DHHS CMS Rule Changes Medicare Strengthen Rules

Thursday,
October 22, 2009
Part II
Department of
Health and Human
Services
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422, 423 et al.

Medicare Program; Policy and Technical
Changes to the Medicare Advantage and
the Medicare Prescription Drug Benefit
Programs; Proposed Rule
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54634 Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Proposed Rules
DEPARTMENT OF HEALTH AND Services, Attention: CMS–4085–P, Mail SUPPLEMENTARY INFORMATION: Inspection
HUMAN SERVICES Stop C4–26–05, 7500 Security of Public Comments: All comments
Boulevard, Baltimore, MD 21244–1850. received before the close of the
Centers for Medicare & Medicaid 4. By hand or courier. If you prefer, comment period are available for
Services you may deliver (by hand or courier) viewing by the public, including any
your written comments before the close personally identifiable or confidential
42 CFR Parts 417, 422, 423, and 480 of the comment period to either of the business information that is included in
[CMS–4085–P] following addresses: a. For delivery in a comment. We post all comments
Washington, DC—Centers for Medicare received before the close of the
RIN 0938–AP77 & Medicaid Services, Department of comment period on the following Web
Health and Human Services, Room 445– site as soon as possible after they have
Medicare Program; Policy and G, Hubert H. Humphrey Building, 200 been received: http://
Technical Changes to the Medicare Independence Avenue, SW., www.regulations.gov. Follow the search
Advantage and the Medicare Washington, DC 20201. instructions on that Web site to view
Prescription Drug Benefit Programs (Because access to the interior of the public comments.
AGENCY: Centers for Medicare & Hubert H. Humphrey Building is not Comments received timely will also
Medicaid Services (CMS), HHS. readily available to persons without be available for public inspection as
ACTION: Proposed rule. Federal government identification, they are received, generally beginning
commenters are encouraged to leave approximately 3 weeks after publication
SUMMARY: We are proposing revisions to their comments in the CMS drop slots of a document, at the headquarters of
the Medicare Advantage (MA) program located in the main lobby of the the Centers for Medicare & Medicaid
(Part C) and prescription drug benefit building. A stamp-in clock is available Services, 7500 Security Boulevard,
program (Part D) based on our for persons wishing to retain a proof of Baltimore, Maryland 21244, Monday
continued experience in the filing by stamping in and retaining an through Friday of each week from 8:30
administration of the Part C and D extra copy of the comments being filed.) a.m. to 4 p.m. To schedule an
programs. The proposed revisions b. For delivery in Baltimore, MD— appointment to view public comments,
clarify various program participation Centers for Medicare & Medicaid phone 1–800–743–3951.
requirements; specify changes to Services, Department of Health and
strengthen beneficiary protections; Human Services, 7500 Security Table of Contents
ensure that plan offerings to Boulevard, Baltimore, MD 21244–1850. I. Background
beneficiaries include meaningful If you intend to deliver your A. Overview of the Medicare Prescription
differences; improve plan payment rules comments to the Baltimore address, Drug, Improvement, and Modernization
and processes; and implement new please call telephone number (410) 786– Act of 2003
policy such as a Part D formulary 7195 in advance to schedule your B. History and Overview
policy. arrival with one of our staff members. II. Provisions of the Proposed Regulation
Comments mailed to the addresses A. Changes To Strengthen Our Ability To
DATES: To be assured consideration, Distinguish for Approval Stronger
comments must be received at one of indicated as appropriate for hand or
Applicants for Part C and D Program
the addresses provided below, no later courier delivery may be delayed and Participation and To Remove
than 5 p.m. Eastern Standard Time received after the comment period. Consistently Poor Performers
(EST) on December 8, 2009. Submission of comments on 1. Require Notice of Intent To Apply Under
paperwork requirements. You may Part C and D Within the Application
ADDRESSES: In commenting, please refer
submit comments on this document’s Requirements (§ 422.501 and § 423.502)
to file code CMS–4085–P. Because of
paperwork requirements by following 2. Application Requirements (§ 422.501(c)
staff and resource limitations, we cannot and § 423.502(c)) and Evaluation and
the instructions at the end of the
accept comments by facsimile (FAX) Determination Procedures for
‘‘Collection of Information
transmission. Determining Whether Applicants Are
You may submit comments in one of Requirements’’ section in this
document. Qualified for a Contract Under Parts C
four ways (please choose only one of the and D (§ 422.502 and § 423.503)
ways listed): For information on viewing public 3. Deny Contract Qualification
1. Electronically. You may submit comments, see the beginning of the Applications Based on Past Contract
electronic comments on this regulation SUPPLEMENTARY INFORMATION section. Performance (§ 423.750 and § 422.750)
to http://www.regulations.gov. Follow FOR FURTHER INFORMATION CONTACT: 4. Use of Data To Evaluate Continued
the instructions under the ‘‘More Search Alissa Deboy, (410) 786–6041, Ability To Act as a Qualified Sponsoring
General information and Part D issues. Organization Under Parts C and D
Options’’ tab.
Sabrina Ahmed, (410) 786–7499, Part (§ 422.504, and § 423.505)
2. By regular mail. You may mail 5. Compliance Programs Under Part C and
written comments to the following C issues. D (§ 422.503(b)(4)(vi) and
address ONLY: Centers for Medicare & Chris Eisenberg, (410) 786–5509, Risk § 423.504(b)(4)(vi))
Medicaid Services, Department of adjustment data validation issues. 6. Network Adequacy of Coordinated Care
Health and Human Services, Attention: Terry Lied, (410) 786–8973, and Network-Based Private Fee-for-
CMS–4085–P, P.O. Box 8013, Baltimore, Collection of information requirements Service Plans Under Part C (§ 422.112)
MD 21244–8013. and regulatory impact analysis issues. 7. Deemable Program Requirements Under
Please allow sufficient time for mailed Kristy Nishimoto, (410) 786–8517, Parts C and D (§ 422.156(b)(7),
comments to be received before the Part C and D enrollment and appeals § 422.156(f), § 423.165(b), and
issues. § 423.165(f))
close of the comment period.
8. Modify the Corrective Action Plan (CAP)
3. By express or overnight mail. You Christine Reinhard, (410) 786–2987, Process as It Relates to Procedures for
may send written comments to the Part C and D compliance and sanction Termination and Nonrenewal of a Part C
following address ONLY: Centers for issues. or D Contract by CMS (§ 422.506(b)(3),
Medicare & Medicaid Services, Frank Szeflinski, (303) 844–7119, Part § 422.510(c)(1), § 423.507(b)(3), and
Department of Health and Human C payment issues. § 423.509(c)(1))
Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 / Proposed Rules 54635
9. Procedures for Imposing Intermediate 17. Non-renewal Beneficiary Notification 2. Pro-rating the Plan Deductible for Part C
Sanctions and Civil Money Penalties Requirement Under Parts C and D MSA Enrollments Occurring During an
Under Part C and D (§ 422.756 and (§ 422.506 and § 423.507) Initial Coverage Election Period
423.756) 18. Notice of Alternative Medicare Plans (§ 422.103)
10. Termination of Contracts Under Parts C Available To Replace Non-renewing G. Changes To Clarify Various Program
and D (§ 422.510(a) and § 423.509(a)) Plans Under Parts C and D Participation Requirements
11. Request for Hearing Under Parts C and (§ 422.506(a)(2)(ii) and 1. Uniform Benefits Under Parts C and D
D (§ 422.662 and § 423.651) § 423.507(a)(2)(ii)) (§ 422.100(d) and § 423.104))
12. Burden of Proof, Standard of Proof, 19. Timeframes and Responsibilities for 2. Ensuring the Security of Personal Health
Standard of Review and Conduct of Making Redeterminations Under Part D Information and Other Personally
Hearing (§ 422.660, § 423.650, § 422.676 (§ 423.590) Identifiable Information (§ 422.504 and
and § 423.658) 20. Requirements for Requesting § 423.505)
13. Expedited Contract Terminations Organization Determinations Under Part 3. Requirement for Sponsoring
Procedures (§ 422.510, § 423.509, C (§ 422.568) Organizations Under Parts C and D To
§ 422.664, § 423.652, § 422.644, and 21. Organization Determinations Under Report Other Payer Information to the
§ 423.642) Under Parts C and D Part C (§ 422.566 and § 422.568) Coordination of Benefits Contractor
14. Time and Place of Hearing Under Parts 22. Representatives (§ 422.561, § 422.574 (§ 422.108 and § 423.464)
C and D (§ 422.670 and § 423.655) and § 422.624) 4. Visitor/Traveler Benefit Under Part C for
15. Discovery Under Parts C and D 23. Disclosure Requirements Under Parts C the Purpose of Extending Enrollment Up
(§ 422.682 and § 423.661) and D (§ 422.111(g) and § 423.128(f)) to 12 Months (§ 422.74)
16. Review by the Administrator Under 24. Definition of MA Plan Service Area 5. Medication Therapy Management
Parts C and D § 422.692(a) and (§ 422.2) Programs Under Part D (§ 423.153(d))
§ 423.666(a)) C. Changes To Provide Plan Offerings With 6. Formulary Requirements-Development
17. Reopening of an Initial Contract Meaningful Differences and Revision by a Pharmacy and
Determination or Decision of a Hearing 1. Bid Submissions—Ensuring Significant Therapeutics Committee (§ 423.120)
Officer or the Administrator Under Parts Differences (§ 422.254 and § 423.265) 7. Generic Equivalent Disclosure Under
C and D (§ 422.696 and § 423.668) 2. Bid Review Process (§ 422.256 and Part D (§ 423.132)
18. Prohibition of MA and Part D § 423.272) 8. Access to Covered Part D Drugs
Applications for 2 Years After a Mutual 3. Transition Process in Cases of (§ 423.120)
Termination § 422.503(b)(6) and Acquisitions and Mergers (§ 422.256 and 9. Standard Timeframe and Notice
§ 423.504(b)(5)) § 423.272) Requirements for Coverage
4. Non-renewing Low-enrollment Plans
B. Changes To Strengthen Beneficiary Determinations Under Part D (§ 423.568)
(§ 422.506(b)(1)(iv) and
Protections 10. Expediting Certain Coverage
§ 423.507(b)(1)(iii))
1. Broker and Agent Requirements Under Determinations (§ 423.570)
D. Changes To Improve Payment Rules and
Parts C and D 11. Timeframes and Notice Requirements
Processes
2. Beneficiary Communications Materials for Expedited Coverage Determinations
1. Risk Adjustment Data Validation
Under Parts C and D (§ 422.2260, Appeals (§ 422.310) (§ 423.572)
§ 423.2262, § 423.2260, and § 423.2262) a. Background 12. Clarify Novation Agreements Under
3. Required Use of Standardized Model b. Risk Adjustment Data Validation Part D (§ 423.551)
Materials Under Parts C and D Initiatives 13. Cost Contract Program Revisions:
(§ 422.2262, and § 423.2262) c. RADV Error Rate Calculation Disputes Appeals and Marketing Requirements
4. Involuntary Disenrollment for Failure To and Reconsiderations (§ 417.428, § 417.494, § 417.500, and
Pay Plan Premiums Under Parts C and D d. Proposed Addition of Medicare § 417.640)
(§ 422.74 and § 423.44) Advantage Organization Risk 14. Appeals Processes for Contract
5. Maximum Allowable Out-of-Pocket Cost Adjustment Data Validation-Dispute and Determinations, Intermediate Sanctions,
Amount for Medicare Parts A and B Appeals Procedures and Civil Money Penalties
Services (§ 422.100) 2. Payments to Medicare Advantage a. Contract Determinations (§ 417.492 and
6. Maximum Allowable Cost Sharing Organizations—Actuarial Valuation 417.494)
Amount for Medicare Parts A and B (§ 422.254) b. Civil Money Penalties (§ 417.500)
Services and Prescription Drugs 3. Determination of Acceptable c. Intermediate Sanctions (§ 417.500)
(§ 422.100 and § 423.104) Administrative Cost by Cost Contract 15. Extending MA Marketing Requirements
7. Prohibition on Prior Notification by and Health Care Prepayment Plans to Cost Program Plans (§ 417.428)
PPO, PFFS, and MSA Plans Under Part (§ 417.564) a. Definitions Concerning Marketing
C (§ 422.2, § 422.4, and § 422.105) 4. Calculation of the Minimum Percentage Materials (§ 422.2260)
8. Requirements for LIS Eligibility Under Increase Under Part C (§ 422.306) b. Review and Distribution of Marketing
Part D (§ 423.773) E. Changes To Improve Data Collection for Materials (§ 422.2262)
9. Enrollment of Full Subsidy Eligible Oversight and Quality Assessment c. Guidelines for CMS Review (§ 422.2264)
Individuals and Other Subsidy Eligible 1. Requirements for Quality Improvement d. Deemed Approval (§ 422.2266)
Individuals Under Part D (§ 423.34) Programs Under Part C (§ 422.152, e. Standards for MA Organization
10. Special Enrollment Periods Under Part § 422.153, and § 480.140) Marketing (§ 422.2268)
D (§ 423.380) a. Quality Improvement Programs f. Licensing of Marketing Representatives
11. Transition Process Under Part D b. New Quality Measures and Confirmation of Marketing
(§ 423.120(b)(3)) c. Use of Quality Improvement Resources (§ 422.2272)
12. Part D Sponsor Responsibility for Organization Review Information g. Broker and Agent Requirements
Retroactive Claims Adjustment 2. CAHPS Survey Administration Under (§ 422.2274)
Reimbursements and Recoveries Under Parts C and D (§ 417.472, § 422.152 and H. Changes To Implement Corrections and
Part D (§ 423.464) § 423.156) Other Technical Changes
13. Time Limits for Coordination of 3. Validation of Part C and Part D 1. Application of Subpart M to Health Care
Benefits (§ 423.466) Reporting Requirements (§ 422.516 and Prepayment Plans (§ 417.840)
14. Use of Standardized Technology Under § 423.514) 2. Generic Notice Delivery Requirements
Part D (§ 423.120) 4. Collection of Additional Part D Claims’ (§ 422.622 and 422.626)
15. Absence From Service Area for More Elements for Nonpayment-Related 3. Revision to Definition of Gross Covered
Than 12 Months Under Part D (§ 423.44) Purposes (§ 423.505) Prescription Drug Costs (§ 423.308)
16. Prohibition of Mid Year Mass F. Changes To Implement New Policy 4. Application Evaluation Procedures
Enrollment Changes by SPAPS Under 1. Protected Classes of Concern Under Part (§ 422.502(c and d) and § 423.503(c and
Part D (§ 423.464(e)) D (§ 423.120(b)(2)(v)) d))
5. Intermediate Sanctions (§ 422.750(a) and b. Changing the Standards of Review, FEHBP Federal Employees Health Benefits
§ 423.750(a)) Clarifying the Standard of Proof and Plan
6. Basis for Imposing Intermediate Burden of Proof for Appeals, and FFS Fee-For-Service
Sanctions and Civil Money Penalties Modifying the Conduct of Hearing for FY Fiscal year
(§ 422.752 and § 423.752) Contract Decisions (Including Denials of GAO Government Accountability Office
III. Collection of Information Requirements Initial Applications to Contract, Service HCPP Health Care Prepayment Plans
A. ICRs Regarding Basic Contract Area Expansions for Existing Contracts, HEDIS HealthCare Effectiveness Data and
Requirements (§ 417.472) Contract Non-Renewals and Information Set
B. ICRs Regarding Apportionment and Terminations, and Intermediate HHS [U.S. Department of] Health and
Allocation of Administrative and Sanctions) Human Services
General Costs (§ 417.564) c. Clarify That CMS May Require a ‘‘Test HIPAA Health Insurance Portability and
C. ICRs Regarding Medicare Secondary Period’’ During an Enrollment/Marketing Accountability Act of 1996 (Pub. L. 104–
Payer (MSP) Procedure (§ 422.108 and Sanction 191)
§ 423.462) d. Right for CMS To Require an HMO Health Maintenance Organization
D. ICRs Regarding Disclosure Requirements Independent Audit of Sponsoring HOS Health Outcome Survey
(§ 422.111) Organizations Under Intermediate HPMS Health Plan Management System
E. ICRs Regarding Quality Improvement Sanction ICD–9–CM Internal Classification of
Program (§ 422.152) e. The Ability for CMS To Require Disease, 9th, Clinical Modification
F. ICRs Regarding RADV Audit Dispute Sponsors To Disclose to Current and Guidelines
and Appeal Processes (§ 422.311) Potential Enrollees Compliance and ICEP Initial Coverage Enrollment Period
G. ICRs Regarding Application Performance Deficiencies ICL Initial Coverage Limit
Requirements (§ 422.501 and § 423.502) f. Section 176 of MIPPA—Formulary and ICR Information Collection Requirement
H. ICRs Regarding General Provisions Protected Classes Requirements (Part D) LEP Late Enrollment Penalty
(§ 422.503 and § 423.504) g. Reducing Duplicative and Low LIS Low Income Subsidy
I. ICRs Regarding Contract Provisions Enrollment Plans (Parts C & D) LTC Long Term Care
(§ 422.504 and 423.505) h. Validation of Part C and Part D LTCF Long Term Care Facility
J. ICRs Regarding Nonrenewal of Contract Reporting Requirements MA Medicare Advantage
(§ 422.506 and § 423.507) F. Accounting Statement MAAA American Academy of Actuaries
K. ICRs Regarding Request for Hearing G. Conclusion MAO Medicare Advantage Operations
(§ 422.662 and § 423.651) Regulations Text MA–PD Medicare Advantage-Prescription
L. ICRs Regarding Time and Place of Drug Plans
Hearing (§ 422.670 and § 423.655)
Acronyms M+C Medicare+Choice program
M. ICRs Regarding Review by the AO Accrediting Organization MPDPF Medicare Prescription Drug Plan
Administrator (§ 422.692 and § 423.666) ADS Automatic Dispensing System Finder
N. ICRs Regarding Procedures for Imposing AEP Annual Enrollment Period MIPPA Medicare Improvements for Patients
Intermediate Sanctions and Civil AHFS–DI American Hospital Formulary and Providers Act of 2008
Monetary Penalties (§ 422.756 and Service MMA Medicare Prescription Drug,
§ 423.756) AHFS–DI American Hospital Formulary Improvement, and Modernization Act of
O. ICRs Regarding Disclosure of Part D Service-Drug Information 2003 (Pub. L. 108–173)
Plan Information (§ 423.128) AHRQ Agency for Health Care Research MSA Metropolitan Statistical Area
P. ICRs Regarding Consumer Satisfaction and Quality MSAs Medical Savings Accounts
Surveys (§ 423.156) ALJ Administrative Law Judge MSP Medicare Secondary Payer
Q. ICRs Regarding Validation of Part C and BBA Balanced Budget Act of 1997 (Pub. L. MTM Medication Therapy Management
Part D Reporting Requirements 105–33) MTMP Medication Therapy Management
(§ 422.516 and § 423.514) BBRA [Medicare, Medicaid and State Child Programs
R. ICRs Regarding Drug Utilization Health Insurance Program] Balanced NAIC National Association Insurance
Management, Quality Assurance, and Budget Refinement Act of 1999 (Pub. L. Commissioners
Medication Therapy Management 106–113) NCPDP National Council for Prescription
Programs (MTMPs) (§ 423.153) BIPA Medicare, Medicaid, and SCHIP Drug Programs
S. ICRs Regarding Timeframes and Notice Benefits Improvement Protection Act of NGC National Guideline Clearinghouse
Requirements for Standard Coverage 2000 (Pub. L. 106–554) NIH National Institutes of Health
Determinations (§ 423.568) CAHPS Consumer Assessment Health NOMNC Notice of Medicare Non-coverage
T. ICRs Regarding Timeframes and Notice Providers Survey OEP Open Enrollment Period
Requirements for Expedited Coverage CAP Corrective Action Plan OIG Office of Inspector General
Determinations (§ 423.572) CCIP Chronic Care Improvement Program OMB Office of Management and Budget
U. ICRs Regarding Access to Covered Part CMR Comprehensive Medical Review OPM Office of Personnel Management
D Drugs (§ 423.120) CMP Civil Money Penalties OTC Over the Counter
V. ICRs Regarding Timeframes and CMR Comprehensive Medical Review PART C Medicare Advantage
Responsibility for Making CMS Centers for Medicare & Medicaid PART D Medicare Prescription Drug Benefit
Redeterminations (§ 423.590) Services Programs
W. Annual Information Collection Burden CMS–HCC CMS Hierarchal Condition PBM Pharmacy Benefit Manager
IV. Response to Public Comments Category PDE Prescription Drug Event
V. Regulatory Impact Analysis CTM Complaints Tracking Module PDP Prescription drug plan
A. Overall Impact COB Coordination of Benefits PFFS Private Fee For Service Plan
B. Increase in Costs to MA Organizations CORF Comprehensive Outpatient POS Point of Service
and Part D Sponsors Rehabilitation Facility PPO Preferred Provider Organization
C. Expected Benefits CY Calendar year PPS Prospective Payment System
D. Analysis by Provision DOL U.S. Department of Labor P&T Pharmacy & Therapeutics
E. Anticipated Effects DRA Deficit Reduction Act of 2005 (Pub. L. QIO Quality Improvement Organization
1. Effects of Cap on Out-of-Pocket Costs 109–171) QRS Quality Review Study
and Cost Sharing Amounts EGWP Employer Group/Union-Sponsored PACE Programs of All Inclusive Care for the
2. Alternatives Considered Waiver Plan Elderly
a. Strengthening CMS’ Ability To Take EOB Explanation of Benefits RAPS Risk Adjustment Payment System
Timely, Effective Contract ESRD End-stage renal disease RADV Risk Adjustment Data Validation
Determinations or Intermediate FACA Federal Advisory Committee Act SCHIP State Children’s Health Insurance
Sanctions (Part C & D) FDA Food and Drug Administration (HHS) Programs
SEP Special Enrollment Periods the Medicare Improvement for Patients under Medicare Part D, and a new
SHIP State Health Insurance Assistance and Providers Act (MIPPA) (Pub. L.110– retiree drug subsidy program.
Programs 275), which contained provisions Both the MA and prescription drug
SNF Skilled Nursing Facility impacting both the Medicare Part C and benefit regulations were published
SNP Special Needs Plan separately, as proposed and final rules,
SPAP State Pharmaceutical Assistance
D programs, and make other policy
Programs clarifications based on experience with though their development and
SSI Supplemental Security Income both programs (73 FR 54208, 73 FR publication were closely coordinated.
TrOOP True Out Of Pocket 54226, and 74 FR 2881). On August 3, 2004, we published in the
U&C Usual and Customary Under this proposed rule, we have Federal Register proposed rules for the
USP U.S. Pharmacopoeia identified additional programmatic and MA program (69 FR 46866 through
operational changes (outlined below) 46977) and the prescription drug benefit
I. Background that we believe are needed in order to program (69 FR 46632 through 46863).
A. Overview of the Medicare further improve our oversight and In response to public comments on the
Prescription Drug, Improvement, and management of the Part C and D proposed rules, we made several
Modernization Act of 2003 programs and to further improve revisions to the proposed policies for
beneficiary experience under MA or both programs. For further discussion of
The Medicare Prescription Drug,
Part D plans. these revisions, see the respective final
Improvement, and Modernization Act of
rules (70 FR 4588 through 4741) and (70
2003 (MMA) (Pub. L. 108–173) was B. History and Overview
FR 4194 through 4585).
enacted on December 8, 2003. The The Balanced Budget Act of 1997 Also as noted above, MIPPA was
MMA established the Part D program (BBA) (Pub. L. 105–33) established a enacted on July 15, 2008, which
and made revisions to the provisions in new ‘‘Part C’’ in the Medicare statute addressed a number of provisions
Part C of the Medicare statute governing (sections 1851 through 1859 of the impacting the Part C and D programs,
the Medicare Advantage (MA) program. Social Security Act (the Act)) which including provisions impacting
The MMA directed that important provided for what was then called the marketing under both programs. In the
aspects of the new Medicare Medicare+Choice (M+C) program. September 18, 2008 Federal Register (73
prescription drug benefit program under Under section 1851(a)(1) of the Act, FR 54208), we published a final rule
Part D be similar to and coordinated every individual entitled to Medicare that finalized certain marketing
with regulations for the MA program. Part A and enrolled under Medicare Part provisions, effective October 1, 2008,
The MMA also directed B, except for most individuals with end- that paralleled provisions in MIPPA. In
implementation of the prescription drug stage renal disease (ESRD), could elect the same issue of the Federal Register
benefit and revised MA program to receive benefits either through the (73 FR 54226), we published a separate
provisions effective January 1, 2006. original Medicare program or an M+C interim final rule that addressed the
The final rules for the MA and Part D plan, if one was offered where he or she other provisions of MIPPA affecting the
prescription drug programs appeared in lived. The primary goal of the M+C MA and Part D programs. We also
the Federal Register on January 28, program was to provide Medicare clarified the MIPPA marketing
2005 (70 FR 4588–4741 and 70 FR beneficiaries with a wider range of provisions in a November 2008 interim
4194–4585, respectively). Many of the health plan choices. The M+C final rule (73 FR 67407 and issued a
provisions relating to applications, provisions in Part C were amended by separate interim final rule in January
marketing, contracts, and the new the Medicare, Medicaid, and SCHIP 2009 to address MIPPA provisions
bidding process for the MA program Balanced Budget Refinement Act of related to Part D plan formularies (74 FR
became effective on March 22, 2005, 60 1999 (BBRA) (Pub. L. 106–111), and 2881).
days after publication of the rule, so that further amended by the Medicare, Now, with almost four years’
the requirements for both programs Medicaid, and State Children’s Health experience behind us, we are proposing
could be implemented by January 1, Insurance Program (SCHIP) Benefits further revisions to these programs
2006. All of the provisions regarding the Improvement Act of 2000 (BIPA) (Pub. affecting both beneficiaries and
new Part D prescription drug program L. 106–554). sponsoring organizations.
became effective on March 22, 2005. As noted previously, the MMA was When the MMA required that the Part
As we have gained more experience enacted on December 8, 2003. Title I of D benefit afford each enrollee a
with the MA program and the the MMA added a new ‘‘Part D’’ to the minimum of two choices in each plan
prescription drug benefit program, we Medicare statute (sections 1860D–1 region, few if any envisioned the
have revised the Part C and D through 42 of the Act) creating the overwhelming response from the
regulations to continue to improve or Medicare Prescription Drug Benefit healthcare industry would result in
clarify existing policies and/or codify Program, one of the most significant most beneficiaries choosing among
current guidance for both programs. For changes to the Medicare program since dozens of plans with various benefit
example, in December 2007, we its inception in 1965. Sections 201 packages. In the first few years of the
published a final rule with comment on through 241 of Title II of the MMA Part D benefit, we believed this was on
contract determinations involving made significant changes to the M+C the whole a great success. More plans
Medicare Advantage (MA) organizations program. Title II of the MMA renamed means more variation, competition and
and Medicare Part D prescription drug the M+C program as the MA program lower prices for Medicare beneficiaries
plan sponsors (72 FR 68700). In April and included new payment and bidding choosing to enroll in a stand-alone
2008, we published a final rule to provisions, new regional MA plans and prescription drug plan (PDP), or
address policy and technical changes to special needs plans, reestablished Medicare Advantage prescription drug
the Part D program (73 FR 20486). In authority for medical savings account plan (MA–PD). However, with so many
September 2008 and January 2009, we (MSA) plans that had been provided in plans to choose from many beneficiaries
finalized revisions to both the Medicare the BBA on a temporary basis, reportedly find the annual task of
Advantage and prescription drug benefit addressed private fee-for-service plans, selecting one plan from so many
programs (73 FR 54226 and 74 FR 1494, and made other changes. Title I of the overwhelming, and confusing.
respectively) to implement provisions in MMA created prescription drug benefits Moreover, we have found that, as
overseers of the Part C and D programs, can encourage seniors to switch to plans coverage and to ensure that current
organizations submitting bids to offer that better meet their medication needs subregulatory practices are codified in
multiple plans have not consistently while reducing their overall costs.3 regulation.
submitted plan benefit designs that were Some have urged that the agency can do We are also proposing another set of
significantly different from each other, more to provide improved individual provisions that are aimed at improving
which can add to beneficiary confusion. drug utilization and cost information to payment rules and processes, and
Since its inception in 2006, the beneficiaries to encourage seniors to improving data collection for oversight
Medicare Part D program has improved switch to lower-cost plans. Other and quality assessment. For example,
access to drug coverage for elderly and studies have found that some we are proposing to expand the
offered beneficiaries a wide range of beneficiaries are not fully aware of the collection of prescription drug event
plans from which to choose. At the financial implications of deferring data that we currently collect for
same time, some have suggested that enrollment in drug plans,4 a finding that research and other non-payment related
significant numbers of beneficiaries are suggests that we could do more to make purposes. Collecting these additional
confused by the array of choices and those implications more salient to data, which are currently collected for
find it difficult to make enrollment beneficiaries. We invite comments on payment purposes, would provide us
decisions that are best for them. Many these possibilities and other additional information to conduct
do not enroll in necessarily the lowest improvements the agency can make, to analyses that may be used to improve
cost plan and many eligible individuals help beneficiaries choose the plans that policies and assist in monitoring of Part
are not enrolled in the low-income best suit their needs. We also invite D plan sponsors.
subsidy program. Finally, once comment on the type of research that In addition, we are proposing
beneficiaries have chosen a plan and might be undertaken to help inform significant new Part D policy in this
enrolled in it, they tend to remain in future regulatory and programmatic rule. For example, in the area of Part D
those plans, despite changes in improvements and how we can best formulary policy, we propose a
medication use or premium increases. support our partners, such as states, to regulatory interpretation of MIPPA
We remain committed to considering assist them in helping beneficiaries protected drug categories and classes
changes in the way we administer the enroll in the best possible plans. For provision in section 176 of MIPPA (Pub.
Part C and D programs to enable example, we are interested in assessing L. 110–275) that we previously
Medicare beneficiaries to choose the the impacts of random auto-assignments addressed in a January 19, 2009 interim
plan that best suits their needs. Among on low-income beneficiaries. To the final rule with comment period (IFC).
other proposals, we making following extent that States are interested in Based on comments received in
three specific proposals to simplify the exploring non-random assignment response to that IFC, we believe that
program for beneficiaries: methods, we invite comment on what interpretation of statutory terms is
• First, we propose to require type of information States would find needed. In addition, we believe that
sponsors to ensure that when they most beneficial, including the types of additional clarification is needed
provide multiple plan offerings, those data analyses we could potentially relative to the process that we intend to
offerings sufficiently differ and thereby undertake with the data we already have utilize to identify the protected
provide beneficiaries meaningful from States who utilize non-random categories and classes of drugs that must
options (see section II. of this proposed assignment methods. be listed on all Part D plan formularies.
rule); We also have found that in certain Finally, we propose other provisions
• Second, we propose to eliminate cases, we have been limited by existing that are aimed at further clarifying
plans with persistently low enrollments, program rules and regulations to existing policy and we make technical
since these can add complexity to implement actions that would improve corrections where needed. For example,
choices without adding value (see sponsoring organization performance. in some cases, we are addressing topic
section II.D. of this proposed rule); Toward this end, we propose provisions areas that were included in our 2010
• Third, we propose to require that would limit the number of plan call letter to Part C and D plans, the
sponsors to use standardized offerings by eliminating duplicative document that outlines policy
‘‘templates’’ in their beneficiary bids, and strengthen our program clarifications and reminders for plans
communication materials (for example, participation requirements. bidding on plan offerings in the coming
the Annual Notice of Changes (ANOC) We are proposing a number of contract cycle. In the spirit of
and the Evidence of Coverage (EOC) additional provisions aimed at transparency, we have outlined some of
notices), so that seniors can better strengthening existing beneficiary these clarifications within this rule so to
understand how their current benefits protections. For example, we propose to ensure the public has a full opportunity
and cost-sharing requirements will be strengthen plan transition process to comment on our policies.
changing and more easily compare their requirements to ensure maximum II. Provisions of the Proposed
current plan with other plan options transparency regarding our expectations Regulations
(see section II.B.3 of this proposed rule). of Part D plans with respect to enrollees
We believe that more can be done to transitioning to the plan from other drug In the sections that follow, we discuss
structure choices for seniors to aid them the proposed changes to the regulations
in making better plan choices.1 2 For 3 See, for example, Wrobel MV, Kling J, in 42 CFR parts 417, 422, 423, and 480
example, studies have suggested that Mullainathan S, Shafir E, Vermeulen L (2009). A governing the MA and prescription drug
providing personalized drug utilization Shot in the Arm for Medicare Part D: Four Ways benefit programs. To better frame the
for the Government to Boost its Customer discussion of the specific regulatory
and cost information to beneficiaries Communications. http://www.brookings.edu/
papers/2008//media/Files/rc/papers/2008/ provisions we are proposing, we have
1 McFadden D (2006). Free Markets and Fettered 1120_medicare_kling/1120_medicare_kling.pdf. structured the preamble narrative by
Consumers. The American Economic Review 96(1), 4 Hargrave E, Piya B, Hoadley J, Summer L, topic area rather than by subpart order.
5–29 Thompson J (2008). Experiences Obtaining Drugs Accordingly, our proposals address the
2 Hanock Y, Rice T, Cummings J, Wood S (2009). under Part D: Focus Groups with Beneficiaries,
How Much Choice is Too Much? The Case of the Physicians, and Pharmacists. Final Report
following eight specific goals as
Medicare Prescription Drug Benefit. Health Services Submitted to the Medicare Payment Advisory foreshadowed in the preceding
Research 44:4; 1157–1168. Commission. National Opinion Research Center. introduction:
• Strengthening our ability to As our understanding of Part C and D that we will only provide three
distinguish for approval strong program operations has deepened over opportunities to submit an approvable
applicants for MMA participation and the past 4 years, our use of our authority contract qualification application to
remove consistently poor performers. to determine which organizations are CMS: The initial solicitation response,
• Strengthening beneficiary qualified to offer MA and PDP sponsor one courtesy opportunity to correct any
protections. contracts, evaluate their compliance identified deficiencies, and a final
• Providing plan offerings with with Part C and D requirements, and opportunity during the 10-day cure
sufficient enrollment and meaningful make determinations concerning period provided for specifically in the
differences. intermediate sanctions, contract regulations.
• Improving payment rules and nonrenewals and contract terminations Some organizations have expressed
processes. has evolved as well. As set forth below, surprise during the last 2 years at our
• Improving data collection for we are proposing changes and use of our authority to impose strict
oversight and quality assessment. clarifications to our regulations to make deadlines and standards of review on
• Implementing other new policies. certain that all current and potential applications for qualification as an
• Clarifying various sponsor program MAOs and PDP sponsors clearly MAO or PDP sponsor. To reduce the
participation requirements. understand and can reasonably opportunity for confusion about the
anticipate how we measure sponsor application process, we are proposing
• Implementing corrections and other
performance, determine when there is some regulatory clarifications in
technical changes.
noncompliance, and when enforcement furtherance of our goal of using a fair
Several of the proposed revisions and
actions are warranted. While we are and efficient process for ensuring that
clarifications affect both programs.
pleased that so many organizations have only truly qualified organizations are
Within each section, we have provided offered Part C or D organization
elected to participate in the Part C and
a chart listing all subject areas that contracts. These provisions, described
D programs, we have an obligation to
contain provisions affecting the Part C in greater detail below, include
ensure that only appropriate
and D programs and the associated requiring applicants to demonstrate that
organizations are given the
regulatory citations that would be they meet all (not a substantial number)
responsibility for providing quality
revised. Please note that in our of the Part C and D program
medical care and drug coverage to
discussion of these provisions, we often requirements, prohibiting applicants
Medicare beneficiaries.
refer to ‘‘sponsoring organizations’’ to Each year, since contract year 2006, from submitting additional curing
refer to both Medicare Advantage we have solicited applications from materials after the expiration of the ten-
organizations (MAOs) and Part D organizations seeking to become day period following their receipt of a
sponsors. qualified to enter into Part C or D notice of intent to deny their
A. Changes To Strengthen Our Ability sponsor contracts. We received application, and requiring applicants to
To Distinguish for Approval Strong hundreds of applications in each of submit a nonbinding notice of intent to
Applicants for Part C and D Program those years. To properly manage a apply for a Part C or D contract.
Participation and To Remove workload of that size, and to ensure that Organizations should be aware that
Consistently Poor Performers we conduct a fair review of every we will continue to exercise our
application, we have adopted an authority to consider an organization’s
This section addresses a number of increasingly standardized, computer- past Part C or D contract performance in
proposals designed to strengthen our based application submission process. evaluating whether it should be afforded
ability to approve strong applicants and At the same time, we have also become the opportunity to obtain additional
remove poor performers in the Part C increasingly strict in the application of contracts or to serve a larger portion of
and D programs. Since the our regulatory authority to limit the the Medicare beneficiary population.
implementation of revisions to the MA number and timing of opportunities for Additionally, sponsoring organizations
and initial implementation of the applicants to resubmit materials to cure should be aware that we rely on data to
prescription drug programs in January applications that do not initially evaluate compliance with program
2006, we have steadily enhanced our demonstrate that the applicant meets requirements in a number of ways. For
ability to measure MAO and PDP Part C or D requirements. example, we use data to evaluate
sponsor performance through efforts Until 2 years ago, applicants may adherence to requirements in the MMA
such as the analysis of data provided have found that we would accept as statute or the Part C and D regulations
routinely by sponsors and by our many corrected submissions as the (for example, retail pharmacy access).
contractors, regular review of applicants needed to make their We also use data to evaluate adherence
beneficiary complaints, marketing materials (usually documents to the requirements outlined in our
surveillance activities, and routine concerning provider/pharmacy manual chapters and other guidance (for
audits. This information, combined with networks, subcontracting arrangements, example, customer and provider call
feedback we have received from or risk-bearing licenses) consistent with center performance standards). Finally,
beneficiary satisfaction surveys, HEDIS Part C or D requirements. We recognized we conduct outlier analysis by
data, and information from MAOs and that this was an inefficient process that comparing the performance across all
PDP sponsors themselves, has enabled afforded some applicants the organizations on a particular Part C or
us to develop a clearer sense of what opportunity to make more re- D requirement to identify organizations
constitutes a successful Medicare submissions than others and arguably that appear to be poor performers. The
organization capable of providing enabled less well-prepared and most notable example of this kind of
quality Part C and D services to qualified applicants to enter the analysis is reflected in our performance
beneficiaries. This information has also program. To improve the fairness of the metrics (that is, the Medicare Part D
allowed us to identify and take application process, and to reduce the Plan Ratings). These ratings represent an
appropriate action against organizations burden it imposes on applicants and effort to make additional information
that are not meeting program CMS alike, we have, through our available to the public regarding the
requirements and not meeting the needs application instructions issued over the price and quality of services for which
of beneficiaries. last 3 years, clarified to all applicants Medicare makes payments. The Plan
Ratings are located on the Medicare as we have become more sophisticated termination or nonrenewal of the
Prescription Drug Plan Finder (MPDPF) in our analysis of sponsor applications contract of that sponsor.
Tool at (http://www.Medicare.gov) and and compliance, we also continue to With the clarifications we are
are designed to provide a clear review our sanction and contract proposing to the Part C and D
differentiation of the various Plan termination authority to ensure that we regulations through this proposed rule
offerings to beneficiaries. Organizations pursue actions when there is sufficient and the background provided in this
receiving less than ‘‘good’’ ratings in basis to support them. For example, we preamble section, MAOs and PDP
any category should anticipate have developed an annual process for sponsors should now be fully aware that
communication from us. Another analyzing sponsor performance during we will continue to apply stricter
example is our review of data in the the preceding contract year. We review scrutiny to sponsor qualifications and
Complaints Tracking Module (CTM), each sponsor’s compliance history, contract performance as our analytical
which can be a particularly strong including CMS-issued compliance capabilities and understanding of
indicator of a sponsor’s inability to industry best practices improves. As the
notices, audit results, and performance
perform a required Part C or D function. Part C and D programs have now
ratings (for example, star ratings) to
An abnormally high complaint rate for reached a certain level of maturity and
a particular sponsor will likely prompt develop a full picture of that sponsor’s organizations’ strong interest in
us to investigate other sources of ability to deliver Part C and D services participating in the programs has been
information to determine whether the to its members. If that picture indicates established, it is appropriate for us to
organization is complying with specific that a particular sponsor has a use the authority and evidence at our
Part C or D requirements. significant pattern of poor performance disposal to make certain that beneficiary
Our efforts are aimed at making or even isolated incidences of plan choices are characterized more by
certain that we have well-functioning noncompliance with crucial operational their quality than their quantity. These
MAOs and PDP sponsors administering requirements (for example, enrollment provisions are described in detail in
Part C and D benefits on our behalf. Just processing), we will consider Table 1.
TABLE 1—PROVISIONS STRENGTHENING OUR ABILITY TO DISTINGUISH FOR APPROVAL STRONG APPLICANTS AND TO
REMOVE CONSISTENTLY POOR PERFORMERS
Part 422 Part 423
Provision
Subpart Section Subpart Section
Notice of Intent to Apply ......................................... Subpart K .. § 422.501 ................................... Subpart K .. § 423.502.

