal, to delay the effective date until 2024 or 2025.
    Response: We disagree that a delay is necessary for MA 
organizations to implement the proposal or to submit accurate bids for 
contract year 2023 that take this change into account. MA organizations 
already have experience projecting costs and utilization for their 
enrollees for purposes of bids and accumulating the cost-sharing 
accrued under the plan benefit; annual bids require projections of cost 
and utilization and MA plans must accumulate cost-sharing and process 
claims after the MOOP limit is reached now for non-dually eligible 
enrollees. There is also sufficient time before the start of the plan 
year to develop tailored notices for dually eligible enrollees and 
their providers.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to

[[Page 27795]]

comments, we are finalizing the provision as proposed with technical 
changes to reflect changes to regulation text made by the MOOP April 
2022 final rule, CMS-4190-FC4. Specifically, in paragraphs Sec.  
422.100(f)(4) and (f)(5)(iii) and in paragraph Sec.  422.101(d)(4), we 
are removing the word ``incurred'' and adding in its place the word 
``accrued''.
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.
    In the proposed rule, we described a number of ways that State 
Medicaid agencies can use their D-SNP contracts under Sec.  422.107 to 
coordinate D-SNP supplemental benefits with Medicaid benefits. The 
proposed rule described specific examples of potential coordination of 
MA supplemental benefits and Medicaid coverage, including Medicaid 
benefits that are delivered through Medicaid FFS, through a separate 
Medicaid managed care contract, or by the State capitating the D-SNP 
for delivery of these benefits. The examples demonstrated how this 
coordination can ensure the overlapping D-SNP supplemental benefits are 
primary to Medicaid, how to ensure D-SNPs and Medicaid providers do not 
receive duplicative payments for delivery of the identical benefits to 
the same individuals, how D-SNP supplemental benefits can extend or 
expand on similar Medicaid benefits, and how D-SNP enrollees can have a 
more integrated experience of care. The examples included discussion of 
typical D-SNP supplemental benefits, such as coverage of dental 
services and non-emergency transportation, as well as delivery of 
supports for community living. We described how CMS considers a FIDE 
SNP's 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 noted that we were 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 and sought comments on that issue. We 
also solicited 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.
    Comment: Several commenters supported the use of D-SNP contracts to 
coordinate MA supplemental benefits with Medicaid. A few commenters 
expressed concerns with operationalizing the coordination of 
supplemental benefits because of the complexity and limitations in data 
sharing and inadequate data systems. Other commenters recommended 
increasing information sharing to better integrate coordination of 
Medicare and Medicaid services. Several commenters also requested more 
oversight and data collection of supplemental benefits. A commenter 
believed that the use of D-SNPs to coordinate Medicare and Medicaid 
benefits would place much of the responsibility on the D-SNPs and would 
require expensive sophisticated integrated IT systems for the exchange 
of data. A few commenters raised concerns with enrollee access to 
services and enrollee confusion about D-SNP supplemental benefits when 
they overlap with Medicaid benefits.
    Response: We appreciate the commenters' perspectives and thank the 
commenters for their input. These comments will inform our 
collaboration with States on D-SNP integration.
(a) Using the D-SNP MOC To Coordinate Medicaid Services
    As described in the proposed rule, 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 
social determinants of health. 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 the minimum requirements at 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. We solicited comments on CMS guidance or 
regulations that may warrant clarification, and whether using D-SNP MOC 
to coordinate Medicaid services create any unintended obstacles to 
accessing services among dually eligible beneficiaries.
    Comment: A few commenters supported using the D-SNP MOC to 
coordinate Medicaid services and a commenter supported more 
transparency by incorporating the MOC process into the regulatory and 
contractual oversight regime. Several plan sponsors and their trade 
associations expressed concern with the State's ability to leverage the 
MOC with Medicaid requirements and the possible addition of any State 
requirements that may be duplicative or in conflict with the MOC-
specific requirements. A few commenters suggested potential ways to 
improve coordination such as training for States on Federal 
requirements, a national State specific requirements repository, and 
better alignment of MOC reviews.
    Response: We appreciate the commenters' support and will take into 
consideration the additional comment on enhancing transparency. We also 
thank the commenters for suggesting ways to improve MOC alignment with 
the State coordination process and will take these into consideration 
in future rulemaking and guidance.
(b) Coordinating Coverage of Medicare Cost-Sharing
    As stated in the proposed rule (87 FR 1887), 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. The proposed rule included examples 
(87 FR 1887) of both State payment arrangements for MA cost-sharing. We 
solicited 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

[[Page 27796]]

obstacles to accessing services among dually eligible beneficiaries.
    Comment: A few commenters supported coordinating coverage of 
Medicare cost-sharing and noted that Medicaid capitation for coverage 
of Medicare cost-sharing will need to be projected accurately and 
actuarially sound.
    Response: We thank commenters for raising this issue. We will 
consider opportunities for future Medicaid rate-setting guidance on the 
issue.
14. Solicitation of Comment on 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, 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.\71\ These 
factors, in combination with the proposals discussed earlier in this 
final rule, offer the opportunity to implement integrated care at a 
much broader scale than existed when MMPs were first created. As a 
result, we described in the proposed rule at 87 FR 1888 our intent, 
contingent on finalizing other proposals in the rule, to 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. 
Table 1 summarizes how our proposals finalized in this rule relate to 
MMP policies.
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    \71\ 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.
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BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR09MY22.005

BILLING CODE 4120-01-C
    We described in the proposed rule at 87 FR 1888 the process for 
transitioning MMPs to D-SNPs and the potential advantages and 
disadvantages of 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, including 
facilitating the transition of MMP enrollees to D-SNPs

[[Page 27797]]

operated by the same parent organization, subject to State approval, 
unless enrollees choose otherwise. This could minimize disruption of 
services and ensure continuity of care to the greatest extent possible. 
As discussed in the proposed rule, we already have experience with 
similar transitions at the end of the Virginia \72\ and New York MMP 
demonstrations \73\ 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.\74\ We solicited comment on this contemplated approach to 
working with States to convert MMPs to integrated D-SNPs.
---------------------------------------------------------------------------

    \72\ 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.
    \73\ 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.
    \74\ 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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    Comment: Several commenters expressed support for our approach to 
work with States to develop a plan for converting MMPs to integrated D-
SNPs. A few commenters stated that this approach would simplify the 
number of products offered to dually eligible individuals and would be 
easier for States to administer and for beneficiaries and providers to 
understand while providing long-term predictability for stakeholders. 
Another commented that D-SNP models have been effective at managing 
hospitalizations and providing access to primary care and MLTSS 
services even without the promise of shared savings offered through 
MMPs.
    Response: We appreciate the support we received for our intended 
approach. As discussed in the proposed rule, current law as well as the 
new and amended regulations finalized in this rule provide 
opportunities and potential for streamlining and strengthening 
integrated care options for dually eligible beneficiaries. We look 
forward to working with States to address their unique circumstances in 
planning for a transition of MMPs to integrated D-SNPs.
    Comment: Numerous commenters opposed our approach to work with 
States to develop a plan for converting MMPs to integrated D-SNPs and 
instead asked to continue the FAI. Many commenters expressed concern 
that certain aspects of integrated coverage in the MMPs may be hard to 
replicate or are otherwise not currently available in integrated D-
SNPs, including integrated enrollment processing in which enrollment 
and disenrollment functions are operationalized through State Medicaid 
agencies; the ability to passively enroll beneficiaries into integrated 
plans; integrated financing that blends Medicare and Medicaid 
capitation payments; and/or opportunities for States to share in 
Medicare savings. Several commenters recommended CMS provide additional 
guidance and opportunities for comment on how such a transition would 
work in States where D-SNPs are not offered or where certain benefits 
are carved out before making a final decision regarding the future of 
MMPs. A number of commenters, including States, plan sponsors, and 
advocates, expressed concern that ongoing funding for dedicated 
ombudsman and one-on-one options counseling services would be lost as 
part of the transition out of the FAI and urged CMS to continue support 
for these programs.
    Response: We thank the commenters for the feedback on our intended 
approach for working with States. Several of the new and amended 
regulations adopted in this final rule create mechanisms and new 
requirements to replicate much of the programmatic or administrative 
integration found in MMPs including integrated member materials, 
unified appeals and grievances, continuation of Medicare benefits 
pending appeals, elements of joint CMS/state oversight, and contract-
specific quality ratings. States can also use their State Medicaid 
agency contracts with D-SNPs, as described throughout this final rule, 
to establish parameters that promote person-centered and integrated 
care, including exclusively alignment enrollment, additional 
requirements for care planning and self-direction, and enrollment 
limited to certain age groups or other variables. Other aspects of 
integration tested in the FAI will not be possible under current law or 
the new and amended regulations adopted here, and we acknowledge 
commenters' concerns to that end. However, we believe that the ability 
to maintain most, if not all, aspects of integration outside the 
confines of time-limited demonstrations outweighs the potential loss in 
the identified areas. Although outside the scope of this rule, we will 
consider whether there are additional opportunities to further 
integrate enrollment and/or financing in the future.
    We intend to work closely with States and other stakeholders not 
only to develop a transition plan that would allow States to preserve 
the integration currently available through MMPs to the greatest extent 
possible but also to provide subsequent technical assistance and 
resources to support these efforts, including in scenarios where States 
do not currently contract with D-SNPs or where certain benefits are 
carved out.
    We agree with commenters that dedicated ombudsman and one-on-one 
options counseling services provide important beneficiary protections. 
Existing grant awards already include a transition period as part of 
the cooperative agreements currently in place, and we will work closely 
with States on potential sustainability plans. We note that Virginia, 
for example, was able to continue its ombudsman services at the end of 
its FAI demonstration without grant assistance.
    Comment: We received numerous comments in support of the 
Massachusetts One Care demonstration. Several commenters expressed 
concern that the elements unique to this demonstration would not be 
applied to the D-SNP model of care or contracting requirements and, as 
a result, key attributes of the One Care model would be lost in such a 
transition. Several commenters highlighted the value the consumer-led 
Implementation Council provides in plan oversight and to ensure the 
demonstration retains its person-centric, independence-driven approach, 
and expressed concerns that the Council would be diminished or 
eliminated in an integrated D-SNP environment.
    Response: We appreciate the ongoing support for the One Care 
demonstration. We look forward to working with the State and other 
stakeholders, including the Implementation Council, on how to sustain 
and strengthen the person-centric, independence approach for which One 
Care is known.
    Comment: Numerous commenters, including States, plan sponsors, and 
advocates, urged CMS to take steps to ensure a smooth transition for 
enrollees if CMS moves forward with transitioning MMPs to integrated D-
SNPs. Such steps included: Use of passive enrollment to transition MMP 
enrollees to corresponding D-SNPs; requiring continuity of care 
provisions to ensure stability of coverage and access to providers; 
and/or ongoing stakeholder engagement that includes

[[Page 27798]]

advocates, MMPs, and D-SNPs to promote collaborative discussion on the 
planning and implementation of integrated D-SNPs and ensure aligned 
messaging and coordination. Many commenters recommended that CMS 
provide technical assistance and resources for States on topics related 
to Medicaid managed care authorities, contracting options, and 
operational steps to assist with the transition from MMPs to D-SNPs. A 
few commenters strongly supported using 1115A authority to facilitate 
the transition of MMP enrollees to D-SNPs operated by the same parent 
organization, subject to State approval, unless enrollees choose 
otherwise.
    Response: We appreciate the feedback on the necessary transition 
steps, and we agree that ensuring an MMP to D-SNP transition is as 
seamless as possible for MMP enrollees is critical to successfully 
implementing this approach. We continue to think through our ability to 
use waiver authority under section 1115A of the Act as part of any MMP 
transition. We are committed to working closely with States and other 
stakeholders and intend to utilize and build from the technical 
assistance resources we already have in place, including the Integrated 
Care Resource Center.
    Comment: The majority of commenters on this section of the proposed 
rule, including States, advocates, and plan sponsors, stated that 
additional time would be needed beyond the current end date in order to 
allow sufficient runway for a seamless transition of operations and 
enrollment. Commenters made this statement regardless of whether or not 
they supported the overall approach. Most suggested at least two 
additional years would be needed for States to evaluate options and 
obtain necessary authorities, vet policy proposals with stakeholders, 
make necessary State system changes, and conduct procurements, if 
necessary, in order to ensure that MMP enrollees experience a seamless 
and easy transition from their MMP to a successor FIDE SNP or HIDE SNP.
    Response: We thank the commenters for these comments. We 
acknowledge the commenters' concerns about the time necessary to ensure 
a seamless transition for all parties involved.
    After considering the comments we received and for the reasons 
outlined in the proposed rule and our responses to comments, we intend 
to adjust our approach to working with the States participating in the 
capitated financial alignment model to develop a plan for converting 
MMPs under the FAI model test to integrated D-SNPs. We will offer 
States the opportunity to continue demonstrations under the FAI, under 
conditions described in this section and where authorized by section 
1115A of the Act.
    States interested in this opportunity will need to convert all MMPs 
to integrated D-SNPs as early as possible, but no later than December 
31, 2025. This timeframe reflects the perspectives expressed in public 
comments related to the time needed for a smooth transition.
    States pursuing converting their MMPs into integrated D-SNPs should 
submit a transition plan to CMS by October 1, 2022. This transition 
plan should reflect each State's individual circumstances and outline, 
for example, the State's commitment to (a) maximize integration 
attained through the capitated financial alignment demo and a seamless 
transition to integrated D-SNPs, (b) sustain dedicated ombudsman 
support without Federal grant funding, and (c) a stakeholder engagement 
process to promote collaborative discussion on the planning and 
implementation of the transition to integrated D-SNPs. The transition 
plan should also identify specific policy and/or operational steps that 
need to occur to fulfill the commitments. These could include, but are 
not limited to, executing Medicaid procurement and/or D-SNP contracting 
processes; obtaining necessary State legislative or additional Medicaid 
authorities, if applicable; and/or identifying and executing system 
changes and processes to implement exclusively aligned enrollment.
    If a State chooses not to convert MMPs to integrated D-SNPs, CMS 
will work with the State on an appropriate MMP conclusion by December 
31, 2023. In all cases, we look forward to working with States, 
beneficiaries, advocates, and other stakeholders to continue our work 
to improve outcomes and experiences for dually eligible individuals.

B. Special Requirements During a Disaster or Emergency for Medicare 
Advantage Plans (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 have 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 proposed 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 codify our previous 
guidance in Chapter 4 of the Medicare Managed Care Manual (MMCM). 
Specifically, we proposed 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.  [thinsp]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 proposed 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

[[Page 27799]]

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 proposed 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 proposed 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) through (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 its MA plans 
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 the MA plans 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, 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 plan's 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 plans, 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 
different 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 different 
location without being able to access out-of-network care. We requested 
comments from stakeholders on our proposed definition to determine 
whether there are circumstances CMS is

[[Page 27800]]

not considering or additional standards that we should be using to 
identify when a disruption of access to health care is occurring.
    We proposed 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 \75\ 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 \76\ and a Public Health Emergency declaration by 
the Secretary as of September 17, 2017.\77\ 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.
---------------------------------------------------------------------------

    \75\ https://governor.hawaii.gov/wp-content/uploads/2016/02/160212_EmergencyProclamation_Dengue.pdf.
    \76\ https://www.govinfo.gov/content/pkg/FR-2017-10-06/pdf/2017-21649.pdf.
    \77\ https://www.cms.gov/About-CMS/Agency-Information/Emergency/Downloads/Puerto-Rico-and-US-Virgin-Islands-PHE-Determination.pdf.
---------------------------------------------------------------------------

    We proposed 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 
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 the affected area to comply with Sec.  
422.100(m). However, 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 and to know the regulatory standard with regard to 
disruption in access to care during a disaster or emergency and when 
compliance with the special requirements during a disaster or emergency 
at Sec.  422.100(m) 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-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 was experienced by MA enrollees during the COVID-19 
PHE, CMS expects that there will be situations where disruptions are 
intermittent and access to health care is disrupted 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 a later time period, 
during the same declared 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 also proposed two technical changes to our regulations at Sec.  
[thinsp]422.100(m)(2) to correct some numbering issues that occurred in 
the 2015 final rule. First, we proposed 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.  [thinsp]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

[[Page 27801]]

Act. Second, we proposed 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 proposed several clarifying revisions to our 
language in Sec.  [thinsp]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 proposed to update the language throughout to 
reference disasters and emergencies with the aim of being consistent in 
referring to the various types of declarations listed at Sec.  
422.100(m)(2).
    Lastly, we proposed 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 proposed to modify the 
text at Sec.  [thinsp]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.  [thinsp]422.100(m)(1), not to the end of the state 
of disaster or emergency itself. We also proposed 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 sooner than the end of the 30 days. 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 when the MA organization 
must furnish services are required by 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 their return to normal operations. We therefore proposed 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 proposed 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.  [thinsp]422.100(m)(3). First, as currently 
provided in Sec.  [thinsp]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 proposed to revise Sec.  
[thinsp]422.100(m)(3)(i) to address situations that may arise where 
there is more than one declaration of a disaster 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 proposed.
    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.  [thinsp]422.100(m)(3)(i), we 
believe that modifying this requirement to refer to the Secretary is 
unnecessary and therefore we proposed 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

[[Page 27802]]

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 proposed 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 did not propose specific time periods but proposed 
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 proposed 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 sub-regulatory 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/) and the CMS website (https://www.cms.hhs.gov/). MA 
organizations are expected to check these sites frequently during such 
disasters and emergencies.
    We proposed 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) through (iv).
     Revise Sec.  [thinsp]422.100(m)(2) to refer to emergencies 
and disasters.
     Move the current text of Sec.  
[thinsp]422.100(m)(2)(ii)(A) to Sec.  [thinsp]422.100(m)(2)(ii).
     Remove Sec.  [thinsp]422.100(m)(2)(ii)(B).
     Revise Sec.  422.100(m)(3) to specify that it addresses 
the end of the applicability of the special requirements rather than 
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.  [thinsp]422.100(m)(3)(ii) to state that no 
end date was identified in Sec.  [thinsp]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.  [thinsp]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).
    We thank commenters for helping inform Special Requirements during 
a Disaster or Emergency. We received approximately 35 comments on this 
proposal; we summarize them and our responses follow:
    Comment: Comments were very supportive of our proposal that there 
must also be a disruption of access to health care in addition to a 
declared disaster or emergency for special requirements during a 
disaster or emergency to apply.
    Response: CMS thanks comments for their feedback.
    Comment: Some commenters agreed that MA plans are in the best 
position to determine when there is a disruption in care and supported 
our proposal. Many of these commenters requested CMS release further 
guidance providing additional examples and objective criteria for MAOs 
to use in further determining ``disruption of access to care.''

[[Page 27803]]

    Response: We thank commenters for their feedback. We proposed that 
a ``disruption of access to health care'' for the purpose of Sec.  
422.100(m) mean 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). We are finalizing this 
definition with a slight change to provide that a disruption of access 
to health care occurs when the interruption or interference in access 
to health care occurs ``in'' the service area such that the standard we 
proposed is met. This revision is to be more consistent with our intent 
and discussion in the proposed rule that a disruption of access to 
health care may be targeted or specific to a limited area. Service 
areas are generally a county or larger and while many disruptions of 
access to health care may be county-wide or cover multiple counties, 
not all emergencies or disasters will result in such scope. Specific 
disruptions, such as those involving physical access (such as road 
damage or flooding that block access to or damage a hospital or larger 
provider group serving many enrollees) or damage to electrical supply 
or utilities, may be more limited in scope. So long as interruption or 
interference in access to health care in the service area is 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) during a declared emergency or disaster as described in 
Sec.  422.100(m)(2), it does not matter if that interruption or 
interference is limited to a specific area. In addition, we are 
clarifying in the regulation text that the term ``service area'' has 
the meaning provided in Sec.  422.2.
    Under this final rule, MA organizations must interpret and apply 
this regulatory standard (for when the special coverage requirements in 
Sec.  422.100(m)(1) apply) by the explanations in the proposed rule and 
this final rule, including the examples, as well as their particular 
and detailed knowledge and understanding of their enrollees, service 
areas, and networks. Applications of Sec.  422.100(m) are to be based 
on reasonable assessments whether and when there is a disruption in 
access to health care in the service area for enrollees in an MA plan. 
MA organizations must take into account available information regarding 
access to health care in the service areas where they offer MA plans 
and must reasonably 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 similarly be guided by the same things 
when evaluating MA organization compliance with Sec.  422.100(m) and 
when issuing instructions if CMS has determined that a disruption of 
access to health care has occurred in an area where a declaration of 
disaster or emergency has been made as described in Sec.  
422.100(m)(2).
    As previously stated in this final rule, per Sec.  422.112(a), MA 
plans must ensure that all covered services are available and 
accessible to enrollees under the plan. Additionally, we note CMS 
quantifies the prevailing patterns of care standard in network adequacy 
with the specific time and distance and minimum number of provider 
requirements at Sec.  422.116. Per CMS regulations at Sec.  422.112, MA 
plans are currently required to maintain and monitor a network of 
appropriate providers, supported by written arrangements, that is 
sufficient to provide adequate access to covered services to meet the 
needs of the population served. The delivery of services in particular 
geographic areas must be consistent with local community patterns of 
care. Simply put, MA plans must currently ensure that contracted 
providers are distributed so that no enrollee residing in the service 
area must travel an unreasonable distance to obtain covered services. 
Given that MA plans must already follow and monitor these existing 
requirements, we believe that MA organizations are in the best position 
to determine when and whether access to network providers has been 
compromised. We also encourage plans to look at how they ensure 
compliance with current access requirements when determining whether 
and when access to health care services has been disrupted.
    Finally, to provide greater clarity, we are changing the term 
``throughout the service area'' to ``in the service area'' at in the 
regulation text at Sec.  422.100(m)(6). If the service area is several 
counties or an entire state but the natural disaster is limited to one 
county, ``throughout the service area'' could be interpreted to signify 
that there has not been a disruption sufficient to trigger Sec.  
422.100(m) if only one county is affected. That is not our intention. 
As discussed in the proposed rule, 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. Any disruption of service within a given service 
area, whether it is multiple counties or one county, is sufficient to 
trigger the requirements at Sec.  422.100(m). MA plans must follow 
422.100(m) for all impacted enrollees. Additionally, we added a 
reference to the statutory definition of ``service area'' to provide 
further clarity on what CMS means by service area. Specifically, we 
define ``service area'' as it is defined at 42 CFR 422.2: a geographic 
area that for local MA plans is a county or multiple county, and for MA 
regional plans is a region approved by CMS within which an MA-eligible 
individual may enroll in a particular MA plan offered by an MA 
organization.
    Comment: Some commenters expressed concern that allowing plans to 
determine whether there is a disruption in care may not sufficiently 
guarantee beneficiary protections. A few expressed concern that 
allowing each plan to make their own determination may lead to 
inconsistency (for example, different determinations by different 
plans) and confusion among enrollees. Others expressed concern that 
providers and MA plans in the same service area may disagree and asked 
CMS for clarification if these scenarios were to occur. Some commenters 
expressed concern that MA plans may have financial incentive to not 
apply or delay compliance with these special requirements.
    Response: We thank commenters for expressing their concern. We 
reiterate that MA plans must provide enrollees health care services 
through a contracted network of providers that is consistent with the 
prevailing community pattern of health care delivery in the network 
service area (42 CFR 422.112(a)). Further, we note that that MA plans 
must meet current network adequacy requirements as defined under 42 CFR 
422.116. Per Sec.  422.112(a)(1), CMS requires that organizations 
monitor their contracted networks throughout the respective contract 
year to ensure compliance with the current network adequacy criteria. 
Given that plans are already required to ensure adequate access, we 
believe that

[[Page 27804]]

plans are best equipped to determine whether these existing standards 
have been compromised in a given service area or not.
    Additionally, MA organizations must consider the extent to which 
services are accessible in the network (meaning, from network 
providers) and whether that access is consistent with normal community 
patterns of health care delivery and with access during periods when 
there is no declaration of disaster or emergency in effect. For 
example, if a plan has a sufficient network per CMS requirements, but 
enrollees are not able to access those contracted providers or those 
providers are unavailable or otherwise unable to furnish services to 
enrollees, this would be a disruption in access. As stated in the 
proposed rule, some examples of a disruption in access to health care 
include physical barriers to accessing health care providers, 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. A 
disruption of access has occurred if the existing network adequacy 
requirements and requirements for access to and availability of 
services cannot be met and/or enrollees cannot access the providers in 
this network. Given that plans are already required to monitor adequate 
access as discussed above, we believe MA plans are already in a 
position to determine if a disaster or emergency has compromised or 
disrupted normal patterns of access to, availability of, and delivery 
of covered services when those services are medically necessary. We 
encourage plans to evaluate whether an emergency or disaster has 
compromised their ability to meet these existing requirements when 
determining whether a disruption of access to health care as defined in 
Sec.  422.100(m)(6) is occurring for purposes of meeting the special 
requirements in Sec.  422.100(m).
    Comment: A commenter suggested CMS change the 30-day transition 
period to one full month for additional clarity and to better align 
with plans' claims processing systems. Some suggested CMS extend the 
30-day transition period, suggesting that 30 days may not be sufficient 
for enrollees to find new or alternative care. A commenter suggested 60 
days instead of 30 days.
    Response: We thank commenters for their feedback. Under our current 
regulations there is no explicit transition period but the general 
minimum period of time when an MA organization must comply with the 
special requirements in Sec.  422.100(m)(1) is 30 days, and we believe 
that 30 days is sufficient in establishing how long an MA plan must 
continue to provide access to services as described in Sec.  
422.100(m)(1) after the end of an emergency or disaster period or end 
of a disruption of access to health care. However, we will consider 
revising this duration in future rulemaking if we determine that it is 
necessary. We note that MA organizations that find it more 
operationally feasible to maintain compliance with the special 
requirements in Sec.  422.100(m)(1)(i) through (iv) for a full month or 
until the end of a month when that it is longer than the 30 days 
transition period are free to do so. As proposed and finalized, the 30-
day transition period is the minimum requirement.
    Comment: A commenter asked CMS to clarify how to determine the end 
point from which to begin calculating the 30 days transitional period.
    Response: As stated in the proposed rule, MA plans are required to 
continue to apply special requirements for 30 days (the 30-day 
transitional period) after the points in time identified in the 
regulation at Sec.  422.100(m)(3) for the end of the special 
requirements. For example, if the only applicable declaration of a 
public health emergency expires without renewal on April 30, the 30-day 
transition period ends on May 30 of the same year. If an MA 
organization reasonably determines, consistent with the regulation as 
it is adopted and explained in this final rule, that a disruption of 
access to health care has ended on January 1, the 30-day transition 
period will end on January 31.
    Comment: Many commenters supported CMS's intention to continue to 
issue sub- regulatory guidance to further explain Sec.  422.100(m) as 
appropriate and requested that CMS release guidance regarding events 
that might trigger special requirements and timeframes associated with 
those requirements.
    Response: We thank commenters for their comments and plan to 
release additional sub-regulatory guidance on this subject as 
appropriate and as needed in the future.
    Comments: We received some comments asking CMS to ensure 
transparency to providers and beneficiaries when these special 
requirements are put into place.
    Response: We thank commenters for their concern. We remind MA plans 
that in addition to annual disclosure requirements at Sec.  422.111, 
plans must follow emergency and disaster disclosure requirements at 
Sec.  422.100(m)(5), which include indicating the terms and conditions 
of payment during the public health emergency or disaster for non-
contracted providers furnishing benefits to plan enrollees residing in 
the state-of-disaster area, annually notifying enrollees of information 
on the coverage requirements related to declarations of emergencies and 
disasters and providing this information on plan websites. 
Additionally, per CMS regulations at Sec. Sec.  422.111 and 422.202(b), 
MA plans must establish policies and procedures to educate and fully 
inform contracted health care provider and, as appropriate, to 
enrollees concerning plan utilization policies, which should include 
any necessary information related to emergencies and disasters. We 
reiterate that we believe that MA organizations are generally in the 
best position to determine when and whether access to network providers 
in a service area has been compromised, so they will be expected to 
initiate compliance with Sec.  422.100(m) as necessary and appropriate. 
We believe that the disaster disclosure requirements at Sec.  
422.100(m)(5) and general provider disclosure requirements at Sec.  
422.202(b) provide adequate transparency.
    Comment: A commenter expressed concern that the special 
requirements will increase plan costs, noting that out of network 
coverage for an extended period is not included in plan rates. Another 
commenter requested OACT provide guidance on whether MA plans should 
include actuarial assumptions related to disaster and emergency events 
when developing prices for their contract year bids.
    Response: We thank commenters for their feedback. When pricing a 
bid, the actuary should refer to the Actuarial Standards of Practice 
(ASOP). For example, ASOP No. 5 Incurred Health and Disability Claims 
says that when estimating incurred claims, the actuary should consider 
items such as changes in price levels, unemployment levels, medical 
practice, managed care contracts, cost shifting, provider fee schedule 
changes, medical procedures, epidemics or catastrophic events, and 
elective claims processed in recessionary periods or prior to contract 
termination (section 3.2.2 ECONOMIC AND OTHER EXTERNAL INFLUENCES).
    Comment: A few commenters asked CMS to clarify whether special 
requirements should apply in other situations beyond national or state

[[Page 27805]]

emergencies, such as shortage of health care staff or other scenarios 
that may still impact normal patterns of community health care 
delivery.
    Response: We thank commenters for their feedback. Section 422.112 
requires MA plans to provide continued availability of and access to 
covered benefits for enrollees, including making medically necessary 
benefits available and accessible 24 hours a day and 7 days a week. 
Additionally, Sec.  422.113 provides that urgently needed services must 
be provided when an enrollee is temporarily absent from the plan's 
service (or, if applicable, continuation) area and therefore cannot 
obtain the needed service from a network provider and/or when the 
enrollee is in the service or continuation area but the network is 
temporarily unavailable or inaccessible. CMS has issued guidance about 
these requirements in section 20.2 of Chapter 4 of the Medical Managed 
Care Manual (MMCM). Further, per CMS regulations at Sec.  
422.112(a)(3), MA plans are required to arrange for specialty care 
outside of the plan provider network when network providers are 
unavailable or inadequate to meet an enrollee's medical needs. Finally, 
MA plans are also currently required to meet network adequacy 
requirements at Sec.  422.116(a)(2) all year, regardless if there is a 
declared state of emergency or not. Given these existing standards, we 
do not believe the special requirements discussed in this rule are 
necessary to apply outside of an emergency or disaster.
    Comment: A commenter asked for more information on who has the 
authority to declare a state of disaster/emergency where these special 
requirements would apply. Another commenter asked CMS to remind state 
governors of their authority under 42 CFR 422.100(m). Another commenter 
stated that CMS should consider the state's role in determining when 
determinations the special requirements apply.
    Response: The relevant types of disasters and emergencies are 
discussed in the proposed rule and reflected in Sec.  422.100(m)(2) and 
include: (i) A Presidential declaration of a disaster or emergency 
under either the Stafford Act or the National Emergencies Act, (ii) a 
Secretarial declaration of a public health emergency under section 319 
of the Public Health Service Act, and (iii) a declaration by the 
Governor of a State or Protectorate. To further clarify, the special 
requirements discussed here do not impose any requirements on state 
governors. Rather, MA organizations are responsible for being aware of 
events discussed here, including an emergency or disaster declared by a 
Governor, in a given service area and knowing the status of their in-
network providers and to applying requirements accordingly. We 
encourage MA plans to liaison with local and state authorities as 
appropriate when making a determination.
    Comment: A commenter asked CMS to clarify whether waiving of 
``gatekeeper'' referrals described at Sec.  422.100(m)(1)(ii) includes 
the waiving of prior authorization (PA) in hospital discharges to other 
settings. Another commenter suggested CMS extend the requirements at 
Sec.  422.100(m) to include waiving prior authorization for hospitals 
and post-care settings in general.
    Response: As discussed in Chapter 4 of the MCM, the primary purpose 
of a gatekeeper is to ensure compliance with plan requirements for 
medically necessary referrals to in-network specialists. Under special 
requirements during an emergency or disaster, MA plans must cover 
Medicare Parts A and B services and supplemental Part C plan benefits 
furnished at non-contracted facilities. Thus, such referrals are not 
applicable and must be waived during a qualifying disaster or emergency 
as described in this provision. We do not believe that adding a 
requirement that MA organizations waive prior authorization for 
hospitals and post-care settings at Sec.  422.100(m)(1) is within the 
scope of our proposal to clarify and revise the time frame during which 
Sec.  422.100(m)(1)(i) through (iv) apply. MA plans are permitted and 
encouraged to waive or relax plan prior authorization requirements at 
any time during disasters or emergencies in order to facilitate access 
to services and alleviate burden on enrollees, plans, and providers.
    Comment: A commenter asked CMS to release guidance to address the 
needs of individuals who are required to evacuate from a disaster area, 
particularly those whose homes are damaged or destroyed in the 
disaster. Another commenter asked CMS to consider the special needs of 
the ESRD population.
    Response: The emergency requirements at Sec.  422.100(m) currently 
address coverage for people who have been evacuated or who had to move 
temporarily as a result of a disaster or emergency declaration by 
requiring plans to cover Parts A and B services and supplemental Part C 
benefits out-of-network. Also, Sec.  422.100(b)(1)(iv) requires 
coverage of renal dialysis services provided while the enrollee was 
temporarily outside the plan's service area. Further, there is a 
Special Enrollment Period (SEP) for people who move out of the service 
area permanently. Thus, enrollees who cannot move back to the area of 
the disaster or emergency are permitted to change plans.
    Additionally, we remind commenters that Sec.  422.112(b) requires 
MA plans to ensure continuity of care and integration of services for 
enrollees through arrangements with contracted providers. Requirements 
in Sec.  422.112(b)(1) through (6) detail specific methods by which MA 
organizations are to ensure an effective continuity and integration of 
health care services. This includes requiring MA plans to have policies 
and procedures that provide enrollees with an ongoing source of primary 
care and to have programs for coordination of plan services with 
community and social services.
    Comment: A commenter asked CMS to clarify the rate a non-contracted 
provider must be paid.
    Response: As discussed in section 1852(a)(2) of the Act, CMS 
regulations at Sec.  422.100(b)(2), and the MA Payment Guide for Out of 
Network Payments,\78\ MA plans must pay non-contracted providers the 
amount that the provider would have received from Original Medicare 
amount for covered services (including balance billing permitted under 
Medicare Part A and Part B). The total payment must take into account 
cost-sharing and the MA plan payment to equal cost-sharing and Medicare 
payment in the Original Medicare program.
---------------------------------------------------------------------------

    \78\ https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/oonpayments.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters suggested CMS align criteria related to 
special emergency requirements with the conditions for the Star Rating 
Extreme and Uncontrollable Circumstances adjustment.
    Response: We thank commenters for their suggestion and will 
consider ways to align CMS policies if and when appropriate in the 
future.
    Comment: A few commenters asked CMS to consider staffing, drug, and 
supply shortage issues to identify when a disruption of access to 
health care is occurring and when making decisions on timeframes and 
standards.
    Response: We thank commenters for these suggestions and remind MA 
plans to also consider these conditions when making a determination 
whether a disruption of access to health care has occurred. The 
definition we proposed and are adopted in this final rule permits 
consideration of these conditions and factors when determining whether 
there is a

[[Page 27806]]

disruption in access. Therefore, we believe that further edits to the 
proposed regulation text Sec.  422.100(m)(6) is unnecessary.
    After consideration of the comments received and for the reasons 
outlined in the proposed rule and our responses to comments, we are 
changing the term ``throughout the service area'' to ``in the service 
area'' at in the regulation text at Sec.  422.100(m)(6). Also, to 
provide further clarity on what CMS means by service area, we added a 
reference to the statutory definition of ``service area'' in 
parenthesis at Sec.  422.100(m)(6). Lastly, we edited some repetitive 
language at Sec.  422.100(m)(1). Specifically, we revised ``until one 
of the conditions described in paragraph (m)(3)'' to ``until the end 
date specified in paragraph (m)(3) of this section occurs'', which is a 
non-substantive, clarifying edit only. We are finalizing all other 
changes proposed to Sec.  422.100(m) without modification.