Application Standards ............................................. Subpart K .. § 422.502 ................................... Subpart K .. § 423.503.
Compliance Measures/Analysis .............................. Subpart K .. § 422.502 ................................... Subpart K .. § 423.503.
Compliance Programs ............................................ Subpart K .. § 422.503(b)(4)(vi) ..................... Subpart K .. § 423.504(b)(4)(vi).
Network Adequacy of Coordinated Care and Net- Subpart C .. § 422.112 ................................... N/A ............. N/A.
work-Based Private-Fee-For-Service plans
under Part C.
Clarify programmatic elements that are Subpart D .. § 422.156(b)(7), § 422.156(f) ..... Subpart D .. § 423.165(b), § 423.165(f).
‘‘deemable’’.
Procedures for termination and Nonrenewals: Part Subpart K .. § 422.510(c)(1), § 422.506(b)(3) Subpart K .. § 423.509(c)(1),
C and D. § 423.507(b)(3).
Intermediate Sanctions: Procedures for imposing Subpart O .. § 422.756 ................................... Subpart O .. § 423.756.
civil and money penalties.
Contract Termination .............................................. Subpart K .. § 422.510(a) ............................... Subpart K .. § 423.509(a).
Proper request for hearings .................................... Subpart N .. § 422.662 ................................... Subpart N .. § 423.651.
Burden of Proof, Standard of Proof, Standard of Subpart N .. § 422.660, § 422.676(d) ............. Subpart N .. § 423.650, § 423.658(d).
Review and Conduct of Hearing.
Postponement of effective date of determination Subpart N .. § 422.664 ................................... Subpart N .. § 423.652.
when a request is being filed.
Extending timeframe for contract determination Subpart N .. § 422.670 ................................... Subpart N .. § 423.655.
hearings.
Appeal times: Require each party provide witness Subpart N .. § 422.682 ................................... Subpart N .. § 423.661.
list and documents 5 calendar days before
hearing.
Appeal times: Require request for a review by the Subpart N .. § 422.692(a) ............................... Subpart N .. § 423.666(a).
administrator must be received with 15 days
after receipt of hearing decision.
Contract redeterminations and reopening .............. Subpart N .. § 422.696 ................................... Subpart N .. § 423.668.
Mutual termination of contract ................................ Subpart K .. § 422.503(b)(6) .......................... Subpart K .. § 423.504(b)(5).
1. Require Notice of Intent To Apply procedures. Section 1871(a)(1) of the of applications to qualify as MA and
Under Part C and D Within the Act authorizes us to prescribe such PDP sponsor contractors.
Application Requirements (§ 422.501 regulations as may be necessary to carry Beginning with the applications for
and § 423.502) out the administration of the Medicare the 2009 contract year, the Medicare
Subpart K of part 422 and subpart K program. We propose using that Advantage, Part D Prescription Drug
of part 423 set forth the requirements for authority to establish an administrative benefit, and Employer/Union-Only
contracts with MA Organizations and requirement for both the Part C and D Group Waiver Plan (Direct Contract or
Part D sponsors including application programs related to the submission to us ‘‘800 Series’’) sponsor applications are
submitted via a paperless process. Each to demonstrate that it met all program determination. If the applicant does not
application is completed through the requirements to qualify for a contract. appear qualified to contract as an MA
CMS Health Plan Management System Accordingly, we are proposing to revise organization or Part D sponsor and has
(HPMS). As a result of the fully § 422.502 and § 423.503 to make it not provided enough information to
electronic submission process and explicit that we will approve only those permit us to evaluate the application,
restrictions on access to HPMS, every applications that demonstrate that they the applicant receives a notice of intent
applicant must complete a Notice of meet all (not substantially all) Part C to deny the application and a summary
Intent to Apply as described in the and D program requirements. for the basis for the finding. As provided
HPMS memo dated October 10, 2008. The application requirements and in § 422.502(c)(2) and § 423.503(c)(2),
This includes current contractors evaluation and determination within 10 days from the date of the
seeking to expand their organization’s procedures for MA organizations and notice, the applicant can respond in
service area, and current contractors Part D sponsors are set forth in subpart writing to the issues or other matters
adding a Special Needs Plan (SNP) or an K of Parts 422 and 423, respectively. that were the basis for our findings and
Employer Group/Union-Sponsored The application process in each revise its application to correct any
Waiver Plan (EGWP) to their existing instance requires an applicant to submit deficiencies.
contract. for CMS review a combination of The purpose of the proposed
The Notice of Intent to Apply attestations that it will comply with regulatory change is to clarify that
provides us with critical information for stated program requirements, as well as information submitted after 10 days
generating a pending contract number contracts with organizations the from the notice will under no
and providing User ID connectivity. applicant has contracted with to circumstances be reviewed for the
Submitting a Notice of Intent to Apply perform key Part C or D functions, purpose of approving an application.
does not bind that organization to evidence of the applicant’s risk-bearing Further, consistent with the proposed
submit an application for the following licenses, and data documenting that the revisions to § 422.650(b)(2) and
year. However, without a pending applicant can provide its members § 423.660(b)(2), which are discussed
contract number and completed CMS access to Part C and D services elsewhere in this proposed rule, the
User ID connectivity, an organization consistent with the programs’ applicant would not be permitted to
will not be able to access the requirements. As we have proposed to submit additional revised application
appropriate modules in HPMS to clarify at § 422.501(c)(1) and (2), material to the Hearing Officer for
complete the application materials. We § 422.502(a)(2), § 423.502(c)(1) and (2), review should the applicant elect to
propose codifying in § 422.501 and and § 423.503(a)(2), we require that appeal the denial of its application. To
§ 423.502 our existing guidance that applicants demonstrate that they meet allow for the submission and review of
initial applicants and existing all requirements outlined in the MA such information as part of the hearing
contractors seeking to expand complete organization and Part D sponsor would, in effect, extend the deadline for
a nonbinding Notice of Intent to Apply. applications. submitting an approvable application.
Under the current regulations at Moreover, the proposed change would
2. Application Requirements § 422.502(a)(1) and § 423.503 (a)(1), we further clarify the standard for the
(§ 422.501(c) and § 423.502(c)) and evaluate an entity’s application on the disposition of applications for which
Evaluation and Determination basis of information contained in the either revisions are not provided within
Procedures for Determining Whether application itself and any additional the 10 days or are inadequate.
Applicants Are Qualified for a Contract information that we obtain through Specifically, we propose to clarify
Under Parts C and D (§ 422.502 and onsite visits, publicly available § 422.502(c)(2) and § 423.503(c)(2) by
§ 423.503) information, and any other appropriate adding a new paragraph (iii) to establish
Subpart K of Part 422 and subpart K procedures. We propose to simplify and that if we do not receive a revised
of Part 423 set forth the requirements for clarify the process by modifying application within 10 days from the
contracts with MA organizations and § 422.502(a)(1) and § 423.503(a)(1) and date of the intent to deny notice, or if
Part D sponsors, respectively, including limiting the evaluation of an entity’s after timely submission of a revised
application procedures. Section 1860D– application to information contained in application the applicant still appears
12(b)(3) of the Act states that we must the application and any additional unqualified to contract as an MA
apply certain specified provisions of information that we obtain through organization or Part D sponsor and/or
section 1857 of the Act including the onsite visits. Limiting our review to this has not provided enough information to
procedures for termination in section information ensures that we will afford allow us to evaluate the application, we
1857(h) of the Act in the same manner all applicants (numbering in the will deny the application.
as they apply to contracts under section hundreds each of the last four years) a
1857(a) of the Act. Therefore, we are 3. Deny Contract Qualification
fair and consistent review of their
making a single proposal that applies to qualifications. Organizations can be Applications Based on Past Contract
both MA organizations and Part D assured that we will not consider Performance (§ 422.750 and § 423.750)
sponsors related to our application additional sources of information As described in § 422.502(b) and
evaluation procedures and appeals of regarding one applicant’s qualifications § 423.503(b), we may deny an
our determinations regarding that we do not consider for others. application based on the applicant’s
applications. We are also proposing a clarification failure to comply with the terms of a
During the first four years of the of our authority to decline to consider prior contract with CMS even if the
Medicare Advantage and Part D application materials submitted after the applicant currently meets all of the
programs, several unsuccessful expiration of the 10-day period application requirements. However, we
applicants contested our denial of their following our issuance of a notice of propose to modify § 422.502(b) and
applications for MA organization or Part intent to deny an organization’s contract § 423.503(b) to state that we will review
D sponsor contracts. At hearings, some qualification application. Under past performance across all of the
of those applicants were successful in § 422.502(c) and § 423.503(c), we notify contracts held by the applicant. The
arguing that the regulations were not applicants of our determination on the provision as currently drafted mentions
clear in stating that an applicant needed application and the basis for the a ‘‘prior contract’’ with CMS. Today,
contracts are ‘‘evergreen’’ and some agreeing with the organization to Some of the data acquired through
organizations hold multiple MA and/or terminate its contract and work(s) with § 422.516 and § 423.514 are used for the
PDP sponsor contracts; therefore the the organization to make certain that purpose of monitoring an organization’s
concept of ‘‘prior contract’’ is outdated, beneficiaries receive uninterrupted or sponsor’s continued compliance with
as the prior performance issues could access to Medicare services through MA and/or Part D requirements. For
have occurred in any other contract another MA organization, PDP sponsor, example, under § 423.514(a)(5), Part D
currently or formerly held by an or original Medicare. But for our acting sponsors must have an effective
applicant. Therefore, we propose to to protect beneficiaries by agreeing to procedure to develop, compile,
revise the language in § 423.503(b) and the contact termination, the evaluate, and report to CMS particular
§ 422.502(b) to refer to ‘‘any current or organization would have faced matters, such as low income subsidy
prior contract’’ held by the organization, significant compliance and enforcement (LIS) contract data, that we require. At
instead of the current language referring actions once its failure to comply with the contract level, the sponsor’s LIS data
to a ‘‘previous year’s contract.’’ We also program requirements became apparent. is compared to our LIS data and a match
propose to clarify that the period that Also, the organization’s failure to rate is calculated. Under our guidance,
will be examined for past performance conduct the proper due diligence on its the match rate between our data and the
problems be limited to those identified contracted provider network or its sponsor’s should exceed 95 percent.
by us during the 14 months prior to the finances represents itself a significant Sponsors who fail to exceed the 95
date by which organizations must failure to have in place the percent match rate are notified of their
submit contract qualification administrative capability to operate a noncompliance and are expected to
applications to CMS. Fourteen months Medicare benefit plan worthy of come into compliance with Part D
covers the time period from the start of compliance and enforcement actions. instructions. In some instances, we may
the previous contract year through the Accordingly, we believe(s) it is use an outlier analysis to determine a
time that applications are received for appropriate to consider an MA organization’s or Part D sponsor’s
the next contract year. organization’s withdrawal from its performance relative to industry
Indicia of performance deficiencies contract prior to the start of the benefit standards established by the
that might lead us to conclude that an year to be a strong indication of poor performance of all the other
organization has failed to comply with performance worthy of our organizations and sponsors as described
a current or prior contract include, but consideration under § 422.750 and earlier in the preamble in our discussion
are not limited to, poor performance § 423.750. of the development of our policies
ratings as displayed on the Medicare We will review performance in concerning the awarding, monitoring,
Options Compare and MPDPF web sites; accordance with these examples and and enforcement of Medicare contracts.
receipt of requests for corrective action other evidence of noncompliance, and For example, Part D plans report
plans (CAPs) unrelated to an audit (as will deny applications for initial grievance data to CMS. We conduct
these types of CAPs generally involve contracts and service area expansions outlier analysis to identify plans with
direct beneficiary harm); and receipt of on the basis of noncompliant past the highest numbers of reported
one or more other types of performance. By specifically providing grievances for the purpose of identifying
noncompliance notices from CMS (for these examples and clarifying that we plans needing some type of compliance
example, notices of noncompliance or intend to exercise this authority, we action. To conduct these types of outlier
warning letters). believe that organizations will be analysis, we usually perform the
Additionally, as indicated by the motivated to enhance their compliance following steps:
changes to § 422.503(b), § 422.508(c), operations in order to avoid being out of • Develop a data distribution—data
§ 423.504(b), and § 423.508(e), we compliance with program requirements, values ordered from low to high.
consider withdrawal of Part C or D and this will significantly deter • Determine the maximum and
operations from some or all of an noncompliance leading to improved minimum data values.
organization’s newly contracted service overall performance of organizations in • Determine the range (maximum–
area prior to the start of a benefit year the Part C and D programs. minimum).
(through mutual termination or • Determine the outlier threshold—
otherwise) an indication of poor 4. Use of Data To Evaluate Continued When conducting an outlier analysis,
performance. Such a situation can arise Ability To Act as a Qualified we typically identify sponsors typically
when, for example, an organization, Sponsoring Organization Under Parts C in the highest (or lowest) 5 percent of
after it has signed its Medicare contract and D (§ 422.504, and § 423.505) comparable sponsors (for example,
for the upcoming program year, loses a Sections 1857(e)(1) and 1860D– compare PDPs to PDPs).
contract with a significant number or 12(b)(3)(D) of the Act provide broad We also use the Performance Metrics
type of providers, jeopardizing its authority for the Secretary to add terms (Plan Star Ratings), some of which are
ability to provide its members adequate to the contracts with MA and Part D determined by relative ranking, for
access to services. Also, an organization sponsors including terms that require oversight and monitoring purposes to
may suddenly face financial difficulties the sponsor to provide the Secretary ensure plan quality. As stated in the
that threaten its ability to offer the ‘‘with such information * * * as the 2009 Call Letter, organizations and
benefit packages approved by CMS Secretary may find necessary and sponsors with less than ‘‘good’’ ratings
throughout the upcoming contract year. appropriate.’’ Under that authority, we should expect to be the subject of our
In such instances, we could simply established § 422.516 and § 423.514, monitoring and compliance actions.
leave the contract in place and take Reporting Requirements. Consistent Likewise, if after an analysis of data
enforcement actions against the with sections 1857(a) and 1860D– submitted under § 422.516 or § 423.514
organization. Under such an approach, 12(b)(1) of the Act, we established that an organization’s or sponsor’s
we would knowingly be permitting we will oversee an MA organization’s performance is found to be an outlier
beneficiaries to remain enrolled with an and Part D sponsor’s continued based on relative ranking, the
organization that cannot effectively compliance with Part C and Part D organization or sponsor may be
deliver the benefit. Instead, we act(s) in requirements under § 422.502(d)(1) and considered out of compliance with MA
the best interests of the beneficiaries by § 423.503(d)(1). and Part D requirements.
We propose to add paragraphs programs, other state programs, requirement and achieving an effective
§ 422.504(m)(1) and (2) and including the State of New York compliance program. Our recent
§ 423.505(n)(1) and (2) to make explicit Medicaid program, now require experience with some sponsoring
our existing authority to find effective compliance programs as a organizations has indicated that Boards
organizations or sponsors out of condition of participation. of Directors may not be sufficiently
compliance with MA and/or Part D Our recent experience is that some aware or may have limited information
requirements when the organization’s or sponsoring organizations have instituted about their organization’s compliance
sponsor’s performance fails to meet a compliance plan that appears to meet programs or compliance issues. In
performance standards articulated in the minimum requirements of our deciding how often the compliance
statutes, regulations, and guidance or regulations, but may not have an officer and committee must directly
when an organization’s or sponsor’s effective compliance program. Other report to the Board of Directors,
performance represents an outlier sponsoring organizations seem to sponsoring organizations must consider
relative to the performance of other legitimately grapple with how best to many factors, including but not limited
organizations or sponsors. implement the regulatory requirements to: the size of the organization, the
within their organization and which number of compliance problems,
5. Compliance Programs Under Parts C particular actions on their part will meet whether there is an emergency that calls
and D (§ 422.503(b)(4)(vi) and our requirements. for the Board’s attention, and whether
§ 423.504(b)(4)(vi)) We propose to stress the importance the sponsoring organization is under an
Section 1857(a) of the Act provides of sponsoring organization’s intermediate sanction. Our proposed
the Secretary with the authority to enter implementing and maintaining robust language further clarifies existing policy
into contracts with MA organizations compliance programs by modifying the related to this requirement for senior
and section 1860D–12(b)(1) of the Act language at § 422.503(b)(4)(vi) and management to be sufficiently engaged,
provides the Secretary with the § 423.504(b)(4)(vi) to explicitly provide informed, and to exercise appropriate
authority to enter into contracts with clarification as to what will constitute governance over the organization’s
PDP sponsors. The current regulatory an ‘‘effective’’ compliance program prior compliance program.
provisions provide that any entity to contracting with CMS. We are also In the third element concerning the
seeking to contract as an MA proposing to further clarify existing requirement to have effective training
organization or PDPsponsor must have policy by modifying current language and education, we are proposing to
administrative and management and/or adding language in support of further clarify existing policy by adding
arrangements satisfactory to us as each of the elements of an effective language at § 422.503(b)(4)(vi)(C) and
demonstrated by (among other compliance plan in order to assist § 423.504(b)(4)(vi)(C) that includes
requirements) having a compliance plan sponsoring organizations with several key groups and individuals (the
that consists of seven basic elements. implementing more effective chief executive or other senior
These seven elements of the compliance compliance programs. administrator, managers, and governing
plan outline fundamental requirements In the first element concerning the body members) among the sponsoring
such as written policies and procedures, overall requirement to have written organization’s employees that are
a compliance officer and committee that policies and procedures, we are required to have compliance training
is accountable to senior management, proposing to further clarify existing and education. Because these employees
effective compliance training and policy by adding language at have specific governing and oversight
communication, enforcement of § 422.503(b)(4)(vi)(A) and responsibilities, we believe it is
disciplinary standards, and procedures § 423.504(b)(4)(vi)(A) that these policies important to clarify these requirements.
for internal monitoring and auditing and must describe compliance expectations We are proposing to further clarify
ensuring prompt responses to detected as embodied in the standards of existing policy by adding language that
offenses. In addition, a compliance plan conduct, implement the operations of also clarifies that this training must
must include measures to detect, the compliance program, provide occur at a minimum annually and must
correct, and prevent fraud, waste, and guidance to others, identify how to be made a part of the orientation for a
abuse. communicate compliance issues to new employee, new first tier,
Compliance programs have long been compliance personnel, describe how downstream and related entities, and
recognized as key to achieving compliance issues are investigated and new appointment to a chief executive,
adherence with contract requirements resolved and include a policy of non- manager or governing body member.
and to protecting against fraud, waste, intimidation and non-retaliation. In the December 5, 2007 Federal
and abuse. The recent focus on the In the second element concerning the Register, we published the ‘‘Medicare
importance of these programs has been requirement to have a compliance Program; Revisions to the Medicare
heightened not only by CMS through officer and committee accountable to Advantage and Part D Prescription Drug
our ongoing audit and oversight efforts senior management, we are proposing to Contract Determinations, Appeals and
but also by several of our oversight further clarify existing policy by adding Intermediate Sanctions Process’’ final
bodies. For example, over the last language at § 422.503(b)(4)(vi)(B) and rule (72 FR 68700). In the December 5,
several years, the U.S. Department of § 423.504(b)(4)(vi)(B) that the 2007 final rule, we established that
Health and Human Services Office of compliance officer and committee must compliance plans for sponsoring
Inspector General (OIG) and the periodically report directly to the organizations must include training and
Government Accountability Office governing body (for example, Board of education and effective lines of
(GAO) have each focused specific Directors) and that body must be communication between the compliance
oversight efforts on MA organizations’ knowledgeable about the compliance officer and the sponsoring
and PDP sponsors’ compliance program and exercise reasonable organization’s employees, managers,
programs and have requested that we oversight over the implementation and and directors as well as their first tier,
take actions to evaluate and oversee effectiveness of the program. The downstream, and related entities.
these programs to ensure entities have governing body’s direct involvement Since publication of the December 5,
effective programs in place. Similarly, with and oversight of the compliance 2007 final rule, it has become apparent
like the Medicare Part C and D program is instrumental in fulfilling this that application of training about fraud,
waste, and abuse to the MA option might be that the plan sponsor § 423.504(b)(4)(vi)(G) to more
organizations’ first tier, downstream, ‘‘assures’’ or ‘‘obtain an assurance’’ that specifically describe the
and related entities may be redundant of the first tier, downstream, and related implementation of a system for
the certification made when these entity has received such training, but promptly responding to compliance
entities submit enrollment applications this leaves open the issue of who would issues as they are raised, investigating
to become Medicare physician and non- then actually provide the needed potential compliance problems
physician practitioners, institutional training. We understand that some plans identified in the course of self-
providers, and suppliers. Medicare are arranging fraud, waste, and abuse evaluations and audits, correcting such
practitioner enrollment applications collaborative training efforts and we problems promptly and thoroughly to
require that applicants certify to having welcome this. Another option might be reduce the potential for recurrence and
read and understood the Penalties for to leave existing language unchanged, ensuring ongoing compliance with our
Falsifying Information contained in the but issue interpretive guidance on this requirements.
application and that the applicant will point. We request workable suggestions
6. Network Adequacy of Coordinated
not present or cause to present a false to assure that our objective is met, while
Care and Network-Based Private Fee-for-
claim to Medicare. Section 422.204(b)(3) eliminating unnecessary duplication.
In the fourth element concerning the Service Plans Under Part C (§ 422.112)
requires that basic benefits offered by
MA organizations be offered through requirement to have effective lines of Section 1852(d)(1)(A) of the Act
providers and suppliers who meet communication, we are proposing to establishes that an organization offering
applicable requirements of Title XVIII further clarify existing policy by adding an MA plan may select the providers
and Part A of Title XI of the Act. language at § 422.503(b)(4)(vi)(D) and from whom the benefits under the plan
Providers of services must have a § 423.504(b)(4)(vi)(D) that requires that are provided so long as the organization
provider agreement with us that permits these lines of communication are makes such benefits available and
them to provide services under original confidential and accessible to all and accessible to each individual electing
Medicare. Requiring an additional allow for compliance issues to be the plan within the plan service area
fraud, waste, and abuse certification as reported anonymously and in good faith with reasonable promptness and in a
was clarified in the response to as issues are identified. manner which ensures continuity in the
comments in the December 5, 2007 final In the fifth element concerning the provision of benefits. The requirements
rule imposes an additional unnecessary requirement to have enforcement of of section 1852(d)(1)(A) of the Act are
standards through well-publicized implemented at § 422.112(a)(1), which
burden on these Medicare providers.
disciplinary guidelines, we are provides that a coordinated care plan
Therefore, we are proposing to modify
proposing to further clarify existing must maintain a network of appropriate
this paragraph to state that providers
policy by adding language at providers that is sufficient to provide
who have met this requirement through
§ 422.503(b)(4)(vi)(E) and adequate access to covered services to
enrollment into the Medicare program
§ 423.504(b)(4)(vi)(E) that more meet the needs of the population served.
are deemed to have met this training To determine if a proposed health
specifically describes that these
and education requirement. More care delivery network of an MA plan
guidelines must be implemented to
specifically, we are proposing to clarify adequately makes health care services
include policies that articulate
existing policy by adding language at available and accessible, it has been our
expectations for reporting issues and
§ 422.503(b)(4)(vi)(C) specifying that practice when initially approving and
their resolution, identify noncompliance
MA organizations whose first tier, when reviewing to compare the
or unethical behavior, and provide for
downstream, and related entities have proposed network with the prevailing
timely, consistent and effective
met the fraud, waste and abuse enforcement of the standards when community patterns of health care
certification requirements are deemed to noncompliance or unethical behavior is delivery in the service area of the plan.
have met the training and educational detected. We have also used as a rough
requirements for fraud, waste, and In the sixth element concerning the benchmark a maximum access to
abuse. We are not proposing similar requirement to have procedures for providers of 30 minutes/30 miles. We
deeming language at internal monitoring and auditing, we are would be interested in comments
§ 423.504(b)(4)(vi)(C) because these proposing to further clarify existing regarding our proposed criteria for
certification requirements do not policy by modifying the current developing standards for the network
currently apply to Part D first tier, language at § 422.503(b)(4)(vi)(F) and adequacy of MA plans. We are in the
downstream, or related entities. § 423.504(b)(4)(vi)(F) to more process of developing an automated
The current requirement for training specifically describe that an effective system for reviewing network adequacy
in fraud, waste, and abuse of first tier, system for routine monitoring and on a continuing basis based on the
downstream, and related entities creates identification of compliance risks elements that we determine define
another potential problem. A particular includes internal monitoring and audits community patterns of health care
pharmacy or other provider may and, as appropriate, external audits, in delivery. In this system, MAOs offering
contract with dozens of MA or PDP order to evaluate the organization’s MA plans would submit data to us
plans, each of which is required by the compliance with our requirements and through the HPMS system specifying
existing language, read literally, to overall effectiveness of the compliance the access and availability of its
provide the required training to the program. These audits should include proposed provider networks. This
pharmacy, or other provider, and its the sponsoring organization’s first tier information would be analyzed and
staff. Clearly, we do not intend to entities. compared through electronic mapping