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 added new 
Sec.  422.116, which sets forth standards and criteria for determining, 
whether an MA organization limits the providers from which its MA plan 
members may receive covered benefits, and satisfies the requirement 
under section 1852(d)(1) of the Act that such benefits be made 
available and accessible in an MA plan's service area with reasonable 
promptness.\79\ New Sec.  422.116 codified, with some modifications, 
network adequacy criteria and access standards that CMS had previously 
outlined in sub-regulatory guidance. In addition, the regulation 
codified our then-existing policy, that CMS does not deny an 
application based on CMS's evaluation of the applicant's network for a 
new or expanding service area. Under our policy as set forth in 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.
---------------------------------------------------------------------------

    \79\ As noted in the proposed rule at 87 FR 1893, CMS has also 
codified network access requirements and standards at Sec. Sec.  
422.112(a) and 422.114(a)(1).
---------------------------------------------------------------------------

    In the proposed rule (87 FR 1893 through 1895), we proposed 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 and we removed network 
adequacy reviews from the application process beginning in 2018 for 
contract year 2019. We explained in the proposed rule that 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, and therefore proposed to improve 
our oversight and effectiveness of network adequacy reviews for initial 
and services area expansion (SAE) applicants by requiring provider 
networks be reviewed by CMS when these MA applications are submitted to 
CMS for consideration.
    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 the 
bid submission deadline, 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 establish an adequate network, 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. The proposed requirement that MA 
networks be submitted for review as part of the application mitigates 
this issue, as CMS's review of these networks as part of the 
application 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 MA organizations have networks that are 
sufficient to provide enrollees with access to providers and facilities 
without placing undue burden on enrollees seeking covered services. We 
indicated that 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 for CMS 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 we 
removed 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 year 2019 continued to have deficiencies upon review of 
their networks once the MA plans were operational. We explained that 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 in this section of this final rule) will 
account for, or whether they are failures that the organization cannot 
cure. Establishing and maintaining adequate provider networks 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 an MA contract due to 
previous failures associated with access to services or network 
adequacy

[[Page 27807]]

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 proposed, 
which 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 proposed to broaden our ability to safeguard the MA program by 
permitting evaluations of network adequacy in connection with our 
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 found that the current timing of the network adequacy reviews 
impacts 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''.\80\ 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 \81\) 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 finalizing our proposal 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.
---------------------------------------------------------------------------

    \80\ https://www.cms.gov/files/document/medicareadvantageandsection1876costplannetworkadequacyguidance6-17-2020.pdf.
    \81\ https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.
---------------------------------------------------------------------------

    We also proposed to amend Sec.  422.116 by adding a new paragraph 
(d)(7), which 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 Sec.  
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'' \82\) 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 proposed 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 have adequate networks 
for furnishing covered benefits to their enrollees.
---------------------------------------------------------------------------

    \82\ https://www.cms.gov/files/document/cy-2022-medicare-part-c-application-updated-1-12-2021.pdf.
---------------------------------------------------------------------------

    Starting with the contract year 2024 application cycle, initial and 
service area expansion applicants will be required to submit their 
proposed contracted networks during the application process. Applicants 
will upload their HSD tables to the NMM by the application deadline, 
and CMS will generally follow the current operational processes for 
network reviews, which include 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 new service area during the 
application process, and their existing network service area(s) 
separately, during the triennial review in mid-June.
    We acknowledge and thank commenters for providing their 
perspectives regarding our proposals to amend our network adequacy 
policy. We received a number of comments related to these proposals, 
and have summarized them and included our responses.
    Comment: Numerous commenters expressed support for our proposal to 
require compliance with network adequacy standards as part of an 
application for a new or expanding service area. Commenters agreed that 
network adequacy is critical to enrollees' access to care. Commenters 
noted that improving our oversight of provider networks would 
strengthen beneficiary protections and ensure timely access to 
providers without placing undue burden on enrollees. Other commenters 
also noted that our proposal would hold plans accountable for providing 
access to care, especially in underserved communities.
    Response: We thank the commenters for their support of our 
proposal. As previously noted, we believe that requiring MA 
organizations to demonstrate compliance with network adequacy standards 
during the application process for a new or expanding service area will 
improve our oversight and effectiveness of network adequacy reviews and 
our ability to safeguard the Medicare program.
    Comment: Some commenters expressed support for our proposal to 
require that applicants demonstrate compliance with network adequacy 
standards during the application process because they believed this 
would help ensure bid integrity, which

[[Page 27808]]

the commenters agreed should be a priority for CMS.
    Response: We thank the commenters for their comments regarding bid 
integrity. As indicated in our proposal, we believe that providing MA 
organizations with information regarding their ability to provide 
coverage in a proposed service area ahead of the bid deadline would 
mitigate issues with service area reduction requests and ensure overall 
bid integrity.
    Comment: A commenter suggested that requests to make service area 
reductions after the bid deadline are relatively rare based on the 
number of new and service area expansion applications that are 
submitted, thus our proposal would needlessly increase burden on the 
entire industry for few occurrences.
    Response: While there may be fewer instances of service area 
reduction requests relative to MA applications submitted, we believe 
that any such request has the potential to compromise the overall 
integrity of the bidding process. As we have previously indicated, 
ensuring overall bid integrity is a priority for CMS. In addition, we 
note that this provision helps improve our oversight of provider 
networks, which strengthens beneficiary protections. Therefore, we 
believe the added burden of requiring applicants to demonstrate 
compliance with network adequacy standards is justified, particularly 
in light of the flexibilities, discussed later in this section, that we 
are adopting for how applicants for new MA contracts or expanded 
service areas can demonstrate compliance with the network adequacy 
requirements.
    Comment: Many commenters did not support our proposal. Commenters 
expressed concerns over the proposed timing for the submission and 
review of initial and service area expansion applicants' networks 
(during the time of application in mid-February of each year). The 
commenters believed this timing would be insufficient for MA 
organizations to build high-quality provider networks, and would 
negatively impact negotiations with provider groups, giving providers 
leverage to negotiate higher rates that could increase healthcare costs 
and reduce benefits. Commenters also suggested that our proposal would 
disproportionately impact smaller organizations working to expand to 
certain regional, rural, and medically underserved areas, thereby 
inhibiting competition among plans and ultimately limiting choice for 
beneficiaries; some of these commenters also expressed that the 
proposal would provide an unfair advantage to large health plans with 
an existing presence in these areas. Several commenters posited that 
our proposal would place a substantial administrative burden on MA 
organizations and on providers, and that establishing contracts with 
organizations takes a significant amount of time. Finally, a number of 
commenters asked CMS to consider allowing MA organizations to use 
Letters of Intent (LOIs) to contract with providers as a means to meet 
network adequacy standards, and in order to provide flexibility as they 
work to come into compliance for the coverage year.
    Response: We appreciate the commenters' feedback regarding our 
proposal. As we noted in the proposed rule, we understand that 
requiring an MA organization to establish a full provider network 
almost a year in advance of the contract becoming operational will be 
difficult. We also indicated that 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. While we believe 
evaluating provider networks at the time of application is important, 
we agree that some flexibility is appropriate to address this challenge 
for applicants.
    Therefore, based on the comments received, we are modifying the 
regulation to allow LOIs to be used in lieu of signed provider 
contracts, at the time of application and for the duration of the 
application review. The LOI must be signed by both the MA organization 
and the provider with which the MA organization intends to negotiate. 
Further, applicants must notify CMS of their use of LOIs to meet 
network standards and submit copies (upon request) of the LOIs in the 
form and manner directed by CMS. At the beginning of the contract year, 
the MA organization must be in full compliance with the section, 
including having signed provider and facility contracts in place of the 
LOIs.
    CMS would also require any MA organization that utilized LOIs for 
the application of a new or expanding service area to participate in 
the triennial review to evaluate compliance with network adequacy 
standards. This triennial review by CMS will occur during the first 
year a plan is operational in its new service area.
    Comment: Many commenters supported our proposal to allow a 10-
percentage point credit at the time of an MA organization's application 
and during the application review. Some of these commenters recommended 
that the credit no longer apply once the contract is operational. Some 
of the commenters expressed the view that the proposed 10-percentage 
point credit struck the right balance between showing sensitivity to 
the challenges for MA organizations in developing and submitting 
provider networks on a much earlier timeline as part of the application 
process and demonstrating awareness of the need for CMS to monitor the 
adequacy of MA organizations' provider networks.
    A number of commenters noted that the 10-percentage point credit 
would not be sufficient to make an impact on meeting network standards, 
especially in rural and other areas with limited providers. Some 
commenters suggested that we increase the 10-percentage point credit 
without specifying what percentage point they would prefer, whereas 
others suggested that we increase the credit to a 20-, 30-, or higher 
percentage point credit. A commenter noted that the credit undermines 
CMS's effort to improve network adequacy. A commenter requested 
clarification on whether other credits would be affected by the 
proposed 10-percentage point credit for initial and service area 
expansion applicants.
    Response: We thank commenters for their support of this proposal 
and acknowledge the concerns that were raised by other commenters. As 
we indicated in our proposal, we understand that organizations may have 
difficulties meeting this timing for submission of a full provider 
network. Therefore, in order to provide flexibility to organizations as 
they build their provider networks, we proposed 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. We believe 
a 10-percentage point credit, in conjunction with use of Letters of 
Intent (LOIs), as discussed above, will provide MA organizations with 
enough flexibility to meet network adequacy standards within the 
application timeframe.
    We also clarify that the 10-percentage point credit would be 
separate from and in addition to any other applicable credit 
established in Sec.  422.116(d).
    Comment: A few commenters suggested that CMS allow MA organizations 
to apply for additional time to meet network adequacy standards for 
initial and service area expansion applicants. A few commenters 
suggested that CMS delay

[[Page 27809]]

implementation of this proposal until 2025.
    Response: We believe that allowing the 10-percentage point credit 
towards the percentage of beneficiaries residing within published time 
and distance standards and allowing the use of LOIs in lieu of signed 
contracts, as discussed previously in this rule, for the contracted 
network in the pending service area, at the time of application and for 
the duration of the application review, provide sufficient flexibility 
for MA organizations. We also believe that establishing these changes 
for the 2024 coverage year will allow us to improve our oversight and 
effectiveness of network adequacy reviews in a timely fashion.
    After careful consideration of the comments received from various 
stakeholders and for the reasons set forth in our responses and in the 
proposed rule, we are finalizing, with modifications, the following 
changes to Sec.  422.116:
     Revise Sec.  422.116(a)(1)(ii) to 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 
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. 
In addition, applicants may use an LOI, signed by both the MA 
organization and the provider or facility with which the MA 
organization has started or intends to negotiate, in lieu of a signed 
contract at the time of application and for the duration of the 
application review, to meet network standards. As part of the network 
adequacy review process, applicants must notify CMS of their use of 
LOIs to meet network standards, in lieu of a signed contract and submit 
copies upon request and in the form and manner directed by CMS. At the 
beginning of the applicable contract year, the credit and the use of 
the LOIs no longer apply, and if the application is approved, the MA 
organization must be in full compliance with this section, including 
having signed contracts with the provider or facility.

D. Part C and Part D Quality Rating System

    This final rule finalizes a technical change at Sec.  
422.166(i)(12) proposed in the January 2022 proposed rule to enable CMS 
to calculate 2023 Star Ratings for three Healthcare Effectiveness Data 
and Information Set (HEDIS) measures that are based on the Health 
Outcomes Survey (HOS). It also finalizes provisions adopted in the 
March 31st COVID-19 IFC and the September 2nd COVID-19 IFC to enable us 
to calculate the 2021 and 2022 Star Ratings due to the COVID-19 
pandemic.
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, respectively.
    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 HOS, Star Ratings are 
based on performance up to 3 calendar years prior to the Star Ratings 
year. For example, the HOS administered in 2021 asked 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 will be used for the 2023 Star Ratings.
    In the March 31st COVID-19 IFC (85 FR 19230), 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 adapt their current practices in light of the COVID-19 
PHE 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 so health and drug plans could have some degree of certainty 
that the Star Ratings would be adjusted and could continue their focus 
on patients who were most in need. (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 impacts of the COVID-19 PHE 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 April 2019 
final rule. Under Sec. Sec.  422.166(i)(9)(i) and

[[Page 27810]]

(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 Federal 
Emergency Management Agency (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 ensures that any impact of 
an unforeseen and uncontrollable circumstance on a particular contract 
(or group of contracts) in a specific geographic area does not affect 
the ratings for other contracts. As explained in the April 2019 final 
rule (84 FR 15777), CAHPS measures use a relative distribution and 
significance testing, rather than clustering, to determine Star Ratings 
cut points; our testing indicated that when affected contracts were 
removed from the distribution of measure-level scores, the distribution 
of the remaining contracts looked very similar, suggesting that the 
affected contracts are randomly distributed among the rating levels. 
Additionally, the CAHPS methodology to assign cut points is less 
sensitive to extreme outliers that may result from the impact of a 
disaster on contract-level measure scores; thus, the 60 percent rule 
does not apply to the calculation of cut points for CAHPS measures. 
When only a small number of counties are designated by FEMA as 
Individual Assistance areas, application of the 60 percent exclusions 
means that the performance of other contracts serving larger or other 
service areas is used to establish the necessary thresholds for Star 
Ratings for non-CAHPS measures and the reward factor.
    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). The unprecedented impact of 
COVID-19 created a new methodological issue where, without a revision 
to the existing disaster policy rules for calculating the measure-level 
cut points for the 2022 Star Ratings, we would not have had enough 
contracts to reliably calculate the non-CAHPS measure-level cut points. 
Consequently, CMS would not have been able to assign Star Ratings for 
all non-CAHPS measures. Similarly, we would not have had enough 
contracts to reliably calculate the performance summary and variance 
thresholds for the Reward Factor.
    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 \83\ during the 2020 measurement 
period results in a disaster adjustment for the 2022 Star Ratings). For 
Part C measures derived from the HOS, the disaster adjustment is 
delayed an additional year due to the timing of the survey and 1 year 
recall period. (See 84 FR 15772 through 15773 for an example of the 
timing of disaster adjustments for measures from the HOS.) Although the 
CAHPS surveys and HEDIS data collection were not completed in 2020 (we 
did conduct the HOS in 2020 on a later schedule than usual), CAHPS 
surveys and HEDIS data collection completed in 2021 reflected 
performance by plans in 2020 during the PHE for COVID-19 and were used 
in the 2022 Star Ratings.
---------------------------------------------------------------------------

    \83\ 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.
---------------------------------------------------------------------------

    In the September 2nd COVID-19 IFC (85 FR 54820), 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) since all 
contracts qualified for the extreme and uncontrollable circumstance 
adjustments due to COVID-19. The change adopted by the September 2nd 
COVID-19 IFC at Sec. Sec.  422.166(i)(11) and 423.186(i)(9) removed 
application of the 60 percent rule and avoided the exclusion of 
contracts with 60 percent or more of their enrollees living in FEMA-
designated Individual Assistance areas from calculation of the non-
CAHPS measure-level cut points for the 2022 Star Ratings. The September 
2nd COVID-19 IFC also modified the calculation of the performance 
summary and variance thresholds for the reward factor so that the 
threshold calculation would not 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. 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 ratings for 2022 Star Ratings and 
2023 QBPs. It was critical to adopt these changes to avoid an 
unworkable result from the current policy in these extraordinary 
circumstances and so that CMS could measure actual performance for the 
2020 measurement period so plans had an opportunity to demonstrate how 
they were tailoring care in innovative ways to meet the needs of their 
enrollees during the PHE for COVID-19. Given the unprecedented impacts 
of the COVID-19 PHE, it was important to be able to calculate the 2022 
Star Ratings to help to continue to drive quality improvement for plans 
and providers.
    We proposed in the January 2022 proposed rule a specific provision 
for 2023 Star Ratings for HEDIS measures derived from the HOS data 
collection administered in 2021 covering the 2020/2021 period. We 
address the comments we received on that proposal in section II.D.2. of 
this final rule. We also address the changes and comments we received 
in response to the March 31st COVID-19 IFC and the September 2nd COVID-
19 IFC in sections II.D.3. and II.D.4., respectively, of this final 
rule. Per section 1871(a)(3)(C) of the Act, CMS responds to comments on 
an interim final rule regarding the Medicare program and finalizes the 
interim rules within 3 years of the issuance of the IFC.
2. Provision Related to the HEDIS Measures Calculated From the HOS From 
the January 2022 Proposed Rule
    In response to the September 2nd COVID-19 IFC, some commenters 
requested clarification about the measures that come from the HOS 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 questioned, 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

[[Page 27811]]

commenters requested clarification since the September 2nd COVID-19 IFC 
adopted a regulatory change to the 60 percent rule for only the 2022 
Star Ratings. We proposed in the January 2022 proposed rule to address 
the HEDIS measures derived from the HOS used in the 2023 Star Ratings.
    As described in the April 2019 final rule (CMS-4185-F) (84 FR 15772 
through 15773), for measures derived from the HOS, 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 for 2020 
extreme and uncontrollable circumstances (85 FR 15772 through 15773). 
Based on the comments received and the timing of the HOS 
administration, we proposed to amend Sec.  422.166(i) to specifically 
address the 2023 Star Ratings, for measures derived from the 2021 HOS 
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 \84\ 
derived from the HOS 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, 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 FEMA-
designated 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 
as described at Sec.  422.166(i)(3)(iv) for the 2023 Star Ratings.
---------------------------------------------------------------------------

    \84\ The HEDIS measures derived from the HOS include Monitoring 
Physical Activity, Reducing the Risk of Falling, and Improving 
Bladder Control.
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    Below we summarize the comments we received and provide our 
responses.
    Comment: Most commenters expressed support for removing the 60 
percent rule for the 2023 Star Ratings for the three HEDIS measures 
(Monitoring Physical Activity, Reducing the Risk of Falling, and 
Improving Bladder Control) derived from the HOS due to the COVID-19 
PHE. Commenters noted the detrimental effects of the COVID-19 pandemic 
on beneficiaries and health care providers and appreciated that this 
proposed policy would ensure plans are not penalized on these three 
measures because of the effects of the pandemic.
    Response: We thank commenters for their support of this provision. 
This change to the calculation of ratings for these three HEDIS-HOS 
measures will permit CMS to calculate these measures for the 2023 Star 
Ratings and include them in the 2023 reward factor calculation.
    Comment: A few commenters requested that HEDIS measures derived 
from the HOS be removed entirely from the 2023 Star Ratings. They 
expressed concern that the proposed policy may be inadequate to account 
for the impacts of the COVID-19 PHE on these measures and that they 
would be penalized for factors outside of their control.
    Response: These three areas--bladder control, physical activity, 
and reducing falls risk--are important for beneficiaries' health and 
well-being, even during a PHE. Removing the 60 percent rule will allow 
most contracts to receive the higher of the 2022 or 2023 Star Ratings 
(and corresponding measure score) for each of the HEDIS measures 
collected through the HOS, following the rules at Sec.  422.166(i). 
This will minimize the impact of the PHE on these measures. It is CMS's 
view that including these measures in Star Ratings will provide 
valuable information for people with Medicare on important areas of 
focus for avoiding serious health problems. As a reminder, as required 
at Sec.  422.504(o), MA organizations must develop, maintain, and 
implement business continuity plans, including policies and procedures 
for disaster or emergency situations. Therefore, we do not believe it 
is appropriate to eliminate use of these measures entirely in the Star 
Ratings.
    After considering the comments we received, and for the reasons set 
forth in the proposed rule and in our responses, CMS is finalizing 
without modification the provision at Sec.  422.166(i)(12) to codify 
special rules for the calculation of the 2023 Star Ratings for the 
three HEDIS measures that are collected through the HOS.
3. Provisions in the March 31st COVID-19 IFC
    This final rule also responds to comments on and finalizes a series 
of changes to the 2021 and 2022 Star Ratings to accommodate the 
disruption to data collection posed by the COVID-19 pandemic (FR 85 
19271-19275) that were established in the March 31st COVID-19 IFC. The 
following is a summary of the provisions and the public comments 
received on those changes to Part C and D Star Ratings policies 
included in the March 31st COVID-19 IFC.
a. HEDIS, CAHPS, and HOS Data Collection and Submission for 2021 Star 
Ratings and 2022 Star Ratings
    The March 31st COVID-19 IFC eliminated the requirement to submit 
HEDIS and CAHPS data at Sec.  422.152(b)(6) for MA contracts and at 
Sec.  417.472(i) and (j) for cost plans, and to submit CAHPS data at 
Sec.  423.182(c)(3) for Part D contracts. CMS suspended the collection 
and submission of HEDIS and CAHPS measures to allow health plans, 
providers, and physician offices to focus on caring for Medicare 
beneficiaries during the early stages of the PHE for COVID-19. These 
actions were adopted to minimize the risk of the spread of infection by 
eliminating travel and in-person work for the collection of HEDIS data 
and ensure the safety of CAHPS survey vendor staff by aligning with the 
CDC's social distancing guidance. Both Part C and D plans could use any 
data already collected for their internal quality improvement efforts.
    CMS also delayed the administration of the HOS until late summer. 
To address the potential that CMS might not be able to complete HOS 
data collection in 2020 (for the 2022 Star Ratings), the March 31st 
COVID-19 IFC also adopted a provision at Sec.  422.166(j)(2)(i) to 
replace, if the HOS was not conducted in 2020, any measures calculated 
based on HOS data collections with earlier values from the 2021 Star 
Ratings that were not affected by the public health threats posed by 
COVID-19. This specific provision was designed to address any gaps in 
the necessary HOS data if the HOS could not be administered in 2020. 
The Star Ratings measures from the HOS include the following: Improving 
or Maintaining Physical Health; Improving or Maintaining Mental Health; 
Reducing the Risk of Falling; Improving Bladder Control; and Monitoring 
Physical Activity.
    Comment: Some commenters commended CMS for curtailing HEDIS and 
CAHPS data collection so that plans and providers could focus on 
providing care and not put their employees at risk. Other commenters 
appreciated that by completely eliminating the submission requirements 
and removing the possibility of a competitive disadvantage as a result 
of ceasing data retrieval efforts, CMS enabled plans to better focus on 
patient care and the safety of plans' employees. Commenters

[[Page 27812]]

expressed a general understanding of the sensitivity around data 
collection during this time and the need to focus plans and providers 
on caring for Medicare beneficiaries.
    Response: CMS appreciates the support and emphasis on plans' focus 
on providing care to Medicare enrollees from the onset of the COVID-19 
pandemic.
    Comment: Some commenters argued that the HEDIS and CAHPS data 
collections were already well advanced before shutdowns occurred so 
there would be little risk to personnel involved in finishing data 
collection. These commenters stated that HEDIS data collection could be 
done electronically or through claims analysis and not through in-
person contact, thus maintaining social distancing guidance. They also 
argued that CAHPS survey response rates do not increase much in the 
last few months of data collection.
    Response: The intent of these changes was to eliminate some of the 
data collection requirements given the public health and safety 
concerns with collecting the data and to enable plans to focus on the 
care and safety of their employees and Medicare beneficiaries. Given 
the extraordinary circumstances under which the healthcare system was 
operating, CMS wanted plans to have some degree of certainty related to 
Star Ratings program requirements and wanted to make sure plans would 
be able to focus on ensuring that Medicare beneficiaries received the 
care and treatment they needed. The issues facing the healthcare 
system, including significant differences across regions and 
demographic groups, created unique challenges for the 2021 and 2022 
Star Ratings calculations. Given these concerns, CMS believes that, had 
the 2020 submission requirements for HEDIS and CAHPS data remained in 
force, we would not have had complete data for HEDIS and CAHPS across 
all contracts as needed in order to accurately calculate Star Rating 
measure cut points for the 2021 Star Ratings. Data collection was 
ongoing for HEDIS, including medical record review, so not all 
contracts were near completion.
    Data collection was curtailed for CAHPS after the first survey 
mailing so the data were not complete or representative of all 
enrollees. In general, for the MA and PDP CAHPS Survey, approximately 
40 percent of responses come from the second mailing and telephone 
follow-up. Further, approximately 50 percent of responses from younger 
beneficiaries (those under age 55) and black beneficiaries, and 60 
percent of Spanish language beneficiary responses, come from the second 
mailing and telephone follow-up, which were not yet completed at the 
time the March 31st COVID-19 IFC was issued.
    Comment: Commenters were generally supportive of CMS's decision to 
delay 2020 HOS data collection until late summer 2020, although some 
commenters wanted all 2020 HOS data collection to be halted. Other 
commenters recommended CMS move forward with the 2020 administration of 
HOS, with the stipulation that any data collected be used for internal 
plan purposes only and not used in the 2022 Star Ratings.
    Response: We appreciate the support for delaying the 2020 HOS 
administration until late summer. The HOS data collection was 
successfully completed in the fall of 2020. Although the survey was 
successfully administered, two measures from the HOS, Improving or 
Maintaining Physical Health and Improving or Maintaining Mental Health, 
were moved to the display page for the 2022 and 2023 Star Ratings due 
to data validity concerns as described in the HPMS memorandum 
``Medicare Health Outcomes Survey (HOS) Outcome Measures Moved to 
Display for 2022 and 2023 Star Ratings,'' released on August 5, 
2021.\85\
---------------------------------------------------------------------------

    \85\ HPMS Memos for WK 1 August 2-6, 2021. CMS.
---------------------------------------------------------------------------

    Comment: A few commenters agreed with CMS's plan to replace the 
2022 Star Ratings for HOS measures with the 2021 Star Ratings if the 
HOS could not be administered, but some commenters argued plans should 
have the choice of receiving either the 2021 or 2022 Star Ratings and 
corresponding scores.
    Response: CMS did not have to replace the 2022 Star Ratings with 
the 2021 Star Ratings for the measures from the HOS since the survey 
was administered in fall 2020. CMS could not select the higher measure-
level star and corresponding numeric data for the measures from the HOS 
for the 2022 Star Ratings since HOS measures did not qualify for the 
extreme and uncontrollable circumstances adjustment due to COVID-19 due 
to the timing and recall periods for the HOS. We are therefore not 
finalizing the provision at Sec.  422.166(j)(2)(i) which authorized 
replacement of measures calculated based on HOS data collections for 
the 2022 Star Ratings with earlier values from the 2021 Star Ratings. 
Because the HOS was completed in 2020, the provision at Sec.  
422.166(j)(2)(i) is moot and it is not necessary to finalize it 
permanently.
    Comment: Some commenters requested that the HOS measures be moved 
to the display page until at least 2023 or 2024. Additionally, some 
commenters urged CMS to consider the impact of COVID-19 not only on the 
2020 and 2021 HOS data but also on the 2022, 2023, and 2024 Star 
Ratings. Many commenters stated that even if current conditions 
improved enough to allow HOS to be fielded in 2020, comparisons of 
previous and future year scores, as well as comparisons across 
contracts, would not be valid during the COVID-19 pandemic. A few 
commenters pointed out that trends will likely vary by region or state 
based on the prevalence of COVID-19 and the presence or absence of 
state governments' constraints on patient travel and provider 
operations. Some commenters argued that it would not be feasible for 
CMS to adjust HOS outcome measures to account for all COVID-associated 
factors (for example, social isolation, loneliness, fear of death, 
national rhetoric regarding the value of elders, economic impacts, and 
decreased opportunity for physical activities) and pointed out that the 
negative impacts may last for years. Some commenters did not believe 
HOS data collected in 2020 would be indicative of overall plan quality, 
but would instead reflect the massive disruption to the healthcare 
system caused by the COVID-19 pandemic. To avoid unfairly penalizing 
plans for circumstances outside their control, most commenters 
recommended that CMS continue to collect HOS data in 2020 but remove 
the measures from the Star Ratings for up to 3 years. In particular, 
commenters were concerned about the two HOS outcome measures, Improving 
or Maintaining Physical Health and Improving or Maintaining Mental 
Health.
    Response: Although the HOS data collection was completed as 
scheduled in fall 2020, CMS agrees that the COVID-19 PHE significantly 
impacted the validity of the two HOS outcome measures. CMS issued the 
HPMS memorandum ``Medicare Health Outcomes Survey (HOS) Outcome 
Measures Moved to Display for 2022 and 2023 Star Ratings,'' on August 
5, 2021 announcing that the Improving or Maintaining Physical Health 
and Improving or Maintaining Mental Health measures would be moved to 
the display page on CMS.gov with a note that the comparisons were pre- 
and post-pandemic and that the measures would not be included in the 
2022 and 2023 Star Ratings because of validity concerns related to the 
COVID-19 PHE. These two measures were therefore not included in the 
2022 Star Ratings, and

[[Page 27813]]

they will not be included in the 2023 Star Ratings.
    After consideration of the public comments we received, we are 
finalizing without modification the provisions eliminating for 2020 the 
requirement to submit HEDIS and CAHPS data for MA contracts at Sec.  
422.152(b)(6) and for cost plans at Sec.  417.472(i) and (j), and to 
submit CAHPS data for Part D contracts at Sec. Sec.  423.156 and 
423.182(c)(3). HOS data collection was completed as scheduled in fall 
2020; thus, we are not finalizing the provision at Sec.  422.166(j)(2) 
to replace any measures calculated based on HOS data collections for 
the 2022 Star Ratings with earlier values from the 2021 Star Ratings 
that were not affected by the public health threats posed by COVID-19.
b. Adjustments to the 2021 Star Ratings Methodology Due To Lack of 
HEDIS and CAHPS Data
    The March 31st COVID-19 IFC replaced the 2021 Star Ratings measures 
calculated based on HEDIS and Medicare CAHPS data collections with 
earlier values from the 2020 Star Ratings (which were not affected by 
the public health threats posed by COVID-19) at Sec. Sec.  
422.166(j)(1) and 423.186(j)(1).
    Comment: Some commenters agreed with CMS that given the impact of 
the COVID-19 pandemic, CMS should use the 2020 Star Ratings scores and 
stars in place of 2021 Star Ratings scores and stars. Some commenters 
stated that such an approach would lessen the impact of any declines in 
performance that were driven by the PHE and outside of the control of 
Part C and D sponsors. Further, given that COVID-19 had differential 
geographic impacts throughout the country, commenters expressed that 
keeping all plans to the 2020 ratings would keep scoring more stable.
    Other commenters recommended that CMS use the 2021 Star Ratings 
scores and stars. They stated that to not do so would not align with 
the goal of the program, which is to provide current unbiased and 
accurate information on the quality performance of a health or drug 
plan for consumers to make their best health care decisions.
    Some commenters also argued that to not use the 2021 Star Ratings 
would ignore the efforts plans had made during the previous year to 
significantly improve their HEDIS and CAHPS measure scores. Some 
commenters stated they disagreed with CMS's statement that measure 
scores and stars do not fluctuate significantly year to year. They 
argued that not using 2021 Star Ratings could negatively impact 
contracts demonstrating year-over-year improvement and ``new'' plans.
    Some commenters wanted the choice to use either their 2020 or 2021 
Star Ratings. A few commenters suggested that if the 2021 HEDIS and 
CAHPS measures were not going to be used, these measures should be 
removed from the 2021 Star Ratings program or moved to the display 
page.
    Response: We believe that the provisions in the March 31st COVID-19 
IFC were necessary to ensure public health and safety during this 
unprecedented time. If we had required plans to collect HEDIS and CAHPS 
data, plans would have been forced to choose between protecting the 
safety of those collecting data, potentially diverting resources away 
from the urgent care needs of Medicare beneficiaries impacted by COVID-
19, and collecting data needed by the Star Ratings program.
    For the 2021 Star Ratings, there was no reason not to use the most 
recent data available from all applicable sources. Unlike HEDIS and 
CAHPS, other data sources for the 2021 Star Ratings were not impacted 
by COVID-19 and could continue to be used to show recent plan 
performance. Given that not all data sources were impacted by COVID-19 
for the 2021 Star Ratings, and CMS had the ability to calculate the 
2021 Star Ratings with the most recent data available for all measures, 
there was no reason to allow plans to choose if they wanted the 2020 
Star Ratings or the 2021 Star Ratings. CMS did not consider moving both 
HEDIS and CAHPS data to the display page for the 2021 Star Ratings, 
since that would have resulted in all contracts being rated on only 10 
out of 32 Part C measures, which would not reflect the full range of 
care and services plans provide.
    After consideration of the public comments we received, we are 
finalizing without modification the provisions, as codified at 
Sec. Sec.  422.166(j)(1) and 423.186(j)(1), to use the 2020 Star 
Ratings HEDIS and CAHPS data for the 2021 Star Ratings.
c. Use of 2020 Star Ratings To Substitute for 2021 Star Ratings in the 
Event of Extraordinarily Compromised CMS Capabilities or Systemic Data 
Issues
    In the March 31st COVID-19 IFC, CMS established a process for the 
calculation of the 2021 Star Ratings in the event that the impact of 
the COVID-19 pandemic made it necessary for CMS to focus exclusively on 
the continued performance of essential agency functions, and the agency 
did not have the ability to calculate valid and accurate 2021 Star 
Ratings at Sec. Sec.  422.164(i), 422.166(j)(1)(v), 423.184(i), and 
423.186(j)(1)(iv).
    CMS's top priority at the beginning of the pandemic was to ensure 
public health and safety, including that of beneficiaries, health and 
drug plan staff, and providers, and to allow health and drug plans, 
providers, and physician offices to focus on the provision of care. 
Adopting this provision to address such extraordinary circumstances 
before they potentially could come to pass in connection with the 
COVID-19 pandemic ensured that Medicare health and drug plans were 
aware of the steps CMS would take if we were unable to calculate the 
2021 Star Ratings.
    Comment: Some commenters supported CMS's proposal to establish 
modified methods of calculating or assigning 2021 Star Ratings if 
needed due to potential concerns over the impact of the COVID-19 
pandemic on agency functions and the ability to calculate the Star 
Ratings.
    Response: CMS appreciates commenters' understanding of our proposal 
to establish modified methods for calculating or assigning 2021 Star 
Ratings in the event that the impact of the COVID-19 pandemic made it 
necessary for CMS to focus exclusively on the continued performance of 
essential agency functions, or there were systematic measure-level data 
issues.
    We are not finalizing the proposed provisions at Sec. Sec.  
422.166(j)(1)(v) and 423.186(j)(1)(iv) in this final rule, as CMS was 
able to calculate the 2021 Star Ratings. We are also not finalizing the 
special rules for 2021 Star Ratings at Sec. Sec.  422.164(i) and 
423.184(i), as CMS did not identify any data quality issues for non-
HEDIS and non-CAHPS measures for the 2021 Star Ratings.
d. Guardrails
    CMS modified Sec. Sec.  422.166(a)(2)(i) and 423.186(a)(2)(i) to 
delay the application of the guardrails for non-CAHPS measures until 
the 2023 Star Ratings are issued in October 2022. To increase the 
predictability of the cut points used for measure-level ratings, in the 
April 2019 final rule (84 FR 15761), we adopted a rule that, starting 
with the 2022 Star Ratings, guardrails would be implemented for 
measures that have been in the program for more than 3 years. As 
specified at Sec. Sec.  422.166(a)(2)(i) and 423.186(a)(2)(i), the 
guardrails ensure that the measure threshold-specific cut points for 
non-CAHPS measures do not increase or decrease more than 5 percentage 
points from 1 year to the next. As noted in the April 2019 final rule, 
the trade-off for the predictability provided by the bi-directional cap 
is the inability to fully

[[Page 27814]]

keep pace with changes in performance across the industry. While cut 
points that change less than the cap would be unbiased and keep pace 
with changes in the measure score trends, changes in the overall 
performance that are greater than the cap would not be reflected in the 
new cut points. We anticipated that most, if not all, contracts could 
have had performance changes on certain measures as they dealt with the 
demands of the COVID-19 pandemic that would result in the guardrails 
not keeping pace with changes in measure scores across the industry. 
Given the enormity of the COVID-19 pandemic, CMS believed it was 
important for plans to be able to focus on patients who were in the 
most need during the outbreak, and our guardrails, as currently 
constructed, could have had unintended incentives to the contrary.
    Comment: Many commenters agreed with our provision delaying the 
application of guardrails for non-CAHPS measures until the 2023 Star 
Ratings. These commenters appreciated that CMS recognized the 
significant changes in health care utilization that have occurred 
during the pandemic and that these changes in utilization might persist 
for some time.
    Response: CMS appreciates commenters' support for this provision.
    After consideration of the public comments and for the reasons 
provided in the March 31st COVID-19 IFC and our responses to comments, 
CMS is finalizing without modification the provisions at Sec. Sec.  
422.166(a)(2)(i) and 423.186(a)(2)(i) to delay the use of guardrails 
until the 2023 Star Ratings.
e. Improvement Measures
    Another provision of the March 31st COVID-19 IFC expanded the 
existing hold harmless adjustment for the Part C improvement measures 
at Sec.  422.166(f)(1)(i) and (g)(3), and for the Part D improvement 
measures at Sec.  423.186(f)(1)(i) and (g)(3), to include all contracts 
for the 2022 Star Ratings, not just those with 4 or more stars for 
their highest rating. At the start of the COVID-19 pandemic, CMS 
anticipated that the pandemic could cause plan performance during the 
2020 measurement period to decline across the nation. Therefore, we 
believed it was appropriate to adopt a provision to minimize the impact 
of potential declines in the Part C and D improvement measures. Namely, 
for the 2022 Star Ratings, if the inclusion of the Part C improvement 
measure reduced the Part C summary Star Ratings, it would be excluded 
from the calculation of the summary rating; if the inclusion of the 
Part D improvement measure reduced the Part D summary Star Rating, it 
would be excluded from the calculation of the summary rating; and if 
the inclusion of the Part C and Part D improvement measures reduced the 
overall Star Ratings, they would be excluded from the overall rating 
calculation.
    Comment: Many commenters supported the hold harmless provision for 
the Part C and D improvement measures to include all contracts for the 
2022 Star Ratings. Some commenters noted that the chaos and disruption 
brought about by COVID-19, which created unparalleled uncertainty and 
fear for members regarding health and health care, were likely to 
eclipse any quality improvement efforts implemented by MA plans during 
the performance year.
    Response: CMS thanks the commenters for their support of this 
provision.
    After consideration of the public comments and for the reasons 
outlined in the March 31st COVID-19 IFC, CMS is finalizing without 
modification the provisions at Sec. Sec.  422.166(g)(3), 423.186(g)(3), 
422.166(f)(1)(i), and 423.186(f)(1)(i), to apply the higher ratings 
after calculating the overall and summary ratings with and without the 
Part C and/or D improvement measures for all contracts only for the 
2022 Star Ratings.
f. QBP Calculations for New Contracts
    For the 2021 Star Ratings only, CMS modified the definition of a 
new MA plan to treat an MA plan as a new MA plan if it was offered by a 
parent organization that had not had another MA contract for the 
previous 4 years. New plans that started in 2019 and reported HEDIS and 
CAHPS data to CMS for the first time in 2020 for the 2021 Star Ratings, 
because of our elimination of the HEDIS and CAHPS data submissions to 
CMS, would not have had enough measures to calculate the 2021 Star 
Ratings and, consequently, the 2022 QBP. A new contract with an 
effective date of January 1, 2019 would normally have been treated as 
new for QBP purposes for 2019, 2020, and 2021. The 2022 QBP rating was 
based on the 2021 Star Ratings, which these new contracts did not have.
    Comment: Some commenters supported the modifications made to the 
definition of a new MA plan for purposes of 2022 QBPs based on 2021 
Star Ratings only. However, some commenters stated this modified 
definition of a new MA plan would penalize new plans, denying them the 
potential to receive 2022 QBPs. A commenter stated that with respect to 
placement on the Medicare Plan Finder, new plans would not have the 
option of earning top billing and placement if they are forced to 
remain unrated for 2021.
    Response: Modifying the definition of a new MA plan as we did in 
the March 31st COVID-19 IFC does not preclude a plan from receiving a 
QBP. In the March 31st COVID-19 IFC, we modified the definition of a 
new plan such that, for purposes of 2022 QBPs based on 2021 Star 
Ratings only, an MA plan is considered a new MA plan if it is offered 
by a parent organization that has not had another MA contract for the 
previous 4 years (rather than 3 years). New plans under parent 
organizations with other MA contracts would continue to get the 
enrollment-weighted average of the ratings of the other MA contracts 
under the parent organization, while new plans under parent 
organizations that did not have other MA contracts with ratings would 
continue to be treated as qualifying plans for the purposes of QBPs and 
would be eligible to receive a QBP percentage increase to the county 
rate of 3.5 percentage points.
    In terms of placement on Medicare Plan Finder, we note that plans 
are currently sorted first by premium, not by Star Rating.
    After consideration of the public comments and for the reasons 
outlined in the March 31st COVID-19 IFC and our response to comments, 
CMS is finalizing the definition at Sec.  422.252 without modification, 
such that for only the 2022 QBP ratings that are based on 2021 Star 
Ratings, a new MA plan is defined as one that is offered by a parent 
organization that has not had another MA contract for the previous 4 
years.
4. Provisions in the September 2nd COVID-19 IFC
    In addition to the provisions discussed in section II.D.3. of this 
final rule, the September 2nd COVID-19 IFC also adopted a modification 
to the application of the extreme and uncontrollable circumstances 
policy for calculation of the 2022 Star Ratings to address the effects 
of the COVID-19 PHE (85 FR 54844-47). The September 2nd COVID-19 IFC 
revised the current disaster policy, codified at Sec. Sec.  422.166(i) 
and 423.186(i), for 2022 Star Ratings only by: (1) Removing the 60 
percent exclusion rule for cut point calculations for non-CAHPS 
measures; and (2) removing the 60 percent exclusion rule for the 
determination of the performance summary and variance thresholds for 
the Reward Factor. As established by the IFC, new Sec.  422.166(i)(11) 
provides that CMS does

[[Page 27815]]

not apply the provisions of Sec.  422.166(i)(9) or (10) in calculating 
the 2022 MA Star Ratings; and new Sec.  423.186(i)(9) provides that CMS 
does not apply the provisions of Sec.  423.186(i)(7) or (8) in 
calculating the 2022 Part D Star Ratings. This change ensured that CMS 
could: (1) Calculate measure-level cut points for the 2022 Star 
Ratings; (2) calculate measure-level Star Ratings for the 2022 Star 
Ratings; (3) apply the ``higher of'' policy for non-CAHPS measures, as 
described at Sec. Sec.  422.166(i)(3)(iv) and (i)(4)(v) and 
423.186(i)(4)(i), for all contracts with 25 percent or more of their 
enrollees living in FEMA-designated Individual Assistance areas which 
included all Part C and Part D contracts operational during the 2020 
measurement period; and (4) ultimately calculate overall and summary 
ratings for 2022 Star Ratings and 2023 QBPs.
    The following is a summary of the public comments received on these 
Part C and Part D Star Ratings policies included in the September 2nd 
COVID-19 IFC.
    Comment: Most commenters supported dropping the 60 percent rule to 
be able to calculate 2022 non-CAHPS measure cut points and apply the 
existing adjustment for extreme and uncontrollable circumstances. They 
expressed support for modifying the disaster policy so that measure-
level data for affected contracts with 60 percent or more of their 
enrollees in FEMA-designated Individual Assistance areas during the 
2020 performance and measurement period are not excluded from the 
measure-level cut point calculations for non-CAHPS measures and the 
performance summary and variance thresholds for the Reward Factor. 
Given the enormous impact the COVID-19 pandemic has had on the delivery 
of health care, commenters noted that allowing plans to receive the 
higher of their measure-level rating from 2021 or 2022 Star Ratings 
would help ensure that plans are not penalized for declines in 
performance due to the pandemic.
    Response: We thank commenters for their support of these 
provisions.
    Comment: Some commenters requested clarification as to whether the 
adjustment for extreme and uncontrollable circumstances would apply to 
the CAHPS measures for the 2022 Star Ratings.
    Response: Under Sec. Sec.  422.166(i)(9) and 423.186(i)(7), CMS 
excludes 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 
clustering algorithms. This rule is limited to non-CAHPS measures since 
CAHPS measures do not use the clustering algorithm. Because the 
calculation of CAHPS cut points was not impacted by the 60 percent 
rule, it was not included in the IFC provisions. We did not propose or 
make any changes to the extreme and uncontrollable circumstance rules 
for the 2022 Star Ratings for CAHPS measures in Sec. Sec.  
422.166(i)(2) and 423.186(i)(2).
    Comment: Some commenters requested clarification about when the 
disaster policy would apply for the measures from the HOS. A few 
commenters questioned, based on how the disaster policy has previously 
applied for the HOS measures, whether CMS anticipated that the impacted 
HOS data collection period would not be until 2021 and the ``higher 
of'' methodology would be applicable to the 2023 Star Ratings for HOS 
measures. Another commenter noted that for purposes of the 2020 Star 
Ratings, 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 observed that if this timing applied to 2020 
disasters, the HOS and HEDIS-HOS measures would receive the higher of 
current or prior year measure-level Star Ratings in the 2023 Star 
Ratings.
    Response: We agree with these commenters that the HEDIS-HOS 
measures should receive the adjustment for extreme and uncontrollable 
circumstances for the 2023 Star Ratings. We proposed in the January 
2022 proposed rule a specific provision for 2023 Star Ratings for HEDIS 
measures derived from the HOS data collection administered in 2021 
covering the 2020/2021 period. In section II.D.2. of this final rule, 
we finalize these changes for the 2023 Star Ratings for the HEDIS-HOS 
measures.
    Comment: A few commenters suggested that not all plans may be 
eligible for the extreme and uncontrollable circumstances policy.
    Response: All Part C and Part D contracts that were operational 
during 2020 qualified for the relevant disaster adjustments for the 
2022 Star Ratings.
    After consideration of the public comments and for the reasons 
outlined in the September 2nd COVID-19 IFC and our responses to 
comments, CMS is finalizing without modification the provisions at 
Sec. Sec.  422.166(i)(11) and 423.186(i)(9) to codify special rules for 
the calculation of the 2022 Star Ratings.