require duplicative training. We In the seventh element concerning the software against our access standards for
therefore seek comment on whether or requirement to have procedures for a given geographical area to confirm
how best to rephrase the existing ensuring prompt response to detected whether the proposed provider network
language to clarify this point, while still offenses and development of CAPs, we meets our access and availability
ensuring that our requirement is met are proposing to further clarify existing standards.
with respect to each first tier, policy by modifying the current Given that we are developing this
downstream, and related entity. One language at § 422.503(b)(4)(vi)(G) and automated system, we believe it is
appropriate to more explicitly define Specifically, the number and believe this cross reference is a more
how we determine network adequacy. distribution of health care providers accurate reflection of the specific
To that end, we propose using our contracting with other health care plans program requirements that are deemable
authority under section 1852(d)(1)(A) of (both commercial and Medicare) per section 1860D–4(j) of the Act for MA
the Act to include more specific criteria operating in the service area of the plan; organizations that offer prescription
that we will apply in defining • Whether the service area is drug benefits.
community patterns of care in order to comprised of rural or urban areas or
determine if a network offered by an some combination of the two; In § 422.156(f) and § 423.165(f), we
MA plan meets Medicare access and • Whether the MA plan’s proposed are proposing to clarify the extent of our
availability requirements. We also provider network meets Medicare time authority under the deeming program.
propose applying these more specific and distance standards for member The regulation currently states that we
criteria to the proposed provider access to health care providers retain our authority to initiate
networks of both coordinated care and including specialties; and enforcement actions against MA
PFFS plans that are intending to meet • Other factors that we determine to organizations or Part D sponsors that we
Medicare access to services be relevant in setting a standard for an determine, on the basis of its own
requirements, in whole or in part, acceptable health care delivery network survey, or the survey of an accrediting
through a network of direct contracting in a particular service area. organization, no longer meet the
providers. We plan to further define through Medicare requirements for which
Our operational experience has subregulatory guidance (for example the deemed status was granted. We believe
demonstrated that the concept of Call Letter) how we will operationalize
that this language is unduly limiting
community patterns of health care these provisions. For example, as
and does not comport with the statute.
delivery provides a useful industry previously noted, we have in the past
used as a rough benchmark a maximum Section 1852(e)(4)(D) of the Act states
standard benchmark for measuring a nothing in section 1852(e)(4) of the Act
proposed provider network because it access to provider ratio of 30 minutes/
30 miles to determine ‘‘network shall be construed to limit our authority
allows for varying geographical and
adequacy.’’ We solicit comment on under section 1857 of the Act, which
regional conditions to be taken into
consideration. For example, plans whether these regulatory provisions are encompasses much more than
operating in rural rather than urban sufficiently clear, and whether enforcement actions. Therefore, we are
counties will necessarily face different clarification should be provided through proposing to revise the language in
market conditions in terms of the regulation or subregulatory guidance, § 422.156(f) and § 423.165(f) to more
number and specialties of providers such as the annual Call Letter. closely match the authority granted by
available and their willingness to the statute, which is to state that we
7. Deemable Program Requirements
contract with the plan. retain authority to impose intermediate
Under Parts C and D (§ 422.156(b)(7),
However, given the lack of specificity § 422.156(f), § 423.165(b), and sanctions and civil money penalties
regarding how we determine if a given § 423.165(f)) (CMPs), initiate contract terminations,
provider network meets Medicare access and perform evaluations and audits of
and availability requirements in We are proposing to clarify which an organization’s records, facilities and
§ 422.112(a)(1) as currently drafted, we regulatory requirements are ‘‘deemable’’ operations, notwithstanding the
believe it is important to amend that for MA organizations that offer deeming provisions.
section of our regulations to describe prescription drug benefit programs.
how we will include the elements of the Sections 1852(e)(4) and 1860D–4(j) of We plan to further define through
prevailing community patterns of health the Act provide that we can authorize subregulatory guidance how we will
care delivery in its evaluations of approved accrediting organizations operationalize these provisions. We
provider networks. We believe the (AOs) to accredit MA organizations and solicit comment on whether these
proposed changes will make the Part D sponsors, and deem such entities regulatory provisions provide sufficient
standards of community patterns of care to have met our program requirements, clarity. If not, we solicit comment on
more transparent and consistent across as long as the standards the AO uses to whether clarification should be
the country. The proposed changes are evaluate the performance of the provided through regulation or
consistent with the elements that will be organizations and plan sponsors meet or subregulatory guidance, such as the
used by the automated system we are exceed our own performance annual Call Letter.
developing to assess network adequacy. assessment standards. The statute also In § 423.165(b), we are proposing to
Specifically, we propose to add dictates which performance standards
delete paragraph (b)(4) from the items
paragraph (a)(10) to amend § 422.112 to we can allow an AO to evaluate in the
listed as deemable program
specify the factors comprising place of CMS. Those standards that we
permit AOs to survey for, rather than requirements. The regulation currently
community patterns of health care
CMS, are referred to as ‘‘deemable’’ states that a program to protect against
delivery that we will use as a
benchmark in evaluating a proposed program requirements. fraud, waste, and abuse is a deemable
MA plan health care delivery network. The current regulations state that the program requirement. We believe that
Under proposed § 422.112(a)(10), these Part D prescription drug benefit program including this in the list of deemable
factors would include, but not be is a deemable requirement for MA requirements was an error, as the statute
limited to— organizations that offer prescription does not list a program to protect against
• The number and geographical drug benefits. We believe that this fraud, waste, and abuse as one of the
distribution of eligible health care language does not precisely reflect the programmatic areas that is deemable.
providers available to potentially requirements that are listed as deemable Therefore, we are proposing to remove
contract with an MAO to furnish plan in the statute. Therefore, we are programs to protect against fraud, waste,
covered services within the proposed proposing to modify § 422.156(b)(7) to and abuse from the list of deemable
service area of the MA plans; refer to the list of deemable programmatic requirements.
• The prevailing market conditions in requirements for Part D sponsors set out
the service area of the MA plan. at § 423.165(b)(1) through (b)(3), as we
8. Modify the Corrective Action Plan occurred and/or the deficiencies have identified deficiencies and achieve
(CAP) Process as it Relates to not been fully corrected. particular compliance outcomes.
Procedures for Termination and Since the implementation of the Therefore, we believe our compliance
Nonrenewal of a Part C or D Contract by December 5, 2007 final rule, we have procedures need to shift from focusing
CMS (§ 422.506(b)(3), § 422.510(c)(1), determined that some modification is on the submission of plans for our
§ 423.507(b)(3), and § 423.509(c)(1)) required of our overall approach to our review and approval that merely outline
compliance procedures, particularly in a process for how deficiencies will be
Sections 1857(h) and 1860D– situations when serious and/or repeated corrected to a focus on requiring plans
12(b)(3)(F) of the Act provide that the compliance deficiencies are identified. to demonstrate that particular outcomes
Secretary may terminate a contract with More specifically, we have concluded have been achieved, for example, that
an MA organization or PDP sponsor in that the compliance procedures and deficiencies have actually been
accordance with formal investigation timeframes set forth in § 422.506(b)(3), corrected. We are proposing to eliminate
and compliance procedures established § 422.510(c)(1), § 423.507(b)(3), and the existing language contained in
by the Secretary under which the § 423.509(c)(1) related to notice and regulations at § 422.506(b)(3),
sponsoring organizations are to be opportunity to develop and implement § 422.510(c)(1), § 423.507(b)(3), and
provided with reasonable notice and corrective actions could be improved to § 423.509(c)(1) that requires CAPs to be
opportunity for hearing and reasonable more effectively assist us and submitted for our approval prior to us
opportunity to develop and implement sponsoring organizations in achieving issuing a notice of intent to terminate or
a CAP to correct the deficiencies that timely, efficient, and effective correction nonrenew a contract.
were the initial basis for termination of identified underlying contract We are proposing instead to add new
prior to terminating the contract. These compliance deficiencies. These current provisions at § 422.506(b)(3),
statutory provisions further provide, § 422.510(c)(1), § 423.507(b)(3), and
compliance procedures require us to
under sections 1857(h)(2) and 1860D– § 423.509(c)(1) that captures the
focus our internal oversight resources
12(b)(3)(F) of the Act, that these outcome-oriented approach which is
and expertise on reviewing and
procedures shall not apply if the currently incorporated in our day-to-day
approving ‘‘how’’ sponsoring
Secretary determines that a delay in ongoing contract compliance and
organizations will correct their
termination, resulting from compliance oversight activities. Under this
deficiencies rather than utilizing our
with these procedures prior to approach, we are proposing to add new
resources and expertise more effectively
termination, would pose an imminent provisions which state that before
and efficiently to review information
and serious risk to the health of providing a notice of intent to terminate
submitted by sponsoring organizations
individuals enrolled with the or nonrenew a contract, we will provide
to determine if the underlying the sponsoring organization with a
sponsoring organization. deficiencies have actually been notice of its deficiencies and afford it
Under this statutory authority, we corrected. For example, if the deficiency the opportunity to develop and
issued the December 5, 2007 final rule cited was for misclassification of implement a CAP to correct these
that detailed timeframes for the appeals versus grievances, current deficiencies. We are also proposing that
development and implementation of practice requires a sponsoring the sponsoring organization is solely
CAPs prior to an issuance of a notice of organization to develop a written plan responsible for the identification,
intent to terminate or nonrenew a CMS on how it will fix the misclassification development, and implementation of its
contract. These regulations, codified at problem. Then the sponsoring CAP and for demonstrating to us that
§ 422.506(b)(3), § 422.510(c)(1), organization must submit the plan to us the underlying deficiencies have been
§ 423.507(b)(3), and § 423.509(c)(1), for review and approval before it would corrected within the time period
currently require us to provide be allowed to implement the plan. afforded under the notice and
sponsoring organizations with 45 Rather than focusing on the plan or opportunity for corrective action.
calendar days from the date of our process that the sponsoring organization All sponsoring organizations are
request, to develop and submit a CAP developed, we instead, should focus on assigned a CMS account manager whose
prior to CMS issuing a notice of intent reviewing data to determine if the primary responsibility consists of day-
to terminate or nonrenew a contract to sponsoring organization has actually to-day monitoring and oversight of that
the sponsoring organization. In fixed the problem and is classifying organization. In addition to these
addition, the current regulations appeals and grievances appropriately. account management monitoring and
provide that if, after our review, this Similarly, under the current oversight activities, we conduct other
first CAP submission is determined compliance procedures, sponsoring oversight activities based on data and
unacceptable, the sponsoring organizations potentially expend information collected from sponsoring
organization will be provided an significant resources and expertise organizations and from other relevant
additional 30 calendar days to submit a responding to requests from us for plans sources. As a part of these ongoing
revised CAP to CMS for review. Under about how they will correct deficiencies overall monitoring and oversight
these current provisions, once we as opposed to expending efforts on activities, sponsoring organizations
determine the CAP acceptable, we are correcting the deficiencies identified by routinely receive written notification of
then required to notify the sponsoring us and providing sufficient evidence their compliance deficiencies, including
organization of the deadline by which that the identified deficiencies have but not limited to, notices of
the CAP must be fully implemented. We been corrected. Given that sponsoring noncompliance, warning notices, and
must then assess whether successful organizations have varying business requests for corrective actions. These
implementation occurred. It is only after models, levels of resources, and ongoing contract monitoring and
exercising these protracted procedures expertise, it is particularly challenging oversight processes are designed to
that we may issue a notice of intent to for us to be the decision-maker as to proactively prevent, detect, and respond
terminate or nonrenew a contract to the whether one operational plan of to compliance deficiencies at the lowest
sponsoring organization in instances correction under a particular level of occurrence by providing
when we determine that successful operational business model versus sponsoring organizations with ongoing
implementation of the CAP has not another will most effectively correct notification and information from CMS
about the current status of any 9. Procedures for Imposing Intermediate independent auditor to provide us with
identified compliance deficiencies that Sanctions and Civil Money Penalties additional information to determine if
come to our attention and an Under Parts C and D (§ 422.756 and the deficiencies upon which the
opportunity to correct where § 423.756)) sanction was based have actually been
appropriate. As a result, in many Sections 1857(g) and 1860D– corrected and are not likely to recur.
instances sponsoring organizations will 12(b)(3)(E) of the Act provide the The independent auditor would be
receive written notification of Secretary the ability to impose hired by the sponsoring organization
noncompliance and opportunities to intermediate sanctions on sponsoring and work in accordance with our
correct any deficiencies arising from the organizations. Intermediate sanctions specifications in order to provide
above-described day-to-day monitoring under these statutory provisions consist accurate and reliable information to
and oversight procedures. Therefore, in of suspension of enrollment, suspension CMS.
most cases the sponsoring organization of payment and CMPs. Sections In making a determination to lift
will have been made fully aware of its 1857(g)(2)(B) and 1860D–12(b)(3)(E) of sanctions, we often must rely on either
deficiencies before CMS provides it the Act that specifically govern self-disclosed information from the
enrollment suspensions require the sanctioned sponsoring organization,
with the notice and opportunity to
intermediate sanctions to remain in CMS data, some of which is also self-
implement a CAP that must be afforded
place until the Secretary is satisfied that disclosed, or we must attempt to engage
prior to CMS issuing a notice of intent
the basis for the sanction determination in a process to independently verify that
to terminate or nonrenew a contract the underlying deficiencies have been
under sections 1857(h) and 1860D– has been corrected and is not likely to
recur. Additionally, under sections corrected and are not likely to recur.
12(b)(3)(F) of the Act. Given our experience with the nature
1857(e)(1) and 1860D–12(b)(3)(D) of the
In addition to these proposals, we are Act, sponsoring organizations are and extent of some compliance
proposing to amend the existing required to provide the Secretary with deficiencies (for example, those caused
language at § 422.506(b)(3), such information as the Secretary may by information technology system
§ 422.510(c)(1), § 423.507(b)(3), and find necessary and appropriate. Current deficiencies or lack of adequate internal
§ 423.509(c)(1) that sets forth the regulations governing intermediate controls) and the need to obtain the
specific timeframes afforded sponsoring sanctions are contained in Subpart O of level of skill and experience necessary
organizations for the development and parts 422 and 423. Sections 422.756 and to conduct an exhaustive audit and
implementation of a CAP prior to CMS 423.756 provide specific procedures for verification of the correction of these
issuing a notice of intent to terminate or imposing intermediate sanctions and deficiencies, we have concluded that an
nonrenew. CMPs, and include provisions outlining independent auditor hired by the
the duration of the sanction. sponsoring organization would be
Based on our experience under our beneficial for both the sponsoring
Existing regulations at § 422.756(d)(3)
ongoing contract compliance and organization and CMS. This proposal is
and § 423.756(d)(3) incorporate the
oversight processes and our new statutory standard by providing that the consistent with our statutory authority
outcome-oriented approaches to sanction remains in effect until we which requires sponsoring organizations
contract oversight and compliance, we notify the sponsoring organization that to provide information to us when we
have concluded that affording we are satisfied that the basis for deem it is necessary and appropriate.
sponsoring organizations at least 30 imposing the sanction has been An independent auditor, who is familiar
calendar days to develop and corrected and is not likely to recur. with the processes of the sanctioned
implement a CAP prior to issuing the Based on recent experience, it has been sponsoring organization, may be able to
notice of intent to terminate or difficult at times for us to make the provide CMS with important
nonrenew is a sufficiently reasonable determination to lift a sanction. For information that we may use to help us
opportunity under the statutory example, when we impose an make a more timely decision as to when
authority afforded. We will consider the enrollment sanction on a sponsoring to lift a sanction.
nature and extent of the particular organization because it has failed to A similar approach is used by the
compliance deficiencies and other comply with enrollment and HHS Office of Inspector General (OIG)
relevant factors such as whether or not disenrollment requirements, it is very in their Corporate Integrity Agreements
the deficiencies are isolated or repeated difficult for us to conclude that the and/or Self-Disclosure Protocol
and longstanding, and whether or not sponsoring organization’s enrollment processes. The OIG often negotiates
the entity has been afforded a prior deficiencies have been corrected and are compliance obligations with health care
notice and opportunity to correct in not likely to recur when the providers and other entities as part of
reaching a decision whether it may be organization is not permitted to enroll the settlement of Federal health care
appropriate for the MAO or Part D members. Difficulties also arise when program investigations. A provider or
Sponsor to be afforded more than 30 the sponsoring organization attempts to entity consents to these obligations as
fix deficiencies with highly technical part of the civil settlement and in
days to correct the identified
internal business processes. In order to exchange for the OIG’s agreement not to
deficiencies.
assist us in making the determination seek an exclusion of that health care
Thus, we are proposing to amend that the deficiencies have been provider or entity from participation in
§ 422.506(b)(3), § 422.510(c)(1), corrected and are not likely to recur, we Medicare, Medicaid, and other Federal
§ 423.507(b)(3), and § 423.509(c)(1) to need to have greater flexibilities at our health care programs. The typical terms
afford sponsoring organizations at least disposal. of a comprehensive OIG corporate
30 calendar days to fully implement a We are proposing two changes to the integrity agreement include the
CAP and to demonstrate to CMS that the regulation that provide additional requirement for the provider to retain an
underlying deficiencies have been flexibilities to assist us in making the independent review organization to
corrected. determination to lift a sanction. First, provide independent validation and
we are proposing that we may require verification of adherence to Medicare
the sponsoring organization to hire an requirements in relevant areas where
the provider has been found to be organization to a ‘‘test period’’ whereby corrected and are not likely to recur.
noncompliant. the organization or sponsor will, for a The sponsoring organization would
We do not intend to require all limited time, engage in marketing have not had a right to a hearing to
sponsoring organizations that are under activities and/or accept enrollments in challenge our determination to keep the
intermediate sanctions to hire an order to assist us in making a sanction in effect.
independent auditor because not all determination as to whether the bases In addition to the above proposed
determinations will require the for the sanctions have been corrected changes to § 422.756 and § 423.756, we
expertise of an independent auditor. and are not likely to recur. The basis for are proposing to delete the existing
However, there are situations when the this proposal is that we have found that provisions at § 422.756(c) and
expertise of an independent auditor will there is often not a satisfactory way to § 423.756(c) which currently detail the
be helpful and in those cases, we are determine if marketing and/or three types of intermediate sanctions
proposing we be afforded the discretion enrollment problems have been that may be imposed pursuant to our
to require that an auditor be hired by the corrected while a sanction is in place authority under sections 1857(g)(2)(B)
sponsoring organization. For example, and no such activities are permitted. through (C) and 1860D–12(b)(3)(E) of
an independent auditor who specializes Similarly, sponsoring organizations also the Act. These provisions are
in complex information technology have experienced challenges in duplicative of the list of sanctions at
systems and who has knowledge of how demonstrating to us that these kinds of § 422.750(a) and § 423.750(a) and are
the systems interact with each other to deficiencies have been corrected and are unnecessary. Due to this deletion, we
be compliant with our requirements not likely to recur while they are under are proposing to redesignate paragraphs
may be helpful in those instances where marketing and/or enrollment sanctions. (d) through (f) in § 422.756 and
an organization with enrollment and In order to lift intermediate sanctions as § 423.756 as paragraphs (c) through (e),
disenrollment processing systems has expeditiously as possible when the respectively.
been sanctioned. This is an example of sponsoring organization has corrected 10. Termination of Contracts Under
a situation where we would require the the deficiencies and to protect Parts C and D (§ 422.510(a) and
sponsoring organization to hire an beneficiaries if the deficiencies have not § 423.509(a))
independent auditor in order to assist in been fully corrected, this proposed
making the determination that the provision will permit us to assess Sections 1857(c)(2) and 1860D–
deficiencies that formed the basis of the whether the deficiencies upon which 12(b)(3)(B) of the Act permit CMS to
sanction have been corrected and are the sanction was made have been terminate a sponsoring organization’s
not likely to recur. corrected and are not likely to recur by contract if the sponsoring
We are also considering an alternative conducting a test of the organizations or organization—
proposal whereby instead of providing sponsor’s processes. The specific • Has failed substantially to carry out
us with the authority to require requirements for the marketing and/or the contract;
sponsoring organizations to engage an enrollment ‘‘test period’’ will be • Is carrying out the contract in a
independent auditor, we would grant determined by considering numerous manner inconsistent with the efficient
sponsoring organizations the discretion factors, including but not limited to: the and effective administration of this part;
to hire an independent auditor to size of the organization, the specific or
evaluate the organization’s compliance deficiencies, and the timeframe in • No longer substantially meets the
with our requirements. We would afford which the ‘‘test period’’ is conducted. applicable conditions of this part.
the results of the independent auditor’s This provision will benefit sponsoring Existing regulations at § 422.510(a)(6)
review some weight in our organizations, beneficiaries, and CMS. through (12) and § 423.509(a)(6) through
determination of whether the bases for Sponsoring organizations will have an (11) provide a number of bases (in
the sanction have been corrected and effective way to demonstrate that a addition to the statutory bases) upon
are not likely to recur. We invite sanction should be lifted. Beneficiaries which a contract may be terminated.
comments from sponsors and the will be protected because we will have This list does not include every reason
industry about this alternative proposal sufficient evidence that deficiencies for which we have the authority to
and suggestions on other options we have been corrected prior to lifting terminate a contract. For example, the
could implement to accomplish the sanctions and we will be assured that list does not explicitly include a
desired outcome. the bases for the sanctions have been provision that provides that a failure by
At this time we are proposing to add corrected and are not likely to recur. the sponsoring organization to comply
language to § 422.756 and § 423.756 that Therefore, we are proposing to add with enrollment and disenrollment
would allow us to require that a language to § 422.756 and § 423.756 that regulations may be a basis for CMS
sponsoring organization hire an in instances where marketing or termination. However, sponsoring
independent auditor to provide us with enrollment or both intermediate organizations must follow enrollment
additional information to determine if sanctions have been imposed, we may and disenrollment regulations and a
the deficiencies that are the basis for a determine, in our sole discretion, that it failure to comply with these regulations
sanction have been corrected and are is appropriate to require the sponsoring may be a basis for terminating the
not likely to recur. Under either this organization to market and/or to accept sponsoring organization’s contract
proposal or our alternative proposal, the enrollments for a limited time in order because it would have failed
independent auditor would work in to assist us in making a determination substantially to carry out the terms of its
accordance with our specifications and as to whether the deficiencies that are contract as required by the Act. We are
must be willing to attest that a complete the bases for the intermediate sanctions concerned that by not specifically
and full independent review has been have been corrected and are not likely including each and every requirement
performed. to recur. Following this time period, if on this enumerated list, organizations
Next, we are proposing that in we determine the deficiencies have not may be under the mistaken impression
instances where an enrollment and/or been corrected or are likely to recur, the that we cannot take an action to
marketing suspension has been intermediate sanction will remain in terminate (or non-renew) a contract, or
imposed, we may determine that it is effect until such time that we are sanction an organization, for a failure to
appropriate to subject the sponsoring assured the deficiencies have been comply with a requirement(s) that is not
enumerated. Therefore, we are performance relative to industry that such a risk to health exists. This
proposing to delete the enumerated standards that were established by language incorporates the Secretary’s
bases for termination contained at looking at the performance of all authority under sections 1857(h)(2) and
§ 422.510(a)(6) through (12) and sponsors across the program, as 1860D–12(b)(3)(F) of the Act to take an
§ 423.509(a)(6) through (11). In addition, described earlier in the preamble in our immediate termination if it is
we are proposing to revise § 422.510(a) discussion of the development of our determined that a delay in termination,
and § 423.509(a) to separate the policies concerning the awarding, in order to comply with the CAP and
language into two paragraphs. The first monitoring, and enforcement of appeal termination procedures, would
paragraph, (a)(1), will list the statutory Medicare contracts. This strategy is part pose an imminent and serious risk to
bases for termination under sections of a larger strategy to oversee the the health of the individuals enrolled.
1857(c)(2) and 1860D–12(b)(3)(B) of the program using a data driven, risk-based, We are proposing changes elsewhere in
Act which state that we may at any time transparent approach. This information these regulations to our provisions
terminate a contract if we determine is used to monitor plan sponsor governing expedited terminations.
that the sponsoring organization has: (i) compliance and make plan-specific and Therefore, we are proposing to delete
Failed substantially to carry out the programmatic decisions. As reflected in the regulatory text contained at
contract; (ii) is carrying out the contract the proposed regulations, in addition to § 422.510(a)(5) and § 423.509(a)(5).
in a manner inconsistent with the using these data for program-wide Recognizing that it is not possible to
efficient and effective administration of evaluations and assessments, these enumerate every reason for which we
this part; or (iii) no longer substantially performance standards will continue to have the authority to terminate a
meets the applicable conditions of this be used to make assessments concerning contract, we believe we have reached a
part. The second paragraph, (a)(2), will compliance with our requirements and, good balance between providing
clarify—(i) that a sponsoring when deemed appropriate, to take CMS sufficient regulatory detail and
organization’s failure to comply with contract actions, including contract preserving administrative flexibility.
our regulations, (ii) failure to meet termination and nonrenewal. When regulatory provisions require
performance standards; and/or (iii) Finally, in our proposed language we further clarification, we plan to further
participation in false, fraudulent, or are retaining the authority to terminate define through subregulatory guidance
abusive activities, may constitute a basis a sponsoring organization that has how we would operationalize these
for CMS to determine that the committed or participated in false, provisions. We have historically used
sponsoring organization meets the fraudulent, or abusive activities as our manual chapters, reporting
requirements for contract termination in currently stated in § 422.510(a)(4) and requirements, and marketing guidelines
accordance with paragraph (a)(1). § 423.509(a)(4). However, we are to indicate how we measure compliance
More specifically, we are proposing to proposing to redesignate current with our performance requirements and
add new language to § 422.510(a)(2)(i) § 422.510(a)(4) and § 423.509(a)(4) as what we consider acceptable practice.
and § 423.509(a)(2)(i) that failure to § 422.510(a)(2)(iii) and We solicit comment on whether these
comply with any of the regulatory § 423.509(a)(2)(iii), respectively, as such regulatory provisions provide sufficient
requirements contained in Parts 422 or failures may also constitute a basis for clarity. If not, we solicit comment on
423 may constitute a basis for CMS to us to determine that the sponsoring whether clarification should be
determine that the sponsoring organization meets the requirements for provided through regulation or
organization meets the requirements for contract termination in accordance with subregulatory guidance, such as the
contract termination in accordance with the proposed revisions to paragraph
annual Call Letter or our Manual.
paragraph (a)(1). This new provision is (a)(1).
intended to clarify that compliance with In addition, we are proposing 11. Request for Hearing Under Parts C
all regulations is necessary to remain a additional amended language to this and D (§ 422.662 and § 423.651)
contracting organization with CMS and regulation. The existing regulations
if the sponsoring organization’s failure permit us to terminate a contract only Sections 1857(c) and 1860D–12 of the
to comply with the regulations supports when we determine that a sponsoring Act permit us to terminate contracts
one or more of the bases for termination organization’s fraudulent activities with sponsoring organizations. Current
in paragraph (a)(1), then we may concern the Medicare program. We regulations at § 422.662(a) and
terminate the contract. believe that we should not be § 423.651(a) governing the hearing
We are also proposing to add new contracting with MA organizations and procedures require sponsoring
language to § 422.510(a)(2)(ii) and Part D sponsors who commit or organizations to file a request for a
§ 423.509(a)(2)(ii) that failure to meet participate in fraudulent activities hearing on contract determinations with
our performance expectations in related to any governmental health care the Hearing Officer and to also file it
carrying out the Part C and Part D programs. Therefore, we are proposing with ‘‘any CMS office.’’ This procedure
regulatory requirements may constitute to amend this regulation to include is ineffective and inefficient because it
a basis for us to determine that the false, fraudulent, or abusive activities is likely to result in a request for hearing
sponsoring organization meets the affecting Medicaid, or other State or not being received by the appropriate
requirements for contract termination in Federal health care programs. officials within CMS. Consequently, we
accordance with proposed paragraph In addition, existing regulations that are proposing a modification in the
(a)(1). This includes when we determine govern termination at § 422.510(a)(5) language contained at § 422.662(a) and
that a sponsoring organization is out of and § 423.509(a)(5) provide that we may § 423.651(a) to state that the sponsoring
compliance with a Medicare terminate a contract if the sponsoring organization must file the request for a
requirement because our analysis of organization experiences financial hearing in accordance with the
data related to that sponsoring difficulties so severe that its ability to requirements specified in the notice of
organization’s performance indicates it make necessary health services available the contract determination or
is an outlier relative to that of other is impaired to the point of posing an intermediate sanction, thus ensuring
organizations. imminent and serious risk to the health that the proper officials within CMS
In some instances, we may use an of its enrollees, or otherwise fails to receive the request and can act upon the
outlier analysis to determine a sponsor’s make services available to the extent request in a timely manner.
We are also making a conforming appeals is unnecessarily confusing and imposition of intermediate sanction. We
change at § 422.662(b) and § 423.651(b) may have led to unintended believe, however, that it is important to
which govern the timeframes for filing consequences in that it may have explicitly state the standard of proof so
the request for hearing to provide that distorted review of the applicable as to provide as much clarity and
the request must be filed within 15 statutory and regulatory requirements. consistency as possible for the Hearing
calendar days after receipt of the notice Accordingly, we are proposing to delete Officers and the parties to a hearing. In
(versus the existing language which ‘‘substantial compliance’’ as a standard addition, the preponderance of the
states 15 calendar days from the ‘‘date of review. evidence standard is consistent with the
CMS notifies’’ the sponsoring In addition to the preceding, the standard of proof used in Subparts T to
organization of its determination). This ‘‘earliest of’’ test does not accurately Parts 422 and 423 which governs appeal
change is to ensure consistency with the reflect how and when we make our proceedings for civil money penalties.
way deadlines are described in other determinations for different contract Second, we are addressing the use of
regulatory provisions of parts 422 and actions or intermediate sanctions. For a proper standard of review. The
423 governing contract determinations example, when making a determination proposed standard of review that we
or the imposition of intermediate as to whether or not we should enter believe applies to these appeal
sanctions (including related appeals into a contract with an applicant, we procedures is dependent on the type of
processes). review all of the information that the contract determination or intermediate
applicant provides and decides whether sanction. Our proposed revisions make
12. Burden of Proof, Standard of Proof, it meets our standards according to explicit which standard of review is to
Standards of Review, and Conduct of § 422.501 and § 422.502 or § 423.502 be applied by the Hearing Officer to the
Hearing (§ 422.660, § 423.650, § 422.676 and § 423.503. If the applicant does not three types of contract determinations
and § 423.658) meet those standards, then we will deny identified at § 422.641(a) and
Under the existing regulations at the application. During a hearing, it § 423.641(a) and to intermediate
§ 422.660(b), and § 423.650(b), when would be inappropriate for the sanctions identified at § 422.750 and
appealing a contract determination or an applicant to insist that its application § 423.750 by noting the different
intermediate sanction, the sponsoring should be approved because it corrected requirements for each type of action.
organization bears the burden of proof its deficiencies after we issued a denial Specifically, the proposed regulation
to demonstrate that it was in of the application. The ‘‘earliest of’’ test clarifies that the standards of review are
‘‘substantial compliance’’ with our may create this mistaken impression different for determinations involving
requirements on the ‘‘earliest of’’ because it provides that during a Part C or D contract application
following three dates: hearing the applicant must demonstrate qualifications, those involving the
• The date of the notice of contract that it was in ‘‘substantial compliance’’ termination or non-renewal of a
determination or intermediate sanction. with our requirements on the ‘‘earliest sponsoring organization’s contract, and
• The date of the most recent onsite of’’ one of three dates. This creates those involving the imposition of
audit. confusion and imposes an unworkable intermediate sanctions. These separate
• The date of the alleged breach of the time period for the applicant or and distinct standards of review are
current contract or past substantial sponsoring organization to demonstrate intended to reflect the inherent
noncompliance as determined by CMS. that it has met CMS standards. differences in the processes and
In practice, these existing standards of Therefore, we are also proposing to standards we use to make each type of
review (‘‘substantial compliance’’ and delete the existing regulations which determination.
‘‘earliest of test’’) have led to confusion provide for an ‘‘earliest of’’ test. Therefore, we are proposing to delete
among parties to the hearing and have Finally, though the existing the existing language contained at
been difficult for the Hearing Officer to regulations explicitly state that the § 422.660(b) and § 423.650(b) and
apply. We have come to realize that the sponsoring organization bears the replace it with language which provides
existing ‘‘substantial compliance’’ burden of proof, it does not provide the that the applicant or the sponsoring
standard of review articulated at standard of proof that is to be applied organization has the burden of proving
§ 422.660(b), and § 423.650(b) does not by the hearing officer. We believe that by a preponderance of the evidence that
reflect the nuances of the different legal the sponsoring organization bearing the our determination was inconsistent with
standards provided in the Act for burden of proof is appropriate since the the requirements of the applicable part.
making contract determinations and purpose of the hearing is to provide the We specify that these requirements are
imposing intermediate sanctions. For sponsoring organization an opportunity § 422.501 and § 422.502 that governs the
example, sections 1857(c)(2)(B) and to appeal and dispute our contract processes and standards for applicants
1860D–12(b)(3)(F) of the Act provide determination or imposition of for the MA program, § 423.502 and
that the Secretary may terminate a intermediate sanction. Therefore, we § 423.503 for applicants for the Part D
contract if the Secretary finds that the believe that no change is necessary program, § 422.506 or § 422.510 for MA
sponsoring organization ‘‘has failed concerning the burden of proof. In contract determinations, § 423.507 or
substantially to carry out the contract, is order, however, to more clearly § 423.509 for Part D contract
carrying out the contract in a manner articulate the standard of proof and determinations, and § 422.752 or
inconsistent with the efficient and standards of review we are proposing § 423.752 for intermediate sanctions.
effective administration of this part, or the following changes to our Additionally, we propose to modify
no longer substantially meets the regulations. § 422.660(c) and § 423.660(c), which
applicable conditions of this part.’’ First, we are clarifying the standard of currently specify that the notice of any
Similarly, there is no reference to a proof that we believe applies to these decision favorable to a Part C or D
substantial compliance standard in the appeals proceedings. It has been our applicants appealing a determination
bases available to CMS for imposing experience that the hearing officer does that it is not qualified to enter into a
intermediate sanctions. Based on these appropriately use the preponderance of contract with us must be issued by July
nuances, we have determined that the evidence standard when weighing the 15th for the contract in question to be
application of the substantial evidence at a hearing for an appeal of a effective on January 1st of the following
compliance standard of review to all CMS contract determination or year. We propose changing the July 15th
deadline to September 1st. Over the past present its argument to the Hearing termination. Our notice of termination
4 years, we have found the July 15th Officer according to any briefing procedures also provide at
deadline to be an unreasonable schedule determined by the Hearing § 422.510(b)(2)(i) and § 423.509(b)(2)(i)
timeframe within which to complete the Officer. We believe that requiring the that, if a contract is terminated under
hearing process afforded denied sponsoring organization to present its § 422.510(a)(4) or (a)(5) and
applicants pursuant to Subpart N of argument to the Hearing Officer first is § 423.509(a)(4) or (a)(5), we will notify
Parts 422 and 423. September 1st allows appropriate since the basis for our the sponsoring organization that its
sufficient time for an applicant to determination is detailed in the notice contract will be terminated on a date
receive a decision issued by the CMS of determination that is sent to the specified by CMS. Appeal procedures at
Hearing Officer on the status of its sponsoring organization. Since the § 422.664(b)(2) and § 423.652(b)(2)
application and for us to contract with purpose of the sponsoring organization’s currently provide that a contract
the applicant should the applicant appeal is to dispute our determination terminated under either of these bases
receive a favorable decision. it seems appropriate that the sponsoring will be terminated on the date specified
Accordingly, we are also proposing to organization should first be required to by CMS and will not be postponed if a
make the following conforming changes present its argument as to why it hearing is requested.
to § 422.660 and § 423.650. believes the determination is incorrect These current regulations governing
• Revise the section headings for or otherwise not supported prior to expedited terminations do not
§ 422.660 and § 423.650 to read ‘‘Right CMS’ putting on its case in support of adequately reflect the scope of the
to a hearing, burden of proof, standard its contract or intermediate sanction Secretary’s authority under section
of proof, and standards of review’’ in determination. 1857(h)(2) and 1860D–12(b)(3)(F) of the
order to conform with the section Act. The Act does not limit the
headings to our proposed changes. 13. Expedited Contract Terminations Secretary’s authority to effectuate
• Add paragraph headings. We Procedures (§ 422.510, § 423.509, expedited terminations solely based on
believe that these additions would § 422.664, § 423.652, § 422.644, and the circumstances prescribed in
improve the structure and readability of § 423.642)) Under Parts C and D § 422.510(a)(4) or (a)(5), and
the proposed regulatory text. Sections 1857(h)(2) and 1860D– § 423.509(a)(4) or (a)(5) and therefore,
• Correct the references in 12(b)(3)(F) of the Act provide the these regulations are unduly limiting. If
§ 422.660(a)(1) and § 423.650(a)(1). procedures requiring reasonable notice compliance with the CAP provisions
Sections 422.660(a)(1) and 423.650(a)(1) and opportunity to develop and and hearing procedures prior to
currently state that a contract applicant implement a CAP and for a hearing shall termination would pose an imminent
that has been determined to be not apply prior to termination if the and serious risk to the health of
unqualified to enter into a contract with Secretary determines that a delay in individuals enrolled with the
CMS under § 422.501 and § 423.503 termination, resulting from compliance sponsoring organization, the Act
respectively, is entitled to a hearing. with these procedures would pose an permits us to terminate a contract
The correct citations for the sections imminent and serious risk to the health without providing a right to a CAP or
that we use when making a of individuals enrolled with the hearing prior to termination. While the
determination as to whether to enter sponsoring organization. These kinds of current regulations provide several
into a contract with an applicant are terminations are referred to as instances where such a determination
§ 422.501 and § 422.502 for Part C ‘‘expedited terminations’’ under current would be appropriate, these are not the
contracts and § 423.502 and § 423.503 regulations. only instances where such a
for Part D contracts. Therefore, we are Sections 422.510(a)(4) and (5), and determination would need to be made to
proposing to accurately reflect these § 423.509(a)(4) and (5) currently provide protect beneficiaries from imminent and
references in the regulations by making two of these bases for expedited serious risk to their health.
a technical change which incorporates terminations. Under § 422.510(a)(4) and Therefore, we are proposing to delete
the appropriate and necessary citations § 423.509(a)(4), we may terminate a the references to § 422.510(a)(4) or (a)(5)
by adding the reference § 422.502 to contract when there is credible evidence and § 423.509(a)(4) or (a)(5) as contained
§ 422.660(a)(1), and by adding the that the sponsoring organization in the termination (§ 422.510(b)(2)(i),
reference § 423.502 to § 423.650(a)(1). committed or participated in false, § 423.509(b)(2)(i), § 422.510(c)(2) and
• Make technical changes in fraudulent, or abusive activities § 423.509(c)(2)) and in the appeal
§ 422.660(a) and § 423.650(a). In affecting the Medicare program. Under procedures (§ 422.664(b)(2) and
paragraphs (a)(1) through (a)(4) of these § 422.510(a)(5) and § 423.509(a)(5), we § 423.652(b)(2)). More specifically, we
sections, we are proposing to revise the may terminate a contract when the are proposing to amend the termination
terminology preceding the cross- sponsoring organization experiences procedures language of § 422.510(b)(2)(i)
reference (that is, change ‘‘pursuant to’’ financial difficulties so severe that its and § 423.509(b)(2)(i) to clarify that for
to ‘‘in accordance with’’ or ‘‘under’’), ability to make necessary health services terminations based on violations
adding a section symbol before the available is impaired ‘‘to the point of prescribed in § 422.510(a) and
section number, and completing the posing an imminent and serious risk to § 423.509(a), if we determine that a
cross-reference by adding the phrase ‘‘of the health of its enrollees or otherwise delay in termination, resulting from
this part’’ after the section number. fails to make services available to the compliance with CAP and hearing
Finally, we are also proposing to extent that such a risk to health exists’’, procedures prior to termination, would
modify the existing regulations at thereby incorporating the expedited pose an imminent and serious risk to
§ 422.676(d) and § 423.658(d) governing termination statutory language. the health of the individuals enrolled
the conduct of the hearing. We are Termination procedures at with the sponsoring organization, the
proposing to revise the language § 422.510(c)(2) and § 423.509(c)(2) effective date of the termination will be
contained in § 422.676(d) and provide that if a contract is terminated specified, in writing by CMS. In
§ 423.658(d) to provide that, consistent under § 422.510(a)(4) or (a)(5), and addition, we are proposing to amend the
with the burden of proof, during the § 423.509(a)(4) or (a)(5), the sponsoring termination procedures language at
hearing the sponsoring organization organization will not have the § 422.510(c)(2) and § 423.509(c)(2) to
bears the burden of being the first to opportunity to submit a CAP prior to clarify that if we determine that a delay
in termination, resulting from own motion, or at the request of party, Therefore, we are proposing to delete
compliance with the CAP procedures, change the time and place for the the formal discovery process contained
would pose an imminent and serious hearing and may adjourn or postpone in § 422.682 and § 423.661.
risk to the health of the individuals the hearing. Based on our experience Simultaneously, we need to ensure that
enrolled with the MA organization or with this process, we believe that both both parties receive witness lists and
Part D sponsor, the MA organization or sponsoring organizations and we may relevant documents with enough time
Part D sponsor will not be provided need additional time to prepare for a prior to the hearing while at the same
with an opportunity to develop and hearing. Therefore, we are proposing to time ensuring the hearing is conducted
implement a CAP prior to termination. add language to § 422.670(b) and in a timely and orderly fashion.
Lastly, we are proposing to amend the § 423.655(b) to state the sponsoring Therefore, we are proposing to amend
appeals procedures language at organization or we may request that the the regulations at § 422.682 and
§ 422.664(b)(2) and § 423.652(b)(2) to hearing date be postponed by filing a § 423.661. First, we propose to modify
state that if we determine that a delay written request no later than 5 calendar the existing regulations to change the
in termination, resulting from days prior to the scheduled hearing, titles of § 422.682 and § 423.661 from
compliance with the notice and when either the sponsoring organization ‘‘Discovery’’ to ‘‘Witnesses and
opportunity for hearing procedures, or CMS requests an extension, the Documents’’ to reflect the changes
prior to termination, would pose an Hearing Officer will provide a one-time made. Second, under this newly titled
imminent and serious risk to the health 15 calendar day postponement, and section, we are proposing to substitute
of individuals enrolled with the MA additional postponements may be new language which requires that
organization or Part D sponsor, the date granted at the discretion of the Hearing witness lists and documents must be
of termination will not be postponed if Officer. identified and exchanged at least 5
the MA organization or Part D sponsor In addition, current regulations at calendar days prior to the scheduled
requests a hearing. § 422.670(a) and § 423.655(a) require hearing. We believe this change more
It is important to note that our that the CMS Hearing Officer schedule
appropriately reflects what is necessary
proposal to delete the references to to meet the evidentiary needs of the
a hearing to review a contract
§ 422.510(a)(4) or (a)(5), and parties by providing the parties with the
determination or the imposition of an
§ 423.509(a)(4) or (a)(5) contained in the appropriate amount of information in
intermediate sanction within 30
existing termination and appeal advance of the hearing to present their
calendar days from the ‘‘receipt of
procedures should not be interpreted in evidence and counter arguments.
request for the hearing.’’ We are Additionally, existing regulations at
any way to limit our ability under our
proposing to change the language at § 422.670(a)(2) and § 423.655(a)(2)
statutory authority to expedite a
§ 422.670(a) and § 423.655(a) to provide currently provide that the Hearing
termination when we determine that a
that the CMS Hearing Officer schedule Officer will notify the parties of the
sponsoring organization is experiencing
a hearing to review a contract ability to conduct formal discovery.
severe financial difficulty, otherwise
fails to make services available to the determination or the imposition of an Because we are proposing to delete the
extent that such a risk to the health intermediate sanction within 30 formal discovery processes in § 422.682
exists or when there is credible calendar days after the ‘‘receipt of the and § 423.661, we are proposing to make
evidence that a sponsoring organization request for the hearing.’’ This change is a conforming change by deleting
committed or participated in false, to ensure consistency with the way § 422.670(a)(2) and § 423.655(a)(2).
fraudulent, or abusive activities. deadlines are described in other
regulatory provisions of parts 422 and 16. Review by the Administrator Under
We are also making conforming
423 governing contract determinations Parts C and D (§ 422.692(a) and
changes (to ensure consistency of the
or the imposition of intermediate § 423.666(a))
proposed regulations) to the termination
notice procedures contained in sanctions (including related appeals Sections 1857(h)(1)(b) and 1860D–
§ 422.510(b) and § 423.509(b) and notice processes). 12(b)(3)(F) of the Act provide the
of contract determinations contained in 15. Discovery Under Parts C and D procedures requiring reasonable notice
§ 422.644(c) and § 423.642(c) which (§ 422.682 and § 423.661) and opportunity for hearing when we
reference the expedited termination terminate a sponsoring organization’s
bases. In § 422.510(b) and § 423.509(b), Sections 1857(h)(1)(b) and 1860D– contract. Our current regulations at
we are deleting the references to 12(b)(3)(F) of the Act provide the § 422.692 and § 423.666 provide for a
§ 422.510(a)(4) or (a)(5), and procedures requiring reasonable notice sponsoring organization to request
§ 423.509(a)(4) or (a)(5). In § 422.644(c) and opportunity for hearing when we review by the CMS Administrator of a
and § 423.642(c), we are deleting the terminate a sponsoring organization’s hearing decision. These existing
references to § 422.510(a)(4) or (a)(5), contract. The statute does not require a regulations provide that a sponsoring
and § 423.509(a)(4) or (a)(5) and formal discovery process for CMS organization may request review by the
replacing the language with the appeal procedures. In the December 5, Administrator within 15 calendar days
proposed language contained in 2007 final rule, we provided in of ‘‘receiving the hearing decision.’’
§ 422.510(b)(2)(i) and § 423.509(b)(2)(i). § 422.682 and § 423.661 for a formal We are proposing to revise the
discovery process prior to hearing. language at § 422.692(a) and
14. Time and Place of Hearing Under However, based on our experience since § 423.666(a) to provide that the
Parts C and D (§ 422.670 and § 423.655) the promulgation of this rule, we do not sponsoring organization may request
Sections 1857(h)(1)(b) and 1860D– now believe a formal discovery process review by the Administrator within 15
12(b)(3)(F) of the Act provide the is necessary or appropriate for these calendar days after ‘‘receipt of the
procedures requiring reasonable notice kinds of proceedings. In addition, the hearing decision.’’ In addition, we are
and opportunity for hearing when we existing timeframe in which the hearing proposing to change the language at
terminate a sponsoring organization’s normally must take place, 30 calendar § 422.692(c) and § 423.666(c) governing
contract. Current regulations at days after request for a hearing, does not the notification of Administrator
§ 422.670(b) and § 423.655(b) provide easily accommodate a formal discovery determination to state that the
the Hearing Officer may, on his or her process. Administrator must notify both parties
of his or her determination regarding nonrenew fewer than all of those entering into new contracts under
review of the hearing decision within 30 contracts. section 1857(c)(4)(A) of the Act, which
calendar days after ‘‘receipt of the In practice, a voluntary nonrenewal of is incorporated for Part D under section
request for review’’ (versus the existing a contract by a Part D sponsor or MA 1860D–12(b)(3)(B) of the Act.
language which provides within 30 organization is not dissimilar from an
organization requesting and being For these reasons, we are proposing
calendar days of ‘‘receiving the request
granted a mutual termination of their that as a condition of the consent to a
for review’’). These changes ensure
consistency with the way deadlines are contract under § 422.503 and § 423.508. mutual termination, we will prohibit the
described in other regulatory provisions The primary difference between the two MA organization or Part D sponsor from
of Parts 422 and 423 governing contract events is often timing, whereby a applying for new contracts or service
determinations or the imposition of nonrenewal request to take effect at the area expansions for a period of 2 years,
intermediate sanctions (including end of the current contract year must be absent circumstances that warrant
related appeals processes). received by us on or before the first special consideration as provided under
Monday in June (the bid deadline), as section 1857(c)(4)(A) of the Act. Such
17. Reopening of an Initial Contract specified in § 423.507(a)(2)(i) and language would be incorporated into the
Determination or Decision of a Hearing § 422.506(a)(2)(i). Once an organization mutual termination consent agreement
Officer or the Administrator Under Parts submits a bid, it can no longer to be signed by both parties.
C and D (§ 422.696 and § 423.668) voluntarily nonrenew its contract for the Therefore, we are proposing to modify
Sections 1857(h)(1)(b) and 1860D– following year. Rather, the Part D
12(b)(3)(F) of the Act provide the § 423.508 by adding paragraph (e),
sponsor or MA organization must
procedures requiring reasonable notice which states that as a condition of the
request a mutual contract termination.
and opportunity for hearing when we The later in the year the organization consent to a mutual termination, we
terminate a sponsoring organization’s requests such a mutual termination for will require as a provision of the
contract. Our current regulations at the following contract year, the more termination agreement language
§ 422.696 and § 423.668 govern the disruptive and difficult the process prohibiting the Part D sponsor from
reopening of an initial contract becomes. Particularly, once the applying for new contracts or service
determination or decision of a Hearing organization completes all of its contract area expansions for a period of 2 years,
Officer or the Administrator. More renewal obligations, such as signing a absent circumstances warranting special
specifically, existing regulations at new bid attestation and a contract with consideration. Similarly, in
§ 422.696(a) and § 423.668(a) state that CMS, where applicable, we begin § 423.504(b), we propose to add a new
we may reopen and revise an ‘‘initial including the new plan offerings under paragraph (b)(6) stating that
determination’’ upon our own motion. the contract on our Web site and in organizations may be qualified to apply
The term ‘‘initial determination’’ is not print materials to inform beneficiaries for new contracts to the extent that they
used elsewhere in Subpart N (Contract about the opportunity to enroll in those have not terminated a contract by
determinations and Appeals). Therefore, plan offerings for the upcoming contract mutual consent under which, as a
we are proposing to revise these year. To request a mutual contract condition of the consent, the Part D
regulations by replacing the language termination late in the year once such sponsor agreed that it was not eligible
‘‘initial determination’’ with ‘‘contract information has become publicly to apply for new contracts or service
determination’’ in the section headings available, marketed to beneficiaries, and
of § 422.696 and § 423.668 and in the area expansions for a period of 2 years
beneficiaries have been given the
text of § 422.696(a) and § 423.668(a). per § 423.508(e). To accomplish these
opportunity to enroll is to create
significant disruption for us and changes, we propose to redesignate the
18. Prohibition of MA and Part D current § 423.504(b)(6) to
Applications for 2 Years After a Mutual beneficiaries. Similarly, even greater
disruption results from mutual § 423.504(b)(7).
Termination (§ 422.503(b)(6) and
§ 423.504(b)(5)) terminations requested to take effect We propose to make the same
during the course of a contract year. modification to the MA regulations.
The regulations in § 422.503(b)(6) and Circumstances are sometimes such Specifically, we are proposing to modify
§ 423.504(b)(5) currently provide that that the requesting MA organization or § 422.508 by adding paragraph (c),
MA organizations and Part D sponsors Part D sponsor is requesting the mutual which states that as a condition of the
that nonrenew contracts with CMS are termination because it realizes it would consent to a mutual termination, we
considered unqualified to recontract be significantly out of compliance with will require as a provision of the
with us for a period of 2 years, unless one or more program requirements termination agreement language
we identify circumstances that warrant should it keep the contract in place.
special consideration. This is consistent prohibiting the MA organization from
Therefore, it is sometimes in the
with § 422.506(a)(4) and § 423.507(a)(3), applying for new contracts or service
organization’s and our interest to
which describe contract nonrenewal area expansions for a period of 2 years,
execute the mutual termination.
requirements and procedures. We absent circumstances warranting special
Nevertheless, the disruption is
interpret these provisions to apply to significant and completely the consideration. Similarly, in section
MA organizations and Part D sponsors responsibility of the sponsor. Yet, § 422.503(b), we propose to add a new
that nonrenew all of their contracts with currently the regulations are silent on paragraph (b)(7), stating that
us in a given area for a given line of whether the MA organization or Part D organizations may be qualified to apply
business (MA or Part D), thereby sponsor would be qualified to enter into for new contracts to the extent that they
severing their contractual relationship new contracts with CMS in future years. have not terminated a contract by
with the Agency across all of their MA, We believe that a termination by mutual mutual consent under which, as a
Part D, or both lines of business in the consent, which involves a termination condition of the consent, the MA
area. We have not interpreted this by an MA organization or a Part D organization agreed that it was not
provision to apply to an organization sponsor as well as by CMS, should be eligible to apply for new contracts or
that, for instance, holds many MA considered a termination of a contract service area expansions for a period of
contracts in an area but chooses to for purposes of the 2-year ban on 2 years per § 422.508(c).
B. Changes To Strengthen Beneficiary Under Part C, we propose to revise solicit comments on options aimed at
Protections our rules to— further protecting beneficiaries in this
• Authorize us to annually establish area. We also propose to strengthen our
This section includes provisions an overall annual cap on member cost marketing requirements, distinguishing
aimed at strengthening beneficiary sharing; marketing materials from enrollee
protections under Parts C and D. Under • Prohibit PPO, PFFS, and MSA plans communications materials and
Part D, we address proposals in the area from using compliance with voluntary mandating the use of standardized
of eligibility and enrollment policy, prior notification procedures in marketing material language and format
transition period requirements, determining cost-sharing amounts; to ensure clarity and accuracy among
coordination of benefits policy, • Establish new requirements for plan documents. We also clarify notice
retroactive claims adjustment organization determinations; and requirements, and propose that
reimbursements and recoveries, and use • Offer two definitional revisions. sponsoring organizations disclose
of standardized technology. We also In the area of Parts C and D marketing, information concerning the
propose to revise Part D rules regarding we continue to monitor plans that use organization’s performance and
timeframes and responsibility for independent agents and brokers to compliance deficiencies to enable
making redeterminations. ensure sponsoring organizations adhere beneficiaries to make informed choices.
to CMS requirements. In this rule, we This information is detailed in Table 2.
TABLE 2—PROVISIONS TO STRENGTHEN BENEFICIARY PROTECTIONS
Part 422 Part 423
Provision
Broker & Agent Requirements under Parts C and D .... N/A ............... N/A ..................................... N/A ............... N/A.
Beneficiary Communications Materials under Parts C Subpart V ..... § 422.2260, § 422.2262 ..... Subpart V ..... § 423.2260, § 423.2262.
and D.
Required Use of Standardized Model Materials under Subpart V ..... § 422.2262 ......................... Subpart V ..... § 423.2262.
Parts C and D.
Extend the mandatory minimum grace-period for failure Subpart B ..... § 422.74 ............................. Subpart B ..... § 423.44.
to pay premiums.
Maximum allowable out-of-pocket cost amount for Subpart C ..... § 422.100 ........................... N/A ............... N/A.
Medicare Parts A and B services.
Maximum allowable cost sharing amount for Medicare Subpart C ..... § 422.100 ........................... Subpart C ..... § 423.104
Parts A and B services and prescription drugs.
Prohibition on prior notification by PPO, PFFS, and Subpart A ..... § 422.2, § 422.4, N/A ............... N/A
MSA plans. § 422.105(b).
Requirements for LIS eligibility: Expand the deeming N/A ............... N/A ..................................... Subpart P ..... § 422.773(c)(2).
period for LIS-eligible beneficiaries to cover at least
13 months.
Expand auto-enrollment rules to entire LIS-eligible pop- N/A ............... N/A ..................................... Subpart B ..... § 423.34
ulation.
Special Enrollment Period (SEP) Policies ..................... N/A ............... N/A ..................................... Subpart B ..... § 423.38.
Transition Process .......................................................... N/A ............... N/A ..................................... Subpart C ..... § 423.120(b)(3).
Sponsor responsibility for retroactive claims adjustment N/A ............... N/A ..................................... Subpart J ..... § 423.464.
reimbursements and recoveries.
Time Limits for Coordination of Benefits ........................ N/A ............... N/A ..................................... Subpart J ..... § 423.466.
Pharmacy use of Standard Technology (ID cards) N/A ............... N/A ..................................... Subpart C ..... § 423.120.
under Part D.
Allow members in stand-alone Part D plans to be tem- N/A ............... N/A ..................................... Subpart B ..... § 423.44.
porarily out of area for up to 12 months.
Prohibit mass SPAP reenrollments during plan year .... N/A ............... N/A ..................................... Subpart J ..... § 423.464(e).
Non-Renewal Public Notice 60-day non-renewal bene- Subpart K ..... § 422.506 ........................... Subpart K ..... § 423.507.
ficiary notification requirement.
Notice of Alternative Medicare Plans ............................. Subpart K ..... § 422.5(a)(2)(ii) .................. Subpart K ..... § 423.507(2)(ii).
Timeframes and Responsibility for making Redeter- N/A ............... N/A ..................................... Subpart M .... § 423.590.
minations under Part D.
Requirements for Requesting Organization Determina- Subpart M .... § 422.568 ........................... N/A ............... N/A.
tions.
Organization Determinations under Parts C .................. Subpart M .... § 422.566 & § 422.568 ....... N/A ............... N/A.
Refine/clarify definitions related to authorized rep- Subpart M .... § 422.561, § 422.574 & N/A ............... N/A.
resentatives. § 422.624.
Sponsors may be required to disclose to enrollees Subpart C ..... § 422.111(g) ....................... Subpart C ..... § 423.128(f).
compliance and performance deficiencies.
Revise definition of ‘‘service area’’ to exclude facilities Subpart A ..... § 422.2 ............................... N/A ............... N/A.
in which individuals are incarcerated.
1. Broker and Agent Requirements Medicare+Choice plans) at any time Effective January 1, 2006, enrollment in
Under Parts C and D throughout the year, effective the first MA plans and Part D prescription drug
day of the next month. Under those plans (PDPs) was limited to an annual
Prior to January 1, 2006, beneficiaries circumstances, most MA plans were coordinated election period in the fall,
could enroll in MA plans (then called able to employ a full-time sales force. and in the case of MA plans only, the
open enrollment period during the first in the requirements related to plan ++ Newspapers;
3 months of the year. As a result, sponsors’ use of agents and brokers. ++ Magazines;
maintaining a full-time, year-round Our overarching objective is that with ++ Television;
sales force became untenable for many any potential further limitations on ++ Radio;
organizations, leading to increasing independent agent and broker activity ++ Billboards;
reliance on independent agents and beneficiaries will continue to have the ++ Yellow pages; or
brokers to educate beneficiaries about assistance they need to make health care ++ The Internet.
their Medicare health care options and choices best suited to their needs. We • Marketing representative materials
enroll them in their products. provide a number of tools, both through such as scripts or outlines for
In 2008, the Congress enacted the our print publications and our online telemarketing or other presentations.
Medicare Improvements for Patients and resources (Medicare Options Compare, • Presentation materials such as
Providers Act (Pub. L. 110–275) MPDPF, and Online Enrollment Center) slides and charts.
(MIPPA). In order to address concerns to assist beneficiaries with their health • Promotional materials such as
raised by reports of significant agent and care decisions, and we continuously brochures or leaflets, including
broker misconduct in the market place, seek to improve these tools. We are materials for circulation by third parties
section 103 of MIPPA placed certain exploring whether State Health (for example, physicians or other
restrictions and limits on the marketing Insurance Assistance Programs (SHIPs) providers);
of MA plans and PDPs. Our objective in have the capacity to serve significantly • Membership communication
implementing the marketing more Medicare beneficiaries. We also materials such as—
requirements included in the MIPPA are considering limiting the use of ++ Membership rules;
was to ensure that agent and broker independent agents and brokers by MA ++ Subscriber agreements;
compensation would not create organizations to certain times of the ++ Member handbooks; and
financial incentives for agents and year, specifically, the open enrollment ++ Wallet card instructions to
brokers to enroll Medicare beneficiaries period (OEP) and annual enrollment enrollees.
in particular MA plans or PDPs based period (AEP), or to selected groups of • Letters to members about—
on considerations other than the best beneficiaries. Limiting the use of ++ Contractual changes;
interests of the beneficiary. independent agents and brokers to the ++ Changes in providers;
In the September 18, 2008 Federal OEP and AEP or to a subset of ++ Premiums;
Register, we published an interim final beneficiaries would allow us to better ++ Benefits, plan procedures, and
rule with comment period (73 FR focus our monitoring efforts throughout membership; or
54226) implementing the MIPPA the year, while still recognizing the role ++ Claims processing activities.
compensation provisions. In the independent agents and brokers play in Sections 422.2260, 422.2262,
November 14, 2008 Federal Register, we assisting beneficiaries with obtaining 423.2260, and 423.2262 codify
published the Medicare Advantage & and evaluating plan information requirements regarding CMS review and
Prescription Drug Programs: (including year to year plan benefit approval of marketing materials. Given
Clarification of Compensation Plans changes), making informed choices, and a number of years of experience in
interim final rule with comment period enrolling in Medicare health plans. implementing these processes under
(73 FR 67406), which clarified and While we are not proposing any both the Part C and Part D programs, we
modified the September 18, 2008 rule in changes at this time, we are seeking have found that our definition of the
part because we believed that plans comments on the approaches discussed term ‘‘marketing materials’’ is so broad
were misinterpreting certain provisions in this section, as well as other potential as to encompass plan notification
of the September 18, 2008 interim final solutions to ensure that beneficiaries materials that are often either situational
rule. Because so little time has passed receive adequate assistance in materials or beneficiary specific
since the publication of these rules, we understanding their choices and with customized communications. As these
believe it is too soon to fully evaluate enrollment, including potential materials are considered marketing
whether these changes involving agent alternative roles for agents and brokers. materials, they are subject to our rules
compensation have achieved the Any changes resulting from comments regarding review, distribution, and
MIPPA’s goal of creating incentives for to this section will be implemented approval in § 422.2262 and § 423.2262.
agents and brokers to assist beneficiaries through future notice and comment However, we have found that CMS
with selecting plans based on their rulemaking. Regional Office review and approval
health care needs rather than on agent procedures for situational marketing
or broker financial interests. 2. Beneficiary Communications materials should follow a separate
We recognize the important role that Materials Under Parts C and D review process determined by CMS.
agents and brokers play in assisting (§ 422.2260, § 422.2262, § 423.2260, and Materials that are beneficiary specific
beneficiaries with accessing and § 423.2262) letters are not considered to be
understanding plan information, making Section 1851(h) of the Act, which is marketing materials such as—
informed choices, and enrolling them in made applicable to Part D in section • Part D explanations of benefits
Medicare health plans. However, we 1860D–1(b)(1)(vi) of the Act, established (EOBs);
remain concerned about the inherent requirements regarding the review and • Notifications about claims
financial incentives independent agents approval of marketing materials by MA processing changes or errors; and
and brokers have when selling Medicare organizations and PDP sponsors. • Other one-time or situational,
products. For this reason, we are Sections 422.2260 and 423.2260 of the beneficiary specific letters to current
continuing to explore the most effective regulations define marketing materials enrollees.
means of providing Medicare health as informational materials targeted to Therefore, we propose to revise
plan and drug plan information and Medicare beneficiaries which may § 422.2260 and § 423.2260 to exclude
enrollment assistance in order to ensure include the following: materials about claims processing
that beneficiaries select the plan that • General audience materials such activities from the definition of
best meets their needs, including as— marketing materials. We also propose to
whether additional changes are needed ++ General circulation brochures; add a definition of current enrollee
communications materials not to be materials and to ensure documents are D, these involuntary disenrollments are
considered marketing materials more accurate and understandable to not mandatory; thus, organizations may
encompassing information targeted to beneficiaries, we propose to move choose to implement longer grace
situational or beneficiary-specific toward greater standardization of the periods or forego involuntary
circumstances, including claims information provided in plan marketing disenrollments entirely.
processing issues and other one-time materials. Specifically, we are proposing However, MA organizations and Part
communications about operations. In to revise § 422.2262 and § 423.2262 to D sponsors that choose to disenroll
addition, we propose to revise require that MAOs and PDP sponsors enrollees for failure to pay premiums
§ 422.2262 and § 423.2262 to specify use standardized marketing material must notify the enrollee of the
that, while current enrollee language and format, without delinquency and allow the enrollee an
communications are not subject to the modification, in every instance in which opportunity to resolve the delinquency
statutory requirement that applies to we provide standardized language and within 30 days. Further, the
marketing materials (that is, that they be formatting. We provide MAOs and PDP organization or sponsor must also be
submitted to CMS for review prior to sponsors with standardized marketing able to demonstrate to us that it has
use), we retain the right to review them, materials through the annual Call Letter made reasonable efforts to collect the
and their use could be disapproved by or Health Plan Management System unpaid premium amounts. Given the
CMS, or disapproved unless (HPMS) memoranda. We believe this time required to notify the enrollee of
modifications are made. We believe change would ensure beneficiaries the delinquency, for the enrollee to
these changes will streamline the review receive more accurate and comparable make payment, and for the payment to
and approval of beneficiary information to make informed decisions be received by the organization in cases
communication notices to current about their health care options. This where the organization has established
members. proposed change will also ensure the minimum grace period, the actual
increased efficiencies and greater amount of time the enrollee has to
3. Required Use of Standardized Model
consistency in our marketing material resolve the delinquency may be less
Materials Under Parts C and D
review protocols and processes. than one month.
(§ 422.2262 and § 423.2262)
Section 1851(h) of the Act establishes 4. Involuntary Disenrollment for Failure A beneficiary who is disenrolled from
standards for review and approval of To Pay Plan Premiums Under Parts C his or her MA or Part D plan for failure
marketing materials. Section 1860D– and D (§ 422.74 and § 423.44) to pay premiums is not eligible for a
1(B)(1)(vi) of the Act requires CMS to Section 1851(g)(3)(B)(i) of the Act special enrollment period based on that
use rules ‘‘similar to (and coordinated provides that MA organizations may disenrollment. This beneficiary may be
with)’’ the foregoing marketing rules set terminate those MA plan enrollees who unable to enroll in another plan until
forth in section 1851(h) with respect to fail to pay basic and supplemental the next annual election period in the
Part D marketing. Specifically, premiums within the grace period fall. This may leave a significant gap in
organizations may not distribute established by the MA organization. coverage for MA–PD and PDP enrollees,
marketing materials unless they have Section 1860D–1(b)(1)(B) of the Act since their disenrollment will likely
been submitted to CMS for review. generally directs us to use disenrollment leave them without prescription drug
Materials submitted for such review are rules for Part D sponsors that are similar coverage for the remainder of the year,
deemed to be approved unless to those established for MA and in addition they potentially face a
disapproved within 45 days, or 10 days organizations under section 1851 of the late enrollment penalty (LEP) should
when using model language specified by Act. Consistent with these sections of they subsequently choose to re-enroll in
CMS. In reviewing marketing materials the Act, the Parts C and D regulations some type of Medicare prescription drug
or election forms under § 422.2264 and set forth our requirements with respect coverage. Given the possible risk to the
§ 423.2264, we ensure that marketing to involuntary disenrollment procedures health status of individuals that lose
materials are provided in a format (with under § 422.74 and § 423.44, prescription drug coverage, as well as
appropriate print size, as applicable) respectively. the LEP consequences, we propose to
specified by CMS and will use standard Currently, § 422.74(d)(1)(i)(B) codify in regulations a stronger version
terminology specified by CMS. specifies that an MA organization must of our existing policy.
Our current marketing materials provide, at minimum, a 1-month grace Therefore, we are proposing to amend
submission and review process period before disenrolling individuals the regulations at § 422.74(d)(1) and
encourages MAOs and PDP sponsors to for failure to pay the premium. § 423.44(d)(1) regarding disenrollment
use model materials to expedite the Similarly, under current regulations at for nonpayment of premium to require
review and approval process. The model § 423.44(b)(1)(i) and § 423.44(d)(1), Part a minimum grace period of 2 months
documents contain language provided D sponsors may disenroll an individual before any involuntary disenrollment
by CMS, including language that is from a PDP for failing to pay PDP associated with failure to pay a
optional (or that can be modified), for premiums on a timely basis, using the premium. We further propose to codify
plan use. Under this arrangement, process set forth in the regulations. the aforementioned manual provision
MAOs and Part D sponsors may submit Unlike the statute, the Part D regulations regarding the beginning of the grace
customized materials that reflect do not specifically use the term ‘‘grace period for Part D. We believe that a 2-
preferred word choices or phrasing tied period,’’ but we have interpreted the month period will provide adequate
to corporate messaging. regulations in the Medicare Managed time for organizations to respond to
As marketing materials that describe Care Manual provisions (Section 40.3.1 instances in which individuals fail to
plan benefits are critical to ensuring that of the Enrollment Chapter) to require pay their premiums, and for affected
beneficiaries make the best health care that organizations provide beneficiaries enrollees to take steps to remedy the
decisions for their particular needs, it is a grace period of not less than 1 month, situation and avoid disenrollment. We
imperative that plan materials are beginning on the first day of the month note that organizations would still be
accurate, free of errors, and comparable for which the premium is unpaid, before able to offer a more generous grace
across MAOs and PDPs. Accordingly, in disenrollment for failure to pay period than provided in the regulation,
order to reduce variability of marketing premiums timely. For both Parts C and if they so choose.
5. Maximum Allowable Out-of-Pocket few years, we have used our authority terms, we propose to amend
Cost Amount for Medicare Parts A and under section 1852(b)(1) of the Act to § 422.100(f)(3) by adding a new
B Services (§ 422.100) scrutinize cost sharing and benefit paragraph (f)(4) to specify that all local
Under section 1852(b)(1) of the Act, designs offered by MA plans, and to MA plans must establish an out-of-
we may not approve MA plans if we require changes on a case by case basis pocket maximum inclusive of all
determine that the design of the plan where we found discriminatory cost- Medicare Parts A and B services that is
and its benefits would substantially sharing. We also established out-of- no greater than the annual limit set by
discourage enrollment by certain MA pocket limits that, if adopted under an CMS. The cap for local PPO plans will
eligible individuals. Based on program MA plan, would exempt the plan cost be inclusive of all in-network and out-
experience and efforts to curb sharing from the same level of scrutiny of-network beneficiary cost sharing. The
discriminatory benefit packages, we are it would otherwise receive. methodology for determining the out-of-
For example, during the period since pocket maximum for local MA plans
proposing that all local MA plans
2003, we have issued guidance: (1) will be similar to the methodology we
include an annual out-of-pocket cap on
Establishing an optional out-of-pocket used to establish the voluntary out-of-
members’ total cost-sharing liability for
maximum that plans could adopt which pocket maximum amount for MA plans
Part A and Part B services, the amount
would result in less scrutiny of cost- for contract year 2010. The out-of-
of which will be set annually by CMS.
sharing amounts for individual benefits pocket maximum will be set at a certain
Given that regional PPO plans already
under the plan; and (2) identifying percentile of expected FFS spending,
are required to have an annual cap on
certain health care services for special and this amount will be estimated by
member out-of-pocket costs and that
review that beneficiaries with higher the Office of the Actuary (OACT). We
many local MA plans already have such than average health care needs are likely summarized the methodology used to
limits, we believe that requiring the to need (for example, in-patient determine the voluntary out-of-pocket
inclusion of such a limit in plan design hospital, dialysis, skilled nursing maximum for MA plans for contract
is necessary in order to avoid facility (SNF), mental health services, year 2010 on page 13 of the 2010 Call
discouraging enrollment by individuals Part B drugs and home health care). Letter. As summarized in the 2010 Call
who utilize higher than average levels of To implement this guidance, we Letter, MA out-of-pocket threshold is
health care services (that is, in order for established a comprehensive process to based on a beneficiary-level distribution
a plan not do be discriminatory in review the proposed cost sharing of of Parts A and B cost sharing for
violation of section 1852(b)(1) of the each plan benefit package and individuals enrolled in Original
Act). determine if the cost sharing design Medicare. The CY 2010 out-of-pocket
While our concern about discriminates against those beneficiaries threshold of $3,400 represents the 85th
discriminatory or confusing benefit with higher than average health care percentile of projected beneficiary
packages is longstanding, it has been needs. Specifically, we have conducted spending in 2010. We do not expect an
particularly acute since the outlier analyses for the purpose of impact on cost-sharing and premiums,
implementation of the Medicare reviewing whether cost sharing levels all other things being equal, for plans
Prescription Drug, Improvement and on submitted benefit designs are that already provide for an out-of-pocket
Modernization Act of 2003 (MMA) (Pub. discriminatory. We review, for example, maximum. However, requiring all plans
L. 108–173). Since that time, plan the distribution of cost sharing levels to have an out-of-pocket maximum will
offerings have become increasingly submitted by MA organizations to likely result in increases to premiums
complex in terms both of cost sharing identify the levels in the upper tail end and/or cost-sharing, although we are not
design and rules governing the of the range. This analysis assists us in able to quantify the extent of this
application of cost sharing. For determining the cost sharing threshold increase. We propose to continue to
example, Health Maintenance above which we consider the level to be furnish information to MA organizations
Organization (HMO) plans may have a discriminatory. We believe these efforts on our methodology and the amounts
point of service benefit that allows the have resulted in some improvements in for acceptable out-of-pocket caps on a
enrollee to obtain services out of reducing discriminatory cost sharing timely basis through the annual Call
network, but for higher cost-sharing and transparency of plan design. For Letter or Health Plan Management
levels. Preferred provider organization example, including regional PPO plans, System (HPMS) memoranda. We solicit
(PPO) plans are required to cover all nearly 60 percent of all current MA comments on this approach.
plan services both in and out of network plans have an out-of-pocket cap on
with typically higher out-of-network beneficiary cost sharing with some local 6. Maximum Allowable Cost Sharing
cost sharing. Members in private fee-for- plans excluding certain services. Based Amount for Medicare Parts A and B
service (PFFS) plans with a network on this experience, we believe that both Services and Prescription Drugs
may have differential cost sharing a standard and mandatory cap on (§ 422.100, § 423.104)
depending on whether they obtain member cost sharing for all local MA We have always reviewed cost sharing
services from a contracting or a deemed plan types is an important and levels for individual services for the
provider. Also, some coordinated care necessary step to ensure that plans are purpose of determining whether or not
plans have introduced cost sharing not discriminatory and beneficiaries are such levels are discriminatory. Based on
‘‘tiers’’ by which enrollees may be protected from unreasonable financial our experience, in which we annually
assessed different cost-sharing amounts costs regardless of which MA plan they review the levels of cost sharing across
depending on, for example, the plan enroll. all bids, we propose to amend our
contracted hospital from which they Under our authority in section regulations on the general requirements
seek care. Because MA plans can vary 1852(b)(1)(A) of the Act to ensure related to MA benefits and qualified
in numerous ways, we are increasingly against MA plans that discriminate, our prescription drug coverage to expressly
concerned that, faced with too many authority under section 1856(b)(1) of the authorize us to establish cost sharing
complex choices, beneficiaries are Act to establish MA standards by thresholds for individual services below
unable to confidently compare health regulation, and our authority under which cost sharing will be considered
plans and make meaningful choices. section 1857(e)(1) of the Act to add non-discriminatory. We believe that
Because of these concerns, in the last necessary and appropriate contract requiring the inclusion of such cost
sharing thresholds in plans’ benefit bid and benefit package to comply with PFFS plans. Program experience has
designs affords greater predictability our non-discrimination requirements. demonstrated that prior notification is
and protection against high out-of- We will annually evaluate our review confusing to beneficiaries, misleading in
pocket costs for beneficiaries with process and the criteria we use to terms of disclosure of cost-sharing, and,
medical conditions that could result in determine cost sharing discrimination in some instances, used inappropriately
exceptionally high out-of-pocket costs and may make changes to ensure that as a form of prior authorization. In the
obligations, and further ensures that beneficiaries are protected from GAO report titled ‘‘Medicare Advantage:
those beneficiaries are not discouraged discriminatory cost sharing. Characteristics, Financial Risks, and
from enrolling in an MA plan. We propose to amend § 422.100 by Disenrollment Rates of Beneficiaries in
Under Part C, we propose annually to adding a new paragraph (f)(5) to specify Private Fee-for-Service Plans (GAO–09–
review bid data to determine specific that cost sharing for Medicare A and B 25),’’ the GAO noted that some PFFS
cost sharing levels for Medicare A and services may not exceed levels annually plans it reviewed ‘‘inappropriately used
B services below which would not have determined by CMS to be the term prior authorization rather than
a discriminatory effect, and therefore discriminatory. Additionally, we pre-notification in the informational
may be approved in an MA benefit propose to revise § 423.104(d)(2) by materials they distributed to
package. Similarly, under Part D, we adding a new paragraph (iii) to specify beneficiaries, which may have caused
would annually review bid data to that tiered cost sharing for non-defined confusion about beneficiaries’ financial
determine acceptable cost sharing tiers standard benefit designs may not exceed risks.’’ We have concluded that the
for non-defined standard benefit levels annually determined by CMS to complexity of cost sharing designs using
designs. We will furnish information to be discriminatory. prior notification has made it more
MA organizations and Part D sponsors difficult for both enrollees and
7. Prohibition on Prior Notification by
on its methodology and the acceptable providers to understand the enrollee’s
PPO, PFFS and MSA Plans Under Part
cost sharing amounts based on the prior cost sharing obligation in advance of
C (§ 422.2, § 422.4, and § 422.105(b))
year’s bids on a timely basis either receiving services. Therefore, in order to
through the annual Call Letter or Health In the preamble of the Medicare reduce the complexity of MA plans’ cost
Plan Management System (HPMS) Program; Establishment of the Medicare sharing designs and improve
memoranda. The methodology for Advantage Program final rule published transparency for both enrollees and
determining the cost-sharing thresholds in the January 28, 2005 Federal Register providers, we are proposing to prohibit
for Part A and B services will involve (70 FR 4598 through 4599), as well as PPO plans (for out-of-network services)
reviewing the prior year’s bid data, as in the 2009 and 2010 Call Letter, and PFFS plans from providing for
well as actuarial equivalencies from http://www.cms.hhs.gov/ lower cost-sharing where prior
original Medicare, to determine outliers. PrescriptionDrugCovContra/Downloads/ notification rules have been satisfied.
These amounts could be adjusted based CallLetter.pdf and http:// We propose to revise § 422.4(a)(1)(v)
on new bid submissions for the current www.cms.hhs.gov/ and (a)(3) to provide that PPO and PFFS
year. PrescriptionDrugCovContra/Downloads/ plans will be prohibited from
We propose to determine these 2010CallLetter.pdf, respectively, we establishing prior notification rules
acceptable cost sharing levels based on provided guidance permitting local and under which an enrollee is charged
factors such as distribution of cost regional PPO plans (for out-of-network lower cost sharing when either the
sharing among submitted bids, services) and PFFS plans to provide for enrollee or the provider notifies the plan
comparison to Original Medicare cost lower cost sharing amounts in cases in before a service is furnished.
sharing (in the case of Part C), and other which an enrollee or provider We also propose to prohibit MSA
factors that we find to assist in voluntarily gives the MA organization plans from establishing prior
identifying discriminatory levels of cost with prior notification that the service notification rules. The definition of a
sharing (for example, the number of will be received. We also made clear MSA plan in section 1859(b)(3)(A)(iii) of
tiers in the case of a Part D plan). A that PPO plans (for out-of-network the Act ensures open access to services
sponsoring organization’s cost sharing services) and PFFS plans may not for MSA enrollees without restriction to
will be considered discriminatory if it is require such notice, or prior a provider network and without prior
higher than the maximum level that we authorization or referrals from authorization reviews for health care
determine to be non-discriminatory for gatekeepers, as a condition of coverage services. MSA plans may have networks
a particular service in the case of an MA in order to restrict an enrollee’s access of providers, but may not restrict an
plan or a drug cost tier in the case of a to services. As stated below, Medical enrollee’s access to those network
Part D plan. We will communicate Savings Account (MSA) plans similarly providers. We believe that prior
expected discriminatory cost sharing may not impose prior authorization notification rules established by MSA
thresholds to sponsoring organizations requirements as a condition of coverage. plans would also be confusing to
through the annual Call Letter or HPMS Under prior authorization, a plan enrollees of those plans and have
memoranda during the annual bid and requires an enrollee to seek its approval similar negative effects as those
benefit package review process. These before obtaining services from a described above for PPO and PFFS
thresholds will be based on the prior provider; if the enrollee does not obtain plans. We propose to modify
year’s experience and may be adjusted prior approval, then the plan can deny § 422.4(a)(2) such that MSA plans will
based on bid submissions for the current coverage for the service. We provided also be prohibited from establishing
year. We solicit comment on this additional guidance to PPO and PFFS prior notification rules under which an
approach, including the extent to which plans on how they must explain to enrollee is charged lower cost sharing
we have provided sufficient clarity on current and prospective enrollees the when either the enrollee or the provider
how we determine whether cost-sharing plan’s standard cost sharing and the notifies the plan before a service is
levels are discriminatory. reduced cost sharing related to prior furnished.
Organizations submitting MA plan or notification. In the preamble of the Medicare
prescription drug plan bids found to However, since that time, we have Program; Establishment of the Medicare
have discriminatory cost sharing will become increasingly concerned about Advantage Program final rule published
have an opportunity to resubmit their the use of prior notification by PPO and in the January 28, 2005 Federal Register
(70 FR 4617 through 4619), we • Individuals eligible for Medicaid as or SSA indicating that the individual
discussed rules related to point of a Qualified Medicare Beneficiary, remains eligible for Medicaid, a
service (POS) options that are offered by Specified Low-Income Medicare Medicare Savings Program, or SSI.
some MA organizations. We stated that Beneficiary, or a Qualifying Individual On the other hand, if a State submits
PPOs may offer a POS-like benefit under under a State’s Medicaid plan. data to CMS indicating that an
which beneficiary cost sharing would be In § 423.773(c)(2), we are proposing to individual is eligible for Medicaid in
less than it would otherwise be for non- amend the length of the period for July or a later month of a given year, and
network provider services, but still which individuals are re-deemed the individual is Part D eligible, we
might be greater than it would be for ineligible for the full low income subsidy deem the individual eligible for the Part
network provider services, provided an to conform with guidance we issued in D subsidy for the remainder of that
enrollee follows preauthorization, pre- section 40.2.2 of Chapter 13 of the calendar year and all of the following
certification, or prenotification rules Medicare Prescription Drug Benefit calendar year. (See section 40.2.2 of
before receiving out-of-network services. Manual. Section 423.773(c)(2) currently Chapter 13 of the Medicare Prescription
We also noted that such specifies that a full subsidy eligible Drug Benefit Manual.) Therefore, we
preauthorization, pre-certification, or individual is deemed eligible for the full propose to amend § 423.773(c)(2) to
prenotification cannot be a necessary subsidy for a period up to 1 year. indicate that the deeming will be, at a
condition for receipt of, or required MA However, in practice, the period of minimum, for the following periods: If
plan reimbursement for, out-of-network deemed eligibility varies from as little as deemed status is determined between
covered services by a PPO enrollee, but 7 months to as long as eighteen months, January 1st and June 30th of a calendar
that it could act as a financial incentive depending on when the individual year, the individual is deemed subsidy
(by lowering the normal out-of-network attained deemed status (that is, became eligible for the remainder of the
cost sharing that would otherwise eligible for Medicaid, a Medicare calendar year. If deemed status is
apply) to an enrollee to voluntarily Savings Program, or for SSI). determined between July 1st and
participate. Similar to our concerns Every year, we review data from State December 31st of a calendar year, the
about the use of prior notification rules Medicaid Agencies and the Social individual is deemed subsidy eligible
by PPO and PFFS plans, as discussed Security Administration (SSA) sent to for the remainder of the calendar year
above, we believe that the complexity of us in July and August, respectively, to and the next calendar year. We believe
cost sharing designs for PPO plans with determine whether individuals this change will streamline the
a POS-like benefit make it more difficult currently deemed eligible for the deeming/redeeming process and
for both enrollees and providers to subsidy should continue to be deemed decrease the administrative burden on
understand the enrollee’s cost sharing (that is, ‘‘re-deemed’’) eligible for the agencies and subsidy eligible
obligation in advance of receiving subsidy. This allows us sufficient time individuals.
services. In order to reduce the to update individuals’ records in our
systems, if necessary, and to notify them 9. Enrollment of Full Subsidy Eligible
complexity of PPO plans’ cost sharing Individuals and Other Subsidy Eligible
designs and improve transparency for if they are losing deemed status, so that
they can take the appropriate steps to Individuals Under Part D (§ 423.34)
both enrollees and providers, we are
proposing to prohibit PPO plans from apply for the subsidy, in time for In the January 28, 2005 Federal
offering a POS-like benefit. We propose coverage to be effective at the start of the Register, when we issued the Medicare
to revise the definition of POS in § 422.2 new calendar year. Prescription Drug Benefit final rule (70
and § 422.105(b) to indicate the only When we are reviewing data in July FR 4193), we added § 423.34 to describe
HMOs may offer a POS benefit. The and August, we also identify our procedures for enrollment of full-
proposed change is consistent with individuals who are newly eligible for benefit dual eligible individuals. We
section 1851(a)(2)(A)(i) of the Act, Medicaid, a Medicare Savings Program, discussed how full-benefit dual eligible
which states that an HMO may include or SSI, and deem these individuals individuals are enrolled, which PDPs
a POS option. eligible for the subsidy for the they are assigned to, and the effective
Although PPO (for out-of-network remainder of the current calendar year. date of their enrollment. As noted in the
services), PFFS, and MSA plans may not We also redeem these individuals for preamble to the final regulation,
impose prior authorization and referral the subsidy for the next calendar year, enrollment of other low-income subsidy
requirements as conditions for covering because we do not have sufficient time (LIS) eligible individuals would also be
services, enrollees and providers have in the final months of the year to conducted, and details would be issued
the right to request a written advance conduct a separate redeeming process in operational guidance. However, we
coverage determination from the plan, for these individuals. If we waited to did not incorporate into the initial Part
in accordance with Subpart M of Part redeem these beneficiaries after the start D regulations further detail about the
422, before an enrollee receives a of the calendar year, they could incur enrollment procedures that would apply
service in order to confirm that the greatly increased premium liability and to this remaining population of LIS-
service is medically necessary and will cost sharing amounts at the start of the eligible individuals.
be covered by the plan. new calendar year than they would have Section 1860D–1(b)(1)(A) of the Act
otherwise. directs the Secretary to establish a
8. Requirements for LIS Eligibility For example, if a State Medicaid process for the enrollment of Part D
Under Part D (§ 423.773) Agency submits data to CMS indicating eligible individuals. As we indicated in
Section 423.773(c) specifies that the an individual is eligible for Medicaid in the preamble to the January 28, 2005
individuals treated as full subsidy March of a given year, and that final rule (70 FR 4209), while the statute
eligible individuals include the individual is Part D eligible, we deem does not explicitly provide for the auto-
following: that individual eligible for the Part D enrollment of other LIS-eligible
• Full-benefit dual eligible low income subsidy from March 1st individuals into the Medicare Part D
individuals; through December 31st of that year. We program, we believe that enrolling these
• Supplemental Security Income redeem that individual for the following individuals clearly is consistent not
(SSI) recipients under Title XVI of the calendar year only if we receive only with statutory intent but also with
Act; and subsequent information from the State the intent of the individuals themselves.
The express purpose of applying for the (that is, not just full benefit dual eligible • The efficacy of the existing auto-
Part D low-income subsidy is to obtain individuals). enrollment and facilitated enrollment
prescription drugs on a subsidized • We are proposing to revise the procedures, and suggestion for
basis, which can only be accomplished paragraph heading of § 423.34(d) from improving these procedures;
through enrollment in a Part D plan. ‘‘Automatic Enrollment Rules’’ to • Ways to assess the impact of these
Therefore, we established a separate ‘‘Enrollment Rules.’’ We are proposing procedures on the dual eligible and LIS
enrollment process for these individuals this change to reflect the inclusion of population, including the costs,
known as ‘‘facilitated enrollment.’’ We full subsidy and other subsidy eligible benefits, and potential unintended
randomly assign these individuals to a groups in this enrollment process, in consequences. For example, is it
PDP in their area with a premium below addition to full-benefit dual eligible possible that seniors who are LIS-
the low-income benchmark and notify individuals. In our guidance, we refer to eligible but not eligible for Medicaid
these individuals that they may choose the process of enrolling full-benefit dual will not realize that they have been
a Part D plan on their own and that if eligible individuals as ‘‘automatic auto-enrolled into a drug plan? Is there
they do not choose a plan, we will enrollment,’’ and the process for other any possibility that auto-enrolling these
enroll them in a plan in their area. We LIS eligibles as ‘‘facilitated enrollment.’’ individuals could ever lead to
have been carrying out the ‘‘facilitated’’ (See section 30.1.4 of Chapter 3 of the delinquencies in payments? Given that
enrollment process for more than 3 Medicare Prescription Drug Benefit LIS-eligible individuals are auto-
years without objections from Manual.) enrolled into plans with premiums
beneficiaries or from the advocacy • We propose to amend § 423.34(e) to below the benchmark, we do not believe
community; in fact, we believe that indicate that the rules regarding these individuals would ever become
many individuals are under the declining enrollment and disenrollment subject to premium issues or liable for
mistaken impression that being also apply to all LIS-eligible other such costs that they are not aware
approved for the subsidy actually individuals. of in advance. However, we welcome
equates with enrolling in a plan, so we • In § 423.34(f), we would clarify that comment on whether the possibility
believe our proposal will help rectify the paragraph heading and contents of exists and, if so, how payment
that problem. (See section 30.1.4 of this paragraph are limited to the delinquencies should be handled in this
Chapter 3 of the Medicare Prescription effective date of enrollment for full- vulnerable population.
Drug Benefit Manual for more benefit eligible individuals. We propose • How we can better assist
information about facilitated to amend § 423.34(f)(3) to specify that, beneficiaries in identifying plan choices
enrollment). for individuals who are eligible for Part
Based on this experience, we believe that best suit their individual drug
D and subsequently become eligible for needs, and encourage them to make an
it would be appropriate to codify in
Medicaid on or after January 1, 2006, active election.
regulation the enrollment procedures
the effective date of enrollment would
that we use for these individuals, which 10. Special Enrollment Periods Under
be the first day of the month the
are similar to those specified in the Part D (§ 423.380)
individual becomes eligible for both
regulation for the dual eligible
Medicaid and Medicare Part D. Consistent with the changes in
population. We believe that our
regulations would be more accurate and • In § 423.34(g), we propose adding a § 423.34, we are proposing to expand
complete if they specifically addressed new paragraph to specify that the the special enrollment period described
this population. Thus, we are proposing effective date for low income subsidy in § 423.38(c)(4), which currently
to amend § 423.34 to reflect the eligibles who are not full benefit dual applies to full-benefit dual eligible
guidance we have issued in Chapter 3 eligibles would be no later than the first individuals, to all LIS-eligible
of the Prescription Drug Program day of the second month after we individuals. This change is consistent
Manual. Specifically, we are proposing determine that the individual meets the with our authority in section 1860D–
to include information on how we criteria for enrollment into a PDP under 1(b)(3)(C) of the Act and would conform
enroll all LIS-eligible individuals, this section. This change conforms to our regulations to current practice as
including full-benefit dual eligible section 30.1.4 of Chapter 3 of the reflected in CMS guidance in section
individuals. Medicare Prescription Drug Benefit 20.3.8, item 7, of chapter 3 of the
We are proposing the following Manual. Unlike full benefit dual eligible Medicare Prescription Drug Benefit
revisions to § 423.34: individuals who may have retroactive Manual.
• In § 423.34(a), we propose to Part D coverage, these individuals have
11. Transition Process Under Part D
expand the general rule to refer to all only prospective Part D coverage.
(§ 423.120(b)(3))
LIS-eligible individuals, so that the rest Although we believe that all these
of that section applies not only to full- provisions will benefit the LIS-eligible Section 1860D–11(d)(2)(B) of the Act
benefit dual eligible individuals, but population, we recognize that concerns gives the Secretary authority similar to
also to all LIS-eligible individuals. have been raised about the impact of the that of the Director of the Office of
• In § 423.34(b), we would retain the current random auto-enrollment process Personnel Management with respect to
definition of full-benefit dual eligible on affected beneficiaries. For example, health benefits plans under chapter 89
individual, and add a definition for focus groups of seniors suggest the of title 5, United States Code. This
‘‘low-income subsidy eligible possibility that some auto-enrolled includes the authority to ‘‘prescribe
individual.’’ beneficiaries may not realize they have reasonable minimum standards for
• We propose to amend the paragraph been enrolled in a drug plan or that they health benefits plans.’’ In addition,
heading of § 423.34(c) to indicate that have been reassigned to a different drug section 1860D–11(e)(2)(D) of the Act
this paragraph describes the process we plan. We are committed to taking prohibits us from approving a plan if
use to reassign LIS individuals during appropriate steps to improve this ‘‘the design of the plan and its benefits
the annual coordinated election period. process. Thus, we welcome comments (including any formulary and tiered
We would indicate that the related to all aspects of these formulary structure) are likely to
reassignment process applies to certain procedures, including comments on substantially discourage enrollment by
low-income subsidy eligible individuals issues such as the following: certain part D eligible individuals.’’
Under the authority of section 1860D– situations, we directed Part D sponsors restricted via utilization management
11 of the Act, we established a to have systems capabilities to allow requirements is essentially equivalent to
requirement in the January 28, 2005 them to provide a one time, temporary a non-formulary Part D drug to the
final rule implementing the Part D supply of non-formulary Part D drugs extent that the relevant utilization
program that requires sponsors of Part D (including Part D drugs that are on a management requirements are not met
plans to provide for an appropriate sponsor’s formulary but require prior for a particular enrollee.
transition process for new enrollees authorization or step therapy under a Additionally, we propose, consistent
prescribed Part D drugs that are not on sponsor’s utilization management rules) with our current guidance, to codify the
its plan’s formulary (70 FR 4264). We in order to accommodate the immediate timeframes for the transition process
further specified in regulation that the needs of an enrollee, as well as to allow and the days’ supply limit for a
transition policy must be consistent the sponsor and/or the enrollee transition fill of an enrollee’s
with written policy guidelines and other sufficient time to work out with the medication. Our guidance was premised
CMS instructions. The transition prescriber an appropriate switch to a on the position that it made sense to
requirement is codified in at therapeutically equivalent medication limit the amount of time during which
§ 423.120(b)(3). or the completion of an exception a transition process is applicable to new
Following publication of the request to maintain coverage of an enrollees to the first 3 months under the
regulation, we issued guidance in 2005 existing drug based on medical plan as we believed an enrollee
on what constituted an appropriate necessity reasons. Our guidance has unfamiliar with his or her plan’s
transition process for new Part D developed over time in response to formulary requirements would likely to
enrollees. We noted in our guidance that these concerns, and we believe it strikes present with a prescription during the
an appropriate transition process was the right balance between enrollee first few months enrolled. We also
one that balances the protection of protection and plan flexibility. propose to codify the transition process
certain vulnerable populations with the Given the importance of our transition timeframe to apply during the first 90
flexibility necessary for Part D plans to policy as an enrollee protection— days of coverage under a new plan. This
develop a benefit design that promotes particularly for auto-assigned and 90-day timeframe would apply to retail,
beneficiary choice and affordable access reassigned beneficiaries who did not home infusion, long-term care, and
to medically necessary drugs. We affirmatively choose a Part D plan—we mail-order pharmacies.
updated the transition guidance for propose to codify in regulation certain We also propose to require plans to
contract year 2007 as part of the 2007 policies from our guidance on the provide a temporary supply of drugs
Call letter, noting that the transition necessary elements of a plan transition under their transition process. As we
guidance represented a minimum set of process. We also believe that any plan noted in our original transition guidance
standards for a Part D sponsor transition that fails to meet its transition policy to Part D plan sponsors in Chapter 6 of
process. This guidance was requirements discourages enrollment (or the Medicare Prescription Drug Benefit
incorporated into Chapter 6 of the re-enrollment) by Part D eligible Manual, providing a temporary supply
Medicare Prescription Drug Benefit individuals that may currently be taking represented the most efficient method of
Manual located at http:// prescription drugs that are not on the triaging requests for filling initial
www.cms.hhs.gov/ plan’s formulary. Accordingly, we prescriptions of non-formulary drugs for
PrescriptionDrugCovContra/downloads/ propose that a Part D sponsor must large numbers of new enrollees who,
R2PDBv2.pdf. provide for a transition for the despite education efforts to make them
Our experience has shown that following: aware of the plan’s benefit, may not be
transition processes represent an • New enrollees into PDPs following aware of which drugs are listed on the
important enrollee protection to ensure the annual coordinated election period; plan’s formulary. Consistent with
access to needed Part D drugs. Given the • Newly eligible Medicare enrollees Chapter 6, we propose that Part D plan
movement from year to year of some from other coverage; sponsors must ensure that the one-time,
dual eligible beneficiaries due to • Individuals who switch from one temporary supply of non-formulary Part
reassignment, and the annual bidding plan to another after the start of the D drugs requested during the first 90
cycle related to Part D plan offerings in contract year; and days of coverage in an outpatient setting
which benefits and formularies may be • Current enrollees remaining in the must be for at least 30 days of
modified, we believe that some plan who are affected by formulary medication, unless the prescription is
protections are necessary for plan changes from one contract year to the written by a prescriber for less than 30
enrollees with immediate prescription next. days, in which case the Part D sponsor
needs who experience a change in Our experience thus far has shown must allow multiple fills to provide up
enrollment or who experience formulary that these groups represent the to a total of 30 days of medication. For
changes under their existing plan at the minimum target populations that are a new enrollee in a Long term Care
beginning of a contract year. These most likely to require protections to (LTC) facility, the temporary supply
protections are particularly important ensure immediate access to their may be for up to 31 days (unless the
when an individual first presents at a prescription drug benefit. prescription is written for less than 31
participating pharmacy with a We also propose, consistent with our days), consistent with the dispensing
prescription for a drug that is not on the current guidance, that a Part D sponsor’s practices in the LTC industry. In
formulary, unaware of what is covered transition process requirements be addition, due to the often complex
by the plan or of the sponsor’s applicable to non-formulary drugs, needs of LTC residents that often
exceptions process for providing access meaning both: (1) Part D drugs that are involve multiple drugs and necessitate
to Part D drugs that are not on the plan’s not on a sponsor’s formulary; and (2) longer periods in order to successfully
formulary. For example, a full-benefit Part D drugs that are on a sponsor’s transition to new drug regimens,
dual eligible enrollee who is auto- formulary but require prior sponsors must honor multiple fills of
enrolled into a plan may not make an authorization or step therapy under a non-formulary Part D drugs, as
affirmative choice based on review of a plan’s utilization management rules. necessary during the entire length of the
plan’s benefit relative to his existing The latter is included because a 90-day transition period. This is
medications needs. For these types of formulary drug to which access is particularly important if transitions to
formulary drugs have not been a transition in coverage, or a transition prescription drug coverage. These
effectuated prior to the refills. We in a level of care, we propose to codify requirements are codified at § 423.464
propose to require up to a 31-day this portion of our guidance and require and set forth in the Medicare
transition supply for enrollees in an provision of transition notices. Prescription Drug Benefit Manual. As
LTC facility given that many LTC However, in addition to this we have gained more experience with
pharmacies and facilities dispense codification, we also propose to require the prescription drug program, we have
medication in 31-day increments. Thus, plan sponsors to make reasonable efforts found that some beneficiary changes (for
a Part D sponsor would be required to to notify prescribers, via mail, electronic example, those resulting from
provide a LTC resident enrolled in its or verbal communication, that the retroactive low income subsidy LIS
Part D plan at least a 31 day supply of affected enrollees’ prescription cannot eligibility determinations, LIS status
a prescription when presenting in the be refilled, either because of utilization changes, or midyear Part D enrollment
first 90 days of enrollment (unless the management requirements such as prior changes) that necessitate retroactive
prescription is written for less) with authorization or step therapy, or claims adjustments are a significant
refills provided, if needed, up to a 93 because the prescribed medication is issue under Part D. These changes, as
day supply. not on the plan sponsor’s formulary. We well as long-term care pharmacy billing
In addition to codifying the preceding believe that this communication is practices for dual-eligible beneficiaries
requirements, we also propose to take necessary in order to expedite the and the presence of secondary, tertiary
the opportunity in this rulemaking to prescriber’s plan to seek therapeutic and even quartenary payers have all
clarify our expectations of sponsors alternatives for the enrollee or to fill out contributed to a higher than expected
with respect to providing transition the requisite paper work to submit to volume of retroactive claims
notices. Based on our experience the Part D sponsor to initiate the adjustments requiring Part D sponsor
overseeing the Part D program, we have exceptions process. We invite comments reimbursements and recoveries, as well
learned that a successful transition on this proposal. as a greater than anticipated complexity
process is contingent upon informing Accordingly, we propose the of calculating these amounts. While we
enrollees and their caretakers about following revisions to § 423.120(b)(3): previously anticipated that beneficiaries
their options for ensuring that enrollees’ • Add paragraph (3)(i) to clarify would be owed reimbursements due to
medical needs are safely accommodated which enrollees the transition process changes in LIS status, and required plan
within a Part D sponsor’s formulary. An should apply; sponsors to make such reimbursements
enrollee who receives a temporary • Add paragraph (3)(ii) to ensure in § 423.800(c), we have since learned
supply of a non-formulary Part D drug access to a temporary supply of drugs that our current regulations do not
at a network pharmacy might simply within the first 90 days of coverage reflect the other entities that may
assume that, by virtue of filling his or under a new plan; sometimes need to be taken into account
her prescription, the plan will cover that • Add paragraph (3)(iii) to provide a in reimbursement or recovery
drug for the remainder of the contract temporary fill when an enrollee requests transactions. Moreover, we have also
year. For this reason, we are proposing a fill of a non-formulary drug during the learned that no industry standard
to require sponsors to provide enrollees time period specified in paragraph (ii) electronic process exists to explicitly
with appropriate notice regarding their (including Part D drugs that are on a handle underpayment recoveries or
transition process within a reasonable plan’s formulary but require prior overpayment reimbursements created by
amount of time after providing a authorization or step therapy under a these adjustments, and that the current
temporary supply of non-formulary Part plan’s utilization management rules) Health Insurance Portability and
D drugs (including Part D drugs that are and the days supply in the outpatient Accountability Act (HIPAA) standard
on a sponsor’s formulary but require setting must be for at least 30 days of for coordination of benefits for
prior authorization or step therapy medication. In the long-term care pharmacy claims only partly supports
under a sponsor’s utilization setting, the temporary supply must be these activities when the pharmacy
management rules). for up to 90 days in 31 day supply
Our guidance specifies that Part D initiates ‘‘reverse and rebill’’
increments; transactions. As a result, we are aware
sponsors send a written notice, via U.S. • Add paragraph (3)(iv) to ensure
First Class mail, to each enrollee who that Part D sponsors are sometimes
written notice is provided to each
receives a transition fill. This standard struggling with how to manage these
affected enrollee within 3 business days
is consistent with our requirement that retroactive adjustments and that those
of the temporary fill;
other enrollee communications, • Add paragraph (3)(v) to ensure that sponsors that are refunding
including formulary change notices and reasonable efforts are made to notify overpayments or seeking underpayment
explanations of benefits, be sent via U.S. prescribers of affected enrollees who recovery are each doing it differently.
First Class mail. In addition, our receive a transition notice under Since current regulations do not
guidance directs sponsors to send this paragraph (iv). address retroactive adjustments and the
notice to each affected enrollee within complexities associated with
3 business days of the temporary fill. 12. Part D Sponsor Responsibility for coordination of benefit activities that
Our rationale for this turnaround time is Retroactive Claims Adjustment cannot be accomplished between the
that it is necessary in order to provide Reimbursements and Recoveries Under Part D sponsor and the pharmacy
an affected enrollee with sufficient Part D (§ 423.464) through reversal and re-billing, we have
time—especially in light of our 30-day Sections 1860D–23 and 1860D–24 of issued general guidance to direct
transition fill policy in the outpatient the Act require PDP sponsors to sponsor coordination of benefit
setting to work with his or her coordinate with state pharmaceutical activities. Sections of the COB and LIS
prescriber to switch to a therapeutically assistance programs (SPAPs) as well as chapters of the Medicare Prescription
equivalent drug that is on the plan’s other drug plans, including Medicaid Drug Benefit Manual specify standards
formulary or to process an exceptions programs, group health plans, Federal for a PDP sponsor to: work with other
request. Employee Health Benefit Plans providers of prescription drug coverage
Given the importance of enrollee (FEHBP), military coverage and other to resolve payment issues; have a
access to medications, especially during plans or programs providing process in place to handle the payment
resolution that is not restricted by dated October, 30, 2006) by proposing pharmacy can no longer effectively
implementation of timely filing that sponsors must both make coordinate benefits between payers.
requirements; make retroactive retroactive claim adjustments and take And payers cannot effectively
adjustments and promptly refund other payer contributions into account coordinate among themselves, both
monies owed to the correct party as part of the coordination of benefits. because of the absence of electronic
(including, but not limited to the Further, we are also proposing to add a standards for post-adjudication claim
beneficiary); and generally limit new timeliness standard at § 423.466 to adjustments among payers (as opposed
requests for pharmacy reprocessing to require adjustment and issuance of to between pharmacies and payers), and
those situations involving a pricing refunds or recovery notices within 45 the presence of contractual prohibitions
error. Additionally, CMS guidance days of the sponsor’s receipt of the between payers and pharmacies on the
includes as part of the coordination of information necessitating the disclosure of proprietary pricing
benefits the transfer of true out-of- adjustment. While claims adjustments information. Therefore, at the present
pocket (TrOOP) costs and gross covered must be made and notices issued within time, CMS and the industry are
drug cost data to a new Part D plan the established timeframes, we continue struggling to determine how best to
when a beneficiary changes enrollment to recognize that calculating the precise handle retroactive claims adjustments
during the coverage year. In our October amount of the adjustment and any whenever the adjustment cannot be
20, 2008 Part D sponsor implementation resulting reimbursements or recoveries resolved simply between the sponsor
guidance on the automated process for may not always be practicable due to and the pharmacy.
the transfer of these TrOOP-related data, limitations in the electronic transaction Pharmacies regard their pricing
we established a 45-day maximum time set and contractual terms and information as proprietary and are
limit from receipt of a post-adjudicative conditions for payment in use in the concerned about the potential chilling
change in the reported data for the pharmacy industry. However, sponsors effect any disclosure of this information
sponsor to take adjustment action, make must exercise due diligence in fulfilling might have on their ability to negotiate
a refund, and/or initiate recovery. We these requirements. with payers. Therefore, to ensure the
established this time limit after an To date, most Part D coordination of confidentiality of pricing information,
informal survey and discussions with benefits activity has been performed at coordination of benefits on the initial
Part D sponsors and their processors. point-of-sale or soon after, so pharmacy claim is accomplished without reporting
While some entities indicated they were reversal and rebilling of claims can be complete information on negotiated
making adjustments more frequently, accomplished within the payers’ timely pricing. The amount reported in the
the industry generally supported a 90- filing windows. For Part D, this window transaction to the Part D plan is the
day limit, which is consistent with the must be a minimum of 90 days, but for amount of the beneficiary payment after
time limit on pharmacy claim reversals. other (non-Part D) providers of the supplemental payment. As a result,
However, we believe this longer prescription drug coverage the filing a Part D sponsor attempting to
timeframe is not in the best interests of window could be as short as 30 days. determine refund or recovery amounts
the beneficiary because it would delay With the instability of LIS data and Part without having the pharmacy reverse
the payment of refunds and notification D enrollments creating a significant and rebill the original claim can
of the need for payment recovery. On volume of retroactive adjustments, it has generally only impute the amount of
the other hand, because many of the become evident that sponsors are facing any supplemental payment made by
claims reversals occur early in the 90- more claims adjustments than current another payer by determining the
day period, a very short adjustment pharmacy claim reversal and rebilling difference between the Part D cost-
timeframe could lead to a series of approaches can adequately address. sharing and the beneficiary amount paid
consecutive refunds and recoveries that Online real-time coordination of after the supplemental payment. The
would be confusing and, therefore, also benefits, in which the order of payment only alternative is to ask the pharmacy
not in the best interests of the among multiple payers is established to reverse and rebill the claim to all
beneficiary. Accordingly, we believe and programmed into payer systems, payers. However, this procedure is
that a 45-day time limit represents a generally did not take place in generally unreasonable after the
reasonable compromise. pharmacy benefit management prior to industry standard 30-day window
Many of the post-adjudicative Part D implementation. Therefore, because many supplemental payers will
adjustments, such as those that are due following the issuance of the Medicare not accept the late claim and, as a
to enrollment changes, are changes that Prescription Drug Benefit final rule on consequence, the pharmacy would be
affect beneficiary cost-sharing, January 28, 2005, CMS and the industry, left short the supplemental payer
premiums and/or plan benefit phase. in collaboration with the National payment amount, as well as any
Establishing a reasonable time limit for Council for Prescription Drug Programs difference in beneficiary cost sharing
all Part D adjustment, refund, and (NCPDP), collaborated to develop an that might be due.
recovery activity is in the beneficiaries’ electronic process consistent with In the absence of legal authority to
best interests because it ensures that HIPAA-authorized transaction standards compel supplemental payer cooperation
required changes are effectuated on to allow supplemental payer and to avoid pharmacy underpayment,
timely basis, thus correcting retroactive information to be available at point-of- imposing a requirement on sponsors to
and prospective beneficiary premium sale and patient-pay amounts remaining nonetheless calculate a precise
and cost-sharing amounts. Moreover, it after supplemental payer payments to be reimbursement or recovery liability
is in the best interest of others who have reported back to the primary Part D would require the creation of a new
paid a claim, or are holding a balance sponsor for purposes of tracking TrOOP. payer-to-payer transaction that both
due, on the beneficiary’s behalf because However, by design, all billing enables reprocessing and addresses
it ensures that these amounts are transactions still require the pharmacy pharmacies’ concerns about revealing
resolved timely. to initiate the activity. What this means their proprietary pricing. It is not clear
At § 423.464 and § 423.466, we are in the case of a claims adjustment is that that both goals can be achieved. Nor is
proposing to codify our previous policy if the beneficiary is no longer at the it clear that even if this conflict could
guidance (for instance, our counter and a supplemental payer’s be resolved, that the cost of doing so
memorandum on plan LIS changes claim filing window is closed, the would be justified by the benefits. That
is, it is not clear to us that the benefits changes when multiple payers are § 423.464(f), as well as accept claims
of more precisely calculating the involved, as well as our assessment that from the beneficiary without imposing
differential amounts owed or due (the the costs of achieving precision in such time limits. This section states further
incremental amounts more or less that transactions may far outweigh the that sponsors, even in those situations
supplemental payers and beneficiaries benefits. when retroactive enrollment is not an
would have paid if the correct LIS In the short-term, there are some issue, continue to be liable for claims
subsidy had been applied to the original adjustment-related activities that plans received after the end of the coverage
claim) outweigh the costs of developing can control and, consistent with our year as defined in § 423.308 and note
customized electronic transactions for authority in section 1860D–24(a)(1) of that while contract provisions regarding
such calculations. This is because while the Act, we can require that sponsors do timely claims filing may limit claims
some adjustments are from non- these better. Therefore, we are from network pharmacies, nonnetwork
subsidized to subsidized cost sharing, proposing the following revisions to pharmacies and beneficiaries must still
many others only change patient pay § 423.464: have the opportunity to submit claims
amounts after the Part D plan payment • Revising paragraph (a) to clarify for reimbursement without the
by a dollar or two, and many would not that all Part D sponsors must comply imposition of time limits by the Part D
change the beneficiary cost sharing at all with administrative processes and sponsor.
because the difference would be picked requirements established by CMS to Experience with Part D has shown
up by or owed to a supplemental payer. ensure effective coordination between there is benefit to be derived from
Thus, despite the importance of Part D plans and other providers of placing a time limit on claims
accurate reimbursement to all parties, prescription drug coverage for submission for Part D sponsor
the cost of developing specialized retroactive claims adjustments, coordination of benefits. In addition to
transactions may outweigh the benefits underpayment reimbursements and limiting sponsors’ financial liability, a
that would accrue. overpayment recoveries; and time limit would strengthen the ability
• Adding a paragraph (g)(7) to of SPAPs, other providers of
Some supplemental payers are address the sponsors’ responsibility to prescription drug coverage and other
cooperating in the exploration of a account for payments by SPAPs and payers, including beneficiaries to obtain
solution through NCPDP, for example, other providers of prescription drug payment for covered Part D drugs. We
certain SPAPs, but others continue to coverage in reconciling retroactive would likewise benefit from a COB time
close their claims filing window at 30 claims adjustments that create limit by enabling us to close our Part D
days and permit no further overpayments and/or underpayments, prescription drug databases.
coordination. Part D sponsors and/or as well as to account for payments In considering now establishing time
their claim processors are likewise made, and for amounts being held for limits on the submission of claims to
currently engaged with CMS through payment, by other individuals or Part D sponsors by beneficiaries and
NCPDP in examining the scope of the entities. The new paragraph also other payers of prescription drug
problem and exploring alternative specifies that Part D sponsors must have coverage for proper coordination of
approaches to retroactively and systems to track and report adjustment benefits, we note that the Medicare FFS
electronically adjust claims. However, at transactions and to demonstrate that— time limit for filing claims, as specified
this time, while simple adjustments ++ Adjustments involving payments in § 424.44, is December 31st of the
involving just the Part D sponsor and by other plans and programs providing following year for services furnished
the pharmacy are relatively prescription drug coverage have been during the first 9 months of a calendar
straightforward (and can and should be made; year and December 31st of the second
promptly transacted), those involving ++ Reimbursements for excess cost- following year for services furnished
other payers are not. Thus, we continue sharing and premiums for low-income during the last 3 months of the calendar
to hold the plans accountable for subsidy eligible individuals have been year. The time for filing will be
making best efforts to coordinate processed in accordance with the extended 6 months if the failure to file
benefits occasioned by claim requirements in § 423.800(c); and timely is due to an error or
adjustments, but we acknowledge that ++ Recoveries of erroneous payments misrepresentation by an employee,
electronic transaction standards have for enrollees have been sought as intermediary, carrier, or agent of the
not yet been developed to support specified in § 423.464(f)(4). Department. We also noted that States
timely, reliable, and precise have a 3-year time limit for seeking
coordination on adjusted claims when 13. Time Limits for Coordination of
recovery of Medicaid claims payments
multiple payers are involved. Therefore, Benefits (§ 423.466)
when the State is not the primary payer.
we will continue to work with the Currently, there is no statutory or Specifically, the Deficit Reduction Act
industry on methods to make best regulatory time limit for Part D sponsor of 2005 (Pub. L. 109–171) (DRA)
efforts in this area, including limiting coordination of benefits with SPAPs, strengthened the State Medicaid
other payer recoveries and other providers of prescription drug programs’ ability to obtain payment
reimbursements to imputed amounts coverage, or other payers. Current CMS from health insurers with which they
due to and from supplemental payers guidance as set forth in the need to coordinate benefits by adding
that choose to fully cooperate with Coordination of Benefits (COB) chapter section 1902(a)(25)(I) of the Act. The
industry consensus-driven processes of the Medicare Prescription Drug new section requires States to have laws
developed through NCPDP. We note Benefit Manual requires Part D sponsors in effect that require health insurers to
that amounts due to or from to establish at least a 90-day timely make payment as long as the claim is
beneficiaries must also be imputed in claims filing window and to make submitted by the State within 3 years
some of these situations. We are appropriate allowances for COB claims from the date on which the item or
soliciting comments on alternative on a case-by-case basis. Section 50 of service was furnished. This DRA
approaches to improving post- the COB chapter also requires sponsors, provision does not include SPAPs and,
adjudication coordination of benefits in retroactive enrollment situations, to therefore, does not impose a time limit
necessitated by retroactive Medicare coordinate benefits with other payers as on the requirement for Part D sponsors
enrollment and low-income subsidy required by the regulations at to coordinate benefits with SPAPs.
Having considered these filing limit 14. Use of Standardized Technology requirements of accurate TrOOP
precedents, we now propose to establish Under Part D (§ 423.120) accumulations, Part D benefit
a 3-year filing limit for Part D Section 1860D–4(b)(2)(A) of the Act, administration of multiple coverage
coordination of benefits with SPAPs, as codified in § 423.120(c), requires Part intervals, and coordination of benefits
other entities providing prescription D sponsors to issue (and reissue, as with other payers all necessitate online
drug coverage, and all other payers, appropriate) a card or other technology real-time adjudication of individual
including beneficiaries or other that may be used by an enrollee to pharmacy claims. Furthermore, since
individuals or entities paying, or assure access to negotiated prices under July 1, 2005, we have stated that we
holding amounts for payment, on the section 1860D–2(d) of the Act. Section expect that Part D plan sponsors will
beneficiaries’ behalf. Specifically, we 1860D–4(b)(2)(B) of the Act requires us establish policies and procedures
propose to revise new § 423.466 by to provide for the development, appropriately restricting the use of
adding a new paragraph (b) that would adoption, or recognition of standards paper claims to those situations in
relating to a standardized format for the which on-line claims processing is not
establish a 3-year time limit on Part D
card or other technology that are available to the beneficiary at the point
coordination of benefits. That is, we
compatible with the administrative of sale in order to promote accurate
propose to require Part D sponsors to TrOOP accounting, as well as to
coordinate benefits with SPAPs, other simplification requirements of Title XI
of the Act and to consult with the minimize administrative costs to the
entities providing prescription drug Part D plans and the Medicare program
coverage, and other payers for a period NCPDP and other standard setting
and reduce opportunities for fraudulent
not to exceed 3 years from the date on organizations, as appropriate. In
duplicative claim reimbursements. We
which the prescription for the covered accordance with section 1860D–
are now proposing at section
Part D drug was filled. By adding this 4(b)(2)(B) of the Act, we consulted with
423.120(c)(3) to require Part D sponsors
provision to the regulation, we clarify NCPDP and subsequently issued
to contractually mandate that their
timely filing responsibilities and guidance adopting NCPDP’s ‘‘Pharmacy
network pharmacies submit claims
deadlines for all beneficiaries and ID Card Standard’’, which is based on
electronically to the Part D sponsor or
payers, as well as place a limit on Part the American National Standards
its intermediary on behalf of the
Institute (ANSI) INCITS 284–1997
D sponsors’ claims payment liabilities beneficiary whenever feasible unless the
standard entitled ‘‘Identification Card- enrollee expressly requests that a
and coordination of benefits
Health Care Identification Cards’’, as the particular claim not be submitted to the
responsibilities.
standard for identification cards for the Part D sponsor or its intermediary.
We are proposing this requirement Part D program. Information required in We are proposing to codify this
consistent with our authority under the Pharmacy ID Card Standard guidance in regulation at this time
sections 1860D–23(a)(2) and 1860D– includes billing identifiers necessary to because we have been made aware of an
24(a)(1) of the Act to establish direct online real-time transactions to increasing number of instances in which
requirements to ensure effective the appropriate online processor to network pharmacies are not submitting
coordination among Part D plans, enable real-time adjudication of the pharmacy claims to Part D Sponsors on
SPAPs, and other providers of prescription drug claim at point of sale. behalf of Part D enrollees. Generally, we
prescription drug coverage, and Our current regulations and guidance believe it is in the best interest of Part
consistent with our general rulemaking specifically address the requirement for D enrollees to have their claims
authority under section 1871(a) of the Part D sponsors to issue (and reissue, as consistently processed through the Part
Act. Experience since the appropriate) standardized cards that D sponsor (or its intermediary). Not only
implementation of Part D has may be used by an enrollee to ensure does processing claims through the Part
demonstrated that the ability of both access to negotiated prices under D sponsor ensure access to Part D
CMS and the sponsors to manage our section 1860D–2(d) of the Act. The only negotiated prices, but it also ensures
respective responsibilities in way that an enrollee can be assured that proper concurrent drug utilization
administering the program is access to the negotiated price at the review (including safety checks) is
complicated by the absence of any time point of sale is through online performed (as required under 1860D–
limit for coordination of benefits. Part D adjudication of the prescription drug 4(c) of the Act). Only the plan can
claim. Any other price available to the conduct accurate concurrent drug
sponsors face open-ended financial
beneficiary at the point of sale, as for utilization review when multiple
liability for continued benefit
instance, the pharmacy’s ‘‘cash price’’, pharmacies are utilized by the
coordination and must project and
cannot be deemed to be the negotiated beneficiary or prevent payment to
include the costs of future liabilities in price mandated under section 1860D–
their bids. We also incur the expense of excluded providers. Online, real-time
2(d) of the Act. Therefore, to ensure processing also facilitates accurate
keeping our databases open to continue access to these negotiated prices, the accounting for enrollees’ true out-of-
to accept prescription drug event data billing information on the cards must be pocket (TrOOP) and total drug costs by
for the purpose of reopening Part D used by the pharmacies at which the Part D sponsor so that each claim is
payment determinations to account for beneficiaries fill their prescriptions to processed in the appropriate phase of
claims received by Part D sponsors from submit claims to an enrollee’s Part D the benefit and accurate cost sharing
SPAPs, other entities providing sponsor (or its intermediary). Beginning assessed. In addition, a Part D sponsor
prescription drug coverage, and other with the COB requirements originally cannot coordinate benefits with other
payers after the end of the coverage issued on July 1, 2005, as required by payers as required under sections
year. We believe that a 3-year limit section 1863D–23(a)(1) of the Act, and 1860D–23 and 1860D–24 of the Act if it
provides more than ample time for subsequently maintained as Chapter 14 never receives the claim.
beneficiaries to seek reimbursement of of the Prescription Drug Plan Manual, We also propose to add a new
out-of-network and other paper claims, we have instructed plan sponsors to paragraph (2) to § 423.120(c) to codify
as well as sufficient time for process all claims online real-time (see our existing guidance that Part D
coordination of benefits activities to section 50.4 entitled, ‘‘Processing sponsors utilize standard electronic
take place among payers. Claims and Tracking TrOOP’’. The transactions established by 45 CFR
162.1102 for processing Part D claims. D enrollees to have their claims cost generic drugs at many Part D
We will issue guidance on the use of electronically submitted at the point of network pharmacies.
optional or conditional fields in the sale by pharmacies to the Part D sponsor It is important to distinguish between
HIPAA standard transactions through (or its intermediary), but recognize there a lower pharmacy price that is the
the Call Letter and Prescription Drug are situations when this will not be pharmacy’s U&C price versus a lower
Benefit Manual instructions. We feasible or warranted. The most obvious pharmacy price that is a non-U&C
routinely work with NCPDP and example involves prescriptions filled at special discounted price. As our ‘‘lower
industry representatives in arriving at out-of-network pharmacies when Part D cash price’’ policy describes, an enrollee
recommendations for standardized use enrollees generally must pay out of would need to pay out of pocket and
of such fields when necessary to pocket and submit paper claims for submit for reimbursement if the
improve administration of the Part D reimbursement from the Part D sponsor. pharmacy’s lower price is not its U&C
benefit. Previous examples of such Another example involves situations price because the pharmacy will not
guidance include those described in when network pharmacies offer special submit that price to the Part D sponsor
sections 50.4 and 50.5 of Chapter 14 of (or its intermediary). However, if the
discount prices that are lower than plan
the Prescription Drug Benefit Manual on pharmacy submits a U&C price that is
negotiated prices. If this discounted
‘‘Processing Claims and Tracking lower than a Part D sponsor’ negotiated
price is not a pharmacy’s usual and
TrOOP’’ and ‘‘Standardized Claims price, the enrollee will pay the lesser of
customary (U&C) price, we understand the Part D sponsor’s negotiated price or
Messaging’’, respectively. Such
that the pharmacy may not offer it to the the pharmacy’s U&C price. Therefore,
instructions are consistent with the
Part D sponsor (or its intermediary) for the enrollee is better off when the
rules governing use of HIPAA
transactions whereby use of optional claims processing. In these situations, pharmacy submits the claim to the Part
and conditional fields is governed by we have articulated a ‘‘lower cash D sponsor (or its intermediary) because
contractual terms between trading price’’ policy whereby the enrollee may the enrollee will pay the lower
partners. pay the pharmacy in full and submit a pharmacy price and have the dollar
In a related matter, we are interested paper claim for reimbursement so that amounts reflected in their TrOOP and
in better understanding the impact of a the costs will be counted towards his or total drug spend balances.
requirement for Part D sponsors to her total drug spend and TrOOP Finally, we are concerned that
establish uniquely identifiable Part D balances. Finally, we also recognize that sometimes enrollees are not aware that
payer/processor and enrollee enrollees may have personal reasons for claims are not being processed through
identification numbers in billing and not wanting specific prescription claims their Part D sponsor. We believe this can
other coordination of benefits-related processed through their Part D sponsor occur when pharmacies mistakenly
transactions. We have learned that not (or intermediary) and we uphold the believe that processing the claim
all processors organize their enrollment enrollees’ right to make such decisions. through the Part D sponsor will result in
data this way, and some may rely upon In situations such as the last two the enrollee paying a higher Part D
other data such as person codes or dates examples, our proposed requirement sponsor negotiated price or because the
of birth to distinguish between two now clarifies that the enrollee must pharmacy deliberately does not want to
enrollees (such as spouses) with a single expressly request that a particular claim incur transaction costs when the
identification number (‘‘RxID’’). This not be submitted to the Part D sponsor enrollee will be paying the pharmacy
practice complicates coordination of or its intermediary for processing. That U&C price regardless. Our new
benefits activities with other parties is, the beneficiary should of his or her requirement makes it clear that Part D
when unique identifiers are necessary. own initiative request that the claim not sponsors must contractually require
We have also learned that pharmacies be submitted to the Part D plan, and this their network pharmacies to submit
cannot routinely distinguish Medicare decision must neither be solicited nor claims to the Part D sponsor (or its
Part D claims from other types of assumed by the pharmacy. intermediary) whenever feasible unless
prescription drug coverage when the the enrollee expressly requests that such
While the previous examples explain claims not be submitted. We believe this
same routing information (‘‘RxBIN and
why some pharmacy claims for Part D requirement will help to ensure that
RxPCN’’) is used for all lines of business
enrollees legitimately will not be Part D enrollees always have access to
managed by a single processor. If
processed through the Part D sponsor critical safety checks, as well as Part D
pharmacies cannot consistently
distinguish Part D claims, they cannot (or its intermediary), we are concerned negotiated prices and that their TrOOP
ensure that Part D claims and about other reasons why network and total drug spend balances
beneficiaries are handled in accordance pharmacies may be failing to submit accurately reflect their Part D
with Part D-specific policies and claims to Part D sponsors (or their expenditures.
procedures. Consequently we are intermediaries). Most notably, we are
concerned that enrollees, their 15. Absence From Service Area for More
proposing to add a new paragraph (c)(4)
pharmacists or both incorrectly believe Than 12 Months Under Part D (§ 423.44)
in § 423.120 to require that sponsors and
their intermediary processors establish that the enrollee will always pay their Section 1860D–1 of the Act
and exclusively utilize unique RxBIN or Part D sponsor’s higher negotiated price establishes eligibility criteria for
‘‘RxBIN/RxPCN combinations’’ to in situations when the pharmacy has a enrolling in a PDP plan or an MA–PD
identify all Medicare part D member lower price. In many cases, this is plan. In accordance with section
claims, as well as to assign unique illustrated by the enrollee submitting a 1860D–1(a)(3) of the Act, a ‘‘Part D
‘‘RxID’’ identifiers to individual Part D paper claim after having paid cash at a eligible individual’’ is defined as an
beneficiaries. We solicit comments on network pharmacy even though the individual who is entitled to or enrolled
the operational issues and timelines that enrollee would have received the same in Medicare benefits under Part A or
would be involved in making these price if the claim was processed through enrolled in Part B. In order to enroll in
proposed technical changes to claims the Part D sponsor (or its intermediary) a PDP, the individual must reside in the
processing systems. by the network pharmacy. We believe plan’s service area, and cannot be
As stated previously, we generally there may be confusion resulting from enrolled in an MA plan, other than an
believe it is in the best interest of Part the increasing availability of very low MSA plan or PFFS plan that does not
provide qualified prescription drug 16. Prohibition of Mid-Year Mass a rare but exceedingly disruptive
coverage. Enrollment Changes by SPAPS Under practice, and require large enrollment
Section 1860D–1(b)(1)(B) of the Act Part D (§ 423.464(e) changes to be made on a calendar year
generally directs us to use disenrollment Section 1860D–23(b) of the Act basis only. We note that individual
rules similar to those established under defines a SPAP as a State program that members of qualified SPAPs (or the
(1) provides financial assistance for the State acting as the authorized
section 1851 of the Act. We applied the
purchase or provision of supplemental representative of individual members)
provisions of section 1851(g)(3) of the
prescription drug coverage or benefits will continue to have Special
Act that provide authority for the basis
on behalf of part D eligible individuals; Enrollment Periods (SEP), as provided
of terminations for MA plans, which are in the current CMS guidance, for case-
codified in § 422.74. The disenrollment (2) when determining eligibility and the
amount of assistance to Part D eligible by-case enrollment actions.
provisions for PDPs are outlined in In addition to beneficiary disruptions,
§ 423.44. individuals under the Part D program,
our actuaries have determined that there
provides assistance to such individuals
Under the current MA and PDP rules are significant financial disparities
in all Part D plans and does not
at § 422.74 and § 423.44, respectively, among the Part D plans related to mass
discriminate based upon the Part D plan
individuals who are out of the service mid-year plan enrollment changes. The
in which the individual is enrolled; and
area for more than 6 months will be source of the disparity is the front-
(3) satisfies the requirements of other
disenrolled. There is an exception for loading of plan liabilities in the annual
provisions in section 1860D–23 of the
MA plans that offer visitor or traveler bid due to the unique benefit structure
Act, like Medicare as primary payer.
benefits which allows a temporary of Part D program, including the
Section 1860D–23(a)(1) of the Act coverage gap. Specifically, plans that
absence from the service area for up to provides that the Secretary has the
12 months. However, given the inherent have beneficiaries early in the year are
authority to establish requirements for likely to incur expenses attributable to
difference between PDPs and MA plans Part D sponsors to ensure the effective
(in particular, the range of services each the initial coverage period, the portion
coordination between a Part D plan and of the benefit that includes 75 percent
provides) we believe that it may not be an SPAP. Included among those
appropriate or necessary to apply the coverage. Plans that have beneficiaries
requirements are enrollment file later in the year are more likely to have
disenrollment requirements established sharing, claims processing and payment, beneficiaries during the coverage gap
under MA in the same way for PDPs. claims reconciliation, application of the portion of the benefit, which requires
The 6-month limit on the length of time out-of-pocket expenditures, and other 100 percent beneficiary cost-sharing and
an MA enrollee may be out of the administrative processes set by the no plan payment obligation in most
service area before being disenrolled is Secretary. In order to coordinate cases. Because the funding of the benefit
based in large part on the inability of the effectively with Part D sponsors, we is uniform over the entire plan year,
enrollee to access the full range of permit SPAPs to conduct large volumes plans that lose beneficiaries mid-year
medical services while out of the plan of enrollments (sometimes referred to as are more likely to incur losses (the
service area. However, Part D benefits ‘‘mass enrollments’’) consistent with our premiums associated with these
generally can be accessed through a nondiscrimination guidance (see beneficiaries after the initial coverage
national pharmacy network, which can Chapter 14 of the Medicare Prescription period), and plans that acquire
serve individuals effectively regardless Drug Benefit Program Manual). Most beneficiaries mid-year from other Part D
of whether they are in their PDP region SPAPs perform these mass enrollments plans are more likely to experience
of residence. Thus, the same out-of-area on a calendar year basis for all its gains (due to the beneficiaries enrolling
time limit for PDPs may not be members who have not chosen a Part D during the gap in coverage) that in
necessary, as long as there are specific plan; however, some SPAPs have neither case have been anticipated in
assurances from the PDP that chosen to perform these enrollments on the plan’s bids. This inequitable result
individuals will have access to PDP a noncalendar year basis. In these demonstrates the importance of having
benefits while out of the area (provided situations, Part D sponsors have found a policy in place that minimizes mass
the individual remains in the United that substantial disenrollment of large mid-year plan changes.
States). For example, a PDP may have numbers of SPAP members from one
plan, followed by mass enrollment into 17. Nonrenewal Beneficiary Notification
shared computer systems with PDPs in Requirement Under Parts C and D
other regions or have a network of another during the calendar year
significantly affects their financial (§ 422.506, and § 423.507)
pharmacies in other regions (or
nationwide) that would provide operations. Section 1857(a) of the Act provides
immediate access to prescription drugs We believe that mass re-enrollment the Secretary with the authority to enter
outside of the region on the same basis into a new plan mid-year disrupts any into contracts with MA organizations,
as pharmacies within the enrollee’s continuity of care the beneficiary has and section 1860D–12(b)(1) of the Act
established with his other current Part provides the Secretary with the
region of residence.
D plan, and introduces transition risks authority to enter into contracts with
Therefore, given the nature of the Part such as drugs not being covered by the PDP sponsors. Additionally, sections
D benefit and the strong likelihood that member’s new plan, or requiring the 1857(c)(1) and 1860D–12(b)(3)(B) of the
a PDP enrollee can access the full range member to change his or her pharmacy Act grant the Secretary the authority to
of PDP benefits while out of the service that are not outweighed by any renew contracts. In accordance with the
area, we are proposing to amend administrative convenience to the above-referenced authority, we have
§ 423.44 to allow a temporary absence SPAP. Therefore, given these concerns, issued contracting regulations including
from the PDP plan service area for up to we are proposing, under our authority § 422.506 of the MA regulations, and
12 months before disenrollment would described above, to add a requirement to § 423.507 of the Part D regulations
be mandatory. We believe 12 months is § 423.464(e) to prohibit mid-year mass which provide for the nonrenewal of a
an appropriate time frame because it is enrollment changes by SPAPs. We contract.
consistent with the time frame for MA believe this revision would deter any Nonrenewals of MA or PDP contracts
plans’ visitor or traveler benefits. SPAPs from engaging in what has been require the MA organization, the Part D
sponsor, or CMS to notify both the reason, we propose deleting requirement to § 423.590, although a
enrollees of the organization or sponsor § 422.506(a)(2)(iii) and (b)(2)(iii) of the parallel instruction is contained in our
and the general public of the MA regulations and § 423.507(a)(2)(iii) subregulatory guidance in Chapter 18 of
nonrenewal. Existing regulations require and (b)(2)(iii) of the Part D regulations the PDP manual. Therefore, we propose
notification 60 days prior to the to remove the requirement that the to reconcile this discrepancy by adding
effective date of the nonrenewal for general public be informed of the new § 423.590(d)(2). Consistent with the
notification both to enrollees and to the impending nonrenewal through the requirements in § 422.590(d)(3), new
general public. The effective date of publication of newspaper notices. § 423.590(d)(2) will allow Part D plan
contract nonrenewals in the MA and sponsors to make the initial notice of a
18. Notice of Alternative Medicare Plans
PDP programs is January 1st of each completely favorable expedited
Available To Replace Nonrenewing
calendar year. We propose to change the redetermination orally, so long as a
Plans Under Parts C and D
requirement for notification to enrollees written confirmation of the fully
(§ 422.506(a)(2)(ii) and
from an ‘‘at least 60 day requirement’’ favorable decision is mailed to the
§ 423.507(a)(2)(ii))
to an ‘‘at least 90 day requirement’’, as enrollee within three calendar days of
it was prior to January 1, 2009. To allow additional operational the oral notice.
Changing the requirement for the flexibility, we also propose to change We also propose in § 423.590(d)(2) to
personalized beneficiary specific CMS- the requirement for PDP sponsors and allow Part D plan sponsors to make the
approved notice to at least 90 days MA organizations to provide written initial notice of an adverse expedited
provides beneficiaries with an increased notification of the alternative Medicare reconsideration orally, so long as a
notice period giving beneficiaries more plans available to replace the written confirmation of the decision is
time to choose a new Medicare plan nonrenewing plan. We propose mailed to the enrollee within three
prior to the start of the new benefit year. changing the requirement to include the calendar days of the oral notice. We also
When we changed the required notice option of either providing a written list propose to add a cross reference to
period to 60 days, we did so primarily of alternatives available, or placing paragraphs § 422.590(d)(1) and (d)(2) in
to provide adequate time for the appeals outbound calls to all affected enrollees paragraph (g) in order to apply the
process to conclude prior to the start of to ensure beneficiaries know whom to written notice requirements in
the next calendar year; however, our contact to learn about their enrollment paragraph (g) to adverse expedited
recent experience has indicated that the options. We believe this change will be redetermination decisions. We
advantageous for beneficiaries because, recognize that the MA reconsideration
vast number of nonrenewals are
depending on where the beneficiary notice provisions at § 422.590(d)(5) and
voluntarily elected by the PDP sponsor
resides, a listing of available plan (e) do not provide explicit instructions
or MA organization, so there is rarely a
options is often very long and may be regarding how MA organizations are to
need to accommodate the appeals
too overwhelming for the beneficiary to notify MA enrollees of adverse
process. For this reason, we propose
use appropriately. A much more useful expedited reconsideration decisions.
revising § 422.506(a)(2)(ii) and (b)(2)(ii)
approach would be to provide However, given the expedited status of
of the MA regulations and
beneficiaries with contact information these requests, we believe adding these
§ 423.507(a)(2)(ii) and (b)(2)(ii) of the
and resources for identifying the most two proposed notice requirements to the
Part D regulations to change the
appropriate option given their unique, Part D expedited redetermination
beneficiary notice requirement from at individual circumstances. For this process is in the enrollee’s best
least 60 days to at least 90 days. reason, we propose revising interests. Additionally, because adverse
We also propose removing the current § 422.506(a)(2)(ii) of the MA regulations redetermination decisions are not
requirement for nonrenewing plans (in and § 423.507(a)(2)(ii) of the Part D automatically forwarded to the Part D
voluntary nonrenewal situations) and regulations, to provide the option of Independent Review Entity, Part D
for us (in CMS-initiated nonrenewal sending written notices of all available enrollees need to receive clear
situations) to provide notice to the alternatives or placing outbound information about the right to appeal
general public by publishing a notice in beneficiary calls to ensure beneficiaries and the procedures for appealing. We
one or more newspapers of general know whom to contact to learn about note that these two proposals are
circulation concerning the impending their enrollment options. In either case, consistent with our subregulatory
nonrenewal. This change is motivated as discussed earlier in this section, a guidance and the process for notifying
by the cost of newspaper advertisements personalized CMS-approved beneficiary enrollees of expedited adverse coverage
and the declining rate of newspaper notice regarding the nonrenewal still determination decisions in § 423.572(b).
circulation, weighed against the very must be sent to each beneficiary. Similarly, § 423.590(a)(1) requires a
limited benefit gained from notice to the plan sponsor to send an enrollee written
general public who is minimally, if at 19. Timeframes and Responsibility for notice of a completely favorable
all, affected by the nonrenewal. Also, Making Redeterminations Under Part D decision for benefits; however, the
non-renewal information is now easily (§ 423.590) regulations do not specify the content of
available to the general public through In accordance with section 1860D– that notice. Consistent with the statute,
Internet web sites maintained by us (for 4(g) of the Act, the Part D § 423.590(a)(1) mirrors the parallel
example, http://www.Medicare.gov), a redetermination notice provisions in provision at § 422.590(a)(1). However,
resource not available to the public § 423.590 largely mirror the MA for the same reasons outlined in the
when the newspaper notice requirement reconsideration notice provisions in discussion above in this section, we
was first adopted. We believe that the § 422.590. There is one notable believe incorporating notice
requirement to provide personalized exception—§ 422.590(d)(3) allows MA requirements for the Part D standard
nonrenewal information to plan plans to make the initial notice of a reconsideration notice provisions does
enrollees is sufficient to ensure completely favorable expedited not conflict with the related MA
adequate nonrenewal notice to the reconsideration orally, so long as a provisions, and will provide an
beneficiaries that are being nonrenewed, written confirmation is mailed to the important beneficiary protection that
the population that is most directly enrollee within 3 calendar days of the will ensure continuity of care for
affected by the nonrenewal. For this oral notice. We did not carry over this Medicare beneficiaries who are
obtaining refills of prescription drugs its meaning and purpose by removing disclosed by the plan, such as through
under Part D. Therefore, we propose to the phrases ‘‘if the enrollee believes that the organization’s Web site, pre-
add § 423.590(h) to establish the form continuation of the services is medically enrollment materials, or separate letter
and content requirements for necessary’’ and ‘‘if an enrollee disagrees to enrollees, and the timing and content
completely favorable redetermination with an MA organization’s decision to’’. of that disclosure, are subject to CMS
decisions, and propose making those Regardless of an enrollee’s decision review and approval. The language we
notice requirements applicable to whether to appeal as a result of this are proposing is not intended to limit
redeterminations issued under discontinuation or reduction, the key these required disclosures to particular
paragraph (a)(1). We also propose to purpose of these provisions was to times of the year when beneficiaries
reference paragraphs (d)(1) and (d)(2) in ensure that enrollees received an would ordinarily be able to make
paragraph (h), so the proposed form and explanation of the plan’s decision and changes or elections (for example, AEP
notice requirements in paragraph (h) their rights if they choose to appeal the or OEP). We believe that this kind of
will apply to completely favorable determination. Therefore, we propose transparency will provide additional
expedited redetermination decisions. removing the language noted above from incentives for sponsoring organizations
§ 422.566(b)(4) and § 422.568(c). to make improvements to their
20. Requirements for Requesting
operations and also provide relevant
Organization Determinations Under Part 22. Representatives (§ 422.561,
information to beneficiaries and the
C (§ 422.568) § 422.574, and § 422.624)
public concerning plan choices. We
Section 1852(g)(3) of the Act allows For various reasons, enrollees may solicit comment on these regulatory
an enrollee to request an expedited choose or need to have someone provisions. In particular, we solicit
organization determination either orally represent them in the appeals process in comment on whether these disclosure
or in writing. However, the method for order to protect their interests. requirements should be imposed only in
requesting a standard determination is Presently, under sections 1852(f) and (g) those circumstances where a beneficiary
not addressed in either the Act or the of the Act, a representative may act on would be afforded the opportunity to act
implementing regulations at § 422.568. behalf of an enrollee or other party on them (for example, requiring
Both beneficiary advocates and MA when filing a grievance. However, disclosure during the particular times of
plans have voiced concern about the existing § 422.561 does not explicitly year when beneficiaries would
absence of express regulatory authority permit the filing of grievances by ordinarily be able to make change or
allowing enrollees to request standard representatives unlike the elections, except in those situations
organization determinations both orally corresponding Part D regulation. In where the compliance deficiency is so
and in writing. Therefore, we propose order to rectify this and be consistent significant that a beneficiary may be
adding specific language in § 422.568 with the Part D definition of afforded a special enrollment
allowing oral requests for organization representative at § 423.560, we propose opportunity).
determinations, except where the to amend § 422.561 to clarify that a
request is for payment. representative may act on an enrollee’s 24. Definition of MA Plan Service Area
behalf with respect to the grievance (§ 422.2)
21. Organization Determinations Under
process. Section 1851(b)(1)(A) of the Act
Part C (§ 422.566 and § 422.568)
provides that Medicare beneficiaries are
Section 1852(g)(1)(A) of the Act 23. Disclosure Requirements Under
eligible to enroll in an MA plan only if
requires MA organizations to have a Parts C and D (§ 422.111(g) and
they reside in the geographic area
procedure for making determinations § 423.128(f))
served by the MA plan, that is, the
regarding whether an enrollee is entitled Section 1857(a) of the Act provides ‘‘service area.’’ An MA plan’s ‘‘service
to receive health services or payment the Secretary with the authority to enter area’’ is currently defined in § 422.2 and
under the program. In accordance with into contracts with MA organizations, the definition expressly requires
section 1852(g)(1)(A) of the Act, and section 1860D–12(b)(1) of the Act organizations to meet access standards,
§ 422.566 and § 422.568 establish the provides the Secretary with the in accordance with access standards in
requirements related to organization authority to enter into contracts with § 422.112.
determinations and notices. Existing PDP sponsors. Currently, § 422.111 and One question that has been posed to
§ 422.566(b)(4) specifies that an § 423.128 provide specific requirements us is whether incarcerated individuals
organization determination includes a on information that must be disclosed to are eligible to join an MA plan,
determination resulting in enrollees, either at specific designated especially an MA plan that does not
‘‘[d]iscontinuation or reduction of a times, or upon request. We are offer Medicare prescription drug
service if the enrollee believes that proposing at § 422.111(g) and coverage. Note that the definition of
continuation of the services is medically § 423.128(f) to state that we may require service area for a Part D plan (§ 423.4)
necessary.’’ (emphasis added). a sponsoring organization to disclose to already excludes a jail or prison within
Similarly, under § 422.568(c), the plan its enrollees and potential enrollees the boundaries of the Part D plan service
must give the enrollee a written notice information concerning the sponsoring area, given that beneficiaries in jail or
of the determination ‘‘if an enrollee organization’s performance and contract prison do not have access to pharmacies
disagrees with the MA organization’s compliance deficiencies in a manner as required under § 423.120. It is a
decision to discontinue or reduce an specified by CMS. This disclosure may logical conclusion that incarcerated
ongoing course of treatment.’’ (emphasis be required when a sponsoring beneficiaries similarly would not have
added). organization is sanctioned, or when a access to MA plan services, as required