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

    CMS has an obligation to ensure the organizations with whom it 
contracts are able to provide health care services to beneficiaries in 
a high-quality manner. CMS does not want organizations entering into or 
expanding in the MA and Prescription Drug programs that are poor 
performers. Currently, if an organization meets all of the requirements 
of CMS' MA or Prescription Drug program 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 MA 
and Prescription Drug 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.  [thinsp]422.502(b) and 423.503(b), that we may deny an 
application submitted by an organization seeking an MA or Prescription 
Drug program contract, including for a service area expansion, if that 
organization has failed to comply with the requirements of a previous 
MA or Prescription Drug contract. In the April 2011 final rule (75 FR 
19684 through 19686), we completed 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

[[Page 27816]]

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 percent of beneficiaries 
currently having access to an MA plan. In addition, 97.7 percent of 
eligible beneficiaries have access to ten or more plans in 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 Prescription Drug 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 Prescription Drug business to the organization would 
pose a high risk to the success and stability of the MA and 
Prescription Drug 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 the proposed rule, CMS sought to expand the bases 
for application denial to include Star Ratings history, bankruptcy 
proceedings, and certain CMS compliance actions. CMS also proposed to 
codify the types of compliance notices which would 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 are codifying 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 are also codifying CMS' compliance 
actions which are NONCs, WLs, and CAPs in Sec. Sec.  [thinsp]422.504(m) 
and 423.505(n). We note that the basis for application denial based on 
past contract performance is not applicable for MA organizations 
establishing new D-SNP-only contracts under Sec.  422.107(e) as 
described in section II.A.6.a.
    We proposed to correct a few technical issues identified since the 
final rule was published in January 2021 and will be codifying those 
proposals. Specifically, we proposed to correct a drafting error in 
Sec.  [thinsp]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. The technical correction revises 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.  [thinsp]422.2410(c). Secondly, we 
proposed to correct a minor technical error in Sec.  
[thinsp]423.503(b)(1)(i)(A) to remove the word ``to'' when referencing 
subpart O. Finally, we proposed to modify Sec. Sec.  
[thinsp]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.  
[thinsp]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.
    As discussed, we proposed to include in Sec. Sec.  
[thinsp]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. 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 Prescription Drug 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 also sought to include, in Sec. Sec.  
[thinsp]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 proposed 
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.
    CMS' Star Ratings are provided to beneficiaries to help them make 
informed health care choices. Moreover, MA organizations and 
Prescription Drug sponsors are required by Sec. Sec.  
[thinsp]422.504(b)(17) and 423.505(b)(26) to maintain summary Part C 
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.  [thinsp]422.510(a)(4) and 423.509(a)(4) permit CMS to 
terminate a contract for having less than 3 Stars for 3 consecutive 
years in a row for Part C summary ratings or for having less than 3 
Stars for 3 consecutive years in a row for Part D summary ratings. Such 
a termination carries with it an exclusion from future MA or 
Prescription Drug application approvals for 38 months under Sec. Sec.  
[thinsp]422.502(b)(3) and 423.503(b)(3), a more significant consequence 
than the 1-year application denial we are discussing in this rule. We 
have decided, based on comments, that a 2-year history of low Star 
Ratings is a better indicator of poor performance. However, we are 
clarifying that the applicant' that have 2.5 or less stars for their 
Part C Summary rating, their Part D Summary rating, or a combination of 
Part C and Part D Summary ratings for two years be subject to 
application and service area expansion denials.
    Finally, we proposed to codify our practice of issuing compliance 
notices in Sec. Sec.  [thinsp]422.504(m) and 423.505(n). CMS also 
proposed, in Sec. Sec.  [thinsp]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.
    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.  [thinsp]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 
Prescription Drug

[[Page 27817]]

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 proposed 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 contract, and 
those applicants that have any single contract with 13 or more 
compliance action points may have applications for new contracts or 
service area expansions denied on the basis of past performance.
    CMS determined the threshold, by reviewing 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, based on historical data, an organization 
would need be in the top 2 percent of plans based on compliance action 
points to accrue 13 compliance action points.
    For these reasons, we are finalizing the regulations as proposed, 
with clarifications regarding compliance actions and modifications to 
Star Ratings. Below we summarize the comments received and our 
responses.
    Comment: We received numerous comments supporting our provisions.
    Response: We appreciate the support for our proposals.
    Comment: A few of the commenters who supported our provisions 
requested CMS take stronger action against plans including reviewing 
plan governance, civil and criminal penalties, ensuring plans have 
enough liquid assets to cover liabilities to providers, and reviews of 
consumer complaints.
    Response: CMS appreciates the recommendations and will continue to 
review performance areas to determine if additional reasons for service 
area expansions and application denials should be added to future 
regulations.
    Comment: A few commenters suggested that the overall methodology 
was too harsh and that it would penalize too many plans. A commenter 
suggested that we limit denials to one contract per Parent organization 
and do not deny applications of contracts that have less than 10 
percent of the Parent organization's total enrollment.
    Response: CMS appreciates the suggestion but does not believe it is 
in the best interest of the program to limit denials to one contract 
per Parent organization or those contracts with less than 10 percent of 
the Parent organization's enrollment. The purpose of past performance 
is to limit the expansion of all poor performing applicants, not just 
one poor performing contract or only those contracts with significant 
enrollment. The goal of past performance assessments would be 
undermined should a Parent organization be allowed to choose which 
contracts are subject to the past performance evaluation and which are 
not. The purpose of our past performance evaluation is to ensure that 
all applicants, regardless of enrollment numbers, are sufficiently 
qualified to expand into a new service area or enter into a new 
contract.
    Comment: A commenter suggested CMS go back to the past performance 
methodology prior to the January 2021 final rule, specifically using 
the outlier percentage threshold for compliance letters and requiring 
poor performance in more than one category.
    Response: CMS appreciates the comment. However, we believe the 
current and proposed methodology sufficiently identifies poor 
performers. The previous methodology, using an 80 percent and 90 
percent outlier resulted in ``poor performers'' in the compliance 
category regardless of the number of compliance actions received. A 
contract with few compliance actions could be considered an outlier 
based on other contracts having one or two fewer compliance actions. 
The prior methodology also failed to identify poor performers if many 
contracts received a significant number of compliance actions. We 
believe the threshold number appropriately identifies all contracts 
that are poor performers in the compliance action category. We also do 
not agree that an applicant should be required to have poor performance 
in more than one category. We believe failing to meet CMS' requirements 
for any of our categories is sufficient to determine that the applicant 
is not qualified to enter into new contracts or expand existing service 
areas based on their past performance. Therefore, we will continue to 
deny applications when the applicant fails to achieve sufficient 
performance in any one category.
    Comment: We received a few comments requesting clarification or 
asking that CMS' Program Audit Corrective Action Plans be excluded from 
the compliance category.
    Response: CMS is clarifying that CAPs resulting from CMS' Program 
Audits were not included in the compliance action category of our 
proposal or this final rule.

[[Page 27818]]

    Comment: We received comments regarding the inclusion of Star 
Ratings as one of the bases for application denials. A few commenters 
asked if the Star Ratings used for past performance were the overall 
Star Ratings or the summary Star Ratings for Part C and Part D. A few 
commenters requested that CMS use the overall Star Ratings and a few 
commenters requested that CMS average the parent organization's Star 
Ratings instead of using the contract-level Star Ratings.
    Response: CMS notes that Star Ratings are calculated at the 
contract level and not the parent organization level. In addition, we 
note that CMS contracts with a legal entity, not a parent organization. 
Therefore, averaging all Star Ratings for all contracts under a parent 
organization would be inconsistent with how CMS contracts with 
organizations. As for using the overall Star Rating instead of the Part 
C or Part D Summary rating, CMS notes that our existing termination 
authority at Sec. Sec.  422.504(a)(17) and 423.505(b)(26) is based on 
low ratings for either the Part C or Part D summary rating. Using the 
overall Star Rating for past performance would be inconsistent with the 
application of Star Ratings for termination. To ensure clarity, we have 
modified the regulatory text to clarify that CMS will use the Part C or 
Part D summary Star rating for past performance purposes.
    Comment: Commenters had various concerns regarding Star Ratings in 
the past performance methodology. A few commenters opposed including 
Star Ratings in the methodology. Commenters expressed concern that 
public health emergencies, such as COVID-19, had a negative effect on 
Star Ratings. A few commenters believe the inclusion of Star Ratings 
would disincentivize high performing plans from acquiring low 
performing plans and decrease plan options. Other commenters stated 
that CMS already has the authority to terminate contracts after three 
years of low ratings and that should be sufficient. A few commenters 
suggested that CMS use two years, instead of one year, of Star Ratings 
in the past performance methodology.
    Response: CMS appreciates the commenters' concerns regarding the 
inclusion of Star Ratings in the past performance methodology. Based on 
the comments received, we are finalizing our proposal with a 
modification to require that a contract have two consecutive years of 
Part C Summary, Part D Summary, or a combination of Part C and Part D 
Summary ratings of 2.5 or below to receive a denial of new applications 
or service area expansions. CMS will use the two most recent Star 
Ratings period--that is, those that fall in the 12-month lookback 
period as specified in 42 CFR 422.502(b)(1) and 423.503(b)(1). More 
specifically, if an organization received a Part C summary rating of 
2.5 or below for both of the most recent Star Rating periods, CMS will 
deny a new application or a service area expansion. The same holds true 
if an organization received a Part D summary rating of 2.5 or below for 
both of the most recent Star Rating periods. If an organization 
received a Part C summary rating of 2.5 or below for one of the Star 
Rating periods during the most recent lookback period and received a 
Part D summary of 2.5 or below for the other Star Rating period during 
the most recent lookback period, CMS will also deny new applications or 
service areas expansions. For example, for a 2024 application submitted 
in February 2023, the lookback period will be March 1, 2022 through 
February 28, 2023, which includes the 2022 and 2023 Star Ratings 
periods. If the applicant received a summary Star Rating of 2.5 or 
below for Part C or Part D for the 2022 Star Rating period AND for the 
2023 Star Rating period, then the application will be denied. If the 
organization received a Part C/or Part D summary Star Rating of 2.5 or 
below only for the 2022 Star Rating period or only for the 2023 Star 
Rating period, then the application will not be denied.
    With respect to commenters' concern that emergencies, such as the 
COVID-19 pandemic, negatively affect Star Ratings, we note that CMS 
addresses emergencies, such as COVID-19, in the calculation of Star 
Ratings using an adjustment for extreme and uncontrollable 
circumstances policy codified at Sec. Sec.  422.166(i) and 423.186(i) 
to mitigate the impact of the disaster on Star Ratings. CMS adopted a 
number of changes to address expected changes in plan performance due 
to the COVID-19 public health emergency (PHE) on Star Ratings in the 
March 31stCOVID-19 IFC (85 FR 19230) and September 2nd COVID-19 IFC (85 
FR 54820). Although we expected a decline in measure scores across Star 
Ratings measures for the 2020 measurement year, we did not see a 
decline across all measures and saw an increase in scores for a number 
of measures (see the Fact Sheet--2022 Part C and D Star Ratings\86\). 
Based on CMS's authority to account for extreme and uncontrollable 
circumstances, such as the COVID-19, we do not believe the methodology 
needs to be modified based on issues related to disasters.
---------------------------------------------------------------------------

    \86\ Part C and D Performance Data CMS.
---------------------------------------------------------------------------

    Finally, in response to the commenters who believe that plan 
choices will decrease as a result of our proposed inclusion of low Star 
Ratings as a basis for application denial, we believe the commenters do 
not fully understand the proposed methodology. The purpose of the 
methodology is to prohibit expansions of contracts, not to terminate or 
decrease the service area of contracts. Based on this, beneficiaries 
will still be able to enroll or stay enrolled in an existing contract, 
even though the contract has low Star Ratings. However, the legal 
entity will not be able to expand into new service areas or add new 
contracts.
    Comment: A few commenters were unsure if the methodology was at the 
Parent organization level, the legal entity level, or the contract 
level.
    Response: CMS' contract and past performance methodology is 
calculated at the legal entity level. CMS contracts with a legal entity 
that covers one or more contracts. If any one of the contracts under 
the legal entity meets any one of the reasons for denial, all new 
applications and service area expansions under that legal entity will 
be denied.
    Comment: A few commenters suggested CMS provide MA organizations 
with an appeal process for compliance actions.
    Response: CMS appreciates the need to ensure that compliance 
actions taken against MA organizations are accurate and appropriate. 
However, we do not believe an appeal process is necessary. The majority 
of our compliance actions are data driven, with formal thresholds that 
define whether an organization receives a compliance action and what 
level of action is issued. CMS also has an organized process which all 
potential compliance actions must go through, resulting in greater 
consistency in the issuance of compliance actions. In addition, when 
requested by an organization, CMS reviews information provided by the 
organization and re-reviews the compliance action to determine if the 
action was appropriate. CMS has a long-standing history of discussing 
compliance actions with organizations and retracting or modifying 
compliance actions when necessary. Based on our existing process we do 
not feel a formal appeals process is necessary for compliance actions. 
CMS notes that a formal appeal process is available for applicants 
whose application has been denied for past performance reasons 
specified in this rule.
    Comment: A few commenters were unsure if the compliance action 
threshold was at the contract level or if

[[Page 27819]]

all contract points for the legal entity were added together.
    Response: The compliance action point threshold of 13 is at the 
contract level. We have modified the regulatory text to ensure clarity 
regarding the point threshold. CMS will review all of the compliance 
actions and total the points for each contract. If any particular 
contract under a legal entity has 13 or more compliance action points 
new applications and service area expansions for that legal entity will 
be denied.
    Comment: A few commenters were concerned that one small contract 
could affect the entire organization.
    Response: CMS acknowledges that one poor performing contract could 
prohibit an applicant from service area expansions of other contracts 
or prohibit the applicant from entering into a new contract. As 
previously stated, if an organization has a poor performing contract it 
is in the best interest of the program for that organization to focus 
on improving the performance of the poor performing contract, no matter 
how small or how few enrollees are in the contract, instead of 
expanding their footprint. CMS believes all contracts under a legal 
entity should meet our requirements before that legal entity is 
permitted to expand into new service areas or add new contracts.
    Comment: A commenter stated that CMS should only consider the 
financial health of the acquiring organization and not of the financial 
health of the organization being acquired.
    Response: Organizations that acquire a poor performing organization 
are provided a 24-month grace period preceding the subsequent 
application deadline, after which the performance of the acquired 
organization will be factored into the acquiring organization's 
performance. Based on this, if a fiscally sound organization acquires 
an organization that fails to meet CMS' net worth requirements, the 
acquiring organization will not be denied the opportunity to expand 
into new service areas or add new contracts, if the entity was acquired 
within the 24-month period prior to the application deadline. However, 
the acquired organization will still be denied. Given the acquired 
organization has significant fiscal soundness issues, the acquiring 
organization should be putting all necessary resources into the 
acquired organization's fiscal soundness issues, rather than trying to 
expand or enter into new contracts under that legal entity.
    Based on the comments received, we are finalizing as proposed with 
a few modifications. The first modification is to use 2 years of Star 
Ratings for Part C Summary, Part D Summary, or a combination of Part C 
and Part D Summary ratings. The second modification is to clarify that 
CMS is using the Part C Summary and Part D Summary Star ratings. The 
final modification is to clarify that the 13 compliance action points 
are allotted on a per contract basis.

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)

    As discussed in the proposed rule, 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 these authorities, CMS has 
promulgated regulations related to marketing and mandatory disclosures 
by MA organizations and Part D sponsors in 42 CFR part 422, subparts C 
(at Sec.  422.111) and V; as well as 42 CFR part 423, subparts C (at 
Sec.  423.128) and V, as directed in the statutory authority granted to 
the agency. Additionally, as we noted in the proposed rule, under 42 
CFR 417.428, most marketing requirements in subpart V of part 422 also 
apply to section 1876 cost plans. Finally, CMS has authority to adopt 
additional contract terms for cost plans (section 1876(i)(3)(D of the 
Act)), MA plans (section 1857(e)(1)) of the Act), 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.
    As we did in the proposed rule, because the changes that CMS is 
finalizing in this section are, unless otherwise noted, applicable to 
MA organizations, Part D plan sponsors, and section 1876 cost plans, we 
collectively refer to these entities in this section as ``plans.''
    In the January 2021 final rule, entitled ``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), we codified much of the 
communications and marketing guidance previously found in the Medicare 
Communications and Marketing Guidelines (MCMG). In this final rule, we 
are codifying additional guidance and standards 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 codifying 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 codifying 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. In the 
proposed rule, we proposed to codify CMS's current guidance for 
additional ID card standards, which has historically been issued in the 
MCMG.
    Comment: Most comments that we received on this proposal were 
supportive. Commenters indicated that including ID cards as required 
materials will ensure consistency for beneficiaries regardless of the 
plan in which they enroll.
    Response: We acknowledge and appreciate the support for this 
provision as well as the awareness of the vital nature of the 
provision.
    Comment: We received a comment that pursuant to the existing 
standards for required materials and context, the ID card would, as a 
required material, be subject to the 12-point font requirement whereas 
CMS guidance has previously excluded ID cards from that requirement. 
Such comment requested

[[Page 27820]]

that we continue to exclude the ID card from the 12-point font 
requirement to which required materials are subject.
    Response: We thank the commenter and acknowledge that it would be 
impractical to require a 12-point font on an ID card. Furthermore, we 
acknowledge that we have previously (in the MCMG) excluded the ID card 
from the 12-point font requirement. In addition, we note that CMS has 
followed the guidance of the Workgroup for Electronic Data Interchange 
(WEDI) in crafting our required formatting for communications 
materials. However, as WEDI does not stipulate any requirements for 
font size, we will not extend our font size requirement to ID cards.
    We are codifying the guidance for ID card requirements under 
Sec. Sec.  422.2267(e)(30) and 423.2267(e)(32) as proposed, except that 
in response to the aforementioned comment we are including an 
additional clarifying at Sec. Sec.  422.2267(e)(30)(vii) and 
423.2267(e)(32)(vii) to exclude the ID cards from the 12-point font 
size requirement under Sec. Sec.  422.2267(a)(1) and 423.2267(a)(1). In 
addition, we have renumbered the remaining required content beginning 
with the Federal Contracting statement, previously 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. In the January 2022 proposed rule, we discussed the 
importance of this disclaimer and the impact of its omission on 
Medicare beneficiaries enrolled in Part D plans that only provide 
access to preferred cost-sharing through a limited number of 
pharmacies.
    Comment: The comments we received on this proposal were supportive.
    Response: We acknowledge and appreciate the support for this 
proposal.
    For the reasons set forth in the proposed rule and in response to 
the supportive comments we received, we are codifying this disclaimer 
requirement at Sec.  423.2267(e)(40), as proposed.
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.  
[thinsp]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.
    Comment: We received comments supporting this proposal.
    Response: We acknowledge and appreciate the support for this 
provision.
    Comment: A commenter noted that CMS did not include the Notice of 
Dismissal of Appeal in part 423. Additionally, CMS has not included the 
Notice of Dismissal of Coverage Request in either part 422 or 423. The 
comment requested that CMS codify both of these notices as indicated.
    Response: This comment is outside the scope of the current rule. 
However, CMS appreciates the observation and will consider this 
suggestion in future rulemaking. We note that the appeal regulations in 
subparts M of parts 422 and 423 (for example Sec. Sec.  422.568(h) and 
423.568(j)) address the content requirements for notices of dismissal.
    In this final rule, after consideration of the comments received in 
response to this proposal and for the reasons described in the proposed 
rule, we are codifying these two requirements as proposed 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
    In the proposed rule, we explained the history of the multi-
language insert (MLI) (a standardized document that informs the reader 
that interpreter services are available in the 15 most common non-
English languages in the United States), CMS's previous requirement in 
the Medicare Marketing Guidelines (MMG) that plans include the MLI with 
certain materials, and why CMS eventually removed from this requirement 
for MA plans, Part D sponsors, and 1876 cost plans because it was 
duplicative of certain notice and tagline requirements implemented by 
the Office for Civil Rights (OCR) in 2016. Specifically, on May 18, 
2016, the OCR published a final rule (81 FR 31375; hereinafter 
referenced to as the section 1557 final rule) implementing section 1557 
of the Patient Protection and Affordable Care Act (ACA) (Pub. L. 111-
148). Section 1557 of the ACA provides that an individual shall not be 
excluded from participation in, be denied the benefits of, or be 
subjected to 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 2016 final rule (81 FR 27778) 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 a 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), CMS proposed an availability of non-
English translations disclaimer. The disclaimer consisted 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

[[Page 27821]]

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 (86 FR 5995). 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 CMS believed deferring 
to OCR's oversight and management of any requirements related to non-
English disclaimers was in the best interest of the Medicare program.
    It is important to note that none of CMS's 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 require 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 complaints in the 
Complaint Tracking Module (CTM) under the term ``language'' and found 
several reporting beneficiary confusion based on a language barrier. In 
retrospect, we believe that solely relying on the requirements 
delineated in OCR's 2020 final rule 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 Medicare benefits 
through these plans, as well as those already enrolled. Ultimately, we 
believe it is counterproductive to have regulatory requirements for 
interpreter services without an accompanying requirement to inform 
beneficiaries that the service is available.
    In the January 2022 proposed rule, we therefore proposed the 
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 
must 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 proposed the 
requirement that plans 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. We also proposed the requirement 
that the MLI be included with all required materials listed in 
Sec. Sec.  422.2267(e) and 423.2267(e). Finally, in the January 2022 
proposed rule, we explained that if OCR were in the future to finalize 
broader or more robust requirements associated with interpreter 
services than what CMS requires and plans adopted those broader or more 
robust OCR requirements, CMS would consider plans compliant with these 
MLI requirements.
    Comment: Most commenters supported this proposal. Many of these 
commenters pointed out that individuals who do not speak English are 
often unaware of their rights. The commenters asserted that having the 
MLI included with required documents was the best way to reach these 
individuals.
    Response: We acknowledge and appreciate the support. As stated 
above, we have reviewed CTM cases and found reported beneficiary 
confusion stemming from not fully understanding materials based on a 
language barrier. While MA organizations, Part D sponsors, and cost 
plans are required to provide translator services, the requirement 
cannot be effective if those organizations do not also inform 
beneficiaries that those services are available. As we consider certain 
required documents to be vital to a beneficiary's understanding of the 
MA, Part D, and cost plan programs, we agree that the requirement to 
include the MLI with those required documents is the best way to reach 
the target audience.
    Comment: Many commenters suggested different ways to implement this 
provision including requiring the MLI to be sent with only specific 
required documents (such as the Summary of Benefits, the Evidence of 
Coverage, and the Annual Notice of Change), requiring the MLI as a 
disclaimer on certain required documents, limiting delivery of the MLI 
to once annually, placing the MLI on the plan's website, and sending 
the MLI as a small flyer with required documents.
    Response: We appreciate the suggested alternate methods. However, 
we believe that requiring the MLI as a separate full-page document that 
is included or provided with all required documents is the best way for 
the MLI to reach the target audience. CMS required plans to provide the 
MLI under similar circumstances for several years before replacing it 
with the language assistance notice and tagline requirements adopted in 
OCR's 2016 final rule. OCR implemented the same dissemination method in 
its section 1557 final rule from July 18, 2016. Between the MLI and 
OCR's analogous language assistance notice and tagline requirements, 
CMS has used this method for over 10 years with positive feedback and 
few complaints. To reiterate, we are again requiring plan delivery of 
the MLI to address the lack of any notification requirement associated 
with the availability of interpreter services for Medicare 
beneficiaries that exists since OCR repealed the notice and tagline 
requirements in its June 19, 2020 final rule.
    Comment: We received a comment on the MLI indicating a fear that 
beneficiaries will not read it as they receive a prohibitive volume of 
paper materials.
    Response: For enrollees whose primary language is not English, we 
are confident, based on historical consumer testing, that they will 
notice a one-page document, prominently displayed with required 
documents, directing them how to access support in their chosen 
language.
    After careful consideration of all the comments received, and for 
the reasons set forth in the January 2022 proposed rule and in our 
responses to the comments, we are finalizing this provision under 
Sec. Sec.  422.2267(e)(31) and 423.2267(e)(33) as proposed.

[[Page 27822]]

4. Third-Party Marketing Organizations
    In the proposed rule, we discussed our concerns regarding third-
party marketing organizations (TPMOs) as well as the reasons for those 
concerns. We also explained that, while we acknowledge that TPMOs can 
serve a role in helping a beneficiary find a plan that best meets the 
beneficiary's needs, additional regulatory oversight is required to 
protect Medicare beneficiaries from confusing and potentially 
misleading activities 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 the plans' behalf. To this end, 
CMS proposed several updates to various sections of parts 422 and 423, 
subpart V.
    First, we proposed 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 Medicare plan or plans to making 
an enrollment decision. In addition, the proposed definition of TPMOs 
specifies 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 provide services to customers 
including an MA or Part D plan or an MA or Part D plan's FDRs. CMS 
specifically solicited 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. Comments revealed that many 
of the commenters thought the definition was too broad. Those 
commenters indicated that they felt the definition would apply to 
entities to whom it shouldn't apply or would be a burden to compliant 
organizations instead of applying compliance actions to deter bad 
actors. There was comment that the definition was too narrow, and that 
there would be bad actors who were not captured by the definition. We 
decided, for the reasons discussed in our below response to these 
comments, that the definition, with clarifying edits described in this 
final rule, is sufficient for now but may choose to revisit it in 
future rule-making if the evolving industry landscape indicates that 
reevaluation is necessary.
    Second, we proposed to codify, in Sec. Sec.  422.2267(e)(41) and 
423.2267(e)(41), the requirement that TPMOs use a standardized 
disclaimer 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.'' As part of this proposal, MA 
organizations and Part D sponsors would need to ensure that any TPMO 
with which they do business, either directly or indirectly, utilizes 
this disclaimer where appropriate. MA organizations and Part D sponsors 
would also need to 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. CMS would not require 
the disclaimer for those TPMOs who truly offer every option in a given 
service area. TPMOs would be required to prominently display the 
disclaimer on their website and marketing materials, including all 
print materials and television advertising that meet the definition of 
marketing. We also would require that 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, the TPMO would be required to 
provide this disclaimer within the first minute of the call. We believe 
the proposed disclaimer would help to reduce the type of beneficiary 
confusion CMS observed when we listened to TPMO-based sales calls.
    Third, we proposed to codify new TPMO oversight responsibilities in 
Sec. Sec.  422.2274 and 423.2274, covering agent, broker, and other 
third-party requirements. These requirements would fall under 
Sec. Sec.  422.2274(g) and 423.2274(g), with the heading ``TPMO 
oversight,'' and would work (when applicable) in conjunction with the 
previously existing FDR requirements in Sec. Sec.  422.504(i) and 
423.505(i). As a part of their oversight responsibilities, plans that 
do business with a TPMO, either directly or indirectly through an FDR, 
would be responsible for ensuring that the TPMO adheres to any 
requirements that apply to the plan. An MA or Part D plan cannot 
purchase the services of a TPMO, and thereby evade responsibilities for 
compliance with Medicare marketing and communication requirements. This 
proposed new requirement that 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. It is the responsibility of the MA organization or Part D 
sponsor to have knowledge of how and from where it (or its FDR) obtains 
leads or enrollments. We also proposed 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. As 
discussed in the proposed rule, MA organizations and Part D sponsors 
may not utilize TPMOs as means of evading their own compliance 
responsibilities, and thus these oversight requirements are intended to 
require plans to ensure that TPMOs adhere to any requirements that 
apply to the plans themselves. Based on this, we are finalizing changes 
to the proposed oversight requirements at Sec. Sec.  
422.2274(g)(2)(iii) and 423.2274(g)(2)(iii) to require that violations 
by TPMOs of requirements that apply to the MA organization or Part D 
sponsor be reported to MA organizations and Part D sponsors, in 
addition to disciplinary actions. These reporting requirements would 
ensure that plans are made aware of all TPMO-associated activities that 
are part of or related to the chain of enrollment.
    Fourth, we proposed to codify a requirement to provide 
beneficiaries with certain notifications associated with TPMO lead 
generating activities. In the proposed rule, we discussed how 
beneficiaries are receiving outreach from sales agents and brokers 
based on previous contact and how this outreach in response to the 
previous contact was not prohibited as unsolicited. We explained the 
potential for bad actors to abuse this situation, and how beneficiaries 
were concerned about how the sales agent or broker had obtained the 
beneficiary's contact information. As part of the proposed rule, plans 
would be required to ensure that TPMOs conducting lead generating 
activities 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. This requirement would help to eliminate 
beneficiary confusion by making the role of lead generating TPMOs more 
transparent.
    Overall, we believe the proposed requirements associated with TPMOs

[[Page 27823]]

will result in greater plan oversight of TPMOs, and in turn, will 
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 new requirements will complement and strengthen 
existing requirements. The finalized disclaimers and notifications will 
ensure that beneficiaries are more informed. Moreover, the more robust 
reporting requirements and oversight we now require will create a 
better mechanism for plans to be made aware when beneficiary-related 
issues arise.
    Comment: We received many comments supporting these proposals. Most 
of the supporting comments indicated the ``severe'' impact of bad 
actors in the TPMO industry on the Medicare beneficiary population and 
the MA and Part D markets. These comments also commended CMS for being 
accountable and taking action to curtail ``predatory'' activities of 
these entities.
    Response: We acknowledge and appreciate the support of these 
proposals.
    Comment: We received a few comments indicating that these proposed 
changes are not sufficient as a whole to protect Medicare beneficiaries 
from the actions of TPMOs. These commenters often suggested that CMS 
develop mechanisms, best practices, or rules to further curtail the 
activities of TPMOs. Other commenters suggested CMS create a reporting 
mechanism specifically for instances where beneficiaries have had 
detrimental experiences with TPMOs.
    Response: We appreciate that the impact of TPMOs on Medicare 
beneficiaries bears further observation and analysis. As proposed, we 
believe that these requirements should reduce the incidence of 
confusing and misleading marketing activities leading to, for example, 
improper enrollments, by making beneficiaries more well-informed. CMS 
has a mechanism, through 1-800 Medicare, for reporting detrimental 
experiences with TPMOs. We review those complaints in our Complaint 
Tracking Module (CTM). CMS also engages in robust surveillance of 
agents associated with TPMOs, monitoring their sales and enrollment of 
beneficiaries. Overall, we have laid the groundwork from which we can 
develop additional rules addressing potentially confusing and 
misleading activities in this space, while acknowledging the 
conscientious performers who act within scope to educate and inform 
beneficiaries of their healthcare options. While we recognize that our 
authority to enforce compliance on TPMOs is limited to MA 
organizations, cost plans, and Part D sponsors, there is room to 
develop additional parameters around TPMOs as we gain a greater 
awareness of their impact on the Medicare insurance landscape. We will 
consider the suggestions made by these commenters as we contemplate 
future rulemaking.
    Comment: We received a comment on this provision indicating that a 
supporting provision further delineating the difference between 
educational and marketing events is necessary.
    Response: We appreciate this comment. It is, however, outside the 
scope of this rule. We will consider this suggestion for future 
policymaking in Sec. Sec.  422.2264(c) and 423.2264(c) as those 
sections provide an explanation of the difference between educational 
events and marketing events.
    Comment: We received comments on this provision providing 
suggestions as to language of the disclaimer the rule requires. Some 
commenters suggested TPMOs be allowed to modify the disclaimer language 
to suit individual situations where the operational systems of the TPMO 
make use of the disclaimer problematic. Some commenters suggested that 
TPMOs be allowed to modify the disclaimer language when reaching out to 
individuals with whom they have a business relationship. Some 
commenters suggested that CMS modify the disclaimer language so that 
entities cannot incorrectly say that beneficiaries will receive their 
full Medicare benefits upon enrollment in an MA plan. Some commenters 
suggested that the language in the disclaimer be more direct, that the 
disclaimer should make it clear that not all plans and benefits are 
available in all service areas. Some commenters stated that CMS should 
require stronger disclaimer language including consideration of 
provider network and availability of current prescription drugs. Other 
commenters suggested that the disclaimer contain language referring 
beneficiaries to other educational tools including Medicare.gov, State 
Health Insurance Programs (SHIPs), and other educational resources.
    Response: We respectfully disagree. CMS carefully considered the 
content and length of this disclaimer, and believes all of it contains 
vital beneficiary information. The potential burden imposed by reading 
or listening to this disclaimer is necessary to ensure that plans, and 
TPMOs engaged in marketing activities on their behalf, are not 
providing information that could mislead beneficiaries into joining 
plans contrary to their intention for reaching out, or do not best meet 
their needs. For example, the TPMO disclaimer makes it clear that the 
TPMO does not offer all available plans, and that beneficiaries must 
call 1-800 Medicare or visit Medicare.gov for that information. CMS 
believes it provides the most pertinent information without including 
more content than a beneficiary can reasonably absorb and understand, 
especially during the limited duration of a television or radio 
advertisement. Requiring disclaimer language such as provider networks 
availability of current prescription drugs, or language referring 
beneficiaries to other educational resources, while good information, 
could cause the beneficiary to miss the most pertinent information 
directly related to the sales and enrollment activities of TPMOs. 
Furthermore, requiring a standardized notice ensures that all 
beneficiaries receive the same message, and assists CMS by allowing 
easier and more robust oversight of that message. The commenters had 
suggested modifications that either narrowed the scope of the 
disclaimer beyond what we had intended, or altered the disclaimer such 
that it no longer matched our intentions. While we received no specific 
examples of what operational limitations make compliance challenging, 
we will review specific requests and will consider allowing 
modifications accordingly. We do not believe that having an existing 
relationship with a beneficiary reduces the need for him or her to 
receive the exact information in this disclaimer. Regarding commenters 
who are concerned about the disclaimer not conveying that enrollees 
will not receive full benefits upon enrollment, please note that the 
requirements to not provide inaccurate or misleading information that 
currently apply to MAOs and Part D sponsors (Sec. Sec.  
422.2262(a)(1)(i), 423.2262(a)(1)(i)) also apply to TPMOs under the 
proposed TPMO oversight requirements. What we proposed and are 
finalizing does match what we intended in both definition and scope.
    Comment: We received several comments on the definition of TPMOs, 
including comments requesting additional clarity about what types of 
entities would be included within this definition. Some commenters 
indicated that the definition of TPMOs was too broad such that the 
provisions would apply unfairly to different actors in the Medicare 
Advantage and Part D plan sales landscape including call center 
employees and advocates Additionally, some commenters believed the 
proposed definition of TPMOs was too

[[Page 27824]]

narrow. Specifically, some commenters suggested that agents and brokers 
should be included in the definition of TPMOs. Other commenters 
suggested that agents and brokers should not be included in the 
definition of TPMOs. Some commenters suggested we limit the definition 
of TPMO to those entities with whom plans have a direct relationship. 
Some commenters suggested we limit the definition of TPMO to those 
entities who are able to offer all plans in a service area. Some 
commenters suggested we limit the definition of TPMO to those entities 
who are able to offer only a specific plan within a service area. Some 
commenters suggested that the definition of TPMO be limited to only 
those entities who are contractually obligated to provide services to a 
plan.
    Response: We believe that the definition is clear that TPMOs 
include all third-party marketers who work on behalf or provide 
services to plans. The definition is intentionally broad to ensure MA 
and Part D plans properly oversee and are accountable for any entity 
who profits in any manner from the enrollment of a beneficiary into an 
MA or Part D plan. As defined in Sec. Sec.  422.2260 and 423.2260, this 
rule would apply to organizations, as well as agents and brokers, that 
are compensated to perform lead generation, marketing, sales, and 
enrollment related functions as a part of the chain of enrollment. 
TPMOs may be a first tier, downstream or related entity (FDRs), as 
defined under Sec. Sec.  422.2 and 423.4, but may also be entities that 
are not FDRs but provide services to customers including an MA 
organization or Part D sponsor or an MA organization's or Part D 
sponsor's FDR. We have carefully considered the wording of this 
provision as to the type of entities it encompasses. As described in 
the proposed rule, our intent is to cover entities that are conducting 
marketing and/or enrollment activities that result in a beneficiary's 
enrollment in a Medicare plan, and the definition of TPMO is 
deliberately broad to accomplish that. With respect to the comments 
regarding the inclusion of individual agents and brokers in the 
definition of TPMO, we note that the proposed definition of TPMO 
included FDRs, which CMS has historically interpreted to mean 
individual agents and brokers, as well as organizational entities (72 
FR 68704). However, because our intention to include individuals 
including independent agents and brokers was not sufficiently clear, we 
are finalizing the definition of TPMO at Sec. Sec.  422.2260 and 
423.2260 with an update to clarify that the definition includes such 
individuals as well as organizations. In addition, we note that 
definition of TPMOs in the proposed rule included incorrect citations 
when referencing the regulatory definitions of first tier, downstream, 
or related entities. These incorrect citations at Sec. Sec.  422.504(i) 
and 423.505(i) have been corrected in this final rule to correctly 
refer to Sec. Sec.  422.2 and 423.4. We will explore the definition in 
future rulemaking if we feel that the landscape of the industry evolves 
such that the definition we are finalizing requires reevaluation.
    After careful consideration of all the comments received, and for 
the reasons set forth in the January 2022 proposed rule and in our 
responses to the comments, we are finalizing the proposed changes to 
amend part 422 subpart V and part 423 subpart V with the following 
modifications. We are updating the TPMO oversight requirements at 
Sec. Sec.  422.2274(g)(2)(iii) and 423.2274(g)(2)(iii) to make clear 
that violations by TPMOs of requirements that apply to the MA 
organization or Part D sponsor must be reported to MA organizations and 
Part D sponsors, in addition to disciplinary actions. We are updating 
the definition of TPMOs at Sec. Sec.  422.2260 and 423.2260 to include 
individuals such as independent agents and brokers. We are making a 
technical correction to the definition of TPMO at Sec. Sec.  422.2260 
and 423.2260 to include correct citations to the definitions of FDRs at 
Sec. Sec.  422.2 and 423.4. Finally, we are adding a technical 
correction that clarifies that ID cards as required documents are 
exempt from the requirement to have all text in 12-point font. We are 
finalizing all the other provisions in this section as proposed.
    To reiterate and summarize, the 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), 423.2265(b)(14), 
422.2265(b)(14), and 423.2265(b)(15) 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. 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 adopts 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 an MA or 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 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

[[Page 27825]]

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 proposed 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. 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 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.
    The proposed rule discussed how CMS originally modeled the Medicare 
MLR reporting format on the tools used to report commercial MLR data, 
in keeping with our 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. The proposed rule also explained how, as part 
of an initiative to reduce the regulatory burden on private industry, 
we later amended the reporting requirements by scaling back the amount 
of MLR data that MA organizations and Part D sponsors submit to CMS on 
an annual basis, starting with CY 2018. Under current Sec. Sec.  
422.2460 and 423.2460, for CY 2018 and subsequent contract years, MA 
organizations and Part D sponsors are only required to report each 
contract's MLR and the amount of any remittance owed to CMS; they are 
no longer required to submit the underlying data needed to calculate 
and verify reported MLR and remittance amount, if any. 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, 16675), which appeared in the April 16, 
2018 Federal Register (hereinafter referred to as the April 2018 final 
rule) and finalized the current MLR reporting requirements, we 
expressed our belief that we would still be able to effectively oversee 
MA organizations' and Part D sponsors' compliance with the MLR 
requirements by relying solely on audits, as authorized under 
Sec. Sec.  422.2480 and 423.2480.
    As discussed in greater detail in the proposed rule at 87 FR 1903 
through 1904, 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. As 
noted in the proposed rule at 87 FR 1905, we believe 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, and 
we anticipate 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.\87\ For these reasons, we proposed to reinstate 
the detailed MLR reporting requirements that were in effect for CYs 
2014 through 2017. In addition, we proposed to collect additional data 
on certain categories of expenditures, and to make conforming changes 
to our data collection tools, which is discussed in section II.G.3. 
later in this final rule.
---------------------------------------------------------------------------

    \87\ 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).

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

[[Page 27826]]

    Comment: Many commenters agreed with our proposed reinstatement of 
the MLR reporting requirements and believe reinstating these 
requirements will provide transparency to beneficiaries and the public.
    Response: We appreciate the support.
    Comment: Some commenters expressed opposition to the proposed 
reinstatement of the Medical Loss Ratio reporting requirement that was 
previously in effect for contract years 2014-2017. These commenters 
state that this proposal will add administrative burden. Several 
commenters expressed concern that more detailed MLR reporting for 
supplemental benefits will add burden and administrative costs for MA 
organizations and Part D sponsors. Commenters suggested that CMS 
require a single consolidated report for supplemental benefits costs 
rather than a separate report for each benefit. A majority of these 
commenters suggested that CMS maintain the current simplified MLR 
reporting requirements that have been in effect since 2018.
    Response: We appreciate the feedback. We proposed to reinstate the 
collection of detailed MLR reporting requirements that were in effect 
for CYs 2014 through 2017 to improve transparency and oversight 
concerning the use of Medicare Trust Fund dollars. This requires 
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. We address the collection of more detailed data 
about categories of supplemental benefits in section II.G.3. of this 
final rule.
    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 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.
    In developing the MLR reporting format, CMS modeled the data 
collection on tools used to report commercial MLR data. This was in 
keeping with a general policy of modeling the data collection on tools 
used to report commercial MLR data, with modifications for Medicare-
specific needs in order to limit the burden on organizations that 
participate in both markets, and to make commercial and Medicare MLRs 
as comparable as possible for comparison and evaluation purposes.
    Additionally, given the minimal data we currently receive from MA 
organizations and Part D sponsors, 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. 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 
($13.8 million per year) would negate the savings that the April 2018 
final rule estimated would result from the changes to the MLR reporting 
requirements ($1.5 million per year). Additional information on the 
projected cost and burden estimates of auditing MLR reports can be 
found in the Regulatory Impact Analysis (RIA) pages.
    Given that MA organizations and Part D sponsors are already 
tracking expenses by line of business and contract in order to comply 
with our current regulations and account for supplemental benefit 
expenditures for both internal accounting and bid development purposes, 
we estimate that the additional start-up and ongoing costs and time 
burden for submitting detailed data will be moderate. 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 and 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. Please see additional discussion of these costs in the 
Collection of Information Requirements section of this rule.
    We are finalizing this provision without modification.
3. 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 final rule, we proposed to 
amend our regulations to reinstate the MLR reporting requirements that 
were in effect for CYs 2014 through 2017, with some modifications. 
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 proposed 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 
proposed 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.
    The proposed rule noted that, 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, with 
certain changes. The proposed rule, at 87 FR 1907, discussed the three 
types of changes that we intend to make to the MLR Reporting Tool:
     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. For example, we will add categories for fraud 
reduction expenses and medication therapy management programs in the 
section for Activities that Improve Healthcare Quality,

[[Page 27827]]

consistent with changes in the April 2018 final rule that redefined 
these categories of expenditures as quality improvement activities (83 
FR 16670 through 16673). Similarly, we will design the MLR Reporting 
Tool to automatically calculate and insert the medical savings account 
(MSA) deductible factor, added to Sec.  422.2440 in a June 2020 final 
rule (85 FR 33908).
     Second, we will separate out certain items that are 
currently consolidated into or otherwise accounted for in existing 
lines of the MLR Reporting Tool. For example, we will 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.
     Third, we will separate out the single line in the MLR 
Report 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 Part 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.
    The proposed rule noted our intention 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 solicited 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).
    The proposed rule discussed our intention to have MA organizations 
report expenditures for 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) on multiple lines of the MLR 
Reporting Tool, which will represent different types or categories of 
supplemental benefits. We explained that 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. The 
proposed rule also stated 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 did not 
propose to require separate reporting of Part D supplemental benefit 
expenditures (that is, they would continue to be reported combined with 
other Part D expenditures).
    The proposed rule explained that 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 supplemental benefits. As part of 
reinstating more detailed MLR reporting, the proposed rule described 
collecting data on claims incurred for certain supplemental benefits 
(that is, benefits not covered by Part 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). 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))

    In the proposed rule at 87 FR 1907 through 1908, we discussed the 
factors that we took into consideration in compiling the list of 
supplemental benefit types and categories in the proposed rule. We 
solicited 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 noted 
that we were interested in feedback that addressed 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 previously listed benefit types or categories into 
larger categories.
    We received some comments requesting that requesting that CMS 
either collapse or expand the proposed supplemental benefit categories. 
As discussed in our response to these comments, we believe it is more 
appropriate for CMS to retain flexibility to modify the scope of data 
fields and the specific list of supplemental benefit categories 
required to be reported on the MLR Reporting Template. Maintaining this 
flexibility will allow CMS to collect data that is sufficiently 
detailed to enable us to understand benefit expenditures and verify and 
increase accountability for the accuracy of MLR calculation. We are 
finalizing the amendments to Sec. Sec.  422.2460(a) and 423.2460(a) to 
provide us with the flexibility to modify the scope of data fields and 
categories required for supplemental benefit expenditures. The intent 
of this rule is not to create a more detailed but static MLR report; 
rather this rule is intended to enable reporting requirements that 
support the program needs, such as supporting MLR calculation, 
verifying data reporting accuracy, gaining insight into supplemental 
benefit policies, and providing transparency into program expenditure 
allocation.
    In considering the scope of data fields and list of supplemental 
benefit categories for reporting we will take into account the 
following four factors, which were previously included in the proposed 
rule in setting forth our rationale for the list of supplemental

[[Page 27828]]

benefit categories. First, data elements and categories should enable a 
thorough reporting of data elements in categories that support MLR 
calculation, reduce errors in reporting, and increase our ability to 
verify data reporting accuracy. Second, data elements and categories 
for supplemental benefits should be selected to provide transparency 
into how MA program payments are allocated and may focus on specific 
benefits, such as the non-primarily health related supplemental 
benefits offered to the SSBCI population, for the purposes of providing 
CMS with information on the impact of a specific benefit change. Third, 
we will take 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, looking at CY 2022 
for developing the CY 2023 Reporting Tool), 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 proposed 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)). 
Fourth in establishing the scope of data fields and categories for 
supplemental benefits, we acknowledge the trade-offs between the 
additional information gained from changing requirements and the 
additional burden placed on MA organizations and Part D sponsors 
brought about by changing requirements. We will take the balance 
between the increased value of additional information and the increased 
reporting burden into account in developing requirements on the scope 
of data fields and specific list of supplemental benefit categories.
    Modifications to the MLR data requirements for supplemental 
benefits expenditures will be set forth in a revision to the MLR 
Paperwork Reduction Act package (CMS-10476, OMB 0938-1232) and made 
available to the public for review and 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.
    The list of supplemental benefits included in the proposed rule 
should be viewed as an example of categories of supplemental benefits 
CMS is interested in collecting and is based on the standards described 
above. We will set forth data reporting requirements in a revised 
package as required by the PRA. This package will be published in the 
Federal Register and be available for public comment.
    In addition, the proposed rule discussed how 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 proposed to collect, including 
the additional data we proposed 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. The proposed rule noted that, consistent with 
Sec. Sec.  422.2490(c) and 423.2490(c), the release of the MLR data we 
proposed to collect for a contract year would occur no sooner than 18 
months after the end of the applicable contract year, and would be 
subject to the exclusions in Sec. Sec.  422.2490(b) and 423.2490(b). We 
proposed to amend Sec.  422.2490(b)(2) by adding new paragraph 
(b)(2)(ii), which will 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 will 
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 
will be reported in the Dental line in the MLR Reporting Tool, and that 
combined amount (assuming both plans had expenditures in the Dental 
category) will not be excluded from our public data release. As stated 
in the proposed rule, 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 solicited 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 also solicited 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.
    Comment: A number of commenters supported CMS' efforts to provide 
additional transparency as part of the proposal to reinstate the 
detailed MLR reporting previously in effect for contract years 2014-
2017. They believed more detailed reporting will demonstrate the value 
of services being offered to beneficiaries, as included in plan bids, 
and provide transparency around how rebate dollars are being put to use 
by plans.
    Response: We appreciate the support.
    Comment: Some commenters were opposed to the public release of MLR 
data related to amounts paid for incurred expenditures for supplemental 
benefits. These commenters do not believe information on expenditures 
on supplemental services will help beneficiaries effectively 
distinguish the value offered by different plans.
    Response: 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,'' which appeared in the Federal Register on November 15, 
2016 (81 FR 80170) (hereinafter referred to as the CY 2017 PFS final 
rule), we adopted Sec. Sec.  422.2490 and 423.2490 to authorize the 
release of MLR reports along with a regulation authorizing release of 
MA bid data. In that rule, we explained the rationale for releasing MA 
and Part D MLR reports,

[[Page 27829]]

which included increasing transparency and access to Federal data sets, 
alignment with the public release of MLR data of commercial issuer, 
facilitating the public evaluation of the evaluation of the MA and Part 
D programs by providing insight into the efficiency of health insurers' 
operations, providing beneficiaries with information that can be used 
to assess the relative value of Medicare health and drug plans, and 
enhancing the competitive nature of the MA and Part D programs. 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. The January 2022 
proposed rule acknowledged that this existing regulation for disclosure 
of MLR reports would include disclosure of the more detailed reports we 
intended to require beginning with CY 2023. We discussed in that prior 
rulemaking how we believe that protecting against disclosures of 
individual beneficiary information and information at the plan level 
would be sufficient to protect against disclosure of proprietary or 
confidential commercial information. Disclosure of the additional 
details about MA supplemental benefits is consistent with the rationale 
and purpose of Sec. Sec.  422.2490 and 423.2490. Public access to 
information on supplemental benefit spending by benefit type or 
category may be a valuable tool for consumers (to make their enrollment 
decisions based on a comparison of the relative value of the 
supplemental benefits actually provided by different MA organization), 
researchers (to potentially use this data to provide insight on trends 
in supplemental benefit coverage in the MA programs or to better 
understand how managed care in Medicare differs from managed care for 
non-Medicare populations), and the public (to have information at an 
aggregate level about expenditures and benefits in the Medicare 
program).
    In the proposed rule titled ``Medicare Program; Revisions to 
Payment Policies Under the Physician Fee Schedule and 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) we enumerated the benefits CMS associated with the 
release of Part C and Part D MLR data to the public. 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 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.
    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 of 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. Further, while not every 
beneficiary will use the MLR data as part of making enrollment 
decisions, we believe providing access to more detailed information 
about expenditures on supplemental benefits, as reported in the MLR 
Reporting Tool, will provide a means for beneficiaries to determine the 
value provided by MA plans.
    Overall, we believe that the release of incurred expenditures for 
supplemental benefits is consistent with the rationale explained in the 
release of MLR reporting in the 2016 final rule. We do not believe it 
is necessary or appropriate to create exceptions from this existing 
regulation to exclude disclosure of the data that will be released for 
incurred expenditures for supplemental benefits, especially when that 
data will be provided at an aggregate level without risk of disclosing 
specific plan-level costs that might be used to put a particular MA 
plan at a competitive disadvantage.
    Comment: A commenter cited that reverting to the requirement to 
submit more detailed expenditure data on the MLR and the newly added 
requirement to submit expenditure data on supplemental benefits, in 
particular, is duplicative of data in the bid pricing tool (BPT).
    Response: In our view, the data collected during the bid process 
and the detailed data collected through the MLR report are not fully 
comparable. The data collected on the BPT is at the plan benefit 
package (PBP) level while MLR data is reported at the contract level. 
MA organizations and Part D sponsors submit bids at the plan level and 
typically use historical spending and utilization as the basis to for 
their bid projections for the applicable year. For example, MAOs this 
June will use 2021 spending and utilization as the basis for trending 
forwarding their bids to the 2023 plan year. If a plan is new or the MA 
organization or Part D sponsor expects a significant change in the 
plan's 2023 enrollment or risk profile, the MA organization or Part D 
sponsor can use historical 2021 experience from another plan or group 
of plans that the MA organization or Part D sponsor expects to have had 
a similar enrollment/risk profile. For this reason, there is not always 
a one-to-one relationship between the historical plan experience used 
for bidding for a specific plan and the plan's expenditures in the 
payment year. For MLR reporting, MAOs submit historical information for 
a specific contract and

[[Page 27830]]

specific contract year, not at the PBP level, so the detailed MLR data 
is not duplicative of the bid data. In addition, we intend to structure 
the MLR reporting so that data on supplemental benefits in the detailed 
MLR report are more granular than the broad supplemental benefit 
categories used in the BPT. The more detailed categories of reporting 
for supplemental benefits will provide increased transparency regarding 
the expenditures on supplemental benefits and enable us to assess the 
impact of specific policies, such as the provision of non-primarily 
health related supplemental services to the SSBCI population. Moreover, 
because the time lag between submission and release of public use files 
for the MLR data is significantly shorter than the time lag between 
submission and release of public use files of bid data, users have 
access to more recent data with the MLR.
    The MLR data is typically released for more recent contract years 
than the BPT data. Under Sec.  [thinsp]422.272(b), MA bid pricing data 
is released for a contract year that is at least 5 years prior to the 
upcoming calendar year. In comparison, according to Sec.  422.2490, MLR 
data cannot be released earlier than 18 months after the end of the 
applicable contract year. CMS anticipates that for future years, MLR 
data will be released for more recent years than MA bid pricing data 
due to these timing requirements.
    Comment: Commenters stated that the release of expenditure 
information on supplemental benefits could risk revealing proprietary 
cost information and may threaten current MA market competition since 
supplemental benefits vary between plans, which helps drive 
competition. Commenters note that given the flexibility around the 
types of supplemental benefits MAOs may offer and the variety of 
benefit and payment structures used to offer these benefits, the cost 
information provided is not ``apples to apples'' across contracts and 
is not useful for comparison by beneficiaries. As an example, a 
commenter noted that if only two or three plans in a given area offered 
a particular benefit category and that information were made publicly 
available, each plan could readily assess the other's costs and could 
result in core business strategy and other highly proprietary cost 
information being revealed.
    Response: Currently, Sec. Sec.  422.2490(b)(2) and 423.2490(b)(2) 
prohibit release of information that is reported in the MLR reports at 
the plan level. Our proposal, which we are finalizing, amends that 
provision to also protect amounts that are reported as expenditures for 
a specific type of supplemental benefit where the entire reported 
amount represents costs incurred by the only plan under the contract 
that offers that benefit. The data will be aggregated at the contract 
level, rather than at the PBP level, which we believe will prevent 
releases of proprietary cost information. Additionally, line items in 
the detailed MLR reporting will include aggregation at the provider 
type or service level (for example, different types of dental benefits 
would be reported together as a single line item) in the general 
supplemental benefit categories. Many MA and Part D contracts cover 
large or multiple geographic regions or areas and are made up by 
several plans, avoiding the risk of releasing plan-specific data. As 
commenters note, the flexibility commenters describe around the types 
of supplemental benefits MAOs may offer and the variety of benefit and 
payment structures used to offer supplemental benefits limits the 
comparability of the data across contracts and therefore, mitigates the 
risk of revealing proprietary cost information through the release of 
the supplemental benefit expenditures data. Moreover, as noted in the 
proposed rule, 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. In creating a list of potential categories of 
supplemental benefits for the more detailed MLR reporting, we did not 
include supplemental benefit types or categories offered by less than 
10 percent of all MA plans in 2021, with the exception of SSBCI that 
are not primarily health related, in order to protect individual plan 
information. Because of the potential variation in coverage of 
different items and services, such as the non-primarily health related 
services provided to the SSBCI population, which can range from indoor 
air quality equipment to transportation to services supporting self-
direction depending on the needs of an individual enrollee whose 
overall function or health is reasonably expected to be improved by the 
item or service, we do not believe that the aggregate data available in 
the MLR reports about expenditures in this category could reveal 
confidential business strategies or cost information of an MA 
organization. We will also review the expenditure information on 
supplemental benefits to gain a better understanding of the data and 
analyze the number of contracts that include a given supplemental 
service and take this into consideration in creating files for public 
use.
    Additionally, according to Sec. Sec.  422.2490(b)(1) and 
423.2490(b)(1), narrative descriptions that MA organizations submit to 
support the information reported to CMS pursuant to the reporting 
requirements at Sec.  422.2460, such as descriptions of expense 
allocation methods, are excluded from MLR data released to the public.
    Finally, consistent with Sec. Sec.  [thinsp]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.  [thinsp]422.2490(b) and 423.2490(b). For example, CMS does 
not release the narrative for the specifics around spending for any 
aspect of the MLR, including supplemental benefits per Sec. Sec.  
422.2490(b)(1) and 423.2490(b)(1). Finally, we believe the time lag 
between submission of data for a given contract year and public release 
of the data mitigates the potential threat to MA market competition on 
the basis of supplemental benefits.
    Comment: Several commenters cited the challenges of reporting more 
detailed information on supplemental benefits, and requested CMS delay 
implementation.
    Response: We do not believe that there are sufficient challenges 
for MA organizations with regard to reporting the more detailed MLR 
information to delay implementation beyond the MLR report due for CY 
2023. 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 order to ensure 
accurate MLR reporting, for bid development purposes, and for internal 
accounting and planning purposes, MA plans presumably already collect 
detailed information on supplemental benefit expenditures. Given that 
plans will submit the detailed MLR reports at end of 2024 for contract 
year 2023, we believe plans will have adequate time to prepare for 
reporting additional

[[Page 27831]]

requirements in the MLR; therefore, a delay in implementation is not 
warranted.
    Comment: A few commenters raised concerns regarding quality 
improving activities (QIA) and requested that CMS ensure that QIA 
expenses represent actual value provided for consumers' premium dollars 
and that plans do not abuse the removal of the ``fraud reduction 
expenses'' cap.
    Response: We appreciate the commenters concerns and remind 
commenters that the regulations at Sec. Sec.  422.2430(a)(3) and 
423.2430(a)(3) require QIA to be grounded in evidence-based practice 
that can be objectively measured. Under the current MLR reporting 
requirements, CMS is unable to determine the extent to which QIA 
expenses are actually spent on quality improving activities. The more 
detailed reporting reinstates requirements that plans submit narratives 
that explain their QIA methodology (for example, there is a line on 
reporting dedicated to spending on fraud reduction specifically). We 
believe these reinstated measures will prevent plans from misusing the 
removal of the fraud reduction cap.
    Comment: A few commenters supporting CMS' efforts to reinstate the 
detailed MLR reporting urged CMS to clarify how health plans should 
capture and report such information and believed that the claims-based 
reporting framework may not be appropriate for all supplemental 
benefits. Commenters stated that using a per member per month (PMPM) 
reporting system would better illustrate what financial support a plan 
is providing for such benefits.
    Response: We appreciate the feedback. A per member per month (PMPM) 
reporting of expenditures is not consistent with the general 
calculation of the medical loss ratio or the method of reporting 
expenditure information. For the purposes of the MLR, MA organizations 
and Part D sponsors submit data on incurred claims for each contract, 
regardless of the type of payment arrangement with providers. The 
medical loss ratio is calculated by dividing total expenditures (as 
defined by the MLR instructions and reported to CMS) by total revenues 
(as defined by the MLR instructions and reported to CMS) for a given 
contract for a given contract year. A per member per month (PMPM) 
reporting for selected service categories, such as supplemental 
services, as suggested by the commenter, would not be suitable for the 
purpose of the MLR report. We are finalizing the detailed MLR 
reporting, including flexibility for CMS to change the specific line 
items and supplemental benefit categories that are reported by MA 
organizations.
    Comment: A few commenters recommended expanding reporting for the 
``Non-Primarily Health Related Items that are Special Supplemental 
Benefits for the Chronically Ill (SSBCI)'' category, and suggested 
adding sub-categories such as food, transportation, and housing, which 
align with the broader areas of focus for CMS and health plans.
    Another commenter recommended that CMS consolidate the ``Wellness'' 
and ``Fitness Benefit'' categories, thus establishing a ``Fitness and 
Wellness Benefit'' category, which would incorporate the programs that 
use a more holistic approach to the health and wellbeing.
    A commenter requested CMS provide clarification on how the 
``Fitness Benefit'' should be classified in the MLR reporting, given 
that currently ``memory fitness'' supplemental benefits are filed as a 
specific category under the ``Fitness Benefit'' category, as are 
physical fitness supplemental benefits and wearable device supplemental 
benefits. They proposed CMS require plans to break out their MLR data 
across the three categories of fitness benefit, to provide data that 
evaluate how these very distinct types of fitness benefit are being 
implemented.
    Response: We appreciate the feedback related to expanding and 
collapsing supplemental benefit categories and line items. As noted 
above, maintaining flexibility to modify the scope of data fields and 
categories for MA supplemental benefits will allow CMS to collect data 
that is sufficiently detailed to enable us to understand benefit 
expenditures, verify and increase accountability for the accuracy of 
MLR calculation and accommodate evolving policy and program needs. We 
describe four standards we will use to determine supplemental benefit 
data reporting requirements above. One of those standards is the 
percentage of MA plans that offer each type of supplemental benefit.
    With regard to the requests for more detailed reporting for the 
``Fitness'' and ``Non-Primarily Health Related Items that are Special 
Supplemental Benefits for the Chronically Ill (SSBCI)'' categories, as 
noted in the proposed rule, we proposed to limit separate reporting of 
expenditures for supplemental benefit types or categories if these 
services were offered by less than 10 percent of all MA plans in 2021. 
The exception was the category of services for the SSBCI population 
that are not primarily health related; we included this category in the 
proposed rule 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 will 
continue to take the concentration of each type of supplemental benefit 
category offered into consideration in proposing the list of 
supplemental benefit categories in the PRA package.
    Similarly, with regard to request to combine the ``Wellness'' and 
``Fitness'' benefit categories, we will also consider the standard 
previously described related to the percentage of MA plans offering 
these specific categories of supplemental benefits.
    Generally, as noted previously in this section II.G.3. of the final 
rule, we will consider the other standards related to administrative 
burden, data transparency, and data accuracy in developing the proposed 
reporting requirements in the PRA package.
    CMS will propose the MLR data requirements in a PRA package that 
will be published in the Federal Register for public comment. The 
comment period is 60 days, during which plans and the public may 
comment on the MLR data reporting requirements. CMS will take these 
comments into consideration in developing final MLR data reporting 
requirements, which will be published in final PRA package.
    After consideration of the comments and for the reasons outlined in 
the proposed and final rules and our responses to comments, we are 
finalizing the proposed amendments to Sec. Sec.  422.2460(a) and (b) 
and 423.2460(a) and (b) without modification. We do note for readers 
that the MLR report will be subject to PRA processes and encourage the 
submission of comments related to reporting requirements and the 
structure of MLR reporting once the PRA package is posted for public 
comment.
    In addition, we are finalizing the requirement for MA organizations 
to separately report expenditures for 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) on multiple lines 
of the MLR Reporting Tool, which will represent different types or 
categories of supplemental

[[Page 27832]]

benefits. Requiring MA organizations to account for their supplemental 
benefit expenditures by benefit type or benefit category will serve 
program purposes, such as providing more transparency into how the MLR 
is being calculated, and assisting 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. We did not 
propose a separate reporting of Part D supplemental benefits 
expenditures and continue to believe that a separate reporting of Part 
D supplemental benefits expenditures is not needed at this time. We 
will set forth detailed reporting requirements through the PRA process 
as noted previously.
4. 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 proposed 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 proposed to amend this paragraph to note 
that it is subject to an exception in new paragraph (e), which as 
proposed will 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) will 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.
    As explained in more detail in the proposed rule at 87 FR 1908 
through 1909, we characterized this as a clarifying amendment because 
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 is based on the contract year revenue 
figure available at the time of reporting, and is not subject to change 
if the contract year revenues increase or decrease through adjustments 
that take place in a future year. The proposed rule at 87 FR 1909 
discussed this requirement at Sec. Sec.  422.2460(d) and 423.2460(d) in 
the context of other provisions in our MLR regulations. We believe this 
discussion provides additional support for our position that we did not 
intend to prohibit ourselves from collecting or considering additional 
or corrected MLR data submitted to address deficiencies or inaccuracies 
in the original annual MLR submission required under Sec. Sec.  
422.2460 and 423.2460. Specifically, if, based on the data available at 
the time of the original MLR submission, or on the data that should 
have been available at the time of the original MLR submission, the MAO 
or Part D sponsor submits an MLR report or data submission that 
contains errors or omissions, the MA organization or Part D sponsor 
must notify CMS of the incorrect report submission. CMS will review and 
may require a resubmission.
    The proposed rule also noted at 87 FR 1909 that a prohibition on 
any and all corrections or resubmissions would be contrary to 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).
    Comment: A commenter requested additional clarification on CMS' 
technical changes and proposal for submitting corrections on MLR data. 
The commenter requested CMS clarify what changes and payment 
reconciliations would result in requiring an organization to resubmit 
MLR information and the types of MLR changes that CMS expects plans to 
report. Further, the commenter requested clarification on any proposed 
timeline or timing limitations for making changes and how that may 
correspond with potential audits. The commenter requested further 
clarification on the materiality thresholds that would trigger the need 
for a refiling, and examples of what criteria would necessitate a 
refiling to improve plan compliance. Another commenter expressed 
concern that requiring MLR corrections as a result of ongoing 
adjustments, such as direct and indirect remuneration (DIR) adjustments 
that can be made for years after the initial DIR submission, could 
require refiling of MLR information for several years. This commenter 
also asked about the process by which an MA organization or Part D 
sponsor would resubmit an MLR report.
    Response: The general concept underlying the resubmission of an MLR 
report remains unchanged from our original intent in the May 2013 
Medicare MLR final rule. In the proposed rule, we stated 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. We also stated 
in the proposed rule that our remarks in the 2013 Medicare MLR proposed 
and final rules made it clear that we 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. We believe that the remittances owed based on a 
failure to meet the MLR standard should be based on the revenue and 
expenditure figures at the time of the report, and should not be 
subject to change if this revenue or expenditure figure is decreased or 
increased in a future year. If the revenue or expenditure figures 
increase or decrease as the result of an omission or other error 
committed by the MA organization or Part D sponsor, then the entity 
must notify CMS and may be required to resubmit the MLR report. We 
understand the commenter's concerns regarding ongoing regularly 
occurring processes that affect payments, such as the reopenings of 
Part D payment reconciliation; however, this requirement for notifying 
CMS of errors in the MLR report does not extend to such adjustments 
that occur after the MLR report is submitted and finalized. 
Furthermore, payment reconciliations applicable for a contract year 
that occur after the contract year MLR report is submitted and 
finalized would not trigger the resubmission of that MLR report. Based 
on our prior experience, we do not anticipate that the identification 
and reporting to CMS

[[Page 27833]]

of issues in an MLR report will be commonplace. If we see that 
organizations are re-stating or correcting MLR submissions that are 
related to MLR reports that were submitted a number of years ago, then 
we will revisit this issue. We decline to set a materiality threshold 
at this time and as we state previously, CMS will review on a case-by-
case basis instances in which an MLR report may need to be resubmitted. 
If CMS decides that an MLR report should be resubmitted, we will 
provide entities with instructions on how to resubmit at that time.
    We assume the commenter who asked about audits is referring to our 
standard desk review of the MLR reports described at Sec.  422.2460. 
The resubmission of MLR reports described herein is separate from 
reporting issues detected through the standard desk reviews of MLR 
reports. If an error is detected during a desk review, the MLR report 
is not considered final until it has been corrected and resubmitted and 
passes the desk review.
    Comment: A commenter requested that CMS confirm whether 
resubmission of an MLR report and/or data may be initiated by CMS only 
or if resubmission may be initiated by a MA organization or Part D 
sponsor.
    Response: CMS confirms that MLR resubmissions may be initiated by a 
MA organization, Part D sponsor, or CMS. The regulations we are 
finalizing at Sec. Sec.  422.2460(e) and 423.2460(e) specify that CMS 
can either require or allow an MLR resubmission. We note that upon 
notification by an MA organization or Part D sponsor of an error in 
reporting, CMS will work with the reporting entity to gather additional 
information as necessary and determine whether a resubmission of the 
MLR report is required.
    Comment: A commenter stated that if a plan were at or around the 85 
percent threshold when it filed its report, it would be disincentivized 
from identifying and collecting any erroneous payments after the data 
submission deadline for fear of subsequently revising its claims 
estimates, falling below 85 percent, having to refile, and potentially 
receiving an enrollment penalty.
    Response: It is incumbent upon the MA organization or Part D 
sponsor to submit data that is complete, accurate, and truthful.
    MA organizations and Part D sponsors that inaccurately report 
revenues or expenditures in an MLR filing, taking into account payment 
policy that was in effect during the contract year and payment amounts 
that the plan received for that contract year prior to the submission 
of the MLR report, may be required, as determined by CMS, to resubmit 
the MLR data for the given contract year. For example, if MA 
organizations and Part D sponsors identify errors (such as double 
counting, math errors, or misclassification of a type of revenue or 
expenditure that is discovered after submission of an MLR report), the 
organization should contact CMS and may be required to refile as 
determined by CMS. Additionally, if an MA organization or Part D 
sponsor develops estimates of revenues or expenditures in preparing the 
MLR report that are inconsistent with payment policy or MLR guidance in 
place at the time of submission of the report, the MA organization or 
Part D sponsor must notify CMS.
    After consideration of the comments and for the reasons outlined in 
the proposed rule and our responses to comments, we are finalizing 
amendments at Sec. Sec.  422.2460(d) and (e) and 423.2460(d) and (e), 
as proposed.

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 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 to 
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).
    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 \88\ 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 by Part D sponsors), net of all pharmacy 
incentive payments, have grown faster than any other category of DIR 
\89\ received by sponsors and their contracted 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 2, the 
growth in pharmacy price concessions from 2010 to 2020 has been a 
continuous upward trend with the exception of 2011.
---------------------------------------------------------------------------

    \88\ 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.
    \89\ 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.