Both of these provisions have at times sponsoring organization’s compliance under § 422.112. Therefore, such an area
been read to imply that the existence of and/or performance deficiencies rise to could not meet the MA service area
an organization determination, and the a certain level, such that we determine definition, which requires that such
associated notice requirements, were it is necessary for the sponsoring access standards be satisfied.
tied to the enrollee’s ‘‘belief’’ or organization to notify its existing and Additionally, there is no reason for an
‘‘disagreement.’’ Therefore, we propose potential enrollees of these deficiencies. individual to enroll in an MA plan
changing this language to better reflect The vehicle by which the information is while incarcerated, since basic health
care services typically are furnished by reduce the number of offerings from streamlining and simplifying the plan
the jail or prison. Similarly, it would not PDP sponsors as well as to convey selection process.
be appropriate for an MA organization information about Part D plan benefit Half of all Medicare beneficiaries have
to receive monthly payments for such designs in ways that are meaningful and over 40 MA plan choices (this figure
an individual, since medical services understandable to beneficiaries. For does not include special needs plans or
typically would be covered for the example, we provide information about employer group health plans which
individual by the facility in which the the various local MA plan and PDP have additional criteria for enrollment),
individual is incarcerated. Such options available to beneficiaries in the and many states offer 50 or more stand
payments would represent an health plan charts included in the alone Part D plans, a number that can
unwarranted windfall for services the annual Medicare & You publication. double when one includes Medicare
MA organization would not have to, and Because there are practical limitations Advantage plans with a Part D benefit.
could not, deliver. Therefore, we are to the display of detailed comparative Several studies suggest that the MA and
proposing to amend the definition of an information in a print format, we also Part D program offerings are so
MA plan ‘‘service area’’ at § 422.2 to provide comparative plan information numerous that they can be confusing. In
exclude facilities in which individuals through other vehicles. We post a report by Marsha Gold of Mathematica
are incarcerated. landscape files to our Web site (see Policy Research, Inc., for example, Gold
http://www.cms.hhs.gov/ writes of the MA program that ‘‘Existing
C. Changes To Provide Plan Offerings
PrescriptionDrugCovGenIn/) that research suggests that simplification
With Meaningful Differences
provide more detailed comparative may have advantages for beneficiaries,’’
This section addresses proposed information, such as information about
changes to our regulations designed to and that one such advantage is
benefit type and, for Part D, whether the preventing competitors to take
foster plan offerings with meaningful plan has a $0 premium with full LIS
differences. One of the underlying advantage of the system ‘‘through
subsidy, and a description of any gap product design.’’ 5 In his study, ‘‘How
principles in the establishment of the coverage provided. This information is
Medicare Part D prescription drug Much Choice is Too Much? The Case of
geared more toward beneficiary
benefit and the revisions to the the Medicare Prescription Drug
advocates and researchers than
Medicare managed care program Benefit,’’ T. Rice argues, based on Part
beneficiaries.
resulting from the MMA was that both In addition, because a static D beneficiary studies that he and others
market competition and the flexibility description of plan benefits design in the field have conducted, that ‘‘The
provided to MA organizations and Part features does not suffice to allow results show that decision quality [of
D sponsors in the statute would result meaningful comparisons between drug seniors’ ability to choose plans with the
in the offering of a broad array of cost- plans, we also design and maintain the lowest annual total cost] deteriorated as
effective health and prescription drug Medicare Options Compare (MOC) and the number of plans increases.’’ 6
coverage options for Medicare the Medicare Prescription Drug Plan As part of our goal of streamlining
beneficiaries. Indeed, in the several Finder (MPDPF) Web tool. These Web and simplifying the plan selection
years since implementation of the tools allow beneficiaries to customize process for beneficiaries, we are also
MMA, private health plans have taken their comparisons based on their proposing to revise the nonrenewal
full advantage of the opportunity to particular needs and thus compare plan regulations to expressly provide as a
offer a wide array of health care plans benefit packages in a meaningful way. ground for nonrenewal the fact that an
and prescription drug benefit packages For example, the MPDPF allows MA or Part D plan has failed to attract
to Medicare beneficiaries. As a result, beneficiaries or their representatives to more than a small number of enrollees
since 2006, Medicare beneficiaries develop customized comparisons that over a sustained period of time. In
throughout the United States have had are sensitive to a beneficiary’s drug deciding whether to nonrenew a plan on
available to them a multiplicity of regimen, as well as tolerance for generic this basis, we would expect to consider
health care and prescription drug and therapeutic substitutes. Our goal in arguments as to why such low
options offered by a substantial number maintaining this tool is to strike a enrollment would be defensible in a
of private sector entities. We continue to balance between the desire to provide as particular situation (for example, the
support the concept of offering a wide much information as possible to plan provides a benefit structure that is
variety of health plan and prescription beneficiaries yet only provide extremely important to its enrollees,
drug coverage choices for Medicare information that is useful in making despite the fact that they are small in
beneficiaries consistent with our appropriate drug plan choices. We number).
commitment to afford beneficiaries continue to look for ways to improve In this section, we discuss our
access to high value health care. this tool and make information more proposed revisions to both the bid
However, based on several years of understandable to beneficiaries and submission and review processes and
experience with the MA and Part D welcome comments in this area. the nonrenewal regulations. We believe
programs, we have learned that Ensuring that Part C and D sponsors these proposed revisions will help us
although beneficiaries need access to a offer substantially different plan accomplish the balance we wish to
variety of alternative plan options, options, as the proposed regulatory strike with respect to encouraging
benefit packages must represent changes discussed below are intended competition and providing health plan
significant differences to ensure to do, will further maximize and PDP choices to beneficiaries that
meaningful choices. As noted opportunities for beneficiaries to select represent meaningful choices in benefit
previously, we have attempted to work benefit packages that meet their packages. Table 3 outlines these
with Part D sponsors since 2006 to particular needs, while also proposed revisions.
5 Gold, Marsha. Strategies for Simplifying the 6 Rice, T. Reducing the Number of Drug Plans for Studies. Presentation at Academy of Health Annual
Medicare Advantage Market. Publication prepared Seniors: A Proposal and Analysis of three Case Research Meeting: Washington, DC. June 9, 2008.
for the Kaiser Family Foundation. July, 2009.
TABLE 3—PROVISIONS TO ENSURE MEANINGFUL DIFFERENCES IN PLAN OFFERINGS

Part 422 Part 423
Provision
Bid Submissions: Ensuring Significant Differences Subpart F ... § 422.254 ................................... Subpart F ... § 423.265.
Bid Review Process ................................................ Subpart F ... § 422.256 ................................... Subpart F ... § 423.272.
Transition Process in Cases of Acquisitions and Subpart F ... § 422.256 ................................... Subpart F ... § 423.272.
Mergers).
Non-renewing Low-enrollment Plans ...................... Subpart K .. § 422.506(b)(1)(iv) ..................... Subpart K .. § 423.507(b)(1)(iii).
1. Bid Submissions—Ensuring We do not propose to specify in and B services out of network.