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[[Page 27834]]

[GRAPHIC] [TIFF OMITTED] TR09MY22.006

    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.
    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.
    As discussed in the proposed rule, based on stakeholder feedback 
and sponsor-reported DIR data, we understand that the share of 
pharmacies' reimbursement that is contingent upon their performance 
under such arrangements has grown steadily each year. 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 proposed changes that would standardize how 
Part D sponsors apply pharmacy price concessions to negotiated prices 
at the point of sale.
    As discussed in the proposed rule, 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. However, in recent 
years, less than 2 percent of sponsors have passed through any price 
concessions to beneficiaries at the point of sale. We now understand 
that sponsors may face market incentives not to 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 a November 2017 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, we published a ``Request for Information Regarding 
the Application of Manufacturer Rebates and Pharmacy Price Concessions 
to Drug Prices at the Point of Sale.'' In the Request for Information, 
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

[[Page 27835]]

sponsor could potentially collect from a network pharmacy for any 
individual claim for that drug. Of the many 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 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), 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 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, 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 are required to disclose 
their pharmacy performance measures to CMS.
    After considering the comments received on the November 2018 and 
January 2022 proposed rules, and in light of recent data indicating 
that pharmacy price concessions have continued to grow at a faster rate 
than any other category of DIR,\90\ applicable beginning with contract 
year 2024, we are finalizing the policy proposed in the January 2022 
proposed rule 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 possible pharmacy price concessions. 
Effective January 1, 2024, we will delete the current definition of 
``negotiated prices'' (in the plural) and we will add a definition of 
``negotiated price'' (in the singular), applicable January 1, 2024, 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 will define 
``negotiated price'' as the lowest possible reimbursement a network 
pharmacy will receive, in total, for a particular drug, taking into 
account pharmacy price concessions. For the reasons described below, we 
are finalizing these proposals.
---------------------------------------------------------------------------

    \90\ From 2018 to 2020, pharmacy price concessions increased by 
50.4 percent while all other DIR increased by 23.5 percent.
---------------------------------------------------------------------------

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-

[[Page 27836]]

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. The January 2022 proposed rule explained in detail how pharmacy 
price concessions applied as DIR can: (1) Lower plan premiums and 
increase plan revenues; (2) 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 
(3) obscure the true costs of prescription drugs for consumers and the 
government.
3. Changes to the Definition of Negotiated Price (Sec.  423.100)
    As discussed in the proposed rule, in the May 2014 final rule (79 
FR 29844), 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). At that time, we did not anticipate the growth 
of performance--based pharmacy payment arrangements that we have 
observed in subsequent years.
    The proposed rule discussed how, based on feedback from 
stakeholders as well as information submitted by plan sponsors in their 
annual DIR reports, we have come to understand that the reasonably 
determined exception has been applied more broadly than we had 
initially envisioned, due to the shift by Part D sponsors and their 
PBMs towards contingent pharmacy payment arrangements. In short, 
because performance-based pharmacy payment adjustments are contingent 
upon performance over a period of time that extends beyond the point of 
sale, the stakeholders asserted that by definition, the amount of these 
adjustments cannot ``reasonably be determined'' at the point of sale as 
they cannot be known in full at the point of sale. 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 plan sponsors' use of performance-
contingent pharmacy payment arrangements, 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 proposed 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 proposed 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 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.
a. All Pharmacy Price Concessions
    In the proposed rule, we proposed 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 proposed rule noted that the regulatory change we proposed 
would change the reporting requirements for Part D sponsors, but it 
does not affect what sponsors may arrange in their contracts with 
network pharmacies regarding payment adjustments after the point of 
sale. 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

[[Page 27837]]

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.
    Comment: Most of the comments we received supported the adoption of 
a requirement that pharmacy price concessions be applied to the 
negotiated price at the point of sale. Many of the commenters who 
supported the proposal agreed that Part D sponsors or the sponsor's 
intermediaries apply the ``reasonably determined'' exception in the 
current definition of ``negotiated prices'' to nearly all performance-
based pharmacy payment adjustments and that the exclusion of these 
adjustments from the negotiated price has resulted in cost-shifting to 
beneficiaries and the government. A majority of the commenters agreed 
with our assessment that the requirement to include all pharmacy price 
concessions in the negotiated price at the point of sale would lead to 
lower overall beneficiary spending for prescription drugs, even after 
accounting for possible increases in beneficiary premiums.
    Many commenters explained that they supported the proposal because 
they believed it would increase price transparency for beneficiaries, 
the government, and other stakeholders. Several commenters agreed with 
our observation in the proposed rule that there is currently wide 
variation in reporting of DIR to CMS, with some, albeit few, plan 
sponsors including certain pharmacy price concessions in negotiated 
price, while others continue to report them as DIR. Some commenters 
suggested that this inconsistency in reporting makes it difficult for 
beneficiaries to accurately compare plans with respect to the true 
costs of their medications. These commenters suggested that requiring 
all pharmacy price concessions to be accounted for in negotiated price 
would enhance the quality of information available to beneficiaries and 
provide them with a better understanding of how they will progress 
through the phases of the Part D benefit based on their current 
medications. Several commenters believed that increased price 
transparency would also create a more level playing field among plans 
by providing more consistency in how Part D sponsors report these price 
concessions. Many commenters suggested that pharmacies would also 
benefit from the increased price transparency because it would provide 
information necessary for more accurate budgeting and improved ability 
to evaluate proposed PBM contracts.
    Response: We thank these commenters for their support and agree 
that changing the definition of ``negotiated price'' will provide 
greater transparency and lower out-of-pocket costs for beneficiaries.
    Comment: Some commenters stated that the policy would harm 
competition among pharmacies, leading to higher program costs. These 
commenters explained that under a revised definition of ``negotiated 
price,'' sponsors would no longer be able to apply pharmacy price 
concessions as DIR to reduce plan premiums. Several commenters stated 
that plan sponsors have demonstrated that the use of preferred networks 
has put a downward pressure on net prices and noted that pharmacies 
aggressively compete for preferred status in low premium plans. Knowing 
that beneficiaries prefer these plans, pharmacies (and, in particular, 
large retail-based pharmacies) are willing to offer substantial 
concessions to ensure that they have access to a large and fast-growing 
membership base. These commenters suggested that beneficiaries are not 
as sensitive to--or aware of--point-of-sale negotiated prices in 
comparison to premiums, and if sponsors are no longer able to reduce 
premiums by applying pharmacy price concessions as DIR, the result will 
be less effective competition between pharmacies for network placement. 
These commenters concluded that the use of post-point-of-sale pharmacy 
price concessions can give sponsors further leverage with pharmacies to 
negotiate prices, which decreases costs for the entire program.
    A few commenters were concerned that including pharmacy price 
concessions in the negotiated price would give pharmacies the power to 
impact future discount levels and pharmacies' increased negotiating 
power would dramatically impact costs for patients, taxpayers, and 
plans. A few commenters suggested that pharmacies would not agree to 
economically equivalent discounts and would use the ``any willing 
provider'' provisions to mandate that they must be allowed to 
participate in the network even at less of a discount.
    Response: The comments contending that sponsors' inability to apply 
pharmacy price concessions as DIR to reduce premiums will lead to less 
effective competition among pharmacies for network placement assume 
that post-point-of-sale recoupments are a more effective incentive than 
post-point-of-sale bonus payments. Commenters did not cite evidence to 
support this assumption; therefore, we believe pharmacies would 
continue to have incentives to compete for placement in networks. In 
addition, the aggressive competition among pharmacies for placement in 
low premium plan networks would be a continuing incentive for plan 
sponsors to keep premiums as low as possible regardless of the change 
in how the negotiated price is reported to CMS. To the extent that this 
policy results in increased transparency and information symmetry it 
would encourage market competition and improve competition among 
pharmacies.
    As noted above, several commenters stated that plan sponsors have 
demonstrated that the use of preferred networks has put a downward 
pressure on net prices, and we see no reason why this would change 
under the new policy. In spite of the statutory requirement at section 
1860D-4(b)(1)(A) of the Act that Part D sponsors permit the network 
participation of any pharmacy willing to accept their standard terms 
and conditions, Part D sponsors and pharmacies remain free to negotiate 
terms of preferred network participation. The commenters provided no 
evidence to support the assertion that post-point-of-sale incentive 
payments (if used) would provide any less effective an incentive for 
pharmacies to continue to compete for preferred network status. We 
believe the policy would improve transparency and not necessarily 
affect any party's leverage.
    Comment: We received some comments that opposed the adoption of a 
requirement that all pharmacy price concessions be included in the 
negotiated price at the point of sale because it would lead to higher 
premiums and increased government costs. Several commenters stated that 
the financial and budgetary impact of revising the definition of 
negotiated price to include all pharmacy price concessions does not 
address the Administration's objectives to reduce overall drug prices. 
A few commenters noted that the CMS impact analysis estimates that drug 
manufacturers would have a financial gain due to less liability during 
the coverage gap. These commenters stated that this is particularly 
concerning as it financially rewards the very industry responsible for 
high drug prices. A few commenters posited that any savings from the 
policy would not be distributed evenly among beneficiaries. The 
commenters noted that although a subset of beneficiaries would pay less 
for discounted drugs, other beneficiaries would only experience higher 
premiums. The

[[Page 27838]]

commenters also pointed out that some of the cost would be shifted to 
the Federal Government and would ultimately be borne by taxpayers. A 
few commenters were concerned this rule would disproportionately 
increase the financial burden for vulnerable beneficiaries with limited 
resources that are especially cost-conscious. They stated that premium 
increases due to the rule may potentially hinder progress in health 
equity for vulnerable populations and asked CMS to consider the 
potential to detract from the Agency's overall goal of improving health 
equity and access.
    Response: While reducing overall prices is one of the 
Administration's objectives, the new definition of ``negotiated price'' 
set forth in this rule was not intended to meet that objective. The new 
definition will lead to savings for some beneficiaries by lowering the 
prices they pay for prescription drugs at the point of sale. As 
explained in the proposed rule, when pharmacy price concessions and 
other price concessions are not reflected in the negotiated price (that 
is, are applied instead as DIR at the end of the coverage year), 
beneficiary cost-sharing increases. For many 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. A principal purpose of any 
health insurance is to help reduce the financial burden borne by 
enrollees who need to utilize covered benefits.\91\ We believe it is 
appropriate that savings from price concessions go toward defraying the 
out-of-pocket costs of the beneficiaries who purchase prescription 
drugs.
---------------------------------------------------------------------------

    \91\ Keisler-Starkey, K.B., & Bunch, L.N. (2021). Health 
Insurance Coverage in the United States: 2020. United States Census 
Bureau.
---------------------------------------------------------------------------

    We disagree that this rule would increase the financial burden for 
vulnerable beneficiaries, hinder progress in health equity for 
vulnerable populations, or detract from the Agency's overall goal of 
improving health equity and access. In fact, the lower cost-sharing for 
prescription drugs will help beneficiaries with serious health 
conditions, who bear a disproportionate burden of health care costs. 
These beneficiaries have reported difficulties paying for prescription 
drugs as a common problem.\92\ As stated earlier in the preamble, the 
application of all pharmacy price concessions to the negotiated price 
will lower cost-sharing for beneficiaries with the most serious health 
conditions. In addition, lower beneficiary cost-sharing can lead to 
increased medication adherence, which could result in a potential 
decrease in overall medical costs.\93\ Finally, this policy does not 
change how much LIS-eligible beneficiaries pay in cost-sharing or 
premiums, and therefore the low-income subsidy will continue to protect 
the most vulnerable populations.
---------------------------------------------------------------------------

    \92\ Kyle, M.A., Blendon, R.J., Benson, J.M., Abrams, M.K., & 
Schneider, E.C. (2019). Financial hardships of Medicare 
beneficiaries with serious illness. Health Affairs, 38(11), 1801-
1806.
    \93\ Cong, M., Chaisson, J., Cantrell, D., Mohundro, B.L., 
Carby, M., Ford, M., . . . & Nigam, S.C. (2021). Association of co-
pay elimination with medication adherence and total cost. The 
American Journal of Managed Care, 27(6), 249-254. https://doi.org/10.37765/ajmc.2021.88664.
---------------------------------------------------------------------------

    Comment: A few commenters stated that, although including all 
pharmacy price concessions in the price at the point of sale could lead 
to lower cost-sharing for beneficiaries, it does not solve the 
complexities of drug pricing. For example, these commenters noted that 
the policy would not help beneficiaries who take expensive drugs with 
no post-point-of-sale rebates or discounts.
    Response: We appreciate the comment. Although we believe adopting 
this new definition of ``negotiated price'' is an important first step 
toward improving the affordability of drugs for the majority of 
beneficiaries who do not receive the low-income subsidy (LIS), and 
improving price transparency, we acknowledge that this change does not, 
nor is it intended to, address the full range of complexities of drug 
pricing, and may not directly reduce out-of-pocket costs for all 
beneficiaries. However, as discussed in further detail in section IV of 
this final rule, we project that the new definition of ``negotiated 
price'' (modified to be applied across all phases of the Part D 
benefit, including the coverage gap phase (see comments, response and 
discussion below)) will save beneficiaries $26.5 billion between 2024 
and 2032.
    Comment: Some commenters opposed the policy on the ground that the 
new definition of ``negotiated price'' would violate the statutory 
definition of negotiated price at section 1860D-2(d)(1)(B) of the Act. 
Some commenters suggested that CMS would be exceeding its delegated 
authority if it finalized a requirement that all pharmacy price 
concessions be included in the point-of-sale price. Commenters also 
stated that Congress's intent was to provide Part D sponsors with the 
flexibility in administering the Part D prescription drug benefit as a 
private market model and that the pharmacy price concession rule breaks 
with this fundamental trust in private markets instilled in the statute 
by Congress. In addition, some commenters noted that CMS has on 
multiple previous occasions recognized that the term ``negotiated 
price,'' as defined by Congress, grants Part D plans discretion in how 
they treat pharmacy price concessions and, as a result of this 
flexibility, Part D plans have been drivers of innovation in benefit 
design. Some commenters contended that CMS cannot now purport to 
interpret the statute in a way that eliminates post-point-of-sale 
pharmacy price concessions, given that the agency previously found that 
the plain language of the statute permitted such price concessions. 
Further, commenters stated that an agency may not reverse a 
longstanding and reasoned policy without an adequate and thoughtful 
explanation for such a decision. Because the rule is unaligned with the 
intent of Congress, commenters argued, a reviewing court may find such 
policy changes to be substantively invalid because they would not be 
based on a permissible construction of the statute.
    A few commenters writing in support of revising the definition 
stated that the statutory definition of negotiated price gives CMS the 
authority to require Part D plan sponsors to include all price 
concessions in the negotiated price. These commenters explained that 
section 1860D-2(d)(1)(B) of the Act specifies 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, and include any 
dispensing fees for such drugs. These commenters stated that the 
statute's use of the word ``shall'' means that the negotiated price is 
required to reflect these price concessions. These commenters reasoned 
that, because the statute does not specify what percentage of these 
price concessions must be used to lower negotiated prices and thus 
passed through to patients at the point of sale or otherwise provide 
details about implementing the pass-through requirement, CMS has the 
authority to fill in those details. These commenters noted that plan 
sponsors and PBMs have exploited the ability to exclude price 
concessions that ``cannot reasonably be determined at the point of 
sale'' under the current definition of negotiated price. These 
commenters stated that plan sponsors and PBMs have applied this 
exception broadly and not passed the vast majority of pharmacy price 
concessions through to the point of sale, and that by doing so, plan 
sponsors and PBMs are violating CMS's intent in allowing this exception 
(see 2014 final rule titled ``Contract Year 2015 Policy and Technical 
Changes to

[[Page 27839]]

the Medicare Advantage and the Medicare Prescription Drug Benefit 
Programs'' (79 FR 29878), which appeared in the Federal Register on May 
23, 2014).
    Response: As we stated in the proposed rule, 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 . . . .'' The statutory language does not 
prescribe the extent to which the negotiated prices shall take into 
account negotiated price concessions, and therefore, provides CMS with 
the authority to decide whether plan sponsors should be required to 
include all price concessions in the negotiated price. 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.'' 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. In this way, the negotiated price is required to 
``take into account'' these price concessions. This policy we are 
finalizing is thus consistent with the statutory definition of 
negotiated price. In addition, the policy we are adopting is consistent 
with CMS's delegated authority to interpret the statute and administer 
the Medicare program. Moreover, the statutory definition of negotiated 
price should be viewed in the broader context of administration of the 
Part D program and support better functioning of the Part D benefit 
overall. The policy we are adopting does so by addressing market 
incentives for plans to keep premiums low, by reducing point-of-sale 
costs for beneficiaries and by bringing the balance of cost-sharing 
among the government, plans, and beneficiaries into better alignment. 
We disagree with commenters who contend that CMS cannot change its 
interpretation of the statute. As noted above, the statutory language 
at section 1860D-2(d)(1)(B) of the Act does not prescribe the extent to 
which the negotiated prices shall take into account negotiated price 
concessions, and therefore, provides CMS with the authority to decide 
whether plan sponsors should be required to include all pharmacy price 
concessions in the negotiated price. We believe that it is a 
permissible interpretation of the statute to require that all pharmacy 
price concessions be applied at the point of sale. The policy decision 
to treat pharmacy price concessions in this way is supported by 
evidence indicating that very few pharmacy price concessions are being 
passed on to beneficiaries in the form of lower cost-sharing at the 
point of sale and the significant growth in such concessions. As noted 
by some commenters, CMS originally believed that Part D plans would 
apply price concessions to the negotiated price due to pharmacy and 
beneficiary market competition; however, this has not been occurring as 
expected. As discussed in the proposed rule preamble, the sponsor 
reported data and stakeholder comments (83 FR 62174 through 62180) 
indicate that most price concessions are being applied after the point-
of-sale. We reconsidered our interpretation of section 1860D-2(d)(1)(B) 
given that the initial interpretation does not accomplish the goals of 
meaningful price transparency, consistent application of pharmacy 
payment concessions, and preventing cost shifting to beneficiaries and 
taxpayers. We also disagree with commenters who claim that CMS is 
reversing its longstanding policy without an adequate explanation. CMS 
has carefully and thoroughly considered this issue over several years. 
Indeed, since 2014, CMS has addressed this topic multiple times, 
including soliciting comment through a formal process three times and 
holding numerous listening sessions.
    We disagree with commenters who contend that the policy we are 
adopting in this rule is inconsistent with trust in private markets or 
would hinder innovation in benefit design. As noted in the proposed 
rule, this policy changes the reporting requirements for Part D 
sponsors; it does not govern payment arrangements or eliminate post-
point-of-sale price concessions, but rather only requires that all 
pharmacy price concessions be included in the negotiated price. 
Therefore, Part D sponsors remain free to negotiate innovative 
arrangements with network pharmacies. In addition, to the extent our 
policy increases transparency and information symmetry, as noted 
previously, it would improve competition in private markets. Regarding 
comments about Congressional intent for Part D sponsor flexibility, we 
do not believe this policy fundamentally changes Part D sponsor 
flexibility in administering the Part D benefit. Sponsors continue to 
exercise extensive flexibility over plan design and payment.
    CMS appreciates commenters support for the revision of the 
regulatory definition and statutory interpretation. As discussed in the 
preamble and mentioned by commenters that support revising the 
definition, this policy requiring that all pharmacy price concessions 
be applied to the negotiated price would ensure that negotiated prices 
``take into account'' at least some price concessions and would be 
passed on to beneficiaries in the form of lower cost-sharing at the 
point of sale.
    Comment: A few commenters stated that a requirement that the 
negotiated price reflect the lowest possible reimbursement to the 
pharmacy at the point of sale would violate the statutory prohibition 
under section 1860D-11(i) of the Act on CMS ``institut[ing] a price 
structure for the reimbursement of covered part D drugs.'' Commenters 
stated that requiring pharmacy price concessions to be passed through 
at the point of sale would effectively create a price structure for 
pharmacy payment whereby sponsors would have to negotiate only on the 
lowest possible price/rates with each and every pharmacy with which 
they contract. Commenters argued that this ``single variable 
negotiating system'' would result in standard rates across all pharmacy 
lines of business.
    Response: CMS did not propose, and is not adopting, a price 
structure for the reimbursement of covered Part D drugs; rather, the 
requirement that the negotiated price reflect the lowest possible 
reimbursement the pharmacy will receive for a particular drug regulates 
only the reporting of data on the PDE record. The examples provided in 
this rule under section 3c. Lowest Possible Reimbursement Example 
clearly illustrate how the requirement that the negotiated price 
reflect the lowest possible reimbursement would be reflected on the 
PDE, under different payment arrangements. The policy we are adopting 
in this final rule has no bearing on how a pharmacy's payment is 
calculated or what price structure sponsors use. Sponsors still have 
the option of negotiating with pharmacies on factors related to the 
payment rate ultimately received by the pharmacy, which may be higher 
than the negotiated price. While sponsors must comply with the prompt 
payment requirements at Sec.  423.530, they continue to have discretion 
over the timeframes

[[Page 27840]]

for settling payment incentives and penalties.
    Comment: Most commenters, including beneficiary advocates and 
beneficiaries, applauded CMS' effort to provide cost-sharing relief to 
beneficiaries.
    Some commenters stated that, if finalized, the requirement that all 
pharmacy price concessions be included in the negotiated price would 
increase beneficiary confusion and frustration over health care costs. 
These commenters suggested that beneficiaries do not have an awareness 
of the impact of pharmacy price concessions on their overall pharmacy 
drug and premium costs, and beneficiaries will not understand that 
their increased premium costs will be due to Part D sponsors no longer 
reporting pharmacy price concessions as DIR.
    Response: We thank commenters for their support of the application 
of all pharmacy price concessions to the negotiated price, which will 
lower beneficiary cost-sharing. Moreover, establishing consistency in 
how sponsors report pharmacy price concessions will allow for more 
meaningful price comparisons (for both premium and cost-sharing) and 
more well-informed choices by consumers. While beneficiaries may not 
immediately understand the factors underlying premiums increases and 
cost-sharing decreases, they will be better positioned to compare 
plans, because the standardized reporting of negotiated price required 
by this rule will create a more consistent basis for comparing plans 
based on premiums and cost-sharing.
    Comment: Several commenters who opposed adopting a new definition 
of ``negotiated price'' stated that a requirement 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.'' A few commenters 
charged that the new definition would be designed to directly affect 
the contracting processes between plans and pharmacies by mandating 
changes to point-of-sale prices. Several commenters indicated that the 
policy would take away Part D sponsors' and PBMs' ability to negotiate 
downside incentives with pharmacies tied to performance or quality 
targets, and that it would impair their ability to negotiate rates with 
pharmacies. A few commenters suggested that the new definition would 
limit the tools available to Part D sponsors to establish varied and 
innovative incentive arrangements with contracted pharmacies intended 
to achieve important goals, such as increasing generic dispensing 
rates, and to focus on priorities, such as reducing the use of high-
risk medications and improving medication adherence. Several commenters 
asserted that pharmacy price concessions are used to develop a 
preferred pharmacy network while also keeping Part D premiums low and 
expressed concern that adopting the new definition of ``negotiated 
price'' would limit the ability of plan sponsors to negotiate 
effective, high-value contracts with pharmacies, resulting in an 
increase in both beneficiary premiums and government spending, as well 
as a decrease in preferred pharmacy networks.
    A commenter noted that this policy would adversely affect the 
reductions in cost-sharing for beneficiaries that have been realized 
under the Part D Senior Savings Model. The commenter stated that Part D 
plans that participate in this Center for Medicare & Medicaid 
Innovation (CMMI) model are relying on their preferred pharmacy 
networks to stock and dispense specific products. The commenter noted 
that additional contract terms help plans achieve goals under models 
and that pharmacy interactions can increase adherence to prescribed 
medications and foster therapeutic substitution that can save 
beneficiaries and plans money in the long run. The commenter stated 
this policy will put the benefits achieved through this model at risk 
by interfering with the relationships that have been formed between 
PBMs and pharmacies.
    Some commenters stated that the new definition of ``negotiated 
price'' would not violate the ``non-interference clause.'' Several 
commenters asserted that CMS would not be inserting itself into 
negotiations between plan sponsors, PBMs, and pharmacies by defining 
the negotiated price and altering the manner in which to account for 
pharmacy price concessions. Rather, some commenters stated, CMS is 
authorized to promulgate regulations in accordance with the Medicare 
statute's any willing provider and prompt payment requirements, and 
such regulations would not run afoul of Medicare's non-interference 
clause. Commenters also noted that CMS retains authority to promulgate 
such regulations in the interest of protecting market competition, 
which is consistent with the plain meaning of the text of the non-
interference clause. Some commenters noted that plan sponsors and their 
PBMs and pharmacies are still free to negotiate any reimbursement, 
concessions, or pay structure they like.
    Response: We agree with commenters that this rule does not violate 
the non-interference clause. This rule does not implicate or impose 
requirements on plan-pharmacy interactions, such as contracting, 
negotiations, payments rates, incentive arrangements, quality goals or 
targets, performance-based payments or performance-based contracting. 
Sponsors and pharmacies remain free to negotiate any such arrangements 
they wish--this rule requires only that the negotiated price reflect 
the price that the parties have negotiated as the lowest possible 
reimbursement that the pharmacy could receive for a particular drug, 
inclusive of all pharmacy price concessions. As noted above, the 
requirement that the negotiated price reflect the lowest possible 
reimbursement that a pharmacy receives for a drug is directly related 
to the reporting of data on the PDE record and determination of 
beneficiary cost-sharing and to promoting price transparency to the 
beneficiary. The connection that commenters make between this policy 
and adverse effects on the Part D Senior Savings model and Part D 
sponsors and pharmacy relationships is unclear. To the extent that our 
policy has an effect on the calculation of cost-sharing under the 
model, we would anticipate that the model could be adapted, to 
accommodate new requirements and policies. As we have stated 
previously, this policy does not impose requirements on contracts 
between sponsors or their PBMs and pharmacies; therefore, we do not see 
how this policy affects performance-based payment adjustments that 
exist in the Senior Savings Model. We agree that pharmacy interactions 
can increase adherence to prescribed medications and foster therapeutic 
substitution that can save beneficiaries and plans money in the long 
run.
    Comment: A commenter noted that beneficiary costs are based on a 
combination of premiums and cost-sharing, both of which are already 
fully disclosed to the beneficiary through plan materials and other 
tools like Medicare Plan Finder (MPF). This commenter stated that 
beneficiaries use tools like MPF to choose plans based on factors 
including cost-sharing, premiums, formulary coverage, pharmacy network, 
Star Ratings, and integration or non-integration with MA plans. This 
commenter maintained that tools like MPF already allow for a real, 
meaningful, and actionable comparison of plan prices and efficiencies 
and

[[Page 27841]]

therefore, promoting transparency through this policy is unnecessary.
    Commenters believed that the pharmacy price concession rule will 
undo the effectiveness of MPF and create less transparency by causing 
confusion with the introduction of the new definition of negotiated 
price. Commenters were also concerned that if CMS allows plans the 
flexibility to determine how much of the pharmacy price concessions to 
pass through at the point of service (POS) for applicable drugs in the 
coverage gap (while using the negotiated price determined using the 
lowest possible reimbursement to the pharmacy in the non-coverage gap 
phases), then MPF will need to be updated to account for the 
differences, which could add to beneficiary confusion.
    Commenters recommend that CMS use the MPF tool to examine which 
factors most impact beneficiaries when making a plan choice before CMS 
makes drastic changes to the program through the pharmacy price 
concession rule. They suggested that CMS use underlying MPF data to 
perform analysis to determine how important premiums are in the total 
calculus of plan choice as compared to overall out-of-pocket (OOP) 
costs.
    Commenters also stated that the proposal would require development 
of processes to ensure accurate information is posted on MPF and that 
there would be considerable challenges with loading accurate pharmacy 
network data into MPF in a timely fashion, as there is likely to be 
increased network volatility as contracts are renegotiated.
    Response: We agree with commenters that MPF is a valuable tool that 
beneficiaries use to make informed decisions. We note that the cost-
sharing and premium data for Part D reflected in the MPF is and will 
continue to give beneficiaries an accurate assessment of their expected 
costs for a given plan. This policy does not affect the accuracy of the 
data in MPF as the new definition of negotiated price does not change 
how the out-of-pocket costs are displayed to the beneficiary. As 
discussed elsewhere in this rule, CMS is finalizing a policy to require 
that pharmacy price concessions be applied to the negotiated price 
across all phases of the Part D benefit, including the coverage gap 
phase. Therefore, MPF will not need to account for the difference in 
how pharmacy price concessions are applied in the gap verses non-
coverage gap phases. Thus, we do not see how commenters' claims that 
the new definition will cause confusion due the new definition of 
negotiated price are substantiated.
    In addition, CMS's MPF tool utilizes drug prices net of rebates and 
other price concessions that are applied at the point of sale, so MPF's 
current design already supports the collection and display of drug 
prices as contemplated under this rule. Therefore, CMS does not 
anticipate implementing changes to the MPF tool or the methodology 
currently in place. Plans should refer back to the Part D drug pricing 
submission guidance published annually by CMS. This guidance provides 
technical instructions on how to submit drug prices that account for 
rebates and other price concessions that are applied at the point of 
sale. The applicability date of January 1, 2024, for the new definition 
of negotiated price provides time for sponsors to prepare data for 
submission to MPF.
    We understand that beneficiaries consider many factors in selecting 
a plan and that the relative importance of premium costs as opposed to 
out-of-pocket costs can vary depending upon a beneficiary's particular 
circumstances. Moreover, even for beneficiaries who prioritize premium 
costs over other factors, this rule will result in premiums that better 
reflect the relative efficiency of plan designs for prescription drug 
coverage, and therefore, this policy will contribute to more informed 
choices by beneficiaries.
    Comment: A few commenters expressed concern that the impact of the 
rule would likely be more profound on prescription drug plans (PDPs) 
than Medicare Advantage prescription drug (MA-PDs) plans, as many PDPs 
would be unable to avoid a significant increase in premiums, and could 
potentially be priced out of the market. Commenters explained that PDPs 
lack the additional financial cushion available to MA organizations 
(MAOs) as a result of their offering an integrated benefit. Also, PDPs 
lack the financial incentives of Star Ratings bonus payments for which 
MAOs are eligible. Commenters were concerned that as beneficiaries lose 
access to PDPs, many would be forced to enroll in MA-PDs, and be driven 
from original Medicare, which may be a source of comfort and stability 
to many, especially older beneficiaries, into managed care plans.
    Response: CMS appreciates the comments and concerns about potential 
differential impacts on PDPs versus MA-PDs. One outcome of this rule is 
that beneficiary cost-sharing may be reduced, regardless of the plan 
type in which they are enrolled. The statement that beneficiaries may 
be driven from original Medicare to Medicare Advantage assumes that 
Part D benefits are the sole factor behind individuals' decisions in 
choosing between original Medicare and Medicare Advantage. We note that 
many factors, such as geographic location, Medicare Advantage plan 
options, and preferences related to provider choices, are also 
important considerations for many beneficiaries in choosing between 
original Medicare and Medicare Advantage. We also note that 
beneficiaries selecting original Medicare (for other reasons) will be 
comparing PDP premiums against one another and not comparing PDP 
premiums against MA-PD premiums. Medicare Advantage plans that use Part 
C rebates to offset Part D premium increases may need to forgo offering 
other benefits that would have been provided with those funds.
    Comment: Some commenters stated that it would be extremely 
challenging, if not impossible, to implement changes to bid 
assumptions, renegotiate pharmacy contracts, and make the necessary 
revisions to pharmacy adjudication systems prior to January 1, 2023, 
and recommended that the implementation of the rule be postponed until 
2024 or later. Commenters noted that if the rule is applicable for 
contract year 2023, there could be disruptions in member benefits 
because of the contracting and systems changes that would have to 
happen in time for the Fall 2022 Open Enrollment. As a result of the 
compressed timeline, they are concerned that focus will be taken away 
from member benefits.
    A commenter noted that Part D plan sponsors would need to 
renegotiate their contracts with PBMs. This commenter stated that not 
only would it be necessary to renegotiate fee arrangements, but also, 
given the rule, Part D plan sponsors may want to discuss new business 
strategies and underwriting scenarios with their PBMs. The commenter 
explained that this is a lengthy, resource-intensive process that 
precedes pharmacy contracting because it is the plan that sets the 
target for pharmacy contracts that the PBM negotiates. This commenter 
stated that CMS' proposed timeline would cause the Part D sponsor/PBM 
negotiations to occur at the same time as PBMs are trying to 
renegotiate pharmacy contracts.
    Commenters also explained that changes to pharmacy contracts would 
not be mere technical changes, but would include how, when, and the 
amount pharmacies would receive in reimbursement. Commenters stated 
that most pharmacies are likely to see a significant reduction in 
reimbursement, which could result in some pharmacies

[[Page 27842]]

refusing to participate in the Part D network at the new reimbursement 
rate. Commenters explained that issues with participation could impact 
preferred pharmacy arrangements and network access, which could result 
in additional time needed for additional contracting to ensure that 
pharmacy network access requirements are satisfied.
    However, other commenters indicated that plans/PBMs customarily 
impose new terms without any consultation or negotiation. Some 
commenters stated that most fees charged to pharmacies are placed in 
the provider manual, which is included by reference into the contract 
terms. A commenter stated that all or substantially all PBMs have 
contractual terms in place with pharmacies to enable payment term 
modifications for any change in DIR, such as requiring immediate 
renegotiation of rates or setting a fixed reimbursement rate in the 
event of policy change. This commenter believed that any additional 
delay in providing this rule would improperly place Part D plan sponsor 
and PBM profits above beneficiary well-being and believe CMS' current 
proposed timeline is appropriate.
    Response: We find commenters' concerns regarding the ability to 
effectuate contract negotiations and make potential systems changes in 
time for 2023 implementation to be compelling. To give all parties 
sufficient time to implement this policy, including making the systems 
changes that will be needed to ensure that cost-sharing is correctly 
adjudicated for beneficiaries at the point of sale, we are modifying 
our proposal and finalizing an applicability date of January 1, 2024. 
This will give the Part D sponsors over a year to contract and prepare 
bids for the 2024 contract year. In addition, based upon our experience 
implementing changes in the Part D program that require Part D sponsor 
and PBM system changes, we believe that this additional time is 
sufficient to operationalize the new definition of negotiated price. We 
are making corresponding changes to the regulation at 42 CFR 423.100 to 
retain the current regulatory definition of ``negotiated prices'' for 
2023 and adopt the new regulatory definition of ``negotiated price'' 
for 2024 and thereafter.
    Comment: A significant volume of letters were submitted as the 
result of a letter writing campaign and encouraged CMS to move forward 
as swiftly as possible in adopting the new definition of negotiated 
price.
    Response: We thank the commenters for their feedback. While we 
appreciate the need to pass meaningful out of pocket cost savings to 
and increase drug price transparency for beneficiaries as soon as 
possible, concerns related to contracting and operational timelines 
that could disrupt successful implementation are sufficiently 
compelling to warrant making this policy applicable beginning on 
January 1, 2024.
    After consideration of comments received, CMS is finalizing the new 
definition of negotiated price at Sec.  423.100 effective January 1, 
2024. Under this definition, the negotiated price must be the lowest 
possible reimbursement a network entity will receive, in total, for a 
particular drug and include all pharmacy price concessions. To 
implement this policy, we will also remove the existing definition of 
negotiated prices at Sec.  423.100, effective January 1, 2024.
b. Lowest Possible Reimbursement
    To effectively capture all pharmacy price concessions at the point-
of-sale consistently across sponsors, we proposed 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 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. The proposed rule discussed our 
bases for believing that requiring that the negotiated price reflect 
the lowest possible reimbursement a network pharmacy could receive for 
a Part D drug 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.
    Consistent with this approach, we proposed 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 explained in the proposed rule, 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 continue 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 emphasized 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.

[[Page 27843]]

c. Lowest Possible Reimbursement Example
    To illustrate how Part D sponsors and their intermediaries would 
report costs under our proposal, we provided 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.
    Comment: Many commenters encouraged CMS to address the proposed 
rule's potential impact on pharmacy cash flow during the first quarter 
of 2023 assuming the rule is implemented in January 2023. Many 
commenters expressed concern that a pharmacy's payments for CY 2022 DIR 
fees to Part D sponsors and/or their PBMs will be due concurrently with 
the time pharmacies expect to receive lower reimbursements at the point 
of sale. Many of these commenters urged CMS to implement this proposal 
on January 1, 2023; however, due to the potential impact of the 
retroactive fees and implementation of the rule, these commenters urged 
CMS to require sponsors and/or their PBMs to establish payment plans 
with pharmacies that need them during the transition period. Commenters 
noted that when Medicare Part D was established, hundreds of pharmacies 
closed because of cash flow issues, necessitating Congressional action 
to establish prompt pay rules. These commenters urged that CMS 
emphasize that prompt payment requirements will continue to be 
enforced.
    Response: CMS understands these concerns but does not have the 
authority to mandate payment plans between plans sponsors and 
pharmacies. We acknowledge the possibility that changes in cash flow 
may cause some already struggling pharmacies to decrease services or 
medication availability, and/or be unable to remain in business, which 
may impact pharmacy networks. Note that CMS will be particularly 
attuned to plan compliance with pharmacy access standards under Sec.  
423.120 to ensure that all Medicare Part D beneficiaries have 
convenient access to pharmacies and medications. Therefore, we 
encourage Part D sponsors to consider options, such as payment plans or 
alternate payment arrangements, to minimize impacts to vulnerable 
pharmacies and the patients they serve. We also note that the prompt 
payment requirements for Part D, as described in Sec.  423.520, will 
continue to apply and that Part D sponsors must pay clean claims in 
accordance with the prompt pay regulation. As noted elsewhere, we are 
finalizing an applicability date of January 1, 2024, instead of January 
1, 2023. Nonetheless, we would expect these same concerns that 
commenters raised for January 1, 2023 to be similarly applicable to 
January 1, 2024. With this extra implementation time, we believe Part D 
sponsors and pharmacies will now have adequate time to implement 
payment plans or make other arrangements to address these cash flow 
concerns at the beginning of 2024.
    Comment: Many commenters wrote in support of a requirement that the 
negotiated price reflect the lowest possible reimbursement to the 
pharmacy because they believed this approach would make it possible for 
pharmacies to better predict the minimum reimbursement they could 
receive on a per-claim level.
    Response: We thank these commenters for their support of this 
policy. We agree that defining negotiated price to mean the lowest 
possible reimbursement received by the pharmacy will provide greater 
transparency and may improve predictability of per-claim revenue.
    Comment: Several commenters opposed the policy, suggesting that a 
requirement that the price paid to a pharmacy for a covered Part D drug 
be net of all possible downward adjustments would effectively eliminate 
the ability of Part D plans to employ performance-based negative 
pharmacy payment adjustments. A few commenters suggested that the 
elimination or restriction of performance-based pharmacy payment 
arrangements is out of line with current CMS initiatives to expand and 
incentivize value-based arrangements, such as the recently announced 
agenda to expand value-based care in Medicare by CY 2023. Commenters 
stated that restricting or eliminating payment arrangements that 
incentivize pharmacy performance is counterintuitive to these ongoing 
efforts to bring increased value to the Part D program as well as the 
rest of Medicare. A few commenters stated that this rule will make it 
harder to achieve the bold quality agenda set forth by CMS (cited in 
Health Affairs written by CMS officials). These commenters stated that 
pharmacy DIR is generated by two-sided, value-based contracts--similar 
to contracts entered into by health plans and other providers as the 
optimal path to transform health care delivery and payment. These 
commenters also noted that these pharmacy DIR contracts often focus on 
driving Stars performance and increasing generic dispensing to the 
benefit of the Medicare program and its beneficiaries. Some commenters 
stated that applying all pharmacy price concessions at the point of 
sale would negatively impact Star Ratings and performance-based models 
such as MIPS and APMs. Commenters argued that if sponsors adopt a 
``bonus only model'' when paying pharmacies for performance, there will 
not be an adequate financial incentive for pharmacies to help plans 
improve pharmacy measures. A few commenters noted that performance on 
adherence measures has been trending up as has the generic dispensing 
rate and MTM completion. These commenters stated that this proposal 
would interfere with the DIR contracting that has yielded these 
impressive results.

[[Page 27844]]

    A commenter noted that recent research has shown that pharmacy 
performance measures that address social determinants of health (SDOH) 
help promote equitable and high-quality care. The commenter stated that 
Medicare beneficiaries are best served when their providers are focused 
on addressing community-level SDOH barriers, and in pharmacy care, a 
number of programs are funded and incentivized through Part D plan 
price concessions that CMS would effectively eliminate.
    Response: We did not propose to eliminate or restrict the use of 
any performance-based pharmacy payment arrangements, and we do not 
agree that a policy of requiring the negotiated price to reflect the 
lowest possible reimbursement to the pharmacy for a Part D drug 
eliminates or restricts Part D sponsors' ability to institute 
performance-based pharmacy payment arrangements. The new definition of 
negotiated price that we are adopting in this final rule does not 
mandate how sponsors contract with, incentivize, or pay pharmacies in 
their network. The new definition of negotiated price applies only to 
how the PDE data is populated and reported and thus the price of the 
drug on which beneficiary cost-sharing is determined. We also disagree 
with the implication that performance-based contingent incentive 
payments provide pharmacies with insufficient motivation to engage in 
activities that impact sponsors' Star Ratings and other performance-
based models. Rather, sponsors remain free to motivate pharmacies by 
offering performance-based payment arrangements to pharmacies. Applying 
all pharmacy price concessions to the negotiated price will provide 
pharmacies with more information on the reimbursement they will receive 
if they fail to meet performance metrics. While we are not specifying 
payment arrangements between plan sponsors and pharmacies, we encourage 
fair and equitable value-based arrangements, including those focused on 
social determinants of health (SDOH), that improve beneficiaries' 
quality of care and reduce health care costs.
    Comment: Many commenters urged CMS to collect pharmacy performance 
measure information from Part D sponsors as finalized in the January 
2021 final rule (86 FR 5864) to assess concerns raised by pharmacies 
about performance measures. Several commenters noted that PBMs often 
apply one-size-fits-all metrics that are not relevant to a pharmacy's 
population or specialty. Commenters explained that they are penalized 
for not having a large enough population for a credible sample that 
PBMs use to assess performance. A few commenters noted they were 
penalized for not meeting generic dispensing rates because the 
pharmacies are specialty pharmacies serving a population whose medical 
conditions do not have available generic drugs for treatment. A 
commenter recommended that plan sponsors not be able to apply the 
pharmacy price concessions to all pharmacies within a particular chain 
of pharmacies, such as local chains or supermarket pharmacies, based on 
the performance of the lowest performing pharmacy in the chain. This 
commenter stated that the ability of pharmacies to meet performance 
standards set forth by PBMs and plan sponsors is hindered by the fact 
that no consideration is given to inherent handicaps, such as socio-
economic disparities between pharmacy geographic locations or as noted 
above differences in dispensing practices between retail and specialty 
drugs. Many commenters noted that penalties from one measure and one 
medication are applied to all medications, setting thresholds 
pharmacies cannot meet.
    Response: We appreciate the comments regarding the nature of and 
differing application of pharmacy performance metrics to assess 
pharmacy performance; however, we did not propose to address pharmacy 
performance metrics in the proposed rule. We addressed reporting of 
pharmacy performance measures to CMS in the January 2021 final rule (86 
FR 5864). In the January 2021 final rule, we finalized a proposal to 
give CMS the authority to establish a Part D reporting 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. This authority to establish a reporting 
requirement is effective January 2022; however, the actual data 
elements must be proposed through the Office of Management and Budget 
(OMB) Paperwork Reduction Act (PRA) process in a future package. We 
encourage the industry to continue to work together on developing a set 
of pharmacy performance measures through a consensus process and Part D 
sponsors to adopt such measures to ensure standardization, transparency 
and fairness. We are aware that the Pharmacy Quality Alliance (PQA), a 
measure developer, is working to build consensus on pharmacy-level 
measures across pharmacies, plans, PBMs, and other stakeholders.
    Comment: Some commenters stated that CMS did not articulate any 
rational basis for giving ``preferable'' treatment for pharmacy 
incentive payments over pharmacy price concessions. A few commenters 
asserted that giving special treatment to higher payments to pharmacies 
underscores the arbitrary and capricious nature of CMS's effort to 
redefine negotiated price. A few commenters supported a requirement 
that all contingent incentive payments be excluded from the negotiated 
price. The commenters noted that this approach supports PBMs' ability 
to measure and monitor pharmacy performance on Stars Ratings-related 
measures and incentivize pharmacies for their performance without 
negatively impacting the beneficiaries' cost-sharing.
    Response: We disagree that the proposal gives preferential 
treatment or higher payments to pharmacies. The proposed rule does not 
impose requirements on the actual payments made to pharmacies. This 
rule sets forth requirements that standardize how and when pharmacy 
price concessions are reported to CMS. In the proposed rule, we 
described the information gathered through the Request for Information 
in the November 2017 proposed rule regarding pharmacy price concessions 
(payments from network pharmacies to sponsors or their intermediaries 
for ``poor performance'') and incentive payments (payments made to 
pharmacies by plan sponsors or their intermediaries for ``high 
performance''). The primary concern with including incentive payments 
in the negotiated price is that including these types of payments 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. 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 to include pharmacy price 
concessions and not incentive payments 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

[[Page 27845]]

claim. We thank the commenters for the support on excluding incentive 
payments from the negotiated price and agree that not including 
contingent incentive payments in the negotiated price best aligns 
beneficiary, plan, and pharmacy incentives.
    Comment: Many commenters requested that CMS establish safeguards to 
guarantee that pharmacies participating in Medicare Part D receive a 
reasonable rate of reimbursement. These commenters urged the 
administration to ensure that the negotiated price at a minimum cover 
the pharmacy's costs of purchasing and dispensing covered items and 
providing covered services. A few commenters requested that CMS 
establish a flat dispensing fee or an alternative model such as a 
pharmacy reimbursement model based on a public drug pricing benchmark 
such as national average drug acquisition costs (NADAC) plus a fair 
dispensing fee in line with those in state Medicaid fee-for-service 
program.
    Response: Thank you for these suggestions. CMS will consider these 
suggestions for future rulemaking.
    Comment: Some commenters suggested that, as an alternative to 
requiring that all pharmacy price concessions be included in the 
negotiated price, CMS could achieve the policy goals of controlling and 
reducing drug prices and improving transparency by making changes to 
the treatment of pharmacy DIR in Part D sponsors' bids. Some commenters 
recommended that plan sponsors be required to reflect some or all of 
the expected pharmacy DIR in cost-sharing amounts when they submit 
their Part D bids. A few commenters encouraged CMS to consider imposing 
a penalty for systematically underestimating DIR within plan bids.
    Some commenters offered alternatives to the implementation of the 
new definition of negotiated price. One suggestion was to offer Part D 
sponsors the flexibility to launch an additional new plan beyond what 
is currently allowable, for example, three PDP products per contract. 
This new plan could be structured to test CMS' negotiated price 
proposal, while the other existing Part D plans remain using the 
current approach. A similar suggestion was for CMS to perform a case-
control study to test the implementation of the new definition of 
negotiated price. A third suggestion was for CMS to require additional 
options for treatment of pharmacy price concessions. These options 
could for example, include no pharmacy price concession arrangements or 
explicitly limit the amount of pharmacy price concession payment 
arrangements relative to point-of-sale payments. Under this approach, 
pharmacies could choose one of the options and not be excluded from 
network participation. Commenters noted that these approaches would 
allow CMS to gather data before finalizing the requirements set forth 
in this rule.
    A few commenters recommended that CMS focus on creating pricing 
transparency through the widespread use of provider and beneficiary-
level real-time benefit tools (RTBT). One of these commenters explained 
that prescriber RTBT allows for real-time decision-making to guide 
beneficiaries, advise them of their options with a focus on clinically 
needed drugs and the prices of those drugs. According to the commenter, 
although many plans use RTBT, the tools are proprietary and can lead to 
highly variant experiences. Congress has mandated broader adoption of 
RTBT by 2023 and mandated provider use of these tools. The commenter 
noted that National Council for Prescription Drug Programs (NCPDP) has 
developed a standard for a real-time prescription benefit request and 
response for use by providers and asked that CMS name the specific 
telecommunications standard for use by Part D program participants. 
This commenter believes that RTBT, rather than changing point-of-sale 
pricing, creates a way to get pricing information into the hands of 
beneficiaries, without the need for computers or smart phones, which 
promotes efficient and socially sensitive SDOH-focused care delivery.
    Response: We thank commenters for their suggestions regarding 
alternative approaches to implementing the new definition of negotiated 
price, but we decline to adopt these approaches. We do not believe that 
a policy that requires sponsors to include all pharmacy price 
concessions in the negotiated price and some of the alternatives 
suggested by commenters are mutually exclusive or that the availability 
of alternatives should prevent us from adopting the revised definition 
of ``negotiated price.''
    With regard to use of the RTBT to promote price transparency, CMS 
is committed to the use of tools that promote efficient and socially 
sensitive social determinants of health focused care delivery. 
Regulations at Sec.  423.160(b)(7) require Part D plans to implement 
one or more electronic RTBT capable of integrating with at least one 
prescriber's e-Prescribing (eRx) system or electronic health record 
(EHR). CMS will continue to evaluate available electronic standards for 
RTBT to determine if they are appropriate for the Part D program and 
propose updated standards, if appropriate. In the meantime, this rule 
will promote lower beneficiary cost-sharing, which also will help 
beneficiaries to overcome financial barriers to the medications they 
need.
    Comment: A few commenters recommended that if CMS instructs plans 
to bid with existing law and regulations in effect currently for the 
2023 bid deadline and then finalizes this policy as proposed, then CMS 
consider conducting the proposed 2019 voluntary two-year demonstration 
that would consist of a modification to the Part D risk corridors in 
order to better manage a transition to new requirements.
    Response: Thank you for the suggestions. However, we decline to 
adopt them at this time, as we have changed the applicability of this 
rule to January 1, 2024, which, as noted previously, provides 
sufficient transition time.
    After considering the comments received, we are adopting a 
requirement as proposed that the negotiated price reflect the lowest 
possible reimbursement that the network entity will receive, in total, 
for a particular covered Part D drug, including all price concessions 
and any dispensing fees, but excluding additional contingent amounts 
that increase prices.
d. Additional Considerations
    In order to implement the proposed change, we indicated we would 
leverage existing reporting mechanisms to confirm that sponsors are 
appropriately applying pharmacy price concessions at the point of sale. 
Specifically, we indicated 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 indicated that we 
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.
    Comment: Several commenters questioned how data ensuring the lowest 
possible reimbursement will be transmitted to the pharmacy via the 
required HIPAA-standard transactions and how data will map to the PDE 
and to the pharmacy remittance. Both plan/PBMs and pharmacies raised 
these questions, as all stakeholders are currently required to use the 
National Program for Prescription Drug Plans (NCPDP) Telecommunications 
standard

[[Page 27846]]

version D.0 (D.0) for claims adjudication, and the Health Care Claim 
Payment/Advice Transaction Set (X12 835) to support the claims payment 
process. A few commenters stated that D.0 would need to be replaced by 
an updated standard, as the current standard cannot support another 
cost field to convey post-point-of-sale remuneration to downstream 
entities. A commenter posited that such capability would not be 
available until 2027 or beyond.
    Response: We disagree with commenters that there is no mechanism 
under the current NCPDP data format for Part D sponsors to provide 
information on a drug's negotiated price to pharmacies. PCMS does not 
dictate or provide guidance regarding plans' billing arrangements, and 
has identified the two following approaches that could accomplish the 
goal of transmitting a drug's negotiated price data between plan 
sponsors and pharmacies using the data format available today.
    The following example reflects a payment arrangement where the 
pharmacy point-of-sale payment reflects the negotiated price.
    Example 1: Pharmacy is paid Negotiated Price of $90 at the Point of 
Sale.
    Pharmacy Point-of-Sale Transactions:

 Ingredient Cost Paid + Dispense Fee Paid = $90 (this is the 
total amount that will be paid to the pharmacy by all parties)
 Patient Pay (beneficiary cost share in deductible is 100%) = 
$90
 Total Amount Paid (Plan paid) = $0

    Because the Negotiated Price of $90 is the lowest possible 
reimbursement there is no need for an informational field to indicate 
future deductions from the pharmacy.
    The second example reflects a payment arrangement in which a plan/
PBM pays the pharmacy more than the negotiated price at the point of 
sale. The Total Gross Payment (negotiated price plus post-POS pharmacy 
price concession) could be populated in the Total Amount Paid Field on 
the claim response, and the post-POS pharmacy could be included in an 
informational structured text field. Under this scenario the pharmacy 
could compute the negotiated price by reducing the Total Gross Payment 
by the amount noted in the informational field on the pharmacy claim 
response. The PBM would calculate the beneficiary cost share at the 
point of sale using the negotiated price and not the total gross 
payment.
    The following example reflects this payment arrangement where the 
price paid to the pharmacy at the point of sale does not reflect the 
negotiated price and so the amount that needs to be adjusted has to be 
separately conveyed in the informational field within D.0. The PBM 
computes beneficiary and plan cost-sharing based on the negotiated 
price; however, the pharmacy will have to subtract the amount reported 
by the PBM in the informational field to determine the negotiated 
price.
    Example 2: Pharmacy is paid $100 at the Point of Sale, Negotiated 
Price is $90.
    Pharmacy Point-of-Sale Transactions:

 Ingredient Cost Paid + Dispense Fee Paid = $100 (this is the 
total amount that will be paid to the pharmacy by all parties)
 Patient Pay (Beneficiary cost share in deductible is 100% of 
negotiated price) = $90
 Total Amount Paid (plan paid) = $10 (this plan paid amount is 
necessary to have pricing fields balance on a claim)
 Additional Message Information-(informational structured claim 
response indicates the amount that could be taken back post point of 
sale) = Negative $10

    Both of these arrangements can be reflected within the current 
standard, and indeed historically this is how coordination of benefits 
occurred prior to availability of specific pricing fields. 
Additionally, any amount paid by the pharmacy to the plan post-point-
of-sale could be reported at the claim level (CLP) on the 835 and will 
be reported in the Estimated Rebate at the Point of Sale field 40 on 
the PDE as some plans are doing today. This would allow the information 
to be transparent from the point-of-sale transaction to the PDE.
    We agree with commenters who pointed out that the pharmacy price 
concessions cannot be conveyed to downstream supplemental payers unless 
price concession values are conveyed in a dedicated cost field, which 
is not available under D.0. Because these price concession amounts 
could only be conveyed in an informational field, the current NCPDP 
standard does not support providing this information to a supplemental 
payer on a COB claim. So, if the PBM uses the method illustrated in 
Example 2, the pharmacy would be unable to provide transparency around 
any amounts that will be taken back post point of sale on the COB claim 
that will be sent to a supplemental payer. However, we are including 
Example 2 for PBMs to use when implementing the new rule because it 
will still benefit those supplemental payers who provide coverage based 
on beneficiary cost- sharing, and will retain the status quo for 
supplemental payers who pay based on plan-paid amounts.
    Comment: A few commenters explained that Part D bidding and payment 
policies in the Advance Notice would be impacted by these provisions 
that are not mentioned in the AN. For example, the risk adjustment 
model for CY 2023 is proposed to be calibrated on 2018 claims and 
encounter data, plus expenditure data from 2019 PDE records that do not 
reflect pharmacy DIR being applied at POS. Commenters noted that the 
risk adjustment is not the only issue impacted by pharmacy DIR at POS 
but also the underlying trends used to make the annual adjustments to 
Medicare Part D benefit parameters would also be impacted.
    Response: Given that we are finalizing an applicability date of 
January 1, 2024, the policy we are adopting will not affect Part D 
payment in 2023. We will consider commenters' feedback as we prepare 
the Part D payment policies for the 2024 Advance Notice.
    Comment: A few commenters urged CMS' Office of the Actuary to 
provide plan sponsors with bid guidance as soon as possible to ensure 
accuracy of the bids. Commenters noted that the pharmacy DIR impacts if 
the rule were final, were not referenced in the draft Bid Pricing Tool 
(BPT) or the Advance Notice. Commenters noted that Part D sponsors will 
have to choose whether to prepare their bids under current regulations 
where they assume that (a) the definition of negotiated price remains 
the same, or (b) the new definition of negotiated price is finalized. A 
few commenters indicated that if the industry is not aligned on 
assumptions, there will be significant disruption for beneficiaries due 
to the erratic bidding in the market. Also, commenters noted that the 
uncertainty of the proposed rule adds additional actuarial risk, which 
may result in plans adopting more conservative (that is, higher) plan 
pricing, in order to mitigate the impacts of the uncertainty during the 
bidding period.
    Response: As noted above, we are finalizing this rule with an 
applicability date of January 1, 2024. CMS will communicate bid 
guidance to support the bid development process with sufficient lead 
time for the 2024 bid cycle.
    Comment: A commenter noted that the Out-of-Pocket Cost (OOPC) 
Models are under development and targeted for release in April 2022, 
possibly prior to the publication of the final rule. The commenter was 
concerned as the values produced from these models are used in CMS's 
bid review and while the

[[Page 27847]]

baselines were released on January 21, 2022, the average price for each 
RxCUI in the model could be influenced by adoption of the proposal to 
require the negotiated price to include pharmacy price concessions. The 
commenter stated that CMS would have to decide whether adjustments for 
potential changes in the average price for each RxCUI in the model 
would be appropriate. The same commenter noted that in relation to 
pricing changes, the Health Plan Management System (HPMS) Formulary 
Submission and Part D Pricing File Submission (PDPFS) Modules are 
expected to be released on May 16, 2022, and that the formulary 
submission module may be directly impacted by this proposal, while plan 
sponsor and PBM formulary strategy most certainly will. The commenter 
noted that the Part D pricing file module would likely either have to 
be delayed or re-released to appropriately reflect this final rule.
    Response: Given the applicability date of January 1, 2024, changes 
to the OOPC model tool for 2023 are not needed. We will consider 
whether updates will be appropriate for the OOPC model for 2024.
    Comment: A commenter requested that CMS ensure that Part D sponsors 
and their PBMs load revised drug pricing tables reflecting the lowest 
possible reimbursement into their claims processing systems that 
interface with contracted pharmacies. The commenter noted that this 
information goes hand-in-hand with a real-time prescription benefit 
model in providing at the point of prescribing and even at the point of 
dispensing an accurate accounting of the beneficiary's out-of-pocket 
cost for their prescription.
    Response: We appreciate the suggestion. We will monitor the 
situation to determine whether it is necessary that we take any 
additional steps to ensure that Part D sponsors and their PBMs have 
made the appropriate changes to their claims processing systems.
    After consideration of the comments, we will finalize our proposal 
to use existing reporting mechanisms to confirm that sponsors are 
appropriately applying pharmacy price concessions to the negotiated 
price.
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 section 3301 of the Patient Protection and 
Affordable Care Act (Pub. L. 111-148) (PPACA), as amended by section 
1101 of the Health Care and Education Reconciliation Act of 2010 (Pub. 
L. 111-152), except that it excludes any dispensing fee for the 
applicable drug. Under that definition, which is codified in the 
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 a 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 on the November 2018 proposed rule 
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.
    In the proposed rule, we noted that 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. However, we did not propose to adopt such a 
mandate and noted that allowing plans flexibility with respect to the

[[Page 27848]]

treatment of pharmacy price concessions for applicable drugs in the 
coverage gap would 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 we were to adopt the proposed approach, we would 
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 solicited comment on whether there are 
other topics CMS would need to address in new guidance if we finalized 
the proposed approach. We also requested 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 solicited 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.
    Comment: The majority of commenters indicated that pharmacy price 
concessions should be included in the negotiated price for applicable 
drugs in the coverage gap. Commenters stated that applying pharmacy 
price concessions at the point of sale, regardless of the benefit 
phase, is the least confusing option for beneficiaries and provides 
consistency and transparency at the point of sale. Some noted that 
predictability in out-of-pocket costs is critically important for 
seniors and people with disabilities. Some commenters believed that 
applying the same rules regarding the reporting of pharmacy price 
concessions in the coverage gap would reduce beneficiary out-of-pocket 
costs and improve patient access and affordability. Several commenters 
stated that having two different sets of rules would be hard to explain 
to beneficiaries and create beneficiary confusion. A few commenters 
raised concerns about how two definitions could be effectively 
communicated in Medicare Plan Finder files, with greater potential for 
errors in the information and confusion among enrollees.
    Many commenters stated that it would be operationally challenging 
to have different rules for applying pharmacy price concessions in the 
coverage gap versus other phases of the Part D benefit. Commenters 
noted that it was unclear how Part D plans, PBMs, and pharmacies could 
operationalize two different rules for negotiated prices. Others noted 
that having two different approaches would increase administrative 
costs for pharmacies, plan sponsors, PBMs, and other stakeholders, and 
that claims systems would need to be reprogrammed. Commenters stated 
that if there were two different approaches, Part D sponsors would need 
specific guidance regarding the calculation of the gap discount, PDE 
reporting, and straddle claim processing. In addition, commenters were 
concerned that having different rules for the negotiated price would 
result in significant complexity during the bid process and CMS 
oversight. Some commenters noted the potential for confusion and errors 
and administrative costs associated with implementation.
    Response: We appreciate the thoughtful feedback on maintaining two 
separate rules for determining the negotiated price and the concerns 
about the potential for beneficiary confusion, added administrative 
burden and cost, and implementation challenges that would result from 
applying one approach to the negotiated price for applicable drugs in 
the coverage gap phase and another for non-applicable drugs in the gap, 
as well as for drugs in all other phases of the Part D benefit.
    As noted in the preamble of the proposed rule, 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 
of applicable drugs in the coverage gap. 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, 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 to beneficiaries at the 
point-of-sale.
    Given our authority under the statute to require plans to include 
all pharmacy price concessions to the negotiated price for all phases 
of the Part D benefit and the beneficiary confusion, additional 
administrative burden and costs, and implementation challenges posed by 
maintaining two approaches for purposes of the two definitions of 
negotiated price, we are finalizing our proposal with modification to 
use the negotiated price determined using the lowest possible 
reimbursement to the pharmacy across all phases of the Part D benefit, 
including for applicable drugs in the coverage gap phase. Accordingly, 
we are revising the definition of negotiated price at Sec.  423.2305 to 
clarify that the negotiated price must be inclusive of all pharmacy 
price concessions in the coverage gap phase of the Part D benefit but 
that sponsors continue to have the flexibility to elect which non-
pharmacy price concessions are to be passed through at the point of 
sale. After consideration of the comments, we are finalizing our 
proposal with modification to use the negotiated price determined using 
the lowest possible reimbursement to the pharmacy across all phases of 
the Part D benefit, including the coverage gap phase.
4. Pharmacy Administrative Service Fees
    As noted in the proposed rule, 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,''

[[Page 27849]]

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 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.
    Comment: Some commenters expressed support for the requirement that 
legitimate administrative service fees be recorded as administrative 
costs in the bid and not as a pharmacy price concession. The commenters 
explained these fees typically provide no additional value to the 
pharmacy or the beneficiary beyond the ability to participate in the 
Medicare Part D plan's pharmacy network and instead mainly offset the 
sponsor's or its intermediary's costs of operating the Part D plan, 
which the commenters contended should not be the responsibility of a 
network pharmacy. A few commenters requested that CMS provide further 
clarification on the definition of pharmacy administrative service fees 
and what should be considered under such definition.
    Response: CMS appreciates the commenters' support. As discussed in 
the May 2014 final rule (79 FR 29877), pharmacy price concessions 
characterized as ``network access fees,'' ``administrative fees,'' 
``technical fees,'' or ``service fees'' and are taken as deductions 
from payments to pharmacies for drugs dispensed, represent charges that 
offset sponsor or PBM operating costs. If a sponsor or its intermediary 
contracting organization wishes to be compensated for these services 
then such administrative costs should be accounted for as such in the 
Part D bid. However, when such fees take the form of deductions from 
payments to pharmacies for dispensed Part D drugs, such costs are price 
concessions and must be reflected in the negotiated price. This is the 
case regardless of whether the deductions are calculated on a per-claim 
basis. CMS declines at this time to further define what should be 
considered pharmacy administrative service fees, but we may consider 
providing further clarification in future rulemaking.
    Comment: A commenter requested that CMS clarify how it intends to 
ensure that administrative service fees are being properly recognized 
and reported. This commenter recommended that CMS utilize Medicare Part 
D Reporting Requirements to ensure fees charged to pharmacies are 
properly reported as either administrative costs or price concessions. 
Another commenter requested that CMS require a Part D sponsor (and its 
PBM) attest that any administrative service fees charged by the Part D 
sponsor (or its PBM) are utilized for administrative services and that 
such services are relevant and applicable to the pharmacy against which 
the fees are applied.
    Response: We appreciate the concerns raised by commenters and will 
consider what steps might be necessary in the future to ensure that 
administrative service fees are properly reported to CMS.
    Comment: A number of commenters expressed concerns that the Part D 
sponsors could use the classifications of price concessions and 
pharmacy administrative service fees to manipulate the Part D bidding 
and MLR processes in order to retain additional profit. A commenter was 
concerned that Part D sponsors had incentives to bid in ways that 
allowed the sponsors to retain pharmacy price concessions and not apply 
them to the negotiated price, diminishing the value available to 
enrollees at the point of sale. This commenter stated that plans 
overbid by underestimating DIR in order to retain additional profit 
during the plan's reconciliation process. The commenter is concerned 
that the terms of the MLR requirements may permit Part D sponsors to 
inflate their actual expenditures, or ``incurred claims,'' by 
classifying their arbitrary charges to pharmacies as ``administrative 
fees'' or ``administrative service fees.'' By doing so, a Part D 
sponsor inflates their reported incurred claims so that they can retain 
such fees while simultaneously reducing the sponsor's probability of 
paying remittances under the MLR. This commenter noted that if such 
fees were instead reported as post-point-of-sale price concessions, 
then they would increase the plan's probability of paying a remittance 
under the MLR. This commenter stated that the MLR requirement was 
created to encourage plans to: (1) Provide value to beneficiaries, (2) 
be transparent and accountable for expenditures, and (3) reduce health 
care costs.
    A commenter rejected the notion that Part D plans have an incentive 
to deliberately underestimate DIR in Part D bids in order to increase 
plan profits. This commenter stated that there are multiple mechanisms 
in place to prevent abuse of the system. The commenter cited the bid 
review process, Part D risk corridors, and the MLR requirement as 
examples of programmatic features that limit Part D plan sponsors' 
gaming of bids and profits. The commenter asserts that the Office of 
the Actuary would refuse to approve bids if a sponsor were 
``consistently off'' in projections. They contended that the current 
plan payment structure applies appropriate incentives and allows for 
appropriate oversight to ensure that private market innovation delivers 
competitive and meaningful choices to beneficiaries and financial 
savings to taxpayers.
    Response: While the bid review process, Part D risk corridors and 
the MLR requirement limit Part D plan sponsors' ability to game bids 
and profits to an extent, we do not agree with the commenters' 
implication that these are CMS. The commenters do not address the 
analysis of Part D plan payment and cost data we discussed in the 
proposed rule, which show that in recent years, DIR amounts that Part D

[[Page 27850]]

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. The commenter 
merely asserts that the Office of the Actuary would have refused to 
approve bids if a sponsor were ``consistently off'' in projections. 
They fail to elaborate under which conditions the Office of the Actuary 
would reject a bid from a Part D sponsor because the Part D sponsor has 
been historically off in their bids, but could provide an argument that 
their current bid is actuarially sound. We do not believe the MLR 
requirement nor the Part D risk corridors function to solve or 
disincentivize the trend of underbidding DIR. The MLR requirement 
mandates that sponsors remit funds if less than 85 percent of all 
revenues are spent on prescription drugs or quality improvement 
activities. When Part D sponsors share extra profits through the Part D 
risk corridor with the Federal Government due to the sponsor 
underestimating DIR, sponsors typically keep a significant majority of 
the extra profits. For example, when a Part D sponsor's target amount 
or revenue exceeds their allowable risk corridor costs by 10%, the 
sponsor would retain 75% of the extra profits while the Federal 
Government would recoup 25%. Also, a Part D sponsor could underestimate 
DIR relative to its bid and receive additional profits up to the 
maximum amount permitted by the Part D risk corridors without 
necessarily failing to meet the 85 percent MLR requirement.
    CMS appreciates the commenter's concerns that Part D sponsors could 
manipulate the treatment of payments from pharmacies in different Part 
D processes in order retain additional profits. However, we believe the 
requirements for both MLR and under this final rule are clear that a 
Part D sponsor could not treat a fee as an administrative cost for one 
purpose, but a drug cost for the other. While Part D sponsors have had 
an incentive to bid using an assumption that pharmacy price concessions 
would not be applied at the point of sale to achieve advantageous 
premiums, Part D sponsors must submit Part D bids that comply with the 
Part D statute, regulations, and rules applicable for the contract year 
as the basis for their actuarial assumptions, and in relation to the 
issuance of this final rule Part D sponsors will be required to reflect 
the new definition of negotiated price in all phases of the Part D 
benefit in their Part D bids. The definition of ``price concession'' 
and the requirements of the MLR would not allow Part D sponsors to 
inflate the ``incurred claims'' in their MLR by reclassifying amounts 
that are deducted from payments made to pharmacies for purchases of 
Part D drugs as administrative fees. ``Incurred claims'' in the MLR 
numerator include direct drug costs that are actually paid (Sec.  
423.2420(b)(2)(i)) and excludes administrative fees (Sec.  
423.2420(b)(4)). The definition of ``price concession'' mirrors 
``actually paid'' as defined in Sec.  423.308. A ``price concession'' 
is defined as 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. Similarly, ``actually 
paid'' are costs that must be actually incurred by the Part D sponsor 
and must be net of DIR from a source that serves to decrease the costs 
incurred under the Part D plan by the Part D sponsor. Therefore, any 
amount that would be considered a price concession in the application 
of this rule would also be netted from the incurred claims amount in 
the MLR numerator, which is why we believe the requirements for both 
MLR and this final rule are clear that a Part D sponsor could not treat 
a fee as an administrative cost for one purpose, but a drug cost for 
the other.
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 sub-regulatory guidance. Therefore, to 
avoid confusion among Part D sponsors and other stakeholders of the 
Part D program resulting from inconsistent terminology, we proposed to 
add a regulatory definition for the term ``price concession'' at Sec.  
423.100 that is consistent with how that term is used in subsections 
(d)(1)(B) and (d)(2) of section 1860D-2 of the Act.
    We proposed to define price concession to include 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. 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.
    The proposed rule noted 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, and it 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.
    Comment: Many commenters expressed concern that PBMs will 
restructure pharmacy fees to sources other than claim-level fees to 
circumvent CMS's intent in the proposal and provided recommendations on 
what CMS should include or consider. Some commenters wanted CMS to 
clarify that pharmacies would not be held accountable for ``non-
pharmacy'' price concessions (for example, manufacturer rebates).
    Many commenters asked CMS to confirm that any fee related to or 
assessed because of a Part D prescription drug claim is considered a 
price concession. Commenters expressed that this should be true whether 
the fee represents an administrative fee, a transaction fee, or the 
value of a contingent amount, such as a performance-based penalty. Many 
commenters explained that the fees and price concessions that PBMs 
utilize in contracts and pharmacy manuals have different names, but 
were primarily deductions from their reimbursements. Commenters felt 
these deductions must be treated as a price concession and fully 
disclosed to them on individual adjudicated claim responses and 
remittance advices within the prompt pay rules of 14 calendar days.
    Response: We believe that the definition of ``price concession'' 
that we discussed in the proposed rule is broad enough 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, so 
that Part D sponsors and their intermediaries are limited in

[[Page 27851]]

circumventing CMS' intent without fundamentally changing. When pharmacy 
administrative service fees take the form of deductions from payments 
to pharmacies, they represent charges that offset the sponsor's or its 
intermediary's operating costs under Part D. If 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 have been accounted for in the administrative costs 
of the Part D bid. However, if the sponsor or its intermediary deducts 
these same costs from payments to pharmacies, such costs are price 
concessions and must be reflected in the negotiated price. For pharmacy 
price concessions that are not at the claim level, Part D sponsors 
would have to determine a methodology to attribute such concessions to 
the claim level to remain in compliance with the definition of 
negotiated price.
    We are confirming that under the definition of negotiated price we 
are adopting in this final rule, the negotiated price must include 
pharmacy price concessions, and does not require inclusion of non-
pharmacy price concessions, such as manufacturer rebates. To the extent 
a non-pharmacy price concession is applied to the negotiated price, it 
would reduce the negotiated price, but not reduce the amount that is 
the lowest possible reimbursement the pharmacy could receive as 
reimbursement for a covered Part D drug under the contract between the 
pharmacy and the Part D sponsor or the sponsor's intermediary.
    Comment: Some commenters recommended changes to our proposed 
definition of ``price concession.'' These commenters recommended that 
the definition consider administrative service fees. A commenter 
recommended that in our proposed definition after the phrase ``received 
by the Part D sponsor or its intermediary contracting organization'' 
that we add ``for a particular claim at any time during the contract 
year.'' This commenter also recommended that after the phrase ``from 
any source'' that we add ``including a network dispensing pharmacy.'' 
Finally, in the list of examples of price concessions, the commenter 
recommended that we include ``fees or other charges to network 
dispensing pharmacy.'' Another commenter recommended that we modify the 
definition of ``price concession'' by adding, after the phrase ``that 
serves to decrease the costs incurred under the Part D plan by the Part 
D sponsor,'' ``or its intermediary contracting organization under the 
Part D plan.'' This commenter also recommends that the examples be 
expanded to include ``any type of fee or other amount that a Part D 
sponsor or its intermediary contracting organization retains from 
payments made to such pharmacies or providers for their provision of 
Part D drugs or requires such pharmacies or providers to pay in 
connection with its provision of Part D drugs under a Part D network, 
including but not limited to transaction fees, network participation 
fees and administrative fees.'' Commenters also requested that CMS 
define ``administrative service fees.''
    Response: For the reasons stated previously, we believe the 
definition we are adopting in this final rule is sufficient to identify 
price concessions. CMS will take commenters' suggestions for changes to 
the definition of price concession, as well as for a new definition of 
``administrative service fees,'' into consideration for future 
rulemaking.
    We are finalizing our proposal without modification to define 
``Price concession'' to include 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 
at Sec.  423.100.

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 the hospital 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 sought information from stakeholders in order to assess the 
impact of MA organizations' use of prior authorization or other 
utilization management criteria during certain PHEs. Through this 
request for information (RFI), CMS sought 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.

[[Page 27852]]

    We noted that we remain mindful of the impact the MA program's 
policies have on the health care system as a whole, and strongly 
encouraged MA organizations to continuously re-assess the need for 
flexibilities in their utilization management practices. We noted 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 invited 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. We indicated that the primary objective of this RFI was 
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 was a general RFI related 
to prior authorizations on patient transfers during any PHE. While many 
commenters may have chosen to provide information in the context of the 
COVID-19 PHE, we welcomed and encouraged commenters to provide 
information in the context of any PHE.

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 the 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 in 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 MA 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 MA organization's 
network, and are uploaded to the Health Plan Management System (HPMS) 
for an automated review. MA plans must have sufficient providers within 
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's network includes telehealth providers for 
certain specialties and the plan covers additional telehealth benefits, 
as defined in Sec.  422.135. However, as noted in the proposed rule, 
even with the availability of the additional 10-percentage point credit 
for the use of telehealth providers, it is our understanding that MA 
organizations may experience difficulties meeting network adequacy 
standards with respect to behavioral health providers.
    In order to increase our understanding of issues related to MA 
enrollees' access to behavioral health specialties, CMS sought input 
from industry stakeholders on the challenges MA organizations face when 
building an adequate network of behavioral health providers for MA 
plans. More specifically, we issued an RFI that solicited comment on 
issues including, but not limited to, the following:
     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 plans, including wait times for 
appointments;
     The extent to which a behavioral health network affects a 
beneficiary's decision to enroll in an MA plan;
     Challenges for behavioral health providers to establish 
contracts with MA 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 network adequacy and behavioral health in MA plans, 
including in rural areas that may have provider shortages; and
     Suggestions from industry stakeholders on how to address 
issues with building adequate behavioral health networks within MA 
plans.
    We acknowledge and appreciate all comments submitted in response to 
this RFI. While we will not be responding to those comments in this 
final rule, we will take the commenters' suggestions, concerns, and 
other feedback into account as we consider future changes to our in 
policy in this area.

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

    In the April 2019 final rule, we established an additional 
contracting requirement at Sec.  422.107(d) for any D-SNP that is not a 
FIDE SNP or HIDE SNP. Under this new requirement for the contract that 
is required between the D-SNP and the State Medicaid agency effective 
January 1, 2021, 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 
short time, all of which coincided with the COVID-19 public health 
emergency. Through the proposed rule we invited 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.
    While we are not responding to specific comments submitted in 
response to this Hospital Transfers to Post-Acute Care Settings during 
a Public Health Emergency, Building Behavioral

[[Page 27853]]

Health Specialties within MA Networks, Data Notification Requirements 
for Coordination-Only D-SNPs request for information (RFI) in this 
final rule, we appreciate all of the comments and interest on these 
topics. We will continue to take all concerns, comments, and 
suggestions into account as we continue work to address and develop 
policies on these topics and may reach out to commenters for further 
discussion.

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 the PRA's implementing regulations.
    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.
    In our January 12, 2022 (87 FR 1842) proposed rule, we solicited 
public comment on each of these issues for the following provisions 
that contain information collection requirements. As indicated below, 
we received public comments on the collection of information 
requirements related to the creation of a one-page multi-language 
insert; the comments and our responses are summarized below under the 
applicable Collection of Information subsection. Separately, on 
February 25, 2022 (87 FR 10761), we published a correction that 
clarified we will submit information on the number of respondents and 
the time estimates to the public and OMB for the collection of 
information requirements related to limiting certain Medicare Advantage 
contracts to D-SNPs prior to the 2025 plan year application.

A. Wage Data

    To derive average costs, we are using data from the 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 finalizing of this rule, provides 
May 2021 wages. In this regard, Table 3 presents BLS's mean hourly wage 
along with our estimated cost of fringe benefits and overhead 
(calculated at 100 percent of salary), and our adjusted hourly wage.
[GRAPHIC] [TIFF OMITTED] TR09MY22.007

    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.
    Revised Wage and Cost Estimates: While our proposed rule's costs 
were based on BLS's May 2020 wages, this final rule uses BLS's May 2021 
wages which are the most current as of the publication date of this 
rule. The wage changes are presented below in Table 4. Overall, the 
revised BLS wages increased our cost estimates by $74,274 for first 
year (from $5,225,170 to $5,299,444) and a corresponding decrease of 
$43,579 for subsequent years (from $3,647,583 to $3,604,004). Note 
these numbers also reflect an adjustment to the numbers published in 
the January 2022 proposed rule (87 FR 1934) since two provisions 
described in section IV.B.2 and section IV.B.3. had changes in their 
estimated number of respondents, and in response to comments one 
additional provision (section IV.B.7.) was added. Therefore, we 
recalculated the estimates from the proposed rule with these three 
changes resulting in $5,225,170 for first year and $3,647,583 for 
subsequent years representing the updated estimates with 2020 wage 
estimates. We then recalculated again using the 2021 wage estimates 
resulting in the $5,299,444 for first year and the $3,604,004 for 
subsequent years numbers so that the difference would compare similar 
items.
    Please note that besides the wage changes there were (i) two 
changes in occupation codes, 13-1198 is now 13-1199 and 15-1250 is now 
15-1252 and (ii) there was one change in occupational title, ``Software 
and Web Developers'' is now ``Software developers.''