Significant Differences (§ 422.254 and regulations text specific benefit package Similarly, a network private FFS plan
§ 423.265) requirements or enrollment thresholds. and a PPO plan could also be viewed as
Consistent with our authority under Rather, it is our goal to permit MA similar plan offerings given the
section 1857(e)(1) of the Act, organizations and PDP sponsors similarity in the access to services rules
incorporated for Part D by section maximum flexibility to create plans between these two MA plan types.
1860D–12(b)(3)(D) of the Act, to with meaningful differences and, where With respect to Part D plans, we
establish additional contract terms and warranted, to permit low enrollment would continue to focus our analysis on
our authority under section 1860D– plans to continue to operate when it is whether there are significant differences
11(d)(2)(B) of the Act to propose in the best interest of the program and in proposed beneficiary out-of-pocket
regulations imposing ‘‘reasonable of Medicare beneficiaries. We would costs as a result of the deductible
minimum standards’’ on Part D issue guidance about the overall amounts (for example, $0 deductible
sponsors, we propose to amend process, including the criteria for versus a $310 deductible) and cost share
§ 422.254(a)(4) and § 423.265(b) to meaningful plan offerings and or coinsurance (for example, a $20 cost
specify that, when submitting bids to assessment of such offerings, in the share versus a $45 cost share for
contract as an MA organization or Part annual Part C and D Call Letter. With preferred brand drugs). We also would
D plan sponsor for the following this in mind, with respect to Part C, we evaluate plan formularies (for example,
contract year, MAOs and Part D would consider meaningful differences a 25 percent difference in the number of
sponsors must ensure that they submit among plans offered by an MAO in a unique generic entities offered on the
bids for multiple plans in the same area service area, as determined by CMS, to plans’ formularies). These factors are the
only if those plans have significant include a mix of plan types (for most significant considerations that are
differences from each other in terms of example, HMO, PPO, private FFS, or applicable to all benefit types. We
key benefit or plan characteristics such MSA plan), significant differences in solicit comment on how big the
as premiums, cost-sharing, formulary plan benefit packages (the offering of a differences between plan offerings need
structure, or benefits offered. Part D benefit or a significant Part B to be in order to be ‘‘meaningful’’ to
By proposing this change to our buy-down, for example), or significant beneficiaries. For example, is there a
existing regulatory requirements differences in premiums or cost-sharing meaningful difference between an
regarding submission, review, and (for example, a low premium-high cost- enhanced plan with a $0 deductible and
negotiation of bids, as well as CMS sharing plan versus a high premium-low no coverage in the gap versus an
approval of plans, we aim to strengthen cost-sharing plan) or aggregate costs to enhanced plan with a $0 deductible and
and build on our efforts to date to beneficiaries. In one possible scenario, coverage of 50 generic drugs in the gap?
ensure a proper balance between under these general guidelines, we Additional benefit offerings such as
affording beneficiaries a wide range of would particularly scrutinize whether free first fill programs and brand-name
plan choices and avoiding undue there were sufficient differences among only deductibles may also be considered
beneficiary confusion in making MA plan options if an MAO proposes to for the appropriate benefit types. In
coverage selections. Since 2005, we offer more than two plans of the same addition to the current considerations of
have reviewed Part D plan bids and plan type in a service area. Even if only formulary depth and breadth we may
negotiated with sponsors based on key two plans of a given type are offered, also consider the overall percent of
benefit package characteristics, such as they would, under our proposal, have to utilization management applied to drugs
deductibles, substantial formulary have meaningful differences relative to and the specific types of utilization
differences, coverage in the coverage one another. For example, if two MA management (for example, prior
gap, and previous enrollment numbers. plans included a Part D benefit, we authorization and step therapy). It is
We also have reviewed plan offerings would require that there also be important to note that, even though a
and negotiated with Part C contractors significant differences between these sponsor may submit different
as part of our annual bid review and plans’ Part D benefits in terms of formularies for different plan offerings,
approval process, in an effort to identify premiums, cost-sharing or other all submitted formularies must be
and eliminate MA plans that appear to benefits. sufficiently robust to pass our rigorous
be duplicative. In connection with 2010 If the proposed new requirement is formulary reviews and be determined
plan offerings, for example, we implemented, we would require that not to discourage enrollment by certain
contacted MAOs whose plans in a plans be dropped that do not offer types of beneficiaries. Based on our
service area represented insignificant meaningful choices for beneficiaries. In experience and given statutory actuarial
cost differences, as well as MAOs making determinations about what is a equivalency requirements, we do not
having MA plans with 100 or fewer meaningful choice of plan type, we expect that, absent substantial
enrollees, and conveyed our expectation could view a PPO and an HMO with a differences in approved formularies,
that they consolidate or terminate such POS benefit as being similar plan sponsors can demonstrate substantial
plans, when appropriate. offering if the POS benefit covered all A differences between plans offering basic
prescription drug coverage. It is also our and would caution plans to ensure that In the 2008 Call Letter for Medicare
experience that sponsors typically must when crafting plan packages with health plans and PDPs, we announced
offer substantial coverage in the meaningful differences, they do not a policy under which PDP sponsors or
coverage gap as a supplemental benefit create discriminatory cost-sharing parent organizations with new
in order to demonstrate that one structures. We have the authority, under acquisitions would be afforded a period
enhanced alternative plan design is section 1852(b)(1) of the Act of 3 years to transition their plan
substantially different from another. (implemented at § 422.110), to reject offerings to meet the goal of ensuring
We are proposing that, in our review bids that we determine to be that the sponsor’s offerings were
process, we would provide particular discriminatory. With respect to Part D substantially different from one another.
scrutiny in those market areas where sponsors, a plan that is considering an For example, a PDP sponsor (or its
multiple MAOs or Part D sponsors offer additional benefit package that is both parent organization) completing an
multiple plans. Specifically, we would nondiscriminatory and substantially acquisition of another sponsor in
particularly target our resources to our different from its basic or enhanced November 2009 would not be subject to
review for ‘‘meaningful differences’’ in alternative PDP offering(s) might choose requirements for offering substantially
areas where the elimination of to bid on enhanced alternative coverage different bids until the 2013 contract
duplicative plans would still leave a that includes coverage of both some year (that is, bids would be due in June
large number of plan options. For brand and generic drugs in the coverage 2010 for the 2011 program year;
example, in the highly competitive gap. Depending on how this enhanced transition would occur during 2011 and
Miami-Dade county market area, we alternative coverage were structured, 2012; and the plan sponsor or parent
might particularly focus our review on such a design could meet the threshold would need to ensure that in June 2012,
multiple HMO offerings from the same of being substantially different from a when it submits its bids for program
MAO in areas where additional HMO benefit package offering basic year 2013, all of its 2013 bids are for
plans are not adding meaningful new prescription drug coverage and/or an substantially different plans).
choices for prospective enrollees. enhanced alternative benefit package Consistent with existing policy, we
Similarly, we would particularly that only offers coverage of certain propose adding a new paragraph
scrutinize Part D plan offerings from the excluded drugs, as provided in § 423.272(b)(3)(ii) providing for a 2-year
same Part D sponsors for meaningful § 423.104(f)(1)(ii)(A). transition period in the case of a merger
differences in regions where multiple of Part D plan sponsors or the
plans with multiple benefit types (for 2. Bid Review Process (§ 422.256 and acquisition of a Part D plan by another
example, enhanced alternative coverage, § 423.272) Part D plan sponsor or parent
coverage in the gap) already exist. organization. We believe a 2-year
In order to further ensure that the
As we continue to accumulate transition period strikes a balance
program experience negotiating with benefit packages and plan cost
between allowing sponsors (or their
MA organizations and Part D plan structures offered by an MAO or Part D
parent organizations) with recent
sponsors regarding bid submissions, it is sponsor are meaningfully different,
acquisitions sufficient time to
our intent to apply these ‘‘lessons consistent with the preceding
streamline their operations after
learned’’ both to our bid submission discussion, we propose to add
completion of an acquisition with the
requirements and to our bid negotiation § 422.256(b)(4)(i) and § 423.272(b)(3)(i)
need to streamline and simplify
protocols. We expect to continue to to provide that we will only approve a beneficiary plan selection. We are
determine whether there are substantial bid submitted by an MAO or Part D proposing the 2-year transition instead
differences in plan types and benefit sponsor if we find its plan benefit of our current policy of 3 years based on
packages by looking at factors such as package to be substantially different our experience with Part D sponsors
health plan benefit packages, cost- from the plan benefit packages reflected that have merged with or acquired other
sharing, and deductibles, substantial in that sponsor’s other submitted bids in sponsors. Based on our experience, we
formulary differences, and coverage in terms of key plan characteristics such as believe that a 2-year period permits
the coverage gap. We are soliciting premiums, cost-sharing, formulary sponsors ample time to ensure that all
comments on our proposed changes to structure, or benefits offered. plans offered represent significant
the bid submission process. 3. Transition Process in Cases of differences, especially because, as
As discussed more fully in section Acquisitions and Mergers (§ 422.256 indicated in the sample bidding cycle
II.B.5. of this proposed rule, we are also and § 423.272) outlined above, we do not count the
interested in building additional checks year of the merger or acquisition as part
into our process to ensure that, in Based on several years of program of the 2-year period.
structuring bids that are sufficiently operational experience, we have also After a transition period of 2 years, we
different from any other bid they may learned that when an MAO or Part D would only approve a bid submitted by
propose, MAOs and Part D sponsors do sponsor (or a parent organization to the a PDP sponsor, or a parent organization
not design benefit packages that have sponsor) purchases another MAO or to that PDP sponsor, if the benefits or
the effect of discriminating against PDP sponsor, the result can be that the plan cost structure represented by that
certain types of Medicare beneficiaries. single parent organization offers plans bid was substantially different from any
This is consistent with our statutory through multiple subsidiaries of that other bid submitted by the same Part D
authority in sections 1852(d)(1)(A) and same parent that are not substantially sponsor (or parent organization to that
1860D–11(e)(2)(D)(i) of the Act, which different from one another. In this Part D sponsor) in terms of key plan
provide that we may disapprove a bid specific situation, plan options may be characteristics, such as premiums, cost-
if we find that a plan’s proposed benefit designed by a subsidiary that has no sharing, or formulary structure.
design substantially discourages incentive to compete against plans We are also proposing to make a
enrollment in that plan by certain offered by other subsidiaries, which similar change so that MA plans
Medicare-eligible individuals. may result in multiple plan offerings by acquired through purchase or merger
In the context of the MA program, we one sponsor or parent organization that offered by same MAO or parent
are especially concerned about cost- do not represent substantial or truly organization reflect meaningful
sharing for certain high-cost services meaningful choices to beneficiaries. differences after a 2-year transition
period. We propose to codify this policy now propose to add continuously low was a reasonable threshold for scrutiny
at § 422.256(b)(4)(ii). enrollment to the specific regulatory under our 2010 assessment of MA plan
We request comments regarding the grounds for nonrenewal by CMS of an enrollments, this number could
adequacy of our proposed transition MA plan or PDP. We note that this fluctuate. As a result we are not
period length of 2 years in both the MA requirement would be independent of proposing to revise our regulations to
and Part D contexts. the current requirement in § 422.514(a) specify a specific threshold. If, using the
and § 423.512(a) that MAOs and Part D principles described above, we identify
4. Non-Renewing Low-Enrollment Plans
sponsors meet minimum enrollment an alternative threshold for scrutiny, we
(§ 422.506(b)(1)(iv) and
requirements at the organization level will include this information in our
§ 423.507(b)(1)(iii))
for purposes of entering into a contract annual Call Letter. We solicit comment
We are proposing to revise the Part C with us. Those requirements apply to all on this approach and whether we have
and Part D nonrenewal regulations to enrollees of the organization, not provided sufficient clarity on how we
include, as a specific ground for enrollees in a particular plan. will determine whether a low-
nonrenewal, a finding that a plan has Although low enrollments often enrollment plan will not be renewed.
failed to attract a significant number of reflect lack of beneficiary interest in a
enrollees over a sustained period of plan, there are instances when low D. Changes To Improve Payment Rules
time. We believe that, absent special enrollment is a function of the type of and Processes
circumstances, which we discuss below, beneficiaries served, geographic
a plan that has failed, over a sustained location, or other circumstance. This section addresses four payment
period, to attract enrollees is being Instances in which we would consider issues under Part C. The first proposal
operated in a manner ‘‘inconsistent with a waiver of the proposed requirements outlines a new proposed dispute and
the efficient and effective include but are not limited to a chronic appeal rights process for risk adjustment
administration’’ of the Part C or Part D care SNP offering health care services data validation audit findings that result
programs, within the meaning of section especially tailored to this category of in payment errors. The second proposal
1857(c)(2)(B) of the Act, which is beneficiaries not available elsewhere, or would require an actuarial certification
incorporated into Part D by section an employer group health plan offering for Part C bids. The third proposal
1860D–12(b)(3)(B) of the Act, and thus benefits augmenting those of an MA under this section would clarify how
would be subject to termination. plan to employees of a small business. health care prepayment plans (HCPP)
In the 2010 Call Letter, we announced If a case can be made that low and cost plans authorized under section
that MA organizations and PDP enrollment is justified and the absence 1876 of the Act must determine
sponsors should terminate or of such a plan would significantly limit acceptable administrative costs. Finally,
consolidate low-enrollment Part C and beneficiary health care options in a the last proposal would update our
D plans. In advance of the 2010 contract service area, consistent with effective regulations to eliminate a 2 percent
year, we have contacted MAO sponsors and efficient administration of the Part minimum update for all rate
with enrollments of 100 beneficiaries or C or Part D benefit, we would not calculations, other than end-stage renal
fewer for 2 or more years, conveying our nonrenew that plan. Similarly, although disease (ESRD), for reasons we set forth
expectation that the organization we believe an enrollment of 100 or below. These provisions are outlined in
consolidate or terminate such plans. We fewer beneficiaries for 2 or more years Table 4.
TABLE 4—IMPROVING PAYMENT RULES AND PROCESSES

Part 417/422 Part 417/422 Part 423 Part 423
Provision
Risk Adjustment Data Validation Appeals .................... Subpart G ......................... Various sections of Part N/A ............... N/A.
422.
Payments to Medicare Advantage Organizations—Ac- Subpart F .......................... § 422.254 .......................... N/A ............... N/A.
tuarial Valuation.
Determination of Acceptable Administrative Costs by Subpart O ......................... § 417.564 .......................... N/A ............... N/A.
Cost Contract and Health Care Prepayment Plans
(HCPPs).
Calculation of the Minimum Percentage Increase Subpart G ......................... § 422.306 .......................... N/A ............... N/A.
under Part C.
1. Risk Adjustment Data Validation Section 1853(a)(3) of the Act requires higher health care costs). Accurate
Appeals (§ 422.310) that we risk adjust our payments to MA payments to MA organizations also help
a. Background organizations. Risk adjustment ensure that providers are paid
strengthens the Medicare program by appropriately for the services they
Subpart G of the MA regulations at ensuring that accurate payments are provide to MA beneficiaries. In general,
part 422 describes how payment is made to MA organizations based on the the current risk adjustment
made to MA organizations. These health status plus demographic methodology relies on enrollee
payment principles are based on characteristics of their enrolled diagnoses, as specified by the
sections 1853, 1854, and 1858 of the beneficiaries and ensures that MA International Classification of Disease,
Act. Subpart G also sets forth the organizations are paid appropriately for currently the Ninth Revision Clinical
requirements for making payments to their plan enrollees (that is, less for Modification guidelines (ICD–9–CM) to
MA organizations offering local and healthier enrollees expected to incur prospectively adjust capitation
regional MA plans, including lower health care costs and more for less payments for a given enrollee based on
calculation of MA capitation rates. healthy enrollees expected to incur the health status of the enrollee.
Diagnosis codes determine the risk documentation. RADV audits occur after the previous enrollee-level audits. In
scores, which in turn determine the risk the final risk adjustment data 2009, we expanded its RADV audits to
adjusted reimbursement. As a result, submission deadline for the MA randomly selected MA organizations
physicians and providers must focus contract year. We validate the HCC data and MA organizations targeted because
attention on complete and accurate submitted by MA organizations by of the results of an earlier coding
diagnosis reporting according to the reviewing hospital inpatient, hospital intensity study. Both the random and
official ICD–9–CM coding guidelines outpatient, and physician/practitioner targeted RADV audits were intended to
(that is, coding diagnoses accurately and provider medical records. The focus of generate statistically valid contract-level
to the highest level of specificity). this medical record review activity is on payment error estimates based on 2007
The current risk adjustment model diagnoses related to the enrollee’s HCC payments.
employed in adjusting MA plan profile. Risk adjustment discrepancies
payments is known as the CMS c. RADV Error-Rate Calculation
are identified when the enrollee’s HCCs
Hierarchical Condition Category (CMS– Disputes and Reconsiderations
used for payment (based upon MA
HCC) model. It functions by categorizing organization-submitted data) differ from Neither the MMA nor existing
ICD–9–CM codes into disease groups the HCCs assigned based on the medical Medicare Advantage regulations
called Hierarchical Condition record, pursuant to the RADV audit expressly provide for an administrative
Categories, or HCCs. Each HCC includes process. Risk adjustment discrepancies appeals process that would apply to
diagnosis codes that are related can be aggregated to determine an RADV-related disputes involving MA
clinically and have similar cost overall level payment error. In turn, organizations undergoing RADV audits.
implications. The CMS–HCC model is payment error for a sample of contract Until 2008, because RADV audit
recalibrated approximately every 2 years enrollees can be extrapolated to payment adjustments were limited to
to reflect newer treatment and coding calculate a contract-level payment error sampled beneficiary-level findings only,
patterns in Medicare FFS. In 2007, a estimate. the overall impact of these payment
demographic data-only payment method From 1999 until 2003, our payment adjustments on MA organizations was
was completely phased-out for MA validation activity for the M+C program relatively small. Nevertheless, affected
plans, and 100 percent of payment was had both an educational and audit focus MA organizations requested that we
risk-adjusted. The statute continues to and was intended to improve the provide some type of appeal remedy for
provide us the authority to add to, accuracy of the risk adjustment data that disputing RADV audit results. In
modify, or substitute for risk adjustment was being submitted to CMS for response to this request, for the RADV
factors if the changes will improve the payment. Payment adjustments were audit activity that occurred for payment
determination of actuarial equivalence. limited to enrollee-level adjustments for year 2005, MA organizations that
those enrollees sampled in the payment disputed our RADV audit findings were
b. Risk Adjustment Data Validation permitted to do so via an administrative
validation audit. At the time, only 10
Initiatives process known as documentation
percent of the MA payment amount was
MA enrollee HCCs are assigned based risk adjusted. As a result, payment dispute. Under documentation dispute,
on risk adjustment diagnoses from FFS recovery amounts for the small number MA organizations selected for RADV
claims and from risk adjustment data of plans audited was very small. Since audit could dispute enrollee-level HCC
submitted to us by MA organizations via payment year 2004 was the first year for findings based on the application of the
the Risk Adjustment Payment System which MA payments were based on the ICD–9–CM guidelines. This
(RAPS). The CMS–HCCs contribute to current HCC risk adjustment model, we documentation dispute process allowed
an enrollee’s risk score, which is used considered payment years 2004 through MA organizations to submit new
to adjust a base payment rate. 2006 as pilot years for the purpose of medical record documentation and
Essentially, the higher the risk score for RADV and no payment recovery activity clarifying documentation. Our medical
an enrollee, the higher the expected occurred. For payment year 2007, we record review contractors reviewed this
health care cost for the enrollee. The began conducting payment adjustments clarifying documentation via the
HCC data that MA organizations submit based on statistical RADV MA contract- documentation dispute process and if
to CMS via the RAPS system is self- level payment error audit findings. The this documentation overturned the
reported by the MA organization and existence of contract-level RADV audits initial discrepancy determination, the
does not go through a validation review is intended to enable us to make contractor would recalculate the MA
before being incorporated into a given contract-level payment adjustments organization’s payment error estimate
beneficiary’s risk-profile. Since there is rather than simply adjusting payments and make payment adjustments based
an incentive for MA organizations to for specific enrollees from an audit upon the revised payment error
potentially over-report diagnoses so that sample as we have done previously. estimate.
they can increase their payment, the On July 17, 2008, we announced a
Agency audits plan-submitted diagnosis pilot program to more extensively audit d. Proposed Addition of Medicare
data a few years later to ensure they are MA organizations for payment year Advantage Organization Risk
supported by medical record 2007 based on calendar year 2006 Adjustment Data Validation—Dispute
documentation. payment data. In this notice, we and Appeal Procedures
Verifiable medical record announced its plans to make contract- Our experience to date in conducting
documentation is the key to accurate level payment adjustments using RADV audits has led us to propose
payment and successful data validation. payment error findings from a sample of affording MA organizations undergoing
We annually select MA organizations enrollees from each of the selected RADV audits the formal dispute and
for risk adjustment data validation contracts. This was a major change to appeal rights as possible remedies for
(RADV) audits. RADV audits are our RADV audit approach in that it RADV audit findings that result in
intended to confirm the presence of risk signaled for the first time the Agency’s payment errors. Since neither the statute
adjustment conditions (that is, intent to recover MA organization nor existing MA program regulations
diagnoses that map to HCCs) as reported contract-level payments. As a specify RADV dispute or appeal
by MA organizations for their enrollees consequence, this would result in requirements, we are, under our
and confirmed via medical record substantially larger payment error than authority to establish MA program
standards by regulation at section accepted from health services that were credentials for inpatient medical records
1856(b)(1) of the Act, proposing conducted by certain physician is relatively small. Furthermore, MA
additions to part 422, subpart G at new specialties. Therefore, RADV organizations would not be permitted to
§ 422.311, to specify RADV dispute and requirements dictate that in addition to use attestations as a vehicle for
appeal rights for MA organizations. the presence of diagnosis information introducing new HCCs for payment
Specifically, we propose allowing MA that would support HCCs submitted by consideration.
organizations that have undergone MA organizations, physician signatures At § 422.311(c)(1)(C)(iv), we indicate
RADV audit(s) to—(1) submit physician and credentials must be present on that we would prospectively notify MA
and other practitioner signed medical records. Medical records with organizations that if their one best
attestations for physician and other missing or illegible signatures and/or medical record necessary to validate an
outpatient medical records with missing credentials are scored as errors under audited HCC was missing a physician/
or illegible signature and/or credentials RADV audit procedures. We estimate practitioner signature or credential, the
that could result in a payment error; (2) that if given the opportunity to do so, MA organization would be permitted to
dispute certain other types of medical many physicians and other practitioners submit a CMS RADV attestation along
record review-related errors through the that provided the diagnosis information with the medical record, to fulfill the
use of a documentation dispute process; on RADV-reviewed medical records requirement that medical records
and (3) appeal our RADV payment error would in fact attest that they contain physician/practitioner
calculation. By availing themselves of documented the information in these signatures and credentials.
these RADV dispute and appeal medical records, even though signatures We describe the process that we
processes, MA organizations may be and credentials were missing. The would jointly undertake to review
able to reduce their RADV payment presence of a signature or credential attestations submitted for our review at
error and thereby, reduce their overall attestation to accompany these medical § 422.311(c)(1)(iv) and (v). Only CMS-
estimated MA payment error. Therefore, records would in our opinion, provide generated attestations that meet certain
we are proposing the following justification for preventing both requirements described at
provisions under part 422: contract-level and national-level RADV § 422.311(c)(1) and (d) are eligible for
• At § 422.2, we provide definitions payment errors that may otherwise consideration. Failure to meet these
of six terms that pertain to Risk originate from medical record signature requirements would result in us not
Adjustment Data Validation (RADV) and/or credential discrepancies only. reviewing submitted attestations. CMS
activities and thereby, relate to our They would not, however, be acceptable attestations that have been altered or
proposals for implementing RADV to address any issues outside the RADV amended (for example, striking out pre-
dispute and appeal processes. audit process. populated words and replacing them
• At § 422.311, we propose adding a Therefore, under our authority to with hand-written replacement words)
new section to Subpart G—RADV audit establish MA program standards by without instruction or written
dispute and appeal processes— regulation at section 1856(b)(1) of the confirmation by CMS will not be
describing procedures that we would Act and the authority at section accepted. Attestations must accompany
implement to afford MA organizations 1853(a)(3) of the Act to risk adjust the medical record at the same time that
undergoing RADV audits the payments for MA organizations, at the medical record is submitted to CMS
opportunity to have certain potential newly established § 422.311(c)(1), we for RADV audit. MA organizations may
RADV payment errors addressed in are proposing to implement a process not submit attestations before or after
advance of RADV-audit-related payment that would allow MA organizations to submission of their RADV medical
error determinations being made, and voluntarily submit CMS attestations records. Attestations must originate
other types of confirmed payment errors (that is, only attestations developed and from the physician/practitioner whose
overturned. At § 422.311(a) and (b), we pre-populated by CMS). These medical record accompanies and
summarize the procedures that we attestations would be signed by corresponds to the attestation. We will
undertake to conduct RADV audits of physicians/practitioners who would not accept attestations or medical
MA organizations. Beginning with attest responsibility for conducting and records from any party other than the
§ 422.311(c), we propose implementing documenting the health services in the MA organization. Organizations may not
three RADV-related dispute and appeal physician and outpatient medical submit attestations during the
procedures that MA organizations could record(s) being submitted for RADV documentation dispute or RADV
undertake to reduce their RADV audit. We specify at § 422.311(c)(1)(ii) reconsideration processes described at
payment error to include— and (iii) that MA organizations would § 422.311(c)(2 and 3). At
• Physician/practitioner be eligible to use attestations to address § 422.311(c)(1)(iv), we describe the
attestation(s); signature and/or credential-related process that we would undertake to
• Documentation dispute; and discrepancies only from physician or review attestations and notify appellant
• RADV payment error calculation outpatient medical records; attestations MA organizations of the results of these
appeal. would not be allowed to address attestation reviews. Our attestation
Analysis of data originating from signature and/or credential-related review determinations would be final
medical records submitted by MA discrepancies found on inpatient and binding upon both parties and
organizations that have undergone medical records. We do not believe it is would otherwise not be eligible for
RADV audit indicates that a substantial necessary to permit attestations for further appeal.
percentage of medical record-related inpatient medical records. The proposed We believe this proposal benefits both
payment error determinations are due to use of an attestation would not in any MA organizations and the Government.
missing or illegible signature or way supplant the medical record, nor First, MA organizations will be
credentials on medical records. would it permit attesting physicians/ provided an opportunity to prevent
Medicare program rules dictate the practitioners to alter the existing substantially high RADV payment errors
necessity of physician signatures on medical record. that would otherwise be associated with
medical records, and MA risk Based on our recent RADV signature and/or credential errors.
adjustment requirements dictate that experience, the percentage of payment Second, we benefit by being able to
risk adjustment diagnosis data be error associated with signature and report RADV payment errors that
originate primarily from the lack of medical record means that no medical is carried out by several independent
diagnosis data necessary to justify record documentation was submitted by CMS contractors, we have structured the
submitted HCCs rather than missing the formal CMS-established deadline. overall medical record review process
signatures and/or credentials or the lack MA organizations would not be so that MA organizations can
of legible signature and/or credentials. permitted to use the documentation successfully submit requested medical
We believe that this is an important dispute process as a mechanism for records necessary to validate diagnoses
distinction given the underlying establishing new HCCs for payment that were sent to us for determining
principles of the risk adjustment consideration. In this context, the term payments under risk adjustment.
payment model—a model that pays MA ‘‘new HCC’’ means an HCC that was not The rigor surrounding the RADV
organizations less for healthy enrollees previously assigned to an enrollee, medical record review process is well
and more for less-healthy enrollees because no associated risk adjustment established and has been known to the
based upon the existence of diagnostic diagnosis data was submitted to CMS MA industry for several years. For
data in enrollee medical records. for payment. purposes of clarity and context, we
We further propose affording MA At § 422.311(c)(2)(iii) and (iv), we summarize that process here. To
organizations the option of disputing indicate that we would prospectively validate the CMS–HCCs selected for
other non-signature or credential-types notify MA organizations of RADV audit, MA organizations need only
of RADV-related medical record payment errors that would be eligible submit medical record documentation
diagnosis coding discrepancies via a for documentation dispute, describe the for each enrollee CMS–HCC requested
proposed documentation dispute documentation dispute process that we by CMS for the specified audit time
process that we describe in new would undertake, along with the frame. The medical record must reflect
paragraph § 422.311(c)(2) et seq. This process that we will undertake to notify a date of service that occurred during
proposal is based upon our authority to MA organizations of the results of the respective audit period. We instruct
establish MA program standards by documentation dispute reviews. As each MA organization to select and
regulation at section 1856(b)(1) of the described at § 422.311(c)(2)(v), our submit the one best medical record
Act and the authority at section documentation dispute review necessary to support each enrollee
1853(a)(1)(G) of the Act to risk adjust determination would be final and CMS–HCC being validated.
payments for MA organizations. In order binding upon both parties and would Furthermore, we provide each MA
to be eligible for documentation dispute, not otherwise be eligible for further organization undergoing RADV audit 12
MA organizations must submit their one administrative appeal. weeks to submit the one best medical
best medical record to us in accordance We believe affording MA record for validation. Once requested
with RADV medical record submission organizations the ability to dispute the medical records have been received, for
deadlines established by CMS during operational processing of those medical any identified RADV errors, we conduct
the RADV medical record request records that are submitted timely offers two rounds of medical record review by
process. MA organizations and CMS a balanced two independent contractors. Medical
At § 422.311(c)(2)(a), we specify the approach for disputing a significant record review contractors employ
types of RADV-related errors that would portion of RADV errors. It also does so certified coders to review medical
be eligible for the documentation in a manner that benefits both MA records. The purpose of the second
dispute process. The documentation organizations and the Government. independent medical record review is to
dispute process will apply only to the Allowing MA organizations to dispute confirm discrepancies found in the
errors that arise out of operational CMS’ operational processing errors initial review. To ensure the integrity of
processing of medical records selected provides MA organizations an the medical record review process and
for RADV audit and submitted to CMS opportunity to overturn certain types of the accuracy of the medical record
by established deadlines. In this RADV payment errors and thereby review findings, the second medical
context, errors that arise from reduce their overall RADV payment record review contractor is blind to the
operational processing mean errors that error. However, the approach we findings from the first medical record
arise from the collection and processing recommend here that limits MA review contractor when it examines
of medical records for RADV audit. For organizations to disputing only certain medical records that the first medical
example, if an MA organization submits types of errors ensures that the integrity record review contractor determined
a two-page medical record that of the CMS’ RADV audit process were discrepant. Further, all discrepant
inadvertently becomes separated into remains intact. We believe this is an records with coding discrepancies are
‘‘two’’ medical records upon receipt by important consideration in developing reviewed twice. First they are reviewed
the CMS Medical Record Review an RADV dispute process that balances by a primary coder and then they are
Contractor—we would permit the MA the desires of the MA industry and the forwarded to a senior-level expert coder
organization to resubmit the two-page program integrity interests of the for review confirmation. As needed,
medical record so that the record can be Federal Government. To date, some MA consultation from physicians is also
reviewed in its intended two-page organizations that have undergone provided. Finally, we undertake robust
format. At § 422.311(c)(2)(ii), we specify RADV audit have been dissatisfied with medical record coder inter-rater
the limitations that we would impose our medical record review processes reliability (IRR) testing to ensure that
upon the documentation dispute and have petitioned CMS to allow medical record review activity is
process, namely that MA organizations additional opportunities to validate consistent and the application of CMS
would not be permitted to dispute any HCCs selected for audit. Given the rigor RADV coding guidelines are applied
medical record coding discrepancies, of our existing RADV audit procedures uniformly and fairly.
nor would MA organizations be generally and multi-faceted medical Together in its entirety, we believe the
permitted to submit altogether new record review procedures specifically, RADV medical record review process is
medical records in place of previously we believe this is unnecessary. Indeed, thorough and it affords MA
submitted medical records. Payment we believe that it is important to organizations ample opportunity to
errors that resulted from missing understand that while the RADV successfully meet RADV audit
medical records will not be eligible for medical record review process is standards. We believe that affording MA
documentation dispute. A missing intentionally a rigorous procedure that organizations additional opportunities
for attestation and documentation At § 422.311(c)(3)(ii) we specify that CMS issues a RADV audit report to that
dispute to meet CMS’ RADV medical MA organizations may not under the organization. MA organizations will
record documentation standards, RADV payment error calculation appeal have 30 days from the date of this notice
beyond those specified at proposed process appeal medical record review to submit a written request for
§ 422.311(c)(1) and(2) et seq., would be errors nor may MA organizations seek reconsideration of its RADV payment
an unnecessary use of government formal appeal of physician or error calculation. A request for
resources that is unlikely to result in practitioner signature or credential- reconsideration must specify the issues
any meaningful change in RADV audit related review errors. Medical record with which the MA organization
results. review-related issues will be resolved as disagrees, the reasons for the
Pursuant to our authority to establish a result of the rigorous medical record disagreements and explain why the
MA program standards by regulation at review process and the proposed organization believes the issues are
section 1856(b)(1) of the Act and the attestation and documentation dispute eligible for reconsideration. The request
authority at section 1853(a)(1)(G) of the processes described earlier in this for reconsideration may include
Act to risk adjust payments for MA proposed regulation. In accordance with additional documentary evidence that
organizations, we are adding our proposed regulation at the MA organization considers material
§ 422.311(c)(3) to establish an appeals § 422.311(c)(3)(i), the RADV payment to the reconsideration, though MA
process whereby RADV payment error error calculation appeals process only organizations are prohibited from
calculations may be subject to appeal. applies to errors identified in the RADV submitting medical record-related
Unlike our proposed attestation process payment error calculation. MA evidence such as new or previously
described at § 422.311(c)(1) and organizations cannot utilize the submitted medical records or physician
proposed documentation dispute payment error calculation appeal or practitioner attestations and from
process describe at § 422.311(c)(2) process as a method for submitting any appealing any issues pertaining to the
which afford MA organizations the medical records for consideration in the methodology applied in any part of the
opportunity to dispute aspects of our calculation of the payment error. In RADV audit. At § 422.311(c)(3)(iv), we
medical record review process, the order to be eligible for RADV payment further specify that the MA organization
RADV payment error calculation appeal error calculation appeal, MA bears the burden of proof to demonstrate
process is specifically designed to afford organizations must adhere to that CMS’ RADV payment error
MA organizations the opportunity to established RADV audit requirements, calculation was clearly incorrect.
appeal our contract-level RADV including the submission of medical We describe the proposed conduct of
payment error calculation. Under the records in the manner and by the a RADV payment error calculation
proposed RADV payment error deadlines specified by CMS. reconsideration, the decision of the
calculation appeal process, we are Furthermore, MA organizations reconsideration official and the effect of
establishing a three-level appeal process cannot appeal the CMS’ payment error the CMS reconsideration decision
whereby MA organizations may— calculation methodology. Our official at § 422.311(c)(3)(e) and (f).
justification for excluding At § 422.311(c)(3)(v) and (vi), we
• Seek reconsideration; describe the first level of RADV
methodological appeals is two-fold.
• Appeal the reconsideration decision First, the methodology that we employ payment error calculation appeal, the
to an independent CMS hearing officer; to calculate RADV payment errors is request for reconsideration of our RADV
and methodologically sound and payment error calculation. Under this
• Appeal the decision of the academically defensible. We intend to process a CMS official or our contractor
independent CMS hearing officer to the ensure that all MA organizations not otherwise involved in error-rate
CMS Administrator. understand the RADV payment error calculation activity reviews our RADV
Unlike the proposed attestation and calculation methodology by providing payment error calculation and any
documentation dispute processes annual notice to all MA organizations of written evidence submitted by the MA
described in our proposed regulations at the methodology that will be employed organization that pertains to CMS’
§ 422.311(c)(1) and (c)(2), our proposed for calculating Part C payment errors. RADV payment error calculation,
RADV payment error calculation appeal MA organizations that object to CMS’ recalculates the payment error utilizing
process has several layers of appeal RADV payment error calculation our RADV payment error calculation
available to MA organizations. Our methodology will be given an methodology as specified in our
proposed dispute processes described at opportunity to provide comment to us standard operating procedures, and
§ 422.311(c)(1) and (c)(2) afford MA under the Agency’s annual notice of renders a determination whether the
organizations only one level of dispute RADV audit methodology. Second, in RADV payment error calculation is
consideration because the RADV addition to providing an annual notice accurate. This CMS official or CMS
medical record audit process already of RADV audit methodology, we will contractor (not otherwise involved in
provides multiple layers of strong and provide an expanded explanation of RADV error-rate calculation activity)
overlapping review and independence. methodology as part of each audit report may calculate and arrive at a different
These measures ensure robust layers of of findings that we send to MA RADV payment error. Whether the
internal checks and balances that help organizations that undergo RADV audit. official or contractor agrees with our
maintain the integrity of the medical Included in this expanded explanation payment error calculation or overturns
record review process. Therefore, we do of methodology will be RADV payment this calculation and establishes a new
not believe that the attestation or error calculation factors unique to each RADV payment error, this party’s RADV
document dispute processes require audited MA organization that will payment error calculation determination
additional levels of dispute. Given the enable the MA organization to is issued to a CMS reconsideration
complexity of RADV audits in general, independently calculate its own RADV official. The CMS reconsideration
and the calculation of RADV-related payment error. official reviews their analysis and makes
error rates in particular, we do believe At § 422.311(c)(3)(iii) and (v), we a determination whether to accept or
it’s prudent to afford appellate MA specify that MA organizations will be reject the findings of the CMS official or
organizations multiple-layers of RADV- notified of their RADV payment error CMS contractor that recalculated the
related payment error appeal. calculation appeal rights at the time RADV payment error. In instances when
the CMS official or contractor CMS rulings. These powers include the compliance date for meeting Federal
recommends overturning CMS’ RADV authority to take appropriate action in regulations requiring MA organizations
payment error calculation and the response to failure of an organization to to submit medical records for the
reviewing CMS reconsideration official comply with such procedures. validation of risk adjustment data,
agrees with the newly calculated RADV As described at proposed (§ 422.310(e)) also be the due date when
payment error, we issue a § 422.311(c)(4)(iv), the CMS hearing MA organizations (or their contractor(s))
reconsideration decision which informs officer reviews and decides whether the selected for RADV audit, must submit
the appealing MA organization in reconsideration official’s decision was medical records to CMS. We will inform
writing of its reconsideration decision, correct and notifies CMS and the MA an MA organization in writing regarding
in effect, notifying the MA organization organization in writing of his/her selection for RADV audit including the
of its new RADV payment error. If the decision, explaining the basis for the due date for submission of medical
reconsideration official upholds the decision. In effect, the CMS hearing records. Without a specific date as a
decision of the CMS official or officer’s ruling either upholds or reference point for evaluating
contractor to sustain our initial RADV overturns the RADV payment error compliance, MA organizations could
payment error calculation, the calculation. The Hearing Officer does choose to assert that while they were
reconsideration official similarly not recalculate the error and offer either unable to meet RADV audit
notifies the appellant MA organization party an alternative RADV payment requirements on the date we specified
of its determination. In either instance, error. In instances where the hearing as the due date for medical record
the decision of the reconsideration officer overturns the RADV payment submission, they were later able to do
official is final and binding unless a error calculation, the hearing officer so. Under this scenario, organizations
request for hearing is filed by CMS or issues their written determination to would be free to assert the right to
the appellant MA organization. CMS and the MA organization, in effect, submit medical records in place of, or
At § 422.311(c)(4), we propose to notifying both parties that we must in addition to, records that were, or,
allow CMS or MA organizations that are recalculate the organization’s RADV were not, as the case may be, submitted
dissatisfied with the decision of the payment error. If the Hearing Officer to us by the RADV audit due date.
CMS reconsideration official described upholds the decision of the CMS Accordingly, if we proceeded to
at § 422.311(c)(3) et seq., to request a reconsideration official regarding the conduct our RADV audit, issue a report
second level of RADV payment error RADV payment error calculation, the of findings, and attempt to collect any
calculation appeal, a hearing on their Hearing Officer similarly notifies CMS identified overpayments, affected MA
RADV payment error calculation and the MA organization of his/her organizations could counter that while
determination. CMS or MA determination. The Hearing Officer’s they did not have medical records to
organizations choosing to pursue a decision is final and binding, unless the justify a particular HCC-level payment
hearing must file a request for hearing decision is reversed or modified by the at the time due, they now have such
within 30 days of the date the MA CMS Administrator in accordance with records. Therefore, we should re-open
organization receives our written RADV § 422.311(c) (5). the audit, review the new medical
payment error calculation The third level of RADV payment
records and adjust our report of findings
reconsideration decision as described at error calculation appeal that MA
accordingly. The medical record review
§ 422.311(c)(3)(vi). CMS or MA organizations can request is
process could continue ad-infinitum,
organizations requesting a hearing must discretionary review by the CMS
preventing us from closing out RADV
do so in writing, include a copy of the Administrator. We describe this
audits and collecting any identified
CMS reconsideration official’s decision proposed process at § 422.311(c)(5) et
overpayments.
to either uphold or overturn our RADV seq. At this level of appeal, CMS or the
payment error calculation, and specify MA organization can appeal the We welcome comments on all aspects
the findings or issues in that decision of the CMS Hearing Officer by of these proposed rules.
reconsideration decision that they requesting that the CMS Administrator 2. Payments to Medicare Advantage
disagree with and why they disagree review the CMS Hearing Officer’s Organizations—Actuarial Valuation
with them. The hearing will be determination. Parties requesting CMS (§ 422.254)
conducted by the CMS Office of Administrator review would have to
Hearings and presided over by a CMS request the review within 30 days of We propose to amend the regulation
Hearing Officer who neither receives receipt of the CMS Hearing Officer’s to expressly require an actuarial
testimony nor accepts any new evidence determination. If the Administrator certification for Part C bids.
that was not presented with the request agrees to review the case, the Operationally, we require an actuarial
for reconsideration of the RADV Administrator reviews the Hearing certification to accompany every bid, for
payment error calculation. The hearing Officer’s decision as well as any other both Parts C and D. A qualified 0actuary
will be held on the record, unless the information included in the record of who is a Member of the American
parties request, subject to the hearing the Hearing Officer’s decision and Academy of Actuaries (MAAA) must
officer’s discretion, a live or telephonic determines whether to uphold, reverse, complete the certification. The objective
hearing. The hearing officer may also or modify the CMS Hearing Officer’s of obtaining an actuarial certification is
schedule a live or telephonic hearing decision. The Administrator’s to place greater responsibility on the
upon their own motion. The CMS determination is final and binding. actuary’s professional judgment and to
hearing officer is limited to the review Based on our experience with appeals hold him/her accountable for the
of the record that was before us when of MA and Medicare Part D program reasonableness of the assumptions and
we made both our initial RADV contract determinations, we have projections. This requirement is already
payment error calculation and our determined that it is necessary for us to set forth in the part D regulations at
reconsidered RADV payment error establish a ‘‘compliance date’’ to use as § 423.265(c)(3). This proposed change in
calculation. a reference point in issuing a ruling the part C regulation text will bring the
The hearing officer has full power to regarding RADV audit findings. By way part C regulation at § 422.254(b)(5) in
make rules and establish procedures, of this proposed regulation at line with current requirements and Part
consistent with the law, regulations, and § 422.311(b)(2), we are requiring that the D.
3. Determination of Acceptable contracts authorized under section 1876 the end stage renal disease MA update
Administrative Costs by Cost Contracts of the Act must be linked to the specific because the statute at section
and Health Care Prepayment Plans administrative function performed by 1853(a)(1)(H) of the Act provides that
(§ 417.564) persons, at a specific rate of pay, for a ESRD rates are to be calculated in a
Our requirements for the specified period of time. We also manner consistent with the way those
apportionment and allocation of propose to clarify that this level of rates were calculated ‘‘under the
administrative and general costs for information must be available to CMS provisions of [section 1853 of the Act]
health care prepayment plans (HCPPs) upon request or in the course of a as in effect before the date of enactment
authorized under section 1833(a)(1)(A) review. Additionally, we propose of the MMA.’’ The pre-2003 version of
of the Act and cost contractors revising § 417.564 by adding a new section 1853 of the Act included the 2
authorized under section 1876 of the paragraph (c) that specifies that, in order percent minimum update. Therefore, we
Act are set forth at § 417.564. As for costs to be considered ‘‘reasonable propose to revise § 422.306 to eliminate
provided under § 417.802(a), with costs’’ within the meaning of section the 2 percent minimum update for all
limited exceptions, allowable costs for 1861(v) of the Act, which expressly rate calculations other than ESRD.
HCPP reimbursement are the same as excludes ‘‘incurred cost found to be
E. Changes To Improve Data Collection
those for reasonable cost HMOs and unnecessary in the efficient delivery of
for Oversight and Quality Assessment
CMPs as specified in Subpart O of Part needed health services,’’ the following
417. Both section 1833(a)(1)(A) of the costs must be excluded when This section of the rule outlines four
Act (for HCPPs) and section 1876(h)(2) computing reimbursable administrative proposals related to improving Part C
of the Act (for cost HMOs and CMPs) costs: and D data collection for oversight and
incorporate the definition of • Donations. quality assessment. The first proposal
‘‘reasonable cost’’ in section 1861(v) of • Fines and penalties. addresses quality improvement projects
• Political and lobbying activities. and data on quality and outcomes
the Act, which used to govern • Charity and courtesy allowances.
reimbursement to providers of services • Spousal education. measures under Part C. As part of this
under Part A prior to the enactment of • Entertainment. proposal, we would use data collected
Prospective Payment Systems (PPS). • Return on equity. by Quality Improvement Organizations
Because that definition was originally Because we are simply clarifying our for MA quality improvement and
established with respect to Original reporting and recordkeeping performance assessment purposes.
Medicare providers, we believe that it is requirements, by clarifying what costs The second proposal addresses
appropriate to interpret and apply the an HCPP may report in its cost report as payment for beneficiary surveys. We
principles in section 1861(v) in the administrative costs for reimbursement would require, consistent with other
managed care context. We accordingly by the government, we do not believe surveys under the MA program that MA
propose to revise the regulations this provision would increase burden or and Part D sponsoring organizations pay
governing payments to HCPPs and cost costs for plan sponsors. However, we for the data collection costs of the
HMOs/CMPs to clarify how we believe solicit comment on our assumptions. Consumer Assessment of Healthcare
the reasonable cost principles in section Providers and Systems (CAHPS) annual
1861(v) should apply to HCPPs and 4. Calculation of the Minimum
survey beginning in 2011.
HMOs/CMPs by specifying the Percentage Increase Under Part C
(§ 422.306) Under our third proposal, we propose
methodologies that must be used in to require that each Part C and Part D
determining the different allowable Section 5301 of the DRA added
sponsor be subject to an independent
administrative costs for both such section 1853(k) of the Act to create a
yearly audit of Part C and Part D
entities. single rate book for calculating MA
measures (collected pursuant to our
We have noted in recent audits of payments and applicable adjustments.
reporting requirements) to determine
HCPP and section 1876 cost contractors The DRA also modified the
their reliability, validity, completeness,
uncertainty regarding what constitutes a methodology for updating the MA
and comparability in accordance with
‘‘reasonable’’ level of administrative payment rates by adding section
specifications developed by us.
costs incurred by these entities. In 1853(k)(1)(B) of the Act. Beginning in
conducting audits, we have not always 2007, the statute requires for purposes Finally, the last proposal would
been able to confirm that HCPP and cost of calculating the minimum percentage amend our rules on the collection and
contractors authorized under section increase rate that the previous year’s use of prescription drug event data for
1876 of the Act were calculating their benchmarks be updated annually using nonpayment-related purposes.
administrative costs in a manner that only the national per capita MA growth Previously our rules addressed only the
has allowed us to verify that they have percentage as described in section collection of the original 37 data
followed appropriate practices. 1853(c)(6) of the Act. Prior to 2007 the elements for non-payment related
In order to remove any uncertainty on minimum percentage increase rate was purposes. In this rule, we are proposing
the part of HCPP and cost contractors the greater of 102 percent of the MA to collect all data elements included on
authorized under section 1876 of the capitation rate for the preceding year or the drug event record for non-payment
Act, we propose revising § 417.564(b)(2) the MA capitation rate for the preceding purposes. We also propose to provide
to clarify how HCPP and cost year increased by the national per capita for the limited release of plan identifiers
contractors authorized under section MA growth percentage for the year. to certain government grantees.
1876 of the Act must determine Since the statute, as revised by the For the reasons set forth below, we
‘‘reasonable’’ administrative costs. As DRA, no longer provides for the 2 believe each of these proposals is
proposed at § 417.564(b)(2)(iii), percent minimum update, we can no necessary to ensure continued quality
personnel costs claimed in longer apply it to the MA rates. The 2 improvement in the Part C and D
administering both HCPP and cost percent minimum update still applies to programs.
TABLE 5—IMPROVE DATA COLLECTION FOR OVERSIGHT AND QUALITY ASSESSMENT

Part 422 Part 423
Provision Part 480
Requirements for Quality Improvement Pro- Subpart D ..... § 422.152, ................... N/A ............... N/A ............................. § 480.140.
grams under Part C. § 422.153 ....................
Require that Sponsors pay for the Consumer Subpart D ..... § 422.152(b)(5) ........... Subpart D ..... § 423.156 .................... N/A.
Assessment Health Plan Survey (CAHPS).
Require validation of reporting requirements .. Subpart D ..... § 422.516, § 423.514 .. Subpart D ..... § 423.514 .................... N/A.
Allow collection of all PDE data elements to N/A ............... N/A ............................. Subpart D ..... § 423.505 .................... N/A.
be collected for non-payment purposes.
1. Requirements for Quality provide beneficiaries with ‘‘available’’ organizations to identify clinical
Improvement Programs Under Part C quality information on MA plans. outcomes that not only fail to meet
(§ 422.152, § 422.153, and § 480.140) national averages, but also jeopardize
a. Quality Improvement Programs
the overall health and quality of life of
Section 1851(d)(4)(D) of the Act The requirement for MA organizations the beneficiary).
requires us to make available to MA to have ongoing quality improvement As a result of our concerns, we are
eligible individuals’ information programs is codified at § 422.152(a). proposing to revise § 422.152(a)(1) and
comparing MA plan options, including Under § 422.152(a)(1), MA plans are § 422.152(a)(2) to require that MA
information on plan quality and required to include a chronic care organizations conduct CCIPs in patient
performance indicators to the extent this improvement program (CCIP) as part of populations and quality improvement
information is available. Separately, their quality improvement program that projects in areas identified by CMS
section 1852(e)(1) of the Act requires meets the requirements set forth in based on our review of data collected
that each MA organization have an § 422.152(c). As specified under from MA organizations and the
ongoing quality improvement program § 422.152(a)(2), MA organizations are population served by the plans. We
for the purpose of improving the quality also required to include quality propose to determine what areas would
of care provided to enrollees in each improvement projects as part of their most benefit from quality improvement
MA plan offered by the MA quality improvement program that are and will provide guidance on specific
organization. Section 1852(e)(3)(A) of expected to have a favorable effect on quality improvement projects for MA
the Act requires that, as part of this enrollee health outcomes and enrollee organizations to implement, either
quality improvement program, MA satisfaction, and meet requirements based on that organization’s specific
organizations collect, analyze, and established in § 422.152(d). Under our quality improvement needs, or quality
report data that permits the current regulations at § 422.152(c) and improvement needs for MA plans
measurement of health outcomes and § 422.152(d), MA organizations have generally. We also will suggest methods
other indices of quality as part of their flexibility to develop criteria for CCIPs and processes by which to manage a
quality improvement program for their and initiate any quality improvement quality improvement project as
coordinated care plans. To the extent project that focuses on clinical and non- appropriate.
that local PPO, regional PPO, PFFS, and clinical areas based on the needs of their Using the HPMS, Medicare Managed
MSA plans have a network of contracted enrolled population. Care Manual, and other means of
providers, these plan types must meet Based on our continued experience communication that CMS determines to
the same quality improvement with the MA program and due to be appropriate, we will annually inform
requirements as other coordinated care inconsistent methods used across MA organizations individually and/or
plans. organizations, we are concerned that generally which patient populations and
Section 1852(e)(3)(B)(i) of the Act relying on MA organizations to establish areas we have determined would benefit
generally limits the collection of data on their own CCIPs and quality most from a CCIP and quality
quality, outcomes, and beneficiary improvement projects may not lend improvement project, respectively.
satisfaction under section 1852(e)(3)(A) itself to effectively compare plans by
b. New Quality Measures
to facilitate consumer choice and beneficiaries and to manage and report
program administration to ‘‘the types of projects. More importantly, we have As we strengthen our oversight of
data’’ that were collected as of concerns that these projects are not quality improvement programs
November 1, 2003, however, section addressing quality improvement areas implemented by MA organizations, we
1852(e)(3)(B)(ii), titled ‘‘Changes in that we believe reflect beneficiary believe that there is also a need for us
Types of Data,’’ provides for the needs. For example, some projects may to collect additional data on quality and
Secretary to ‘‘change the types of data be designed to improve processes only outcomes measures in order to better
that are required to be submitted under without linking the processes to clinical track plan performance. We currently
subparagraph (A) after submitting to outcomes. For example, improving the collect from MA organizations data on
Congress a report on the reasons for timeliness and effectiveness of referrals quality, outcomes, and beneficiary
such changes that was prepared in to specialists, as measured by process satisfaction under Healthcare
consultation with MA organizations and measures, may have little or no impact Effectiveness Data and Information Set
private accrediting bodies.’’ Section on improved health outcomes for (HEDIS®), Health Outcome Survey
1852(e)(3)(B)(iii) also makes clear that beneficiaries. We are interested in MA (HOS), and Consumer Assessment
the limitation in section 1852(e)(3)(B)(i) organizations focusing on individual as Health Providers Survey (CAHPS®). We
shall not be construed as ‘‘restricting the well as population specific health risk anticipate additional collection and
ability of the Secretary to carry out the needs (for example, MA organizations’ reporting of the same types of data on
duties under section 1851(d)(4)(D)’’ to use of data sources internal to their health outcomes and quality measures
that we currently collect as part of these Certain QIO data could be used to solely for the purposes specified in
processes. develop a standardized core set of § 422.153.
We believe that the collection of these clinical and non-clinical quality and
data is consistent with our authority 2. CAHPS Survey Administration Under
performance measures that could be
under section 1852(e)(3)(A) of the Act, Parts C and D (§ 417.472, § 422.152, and
applied to all MA plans in order to § 423.156)
and do not believe that the limitation allow beneficiaries to make better
described under section 1852(e)(3)(B) of comparisons across all MA plan types In accordance with the 1997 Balanced
the Act limits this proposed additional and make an informed decision when Budget Act mandate to collect quality
data collection because the data selecting a plan. These measures could assessment data about health plans, we
collected would be of the same ‘‘type’’ be used to rate plans according to their began collecting data in 1998 for the
of data that we currently collect as part performance. To support efforts to Consumer Assessment of Healthcare
of the HEDIS®, HOS, and CAHPS® provide meaningful information to Providers and Systems (CAHPS) survey
processes. Examples of additional areas beneficiaries when selecting an MA of enrollees in Medicare Advantage
on which we plan to collect data are plan, we also plan to develop minimum (MA) plans (then called
post-surgical infections or patient falls. performance levels and requirements Medicare+Choice plans). In addition,
Therefore, we are proposing to modify that address clinical and non-clinical cost contractors under section 1876 of
§ 422.152(b)(3) and § 422.152(e)(2) to areas. In addition to tracking plan the Act have also been participating in
require MA plans to collect, analyze, performance, these data could also be the CAHPS survey process with respect
and report quality performance data used to ensure plan compliance with to their enrollees. We have continued to
identified by CMS that are of the same MA contract requirements and support conduct this annual CAHPS survey at
type of data that plans are currently compliance or enforcement actions no cost to MA organizations or section
required to collect and report to CMS. against plans that are poor performers 1876 cost contractors. After passage of
Consistent with the Paperwork on certain quality and performance the Medicare Modernization Act
Reduction Act, we will provide the measures. These data would also allow (MMA), we began administering a Part
public at least two opportunities for us to create a competitive value-based D version of this survey in 2007 to
public comment before imposing purchasing program based on quality of Prescription Drug Plans (PDPs) and
additional quality-related collection and care. Medicare Advantage-Prescription Drug
reporting requirements. Plans (MA–PDs) in accordance with
Therefore, we plan to use one § 423.156 and § 422.152.
c. Use of Quality Improvement particular type of information already Under sections 1857(e) (1) and
Organization Review Information collected by QIOs and retool the data 1860D–12 of the Act, the Secretary may
The mission of the Quality elements to make them specific to add additional terms to the contracts
Improvement Organization Program, as beneficiaries enrolled in MA plans. This with MA organizations and Part D
authorized under section 1862(g) and information is quality review study sponsors as deemed necessary and
Part B of title XI of the Act, is to (QRS) information, which is defined in appropriate. Similarly, in the case of
improve the effectiveness, efficiency, 42 CFR 480.101(b). A QRS is ‘‘an cost contracts under section 1876, such
economy, and quality of services assessment, conducted by or for a QIO, new contract terms may be added under
delivered to Medicare beneficiaries. We of a patient care problem for the section 1876(i)(3)(D). As explained
contract with one organization in each purpose of improving patient care below, we are proposing on the basis of
state, as well as the District of Columbia, through peer analysis, intervention, this authority, that MA, Part D, and
Puerto Rico, and the U.S. Virgin Islands, resolution of the problem and follow- section 1876 cost contracts will be
to serve as that state/jurisdiction’s up.’’ QRS information means all amended to require MA organizations,
Quality Improvement Organization documentation related to the QRS Part D sponsors, and cost contractors to
(QIO) contractor. QIOs are private, process. We intend to collect from the pay for the data collection costs of the
mostly not-for-profit organizations, QIO only the data that relates to MA annual CAHPS survey beginning in
which are staffed by professionals, plan beneficiaries, providers, 2011.
mostly doctors and other health care practitioners, and services. We could In the 2010 Call Letter to Part C and
professionals, who are trained to review then aggregate the data to the applicable D sponsoring organizations, we
medical care and help beneficiaries with MA plan based on beneficiary indicated that all MA and Part D
complaints about the quality of care and enrollment. Accordingly, we are contracts with at least 600 enrollees as
to implement improvements in the proposing to add a new § 422.153 to of July 1 of the prior calendar year
quality of care available throughout the indicate that we will collect from the would be required to pay for the data
spectrum of care. Over time, QIOs have QIOs and use quality review study collection costs of the CAHPS survey
been instrumental in advancing national information that is generated, collected, starting with the administration of the
efforts to motivate providers in or acquired by QIOs under part 42 CFR 2011 annual CAHPS survey. This
improving the quality of Medicare 480. We intend to use these data for the proposal is intended to codify this
services, and in measuring and following functions: Enabling requirement in the Part C and Part D
improving outcomes of quality. beneficiaries to compare health coverage regulations at § 423.156 and § 422.152,
Data collected by QIOs to accomplish options and select among them, and for cost contractors in § 417.472.
their mission represent an important measuring performance under the plan, The proposal to require MA
tool for CMS in our efforts to improve ensuring compliance with plan organizations, Part D sponsors, and
quality under the MA program. QIOs requirements under Part 422, and other section 1876 cost contractors to pay for
collect survey, administrative, and purposes related specifically to MA the data collection costs of the CAHPS
medical records data in order to monitor plans, as specified by CMS. We will not survey would apply only to contracts
and assess provider performance. These disclose any beneficiary identifiable with 600 or more enrollees. For reasons
data are frequently required by scope of information. In addition, we are of statistical precision, a target
work contracts administered by CMS to proposing to amend § 480.140 to add a minimum of 300 or more completed
assess whether or not QIOs are meeting new paragraph (g), authorizing CMS’s Medicare CAHPS Surveys must be
performance goals. use of quality review study information received for each contract. In order to
obtain 300 or more completed surveys, are excluded from this CAHPS include seventeen measures ranging
we believe plans must have 600 or more administration. from access to extended day supplies at
enrollees because some enrollees will Under this proposal, the first survey retail pharmacies to drug benefit
not be eligible to receive the survey, using the new model of data collection analyses. Over time, we have modified
such as institutionalized enrollees, and would be conducted in early 2011. the data elements collected as we gained
not all enrollees selected to be surveyed Contracts that were in effect on or before more experience with the program. The
will respond to the survey. January 1, 2010, would use the number current Part D reporting requirements
It is important to note that we conduct of enrollees in a plan as of July 1, 2010 (OMB 0938–0992) may be accessed at
other Medicare quality surveys, such as to determine whether they are required http://www.cms.hhs.gov/
the Hospital CAHPS and the Medicare to conduct the 2011 CAHPS survey. In PrescriptionDrugCovContra/08_
Health Outcomes Survey (HOS) for late 2010, all MA and Part D contracts RxContracting_ReportingOversight.asp.
which the MAOs are responsible for the that are subject to the CAHPS survey We also require routine reporting of
cost of the data collection. This model requirement in 2011 would need to specific data elements by MA
for data collection is standard industry select an approved Medicare CAHPS organizations. Beginning in January
practice. For example, FEHB plans pay survey vendor to administer the survey. 2009, MA organizations are required to
for the administration of the CAHPS We note that, in addition to approving report information across 13 measures
survey to their members. The data a list of survey vendors to conduct the ranging from benefit utilization to agent
collection model that we are proposing survey on behalf of all MA and Part D training and testing. Similar to the Part
for CAHPS survey process would use contracts, we would select the sample of D reporting requirements, these
the same model that MAOs currently enrollees to be surveyed for each measures are designed to enable us to
follow for HOS. The National contract, approve survey vendors, monitor plan performance and to
Committee for Quality Assurance provide oversight of survey vendor respond to inquiries. The current Part C
(NCQA) certifies vendors to conduct the activities, analyze the CAHPS data for reporting requirements (OMB 0938–
HOS survey on behalf of CMS. In 2009, plan ratings, and produce individual- 1054) may be accessed at http://
MAOs chose from a list of six approved level reports for quality improvement www.cms.hhs.gov/HealthPlansGenInfo/
vendors for HOS. We have been moving use by MA and Part D contracts. 16_ReportingRequirements.asp.
toward this model for all of our data Vendors will be trained by us to collect In order for us to use the data
collection efforts for beneficiary and submit data within specified provided by MA organizations and PDP
timeframes. If we decide to implement sponsors, the data must be accurate,
satisfaction surveys. We propose to use
this proposal, we will provide further valid, reliable, and comparable across
a similar model for the Medicare
information regarding access to the plans. Because we have received data of
CAHPS survey where Part C & D
listing of approved vendors for the questionable validity from some Part D
contractors and section 1876 cost
CAHPS survey. sponsors, we stated in the 2010 Call
contractors would select a vendor from
letter (http://www.cms.hhs.gov/
a CMS list of approved vendors to 3. Validation of Part C and Part D
prescriptiondrugcovcontra) that the
conduct the survey on their behalf. Reporting Requirements (§ 422.516 and
agency ‘‘has received many inquiries
While this proposal would shift the § 423.514)
from Congress, oversight agencies, and
cost of data collection to the eligible Under sections 1857(e) and 1860D–12 the public about costs, availability of
Part C and D contractors for the of the Act, we have the authority to services, beneficiary use of available
Medicare CAHPS survey (section 1876 establish information collection services, patient safety, grievance rates,
cost contractors would be able to claim requirements with respect to MA and other factors pertaining to MAOs
these costs on their cost reports), with organizations and Part D sponsors. and PDPs. However, to date, we have
this change the sponsoring Under section 1857(e)(1) of the Act, MA not been able to address many of these
organizations will have the flexibility of organizations are required to provide inquiries due to either an absence of
adding their own questions to the the Secretary with such information as data with respect to MAOs or, despite
Medicare CAHPS survey. The flexibility the Secretary may find necessary and collecting over three years’ worth of
to add questions will allow them to get appropriate. Section 1857(e)(1) of the data, data of questionable validity
feedback about any contract specific Act applies to PDPs as indicated in submitted by Part D sponsors.’’
issues. section 1860D–12. Pursuant to our Accordingly, to meet the goals of data
Under this proposal, the following statutory authority, we codified these validity reliability, and comparability,
types of contracts would be amended to information collection requirements in we indicated in the Call Letter that, ‘‘to
include a requirement to administer the regulation at § 422.516 and § 423.514, better enable CMS to respond to
CAHPS survey— respectively. inquiries and manage our programs,
• All Coordinated Care contracts, Consistent with our regulatory sponsoring organizations should
including local and regional preferred authority to collect information, we undertake a data validation audit on
provider organizations (PPOs) and developed specific MA and Part D reported Part C and Part D data effective
contracts with exclusively Special reporting requirements to assist in for CY2010.’’ Given the importance of
Needs Plans (SNPs) benefit packages; monitoring the Part C and D programs the new Part C and Part D data reporting
• Cost contracts under section 1876 of and to respond to questions from requirements, we are proposing to
the Act; Congress, oversight agencies, and the require MAOs and Part D sponsors to
• Private-Fee-For Service (PFFS) and public. These inquiries include undertake an independent data
Medical Savings Accounts (MSA) questions about costs, availability of validation audit in accordance with
contracts; and services, beneficiary use of available CMS specifications on reported Part C
• Prescription Drug Plans contracts services, patient safety, grievance rates, and Part D data that would be effective
(PDPs). and other factors pertaining to MAOs for CY2011. We believe that only an
All plans under Programs of All and PDPs. We began collecting Part D independent data validation audit
Inclusive Care for the Elderly (PACE), information at the inception of the conducted by an external entity under
HCPP—1833 cost plans, and employer/ program. Data collected under the Part contract to the MAO or PDP sponsoring
union only (PDP and PFFS) contracts D reporting requirements currently organization would ensure that the
results of the audit are in accordance In 2006 and 2007 there were 37 PDE by the September 18, 2008 interim final
with CMS specifications, that data used elements. In 2008 the number of PDE rule that incorporated changes made as
to develop plan performance measures elements collected was expanded from a result of section 181 of MIPPA. Thus,
are credible to other stakeholders, and the original 37 elements to 39 elements. in this rule, we propose that the release
that information used to respond to The additional PDE elements are of any additional PDE data elements
Congressional and public inquiries are ‘‘Estimated Rebate Amount Applied to collected using our authority under
reliable. We therefore propose to amend the Point-of-Sale Price’’ and ‘‘Vaccine section 1860D–12(b)(3)(D) of the Act
§ 422.516 and § 423.514 to state that Administration Fee.’’ The ‘‘Estimated would continue to be subject to our
each Part C and Part D sponsor be Rebate Amount applied to the Point-of- minimum necessary data policy, our
subject to an independent yearly audit Sale Price’’ is the estimated amount of data sharing procedures, and the
of Part C and Part D measures (collected a rebate that the plan sponsor has encryption of certain identifiers and
pursuant to our reporting requirements) elected to apply to the negotiated price aggregation of cost data to protect
to determine their reliability, validity, as a reduction in the drug price made beneficiary confidentiality and
completeness, and comparability in available to the beneficiary at the point commercially sensitive data of Part D
accordance with specifications of sale. The ‘‘Vaccine Administration sponsors.
developed by CMS. Fee’’ is the amount that is charged for This proposal would allow us to
We note that we are working with a the administration of a vaccine separate collect and use for non-payment-related
contractor to develop data validation from the actual vaccine. purposes any data obtained as a result
specifications to ensure that the goals of In the 2010 Call Letter to sponsoring of the addition of new elements to the
reliability, validity, completeness, and organizations we noted that we were PDE record without undertaking
comparability are met at the conclusion planning to add a new (40th) element to rulemaking for each additional element
of the data validation audit. These the PDE record, referred to as the added in the future. We believe that the
specifications will focus on how ‘‘Prescription Origin Code.’’ (at http:// May 28, 2008 of Part D Claims Data final
organizations and sponsors compile www.cms.hhs.gov/ rule (73 FR 30664) resolved any
numerators and denominators, take into PrescriptionDrugCovContra/Downloads/ statutory ambiguity surrounding our
account appropriate data exclusions, CallLetter.pdf). The prescription origin broad authority to collect PDE data
and verify calculations, computer code, code is designed to capture the under section 1860D–12(b)(3)(D) of the
and algorithms. In addition, they will be frequency with which providers use e- Act. Accordingly, we may use this same
used to inform how the MAOs, cost prescribing. authority to collect additional elements
plans, and Part D sponsors collect, store, The original Part D claims data that have been added to the PDE since
and report data. We expect that these proposed rule published on October 18, 2007. Once data have been collected
specifications will be utilized by the 2006 (71 FR 61447) did not address the under section 1860D–12(b)(3)(D) of the
auditors hired by MAOs and Part D collection, for purposes other than Act, we may use these data for non-
sponsors to conduct the data validation payment, of any additional elements payment related purposes and may
audits, the results of which will be that might be added to the original 37 release PDE data consistent with our
forwarded to us. We expect to make elements. Rather, in the proposed rule, minimum necessary policy and our data
these specifications available on our we only included a discussion of the 37 procedures.
website for public comment early next elements that then comprised the PDE Elements such as rebates applied at
year. We solicit comment on this record and proposed that we would the point-of-sale, vaccine
approach. collect these 37 PDE elements under administration, and prescription origin
section 1860D–12(b)(3)(D) of the Act. As code represent claim-level information
4. Collection of Additional Part D a result, as noted in the May 28, 2008 that once accessed and analyzed, could
Claims’ Elements for Nonpayment- final rule (73 FR 30667) on Part D provide useful insight into operations of
Related Purposes (§ 423.505) claims data, interested parties were not the Part D prescription drug benefit
Section 1860D–12(b)(3)(D) of the Act, afforded an opportunity to comment on program. For example the prescription
which incorporates section 1857(e) of whether new elements that were added origin code could be studied to identify
the Act provides the Secretary with to the PDE record for 2008 (or any PDE how often electronic prescribing is used
authority to include in Part D sponsor elements that might be added in the in practice, and serve as background for
contracts any terms or conditions the future) should be collected under policy proposals to further support this
Secretary deems necessary and section 1860D–12(b)(3)(D) of the Act, practice in the industry. Accordingly,
appropriate, including requiring the and, consequently, used or disclosed to we believe it is appropriate that these
organization to provide the Secretary other parties for non-payment related elements should be collected under
with such information as the Secretary purposes. section 1860D–12(b)(3)(D) of the Act.
may find necessary and appropriate. In this rule, we are now proposing to For the same reason, we believe it
Under this authority, on May 28, 2008 collect all additional PDE elements would be appropriate to use our
we published a final rule that allowed beyond the original 37 elements under authority under section 1860D–
the Secretary to collect Part D ‘‘claims’’ the same authority described in the May 12(b)(3)(D) of the Act to collect for non-
data from the prescription drug event 28, 2008 final rule on Part D claims data payment purposes all elements that may
(PDE) record and use the information (that is, section 1860D–12(b)(3)(D) of the be added to the PDE record in the
gathered for non-payment purposes (73 Act). As a result, we would be able to future. We believe that the ability to
FR 30664). However, this rule limited use these data for non-payment related analyze new claims-related elements
what data (hereinafter referred to as PDE purposes. Similarly, under this added to the PDE record would increase
elements) we may collect and use for proposal, we would be able to release both specific and general knowledge of
non-payment purposes. The rule also these elements to governmental and Medicare beneficiaries’ healthcare and
described circumstances under which external entities, under the authority of the operation of the Part D program and
we may disclose the data to other section 1106 of the Act, using the same would aid our ability to conduct
government and external entities, and process that we now use to release the program oversight, support operational
the limitations associated with any such original 37 elements as described in the tasks, and provide more information for
release. May 28, 2008 final rule, and as updated use in internal and external healthcare
research studies. Moreover, we would In contrast, under the current rule, there • Medicare program benefit, we
not be required to undertake a separate is no exception to the requirement that propose to review the requestor’s
rulemaking and public comment plan identifiers be encrypted for all rationale for the importance of study
process each time new elements are external research requests. Under the findings to the Medicare program.
added to the PDE record, but rather current regulation, grantees of HHS • Public reporting, we propose to
would automatically begin collecting for agencies are treated as external entities require an attestation from the requestor
non-payment purposes elements added and may not access plan identifiers. In that the requestor will not identify
to the PDE record using our authority contrast, contractors acting on behalf of specific plans or plan sponsors in any
under section 1860D–12(b)(3)(D) of the HHS are not considered to be external public reporting.
Act and § 423.505(f)(3) of the entities and may receive unencrypted
plan identifiers when necessary for a We are proposing to provide access to
regulations. As a result, we would have
particular project, due to the provision unencrypted plan identifiers to HHS
the ability to analyze these data for
in § 423.505(m)(iii)(A) that ‘‘all elements grantees for several reasons. First, some
nonpayment related purposes in order
on the claim are available to HHS.’’ HHS agencies accomplish their mission
to identify operational problems or to
Subsequent to publication of the Part through grants, rather than contracts,
support future policy proposals without
D data rule, we have been made aware and hence cannot rely on the access that
delay. Moreover, because we do not
by some HHS agencies that a number of is provided to HHS contractors, which
propose to modify our data sharing
their grantees are having difficulty means that HHS agencies have
processes or our minimum necessary
conducting some studies without a Plan differential access to prescription drug
data policy with this proposal, any
ID (for example, studies which examine event data. In addition, we believe that
release of these new elements would be
the extent to which plan choice is research performed by HHS grantees
subject to the same protections that
influenced by a plan’s name could only will advance the interests of Medicare
currently apply to all other Part D PDE
be determined using actual plan beneficiaries, who may also be served
data. Thus, we will continue to—
identifiers). These concerns have arisen by other HHS programs. A number of
• Ensure that beneficiary, prescriber,
at time when healthcare costs and HHS agencies, such as the National
or pharmacy identifiers are not released
patient outcomes under existing Institutes of Health (NIH) and the
unless absolutely necessary for a project
healthcare delivery systems are under Agency for Health Care Research and
(for example, to link to another
great scrutiny, necessitating more Quality (AHRQ), provide grants for
database);
• Encrypt Part D plan identifiers and research on cost-effective alternatives research on topics such as the
aggregate cost data elements (ingredient for healthcare delivery. utilization, adherence, safety, and
cost, dispensing fee, and sales tax) when We are proposing to revise effectiveness of medications in the
sharing PDE data with external § 423.505(m)(iii)(C) to permit CMS elderly and disabled populations which
requesters; and disclosure to HHS grantees of are of key interest to the Medicare
• Subject each request to our data unencrypted plan identifiers when program. We anticipate that such
certain conditions are met. We believe studies will assist health care providers
sharing procedures which includes
these conditions will mitigate the risk of in improving medication use in
ensuring that requestors have the
any unauthorized use or disclosure of Medicare beneficiaries over time.
appropriate experience and are working
commercially sensitive plan Although our proposal is limited to
for, or on behalf of, a reputable
information. The conditions we propose HHS grantees, we also request
institution and that, when appropriate,
be met include— comments on whether it would be
make their project results public.
• The plan identifier is essential to appropriate to extend this proposal to
External requests concerning beneficiary
the study and there is no other source permit grantees of other Federal
identifiable data would continue to be
of CMS data that would substitute for agencies to have access to plan
reviewed by the CMS Privacy Board,
plan identifiers in order to carry out the identifiers when this access may be
and would require the requestor to sign
study; necessary for a particular research
a data use agreement. • The study is key to the mission of
Accordingly, for the aforementioned project and that project otherwise meets
the sponsoring agency; the conditions described above.
reasons, we are proposing to amend • The study provides significant
§ 423.505(f)(3) to include all data benefit to the Medicare program; and F. Changes To Implement New Policy
elements included in all drug claims for • The requestor attests that any
purposes deemed necessary and public findings or publications will not This section addresses two policy
appropriate by the Secretary and identify plans or plan sponsors. proposals. In the area of Part D
consistent with the Paperwork In evaluating requestors’ proposals to formulary policy, we propose new
Reduction Act. determine whether these conditions are regulatory requirements affecting the
In the May 28, 2008 final rule we met, we propose the following inclusion of protected drug categories
deemed it necessary to protect various evaluation standards: and classes on Part D formularies,
Part D elements when responding to • Plan identifier, to evaluate the following the enactment of MIPPA,
external research requests (as discussed requestor’s rationale to determine which made a number of changes to the
above). Accordingly, beneficiary ID, whether an encrypted plan identifier Part C and D programs., Under Part C,
plan ID, prescriber ID, and pharmacy ID would be sufficient for the study design we propose to revise our rules to allow
are encrypted prior to release to external or if the real identifier is necessary for beneficiaries who elect MSAs as a type
entities. However, in the case of the study. of health insurance plan to pay only a
beneficiary ID, prescriber ID, and • Agency mission, we propose to pro-rated deductible if their MSA
pharmacy ID, this information may be review the requestor’s agency’s rationale deposit is pro-rated because they enroll
provided in an unencrypted format for the study and how the study would after January 1. These revisions are
when needed to link to another data set. help the agency achieve its mission. detailed in Table 6.
TABLE 6—REVISIONS TO IMPLEMENT NEW POLICY

Part 422 Part 423
Provision
Clarify the MIPPA 176 ‘‘Protected Classes’’ for- N/A ............. N/A ............................................. Subpart C .. § 423.120(b)(2)(v).
mulary provision.
Pro-rating the Plan Deductible for Part C MSA En- Subpart C .. § 422.103 ................................... N/A ............. N/A.
rollments Occurring During an Initial Coverage
Election Period.
1. Protected Classes of Concern Under actions and pharmacological effects of • A secondary review by a clinical
Part D (§ 423.120(b)(2)(v)) the drugs within a category or class. In review panel that will serve to validate
As noted previously, the MIPPA was addition, the MIPPA provides the the findings of the initial analysis.
enacted on July 15, 2008. Prior to the Secretary with the discretion to We also stated that the second-level
passage of MIPPA and before the start of establish exceptions permitting Part D expert panel would be ‘‘consensus
the program, we directed Part D sponsors to exclude from their driven’’ and that ‘‘information regarding
sponsors to include on their formularies formularies, or to otherwise limit access the independence, potential conflicts of
all or substantially all drugs in six drug to (including utilization management interest, expertise, and balance of the
categories (that is, antidepressant; restrictions or prior authorization), individuals chosen for this panel would
antipsychotic; anticonvulsant; certain Part D drugs from the protected be made publicly available.’’
immunosuppressant for transplant categories and classes.
In the January 16, 2009 Federal We received 30 public comments on
rejection; antiretroviral; and
Register (74 FR 2881), we published the the January 16, 2009 IFC. Some
antineoplastic categories or classes).
Medicare Advantage and Prescription commenters suggested an expansion of
This directive was aimed at ensuring a
smooth transition of the approximately Drug Programs MIPPA Drug Formulary the current six classes of clinical
6 million dual eligible beneficiaries who and Protected Classes Policies interim concern policy, either through the
were converting from Medicaid drug final rule with comment period that removal of current exceptions or
coverage to Medicare drug coverage at revised the regulations governing the through processes that might broaden
the start of the Part D program. Medicare Part D formularies as a result the number of protected classes beyond
Although section 1860D–11(i) of the Act of MIPPA. We codified the MIPPA six. Other commenters suggested that
prohibits us from establishing a provision requiring the inclusion of all the MIPPA was passed in order to
‘‘national formulary,’’ we have drugs from identified ‘‘protected codify the current six classes of clinical
interpreted our obligation under section categories and classes’’ on Part D concern. Still other commenters
1860D–11(e)(2)(D)(i) of the Act not to sponsor formularies at suggested limiting the protected classes,
approve discriminatory benefit designs § 423.120(b)(2)(v). We also noted in the stating that plans and pharmaceutical
as providing the authority to set preamble of the January 16, 2009 IFC benefit managers can only limit
standards for review of formularies. In that the timing of Part D formulary beneficiary cost increases through use of
developing our formulary policy, we submissions for 2010 will preclude us formulary and drug utilization
have sought to build on a careful from making identification in time for management tools. These commenters
balance between ensuring access to the 2010 contract year. As such, we stated that CMS must carefully weigh
drugs for vulnerable populations, while noted that Part D sponsors must increased beneficiary costs against any
at the same time allowing Part D continue to provide coverage of the six additional protections that derive from
sponsors the ability to implement drug classes of clinical concern in contract the establishment protected drug
utilization management processes to year 2010, consistent with the policy classes. Several commenters requested
achieve cost containment. These already in place since 2005. For contract further clarification of terms, such as
standards are contained in Chapter 6 of years 2011 and subsequent contract what we meant by our review of
the Medicare Prescription Drug Benefit years, we indicated in the preamble that ‘‘widely used treatment guidelines’’ and
Manual located at http:// we plan to conduct a comprehensive what is meant by the MIPPA definition
www.cms.hhs.gov/ analysis to— of ‘‘access to multiple drugs,’’ with
PrescriptionDrugCovContra/downloads/ • Determine which categories and many suggesting different
R2PDBv2.pdf. classes of drugs, including which interpretations. Finally, many
Section 176 of MIPPA added a new existing six classes of clinical concern, commenters focused on our process
section 1860D–4(b)(3)(G)(i) to the Act meet the MIPPA requirements for outlined in the January 2009 IFC, with
requiring, effective plan year 2010, that protected categories and classes; and some questioning whether members of
the Secretary establish certain categories • Identify any potential exceptions to the validation review panel would be
or classes of drugs that meet two the requirement that all drugs from solicited from experts outside the
specific statutory specifications: (1) protected categories or classes be government under a Federal Advisory
Restricted access to the drugs in the included on Part D sponsor formularies. Committee Act (FACA) process,
category or class would have major or We also specifically noted in the whether the representation would
life threatening clinical consequences preamble that we are planning a include the perspective of beneficiaries,
for individuals who have a disease or multilevel review process to identify especially groups that advocate for
disorder treated by drugs in such protected categories and classes that beneficiaries living with specific
category or class; and (2) There is a would include the following: diseases prevalent among Medicare
significant need for such individuals to • An initial data-driven analysis of beneficiaries, and whether the panel
have access to multiple drugs within a widely used treatment guidelines and would include practicing physicians
category or class due to unique chemical Part D utilization data; and and specialists with documented
experience in treating Medicare patients coverage determination for a non- application of existing procedures will
in the therapeutic areas under review. formulary Part D drug on the basis of result in the exacerbation of the
Based on the comments received on medical necessity. Our requirements enrollee’s underlying disease to an
the January 16, 2009 IFC, we have further include the right of review of a extent that it would cause persistent or
decided to revisit section 176 of MIPPA sponsor’s negative determination by an permanent damage. For example, a short
and the ‘‘protected classes’’ for further independent review entity in cases of delay in access to an
interpretation and review. While some both a standard and expedited appeal. immunosuppressant to prevent
commenters and a few outside parties We believe that it is critically transplant rejection would be more
have suggested that the Congress’ important that section 176 of MIPPA be likely to meet the statutory criteria than
intention behind section 176 of MIPPA read in the context of the other a short delay in access to a drug
was to codify our preexisting ‘‘6 class’’ protections inherent in the Part D intended to increase bone density or
policy, we do not believe that the plain program in order to avoid establishing treat hyperlipidemia.
reading of the statute supports such an unnecessary duplicative protections. Given these considerations, we
interpretation because the six classes are The current protections already serve as believe that in light of existing
not expressly identified in the MIPPA. an underlying foundation to ensuring beneficiary protections under Part D,
Rather, we continue to believe that access to needed Part D drugs that do ‘‘restricted access’’ should be construed
various analyses are needed to not appear on a Part D plan’s formulary. to occur in the case of someone who,
determine which drug classes meet the We therefore propose to amend the but for the protected classes provision,
MIPPA criteria. Furthermore, varied and regulatory language at § 423.120(b)(2)(v) urgently requires a Part D drug but is
conflicting public comments we that was added by the January 16, 2009 waiting for an expedited
received on the January 16, 2009 IFC IFC in order to reflect the MIPPA redetermination by a Part D plan or our
persuade us that the MIPPA criteria are protected categories and classes independent review entity with respect
not self implementing and, moreover, provision in the context of these to coverage of that drug. It is during this
the process envisioned in the January protections. Specifically, we are period of time—where the beneficiary
16, 2009 IFC may be unduly proposing to interpret several of the may urgently need the drug but does not
burdensome and too unwieldy to permit statutory terms in section 176 of MIPPA yet have access to it—that is most likely
timely changes in reaction to medical to better define the scope of the to result in a major or life threatening
and pharmacological advances. As a protections under this section of clinical consequence for beneficiaries
result, we are engaging in notice and MIPPA. To that end, we are proposing who require treatment of a chronic
comment rulemaking to further interpret several new definitions at § 423.100. condition or disease and who are going
section 176 of MIPPA. In order to read section 176 of MIPPA without such medications while
We believe that the critical policy in the context of the existing Part D awaiting the redetermination.
decision at hand, based on the program, we believe there is a need to Accordingly, we believe that we must
comments received, is how broadly or interpret the meaning of the term identify drug classes and categories to,
narrowly we interpret specific terms in ‘‘restricted access’’ under the first in part, address this situation.
the MIPPA provisions. Interpreted MIPPA criterion in section 1860D– To understand how our proposed
broadly, the provisions in section 176 of 4(b)(3)(G)(i) of the Act, which refers to definition of restricted access fits in
MIPPA might easily encompass many ‘‘restricted access to the drugs in the context with the rest of the first MIPPA
classes of drugs and significantly category or class [having] a major or life criterion, we believe it is important to
increase costs to the Part D program by threatening clinical consequences for have a consistent interpretation of the
eliminating the need for manufacturers individuals who have a disease or phrase ‘‘major or life threatening
to aggressively rebate their products for disorder treated by drugs in such clinical consequences.’’ In thinking
formulary placement. However, a category or class.’’ In theory, lack of about how to define this term, we
narrow interpretation of these criteria access to any drug that is medically considered a definition developed by
would reduce the number of classes that necessary could result in serious or life- the FDA for new drug and biological
are ‘‘protected’’. threatening clinical consequences. products that are being studied for their
We believe that the plain reading of Thus, one could argue that all safety and effectiveness in treating life-
section 176 of MIPPA does not remove prescribed Part D drugs are medically threatening or severely debilitating
or otherwise revise our transition and necessary and therefore should be diseases. The definition of life-
coverage determination protections protected. However, we believe that is threatening in that context reads as: (1)
outlined in subparts C and M of part more appropriate to interpret the MIPPA Diseases or conditions where the
423, and further explained in Chapters criteria more narrowly, both to avoid likelihood of death is high unless the
6 and 18 of the Medicare Prescription duplicative protections, as mentioned course of the disease is interrupted; and
Drug Benefit Manual at http:// above, as well as to preserve one of the (2) diseases or conditions with
www.cms.hhs.gov/ key aspects of the Part D program— potentially fatal outcomes, where the
PrescriptionDrugCovContra/ namely, that Part D sponsors have the endpoint of clinical trial analysis is
12_PartDManuals.asp#TopOfPage. ability to undertake cost containment survival (21 CFR 312.81(a)). However,
These existing protections require Part efforts through formulary design. For we concluded that this definition is too
D sponsors to establish a transition this reason, we believe it makes sense to restrictive for our purposes. Seciton 176
process, consistent with our interpret the statutory criteria that will of MIPPA contemplates ensuring
requirements (which we propose to be used to identify protected categories enrollee access to drugs where restricted
codify elsewhere in this rule), for issues or classes of drugs with these access ‘‘would have major or life
associated with coverage of non- parameters in mind, while seeking to threatening clinical consequences’’
formulary drugs. They also require a ensure that the protections afforded (emphasis added). Thus, an
Part D sponsor to establish an under section 176 of MIPPA are interpretation that potentially could
exceptions and appeals process, meaningful. Under this interpretation, exclude ‘‘major’’ clinical consequences
including an expedited request process therefore, we intend the criteria to apply that were non-life-threatening would be
in urgent situations that allows a in those circumstances wherein a short insufficient. Instead, we believe that the
beneficiary the right to request a time delay that results from the definition of a similar term, ‘‘serious
reaction,’’ found at World Health propose to define the term to mean D drug,’’ and based upon scientific
Organization’s Web site at http:// instances in which— evidence and medical standards of
www.who.int/medicines/areas/ • There is a need for simultaneous practice, Part D sponsors will only be
quality_safety/safety_efficacy/ use of multiple drugs within a drug required to include on their formularies
Annex1GlossaryofTerms.pdf is more grouping because such drugs work in all chemically distinct drugs from the
instructive and more appropriate for combination with each other; or protected classes or categories in order
addressing the circumstances in which • There is a strong likelihood of to the meet the provision in section 176
Part D enrollees may face restricted sequential use of drugs within a class or of MIPPA. Thus, two drug products that
access to medically necessary drugs category within a short period of time are determined to be therapeutic
without a protected class requirement due to a significant likelihood of failure equivalents by the FDA and identified
because unlike the FDA definition, it is of a specific drug in a class leading to as such in the FDA’s Orange Book are
not limited life-threatening situations, the substitution of another drug or drugs considered to be the same Part D ‘‘drug’’
but rather encompasses both major and in the same class. In other words, there and would not be required on all
life-threatening clinical consequences. is a strong likelihood that a different formularies.
Therefore, we propose to define major drug in the same category or class will We also believe that it is important to
or life threatening clinical consequences be needed in a short period of time if consider safety and general drug and
in a manner similar to the WHO the first drug failed due to the unique population applicability issues in the
definition. Specifically, we propose to effects that the drug type may have on context of the new protections under
define ‘‘major or life threatening clinical an individual. For example, there is a section 176 of MIPPA. Although, as
consequences’’ to mean serious clinical strong likelihood that noncurative noted above, we believe that section 176
events that arise as a result of not taking chemotherapy will require multiple of MIPPA is intended to provide
a drug that leads to patient different drug substitutions as the additional beneficiary protections, we
hospitalization, or a persistent or cancer goes in and out of remission. believe it would be imprudent to
significant disability or incapacity, or Second, with respect to duration, we interpret these new protections in such
that result in death. propose that a ‘‘short period of time’’ is a way that they interfere with existing
a short time frame delay that will result protections intended to promote safety
We note that our proposed definitions
in exacerbation of underlying disease to and efficacy. For example, we believe
with respect to the first criterion of
an extent that persistent and permanent that it is appropriate for Part D sponsors
section 176 of MIPPA are intended to
damages will occur. to establish edits for safety and that our
provide protection against major or life We propose to define the term policies not interfere with basic drug
threatening consequences at a time ‘‘multiple drugs’’ to mean two or more utilization management edits that
when other beneficiary protections still drugs, and we propose to define the sponsors apply at point-of-sale to ensure
would result in a delay in access. We phrase ‘‘category or class’’ for purposes that adverse events do not occur. Such
believe that only categories or classes of of determining compliance with the edits must be consistent with FDA
drugs for which a delay could cause a rules for protected categories and labeling to ensure that they are based on
major or life threatening clinical classes of section 176 of MIPPA as the scientific evidence and medical
consequences based on the definitions identification of a drug grouping that is standards of practice. Indeed, we
described above establish the most reasonable to identify the applicable believe that any interpretation of section
logical standard for the Part D program drug product. We do not believe this 176 of MIPPA that interferes with a
given existing beneficiary protections identification is necessarily tied to a plan’s ability to impose safety edits
while avoiding potential increased specific drug classification system, but would defeat the very purpose of
program costs associated with adding rather represents the most specific section 176 of MIPPA.
duplicative protections. grouping that is reasonable to identify In order to minimize confusion about
The second MIPPA criterion requires the applicable drug products. For the scope of the protections under
that ‘‘[t]here is a significant need for example, it may include drug groupings section 176 of MIPPA, we clarify that
such individuals to have access to based on the USP Model Guidelines, the the formulary requirements set forth in
multiple drugs within a category or American Hospital Formulary Service section 1860D–4(b)(3)(G)(ii) of the Act
class due to unique chemical actions (AHFS) classification, another drug apply only to Part D drugs; therefore,
and pharmacological effects of the drugs classification system, or some drugs that are not Part D drugs need not
within the category or class, such as combination thereof to define be included on a plan’s formulary, even
drugs used in the treatment of cancer.’’ reasonable groupings of drugs. if a particular non-Part-D drug might
To understand how this criterion Finally, consistent with the statutory otherwise be included in a protected
intersects with the first criterion, one authority for the Secretary to identify class or category under section 176 of
has to understand the meaning of the exceptions to the provision in section MIPPA. In other words, the MIPPA
phrase ‘‘significant need for access to 176 of MIPPA, we propose to specify protections do not apply to non-Part D
multiple drugs.’’ We believe that this some of the exceptions to the MIPPA drugs and their exclusion from the
phrase can be interpreted in only two provision to include on formulary ‘‘all’’ formulary requirements is not based on
ways: (1) To infer that the statutory Part D drugs meeting the two conditions our exceptions authority under section
phrase means simultaneous use of set forth in section 1860D–4(b)(3)(G)(i) 1860D–4(b)(3)(G)(iii) of the Act. Further,
multiple drugs; or (2) to infer that the of the Act. As we stated in the January we do not require now as part of our six
phrase means the sequential use of 16, 2009 IFC (74 FR 2881) and in our class policy, and would not require
drugs due to a significant likelihood of January 28, 2005 Part D final rule (70 FR under the authority of section 176 of
failure of a specific drug in a class 4260), inclusion of ‘‘all covered Part D MIPPA, the inclusion of drugs that have
leading to the substitution of another drugs’’ on formulary from a protected been historically paid for under Part B
drug or drugs in the same class. To class or category does not extend to (for example, ‘‘incident to’’ drugs
ensure beneficiary protection, we inclusion of all brand-name drugs and supplied and administered by
propose to define the term ‘‘significant generic versions of the covered drug in physicians during patient visit and paid
need for access to multiple drugs’’ to question. Under our longstanding for under Part B) or whose regulatory
include both readings. Thus, we interpretation of the term ‘‘covered Part status under the definition of a Part D
drug at § 423.100 is not known. Given were followed every year or some to identify exceptions that are based
the fact that these drugs are not covered periodic timeframe thereafter. upon available scientific evidence and
under Part D today, we believe their We continue to believe that the best medical standards of practice.
lack of presence on plan formularies way to determine which drug classes Moreover, an expert panel of
would not disrupt access. We further meet the MIPPA criteria is through a government physicians and pharmacists
believe that requiring the inclusion of data-driven process, which includes an will obviate any problems surrounding
these drugs on the formulary when they analysis of prescription drug event data, independence of clinical judgment and
are not payable under Part D would lead a review of widely used treatment potential conflicts of interest.
to beneficiary confusion, particularly guidelines, validation of the results by • Present recommendations to the
with respect to drugs with an unknown a expert committee of clinicians, and Secretary of HHS of the drug classes or
approval status. For these reasons, we acceptance by the Secretary. By widely categories, and any recommended
are proposing to exclude drugs with used treatment guidelines, we mean exceptions.
very limited applicability to the clinical literature that we consider to We note that the main difference
Medicare Part D population and non- represent best practices. We envision between these data-driven process
Part D drugs from the formulary these would include references in such described here and the process outlined
requirements under section 176 of sources as the Cochrane database and in the January 16, 2009 IFC is the
MIPPA. the AHRQ National Guideline composition of the clinical committee
Therefore, we have added a new Clearinghouse (NGC), and to include that will serve a validation review. As
paragraph to § 423.120(b)(2) to clarify literature referred to in the Part D we noted above, an expert panel
exceptions to the inclusion of all drugs statutory compendia. (For more composed solely of government
meeting the criteria under section 176 of information on the Cochrane database physicians and pharmacists would
MIPPA. Under § 423.120(b)(2)(vi), and the NGC are see their Web sites at obviate any problems surrounding
exceptions would include the following: http://www.cochrane.org/reviews and independence of clinical judgment and
http://www.guideline.gov/, potential conflicts of interest, and
• Drug products that are determined
respectively.) Therefore, it is our would simplify the process compared to
to be therapeutic equivalents under the
expectation that we will undertake the an external panel commissioned under
FDA’s Orange Book;
following multilevel process, which we the FACA.
• Edits that limit the quantity of With regard to the designation of the
again state is critical to any future
drugs due to safety; and drug classes themselves and the manner
identification of protected formulary
• Other drugs that we may specify in which they are announced, we
classes under the Part D program:
through a process that is based upon • Commence an initial data-driven believe there are two options and solicit
scientific evidence and medical analysis of widely used treatment comment on which option the public
standards of practice (and, in the case of guidelines and Part D utilization data to believes will allow us to make timely
antiretroviral medications, is consistent identify the following: determinations in a transparent manner.
with the Department of Health and ++ Possible categories and classes of Option 1: Announce protected classes
Human Services Guidelines for the Use drugs, including those of the existing six through subregulatory guidance (for
of Antiretroviral Agents in HIV–1– classes of clinical concern, that meet the example, the Call Letter) that provides
Infected Adults and Adolescents) and requirements for protected categories a notice and comment process but does
which permits public notice and and classes; and not entail full notice and comment
comment. ++ Any potential exceptions to the rulemaking.
We welcome comment on these requirement that all drugs from One option would be to promulgate
proposed definitions and clarifications. protected categories or classes be regulations that set forth the criteria we
As noted previously, we now believe included on Part D sponsor formularies. would use to identify the protected
that the process outlined in the January We note that a review of treatment classes and to apply those criteria as
16, 2009 IFC may be too burdensome to guidelines along with the review of the part of the data analysis and validation
pursue. One practical concern with that prescription drug event data will process described above, but to
process is one of timing. We no longer provide us with the necessary data to announce the protected classes that
consider it feasible by contract year make informed decisions on the result from this process through
2011 to complete the process outlined identification of MIPPA protected subregulatory guidance, such as CMS’s
in the January 16, 2009 IFC, in which classes to present to the Secretary. annual Call Letter to Part D plans, or
we would—(1) contract with an • Arrange for a secondary review by alternatively through a separate Federal
organization to complete a data-driven a group of government clinicians that Register notice. Under either vehicle,
analysis to identify possible protected will serve to validate the findings of the we would invite comment prior to the
classes and exceptions under the initial analysis. We believe that an final announcement of the protected
MIPPA; (2) decide on the composition, expert Government panel will best assist classes and exceptions thereto, and
independence, expertise, potential us in appropriately weighing the data prior to finalizing any changes to the
conflicts of interest, and balance of derived from the initial analysis against protected classes or exceptions. We
individuals chosen to participate in the the statutory requirements to identify believe this approach represents a more
second-level validation panel that protected categories or classes of drugs simplified and streamlined process. We
would arrive a consensus-driven set of in which ‘‘access to multiple drugs further believe that this simplified and
recommendations; and (3) complete within a category or class’’ is needed streamlined process would provide
notice-and-comment rulemaking to both because ‘‘major or life threatening ample opportunity for public input and
identify the protected categories or clinical consequences’’ may arise if adequate protection of the public
classes and to establish exceptions. access is restricted. Furthermore, we interest in the determination of the
Additionally, periodic updates and believe the expert panel will be well protected classes and any exceptions
adjustments to the protected categories positioned to consider the data that may thereto.
and classes, as well as to the exceptions, suggest possible exceptions and Furthermore, we believe that this
would take longer to implement if the consider this data in light of the process also is consistent with other
process contemplated in the preamble protected categories or classes in order processes we use to make similar
determinations. For example, under protected classes and any exceptions We are proposing to interpret the
Medicare Part B, coverage of off-label thereto and/or as part of the 2011 Call deductible requirement as implicitly
use of anticancer therapies may include Letter to Part D plans. applying only for the number of months
uses that are supported by certain drug in which a beneficiary is enrolled in the
2. Pro-rating the Plan Deductible for Part
compendia. In the CY 2008 Medicare MSA plan, and accordingly are
C MSA Enrollments Occurring During
Physician Fee Schedule final rule, we proposing to revise § 422.103(d) to allow
an Initial Coverage Election Period
implemented a new process to make beneficiaries who enroll during the year
(§ 422.103)
changes to the list of Part B-accepted as ICEP enrollments to pay only a pro-
compendia. This process involves Section 1851(a)(2)(B) of the Act
rated deductible consistent with the
posting materials on the CMS website, establishes Medicare Medical Savings
pro-rated deposit they receive. This rule
soliciting comment, and announcing Account (MSA) plans as a type of health
insurance plan that combines both a tax would also apply to disabled enrollees
final decision through nonregulatory under age 65 who become eligible for
means. advantaged savings account and a high-
Option 2—Announce the protected deductible health insurance policy. Medicare during the year. Interested
classes through formal notice and Under this MA plan option, Medicare beneficiaries may inquire with potential
comment rulemaking. pays the MA organization offering the MSA plans about their options prior to
A second option would be to MA plan the premium amount charged enrollment, and, upon enrollment,
undertake the clinical and data driven by the organization for a high- would receive a confirmation of
review process described above and deductible insurance policy and the enrollment letter that would inform
after promulgating regulations remainder of the MA payment amount them of both their pro-rated deposit
addressing the criteria for identifying is deposited in the enrollee’s savings amount and their pro-rated deductible.
the protected classes, implement the account. If an individual enrolls in such
G. Changes To Clarify Various Program
proposed protected classes themselves a plan mid-year, a pro-rated share
corresponding to the number of months Participation Requirements
through notice and comment
rulemaking, consistent with our remaining in the calendar year is placed We have worked with sponsoring
proposal in the January 16, 2009 IFC. into the individual’s savings account. organizations to implement and
We welcome comments on these two As provided under § 422.103(d), operationalize the Medicare Advantage
approaches for soliciting public however, beneficiaries newly eligible for and Prescription Drug Benefit Programs
comment and announcing the protected Medicare who enroll in MSAs midyear
over the past 4 years. As part of this
categories or classes of drugs required pursuant to an initial coverage election
for inclusion on Part D sponsor partnership, we have implemented
period (ICEP) are currently required to
formularies. We note that, given the pay a full deductible for the calendar operational and/or policy guidance via
implementation timeframes discussed year. For example, an enrollee whose HPMS memoranda or manual
above, as well as the need to ensure 65th birthday is in May and who instruction to assist sponsoring
consistency in formulary coverage as we chooses to enroll May 1 will be given 8/ organizations in ensuring the proper
complete our analysis to implement the 12ths of the deposit that has been and efficient administration of the Part
requirements of section 1860D– approved for the plan for the year, but C and D programs. The proposed
4(b)(3)(G)(i) of the Act, we will retain this enrollee is required to pay the full regulations in this section either clarify
our existing six classes of clinical deductible approved for the plan for the existing regulations or implement new
concern contained in Chapter 6 of the entire calendar year. An enrollee whose requirements consistent with existing
Medicare Prescription Drug Benefit 65th birthday is later in the year could policy guidance, to assist sponsoring
Manual (section 30.2.5) for contract year enroll, for example, on September 1 and organizations with attaining the goals
2010. We further note that any decisions would receive a pro-rated deposit envisioned by the Congress when the
with respect to the retention of these representing only 4/12ths of the year; legislation implementing the Medicare
classes for the 2011 contract year will be however, this enrollee would also be Advantage and Prescription Drug
made either through a separate required to pay the full calendar year Benefit programs was first passed. These
rulemaking that identifies the MIPPA deductible. clarifications are detailed in Table 7.
TABLE 7—CLARIFICATIONS OF VARIOUS SPONSOR PROGRAM PARTICIPATION REQUIREMENTS