[[Page 27854]]

[GRAPHIC] [TIFF OMITTED] TR09MY22.008

B. Information Collection Requirements (ICRs)

    The following ICRs are listed in the order of appearance within 
section II. of this final rule.
1. ICRs Regarding Enrollee Participation in Plan Governance (Sec.  
422.107) (CMS-10799, 0938-1422)
    The requirement and burden for D-SNPs to create one or more 
enrollee advisory committees will be submitted to OMB for approval 
under control number 0938-TBD (CMS-10799). The requirement and burden 
for D-SNPs to update audit protocols to require documentation of the 
enrollee advisory committees will be submitted to OMB for approval 
under control number 0938-1395 (CMS-10717).
a. Creating One or More Enrollee Advisory Committees (CMS-10799, OMB 
0938-1422)
    At Sec.  422.107(f), we are requiring 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 require 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 requirements. We believe that D-SNPs should work 
with enrollees and their representatives to establish the most 
effective and efficient process for enrollee engagement; therefore, we 
chose not to establish the: (1) Frequency; (2) location; (3) format; 
(4) participant recruiting and training methods; (5) use and adoption 
of telecommunications technology; or (6) other parameters for operation 
of the required committee. In addition, the final rule requires one 
committee (for example, one committee at the State level to serve all 
of the MA organization's D-SNPs in that State) but MA organizations may 
establish more than one committee). This rule also permits MA 
organizations to use existing committees which would meet the 
requirements of both Sec. Sec.  422.107(f) and 438.110 (we expect this 
approach to be used by FIDE and HIDE SNPs).
    The only requirements in this rule for an MA organization offering 
one or more D-SNPs in a State is 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(s) 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(s) 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 
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 required by 
Sec.  438.110 for Medicaid managed care plans that cover Medicaid LTSS.
    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 enrollee 
advisory committee, detailed previously in this section, we expect the 
average time and annual cost for an MA organization to establish and 
hold an enrollee advisory committee meeting(s) 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 committees created by MMPs must 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 rule. With this understanding that 
a wide variety of approaches would be used, we estimate that on average 
a business compliance officer will spend 40 hours at $76.20/hr to 
establish and hold enrollee advisory committee meetings.
    In the proposed rule, we noted that each MA organization offering 
one or more D-SNPs in a State will decide how to establish an enrollee 
advisory

[[Page 27855]]

committee based on the MA organization's approach to obtaining maximal 
input from enrollees leading to the highest quality enrollee 
experience. Because of the wide variability, we solicited stakeholder 
comments on our assumptions and burden estimates. We received no 
comments on this issue and therefore we are finalizing our estimates 
that an MA organization will spend 40 hours at a cost of $3,048 (40 hr 
x $76.20/hr for a business operation specialist) to establish an 
enrollee advisory committee.
    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. We are updating these 
estimates from the estimates used in the proposed rule based on the 
increase in D-SNP PBPs for contract year 2022. There were 596 D-SNP 
PBPs in 2021 and 703 D-SNP PBPs in 2022. For 2022, we estimate 578 D-
SNPs do not have a corresponding Medicaid managed care plan that 
provides LTSS, with 125 D-SNP PBPs in MA contracts that provide LTSS. 
Additionally, 268 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 requirement. Therefore, we estimate MA organizations 
operating D-SNPs will need to establish 310 (703 D-SNP PBPs minus 125 
PBPs in D-SNP contracts that provide LTSS minus 268 PBPs under the same 
contract in the same State) new enrollee advisory committees.
    Thus, the aggregate minimum annual burden for MA organizations 
operating D-SNPs to meet the requirements of Sec.  422.107(f) is 12,400 
hours (310 new committees x 40 hr per committee) at a cost of $944,880 
(12,400 hr x $76.20/hr). As stated above, the requirement and burden 
will be submitted to OMB for approval under control number 0938-1422 
(CMS-10799).
b. Updates to Audit Protocols (CMS-10717, OMB 0938-1395)
    As noted in section II.A.3. of this rule, we anticipate updating 
the CMS SNP Care Coordination audit protocols \94\ 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. In our currently approved collection of information 
request, we estimated that the audit protocol and data request will 
take 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). With 
regard to this final rule, we believe MA organizations offering D-SNPs 
will prepare and retain a committee member list and meeting minutes a 
of customary business practices that is exempt from the requirements of 
the PRA under 5 CFR 1320.3(b)(2). Therefore, we do not believe 
reporting this documentation on the enrollee advisory committee will 
impact our currently approved 701-hour audit protocol time estimate.
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    \94\ See https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/ProgramAudits.
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    While we do not anticipate any changes to our active time 
estimates, we will revise the SNP Care Coordination audit protocol 
prior to the effective date of the rule to provide stakeholders with an 
opportunity to comment on the contents of our revised audit protocol. 
The CMS-10717 collection of information request will be made available 
to the public for review and 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.
c. Conclusion
    We did not receive any public comments on our proposed collection 
of information requirements, however, as noted and explained previously 
in this section, we have updated to our estimates based on: (1) The 
increase of D-SNP PBPs for contract year 2022; and (2) updated hourly 
wage estimates.
2. ICRs Regarding Standardizing Housing, Food Insecurity, and 
Transportation Questions on Health Risk Assessments (Sec.  422.101) 
(CMS-10799, OMB 0938-1422) and (CMS-10717, OMB 0938-1395)
    The following HRA requirements will be submitted to OMB for 
approval prior to the CY 2024 applicability date. The changes to our 
SNP audit protocols will be submitted to OMB for approval under control 
number 0938-1395 (CMS-10717).
a. Added HRA Questions
    As described in section II.A.4. of this final rule, we are 
requiring that SNPs include questions on housing stability, food 
security, and access to transportation as part of their HRAs, although, 
based on insight from public comments, we are not finalizing our 
proposal to require standardized questions as proposed in our January 
2022 proposed rule. Instead, we will require SNPs to include one or 
more questions from a list of screening instruments specified by CMS in 
sub-regulatory guidance on housing stability, food security, and access 
to transportation in their HRAs. SNPs will also have the option to use 
any State-required Medicaid screening instruments that include 
questions on these domains. We have updated our burden estimates 
accordingly, as described later in this section. As noted in section 
II.A.4. of this final rule, we will ensure compliance with the PRA as 
we strive to post the sub-regulatory guidance by the end of 2022.
    This provision will 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 do not believe 
that collecting this information will 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, and public comments confirmed, that many SNPs are 
already including questions in their HRA tools related to housing 
stability, food security, and access to transportation, and many such 
questions are drawn from the types of validated and widely-used 
screening instruments that we will specify in sub-regulatory guidance. 
Therefore, many SNPs will not need to revise their HRA tools. 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. CMS will not be collecting data elements from the 
HRA as part of this collection of information.
    We estimate a one-time burden for the parent organizations offering 
SNPs to update their HRA tools in their care management systems and 
adopt questions on housing stability, food security, and access to 
transportation, in cases where the SNPs are not already asking 
questions on the required topics.
    In our proposed estimate, we assumed that each parent organization 
offering one or more SNP would be impacted. Because we are not 
finalizing standardized questions but rather requiring SNPs to choose 
questions from a list of existing screening instruments that comments 
indicate are widely in use or a State-required Medicaid screening 
instruments, we assume that many SNPs are already asking questions that 
we will include on the list; therefore, we estimate about 35 percent of 
parent organizations with one or

[[Page 27856]]

more SNPs would update the care management system where an enrollee's 
HRA responses are recorded. We estimate that it will take a software 
programmer 3 hours at $116.34/hr to update the care management system 
resulting in a cost of $349 (3 hr x $116.34/hr) per parent 
organization. We are updating the number of parent organizations making 
these updates based on the 2022 contract year numbers from 123 parent 
organizations with a SNP PBP in 2021 to 133 parent organizations with a 
SNP PBP in 2022. We therefore estimate 47 parent organizations (35 
percent of organizations that update multiplied by 133 parent 
organizations) will be making these updates. In aggregate, we estimate 
a one-time burden for updating the HRA tool of 141 hr (47 parent 
organizations x 3 hr) at a cost of $16,404 (141 hr x $116.34/hr).
b. Updates to Audit Protocols (CMS-10717, OMB 0938-1395)
    The change to the HRAs would also require an update to the CMS SNP 
Care Coordination audit protocols \95\ that ensure the completed HRAs 
include the assessment of housing stability, food security, and access 
to transportation based on the list of screening instruments specified 
by CMS in sub-regulatory guidance. Currently, audit protocol and data 
request burden are estimated at 701 hours per MA organization at an 
average hourly cost of $87.00/hr, totaling $60,987 per MA organization. 
We do not believe the changes to SNP audit protocols would add more 
time to the 701-hour audit protocol estimate, as we are adding a 
confirmation that the SNP's HRA includes the changes as part of the SNP 
Care Coordination audit protocols.
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    \95\ See https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-and-Audits/ProgramAudits.
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    While we do not anticipate any changes to our active time 
estimates, we will revise the audit protocol documents to provide 
stakeholders an opportunity to review and comment on the contents of 
the protocol documents. The revised collection of information request 
is not available at this time, but it will be made available to the 
public for review and 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.
c. Conclusion
    We did not receive any public comments on our proposed collection 
of information requirements regarding housing, food insecurity, and 
transportation questions on health risk assessment. As indicated above, 
(i) we have updated our burden estimates from 123 affected parent 
organizations to 47 parent organizations and (ii) updated our cost 
estimates by using BLS' 2021 wages; however, the estimated time per 
respondent remains the same.
3. ICRs Related To Refining Definitions for Fully Integrated and Highly 
Integrated D-SNPs (Sec.  422.2)
    The following changes will be submitted to OMB for approval under 
control number 0938-1410 (CMS-10796).
    As described in section II.A.5. of this final rule, we are making 
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 changes to the FIDE SNP definition require these plans to: Have 
exclusively aligned enrollment; cover Medicare cost-sharing; and cover 
the Medicaid benefits of home health (as defined in Sec.  440.70), 
medical supplies, equipment, and appliances (as described in Sec.  
440.70(b)(3)), and Medicaid behavioral health services through a 
capitated contract with the State Medicaid agency. We also 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 are also codifying 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 changes to the definition of FIDE SNP and HIDE SNP, a D-
SNP may need to update its contract with the State Medicaid agency. 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 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 changes to these 
definitions at Sec.  422.2 would impact our currently approved annual 
30 hour contracting burden estimate for D-SNPs.
    The 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, we will update the content of the collection of 
information to reflect the changes to Sec.  422.2 by revising 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-
1410 (CMS-10796). We believe including these forms in a separate OMB 
control number 0938-1410 (CMS-10796) exclusively for the D-SNP State 
Medicaid agency contracts is more operationally consistent with the 
collection of information required from MA organizations. The matrix 
documents will be removed from 0938-0935 after they are approved by OMB 
under 0938-1410.
a. Service Area Overlap Between HIDE SNPs and Companion Medicaid Plans 
(CMS-R-262, OMB 0938-0763)
    In addition to the updates described in this section, changes to 
the FIDE SNP or HIDE SNP definition described in section II.A.5.f. of 
this final rule will require the service area of a FIDE SNP or HIDE SNP 
to overlap with companion Medicaid plans; therefore, the 15 HIDE SNPs 
that have service area gaps with their affiliated Medicaid 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 15 impacted D-SNPs, or 5 D-
SNPs, would choose to remain a HIDE SNP. The remaining 10 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.

[[Page 27857]]

    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 15 D-SNPs an opportunity to expand the service area of 
the companion Medicaid plan in CY 2025.
b. Conclusion
    We did not receive any public comments on our proposed collection 
of information requirements and are therefore finalizing them without 
modification.
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 final rule, we are adding 
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. 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 these requirements and associated burden 
follows:
a. State Medicaid Agency Contract Requirements
    The following changes will be submitted to OMB for review under 
control number 0938-1410 (CMS-10796).
    For States that opt to require the contract requirements at Sec.  
422.107(e), States and plans will need to modify the existing State 
Medicaid agency contract. These modifications will 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 (CMS-10796, OMB 0938-1410)
    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 associated with administering the Medicaid 
program, half of which the States incur and half of which the Federal 
Government incurs. 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 will take a total of 24 hours at 
$142.34/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 
final rule. This estimate includes the burden to negotiate with the D-
SNPs on contract changes and engage with CMS to ensure contract changes 
meet the requirements that we are finalizing 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 (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 our proposal, we projected that 
States would implement this one-time change during the first year 
(contract year 2025). In section II.A.14. of this final rule, we 
discuss our intent to explore extension of the FAI model test in 
certain circumstances and consistent with our authority under section 
1115A of the Act to convert MMPs to integrated D-SNPs. The discussion 
in section II.A.14. of this final rule makes us less certain of when 
States will incur the burden described in this collection of 
information; however, we do not expect the number of States impacted to 
change. Therefore, we are not updating our estimates based on the 
discussion in section II.A.14. of this final rule.
    Section 1903(a)(7) of the Act requires the Federal Government to 
pay half of the States' administrative costs. In aggregate we estimate 
a one-time burden of 288 hours (12 States x 24 hr/State) at a cost of 
$20,497 (288 hr x $142.34/hr x 0.5). 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.
(2) MA Organization Burden (CMS-10796, OMB 0938-1410)
    For the initial year, we expect each affected D-SNP will take 8 
hours at $142.34/hr for a lawyer to update the contract with the State 
Medicaid agency to reflect the revised and new provisions in this rule 
at Sec.  422.107(e). Based on our assumptions of States likely to opt 
to require the contract changes, we estimate between 40 to 80 MA 
organizations would be impacted. Since we are uncertain of which 
extreme to use, we use the average, 60 MA organizations. We further 
expect the updates to be completed in the first year (contract year 
2025). In aggregate we estimate a one-time burden of 480 hours (60 MA 
organizations x 8 hr) at a cost of $68,323 (480 hr x $142.34/hr).
b. Limiting Certain Medicare Advantage Contracts to D-SNPs (CMS-10237, 
OMB 0938-0935 and CMS-10137, OMB 0938-0936)
    The following changes regarding additional Part C application 
respondents will be submitted to OMB for approval under control number 
0938-0935 (CMS-10237). The following changes regarding additional Part 
D application respondents will be submitted for OMB approval under 
control number 0938-0936 (CMS-10137).
    At Sec.  422.107(e) we are codifying a pathway by which States can 
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 will 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 will 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

[[Page 27858]]

need to complete a new application for Parts C and D.
    We estimate that 60 D-SNPs will be impacted by our changes to Sec.  
422.107(e). Currently, 32 percent of D-SNPs are in D-SNP-only 
contracts; \96\ 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.
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    \96\ HPMS, Contract Management Reports 2020, SNP Type and 
Subtype Report, August 7, 2020.
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    The burden per MA organization 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 $72.90/hr for a compliance officer to review 
instructions and complete the application (including submission) at a 
cost of $729 (10 hr x $72.90/hr). Under this final rule, we estimate 41 
D-SNPs will need to submit a new Part C application; therefore, the 
currently approved total burden for one-time Part C applications will 
increase by 410 hours (10 hr x 41 D-SNPs) at a cost of $29,889 (410 hr 
x $72.90/hr).
    The burden per MA organization 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 application (including submission) at a 
cost of $467 (6.41 hr x $72.90/hr). Under this final rule, we estimate 
41 D-SNPs will need to submit a new Part D application; therefore, the 
currently approved total burden for one-time Part C applications will 
increase by 263 hours (6.41 hr x 41 affected D-SNPs) at a cost of 
$19,173 (263 hr x 72.70/hr).
    While we anticipate changes to the number of respondents and our 
active time estimates for the Part C and Part D applications, we will 
revise control numbers 0938-0935 (CMS-10237) and 0938-0936 (CMS-10137) 
for the 2025 plan year application. Because States will likely consult 
with CMS, MA organizations, and other stakeholders on whether and how 
to pursue this step toward integration and because of the timing of MA 
applications, bids, and contract execution, we believe the 2025 plan 
year application is the earliest date that the new policy in Sec.  
422.107(e) can be implemented by a State and MA organization. The CMS-
10237 and CMS-10137 collection of information materials will 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.
    We acknowledged in our proposal that 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 requested comments on 
these impacts for a new contract under an already existing MA 
organization and if they should be included in our estimates. We 
received no comments and are finalizing our estimates without including 
any additional collection of information impacts.
c. Integrated Member Materials
    As described in section II.A.6.b. of this final rule, to provide a 
more coordinated beneficiary experience, at Sec.  422.107(e) we are 
codifying a pathway by which States and CMS will 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. Section 
422.107(e)(1) 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 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.c. of this final 
rule.
d. Conclusion
    We did not receive any public comments on our proposed collection 
of information requirements and are finalizing these estimates as is 
with updated mean hourly wages.
5. ICRs Related to Definition of Applicable Integrated Plan Subject to 
Unified Appeals and Grievances Procedures (Sec.  422.561) (CMS-10796, 
OMB 0938-1410)
    The following changes will be submitted to OMB for approval under 
control number 0938-1410 (CMS-10796).
    In Sec.  422.561, we are expanding 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 should be required to use, and are 
capable of using, the unified grievance and appeals processes.
    We anticipate that additional D-SNPs will be implementing the 
unified grievance and appeals procedures under Sec. Sec.  422.629 
through 422.634 and that the D-SNPs impacted by this rule are D-SNPs in 
California with exclusively aligned enrollment, including those plans 
receiving Cal MediConnect members at the end of the California 
capitated FAI demonstration.
    We 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 will take a business operation 
specialist 8 hours at $76.20/hr. In aggregate, we estimate a one-time 
burden of 104 hours (8 hr x 13 D-SNPs) at a cost of $7,925 (104 hr x 
$76.20/hr).
    While new D-SNPs will use the CMS-10716 denial notice under 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. As indicated 
previously, the rule's changes will be submitted to OMB under control 
number 0938-1410 (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 will be a new requirement for the impacted D-
SNPs, we note that the timeframe for sending

[[Page 27859]]

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.
    We did not receive any public comments on our proposed collection 
of information requirements and are therefore finalizing our estimates 
as is but with updated mean hourly wages.
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 final rule, we are making 
a revision to which costs accumulate toward the MOOP limit, with the 
most significant impact being 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. As established in this 
final rule, 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 (such as because of limits on Medicaid liability for 
Medicare cost-sharing under lesser-of policy and the cost-sharing 
protections afforded certain dually eligible individuals), will count 
towards the MOOP limit. This will 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 will 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 provision does not add additional requirements or 
burden.
    This final rule will 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 foresee any new or 
revised burden that would arise from the changes. The non-PRA related 
burden can be found in section V.D.4. of this final rule.
    We did not receive any public comments on regarding the collection 
of information requirements for this provision and are finalizing them 
without change.
7. ICRs Related to Network Adequacy (Sec.  422.116(a)(i)(ii) and 
(d)(7))
    The following changes will be submitted to OMB for approval under 
control number 0938-1346 (CMS-10636).
    In this rule we will require compliance with CMS's network adequacy 
standards for initial and service area expansion (SAE) applicants as 
part of the MA application process. Therefore, we will 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.
    Comment: We did not receive any public comments specific to our 
proposed collection of information requirements. However, based on 
comments we received on our proposal to review applicants' provider 
networks during the time of application in mid-February of each year, 
we will modify the final regulation to include a change in our 
collection of information.
    We received a number of comments that were not supportive of our 
proposal to require compliance with CMS's network adequacy standards 
for initial and SAE applicants as part of the MA application process. 
Commenters expressed concerns over the proposed timing for submission 
and review of provider networks, which they said would not allow 
sufficient time for MA organizations to build high-quality networks. 
Further, commenters said that our proposal would negatively impact 
negotiations with provider groups, give providers leverage to negotiate 
higher rates that would increase healthcare costs and reduce benefits. 
Commenters also suggested that our proposal would disproportionately 
impact smaller organizations working to expand to certain regional, 
rural, and medically underserved areas, thereby inhibiting competition 
among plans and ultimately limiting choice for beneficiaries; some of 
these commenters also expressed the view that the proposal would 
provide an unfair advantage to large health plans with a presence in 
these areas. Several commenters posited that our proposal would place a 
substantial administrative burden on MA organizations and on providers, 
and that establishing contracts with organizations takes a significant 
amount of time. Finally, a number of commenters asked CMS to consider 
allowing applicants to use Letters of Intent (LOIs) to contract with 
providers as a means to meet network adequacy standards, which would 
provide flexibility as they work to come into compliance for the 
coverage year.
    Response: We appreciate the commenters' feedback regarding our 
proposal. As we noted in the proposed rule, we understand that 
requiring an applicant to establish a full provider network almost a 
year in advance of the contract becoming operational will be difficult. 
We also indicated that 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.
    Therefore, based on the comments received, we will modify the 
regulation to allow applicants to use LOIs in lieu of signed provider 
contracts, at the time of application and for the duration of the 
application review. The LOI must be signed by both the MA organization 
and the provider with which the MA organization intends to negotiate. 
Further, as part of the network adequacy review process, applicants 
must notify CMS of their use of LOIs to meet network standards in lieu 
of a signed contract and submit copies upon request and in the form and 
manner directed by CMS. At the beginning of the contract year, the MA 
organization must be in full compliance with the section, including 
having signed provider and facility contracts in place of the LOIs.
    We are not estimating the burden of updating systems to receive 
LOIs since this is done by CMS and its contractors and not subject to 
PRA requirements. We are not estimating the negotiations between plans 
and providers since these already occur, as would negotiations of LOIs. 
While there might be some increase in these negotiations, we do not 
have access to data on plan negotiations and believe that the 
assumption that the negotiations remain the same is valid.
    There is an increase in burden because we will require applicants 
to submit the providers with whom LOIs have been entered into when 
submitting their MA application using CMS systems; previously, the LOIs 
were internal documents to the plan. We must be prepared that all 
applicants who may be requesting an exception to the network adequacy 
standards may submit LOIs. While there might be additional or less we 
have no way of ascertaining this and believe this a reasonable 
assumption.
    As noted, applicants will use existing processes to submit the 
LOIs. Currently we have 468 MA applicants of which we expect about 45 
percent to submit exceptions through CMS systems (CMS-10636, OMB 0938-
1346). Thus, we assume 211 applicants (45 percent x 468

[[Page 27860]]

applicants) would submit an exception request. MA applicants are 
already collecting LOIs, and already submitting zipped files through 
our application and network adequacy review process. The extra burden 
to the applicants from this provision would be in gathering documents 
for the zip file and indicating whether there are LOIs. We are 
estimating that the extra burden of gathering forms and indicating a 
check on an application will take 5 minutes (0.083 hr). Therefore, the 
total burden of this provision is 18 hours (211 applicants x 0.083 hr) 
at a cost of $1,312 (18 hr x $72.90/hr for a compliance officer.)
8. ICRs Related to the Disclaimer for Preferred Pharmacy (Sec.  
423.2267(e)(40))
    The following 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 is 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 will 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 will be codified in this final rule. 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. We did not receive any public comments on our proposed collection 
of information requirements and are finalizing them without change.
9. ICRs Related to Member Identification Cards (Sec. Sec.  
422.2267(e)(30) and 423.2267(e)(32))
    Member Identification Cards burden is exempt from the requirements 
of the PRA 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 enrollee's 
insurance.
    This final rule 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 sub-regulatory 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 
will 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 sub-regulatory guidance and 
therefore no further burden is imposed by codifying these standards in 
regulation.
    We did not receive any public comments on our proposed collection 
of information requirements and are finalizing them without change.
10. ICRs Related to the Creation of a One-Page Multilanguage Insert 
(Sec. Sec.  422.2267(e)(31) and 423.2267(e)(33)) (CMS-10802, OMB 0938-
1421)
    The following changes will be submitted to OMB for approval under 
control number 0938-1421 (CMS-10802).
    The requirements finalized under Sec. Sec.  422.2267(e)(31) and 
423.2267(e)(33) will require 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's 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 proposed to require that MA plans and Part D plan 
sponsors provide the one-page document.
    Because the MLI will be standardized, plans will not be permitted 
to create their own version and will need to use the standardized 
template provided by CMS. In estimating the burden of this 1-page 
standardized 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 the standardized 
template that CMS will provide 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 beneficiaries who request a paper copy, this final rule 
requires that plans mail it to those beneficiaries along 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 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.\97\
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    \97\ 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 40 percent or 
20,800,000 beneficiaries (52 million beneficiaries x 0.40) will request 
paper copies.

[[Page 27861]]

    It follows that the aggregate cost of providing one extra sheet of 
paper is $312,000 (20,800,000 enrollees x $0.015/page).
    There is no labor cost for providing one extra sheet of paper.
    We solicited 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.
    Comment: We received comments indicating generally that our 
estimate of the burden to plans was incorrect. A commenter indicated 
our estimate of the burden was incorrect without providing any 
specifics on the nature of the alleged error or its impact on the 
burden calculation. Another commenter indicated that our estimate of 
the burden was too low, but they did not indicate to what degree or in 
what way they felt we had miscalculated.
    Response: As the comments did not provide specific parameters as to 
how our burden estimate is inaccurate, we decline modification of 
estimates based on the comment. On review, we believe our assessment of 
the burden on plans is accurate. Regardless, we also believe the burden 
on plans is acceptable considering the vital nature of the MLI. 
Additionally, we expect that plans consider the burden acceptable as 
the MLI improves awareness of health issues; and as plans are committed 
to the health of their members, they support the MLI as is a bridge to 
education and awareness of health and health insurance issues.
    We did not receive any other comments on our proposed collection of 
information requirements and are finalizing them without change.
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))
    Sections 422.2260, 422.2267(e)(41), 422.2274(g), 423.2260, 
423.2267(e)(41), and 423.2275(g) will require MA organizations and Part 
D sponsors to insert a CMS standard disclaimer on materials created by 
Third Party Marketing Organizations.
    The burden associated with this requirement will be the time and 
effort to copy the disclaimer on marketing materials during document 
creation. The disclaimer is a standardized, required material. In this 
regard we believe that the disclaimer is not subject to the 
requirements of the PRA because it does not constitute a ``collection 
of information.'' Instead, the disclaimer is a ``public disclosure'' of 
information originally supplied by the Federal Government to the 
recipient (5 CFR 1320.3(c)(2)).
    CMS did not receive any other comments on our proposed collection 
of information requirements and are finalizing them without change.
    CMS received no comments on the estimates for this proposal and 
therefore are finalizing this provision estimate without modification.
12. ICRs Related to the Medicare Medical Loss Ratio (MLR) Reporting 
Requirements (Sec. Sec.  422.2460 and 423.2460) (CMS-10476, OMB 0938-
1232)
    The following changes to the Medicare MLR reporting requirements 
will be submitted to OMB for approval under control number 0938-1232 
(CMS-10476).
    In section II.G.2. of this final 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 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.
    In estimating impact, we initially focus on hourly burden. Once the 
hourly burden of this final rule is established, we calculate the per 
contract and aggregate hourly and dollar burden. The reason for this 
approach is that the estimates of hourly burden have undergone several 
changes; focusing on them first provides a clearer exposition.
    The following four regulatory sources, final rules and PRA 
packages, are used as a source for items estimated. These are presented 
here with brief outlines of their contributions which will be detailed 
below. (i) The information collection that was previously approved by 
OMB under 0938-1232 (CMS-10476) in connection with the requirements 
finalized in the May 2013 Medicare MLR final rule, CMS estimated that, 
on average, MA organizations and Part D sponsors will spend 47 hours 
per contract on Medicare MLR reporting, including: Collecting data, 
populating the MLR reporting forms, conducting internal review, 
submitting the reports to the Secretary, and conducting internal 
audits. (ii) This 47-hour figure was also used in the April 2018 final 
rule (83 FR 16701) to estimate the reduction in burden resulting from 
that rule's revisions to the MLR reporting requirements that apply with 
respect to MLR reporting for contract year 2018 and subsequent contract 
years. (iii) The June 2020 final rule (84 FR 33796 to 33850), added a 
deductible-based adjustment to the MLR calculation for MA medical 
savings account (MSA) contracts. (iv) The current final rule, which 
introduces three changes: Automation of the MLR reporting for MA 
organizations including the MSA reporting requirement, reinstatement of 
detailed MLR reporting requirement used in 2014-2017, and addition of 
data fields related to expenditures on supplemental services.
    Five items must be estimated to perform the impact analysis. They 
are presented in Table 5. Table 5 indicates if these items have 
undergone change for this final rule.
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[[Page 27862]]

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BILLING CODE 4120-01-C
    We next present more detailed discussion of some of these 
assumptions.
    Number of contracts: Our analysis of the estimated administrative 
burden related to the MLR reporting

[[Page 27863]]

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 varying from 533 to 691 during CYs 2014-2020, 
such that we are applying the 601 average in this rule's burden 
estimates.
    Total hourly burden related to MLR: It is necessary to estimate the 
total effort (time) related to the Medicare MLR requirements that 
applied with respect to MLR reporting for contract years 2014 through 
2017. In the information collection request that was previously 
approved by OMB under 0938-1232 (CMS-10476), CMS estimated the total 
time spent on MLR reporting to be 47 hours. The April 2018 final rule 
subsequently divided this 47 hour estimate into two components: Time to 
complete the MLR form and time spent on other administrative tasks 
related to MLR reporting.
    Time to complete the MLR form: 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.
    In 2018, we finalized a less detailed form which we estimated takes 
0.5 hours to complete.
    The calculations for hourly burden per contract that were included 
in the April 2018 final rule are summarized in Table 6. These 
calculations do not reflect the corrections to the April 2018 rule that 
were taken into account in our burden estimate for the proposed rule.
[GRAPHIC] [TIFF OMITTED] TR09MY22.010

    The following explanations apply to the rows in Table 6:
    Row (1): The 47-hour figure, as explained in the opening paragraphs 
of this ICR, is CMS's estimate for the total amount of time MA 
organizations and Part D sponsors will spend per contract on 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 6.
    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 April 
2018 final 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).
    However, we cannot use Table 6 as a basis for comparing the burden 
of this final rule with the current burden. The reason we cannot use 
Table 6 is because the 11.5 hours (Row (2)) in Table 6 was corrected in 
the proposed rule. As indicated in Tables 5 and 6, the other 
Administrative burden is a calculated number equal to the difference 
between the total burden of 47 hours and the

[[Page 27864]]

burden of filling out the form (Row (3)). Consequently, if Row (2) 
changes, then Row (3) must change also. We next discuss the revisions 
of the April 2018 estimates just summarized in Table 6.
    In the proposed rule, we explained that 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 6), 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 contract year (for years 
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 estimated 
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 
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.
    Table 7 presents a revision of Table 6 with the primary change 
being replacing 11.5 (Row (2) in Table 6) with 10.75 (Row (7) in Table 
7), with the other rows following by computation. Table 7 also differs 
from Table 6 is the addition of the per contract burden of calculation 
of the MSA deductible factor. This is explained in the narrative to 
Table 7.
    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 under the MLR reporting requirements in effect for 
CYs 2014 through 2017 (Row (1) in Table 6) which as we have noted was 
an aggregate number estimated by CMS in the information collection that 
was previously approved by OMB under control number 0938-1232 (CMS-
10476). 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 6 and Row (7) in Table 7), with the remaining administrative 
tasks, a derived calculation, now estimated as taking the other 36.25 
hours (47 hours-10.75 hours) (Row (8) in Table 7).
[GRAPHIC] [TIFF OMITTED] TR09MY22.011

    We next 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 7 are per contract, not aggregate. Thus, the hourly 
burden for calculation of the MSA

[[Page 27865]]

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 (zero).
    This final rule finalizes three items affecting per contract hourly 
burden that were introduced in the proposed rule. These changes are 
summarized in Table 9 which will be referred to throughout the 
following discussion of the three changes. First, as noted in section 
II.G.3. of this final rule, in connection with the changes to the 
reporting requirements CMS is adopting in this final rule, we expect 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 contract year 2017. In making 
these updates, CMS is revising 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 will be eliminated. Thus Row (19) in Table 
9 is 0 contrasting with Row (10) in Table 7 which had a positive 
amount.
    Second, as discussed in section II.G.2. of this final rule, CMS is 
finalizing our proposal to reinstate the detailed MLR reporting 
requirements in effect for CYs 2014 through 2017. This changes the 0.5 
hour estimate in Rows (4) and (9) to 10.75 hours (Row (18)).
    Third, we are finalizing our proposal to require a detailed MLR 
report that provides details on several categories of data and costs 
(for example, 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) and also permits CMS to break down the general categories and 
require additional details or line items to be included in the report. 
As discussed in section II.G.3. of this final rule, to collect this 
information, we are adding additional fields to the MLR Report template 
in which MA organizations will enter their total expenditures for 
different types or categories of supplemental benefits. We are also 
adding narrative fields in which users will 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 
will 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, will increase the number of fields that will 
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 tasks 
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 in contrast to the 
33.3 percent increase for MA contracts and Part D sponsors estimated in 
the previous paragraph. This is summarized in Row (12) of Table 8. 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 8. 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. This weighted average on Row (14) in Table 8 is 
used to estimate the increased burden finalized in this rule of filling 
out MLR forms as calculated in Row (21) in Table 9.
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[[Page 27866]]


[GRAPHIC] [TIFF OMITTED] TR09MY22.013

BILLING CODE 4120-01-C
    Table 9 incorporates these three 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 increased hourly burden per contract, and then 
calculates dollar burden per contract as well as aggregate burden for 
all contracts. The following presents further information about the 
rows in Table 9 as compared to Table 7.
     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 final 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 changes CMS is 
finalizing 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 contract year 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

[[Page 27867]]

requirements we are adopting in this final rule, 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 time under the 
requirements we are finalizing of 24.34945 is obtained by subtracting 
from the total burden under the regulation requirements we are 
finalizing of 61.1 hours on Row (21) the current-form burden of 
36.75055 hours on Row (22).
     Row (25): The increased contract cost ($) $3,815 on Row 
(25) is obtained by multiplying the average increase in time (hours) of 
24.34945 on Row (23) by the wages ($156.66/hr) on Row (24).
     Row (26): The total number of contracts is presented in 
Table 5
     Row (27): The average increase in time (hours) across all 
contracts of 14,634 is obtained by multiplying the 601 contracts (Row 
(26)) by the per contract increase in time (hours) of 24.34945 on Row 
(23).
     Row (28): The aggregate increase in cost ($) across all 
contracts, $2,292,562 is obtained by multiplying the increase in time 
(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 10 summarizes the relevant calculations as one combined line 
item.
[GRAPHIC] [TIFF OMITTED] TR09MY22.014

    The average burden per contract as given on Row (25) of Table 8 is 
$3,815. 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 $4,061. 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 MLR 
reporting requirement we are adopting in this final rule with the 36.75 
hours under the reporting requirements that have been in effect since 
contract year 2018 shows an increase time of 25.92 hours (62.67-36.75) 
at a cost of $4,061 (25.92 hours x $156,66/hr).
    For Part D contracts, we estimate 12.6 additional hours of burden 
at an additional cost of $1,974. 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 $1,974 (12.6 hours x $156.66/hr) per 
contract.
    As indicated above, the total increased impact of finalizing the 
MLR provision is presented in Table 10.
    We did not receive any comments on our proposed collection of 
information requirements and are finalizing them without change.
13. ICRs Related to Pharmacy Price Concessions in the Part D Negotiated 
Price (Sec. Sec.  423.100 and 423.2305) (CMS-10174, OMB 0938-0982)
    The requirement and burden for Part D Sponsors to implement the 
proposals related to pharmacy price concessions that we are now 
finalizing, as discussed in section II.H. of this final rule will be 
submitted to OMB for approval under control number 0938-0982 (CMS-
10174), as needed. Below we discuss in greater detail the burden 
associated with the requirements we are finalizing.
    Revisions to Sec. Sec.  423.100 and 423.2305 will require that Part 
D sponsors apply all pharmacy price concessions to the point of sale 
price in all phases of the Part D benefit. Under this rule, 
beneficiaries will see lower prices at the pharmacy point-of-sale and 
on Plan Finder beginning immediately in the year the policy will apply, 
2024. We anticipate that the change will require that Part D sponsors 
make certain system changes related to the calculation of the amounts 
they report in one or two fields in the PDE data collection form.
    In the NPRM we only estimated the impact of annual costs for PDE 
Data transmission. Although we received no

[[Page 27868]]

external comments on our burden estimates, we made two changes from the 
NPRM. First, we anticipate that this provision will cause sponsors to 
incur both one-time costs for updating software, and annual costs for 
PDE Data transmission. Second, our estimates of PDE data transmission 
used an estimate of a $35.50/hr cost for electronic submission. This is 
incorrect and should be $17.75/hr.
    Update of Software: The systems for submitting PDE transmission are 
already in place as required by the regulations. A software update is 
required to deal with transmitting data at the time of sale. We believe 
it reasonable that this software update will be done at the parent 
organization level rather than the contract level. Based on internal 
CMS data, currently there are 298 parent organizations. The burden of 
update requires that 2 software developers will each spend 20 hours (2 
and one half days) performing the necessary designs. Therefore, the 
aggregate burden across all parent organization is 11,920 hours (2 
software developers x 20 hr a programmer x 298 parent organizations) at 
a total cost of $1,386,773 (11,920 hr x 116.34/hr). The burden per 
parent organization would be 40 hours (20 hr x 2 software developers) 
at a cost of $4,654 (40 hr x $116.34/hr).
    PDE Data Submission: The calculations discussed in the narrative 
are presented in Table 11. 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, 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 1,752,336.449 PDEs/contract (Row D (1.5 billion divided by 
856)). The extra decimal places listed in Row D and other rows are to 
assure consistency in two methods at arriving at the final burden. A 
similar computation shows that the average number of PDEs per Part D 
enrollee is 30.5047 (1.5 billion PDE (Row C) divided by 49,229,626 
enrollees (as of November 2021) (Row A).
    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 $17.75/hr (for 
2020) to process PDEs (Row E).
    Using these numbers, we can compute individual contract and 
aggregate burden.
    It would take 3.5047 hours (Row G) on average for each respondent 
(contract) to process its 1,752,336.449 PDEs at a rate of 500,000 per 
hour (1,752,336.449 PDEs per contract (Row D) divided by 500,000/hr 
(Row F). The aggregate hours to process all 1.5 billion claims is 
therefore 3,000 hours (Row H) (3.5047 hours/contract (Row G) x 856 
contracts (Row B)).
    The average cost per contract (Row I) is $62.2084 hours (3.5047 
hours (Row G) x $17.75/hr (Row E)). The ongoing cost for all contracts 
(Row J) is therefore $53,250, which can be obtained either by 
multiplying total hours (3,000 (Row H)) by cost per hours(17.75/hr (Row 
E)) or by multiplying the cost per contract ($62.2084 (Row I)) by the 
number of contracts (856 (Row B)).
BILLING CODE 4120-01-P

[[Page 27869]]

[GRAPHIC] [TIFF OMITTED] TR09MY22.015

    The aggregate burden for the provision is $1,440,023 in the first 
year ($1,386,773 for software updates plus $53,250 for transmission 
costs) and $53,250 in subsequent years.