Part 422 Part 423
Provision
Clarify what we mean by uniform benefits ............. Subpart C .. § 422.100(d) ............................... Subpart C .. § 423.104.
Ensure security of personal health information and Subpart K .. § 422.504 ................................... Subpart K .. § 423.505.
other personally identifiable information.
Require plans to report other payer information to Subpart C .. § 422.108 ................................... Subpart C .. § 423.464.
support coordination of benefits (COB).
Visitor/Traveler Benefit under Part C for the Pur- Subpart B .. § 422.74 ..................................... N/A ............. N/A.
pose of Extending Enrollment up to 12 Months.
Codify authority to establish (MTM) Program re- N/A ............. N/A ............................................. Subpart D .. § 423.153(d).
quirements.
Clarify Pharmacy & Therapeutics (P&T) Com- N/A ............. N/A ............................................. Subpart C .. § 423.120.
mittee requirements.
Generic equivalent disclosure ................................ N/A ............. N/A ............................................. Subpart C .. § 423.132.
Application of access standards at application N/A ............. N/A ............................................. Subpart C .. § 423.120.
level.
Standard Timeframe for coverage requirements ... N/A ............. N/A ............................................. Subpart M .. § 423.568.
Clarify Novation requirements ................................ N/A ............. N/A ............................................. Subpart L ... § 423.551.
TABLE 7—CLARIFICATIONS OF VARIOUS SPONSOR PROGRAM PARTICIPATION REQUIREMENTS—Continued

Part 422 Part 423
Provision
Cost Contract Program revisions: Appeals and Subpart O .. § 417.428 ................................... N/A ............. N/A.
Marketing Requirements. § 417.492 ...................................
§ 417.494 ...................................
§ 417.500 ...................................
§ 417.640 ...................................
1. Uniform Benefits Under Parts C and mirror the language at § 422.100 to screen shots, CDs, and similar
D (§ 422.100(d) and § 423.104) specify that Part D sponsors apply information.
Section 1852(d)(1)(A) of the Act uniform premiums and cost-sharing. We encourage the use of
requires a Medicare Advantage (MA) computerized and electronic systems by
2. Ensuring the Security of Personal MAOs and Part D sponsors. We are
organization offering a plan to select the Health Information and Other
providers from whom the benefits under aware, however, of the additional
Personally Identifiable Information potential for security and privacy
the plan are provided so long as the (§ 422.504 and § 423.505)
organization makes such benefits breaches in a computerized/electronic
available and accessible to each context. Our proposed changes are
In the contract provisions sections of
individual electing the plan within the designed to ensure that beneficiaries’
subpart K of parts 422 and 423, we
plan’s service area with reasonable protected health information and
specify that MAOs and Part D sponsors personally identifiable information
promptness and in a manner which must permit access to their facilities by
assures continuity in the provision of associated with their enrollment remain
the Secretary or his or her designee. private and secure.
benefits. Section 1860D–2(a) of the Act Access to facilities must be granted in
defines qualified prescription drug connection with the Secretary’s right to 3. Requirement for Sponsoring
coverage to mean access to standard or evaluate through audit, inspection, or Organizations Under Parts C and D To
actuarially equivalent prescription drug other means MAO and Part D sponsor Report Other Payer Information to the
coverage and access to negotiated prices compliance with Medicare contract Coordination of Benefits Contractor
(in accordance with section 1860D–2(d) requirements, including the quality, (§ 422.108 and § 423.464)
of the Act). We codified these sections appropriateness, and timeliness of Section 1852(a)(4) of the Act provides
in our regulations at § 422.100(d) and services. that an MA organization may charge or
§ 423.104(b). authorize a provider to seek
Both sections currently require that We interpret the Secretary’s right to
audit or inspect compliance with MA reimbursement for services from a
either an MA organization or PDP beneficiary or third party to the extent
sponsor offering a plan must offer that and Part D program regulations to
include evaluation of compliance with that payment is made secondary under
plan to all eligible beneficiaries residing section 1862(b)(2) of the Act. Section
in the plan’s service area, or for MA CMS requirements for maintaining the
privacy and security of personal health 1860D–2(a)(4) of the Act extends the
organizations, a subset of the plan’s Medicare secondary payer (MSP)
service area. We further interpret information and other personally
identifiable information of Medicare procedures applicable to MA
section 1860D–2(a) of the Act as organizations under section 1852(a)(4)
requiring the provision of uniform enrollees. In order to clarify our policy
that beneficiaries’ personal health of the Act to Part D sponsors and their
premiums and benefits. provision of qualified prescription drug
We have provided guidance to Part D information and other personally
coverage. This authority is implemented
sponsors on several occasions indicating identifiable information must remain
for MA organizations in § 422.108 and
that varying cost-sharing or premiums, secure, we propose to revise § 422.504
for Medicare PDPs in § 423.462, as well
including waiving cost-sharing or and § 423.505 to make this
as in CMS manuals.
premiums, violates the uniform benefit interpretation explicit. In a related MA organizations are responsible for
requirements at § 423.104(b) because change, we propose to clarify that we identifying payers that are primary to
doing so results in the Part D sponsor’s interpret the term ‘‘facilities’’ to include Part C of Medicare, determining the
plan not providing uniform premiums an MAO’s or Part D sponsor’s computer amounts payable by those payers, and
and benefits to all eligible beneficiaries or other electronic systems. We would for coordinating the benefits the plan
within its service area. We have further implement these proposed changes at offers with the benefits of such payers.
informed Part D sponsors that their § 422.504(e)(1)(ii) and § 423.505(e)(1)(ii). Additionally, MA organizations must
failure to collect cost-sharing at the time We are also proposing conforming take into account Part C costs that could
the service is provided or to attempt to changes to the contract requirements have been recovered or avoided due to
collect cost-sharing or bill cost-sharing related to downstream entities at MSP when determining costs in the base
to the appropriate party (either a § 422.504(i)(2)(i) and § 423.505(i)(2)(i), period. MA organizations must account
beneficiary or another payer) after the respectively. Note that while we do not for Part C MSP amounts in one of three
fact is in violation of the uniform benefit believe our authority extends to ways. MA organizations must—
provisions set forth in the current accessing the facilities of downstream • Recover from liable third parties;
regulation at § 423.104(b). entities, we may review systems and • Avoid Part C costs by directing
However, we believe that § 423.104(b) computer-generated information from providers to bill liable third parties
is not clear in regard to the PDP downstream entities for compliance directly; or
sponsor’s imposition of uniform with privacy and security requirements. • Account for Part C costs that could
premiums and cost-sharing. Therefore, Such information includes, but is not have been recovered or avoided, but that
we propose to revise § 423.104(b) to limited to, backup tapes, print outs of were actually not recovered or avoided,
by not including them in Part C base However, MA organizations and PDP organizations but would not change
period costs. sponsors will on occasion continue to current MSP and coordination of
MA organizations and PDPs are receive information about other benefits policy for the prescription drug
required to follow the same rules coverage from their enrollees, as well as program.
regarding— other sources. While our MA program
• Their responsibilities under the 4. Visitor/Traveler Benefit Under Part C
policy does not currently include
MSP statutory and regulatory for the Purpose of Extending Enrollment
reporting requirements, Part D
provisions; Up to 12 Months (§ 422.74)
subregulatory policy guidance, reflected
• Collection of payment from in section 50.2 of the Coordination of Under our authority to establish
insurers, group health plans and large Benefits chapter of the Prescription special rules for the enrollment of
group health plans, the enrollee, or Drug Benefit Manual, requires that PDP beneficiaries in MA plans at section
other entities for covered Part D drugs; sponsors submit other coverage 1851(b) of the Act, we had previously
and information that is brought to their described in the Medicare Advantage
• The interaction of MSP rules with attention within 30 days of receipt to regulations a visitor/traveler (V/T)
State laws. the CMS COB Contractor for verification benefit. Specifically, § 422.74(d)(4)(iii)
Sections 1860D–23 and 1860D–24 of and application of the verified data to established an exception to our
the Act also require a Part D sponsor to our data systems. disenrollment requirements, under
coordinate with SPAPs, as well as other Given the importance of the other which a plan member must be
drug plans, including Medicaid payer information to MA organization disenrolled when out of the service area
programs, group health plans, FEHBP, and PDP MSP procedures and for for more than 6 months. Under this
military coverage, and other plans or prescription drug program coordination exception, MA plans may offer their
programs providing prescription drug of benefits, we propose to require the enrollees extended enrollment in the
coverage. To support the required reporting of other coverage information plan when they are out of the plan
benefit coordination, section 1860D– in § 422.108 for MA organizations and service area, but within the United
2(b)(4)(D)(ii) of the Act permits Part D § 423.462 and § 423.464 for PDP States, from 6 to 12 months if the plan
sponsors to request information on third sponsors. Given concerns regarding the covers services other than emergent,
party insurance from beneficiaries. The quality of the information, we propose urgent, maintenance and post
authority for COB, as well as for to limit the information reported to that stabilization, and renal dialysis services.
information collection from which is reported to the sponsor as Section 422.74(d)(iii) establishes that an
beneficiaries is implemented for being inconsistent with existing MAO can offer a ‘‘visitor’’ or ‘‘traveler’’
prescription drug sponsors in § 423.464 information on the COB file. type program which would allow its
and in the Coordination of Benefits Specifically, we propose to include in enrollees to remain enrolled in the plan
chapter of the Medicare Prescription regulatory text the requirement that MA while out of the plan’s service area for
Drug Benefit Manual. organizations and Part D sponsors, upon up to 12 months. We note that
The growing number of CMS data being notified of credible new Medicare-covered services can only be
sharing agreements with other payers information regarding other payers or covered within the United States.
has improved the volume and quality of changes to existing other payer Although we stated in the preamble of
other payer information available to MA information, report this information to the Medicare+Choice program; Managed
organizations and prescription drug the CMS COB Contractor in accordance Care Provisions final rule, published in
sponsors on the COB data file from with the processes and timeframes the August 22, 2003 Federal Register
CMS. New mandatory insurer reporting established by CMS. By ‘‘credible’’ we (68 FR 50848), that the visitor or traveler
of MSP group health plan coverage, mean information that is consistent with program must cover ‘‘the full range of
liability insurance, no-fault insurance conventions for how group health services available to other members,’’
and workers’ compensation, required by insurance coverage is identified, for we did not specify in regulation text
section 111 of the Medicare, Medicaid, instance including the name and what we intended by ‘‘full range of
and State Children’s Health Insurance address of the insurance company and services.’’
Program (SCHIP) Extension Act of 2007 the policy identification number. We Given the lack of specificity in our
(Pub. L. 110–173), will further expand also propose to extend the reporting regulations, we have received a number
the other payer information available for requirements to MA organizations as of questions since that time regarding
MA organization and PDP MSP they relate to other primary payers. We what services must be covered through
procedures and for Part D sponsor note that Medicare MA organizations a V/T program if an MA plan wishes to
coordination of benefits. (See 42 U.S.C. and Part D sponsors should never be retain members up to 12 months when
1395y(b)(7) and (8).) Most insurers will reported to CMS as a ‘‘primary’’ payer. those members are residing outside the
need to report their own coverage In the absence of another (that is, non- service area. We propose to amend
already. It is only when an MA Medicare) primary payer, the MA § 422.74(d)(4)(iii) to specify that an
organization becomes aware of coverage organization or Part D plan is always MAO may offer an extended enrollment
that is primary to Medicare offered by primary. This is not to say that if an V/T option under an MA plan if that
another insurer that it will need to enrollee has primary individual or plan furnishes all plan covered
report under this rule. In addition to employer group coverage through the services—that is, Medicare Parts A and
these advances, we continue to seek same insurer or organization through B services and all mandatory and
improvements to the quality of the MSP which they also have MA or Part D optional supplemental benefits—at in-
and COB information we report to MA coverage, such primary coverage should network cost-sharing levels consistent
organizations and Part D sponsors. We not be reported. In fact, such coverage with Medicare access and availability
believe the best means to accomplish must be reported. However, reporting requirements at § 422.112. An MAO
this is to rely primarily on the most Medicare itself as primary serves no offering a V/T benefit under an MA plan
reliable sources of other coverage purpose and merely causes confusion. must make the option available to all
information. Based on our experience, The proposed changes described in plan enrollees. Specifically, the V/T
these sources tend to be the other this section of the proposed rule would benefit must be available to all plan
insurers. impose a new requirement on MA enrollees who are temporarily in the
areas where the V/T benefit is offered MTMPs that were derived from our for all Part D sponsors will allow more
for the 6–12 months the member is in extensive review of MTMP applications, Medicare beneficiaries to have access to
the area. plan-reported data, exploratory research the MTMP earlier in the year. Part D
on MTM, informal interviews with Part sponsors also can promote continuity of
5. Medication Therapy Management
D sponsors, and other relevant literature care by identifying current MTMP
Programs Under Part D (§ 423.153(d))
and data. In this rule, we are proposing enrollees towards the end of a plan year
Section 1860D–4(c)(1)(c) of the Act to codify this policy guidance in who will qualify for MTMP enrollment
requires Part D sponsors to establish § 423.153(d). We believe the proposed in the next plan year. This practice
Medication Therapy Management changes to the MTMP requirements will would allow the Part D sponsors to have
programs (MTMP) and section 1860D– promote greater consistency across the such beneficiaries enrolled in their
4(c)(2) of the Act requires MTMPs to be Part D program that will allow for better MTMP at the beginning of the next plan
designed to ensure, with respect to evaluation and comparison of MTMPs year.
targeted beneficiaries described in when outcomes measures become We also propose adding
section 1860D–4(c)(2)(A)(ii) of the Act, available. § 423.153(d)(1)(vii) to require Part D
that covered Part D drugs are Specifically, in accordance with sponsors to offer a minimum level of
appropriately used to optimize sections 1860D–4(c)(1)(C) and 1860D– MTM services for each beneficiary
therapeutic outcomes through improved 4(c)(2) of the Act, we propose to add the enrolled in the MTMP that includes
medication use and to reduce the risk of following requirements: interventions for both beneficiaries and
adverse events. These requirements are • Part D sponsors shall use only an prescribers; annual comprehensive
codified at § 423.153(d) of the Part D opt-out method for MTMP enrollment; medication reviews; and quarterly
regulations. • Part D sponsors shall target targeted medication reviews. In 2008,
Section 423.153(d)(1) requires each beneficiaries for MTMP enrollment at approximately 90 percent of Part D
Part D sponsor to establish a MTMP that least quarterly during each plan year; MTMPs provided interventions
is designed to ensure that covered Part and targeting both beneficiaries and
D drugs (as defined in § 423.100) • Part D sponsors shall offer a prescribers. Our proposed requirement
prescribed to targeted beneficiaries are minimum level of MTM services for that MTMPs include interventions for
appropriately used to optimize each beneficiary enrolled in the MTMP both beneficiaries and prescribers does
therapeutic outcomes through improved that includes interventions for both, not mean, however, that all
medication use; designed to reduce the beneficiaries and prescribers, annual interventions must target both the
risk of adverse events for targeted comprehensive medication reviews, and beneficiary and the prescriber. Instead,
beneficiaries; furnished by a pharmacist quarterly targeted medication reviews. Part D sponsors must determine if the
or other qualified provider; and allowed In addition, we are proposing to beneficiary, prescriber, or both should
to distinguish between services revise the requirements for targeting be targeted for any specific intervention
provided in ambulatory and beneficiaries who have multiple chronic or interventions. Prescriber
institutional settings. Section diseases and take multiple Part D drugs interventions may be passive (for
423.153(d)(2) defines targeted by specifying the maximum number of example, faxed or mailed) and should
beneficiaries as enrollees who have multiple chronic diseases and multiple be targeted to resolve potential
multiple chronic diseases, are taking Part D drugs that Part D sponsors may medication-related issues or other
multiple Part D drugs, and are likely to establish as a minimum threshold for opportunities to optimize medication
incur annual costs for covered Part D satisfying their MTMP targeting criteria. use.
drugs that exceed a predetermined level We propose adding § 423.153(d)(1)(v) Furthermore, while Part D sponsors
as specified by the Secretary. to require Part D sponsors to enroll may incorporate passive or ‘‘lower
In the original Part D final rule (that beneficiaries in their MTMPs using an touch’’ beneficiary interventions, such
is, the January 28, 2005 final rule), we opt-out method of enrollment only. as education newsletters, drug
did not identify specific medication Under this proposal, a beneficiary that utilization review (DUR) edits, refill
therapy management (MTM) meets the targeting criteria would be reminders, and medication lists into
requirements beyond those contained in auto-enrolled into the MTMP and their MTMPs, where appropriate, these
the Act because there was insufficient considered to be enrolled unless the he passive interventions cannot be the sole
industry experience and no widely or she declines enrollment. This opt-out offerings. Part D sponsors must also
accepted standard practices for MTMPs. method of enrollment is currently the offer MTM services to beneficiaries that
Moreover, we also believed that in the preferred method of enrollment among include an interactive component,
future outcomes measures would Part D sponsors, used by approximately continued monitoring, and follow-up
provide the best method for evaluating 85 percent of current MTMPs, and has when necessary. In addition, Part D
MTMPs and promoting the most increased enrollment of targeted sponsors should have procedures in
effective programs. However, given the beneficiaries into MTMPs. As a result, place to follow-up with beneficiaries
experience garnered from the first few we believe that requiring an opt-out that do not respond to initial offers for
years for the Part D program, and as we method of enrollment will provide more MTM services.
still await further development of beneficiaries with access to MTM Under this proposal, Part D sponsors
MTMP outcomes measures that can services. would also be required to offer an
serve the Part D program, we have We also propose adding annual comprehensive medication
determined that it necessary to have § 423.153(d)(1)(vi) to require Part D review (CMR) to all targeted
more specific Part D MTMP sponsors to target beneficiaries for beneficiaries. With the exception of
requirements for enrollment methods, enrollment in the MTMP at least targeted beneficiaries in long-term care
targeting procedures, and MTM quarterly during each plan year. settings, the CMR would be required to
services. Accordingly, in the 2010 Call Currently, more than 95 percent of Part include an interactive, person-to-person
Letter, we included policy guidance D sponsors target beneficiaries for consultation performed by a pharmacist
regarding the implementation of enrollment in their MTMPs on a daily, or other qualified provider. A CMR is a
MTMPs. This policy guidance reflects weekly, monthly, or quarterly basis. We review of a beneficiary’s medications
common practices among Part D believe that making this a requirement including prescription medications,
over-the-counter (OTC) medications, beneficiaries with at least two chronic based upon a benchmark that is tied to
herbal therapies and dietary diseases or at least three chronic the Part D benefit. We believe that the
supplements intended to aid in diseases. initial coverage limit (ICL) for the Part
assessing medication therapy, and Under this proposed revision to D defined standard benefit provides a
optimizing patient outcomes. The § 423.153(d)(2)(i), Part D sponsors may logical benchmark for the MTMP
review of the beneficiary’s medication continue to target any chronic diseases because it ensures that Part D sponsors
may be performed concurrently with the or limit MTMP enrollment to enrollees will always be able to target enrollees at
beneficiary consultation or prior to the having specific chronic diseases. risk of entering the coverage gap.
consultation by a qualified provider or However, beginning in 2010, CMS Accordingly, in this rule, we propose to
computerized clinical algorithm. The guidance specifies, at a minimum, that revise § 423.153(d)(2)(iii) to specify that
consultation must be a real-time Part D sponsors should target at least targeted beneficiaries must be likely to
interaction that is provided either face- four of seven core chronic diseases that incur costs for covered Part D drugs that
to-face or via an alternative interactive we have identified as prevalent in the exceed the ICL for the Part D defined
method such as the telephone. Finally, Medicare population based upon the standard benefit for the applicable Part
the beneficiary must receive a written analysis of the RxHCC Risk Adjustment D plan year.
summary of the CMR and consultation model, posing a risk to the Medicare
Trust Fund, and reflecting the most 6. Formulary Requirements—
that may include such things as a
common diseases targeted by Part D Development and Revision by a
medication record, reconciled
MTMPs in general. The seven chronic Pharmacy and Therapeutics Committee
medication list, action plan, or
diseases are hypertension, heart failure, (§ 423.120)
recommendations for monitoring,
education, or self management. diabetes, dyslipidemia, respiratory Section 1860D–4(b)(3)(A) of the Act
In addition to the annual CMR, under disease, bone disease-arthritis, and requires Part D sponsors to use a
this proposal, Part D sponsors would be mental health diseases such as pharmacy and therapeutics (P&T)
required to perform targeted medication depression, schizophrenia, and bipolar committee to develop and review the
reviews for all beneficiaries enrolled in disorder. In determining whether a formulary if the Part D sponsor uses a
the MTMP no less often than quarterly. beneficiary meets the minimum number formulary. In developing and reviewing
These targeted reviews would focus on of multiple chronic diseases to be the formulary, section 1860D–4(b)(3)(B)
assessing medication use since the CMR targeted for MTM services, a beneficiary of the Act requires the P&T committee
and determining if any issues that were could have any combination of the to base clinical decisions on the strength
identified during the CMR remain chronic diseases targeted by the Part D of scientific evidence and standards of
unresolved or if any new drug therapy sponsor. practice, including accessing peer-
issues have arisen. The Part D sponsor Consistent with section 1860D– reviewed medical literature, such as
must assess the findings of these 4(c)(2)(ii)(II) of the Act, plan sponsors randomized clinical trials,
reviews to determine if a follow-up must target beneficiaries taking multiple pharmacoeconomic studies, outcomes
intervention is necessary with either the covered Part D drugs for MTM services. research data, and on such other
prescriber or beneficiary. Unlike the In the original Part D rule, we left the information as the committee
CMR, these interventions are not determination of ‘‘multiple’’ entirely to determines to be appropriate. The P&T
required to be interactive although it the Part D sponsors. Based upon our committee must also consider whether
should be considered when appropriate. experience and extensive analysis of the the inclusion of a particular Part D drug
Consistent with section 1860D– Part D MTMPs since the beginning of in a formulary or formulary tier has any
4(c)(2)(ii)(A) of the Act, Part D sponsors the Part D program, we issued guidance therapeutic advantages in terms of
must target beneficiaries who have in 2009 to clarify the range that plan safety and efficacy. We codified these
multiple chronic diseases for MTM sponsors should consider in order to requirements at § 423.120(b)(1).
services. In the original rule, we left the satisfy the statutory requirement In the preamble to the January 28,
determination of ‘‘multiple’’ and beginning in 2010. Specifically, we 2005 final rule (70 FR 4193) and
‘‘chronic disease’’ entirely to the Part D noted that Part D sponsors should subsequent formulary guidance, we
sponsors. In 2008, approximately 85 define ‘‘multiple’’ for purposes of distinguished between the roles of the
percent of Part D MTMPs targeted satisfying this requirement as no more P&T committee in determining which
beneficiaries with a minimum of two or than eight Part D drugs as the minimum drugs are placed on a formulary versus
three chronic diseases. Based upon our number of multiple Part D drugs. the application of utilization
experience with Part D MTMPs since Consistent with this policy guidance, management tools that are applied to
the beginning of the Part D program, we we now propose to revise the drugs placed on the formulary.
issued guidance in 2009 to clarify the § 423.153(d)(2)(ii) to specify that no Specifically, we said that the P&T
range and types of diseases that will more than eight multiple Part D drugs committee recommendations regarding
satisfy this requirement beginning in be established as a minimum for which Part D drugs are placed on a
2010. targeted beneficiaries. Therefore, Part D formulary are binding on the Part D
In this rule, we propose to revise sponsors would be permitted to set this sponsor while recommendations
§ 423.153(d)(2)(i) to specify that the minimum threshold for MTMP regarding utilization management tools
minimum number of multiple chronic eligibility at any number equal to or such as prior authorization (PA), step
diseases for targeted beneficiaries be no between two and eight. therapy, and quantity limits are
more than three. Under the proposed Under section 1860D–4(c)(2)(ii)(III) of advisory only and not binding on the
revision to § 423.153(d)(2)(i), we would the Act, plans must target beneficiaries Part D sponsor. We made this
require Part D sponsors to define the that are likely to incur annual costs for distinction because we believed that the
minimum threshold for ‘‘multiple’’ for covered Part D drugs that exceed a level placement of a drug on the formulary
purposes of targeting beneficiaries as no specified by CMS. In the 2010 Call was the primary clinical decision in
more than three chronic diseases. Letter, we specified a new, lower three developing a formulary while the
Therefore, Part D sponsors would be thousand dollar threshold. Moving application of utilization management
permitted to set their minimum forward, we believe that it makes more tools, although clinically justified,
threshold at two or three and target sense to establish a dollar threshold required the consideration of additional
financial and benefit design criteria that that this is standard practice for P&T the prescription drug claim has been
went beyond the scope of the P&T committees, and therefore, do not submitted by the LTC pharmacy and
committee role. Consequently, we believe this requirement creates an processed by the Part D sponsor.
believed it was only necessary for the additional burden. Therefore, the ability of the beneficiary
P&T committee to review for clinical Finally, we do not believe it is to make changes at the point-of-service
appropriateness Part D sponsor policies necessary for P&T committees to review based upon information provided on the
that guide utilization management and approve administrative PA criteria EOB is simply not feasible. Unlike the
processes and codified this requirement such as those used to make ‘‘B vs. D’’ enrollee standing at the retail pharmacy
in § 423.120(b)(vi). determinations. Only PA criteria that counter at time of service, enrollees in
We have gained a better require clinical information and long-term care institutions have limited
understanding of the formulary justification require the review and opportunities to affect a switch to a
development process since the approval of the P&T committee. lower-priced generic substitute before
beginning of the Part D program and dispensing. Because of this limitation,
7. Generic Equivalent Disclosure Under
now recognize that the application of we have not enforced this regulatory
Part D (§ 423.132)
PA criteria, step therapy, and quantity requirement and have not included
limits are as important to the clinical Section 1860D–4(k)(1) of the Act model language that addresses this
soundness of a formulary as the drugs requires a Part D sponsor to have each requirement in the EOB.
that are included. Access to Part D drugs of their network pharmacies inform For the aforementioned reasons, we
may be influenced as much by the enrollees of any difference between the are proposing to revise § 423.132(c) by
application of PA criteria, step therapy price of the drug(s) they are purchasing adding long-term care network
requirements, or quantity limit via the plan and the price of the lowest pharmacies to the list of entities for
restrictions as it can be by exclusion of priced therapeutically equivalent which from the public disclosure
a Part D drug from a Part D formulary. generic product available to the requirement is waived, and revise
For example, one formulary could list pharmacy. Section 1860D–4(k)(2)(A) of § 423.132(d) to remove the requirement
twice as many drugs as another the Act requires that this information be that long-term care network pharmacies
formulary but if all the additional drugs provided at the time of purchase except provide the pricing differential
on the second formulary are subject to for purchases delivered by mail when it information in enrollees’ EOBs.
PA requirements, overall access to Part must be provided at the time of
delivery. Under section 1860D– 8. Access to Covered Part D Drugs
D drugs may be the same under both
4(k)(2)(B) of the Act the Secretary has (§ 423.120)
formularies. For this reason, our
formulary review process has not been the authority to waive this requirement The statute at sections 1860D–
limited to evaluating the number and for certain entities in certain cases as 4(b)(1)(C) and 1860D–21(c)(1) of the Act
types of drugs on Part D formularies but specified in § 423.132(c). establishes the standards for convenient
also includes the review of the specific In § 423.132(d), we specified that for access for network pharmacies for PDP
PA criteria, step therapy requirements, enrollees in long-term care pharmacy sponsors and other Part D sponsors.
and quantity limit restrictions that are settings, the timing portion of the This section of the statute requires that
applied within the Part D formularies. disclosure requirement (that is, the the sponsor of a PDP shall secure the
Therefore, in accordance with section requirement that the enrollee be participation in its network of a
1860D–4(b)(3)(A) and (b)(3)(B) of the informed at time of purchase) may be sufficient number of pharmacies that
Act, we propose adding new paragraph waived. Accordingly, sponsors are dispense (other than by mail order)
§ 423.120(b)(1)(ix) to require Part D P&T required to disclose the differential (if drugs directly to patients to ensure
committees to review and approve all any) in pricing for long-term care convenient access consistent with the
clinical PA criteria, step therapy network pharmacies by requiring that rules established by the Secretary, and
protocols, and quantity limit restrictions this information be provided in the as long as they are no less favorable than
applied to each covered Part D drug. explanation of benefits (EOB). the TRICARE pharmacy access
PA criteria, step therapy Over time, we have heard from standards.
requirements, and quantity limits sponsors, as well as pharmaceutical A TRICARE contractor is required to
directly affect beneficiary access to benefit managers on behalf of sponsors, maintain a pharmacy network sufficient
formulary drugs. Because P&T that providing this information in the to meet the following minimum
committees must review and approve all EOB is unworkable from a plan beneficiary access standards on an
drugs before they may be added to a operational standpoint. Primarily, this is overall basis—Urban: a pharmacy
formulary, we also believe it is due to the fact that information on within 2 miles of 90 percent of the
necessary that all PA criteria, step generic pricing can—and often does— beneficiaries; Suburban: a pharmacy
therapy protocols, and quantity limits vary day to day; thus, sponsors cannot within five miles of 90 percent of the
be approved by P&T committees prior to accurately reflect the differential within beneficiaries; and Rural: a pharmacy
their application to formulary drugs. We a monthly EOB. Additionally, sponsors within fifteen miles of 70 percent of the
continue to recognize that the decision have pointed out that they would need beneficiaries. We adopted into
to apply such utilization management to program the generic equivalent prices regulation these standards, but instead
tools is not based solely upon clinical for all drugs specific to a particular of specifying them at the contract or
considerations and, therefore, remains LTC’s contracted reimbursement rate PDP sponsor level, erroneously
the responsibility of the Part D sponsors. into their systems to populate established them at the plan level.
However, we believe this new electronically on the EOB, which Specifically, in § 423.120(a) of the
requirement adds a necessary represents a significant programming regulation, which describes the
beneficiary protection by ensuring that and financial burden. requirements to assure pharmacy access,
independent clinical experts have We also believe the generic equivalent we inadvertently used the term ‘‘plans’’
reviewed and approved each information provided on the EOB is of instead of the correct terminology of
application of these utilization no value to the long-term care PDP sponsor or other Part D sponsors.
management tools for clinical beneficiary. In the LTC setting, the This error is problematic when
appropriateness. It is our understanding beneficiary receives the medication after considering the definitions outlined in
§ 422.2 (for MA) and § 423.4 (for Part D) requests for coverage determinations organization determinations. The MA
because the term ‘‘plan’’ is intended to and redeterminations. Those procedures regulations under § 422.568 distinguish
mean a specific benefit package offered must apply to Part D plan sponsors in between how requests for benefits not
to beneficiaries living in a geographic the same manner as such requirements yet received and requests for payment
area. For any given service area, Part D apply to MA organizations with respect are processed by MA plans. The rules
sponsors frequently offer multiple plans to organization determinations and pertaining to requests involving benefits
under one contract with CMS, and any reconsiderations. In accordance with not yet received are contained in
given plan may be offered within a section 1860D–4(g) of the Act, § 423.568 paragraph (a), while paragraph (b)
subset of the Part D sponsor’s total establishes the standard timeframe and contains the rules for processing
service area. notice requirements for coverage requests for payment. In accordance
Our intention has always been to determinations. However, that section with section 1860D–4(g) of the Act, this
ensure adequate access to Part D does not explain the method for filing distinction was carried over to Part D in
covered drugs at sponsor level, not at such requests. We originally omitted current § 423.568(a) and (b).
the plan level. For one, the statute these instructions from § 423.568 We received a comment on the
explicitly states that access should be because § 422.568 does not dictate the Application of Certain Appeals
ensured at the PDP sponsor level. method for filing requests for standard Provisions to the Medicare Prescription
Further, assessing adequacy of organization determinations. However, Drug Appeals Process proposed rule (73
pharmacy access is one of the most elsewhere in this rule, we are proposing FR 14342), published in the March 17,
critical steps in the Part D application to revise § 422.568 of the MA 2008 Federal Register, recommending
review process and determining access regulations by adding a new paragraph that we revise § 423.568(b) of the
to Part D covered drugs at the plan level (a) clarifying the method for filing existing regulations by lengthening the
is not possible during application requests for standard organization timeframe for making standard coverage
review. This is because plan service determinations. The proposal requires determinations involving requests for
areas (potentially subsets of Part D MA organizations to accept standard reimbursement submitted by enrollees.
sponsor or organization service areas) organization determination requests Although the comment was outside the
are not determined until the time of the orally and in writing, except for scope of the Part D appeals-related
bid submission, which occurs after standard requests for payment, which proposals in the March 17, 2008
applications are reviewed. However, must be submitted in writing unless the proposed rule, we believe the
sponsor service areas are known at the MA organization adopts a voluntary commenter’s suggestion merits
time of application submission. Our policy of accepting oral payment consideration, as discussed in detail
proposed correction would align our requests. Because section 1860D–4(g) of below.
regulations with the intent of the statute the Act requires Part D plan sponsors to The commenter contends that the
with regard to the level of analysis that meet the requirements for Part D existing 72-hour requirement for making
should be conducted for access to Part coverage determinations in the same a determination on an enrollee’s request
D drugs, namely at the Part D sponsor manner as such requirements apply to for reimbursement constitutes an
level, rather than at the plan level. MA organizations for organization unprecedented and overly burdensome
We note that as a practical matter and determinations, we propose to make a timeframe, and the only way a Part D
consistent with the current drafting of corresponding change to § 423.568 and plan sponsor can meet the regulatory
the regulation, if the Part D sponsor’s require Part D plan sponsors to accept timeframe is by making an adverse
entire service area is larger than one standard coverage determination coverage determination (that is, deny
State, we will continue to ensure access requests orally and in writing. This the request for payment). Thus, the
at no greater than the State level for proposed change would not apply to existing requirement in effect forces an
multi-state regions. This approach is standard requests for payment, which enrollee into the Part D appeals process,
necessary to ensure that pharmacies are must be submitted in writing unless the even though in the vast majority of such
not unduly clustered in one part of the plan sponsor adopts a policy for situations, the claim will eventually be
region. Accordingly, based on the accepting those requests orally. paid within the 30-day timeframe for
preceding rationale, we are proposing to In addition to this technical change, effectuating a coverage determination.
revise the text of the regulation that we propose to revise the timeframe for The commenter recommended that we
discusses pharmacy access in a Part D plan sponsor to notify an revise § 423.568(b) to extend the
§ 423.120(a)(10 through (a)(7) to refer to enrollee of a payment determination in timeframe for making a coverage
PDP sponsors, MA organizations § 423.568(b). The regulation currently determination on a request for payment
offering local and regional MA–PD requires that a plan sponsor notify the from 72 hours to 30 days.
plans, and cost contracts rather than enrollee of its determination no later As the commenter indicates,
plans. Additionally, since § 423.120(a) than 72 hours after receipt of the § 423.568(b) sets forth the coverage
(defining access requirements for Part D request. We propose to revise the determination and notification
drugs) references a definition provided provision to require Part D plan requirements in situations (generally
in § 423.112(a) (establishment of PDP sponsors to process requests for involving non-network pharmacies)
service areas), it is necessary to correct payment no later than 14 calendar days where an enrollee has already obtained
the terminology in that location as well. after receipt of the request, and also a drug and subsequently makes a
Therefore, we propose to revise make payment no later than 14 calendar request to the Part D plan sponsor for
§ 423.112(a) to specify the establishment days after receiving the request when a payment. Existing § 423.568(b) requires
of service areas for PDP sponsors. plan sponsor’s decision is partially or a Part D plan sponsor to make this
fully favorable. coverage determination and notify the
9. Standard Timeframe and Notice As noted above, section 1860D–4(g) of enrollee of its determination no later
Requirements for Coverage the Act requires Part D plan sponsors to than 72 hours after receiving such a
Determinations Under Part D (§ 423.568) meet the requirements for Part D payment request. Although the
Section 1860D–4(g) of the Act coverage determinations in the same regulations do not specify a timeframe
requires Part D plan sponsors to manner as such requirements apply to for making payment to the enrollee
establish procedures for processing MA organizations with respect to when the plan determines the drug in
question should be covered, plans are reimbursement already has the needed beneficiaries on a recurring basis (unlike
directed by manual guidance that such prescription drug in hand. Thus, we most MA services which are generally
payment should be made within 30 days believe it is more important for him or provided to beneficiaries only once),
of the request. We note that the 30-day her to receive the actual payment as and requiring plans to provide the terms
effectuation timeframe comports with soon as possible, rather than simply a of an approval in writing helps ensure
the established requirements in determination as to whether payment continuity of care for Medicare
§ 423.636 for effectuating will or will not be made. beneficiaries who receive prescription
redeterminations or reconsiderations Therefore, we believe it would be in drugs under Part D. The prescription
involving requests for payment. It also the best interests of enrollees to modify may be subject to prior authorization or
generally parallels the prompt payment the requirements of § 423.568(b) by some other rule which needs to be met
provisions that apply under § 422.520 extending the timeframe for making before a prescription can be refilled.
and § 422.568 of the MA program. coverage determinations with respect to Also, a prescription may only be
The intent of these provisions was to requests for payment in such a way as approved for a specific period of time
ensure enrollees receive a prompt to avoid confusion but also ensure that and refills may not be authorized. In
response to requests for payment while enrollees receive payment as soon as those situations, it is important for the
still giving plans a reasonable amount of possible. Based on our experience and enrollee to know the conditions (for
time to process the payment. However, previous discussions with Part D plan example, duration, limitations, and
in practice, we agree that the 72-hour sponsors, we have determined that Part coverage rules for refills) of the approval
timeframe for making a coverage D sponsors generally are capable of before he or she needs to refill the
determination in these situations may making such payments within a 14-day prescription, so he or she can work with
be quite difficult for Part D plan period following receipt of a his or her physician to secure prior
sponsors to meet. Requests for reimbursement request, as opposed to approval for additional refills, obtain an
reimbursement are generally submitted the 30-day period recommended by the exception, or switch to an appropriate
by mail in paper form, and must be commenter. Therefore, we propose alternative prescription if necessary.
identified as reimbursement requests, revising § 423.568(b) to require Part D Otherwise, the enrollee may experience
transferred from the mailroom to the plan sponsors to take the following a break in coverage if he or she attempts
reimbursement processing department, actions: (1) Make a coverage to fill a prescription and is told for the
and then manually entered and determination on a request for payment first time at the pharmacy that the
adjudicated by Part D plan sponsors and notify the enrollee of its prescription cannot be filled because it
outside of the usual online real-time determination no later than 14 calendar is subject to a coverage rule or
electronic claims processing procedures. days after receipt of a request for additional refills have not been
We also note that under these reimbursement, and (2) for favorable authorized. We believe the proposed
circumstances, information that Part D coverage determinations, make payment changes to the notice requirements for
plan sponsors need to make meaningful no later than 14 calendar days after favorable coverage determinations will
determinations with respect to a request receipt of the reimbursement request. help to ensure that enrollees and their
(which is readily available on electronic We believe these changes will establish physicians or other prescribers have the
claims) may be missing from the a more reasonable standard for the information they need in order maintain
member-submitted paper claim. Finally, adjudication of paper claims, as well as the continuity of prescription drug
the Part D plan sponsor must notify the ensure faster payments to enrollees who treatment.
enrollee of its determination within 72 submit these requests. Thus, this change
hours. Thus, as the commenter asserts, will better serve both plans and their 10. Expediting Certain Coverage
in practice the only way to meet the 72- members. As a result of changes Determinations (§ 423.570)
hour coverage determination timeframe proposed elsewhere in this rule, if Consistent with the proposed
often may be to make a negative adopted, these new requirements revisions to § 423.568, we propose to
coverage determination, at least regarding the timeframe for processing make a technical change to § 423.570 by
initially, which is clearly not in the best requests for payment would appear at revising the cross reference to
interests of the enrollee. This initial § 423.568(c) of the regulations. § 423.568(a) to § 423.568(b).
negative determination can be Our last proposed change to § 423.568
11. Timeframes and Notice
particularly confusing to an enrollee in involves adding new paragraphs (d) and
Requirements for Expedited Coverage
situations where a Part D plan sponsor (e), which will explain the form and
Determinations (§ 423.572)
subsequently determines that the content of favorable coverage
reimbursement request should be paid determination decisions. In In accordance with section 1860D–
and remits payment to the enrollee, § 423.568(d), we propose requiring plan 4(g) of the Act, § 423.572 establishes the
frequently within a few days of the sponsors to send written notice of fully timeframe and notice requirements for
initial negative determination. favorable decisions to enrollees. We also expedited coverage determinations.
As previously stated, the current propose to allow plan sponsors the Section 423.572(c)(1) requires Part D
regulations do not establish a timeframe option of providing the initial notice plan sponsors to include the specific
for effectuating payment, and our orally so long as a written follow-up reasons for any expedited decision
manual guidance establishes a 30-day notice is sent to within 3 calendar days (whether favorable or adverse) in its
timeframe for doing so. Thus, even of the oral notification. In § 423.568(e), decision notice, and paragraph (c)(2)
when a Part D plan sponsor completes we propose to require notice of fully addresses the content of adverse
the process above and issues a coverage favorable decisions to include the decision notices. However, § 423.572
determination within 72 hours, it is conditions of the approval in a readable does not include any content
under no obligation to make payment and understandable manner. requirements for favorable expedited
any sooner than 30 calendar days after Adding further requirements decisions. Consistent with our rationale
receiving the request. While we regarding the form and content of for adding form and content
recognize that receiving Part D coverage favorable determination decisions to the requirements for favorable standard
decisions as soon as possible is Part D regulations is necessary because coverage determination decisions, we
important, an enrollee who is requesting prescription drugs are often provided to believe form and content requirements
for favorable expedited coverage sponsor contract in the event of a of the program indicates this is
determinations are important change of ownership involving a PDP necessary for the reasons stated above.
beneficiary protections that will help to sponsor. A change of ownership The proposed change would also create
ensure that enrollees are able to prompting the execution of a novation consistency between the MA program
maintain continuity in their agreement is appropriate when a PDP and the PDP program, because the MA
prescription drug treatment. Therefore, sponsor is acquired or when it no longer program only allows novations that
we propose to revise § 423.572(b) by can or wants to continue to participate include the entire MA line of business
requiring plan sponsors to send written in the PDP program. In the latter (that is, all MA contracts held by a
notice of fully favorable expedited instance, a change of ownership can single legal entity). We invite comments
decisions to enrollees, and allowing provide both the holder of the contract from sponsors and the industry about
plan sponsors the option of providing and CMS with an opportunity to this proposed change, and suggestions
the initial notice orally so long as a transfer the ownership of the contract to on other options which would
written follow-up notice is sent to the a different entity with little or no accomplish the same policy goals.
enrollee within three calendar days of disruption to the enrolled beneficiaries
13. Cost Contract Program Revisions:
the oral notification. We also propose to when the original entity faces
Appeals and Marketing Requirements
add paragraph (c)(2), which requires difficulties (for example., financial,
(§ 417.428, § 417.494, § 417.500, and
notice of a fully favorable expedited administrative) in operating its PDP
§ 417.640)
decision to provide the conditions of the contract. A change in ownership of the
approval in a readable and PDP line of business, which is Although the cost contract program
understandable manner. recognized by CMS when we agree to a authorized under section 1876 of the
We are also proposing in novation of the existing PDP sponsor Act and the health care prepayment
§ 423.572(c)(2)(i) to require plan contract, in this instance promotes the plan (HCPP) programs authorized under
sponsors to issue adverse expedited efficient and effective administration of section 1833 of the Act are based on
coverage determination decisions using the PDP program. reasonable costs, these programs have
CMS approved language in readable and However, over the past few years important elements in common with the
understandable form. Section several PDP sponsors have requested MA program. As in the case of MA
423.568(d) requires plan sponsors to use CMS approval of transactions that coordinated care plans, and unlike
approved notices for adverse standard involve the sale of a piece of the original Medicare, cost contractors
coverage determinations, and a parallel sponsor’s contract with CMS or less authorized under section 1876 of the
instruction for adverse standard and than the full line of PDP business [all Act and HCPPs employ networks of
expedited coverage determinations is PDP contracts held by that PDP providers and deliver services through a
contained in subregulatory guidance. sponsor]. For example, several PDP managed care model. However, unlike
We developed Form CMS–10146 for use sponsors who have missed the LIS MA plans, enrollees under cost
when plan sponsors issue adverse benchmark for a particular region contracts authorized under section 1876
coverage determinations and, in our requested to novate that portion of their of the Act and HCPPs are not ‘‘locked
subregulatory guidance, we instruct contract to another PDP who met the in’’ to their plans networks, and can
plan sponsors to use that form when benchmark in the region. always receive any service through
issuing adverse standard and expedited However, our policy goals are not Original Medicare if they pay original
coverage determination decisions. Our served when a sponsor is simply using Medicare cost sharing.
proposed change in § 423.572(c)(2)(i) the novation process to pick and choose In the case of cost contracts
would reconcile this discrepancy in the which markets it wishes to serve at any authorized under section 1876 of the
regulations. We note that the proposed given time and to profit from its exit Act, the MA statute specifically
change does not create an additional from a given PDP region when a simple recognized the parallels between
burden for plan sponsors because nonrenewal for that region is an option contracts authorized under section 1876
sponsors already submit Form CMS– available to the sponsor. Novations are of the Act and MA contracts, providing
10146 to CMS for approval for adverse not intended to be an instrument for in section 1856(b)(2) of the Act that MA
standard coverage determination moving LIS beneficiaries when a standards ‘‘shall be based on standards
decisions and, consistent with our particular sponsor has missed the established under section 1876 to carry
subregulatory guidance, we expect plan benchmark. Rather, we have a out analogous provisions of such
sponsors to also use Form CMS–10146 reassignment process for moving LIS section.’’ Indeed, many of the original
for adverse expedited coverage beneficiaries to sponsors who have met Part C regulations borrowed wholesale
determination decisions. benchmark for the new contract year. from the provisions in section 1876 of
Accordingly, we propose to revise the Act and codified in Part 417. Using
12. Clarify Novation Agreements Under § 423.551 and add new paragraph already established programs as the
Part D (§ 423.551) § 423.551(g) to restrict the situations in basis for new but related programs is
Section 1860D–12(b) (1) of the Act which we will agree to a PDP sponsor common practice, one of the most recent
provides the Secretary with the contract novation to those transfers examples of which is the Part D
authority to enter into contracts with involving the selling of the sponsor’s prescription drug benefit program. The
PDP sponsors. Additionally, section entire line of PDP business, which MMA directed that fundamental aspects
1860D–12(b)(3)(B) of the Act grants the would include all PDP sponsor of the program, such as enrollment and
Secretary the authority to amend or contracts held by the legal entity. We payment polices, be similar to those of
modify these contracts in accordance believe that allowing the spin-off of just the MA program.
with the furtherance of the purpose of one contract (when the PDP sponsor has There are several MA program
the Act. more than one PDP contract) or pieces requirements that we believe are
Consistent with the above-stated of a single contract can have a negative appropriate to apply to cost contracts. In
authority, we have implemented impact on beneficiary election rights. the case of contracts authorized under
contracting regulations including We are recommending becoming more section 1876 of the Act, because section
§ 423.551 of the Part D regulations, prescriptive in this area because our 1876 of the Act contains similar
which provide for the novation of a PDP experience gained over the first 4 years statutory language to that in Part C for
MA contracts, this language provides section 1876 of the Act and ensure that contract plans to follow the contract
clear authority to impose the same marketing material is not misleading, determination appeal procedures under
policies to both types of contracts. We the MA program requirements for Subpart N of Part 422.
have expressly done this in past marketing to cost contract plans.
We discuss the above proposals for b. Civil Money Penalties (§ 417.500)
regulations. For example, given the
similarities between the statutory cost contracts authorized under section Currently, the regulations governing
language in sections 1876(c)(5) and 1876 of the Act in greater detail in the cost contracts authorized under section
1852(g) of the Act, and the procedures sections that follow. 1876 of the Act do not set forth a formal
for an independent review entity that process for appealing CMPs. We
14. Appeals Processes for Contract
existed in part 417 before Part C was propose these plans would follow the
Determinations, Intermediate Sanctions,
enacted, we revised the part 417 same requirements for CMP appeals that
and Civil Money Penalties
beneficiary appeals regulations MA organizations follow. As a result,
governing cost contract appeals The policy reasons we gave in our we propose to revise § 417.500 to
authorized under section 1876 of the December 2007 final rule for revising require cost contracts authorized under
Act simply to incorporate the Part C the contract determination and appeals section 1876 of the Act to follow the MA
beneficiary appeals regulations in part processes for MA plans apply equally to programs requirements for appeals of
422. MA contracts and cost contracts cost contracts authorized under section CMPs at Subpart T of Part 422. The
authorized under section 1876 of the 1876 of the Act. By extending the MA appeals process for CMPs specified at
Act similarly have had largely the same and Part D requirements regarding these Subpart T allows for a hearing by an
process concerning appeals of contract processes to cost contracts authorized Administrative Law Judge (ALJ) and a
determinations, sanctions, and civil under section 1876 of the Act and review of the ALJ’s decision by the
money penalties (CMPs). More recently, organizations that have both MA and Departmental Appeals Board. In
however, these processes have diverged, contracts authorized under section 1876 proposed new paragraph (c), we specify
especially since the publication of final of the Act will also have a more efficient that the amount of CMPs a cost contract
regulations revising the contract and clear path for appealing contract may be assessed is governed by section
determination, sanctions, and CMP determinations, intermediate sanctions, 1876(i)(6)(B) of the Act, not by the
processes for MA organizations on and CMPs. provisions in part 422 of the MA
December 5, 2007 (72 FR 68700 through We are proposing to revise the program regulations.
68741). Similarly, the marketing following sections of the current
requirements for cost contras, which at contract requirements provisions of Part c. Intermediate Sanctions (§ 417.500)
one time largely mirrored the MA 417 authorized at section 1876 of the Our proposed revision to the cost
requirements, have diverged. This is Act to specify that, with respect to contracts regulations authorized under
especially true since publication of our appeals of contract determinations, section 1876 of the Act would ensure
final regulations implementing intermediate sanctions and CMPs, cost that these contracts follow the same
significant changes to marketing contracts authorized under section 1876 requirements for intermediate sanctions
standards, agent/broker compensation, of the Act would follow the provisions appeals specified in § 422.750 through
and other marketing changes in 2008. applicable to MA organizations at, § 422.764 of the MA program
As a result, there is sometimes respectively, Subpart N and Subpart T regulations (subpart O).
confusion over which marketing of part 422. With respect to appeals of These sections concern—
requirements cost contract plans must intermediate sanctions, we are • Types of intermediate sanctions and
follow. proposing to revise § 417.500 of the cost CMPs (§ 422.750);
Therefore, we are proposing in this contracts requirements authorized • Bases for intermediate sanctions
rule, under the authority under section under section 1876 of the Act to make and CMPs (§ 422.752);
1876(i)(3)(D) of the Act to impose ‘‘other these consistent, with the exception of • Procedures for imposing
terms and condition’’ under contracts some CMP amount provisions, with the intermediate sanctions and CMPs
authorized by the statute that the sanctions processes for MA (§ 422.656);
Secretary finds ‘‘necessary and organizations. We discuss the proposed • Collection of CMPs (§ 422.758);
appropriate,’’ and in implementation of changes below. • Settlement of penalties (§ 422.762);
the provisions authorized by section and
a. Contract Determinations (§ 417.492 • Other applicable provisions
1876 of the Act set forth below, to apply
and 417.494)) (§ 422.764).
the following MA program requirements
to cost contracts authorized under Previous to the implementation of the As noted above, with respect to
section 1876 of the Act: contract determination requirements in determinations of the amount of CMPs,
• Under the authority in section the December 2007 final rule, the cost the provisions in section 1876(i)(6)(B)
1876(i)(1) of the Act to terminate or contracts authorized under section 1876 and (C) of the Act would govern such
nonrenew contracts and the authority in of the Act and MA plan contract amounts.
section 1876(i)(6) of the Act to impose determination requirements were very
similar. Although we did not apply the 15. Extending MA Marketing
intermediate sanctions and CMPs, the
MA program requirements on appeals provisions of the December 2007 Requirements to Cost Program Plans
processes for contract determinations regulations to cost contracts authorized (§ 417.428)
and intermediate sanctions. (To the under section 1876 of the Act at that In 2008, we published several
extent that the CMP in section time, we believe that it makes sense to marketing-related regulations that
1876(i)(6)(B) and (C) of the Act differ do so now for the same reasons we significantly revised the marketing
from those under Part C, the penalty made changes to the MA processes at requirements for MA organizations and
amounts under section 1876 of the Act that time. Part D sponsors. In the Medicare
would continue to control); and As a result, we propose in Advantage and Prescription Drug
• Under the authority in section § 417.492(b)(2), concerning notice of Benefit Programs; Final Marketing
1876(c)(3)(C) of the Act to regulate appeal rights, and § 417.494, concerning Provisions final rule, published in the
marketing of plans authorized under notice of termination, to require cost September 18, 2008 Federal Register (73
FR 54208 through 54223), we discussed be subject to the same marketing review except with regard to any portion of the
exclusively the marketing and guidelines and timelines as MA plans at material or form that is specific to the
established marketing standards § 422.2262. While section 1876(c)(3)(C) particular area, as provided under
including prohibiting soliciting door-to- of the Act, like section 1851(h) of the § 422.2266.
door or through other unsolicited means Act, provides that marketing materials
e. Standards for MA Organization
for Medicare beneficiaries. A second must be provided to CMS for review
regulation, the Revisions to the prior to use, and generally provides that Marketing (§ 422.2268)
Medicare Advantage and Prescription such materials may be used after 45 MA marketing standards we propose
Drug Benefit Programs IFC, also days if we do not disapprove them, to extend to cost contract plans include
published in the September 18, 2008 section 1876(c)(3)(C) of the Act does not the following provisions at § 422.2268:
Federal Register (73 FR 54226 through include the shorter, 10-day timeframe • Plans may not offer gifts to potential
54254), added requirements limiting that applies under section 1851(h)(5) of enrollees, unless the gifts are of nominal
agent and broker commissions. A third the Act in the case of marketing (as defined in the CMS Marketing
regulation, the Revisions to the materials using model language. Guidelines) value, are offered to all
Medicare Advantage and Prescription However, we believe that as long as potential employees without regard to
Drug Benefit Programs; Clarification of material is submitted to CMS prior to whether or not the beneficiary enrolls,
Compensation Plans IFC, published in use, we can authorize use by an earlier and are not in the form of cash or other
the November 14, 2008 Federal Register timeframe than that provided for under monetary rebates.
(73 FR 67406 through 67414), clarified the applicable statute, or for use under • Plans may not market any health
and augmented the agent broker conditions established by CMS for care-related product during a marketing
requirements as specified. The new ‘‘deemed’’ approval under the file and appointment beyond the scope agreed
marketing regulations resulted in the use policy or as discussed in section upon by the beneficiary, and
creation of a new subpart V in parts 422 II.G.15.d. of this proposed rule. documented by the plan, prior to the
and 423. Although many of these Therefore, notwithstanding the appointment.
provisions reflect or implement differences in statutory language • Plans may not market additional
statutory provisions applicable only to between sections 1876(c)(3)(C) and health-related lines of plan business not
MA plans and Part D plans, many of 1851(h) of the Act, we propose that the identified prior to an in-home
these same provisions were initially part 417 marketing regulations be appointment without a separate
proposed under our broad authority to revised to provide that cost contracts appointment that may not be scheduled
regulate marketing and impose new plans authorized under section 1876 of until 48 hours after the initial
contract terms. As noted above, under the Act submit all such marketing appointment.
this latter authority, we propose to materials to CMS at least 45 days before • Plans may not use a plan name that
amend § 417.428, which governs 1876 the date planned for distribution (10 does not include the plan type. The plan
cost contract program marketing days if plans use CMS model language, type should be included at the end of
requirements, to require cost contract without any modifications), and that file the plan name.
plans to follow the MA marketing and use materials, as designated by CMS
f. Licensing of Marketing
requirements in § 422.2260 et.seq. under the MA marketing regulations,
Representatives and Confirmation of
(Subpart V). We discuss the proposed may be released 5 days following their
Marketing Resources (§ 422.2272)
marketing changes in the sections submission to CMS.
below. As is the case currently for MAOs, we
c. Guidelines for CMS Review propose that cost contract plans
a. Definitions Concerning Marketing (§ 422.2264) authorized under section 1876 of the
Materials (§ 422.2260) In our proposal to apply the same Act, consistent with § 422.2272:
We are proposing that cost contracts standards to cost contract plans as • Demonstrate to CMS’ satisfaction
authorized under section 1876 of the currently applied to MAOs at that marketing resources are allocated to
Act follow the same standards as MAOs § 422.2264, cost contractors authorized marketing to the disabled Medicare
under § 422.2260. Thus, cost contract under section 1876 of the Act would be population as well as beneficiaries age
plan marketing materials would include required to comply with MA regulations 65 and over.
any materials which— that specify the information that cost • Establish and maintain a system for
• Promote the cost contract, or any contract plans must include in confirming that enrolled beneficiaries
cost contract plan offered by the cost marketing materials, and specify that have, in fact, enrolled in the plan, and
contract; the cost contract plan must notify the understand the rules applicable under
• Inform Medicare beneficiaries that general public concerning the plan’s the plan.
they may enroll, or remain enrolled in, enrollment period. Under section • Employ as marketing
a cost contract plan offered by the cost 1876(i)(3)(D) of the Act, we also propose representatives only individuals who
contract; that in markets with a significant non- are licensed by the State to conduct
• Explain the benefits of enrollment English speaking population, cost marketing activities (as defined in the
in a cost contract plan, or rules that contract plans be required to provide Medicare Marketing Guidelines) in that
apply to enrollees; and materials in the language of these State, and whom the cost program has
• Explain how Medicare services are individuals. informed that State it has appointed,
covered under a cost contact plan, consistent with the appointment process
d. Deemed Approval (§ 422.2266)