C. Summary of Finalized Information Collection Requirements and 
Associated Burden Estimates

[[Page 27870]]

[GRAPHIC] [TIFF OMITTED] TR09MY22.016


[[Page 27871]]


BILLING CODE 4120-01-C

V. Regulatory Impact Analysis

A. Statement of Need

    This final rule will 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 final rule will also revise regulations related to MA 
and Part D plans, D-SNPs, other special needs plans, and cost contract 
plans. Additional revisions will 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 provisions 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 final rule 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 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 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. In sections II.D.3. and II.D.4. of this final 
rule, we are also responding to comments about and finalizing Star 
Ratings provisions from the March 31st COVID-19 IFC and the September 
2nd COVID-19 IFC without modification: Sec. Sec.  417.472(i) and (j), 
422.152(b)(6), 422.166(a)(2)(i), (f)(1)(i), (g)(3), (i)(11), and 
(j)(1)(i) through (iv), 422.252, 423.182(c)(3), and 423.186(a)(2)(i), 
(f)(1)(i), (g)(3), (i)(9), and (j)(1)(i) through (iii). We are not 
finalizing the following provisions in the March 31st COVID-19 IFC: 
Sec. Sec.  422.164(i), 422.166(j)(1)(v) and (j)(2), 423.184(i), and 
423.186(j)(1)(iv) and (j)(2).
    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 
finalizing our proposal 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 deleting the existing definition of ``negotiated prices'' at 
Sec.  423.100 and adopting a new definition for the term ``negotiated 
price'' at Sec.  423.100, which we 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). This provision will reduce out-of-
pocket prescription drug costs, improve price transparency and market 
competition under the Part D program. As discussed in the proposed 
rule, based on stakeholder feedback and sponsor-reported DIR data, we 
understand that the share of pharmacies' reimbursement that is 
contingent upon their performance under such arrangements has grown 
steadily each year. 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 proposed changes that would standardize how 
Part D sponsors apply pharmacy price concessions to negotiated prices 
at the point of sale.
    We are clarifying 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 are finalizing the 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

[[Page 27872]]

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). While the 
total annualized costs for this rule are estimated at $3.1 million a 
year, as indicated in Table 20, the net transfers from the Trust Fund 
to enrollees and manufacturers exceed $100 million annually. Therefore, 
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, and hence also a major rule 
under Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (also known as the Congressional Review Act). Accordingly, 
we have prepared a Regulatory Impact Analysis that to the best of our 
ability presents the costs and benefits of 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 2022, that 
threshold is approximately $165 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 final 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 final rule was reviewed by OMB.
    If regulations impose administrative costs on reviewers, such as 
the time needed to read and interpret this final rule, then we should 
estimate the cost associated with regulatory review. 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 
final 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 
final rule. For each person that reviews this final rule, the estimated 
cost is therefore $900 (8 hours x $114.24). Therefore, we estimate that 
the maximum total cost of reviewing this entire final rule is $.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 final 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 final rule may have a significant economic 
impact on a substantial number of small entities, then the final 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.\98\ 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.
---------------------------------------------------------------------------

    \98\ 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.
---------------------------------------------------------------------------

    As can be seen from the Summary of Annual Information Collection 
Requirements and Burden table (Table 12) in section IV.C. of this final 
rule, as well as Table 21 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 $3.6 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

[[Page 27873]]

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 final 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). Payments to MA plans of the 
bid (or benchmark) amounts are risk adjusted and are higher for 
enrollees with risk scores above 1.0 and lower for enrollees with risk 
scores below 1.0.
    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 or Part D) 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 risk adjusted 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 final 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 making risk 
adjusted payments to the plan of 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 
final rule does not have a significant economic impact on a substantial 
number of small entities, as required by the RFA.
    There are certain indirect consequences of these provisions which 
also create impact. We have already explained that 98 percent of the 
plans bid below the benchmark. Thus, their estimated costs for the 
coming year are fully paid by the 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 
final 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 packages. 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 more generous 
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 definition at Sec.  
422.561. At Sec.  422.561, we are expanding 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

[[Page 27874]]

appeals procedures are feasible for the additional D-SNPs and MCOs 
included in the revisions to the definition. While we are not imposing 
new Medicaid requirements, the applicable integrated plan 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 final rule on 
Medicaid managed care plans is the one-time requirement to update their 
grievance and appeals procedures, which as estimated in Table 12, is a 
one-time cost of $7,582. Consequently, we have determined that this 
final rule will not have a significant impact on Medicaid managed care 
plans.
    Therefore, the Secretary has certified that this final 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 final rule.
    Comment: We received support, thanks, and encouragement from a 
large number of small business stakeholders including several 
organizations representing large numbers of small businesses. This 
support frequently echoed comments already made in the analysis: (i) 
The enormous expenses and rise of DIR, (ii) the lack of transparency 
resulting from pharmacy price concessions being collected a year or so 
after a small pharmacy had gained a profit and resulted in a net loss, 
(iii) the increased cost-sharing to enrollees, which can result in 
increased levels of medication non-compliance and lead to poorer health 
incomes. Commenters' criticism consisted of: (1) Requests for CMS to 
regulate the PBMs; (2) requests for extending the pharmacy price 
concessions provisions to the coverage gap; (3) requests for a delay of 
the effective date pointing to the burden of updating software and 
preparing for the 2023 bid; and (4) requests for further protections 
for small businesses and specialty pharmacies, which the commenters 
stated were very vulnerable and at risk for going out of business. Some 
commenters also noted that although this final rule is a step in the 
right direction, it does so on average and may not meet the needs of 
very small pharmacies not belonging to chains or pharmacies 
specializing in certain types of drugs.
    Response: We thank the stakeholders for their support. With respect 
to the criticisms received: (1) We did not propose to impose any 
requirements directly on PBMs in the proposed rule. (2) After 
consideration of the comments, however, we modified our proposal to 
require pharmacy price concessions be applied to the negotiated price 
in the coverage gap. (3) We agree with the comment that pharmacies, 
including small pharmacies, need time to prepare software updates and 
that Part D sponsors will need time to prepare their 2023 bids. In 
response to comments here and as addressed previously, we are 
finalizing the proposal with a 2024 applicability date. We are also 
sympathetic to specialty pharmacies. CMS does not collect data on 
pharmacy price concessions at the pharmacy level, and this information 
is not publicly available. In order to estimate, for example, the 
effects on specialty pharmacies in particular, we would need to 
speculate on the relative difference between price concessions to those 
pharmacies versus retail pharmacies. As we do not have any basis for 
developing this difference, it is not possible to meaningfully analyze 
impacts by type of pharmacy.
    We are therefore finalizing our analysis as presented above.
3. Rural Hospitals
    Section 1102(b) of the 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 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This rule however is 
directed to plans and enrollees. Providers 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 final 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 final rule, at Sec.  
422.107(f), we are finalizing our proposal 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 are also finalizing 
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 final rule intends to ensure enrollees are engaged in 
defining, designing, participating in, and assessing their care 
systems. Section IV.B.1. of this final rule presents the collection of 
information burden for this provision.
    To support D-SNPs in establishing enrollee advisory committees that 
meet the objective of this final 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.\99\ 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.
---------------------------------------------------------------------------

    \99\ Resources for Integrated Care and Community Catalyst, 
``Member Engagement in Plan Governance Webinar Series'', 2019. 
Retrieved from: https://www.resourcesforintegratedcare.com/article/member-engagement/.
---------------------------------------------------------------------------

    We received no comments on this proposal and therefore are 
finalizing this analysis without modification.
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 final rule. 
In this section, we describe the impacts of our 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 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

[[Page 27875]]

final 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.\100\ 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.
---------------------------------------------------------------------------

    \100\ See the locality pay tables for 2021 at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/2021/general-schedule/.
---------------------------------------------------------------------------

a. Exclusively Aligned Enrollment for FIDE SNPs
    As described in section II.A.5.a. of this final rule, we are 
requiring exclusively aligned enrollment for FIDE SNPs beginning in 
2025. We noted 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 requirement. Therefore, we do not believe 
the final rule will result in a significant reduction of Medicare 
payments from FIDE SNPs losing the frailty adjustment.
b. Capitation for Medicare Cost-Sharing and Behavioral Health Services 
for FIDE SNPs
    We do not anticipate any cost transfers from the State to FIDE SNPs 
resulting from the final rule amendment of the definition of FIDE SNP 
(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. We initially estimated that all FIDE SNPs include 
coverage of Medicare cost-sharing in their capitated contracts with the 
State Medicaid agency; however, we learned that Tennessee does not 
capitate FIDE SNPs for cost-sharing. In this final rule, we are making 
the requirement related to cost-sharing applicable starting in 2025. We 
expect policy changes in Tennessee before 2025 will allow all current 
FIDE SNPs to meet the new definition. As noted in section II.A.5.b. of 
this final 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, which is also defined at Sec.  422.2 (with revisions 
adopted in this final rule). 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 Medicare revenue, as none of the impacted D-SNPs 
receive the frailty adjustment.
    We received no comments on our analysis and are finalizing it 
without modification.
3. Additional Opportunities for Integration Through State Medicaid 
Agency Contracts (Sec.  422.107)
    As described in section II.A.6. of this final rule, we are 
finalizing new paragraph (e) at Sec.  422.107 to describe conditions 
through which States may require certain contract terms for D-SNPs with 
exclusively aligned enrollment and how CMS would facilitate compliance 
with those contract terms. This final rule 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. Section 422.107(e) 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.
a. State Medicaid Agency Contract Requirements
    Section IV.B.4. of this final 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 final rule and consult with 
CMS to ensure contract changes meet the 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 Sec.  422.107(e) would need to determine 
readiness and make changes to State policy. The State's time and cost 
for adopting this final rule would depend on the State's current level 
of integration. For example, 11 States currently have a policy 
requiring some or all of the D-SNPs in the State to have 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 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 
did not receive any comments on what State resources would be needed to 
use the pathway for requiring or achieving higher integration and 
collaboration with CMS as described in 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
    At Sec.  422.107(e), we are codifying 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 final 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.

[[Page 27876]]

    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 final rule, to provide a 
more coordinated beneficiary experience we are finalizing at Sec.  
422.107(e) 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. Section 
422.107(e)(1) establishes factual circumstances that commit CMS to 
certain actions under paragraphs (e)(2) and (3).
    In section IV.B.4.c. of this final rule, we note that we do not 
intend 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 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. This final rule assures interested States that, under the 
conditions outlined in Sec.  422.107(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. 
Therefore, we do not estimate any additional burden for States or plans 
to implement integrated member materials 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 
materials for dually eligible beneficiaries. 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 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 final rule on 
integrating member materials is $118,500.
d. Joint State/CMS Oversight
    In section II.A.6.c. of this final rule, we discuss our changes 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 
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 Sec.  422.107(e) would already have 
resources invested in coordinating care between MCOs and D-SNPs and 
would otherwise make choices that avoid significant increases in State 
burden.
    At paragraph (e)(3)(i), we are finalizing 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 final rule will 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 will 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.
    We received no comments on our analysis and are finalizing it 
without modification.
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 final rule, we are 
finalizing a revision to which costs are tracked and accumulate toward 
the MOOP limit for dually eligible enrollees in MA plans under Sec.  
422.101(d) for MA regional plans and Sec.  422.100(f)(4) and (5) for 
all other MA plans. Our rule will 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 final 
rule 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 to non-dually 
eligible individuals. However, in the short term, as we note above, MA 
organizations may prefer to reduce their profit margins, rather than 
raise their bids and thereby reduce the rebate dollars available for 
supplemental benefits.
    Specifically, we are finalizing 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 (such as 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 
will 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

[[Page 27877]]

of covered Medicare Part A and Part B services. As a result, the State 
Medicaid agency will 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 will 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 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. This change will also 
eliminate the perceived need for providers to bill dually eligible for 
non-paid coinsurance, which although prohibited, is not uncommon. As a 
result, this final rule 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 final rule will 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 final rule 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 final rule, we started with CY 2022 
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 final rule 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 13.
    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 final rule 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 U.S. 
Per Capita Costs (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 final rule will 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 final rule 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 final rule 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 13.
    Finally, 25 percent of the additional Medicare costs that represent 
Part B 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 13. 
The total Federal costs of the final rule, net of Federal Medicaid 
savings and the Part B premium offset are shown in column 7 of Table 
13.
    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.

[[Page 27878]]

[GRAPHIC] [TIFF OMITTED] TR09MY22.017

    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.
    We received no comments on our analysis and are finalizing this 
analysis without modification.
5. Special Requirements During a Disaster or Emergency for Medicare 
Advantage Plans (Sec.  422.100(m))
    We are not scoring the finalized 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 final revisions clarify our current policy. 
More detailed arguments for not scoring are presented after a 
discussion of the finalized revisions.
    Our final amendments to Sec.  422.100(m) include codifying our 
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 comments and 
questions from MA organizations and others in administration of the 
existing requirement during the pandemic. 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 proposal to clarify what amounts to 
a disruption of access to health care and how the special requirements 
only apply when there is a disruption in connection with a declared 
emergency or disaster has an impact because it is consistent with 
current application of the regulation and MA organizations are already 
complying.
    We are also finalizing 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 MA plans have experience with 
disasters or other changes in cost that arise annually. The nature of 
the business cycle shows that MA plans may experience losses due to 
short-term 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 are finalizing an update the past performance measures at 42 CFR 
422.504 and 423.505 in order to better ensure CMS' capacity to limit 
new

[[Page 27879]]

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. Although there are 
no tangible costs to organizations, there may be future costs that may 
or may not occur. Organizations that fail to meet CMS' requirements 
will have applications denied, resulting in their inability to gain 
enrollment, thus losing potential future dollars. On the other hand, 
some organizations may actually improve performance, because of the 
ramifications of being a poor performer. In these cases, these 
organizations will actually be in a better position, potentially having 
higher Star Ratings, resulting in additional funds if the organization 
receives performance pay for their Star Ratings. The CMS costs are as 
follows:
     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. Marketing and Communications Requirements on MA and Part D Plans To 
Assist Their Enrollees (Sec. Sec.  422.2260, 423.2260, 422.2267, and 
423.2267)
    We have presented a discussion of collection of information burden 
associated with this provision in section IV.B.11. of this final rule. 
In this section, we summarize comments on the impacts of these 
provisions.
    Comment: Comments suggested that the MLI as proposed would impose a 
greater burden on plans than we anticipated in the proposed rule. 
However, the comments suggesting this did not indicate why this was the 
case or what aspect of the burden we failed to address.
    Response: On review, we believe our assessment of the burden on 
plans as discussed in the Regulatory Impact Assessment of this rule is 
accurate. We also believe the burden on plans is acceptable considering 
the vital nature of the MLI. As indicated earlier in the preamble and 
the response to a previous comment, certain required documents (under 
Sec. Sec.  422.2267(e) and 423.2267(e)) are vital to a beneficiary's 
understanding of the MA, Part D, and cost plan programs. While those 
organizations must provide translation services, the requirement is 
less effective if beneficiaries are not aware of the availability of 
and right to the translation services. As such, the requirement to 
provide the MLI with required documents alerts the beneficiary to 
services that may help to prevent misunderstanding of the program and 
thus avoid beneficiary harm. Additionally, the MLI replaces OCR's 
analogous language assistance tagline requirement that was, based on 
scope and size, more burdensome than the MLI. Furthermore, CMS required 
plans to deliver the MLI until 2016, when it was replaced by OCR's 
analogous requirement. Finally, the MLI improves communication 
affecting a variety of health issues, acting as a bridge to education 
and awareness. This should ultimately improve beneficiary health and 
reduce the cost of beneficiary care.
8. Revisions to the Medical Loss Ratio Reporting Requirements 
(Sec. Sec.  422.2460 and 423.2460)
    As discussed in section II.G. of this final rule, we are finalizing 
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.
    The paperwork burden associated with these provisions, $2.3 
million, is estimated in section IV.B.12. of this final rule and 
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).
    In the proposed rule, we explained that if we reinstate and add to 
the detailed MLR reporting requirements, as we proposed and are now 
finalizing, we will continue to 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, at a level comparable to the amount we paid for 
similar services for the contract years for which MA organizations and 
Part D sponsors were previously required to submitted detailed MLR data 
(that is, contract years 2014 through 2017). As a starting point for 
our analysis of the estimated cost increase associated with the 
additional desk review and analysis services that we anticipate a 
contractor will perform for us starting with contract year 2023 MLR 
reporting, we noted that, in the Regulatory Impact Analysis for the 
April 2018 final rule which had previously 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. As noted in the proposed rule, this has not been our experience, 
and 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.
    The proposed rule estimated that, if we finalized the detailed MLR 
reporting requirements as we had, and if we resume 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 will 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

[[Page 27880]]

perform MLR desk reviews of the detailed MLR data that CMS will be 
requiring MA organizations and Part D sponsors to submit to us on an 
annual basis, starting with CY 2023, under the requirements we are now 
finalizing.
    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. The proposed rule noted 
that 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 
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 final 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 Table 14. These 4 years represent the time period 
when detailed MLR data was submitted to CMS and subjected to desk 
reviews.
[GRAPHIC] [TIFF OMITTED] TR09MY22.018

    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 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 
regulations we are adopting in this final rule, 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 15 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

[[Page 27881]]

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.
[GRAPHIC] [TIFF OMITTED] TR09MY22.019

    We are finalizing our impact analysis without change.
9. Pharmacy Price Concessions in the Part D Negotiated Price 
(Sec. Sec.  423.100 and 423.2305)
    As discussed in section II.H.3. of this final rule, at Sec. Sec.  
423.100 and 423.2305, we are finalizing our proposal 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 through all phases of the Part 
D benefit In response to comments, we will retain the current 
regulatory definition of ``negotiated prices'' for 2023 and 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 for 2024 and thereafter. We are finalizing the definition of 
``negotiated price'' that was proposed and 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 beginning with plan year 
2024 onward. The requirement to apply pharmacy price concessions the 
negotiated price will apply in all phases of the Part D benefit.
    The provision would have several impacts on prescription drug costs 
for government, beneficiaries, Part D sponsors, and manufacturers. 
Tables 16, 17, and 18 summarize these impacts, which are discussed in 
more detail in the narrative that follows. We note that this provision 
would also have one-time administrative costs for Part D sponsors. This 
cost is discussed in the Collection of Information section of this 
final rule.
a. Impact on Prescription Drug Costs for Government, Beneficiaries, 
Part D Sponsors, and Manufacturers
    Tables 16, 17, and 18 summarize 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. These tables 
estimate a modest potential indirect effect on pharmacy payment as a 
result of pharmacies' independent business decisions. Specifically, the 
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 0.2 percent of Part D gross 
drug cost.
    Tables 16, 17, and 18 reflect the impact of these provisions to 
enrollees, manufacturer gap discounts, and the Federal Government 
respectively. Overall beneficiaries are expected to save $26.5 billion, 
manufacturers pay $16.8 billion less in gap discounts, and the 
government cost is expected to increase $46.8 billion dollars over 
2024-2032.
    Under this provision, 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 (2024). (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 would exceed the premium 
increases. While the amounts will vary

[[Page 27882]]

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 change to the 
definition of negotiated price--if pharmacy price concessions are 
required to be passed through to beneficiaries at the point of sale, 
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 would be large enough to lower beneficiaries' overall out-
of-pocket costs on average.
    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. However, 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 effects are presented in Table 18.
    These impacts assume that the definition of ``negotiated price'' 
would apply for Part D drugs in all phases of the Part D benefit 
(applicable drugs in the coverage gap phase of the benefit). While we 
initially proposed excluding the coverage gap phase from this policy, 
we are finalizing the alternative proposal which applies this policy to 
the entire benefit. This policy increases beneficiary savings and 
government costs relative to the initial proposal, but simplifies 
administration and provides greater transparency to beneficiaries.
    Table 16 shows the increased total savings to enrollees which is 
projected to be $26.5 billion for the period from 2024-2032. As 
explained in the previous narratives, the total savings to enrollees' 
accounts for both cost-sharing savings and expected premium increases.

[[Page 27883]]

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[[Page 27884]]


[GRAPHIC] [TIFF OMITTED] TR09MY22.021


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[GRAPHIC] [TIFF OMITTED] TR09MY22.022

    We received comments on our impact analysis.
    Comment: A commenter stated that while this final rule is a step in 
the right direction CMS must conduct a complete regulatory impact 
analysis of how this

[[Page 27886]]

rule affects all types of specialty pharmacies. There was concern that 
because of the more expensive drugs sold by specialty pharmacies that 
this final rule would not meet their needs even though in aggregate it 
improved the program.
    Response: CMS does not collect data on pharmacy price concessions 
at the pharmacy level, and this information is not publicly available. 
In order to estimate, for example, the effects on specialty pharmacies 
in particular, we would need to speculate on the relative difference 
between price concessions to those pharmacies versus retail pharmacies. 
As we do not have any basis for developing this difference, it is not 
possible to meaningfully analyze impacts by type of pharmacy.
    Comment: A commenter offered that in addition to the financial 
impacts described in the rule, there may be additional improvements in 
health outcomes and medical costs resulting from improved medication 
adherence as a result of lower negotiated prices.
    Response: We agree that it is possible that there will be effects 
on health outcomes. We do not have adequate information to quantify 
these impacts at this time because the actual cost-sharing effects will 
vary considerably with how plan sponsors reflect this in their benefit 
design. For example, it is possible that the plans will concentrate 
these effects on certain categories of drugs, and many health effects 
may take several years to realize.
    Comment: We received several comments requesting that the financial 
impacts include analysis by type of retail pharmacy.
    Response: We do not have sufficient data to determine impacts by 
type of pharmacy, as the pharmacy price concessions are not reported in 
connection to a particular pharmacy or type of pharmacy.
    Comment: A commenter stated that CMS did not disclose their 
assumptions in developing the tables. These would include future Part D 
membership, trends in drug utilization, drug cost, network contracting, 
manufacturer rebates, drug mix, benefit designs, and general inflation. 
The commenter noted that CMS did disclose that they assumed pharmacies 
would seek to retain 2 percent of the existing pharmacy concessions for 
risk and cashflow. Most importantly, CMS did not disclose how lowest 
reimbursement was applied in the model.
    Response: We modeled the lowest reimbursement as the negotiated 
price, rather than having bonus payments to pharmacies that would lower 
DIR and therefore lead to higher premiums. Aggregate forecasts for the 
Part D program payments, including cost and DIR trends similar to those 
used in our analysis, may be found in the Medicare Trustees Report for 
2021, a publicly available resource (https://www.cms.gov/files/document/2021-medicare-trustees-report.pdf). More detailed assumptions 
are based on CMS internal data that is not public, and if made public 
could adversely affect Part D bid submissions, such as drug mix or 
beneficiary progression through the benefit. For example, sharing the 
assumptions on the projected mix of price concessions by drug could 
allow sponsors to infer whether their current mix presents 
opportunities for greater price concessions on certain drugs.
    Comment: Several commenters commissioned an independent actuarial 
analysis to gain additional insight into the proposed rule's potential 
impacts. The actuary performing the independent analysis believed that 
the CMS assumption of pharmacies negotiating 2 percent of the 
concessions would produce a different value than what was shown in the 
proposed rule.
    Response: We assumed that 2 percent of only the existing pharmacy 
price concessions impacted by this policy are reflected as an offset to 
pharmacies for the change in cashflow and risk. As the proposed rule 
specified that the new definition for the term ``negotiated price'' 
would not apply in the coverage gap, we did not apply the 2 percent 
assumption to price concessions in the coverage gap in the proposed 
rule. This difference between applying the 2 percent assumption to the 
entire benefit or excluding the coverage gap explains the discrepancy.
    As the proposed rule specified that the new definition for the term 
``negotiated price'' would not apply in the coverage gap, we did not 
apply the 2 percent assumption to price concessions in the coverage gap 
in the proposed rule.
    Comment: Several commenters commissioned an independent actuarial 
analysis to gain additional insight into the proposed rule's potential 
impacts. The actuary performing the independent analysis noted that 
premium is an important factor--perhaps the most important factor--in 
the purchase decisions of members.
    Response: We agree that Part D sponsors are highly motivated to 
keep premiums low. CMS agrees that premiums are a key factor 
influencing insurance purchasing decisions and we have taken premium 
levels into account in our analysis.
    Comment: A commenter questioned the difference between the 
calculations provided in the Alternative Analysis section of the 
proposed rule (section V.E.2.) and the calculations provided in the 
narrative in section V.D.8. of the proposed rule, the difference 
between them being inclusion of the coverage gap. The commenter 
questioned the validity of assuming a 6% drop in manufacturer cost 
between the two tables.
    Response: We thank the commenter for their feedback. The 
manufacturer cost is impacted not only directly by the change in 
negotiated price used for calculating the coverage gap discount on a 
particular drug, but also by changing the amount of spending in the gap 
phase of the benefit. As negotiated prices decrease from this policy, 
there is less spending in the coverage gap phase of the benefit.
    Comment: A commenter provided an alternative analysis that 
considered the effects of an incentive payment of 4.3 percent of drug 
cost to the pharmacies after the point of sale, rather than the net 
payment to the pharmacy paid at the point of sale assumed in the RIA. 
They noted that this is another possible payment arrangement under the 
proposed rule.
    Response: While an interesting example, we believe this approach is 
unlikely. A bonus payment to pharmacies would further increase premiums 
because it would decrease the DIR paid to the plan sponsor. Recent data 
indicate an increase in DIR of 512 percent between 2009 and 2018, which 
suggests plan sponsors are very focused on increasing DIR.
    Comment: A few commenters commissioned an independent actuarial 
analysis to gain additional insight into the proposed rule's potential 
impacts. These analyses assumed pharmacy DIR was applied at the POS in 
all phases including the coverage gap. The results were generally 
consistent with the direction and magnitude of CMS's overall findings 
by stakeholder. The independent analyses assumed no behavior changes 
among stakeholders, which, if considered, could have a material impact 
on the estimates. The independent analyses indicated that at best 29 
percent of beneficiaries may see cost-sharing savings that exceed their 
increases in premiums. By contrast, at least 38 percent of 
beneficiaries may realize higher net costs, as their premium increases 
typically outweigh their cost-sharing savings, and 33 percent (low 
income enrollees) may see little or no change in OOP costs.
    Response: We appreciate the feedback and additional analysis shared 
in this comment. As noted by the commenter, the overall magnitude and 
direction of

[[Page 27887]]

cost impacts is broadly similar to the results in the regulatory impact 
analysis. We agree that low income beneficiaries will not see 
significant impacts from the rule. We do not wholly agree with the 
percentages of beneficiaries described in the analysis. For non-low 
income beneficiaries, we disagree with the characterization in the 
comment that no beneficiaries ending in the deductible phase will 
benefit. On the contrary, those beneficiaries who are nearly at the end 
of the deductible could see substantial cost decreases as they are 
paying the full negotiated price of any drug in that phase. This is 
also implicitly acknowledged in the independent analysis with the 
caveat that beneficiaries in this phase would ``typically'' not see a 
cost decrease.
    We are finalizing our impact analysis without change. We 
appreciated the additional analysis provided by commenters. For the 
more complete analysis providing a range of potential future impacts, 
we note that our estimates of government cost are within the range they 
estimated. We believe the independent analysis largely confirms our 
results and the majority of differences are due to more granular data 
in the CMS analysis.

E. Alternatives Considered 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. 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 detailed MLR Report 
template in order to calculate their MLRs in accordance with current 
requirements.
2. Alternatives Related to Pharmacy Price Concessions in the Part D 
Negotiated Price (Sec.  423.100)
    As discussed in section II.H.3. of this final rule, we proposed 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 final 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. In this alternative analysis, we consider 
the added impact of only requiring application of pharmacy price 
concessions to the negotiated price of applicable drugs outside of the 
coverage gap phase.
    This alternative proposal would be more complex, but produces a 
smaller premium impact. Given that Part D sponsors are highly focused 
on premium targets for their competitive position, we would expect the 
pharmacy price concessions to be held back from the point of sale 
transaction and reimbursed at a later date.
    Table 19 shows decreased savings to pharmaceutical manufacturers if 
pharmacy price concessions are applied to applicable drugs in the 
coverage gap.

[[Page 27888]]

[GRAPHIC] [TIFF OMITTED] TR09MY22.023

    Table 20 shows the impact to the Government. As explained in the 
narrative of section IV.D.8. of this final rule, the total Government 
cost reflects four separate components including direct payments, 
reinsurance, low

[[Page 27889]]

income cost-sharing payments, and low-income premium payments. We note, 
that this cost is a transfer. More specifically, the identical Rx that 
was formerly paid for by enrollees is now being paid for by the 
Government.
[GRAPHIC] [TIFF OMITTED] TR09MY22.024

F. Accounting Statement and Table

    In accordance with OMB Circular A-4, Table 21 depicts an accounting 
statement summarizing the assessment of the benefits, costs, and 
transfers associated with this regulatory action.
[GRAPHIC] [TIFF OMITTED] TR09MY22.025

    Table 21 is based on the summary of costs presented in Tables 22 
and 23. Tables 22 and 23 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

[[Page 27890]]

numbers indicate savings. There are 3 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 22 and 23). The MLR provision is a savings to the Treasury (the 
corresponding loss in equal amount to the plans is not shown in the 
Tables 22 and 23). 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 22 and 23 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 21 reflects 
separately, annualized transfers to the Treasury and annualized 
transfers from the Trust Fund for the MOOP and pharmacy price 
concessions provision. Thus, complete detailed amounts on all 
provisions may be found in Tables 22 and 23.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR09MY22.026


[[Page 27892]]


[GRAPHIC] [TIFF OMITTED] TR09MY22.027


[[Page 27893]]


BILLING CODE 4120-01-C

F. Conclusion

    The previous analysis, together with the preceding preamble, 
provides an RIA. This rule at an annualized average cost of 3.1 
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 
$4.3 to $4.5 billion annually. We estimate that this rule generates 
$2.0 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 
final rule was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on April 22, 2022.

List of Subjects

42 CFR Part 417

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

42 CFR Part 422

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

42 CFR Part 423

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

    For the reasons set forth in the preamble, the interim rule 
amendments to 42 CFR 417.472, 422.152, 422.166, 422.252, 423.182, and 
423.186, which published at 85 FR 19230 (April 6, 2020) and 85 FR 54820 
(September 2, 2020), are adopted as final and the Centers for Medicare 
& Medicaid Services further 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, and for plan year 2025 and 
subsequent years 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 of this chapter; and
    (v) For plan year 2025 and subsequent years, medical supplies, 
equipment, and appliances, as described in Sec.  440.70(b)(3) of this 
chapter;
    (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. In paragraph (f)(4), removing the word ``incurred'' and adding in 
its place the word ``accrued''.
0
b. In paragraph (f)(5)(iii), removing the word ``incurred'' and adding 
in its place the word ``accrued''.
0
c. Revising paragraphs (m)(1) introductory text and (m)(2) introductory 
text;
0
d. Removing paragraph (m)(2)(ii)(B);
0
e. Redesignating paragraph (m)(2)(ii)(A) as paragraph (m)(2)(ii);
0
f. Revising paragraphs (m)(3) and (4) and (m)(5)(i); and
0
g. Adding paragraph (m)(6).
    The revisions and addition read as follows:


Sec.  422.100  General requirements.

* * * * *
    (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 the end date specified in paragraph 
(m)(3) of this section occurs,

[[Page 27894]]

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 in the service area (as defined at Sec.  
422.2) 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 ``(d)(3)'' and ``incurred'' and adding 
in their places ``(3)'' and ``accrued'', respectively.
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 one or more questions from a list of 
screening instruments specified by CMS in sub-regulatory guidance on 
each of the following domains:
    (A) Housing stability;
    (B) Food security; and
    (C) 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 Medicare and 
Medicaid managed care requirements consistent with applicable 
regulations in parts 422, 423, and 438 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 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

[[Page 27895]]

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. In 
addition, applicants may use a Letter of Intent (LOI), signed by both 
the MA organization (MAO) and the provider or facility with which the 
MAO has started or intends to negotiate, in lieu of a signed contract 
at the time of application and for the duration of the application 
review, to meet network standards. As part of the network adequacy 
review process, applicants must notify CMS of their use of LOIs to meet 
network standards in lieu of a signed contract and submit copies upon 
request and in the form and manner directed by CMS. At the beginning of 
the applicable contract year, the credit and the use of LOIs no longer 
apply and if the application is approved, the MA organization must be 
in full compliance with this section, including having signed contracts 
with the provider or facility.
* * * * *


Sec.  422.164   [Amended]

0
7. Section 422.164 is amended by removing and reserving paragraph (i).

0
8. Section 422.166 is amended by--
0
a. Revising paragraph (a)(2)(i);
0
b. Adding paragraph (i)(12); and
0
c. Removing and reserving paragraphs (j)(1)(v) and (j)(2).
    The revision and addition read as follows:


Sec.  422.166  Calculation of Star Ratings.

    (a) * * *
    (2) * * *
    (i) The method maximizes differences across the star categories and 
minimizes the differences within star categories using mean resampling 
with the hierarchal clustering of the current year's data. Effective 
for the Star Ratings issued in October 2022 and subsequent years, CMS 
will add a guardrail so that the measure-threshold-specific cut points 
for non-CAHPS measures do not increase or decrease more than the value 
of the cap from one year to the next. The cap is equal to 5 percentage 
points for measures having a 0 to 100 scale (absolute percentage cap) 
or 5 percent of the restricted range for measures not having a 0 to 100 
scale (restricted range cap). New measures that have been in the Part C 
and Part D Star Rating program for 3 years or less use the hierarchal 
clustering methodology with mean resampling with no guardrail for the 
first 3 years in the program.
* * * * *
    (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
9. Section 422.252 is amended by revising the definition of ``New MA 
plan'' to read as follows:


Sec.  422.252  Terminology.

* * * * *
    New MA plan means a MA contract offered by a parent organization 
that has

[[Page 27896]]

not had another MA contract in the previous 3 years. For purposes of 
2022 quality bonus payments based on 2021 Star Ratings only, new MA 
plan means an MA contract offered by a parent organization that has not 
had another MA contract in the previous 4 years.
* * * * *

0
10. 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 any combination of Part C or D summary ratings of 2.5 
or less in both of the two most recent Star Rating periods, as 
identified in Sec.  422.166.
    (E) Met or exceeded 13 points for compliance actions for any one 
contract.
    (1) CMS determines the number of points each MA organization 
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.  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
11. 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
12. 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 noncompliance. A notice of noncompliance 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 noncompliance 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 noncompliance 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
13. Section 422.530 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  422.530  Plan crosswalks.

* * * * *
    (c) * * *
    (4) When--

[[Page 27897]]

    (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)(i), 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. For the 
crosswalk exception in this paragraph (c)(4)(ii), CMS permits enrollees 
to be moved between different contracts.
* * * * *

0
14. 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
    (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, one of the following: Home health services as defined in 
Sec.  440.70 of this chapter, medical supplies, equipment, and 
appliances as described in Sec.  440.70(b)(3) of this chapter, or 
nursing facility services are covered for the enrollees.
* * * * *

0
15. 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
16. 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
17. 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, when 
the request is not a request for expedited payment.
* * * * *

[[Page 27898]]

    (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
18. 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
19. 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.

* * * * *
    Third-party marketing organization (TPMO) means organizations and 
individuals, including independent agents and brokers, 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.  422.2, but 
may also be entities that are not FDRs but provide services to an MA 
plan or an MA plan's FDR.

0
20. 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
21. 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 the last day of 
the month prior to the plan 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;
    (vi) Is excluded from the translation requirement under paragraph 
(a)(2) of this section; and
    (vii) Is excluded from the 12-point font size requirement under 
paragraph (a)(1) 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 material, 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.

[[Page 27899]]

    (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
22. 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 or 
violations of any requirements that apply to the MA plan 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
23. Section 422.2460 is amended by revising paragraphs (a), (b) 
introductory text, and (d) and adding paragraph (e) to read as follows:


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
24. 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
25. 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
26. Section 423.100 is amended by adding in alphabetical order the 
definition of ``Price concession'' to read as follows:


Sec.  423.100  Definitions.

* * * * *
    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
27. Effective January 1, 2024, Sec.  423.100 is further amended by 
removing the definition of ``Negotiated prices'' and adding in 
alphabetical order the definition of ``Negotiated price'' 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.
* * * * *


Sec.  423.184   [Amended]

0
28. Section 423.184 is amended by removing and reserving paragraph (i).

0
29. Section 423.186 is amended by--
0
a. Revising paragraphs (a)(2)(i) and (i)(9); and
0
b. Removing and reserving paragraph (j)(1)(iv).

[[Page 27900]]

    The revisions read as follows:


Sec.  423.186  Calculation of Star Ratings.

    (a) * * *
    (2) * * *
    (i) The method maximizes differences across the star categories and 
minimizes the differences within star categories using mean resampling 
with the hierarchal clustering of the current year's data. Effective 
for the Star Ratings issued in October 2022 and subsequent years, CMS 
will add a guardrail so that the measure-threshold-specific cut points 
for non-CAHPS measures do not increase or decrease more than the value 
of the cap from one year to the next. The cap is equal to 5 percentage 
points for measures having a 0 to 100 scale (absolute percentage cap) 
or 5 percent of the restricted range for measures not having a 0 to 100 
scale (restricted range cap). New measures that have been in the Part C 
and D Star Rating program for 3 years or less use the hierarchal 
clustering methodology with mean resampling with no guardrail for the 
first 3 years of the program.
* * * * *
    (i) * * *
    (9) Special rules for the 2022 Star Ratings only. For the 2022 Star 
Ratings only, CMS will not apply the provisions in paragraph (i)(7) or 
(8) of this section and CMS will 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
30. 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 any combination of Part C or Part D summary ratings of 
2.5 or less in both of the two most recent Star Rating periods, as 
identified in Sec.  423.186.
    (E) Met or exceeded 13 points for compliance actions on any one 
contract.
    (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
31. 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 
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 noncompliance. A notice of noncompliance 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 noncompliance 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 noncompliance 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,

[[Page 27901]]

and/or must implement a detailed plan to correct the underlying causes 
of the noncompliance.
* * * * *

0
32. 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 and 
individuals, including independent agents and brokers, 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.  423.4, but 
may also be entities that are not FDRs but provide services to a Part D 
sponsor or a Part D sponsor's FDR.

0
33. 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
34. 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 the last day of month 
prior to the plan 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;
    (vi) Is excluded from the translation requirement under paragraph 
(a)(2) of this section; and
    (vii) Is excluded from the 12-point font size requirement under 
paragraph (a)(1) 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 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
35. 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:

[[Page 27902]]

    (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 or 
violations of any requirements that apply to the Part D sponsor 
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
36. Effective January 1, 2024, Sec.  423.2305 is amended by--
0
a. Revising paragraphs (1) and (2) of the definition of ``Negotiated 
price''; and
0
b. Designating the undesignated paragraph following the definition of 
``Negotiated price'' as paragraph (4).
    The revisions read as follows:


Sec.  423.2305  Definitions.

* * * * *
    Negotiated price * * *
    (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;
    (i) Includes all price concessions (as defined in Sec.  423.100) 
from network pharmacies or other network providers; and
    (ii) Excludes additional contingent amounts, such as incentive 
fees, if these amounts increase prices;
    (2) Is reduced by those discounts, direct or indirect subsidies, 
rebates, non-pharmacy 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
* * * * *

0
37. 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, 
supplemental benefits, 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: April 27, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-09375 Filed 4-29-22; 4:15 pm]
 BILLING CODE 4120-01-P