including conditions that apply to such provided for under State law.
coverage. We propose to specify that if we have
not disapproved the distribution of g. Broker and Agent Requirements
b. Review and Distribution of Marketing marketing materials or forms submitted (§ 422.2274)
Materials (§ 422.2262) by a cost contract plan in an area, we Under section 1876(i)(3)(D) of the Act,
We propose that cost contracts are deemed not to have disapproved the we propose applying the MA limits on
authorized under section 1876 of the distribution in all other areas covered by independent agent and broker
Act plan program marketing materials the cost contract plan and cost contract compensation at § 422.2274 to 1876 cost
contract plans. As with MA plans, aggregate compensation paid for the authorized under section 1876 of the
compensation would be based on a 6- enrollment. If an enrollee moves to plan Act.
year compensation cycle. Agents and type distinct from the one in which he
brokers would receive initial or she is currently enrolled, the agent/ H. Changes To Implement Corrections
compensation (first year of the cycle) broker would receive an initial and Other Technical Changes
with compensation over each of the commission and the cycle would begin We propose six technical changes in
successive 5 years to be no more and no anew. Distinct plan types include MA, this section outlined below.
less than 50 percent of the initial MA–PD, PDP, and cost contract plans
TABLE 8—CHANGES TO IMPLEMENT CORRECTIONS AND OTHER TECHNICAL CHANGES

Part 422 Part 423
Provision
Applications of Subpart M to Health Care Prepay- Subpart M .. § 417.840 ................................... N/A ............. N/A.
ment Plans.
Generic Notice Requirements ................................ Subpart M .. § 422.622, § 422.626 ................. N/A ............. N/A.
Revision to Definition of Gross Covered Prescrip- N/A ............. N/A ............................................. Subpart G .. § 423.308.
tion Drug Costs.
Application Evaluation Procedures ......................... Subpart K .. § 422.502(c) through (d) ............ Subpart K .. § 423.503(c) through (d)).
Intermediate Sanctions ........................................... Subpart O .. § 422.750(a) ............................... Subpart O .. § 423.750(a).
Basis for Imposing Intermediate Sanctions and Subpart O .. § 422.752 ................................... Subpart O .. § 423.752.
Civil Money Penalties.
1. Application of Subpart M to Health rights provided for under section 1869 prices’’, the prices made available to
Care Prepayment Plans (§ 417.840) of the Act. Part D beneficiaries at network
pharmacies, and not also referencing
As part of the January 28, 2005 2. Generic Notice Delivery
‘‘usual and customary prices’’, the
Medicare Advantage (MA) final rule, we Requirements (§ 422.622 and § 422.626)
prices for drugs purchased at out-of-
required cost plans (HMOs), including We propose making two technical network pharmacies. When we revised
HCPPs, established under section 1876 revisions in § 422.622 and § 422.626 to the definition of ‘‘gross covered
of the Act (Part E) and regulated under ensure that the MA regulations prescription drug costs’’ our intent was
Part 417, to follow the MA appeals accurately state when plans and to clarify that Part D sponsors must use
requirements in Subpart M of Part 422. providers are responsible for delivering the amount received by the dispensing
While the MA beneficiary appeals certain notices to enrollees. Section pharmacy or other dispensing provider
provisions in section 1852(g) of the Act 422.622, states that when a QIO as the basis for determining the drug
and cost-HMO–CMP beneficiary appeals determines that an enrollee may remain costs that must be reported to us. The
provisions in section 1876(c)(5) of the in an inpatient setting, the MA use of the term ‘‘negotiated prices’’ as
Act do not apply to HCPP enrollees, organization must again provide the defined at § 423.100 (74 FR 1544) in the
HCPP enrollees retain the general right enrollee with a copy of the Important definition of ‘‘gross covered prescription
to appeal Medicare coverage decisions Message from Medicare (IM) when the drug costs’’ clarifies this requirement
consistent with section 1869 of the Act. enrollee no longer requires inpatient with regards to covered Part D drugs
In applying the MA appeals procedures hospital care. However, the IM form purchased at network pharmacies.
to HCPPs by regulation, we adapted and instructions make clear that the IM is However, by not also referencing ‘‘usual
implemented section 1869 appeal rights always delivered by a hospital. and customary prices’’ for covered Part
in the HCPP context. The regulations Similarly, in § 422.626, the current D drugs purchased at out-of-network
implementing section 1869 for services regulations make delivery of the Notice pharmacies, we inadvertently omitted
received on a fee-for-service basis of Medicare Noncoverage (NOMNC) the from the definition of ‘‘gross covered
through original Medicare do not MA organization’s responsibility. Again, prescription drug costs’’ the share of
address the case of services furnished by the form instructions for the NOMNC drug costs actually paid by Part D
an HCPP in the managed care context. clearly state that the notice is to be sponsors to out-of-network pharmacies.
delivered by the provider. Accordingly, Section 1860D–15(b)(3) of the Act
Because HCPPs only provide Part B we propose replacing ‘‘MA defines ‘‘gross covered prescription drug
services, in our January 28, 2005 final organization’’ with ‘‘hospital’’ in costs’’ as ‘‘the costs incurred under the
rule (70 FR 4194), we limit the § 422.622, and ‘‘provider’’ in § 422.626. [Part D] plan, not including
applicability of Subpart M to HCPP administrative costs, but including costs
enrollees to only those provisions 3. Revision to Definition of Gross directly related to the dispensing of
affecting Part B services. However, in Covered Prescription Drug Costs covered part D drugs * * *.’’ These
doing so we inadvertently failed to (§ 423.308) costs include costs incurred for covered
include fast-track appeal rights On January 12, 2009, we published a Part D drugs at out-of-network
regarding services provided by a (Part B) final rule (74 FR 1494) that included pharmacies, as well as costs incurred at
comprehensive outpatient rehabilitation revisions to the definition of ‘‘gross network pharmacies. Therefore, we are
facility (CORF). The proposed revision covered prescription drug costs’’ in the proposing to revise the definition of
corrects this oversight, and ensures that Part D regulations at § 423.308. In ‘‘gross covered prescription drug costs’’
HCPP enrollees have access to fast-track amending § 423.308, we made a to correctly reference both ‘‘negotiated
appeals for CORF services furnished by technical error in the definition of prices’’ paid to network pharmacies and
an HCPP. This would also effectuate for ‘‘gross covered prescription drug costs’’ ‘‘usual and customary prices’’ paid to
HCPP enrollees the fast track appeal (74 FR 1545) by referencing ‘‘negotiated out-of-network pharmacies. Specifically,
we are proposing to replace the term Therefore, we are proposing to delete which currently states that we may
‘‘negotiated price’’ with the term ‘‘actual § 422.502(d) and § 423.503(d). The impose an intermediate sanction that
cost,’’ which is defined at § 423.100 as deletion of this language should not in requires the suspension of all marketing
‘‘the negotiated price for a covered Part any way be interpreted as limiting our activities to Medicare beneficiaries by a
D drug when the drug is purchased at ability to oversee a sponsoring sponsoring organization for specified
a network pharmacy, and the usual and organization’s compliance with our MA or Part D ‘‘plans.’’ The use of the
customary price when a beneficiary requirements as outlined at § 422.504 words ‘‘for specified’’ MA or Part D
purchases the drug at an out-of-network and § 423.505 or our ability to terminate ‘‘plans’’ does not conform to the
pharmacy consistent with § 423.124(a).’’ a contract when a sponsoring statutory language that applies
Thus, with this correction, the organization no longer meets intermediate sanctions at the
definition of gross covered prescription requirements as outlined in § 422.510(a) organization level. Therefore, we are
drug costs would include ‘‘the share of and § 423.509(a). amending § 422.750(a)(3) and
actual costs (as defined by § 423.100 of § 423.750(a)(3) to conform to the
5. Intermediate Sanctions (§ 422.750(a)
this part) actually paid by the Part D statutory language by deleting the words
and § 423.750(a))
plan that is received as reimbursement ‘‘for specified MA or Part D plans.’’
by the pharmacy or other dispensing Sections 1857(g) and 1860D–12 of the
Act provide the Secretary the ability to 6. Basis for Imposing Intermediate
entity* * *.’’
impose intermediate sanctions on Sanctions and Civil Money Penalties
4. Application Evaluation Procedures sponsoring organizations. Section (§ 422.752 and § 423.752)
(§ 422.502(c) and (d) and § 423.503(c) 422.750 and § 423.750 provide the types Sections 1857(g) and 1860D–12 of the
and (d)) of intermediate sanctions that we may Act provide a list of bases for
Section 1857(a) of the Act provides impose. Those intermediate sanctions intermediate sanctions and civil money
the Secretary with the authority to enter are suspension of enrollment, penalties. Existing regulations at
into contracts with MA organizations, suspension of payment, and suspension § 422.752(a) and § 423.752(a) provide a
and section 1860D–12(b) (1) of the Act of all marketing activities. We are similar list of bases for intermediate
provides the Secretary with the proposing to make technical changes to sanctions and civil money penalties.
authority to enter into contracts with each intermediate sanction regulation to However, the language provided in
PDP sponsors. Sections 422.502 and more accurately reflect the statute. § 422.752(a)(1), (3), and (4) and
423.503 provide the evaluation and We are first proposing to change § 423.752(a)(1), (3), and (4) does not
determination procedures for approving § 422.750(a)(1) and § 423.750(a)(1), adequately conform to the statutory
or denying a contract application. We which currently state that we may language in section 1857(g)(1)(A), (C),
are proposing two amendments to these impose an intermediate sanction that and (D) of the Act, respectively.
regulations in § 422.502(c) and (d), and requires the suspension of enrollment of Specifically, section 1857(g)(1) of the
§ 423.503(c) and (d). Medicare beneficiaries. This regulation, Act states the Secretary may impose an
Currently, § 422.502(c)(3)(iii) and as currently written, does not intermediate sanction if it determines
§ 423.503(c)(3)(iii) state that if we deny adequately reflect the statutory language that the sponsoring organization: (A)
the application, it gives written notice to which specifies that the enrollment Fails substantially to provide medically
the contract applicant indicating the suspension applies to the sponsoring necessary items and services that are
applicant’s right to request organization’s enrollment of Medicare required (under law or under the
reconsideration. In the December 5, beneficiaries. Therefore, we are contract) to be provided to an individual
2007 final rule, we modified the appeal proposing to amend § 422.750(a)(1) and covered under the contract, if the failure
rights for initial applications and § 423.750(a)(1) to add language which has adversely affected (or has
eliminated the reconsideration process. makes it explicit that the suspension of substantial likelihood of adversely
However, in the final regulations we did enrollment applies to suspension of the affecting) the individual; (C) acts to
not update § 422.502(c)(3)(iii) and sponsoring organization’s enrollment of expel or to refuse to re-enroll an
§ 423.503(c)(3)(iii) to state that the Medicare beneficiaries . individual in violation of the provisions
applicant has a right to request a hearing We also are proposing to change the of this part; and (D) engages in any
and as a result the existing regulations language of § 422.750(a)(2) and practice that would reasonably be
incorrectly provide for a right to § 423.750(a)(2), which currently states expected to have the effect of denying
reconsideration. Therefore, at that we may impose a suspension of or discouraging enrollment (except as
§ 422.502(c)(3)(iii) and payment to the sponsoring organization permitted by this part) by eligible
§ 423.503(c)(3)(iii) we are proposing to for Medicare beneficiaries who are individuals with the organization whose
make a technical correction and delete enrolled in the MA plan. This language medical condition or history indicates a
the language ‘‘right to reconsideration’’ does not conform to the statutory need for substantial future medical
and replace it with ‘‘right to request a language at section 1857(g)(2)(C) of the services. To ensure accuracy,
hearing’’. Act which states suspension of payment consistency and uniformity we are
Sections 422.502(d) and 423.503(d) may be imposed for individuals making conforming changes to our
currently provide that we have the enrolled after the date the Secretary regulation at § 422.752(a)(1), (3), and (4)
ability to oversee the sponsoring notifies the organization of the and § 423.752(a)(1), (3), and (4) to more
organization’s continued compliance imposition of an intermediate sanction. accurately reflect the statutory language.
with the requirements and that if the Therefore, we are amending First, § 422.752(a)(1) states that we
sponsoring organization no longer meets § 422.750(a)(2) and § 423.750(a)(2) to may impose an intermediate sanction if
those requirements, we will terminate add language that specifically states a the sponsoring organization fails
the contract in accordance with suspension of payment applies to substantially to provide, to a sponsoring
§ 422.510 and § 423.509. This regulation Medicare beneficiaries enrolled after the organization enrollee, medically
is not an appropriate regulation for a date we notify the organization of the necessary services that the organization
section dedicated to the evaluation and intermediate sanction. is required to provide (under law or
determination procedures for approving We are also proposing changes to under the contract) to a sponsoring
or denying a contract application. § 422.750(a)(3) and § 423.750(a)(3), organization enrollee, and that failure
adversely affects (or is substantially and § 423.752(c)(2)(ii) state that OIG enrollees in accordance with CMS
likely to adversely affect) the enrollee. may impose civil money penalties for a specifications and submit the survey
This language is slightly different than determination made pursuant to data to CMS. The burden associated
the language provided in the statute at § 422.510(a)(4) and § 423.509(a)(4). with the requirement in § 417.472(i) and
section1857(g)(1)(A) of the Act. Since we are proposing elsewhere in (j) is detailed in our discussion of
Therefore, we are proposing to amend these proposed regulations to § 422.152(b)(5).
§ 422.752(a)(1) and § 423.752(a)(1) to redesignate § 422.510(a)(4) and B. ICRs Regarding Apportionment and
conform with the statutory language and § 423.509(a)(4) to § 422.510(a)(2)(iii) and Allocation of Administrative and
state that we may impose an § 423.509(a)(2)(iii), we need to conform General Costs (§ 417.564)
intermediate sanction if the sponsoring § 422.752 and § 423.752 to these
organization fails substantially to changes. Therefore, for regulations We are not imposing any new
provide medically necessary items and § 422.752(c)(1), § 422.752(c)(2)(ii), reporting requirements. We are simply
services that are required (under law or § 423.752(c)(1), and § 423.752(c)(2)(ii) clarifying what costs an HCPP may
under the contract) to be provided to an we are proposing to delete the reference report in its cost report as
individual covered under the contract, if to § 422.510(a)(4) and § 422.509(a)(4) administrative costs for reimbursement
the failure has adversely affected (or has and replace them with a reference to from the government. We do not believe
substantial likelihood of adversely § 422.510(a)(2)(iii) and that our proposal will result in
affecting) the individual § 423.509(a)(2)(iii). additional burden on cost plans;
Second, § 422.752(a)(3) and therefore, we have not incorporated a
§ 423.752(a)(3) states that we may III. Collection of Information burden increase in the PRA section.
impose an intermediate sanction if the Requirements However, we solicit comment on our
sponsoring organization expels or Under the Paperwork Reduction Act burden estimates.
refuses to reenroll a beneficiary in of 1995, we are required to provide 60- C. ICRs Regarding Medicare Secondary
violation of the provisions of this part. day notice in the Federal Register and Payer (MSP) Procedure (§ 422.108 and
This language does not include the solicit public comment before a § 423.462)
word ‘‘acts’’ to expel which is collection of information requirement is
mentioned in the statute at section submitted to the Office of Management Section 422.108(b)(3) proposes that
1857(g)(1)(C) of the Act. Therefore, we and Budget (OMB) for review and MA organizations must coordinate
are proposing to amend § 422.752(a)(3) approval. In order to fairly evaluate benefits to Medicare enrollees with the
and § 423.752(a)(3) to conform with the whether an information collection benefits of the primary payers,
statutory language and state that we may should be approved by OMB, section including reporting, on an ongoing
impose an intermediate sanction if the 3506(c)(2)(A) of the Paperwork basis, information obtained in
sponsoring organization ‘‘acts’’ to expel Reduction Act of 1995 requires that we accordance with requirements in
or refuses to re-enroll a beneficiary in solicit comment on the following issues: paragraphs (b)(1) and (b)(2) of this
violation of the provisions of this part. • The need for the information section in accordance with CMS
Third, § 422.752(a)(4) and collection and its usefulness in carrying instructions. Similarly, § 423.462
§ 423.752(a)(4) states that we may out the proper functions of our agency. proposed that Part D plan sponsors must
impose an intermediate sanction if the • The accuracy of our estimate of the report creditable new or changed
sponsoring organization engages in any information collection burden. primary payer information to the CMS
practice that could reasonably be • The quality, utility, and clarity of Coordination of Benefits Contractor in
expected to have the effect of denying the information to be collected. accordance with the processes and
or discouraging enrollment of • Recommendations to minimize the timeframes specified by CMS. The
individuals whose medical condition or information collection burden on the burden associated with this requirement
history indicates a need for substantial affected public, including automated is the time and effort necessary to report
future medical services. This language collection techniques. the specified information to CMS on an
does not match the exact language We are soliciting public comment on ongoing basis. We estimate that 624 MA
contained in section 1857(g)(1)(D) of the each of these issues for the following organizations and 456Part D plan
Act. Therefore, we are proposing to sections of this document that contain sponsors must comply with these
amend § 422.752(a)(4) and information collection requirements requirements, a total of 1,080 entities.
§ 423.752(a)(4) to conform with the (ICRs): We also estimate that, on average, each
statutory language and state that we may entity will produce one report thereby
A. ICRs Regarding Basic Contract
impose an intermediate sanction if the yielding a total of 1,080 reports annually
Requirements (§ 417.472)
sponsoring organization engages in any for involved entities. It will take each
practice that would reasonably be Proposed § 417.472(i) states that HMO entity an average of 2,885 hours to
expected to have the effect of denying or CMP must comply with the report the required information to CMS.
or discouraging enrollment (except as requirements at § 422.152(b)(5). The estimated annual burden associated
permitted by this part) by eligible Proposed § 417.472 states that all with these requirements is 3,115,800
individuals with the organization whose coordinated care contracts (including hours. The cost associated with meeting
medical condition or history indicates a local and regional PPOs and contracts these requirements is $77.9 million.
need for substantial future medical with exclusively SNP benefit packages,
services. cost contracts under section 1876 of the D. ICRs Regarding Disclosure
We are also proposing to make Act, private fee-for-service contracts, Requirements (§ 422.111)
conforming changes to § 422.752(c) and and MSA contracts with 600 or more Proposed § 422.111 states that we may
§ 423.752(c). Currently § 422.752(c)(1) enrollees in July of the prior year) must require an MA organization to self-
and § 423.752(c)(1) state that we may contract with approved Medicare disclose to its enrollees or potential
impose civil money penalties for any of Consumer Assessment of Healthcare enrollees, the MA organization’s
the determinations at § 422.510(a) and Providers and Systems (CAHPS) survey performance and contract compliance
§ 423.509(a), except § 422.510(a)(4) and vendors to conduct the Medicare deficiencies in a manner specified by
§ 423.509(a)(4). Also, § 422.752(c)(2)(ii) CAHPS satisfaction survey of MA plan CMS. The burden associated with this
requirement is the time and effort CAHPS satisfaction survey of MA plan generally include items in the following
necessary for an MA organization to enrollees in accordance with CMS categories, which include but are not
make the aforementioned disclosures. specifications, and submit the survey limited to affidavits, oaths, affirmations
We have not accounted for the burden data to CMS. The burden associated and certifications, provided that they
associated with this provision for two with this requirement is the time and entail no burden other than that
reasons. First, we may require effort necessary to conduct the CAHPS necessary to identify the respondent, the
organizations that are under survey and submit the corresponding date, the respondent’s address, and the
enforcement actions to disclose their data to CMS. While this requirement is nature of the instrument. Similarly, we
compliance deficiencies in a letter to subject to the PRA, the associated believe the burden associated with the
their existing members. However, the burden is currently approved under aforementioned information collection
number of organizations that receive OMB control number 0938–0732. requirements is exempt from the PRA
enforcement actions per year does not Proposed § 422.152(e)(2)(ii) states that under 5 CFR 1320.4. Information
exceed the PRA threshold of 10. Based MA organizations offering an MA collected during the conduct of an
on past history and experience, we have regional plan or local PPO plan must administrative action or audit is not
not imposed intermediate sanctions on collect, analyze and report quality subject to the PRA.
more than 10 plans in a given year. For performance data identified by CMS Proposed § 422.311(c)(2) states that an
example, there have been a total of 4 that are of the same type as those MA organization may choose to dispute
organizations with intermediate described under § 422.152(e)(2)(i). The CMS’ operational processing of RADV
sanctions imposed this year which is burden associated with these medical records using a CMS-
the highest number of intermediate requirements is the time and effort administered documentation dispute
sanctions imposed during the past 4 necessary for an MA organization process.
years. Second, for organizations that are offering an MA regional plan or local Proposed § 422.311(c)(2)(iii)(B) states
not under enforcement action, we may PPO plan to collect, analyze and report that MA organizations have 30 days
require them to disclose compliance and quality performance data to CMS. We from the date of issuance of the RADV
performance deficiencies but only in estimate that it will require 54 hours per audit report to request a documentation
their existing marketing or enrollment MA organization to comply with these dispute. Proposed § 422.311(c)(2)(iv)
materials sent to current and potential requirements; there are 509 outlines the documentation dispute
enrollees. There will be no requirement organizations offering an MA regional review and notification procedures. The
for them to submit additional materials plan or local PPO. The estimated annual burden associated with the
to enrollees. We solicit comment on burden associated with these requirements in this section is the time
whether these provisions could impact requirements is 27,486 hours. The and effort necessary for an MA
10 or more plans and whether these estimated annual cost associated with organization to request a documentation
burdens should be accounted for under these requirements is $3.1 million. dispute. While this requirement is
the PRA. subject to the PRA, we believe the
F. ICRs Regarding RADV Audit Dispute associated burden is exempt under 5
E. ICRs Regarding Quality Improvement and Appeal Processes (§ 422.311) CFR 1320.4. Information collected
Program (§ 422.152) Proposed § 422.311(c)(1) discusses the during the conduct of an administrative
Proposed § 422.152(b)(3)(ii) states that attestation process with regard to the action or audit is not subject to the PRA.
MA coordinated care plans must collect, RADV audit dispute and appeal Proposed § 422.311(c)(3) describes the
analyze and report quality performance processes. Specifically, proposed RADV payment error appeal process.
data indentified by CMS that are of the § 422.311(c)(1)(i)(A) states that Specifically, proposed
same type as those specified under subsequent to the conduct of a RADV § 422.311(c)(3)(iii) states that at the time
paragraph (b)(3)(i) of this section. The audit, MA organizations may submit CMS issues its RADV audit report, we
burden associated with these CMS-generated attestations from notify affected MA organizations in
requirements is the time and effort physician/practitioner(s) in order to writing of their appeal rights around the
necessary for an MA coordinated care dispute signature or credential related RADV payment error calculation. The
plan to collect, analyze and report RADV errors. Proposed MA organizations have 30 days from the
quality performance data to CMS. We § 422.311(c)(1)(iv)(A) states that CMS date of this notice to submit a written
estimate that it will require 1,000 hours notifies an MA organization of their request for reconsideration of its RADV
per MA coordinated care plan to comply RADV audit status, we will provide the payment error calculation. The burden
with these requirements. There are 624 attestation forms and submission associated with this requirement is the
MA coordinated care plans. The instructions. As stated in proposed time and effort necessary for an MA
estimated annual burden associated § 422.311(c)(1)(iv)(B), MA organizations organization to draft and submit a
with these requirements is 624,000 are required to submit the attestation to redetermination request that contains
hours. The estimated annual cost CMS at the same time that the MA the content specified in proposed
associated with these requirements is organization is required to submit § 422.311(c)(3)(v). While this
$36.9 million. related medical records for RADV requirement is subject to the PRA, we
Proposed § 422.152(b)(5) requires that audits. believe the associated burden is exempt
all coordinated care contracts (including The burden associated with the under 5 CFR 1320.4. Information
local and regional PPOs and contracts requirements in this section is the time collected during the conduct of an
with exclusively SNP benefit packages, and effort necessary for MA administrative action or audit is not
cost contracts under section 1876 of the organizations to complete the CMS- subject to the PRA.
Act, private fee-for-service contracts, generated attestations and to submit the Proposed § 422.311(c)(4) states that an
and MSA contracts with 600 or more related documentation to CMS. While MA organization that is dissatisfied
enrollees in July of the prior year) must these requirements are subject to the with the written decision of the CMS
contract with approved Medicare PRA, we believe the associated burden reconsideration official is entitled to a
Consumer Assessment of Healthcare is exempt from the PRA under 5 CFR hearing as provided in this section. The
Providers and Systems (CAHPS) survey 1320.3(h)(1). As stated in 5 CFR organization’s request for a hearing must
vendors to conduct the Medicare 1320.3(h)(1), information does not be made in writing and filed with CMS
within 30 days of the date CMS and the H. ICRs Regarding General Provisions renew its contract, it must notify each
MA organization receive CMS’ written (§ 422.503 and § 423.504) Medicare enrollee by mail at least 90
reconsideration decision. The Section 422.503(b)(4)(vi) and calendar days before the date on which
reconsideration request must contain § 423.504(b)(4)(vi) propose to expand on the nonrenewal is effective. An
the information listed in proposed the existing requirements by providing organization would also have to provide
§ 422.311(c)(4)(ii). The burden information about alternative
clarification and additional guidance
associated with this requirement is the enrollment options by complying with
with respect to the requirements for
time and effort necessary for an MA at least one of the requirements
developing, implementing and
organization to draft and submit a specified in proposed § 422.506(a)(2)(ii)
maintaining effective compliance
hearing request. While this requirement or § 423.507(a)(2)(ii). In addition,
programs. We believe the requirements
is subject to the PRA, we believe the proposed § 422.506(b)(2) and
contained in § 422.503(b)(4)(vi) and
associated burden is exempt under 5 § 423.507(b)(2) state that an organization
§ 423.504(b)(4)(vi) will assist sponsoring
CFR 1320.4. Information collected notify each Medicare enrollee by mail at
organizations further improving their
during the conduct of an administrative least 90 calendar days before the date on
existing compliance programs. While
action or audit is not subject to the PRA. which the nonrenewal is effective, or at
these requirements are subject to the the conclusion of the appeals process if
G. ICRs Regarding Application PRA, we believe the associated burden applicable.
Requirements (§ 422.501 and § 423.502) is part of usual and customary business The burden associated with the
practices and thereby exempt under 5 aforementioned requirements is the time
Proposed § 422.501(b) and proposed CFR 1320.3(b)(2). However, we solicit
§ 423.502(b) require that an organization and effort necessary for an organization
comment on our assessment and to notify its Medicare enrollees by mail
submitting an application under this whether these burdens are, in fact, part
section for a particular contract year at least 90 calendar days before the date
of usual and customary business on which the nonrenewal is effective, or
must first submit a completed Notice of practices.
Intent to Apply by the date established at the conclusion of the appeals process
by CMS. We will not accept I. ICRs Regarding Contract Provisions if applicable. While this requirement is
applications from organizations that do (§ 422.504 and 423.505) subject to the PRA, we are unable to
not submit a timely Notice of Intent to accurately quantify the burden because
Proposed § 422.504 and § 423.505 we cannot estimate the number of
Apply. The purpose of these explicitly state our existing authority to
requirements is to facilitate CMS organizations that may not renew their
find sponsors out of compliance with contracts from year to year. We believe
systems access earlier so that the either MA requirements, Part D
contract number may be given out and that less than 10 contracts will be
requirements, or both when the terminated on an annual basis; however,
applications may be submitted sponsor’s performance represents an
electronically. While the burden we welcome public comments on these
outlier relative to the performance of information collection requirements and
associated with the requirements other sponsors. Specifically, proposed
contained in proposed § 422.501(b) and whether the PRA would apply. We will
§ 422.504(e)(2) and § 423.505(e)(2) state reevaluate this issue in the final rule
proposed § 423.502(b), the Notice of that HHS, the Comptroller General or
Intent to Apply, is subject to the PRA, stage of rulemaking.
their designees have the right to audit,
the burden associated with these evaluate, and inspect any books, K. ICRs Regarding Request for Hearing
requirements is already approved under contracts, computer or other electronic (§ 422.662 and § 423.651)
the OMB control numbers for the Part C systems, including medical records and With respect to Medicare contract
and Part D applications, 0938–0935 and documentation of the first tier, determinations and appeals, § 422.662
0938–0936, respectively. downstream, and related to our contract and § 423.651 propose the requirements
Section 422.501(c) and § 423.502(c) with the MA organization. These for submission methods and time for
propose to revise the current regulation, proposed sections contain filing requirements for MA
making clear the application standards recordkeeping requirements. The organizations and Part D plan sponsors
for becoming an MA organization or burden associated with proposed that want to request a hearing for a
Part D plan sponsor. Specifically, § 422.504(e)(2) and § 423.505(e)(2) is the determination under appeal. The
proposed § 422.501(c) and § 423.502(c) time and effort necessary for MA request for hearing must be submitted in
would require that applicants complete organizations or Part D sponsors to writing and must be filed within 15
all parts of a certified application. The maintain the information on file and calendar days after the receipt of the
burden associated with the make it available to CMS upon request. notice of the contract determination or
aforementioned requirements is the time While these requirements are subject to intermediate sanction. The PRA is not
and effort necessary for an applicant to the PRA, we believe the associated applicable to this proposal because
complete all parts of a certified Part C burden is exempt under 5 CFR there are no additional requirements for
or Part D application. While the burden 1320.3(b)(2). However, we solicit sponsoring organizations. This is an
associated with the requirements comment on our assessment and existing regulation and we are only
contained in proposed § 422.501(c) and whether these burdens are, in fact, part modifying the language ‘‘after receipt of
proposed § 423.502(c) is subject to the of usual and customary business the hearing decision’’ to conform to
PRA, the burden associated with these practices. other regulations.
requirements is already approved under
OMB control numbers for the Part C and J. ICRs Regarding Nonrenewal of L. ICRs Regarding Time and Place of
Part D applications, 0938–0935 and Contract (§ 422.506 and § 423.507) Hearing (§ 422.670 and § 423.655)
0938–0936, respectively. Proposed § 422.506 and § 423.507 Proposed § 422.670 and § 423.655
The costs associated with submitting contain notification requirements for state that CMS, an MA organization or
the applications approved under 0938– MA organizations and Part D plan a Part D plan sponsor may request an
0935 and 0938–0936 are $864,600 and sponsors. Section 422.506(a)(2) and extension by filing a written request no
$655,559, for MA plans and Part D plan § 423.507(a)(2) propose to require that later than 5 calendar days prior to the
sponsors, respectively. when an organization does not intend to scheduled hearing. The burden
associated with these requirements is sponsor to disclose the aforementioned Part D sponsor be subject to an
the time and effort necessary for an MA information. We do not believe the PRA independent yearly audit of Part C and
organization or a Part D plan sponsor to is applicable for this proposal for two Part D measures (collected pursuant to
submit a written extension request to reasons. our reporting requirements) to
the presiding hearing officer. While this First, we may require organizations determine their reliability, validity,
requirement is subject to the PRA, we that are under enforcement actions to completeness, and comparability in
believe the associated burden is exempt disclose their compliance deficiencies accordance with specifications
from the PRA as stated under 5 CFR in a letter to their existing members. developed by CMS. The burden
1320.4. Information collected during the Based on past history and experience,
associated with this proposed provision
conduct of an administrative action is we have not imposed intermediate
is the time and effort of the MA
not subject to the PRA. sanctions on more than 10 plans in a
given year. For example, there have organizations and Part D sponsors in
M. ICRs Regarding Review by the been a total of 4 organizations with procuring an auditor and in supporting
Administrator (§ 422.692 and § 423.666) intermediate sanctions imposed this the auditor as well as the time and effort
Proposed § 422.692 and § 423.666 year which is the highest number of of the auditor in conducting the yearly
state that CMS, an MA organization or intermediate sanctions imposed during audit. We estimate that the total yearly
a PDP plan sponsor that has received a the past 4 years. We believe the burden hourly burden for procuring and
hearing decision may request a review associated with the requirement is not supporting the auditor is equal to the
by the Administrator within 15 calendar subject to the PRA under 5 CFR number of sponsors (710) × the average
days after receipt of the hearing 1320.3(c), which defines the agency estimated hours per sponsor (120). This
decision. The burden associated with collection of information subject to the equals 85,200 hours. We estimated that
these requirements is the time and effort requirements of the PRA as information the average number of hours for the
necessary to submit a request for the collection imposed on 10 or more auditor to conduct an audit was 304.
Administrator to review a hearing persons within any 12-month period. The total estimated hours to conduct
decision. The PRA is not applicable to This information collection does not audits across all sponsors would then be
this proposal because there are no impact 10 or more entities in a 12- 710 × 304 = 215, 840. The total hours
additional requirements for sponsoring month period. However, we welcome would be 85,200 + 215,840 = 301,040.
organizations. This is an existing public comments on this issue. We will The estimated annual cost associated
regulation and we are only modifying reevaluate this issue in the final rule with these requirements is $45.6
the language ‘‘after receipt of the stage of rulemaking. million.
hearing decision’’ to conform to other Second, for organizations that are not
regulations. under enforcement action, we may R. ICRs Regarding Drug Utilization
N. ICRs Regarding Procedures for require them to disclose compliance and Management, Quality Assurance, and
Imposing Intermediate Sanctions and performance deficiencies but only in Medication Therapy Management
Civil Monetary Penalties (§ 422.756 and their existing marketing or enrollment Programs (MTMPs) (§ 423.153)
§ 423.756) materials sent to current and potential
enrollees. The proposed revisions to § 423.153
Proposed § 422.756 and § 423.756 While we do not believe this state that Part D plans must offer a
state before CMS imposes intermediate additional disclosure would increase minimum level of medication therapy
sanctions, MA organizations and Part D burden or costs to organizations, we management services for each
plan sponsors may request a hearing solicit comment on our burden beneficiary enrolled in the MTMP that
before a CMS hearing officer. A written estimates and assumptions. includes but is not limited to annual
request must be received by the comprehensive medication reviews with
designated CMS office within 15 P. ICRs Regarding Consumer
Satisfaction Surveys (§ 423.156) written summaries. The comprehensive
calendar days of the receipt of the notice
medical review must include an
of sanction. The burden associated with Proposed § 423.156 requires Part D
interactive, person-to-person
these requirements is the time and effort contracts with 600 or more enrollees as
consultation performed by a pharmacist
necessary to draft and submit a hearing of July of the prior year to contract with
request to the designated CMS office. approved Medicare Consumer or other qualified provider unless the
The PRA is not applicable to this Assessment of Healthcare Providers and beneficiary is in a long-term care setting.
proposal because there are no additional Systems (CAHPS) survey vendors to Additionally, there must by quarterly
requirements for sponsoring conduct the Medicare CAHPS targeted medication reviews with
organizations. This is an existing satisfaction survey of Part D plan enroll follow-up interventions when
regulation and we are only modifying enrollees in accordance with CMS necessary.
the language ‘‘after receipt of the specifications and submit the survey The burden associated with these
hearing decision’’ to conform to other data to CMS. The burden associated requirements is the time and effort
regulations. with this requirement is the time and necessary for a Part D sponsors (both
effort necessary to conduct the CAHPS MA–PDs and PDPs) to conduct the
O. ICRs Regarding Disclosure of Part D
survey and submit the corresponding medical reviews with written
Plan Information (§ 423.128)
data to CMS. While this requirement is summaries. We estimate that each
Proposed § 423.128 states that we may subject to the PRA, the associated medical review will take an average of
require a Part D plan sponsor to self- burden is currently approved under

disclose to its enrollees or potential 30 minutes to conduct. Similarly, we
OMB control number 0938–0732. estimate that there will be 1,875,000
enrollees, the Part D plan sponsor’s
performance and contract compliance Q. ICRs Regarding Validation of Part C reviews conducted by 456 Part D
deficiencies in a manner specified by and Part D Reporting Requirements sponsors on an annual basis. The total
CMS. We believe the burden associated (§ 422.516 and § 423.514) annual burden associated with this
with this requirement is the time and We propose to amend § 422.516 and requirement is 937,500 hours.
effort necessary for a Part D plan § 423.514 to state that each Part C and
S. ICRs Regarding Timeframes and each of the 456 Part D plan sponsors line of business, and the Part D
Notice Requirements for Standard will issue an average of 87,103 written cardholder identification number if it is
Coverage Determinations (§ 423.568) favorable expedited notifications per not already unique to each Medicare
If a Part D plan sponsor makes a year. We further estimate that it will Part D enrollee. We estimate the annual
completely favorable standard decision take a Part D plan sponsor 30 minutes hourly burden to be 1,380 hours per
under paragraph (b) of this section, it to distribute a single notice. The processor to make the coding changes
must give the enrollee written notice of estimated annual burden associated necessary to implement this
the determination. The initial notice with the requirement in § 423.572(b) is requirement. There are an estimated 28
may be provided orally, so long as a 43,552 hours. The estimated annual cost processors. At an estimated $150 cost
written follow-up notice is sent within associated with these requirements is per hour for the fully loaded labor of a
3 calendar days of the oral notification. $15.2 million. computer programmer, we estimate the
The burden associated with the U. ICRs Regarding Access to Covered yearly burden to be 38,640 hours for CY
requirement proposed in paragraph (d) Part D Drugs (§ 423.120) 2010. This is a one-time only burden for
is the time and effort necessary for a programming.
Part D plan sponsor to notify an enrollee Proposed § 423.120(b)(iv) would
The estimated annual cost associated
(and the prescribing physician or other require sponsors to provide enrollees
with requirements associated with the
prescriber involved, as appropriate) in with appropriate notice regarding their
transition process is $6.8 million.
writing of completely favorable standard transition process within a reasonable
decision for benefits. We estimate that amount of time after providing a V. ICRs Regarding Timeframes and
each year, the 456 Part D plan sponsors temporary supply of non-formulary Part Responsibility for Making
will issue a total of approximately D drugs (including Part D drugs that are Redeterminations (§ 423.590)
760,411 written favorable standard on a sponsor’s formulary but require
prior authorization or step therapy Proposed § 423.590(d)(2) states that if
notifications for benefits. We further a Part D plan sponsor first notifies an
estimate that it will take a Part D plan under a sponsor’s utilization
management rules). The burden enrollee of an adverse or favorable
sponsor 30 minutes to distribute a single
associated with this requirement is the expedited determination orally, it must
notice. The estimated annual burden
time and effort necessary for a Part D mail written confirmation to the
associated with the requirement in
plan sponsor to provide a notice to enrollee within 3 calendar days of the
proposed § 423.568(d) is 380,206 hours.
beneficiaries regarding the transition oral notification. The burden associated
The estimated annual cost associated
process. We estimate this would result with this requirement is the time and
with these requirements is $15.2
in 1.35 million notices that would take effort necessary for a Part D plan
million.
an average of 15 minutes to prepare. We sponsor to follow up an initial oral
T. ICRs Regarding Timeframes and then estimate the total burden to be notification to an enrollee with a written
Notice Requirements for Expedited 337,500 hours. notification. We estimate that each of
Coverage Determinations (§ 423.572) Proposed § 423.120(c)(3) would the 456 Part D plan sponsors will have
If a Part D plan sponsor makes a require Part D sponsors to contractually to distribute approximately 95 notices
completely favorable expedited decision mandate that their network pharmacies for an estimated annual number of
under paragraph (b) of this section, it submit claims electronically to the Part 43,320 responses. Similarly, we estimate
must give the enrollee written notice of D sponsor or its intermediary on behalf that the work will be conducted at a rate
the determination. The initial notice of the beneficiary whenever feasible of $40 per hour. The estimated annual
may be provided orally, so long as a unless the enrollee expressly requests cost associated with this requirement is
written follow-up notice is sent within that a particular claim not be submitted $1.733 million.
3 calendar days of the oral notification. to the Part D sponsor or its W. Annual Information Collection
The burden associated with the intermediary. Proposed § 423.120(c)(3) Burden
requirements listed in § 423.572(b) is would require the approximately 28
the time and effort necessary for a Part pharmacy claims processors currently Table 9 shows our estimates of the
D plan sponsor to notify an enrollee responsible for the electronic annual reporting and recordkeeping
(and the prescribing physician or other adjudication of pharmacy benefits to burden based on the discussion detailed
prescriber involved, as appropriate) in change their RxBIN or RxBIN and in sections III.A. through III.V. of this
writing of completely favorable RxPCN combination if such identifiers proposed rule.
expedited decision. We estimate that are not already unique to its Medicare BILLING CODE 4120–01–P
BILLING CODE 4120–01–C

EP22OC09.000</GPH>
If you comment on these information nonprofit status or by having revenues We do not believe that this proposed
collection and recordkeeping of $7.0 million to $34.5 million in any rule imposes substantial direct
requirements, please do either of the 1 year. Individuals and States are not requirement costs on State and local
following: included in the definition of a small governments, preempts State law, or
1. Submit your comments entity. MA organizations and Part D otherwise has Federalism implications.
electronically as specified in the sponsors, the only entities that will be Because there are costs to plans and
ADDRESSES section of this proposed rule; affected by the provisions of this rule, sponsors associated with several
or are not generally considered small provisions of this rule, we indicate
2. E-mail comments to the Office of business entities. They must follow general areas affected and specify the
Information and Regulatory Affairs, minimum enrollment requirements costs associated with these. For specific
Office of Management and Budget to (5,000 in urban areas and 1,500 in non- burden associated with the
oira_submission@omb.eop.gov or fax urban areas) and because of the revenue requirements and the bases for our
comments to 202–395–7285. Please from such enrollments, these entities are estimates, see section III. of this
reference this rule (CMS–4085–P) and generally are above the revenue proposed rule.
mark your comments to the attention of threshold required for analysis under We estimate this rule is
CMS desk officer. the RFA. While a very small rural plan ‘‘economically significant’’ as measured
could fall below the threshold, we do by the $100 million threshold, and
IV. Response to Comments not believe that there are more than a hence a major rule under the
Because of the large number of public handful of such plans. A fraction of MA Congressional Review Act. Accordingly,
comments we normally receive on organizations and sponsors are we have prepared a Regulatory Impact
Federal Register documents, we are not considered small businesses because of Analysis.
able to acknowledge or respond to them their non-profit status. For an analysis B. Increase in Costs to MA
individually. We will consider all to be necessary, however, 3 to 5 percent Organizations and Part D Sponsors
comments we receive by the date and of their revenue would have to be
time specified in the DATES section of affected by the provisions. We do not The provisions of this proposed rule
this preamble, and, when we proceed believe that this threshold would be would require MA organizations and
with a subsequent document, we will reached by the proposed requirements. Part D sponsors an estimated cost of
respond to the comments in the Therefore, the Secretary has determined approximately $321.68 million for CY
preamble to that document. that this proposed rule will not have a 2010. We believe the following
significant impact on a substantial requirements will result in monetized
V. Regulatory Impact Analysis number of small entities. transfers from the Federal Government
In addition, section 1102(b) of the Act to MA organizations and Part D
A. Overall Impact
requires us to prepare a regulatory sponsors between 2011 and 2015. Risk
We have examined the impact of this impact analysis, if a rule may have a Adjustment Validation (Part 422),
rule as required by Executive Order significant impact on the operations of Quality Improvement program
12866 on Regulatory Planning and a substantial number of small rural (§ 422.152), Medicare Secondary Payer
Review (September 30, 1993), the hospitals. This analysis must conform to Procedures (§ 422.108), Validation of
Regulatory Flexibility Act (RFA) the provisions of section 603 of the Reporting Requirements (§ 422.516 and
(September 19, 1980, Pub. L. 96–354), RFA. For purposes of section 1102(b) of § 423.514), the Quality Improvement
section 1102(b) of the Social Security the Act, we define a small rural hospital Program and Consumer Satisfaction
Act, section 202 of the Unfunded as a hospital that is located outside of Surveys (§ 422.152 and § 423.156),
Mandates Reform Act of 1995 (Pub. L. a Metropolitan Statistical Area and has Providing Written Notifications
104–4), Executive Order 13132 on fewer than 100 beds. We are not (§ 422.568(e)), Organization
Federalism (August 4, 1999), and the preparing an analysis for section 1102(b) Determinations, Transition Process
Congressional Review Act (5 U.S.C. of the Act because we believe and the Notice (§ 423.120), Standard Timeframe
804(2)). Secretary has determined that this rule and Notice Requirements for Coverage
Executive Order 12866 directs will not have a significant impact on the Determinations (§ 423.568), Drug
agencies to assess all costs and benefits operations of a substantial number of Utilization Management, Quality
of available regulatory alternatives and, small rural hospitals. Assurance, and Medication Therapy
if regulation is necessary, to select Section 202 of the Unfunded Management Programs (§ 423.153), and
regulatory approaches that maximize Mandates Reform Act of 1995 also Pharmacy Use of Standard Technology
net benefits (including potential requires that agencies assess anticipated under Part D (§ 423.120(c)(3)). We
economic, environmental, public health costs and benefits before issuing any believe that the MIPPA 176 provision
and safety effects, distributive impacts, rule whose mandates require spending will result in savings. However, the
and equity). A regulatory impact in any 1 year by State, local or tribal MIPPA 176 provision will not take
analysis (RIA) must be prepared for governments, in the aggregate, or by the effect until CY 2011. Most of the
major rules with economically private sector of $100 million in 1995 proposed changes do not require
significant effects ($100 million or more dollars, updated annually for inflation. additional data collection or reporting
in any 1 year). That threshold level is currently $133 burden but rather involve clarification
The RFA requires agencies to analyze million. This proposed rule is expected or codification of current policy. The
options for regulatory relief of small to reach this spending threshold. economic impact will be funded
entities, if a rule has a significant impact Executive Order 13132 establishes through monetized transfers from the
on a substantial number of small certain requirements that an agency Federal government to health plans and
entities. For purposes of the RFA, small must meet when it promulgates a through increases in beneficiary
entities include small businesses, proposed rule and subsequent final rule premiums. We expect that these
nonprofit organizations, and small that imposes substantial direct expenses will be largely reflected in
governmental jurisdictions. Most requirement costs on State and local higher bid prices. Given that there are
hospitals and most other providers and governments, preempts State law, or approximately 27 million PDP enrollees
suppliers are small entities, either by otherwise has Federalism implications. and an additional 8 million MA
enrollees, the impact on the premium approximately $3.2 million, translating than $1.00. The estimated impact on
per enrollee will be minimal. In CY to under $10.00 per enrollee. The affect enrollees would appear to be negligible.
2010, the estimated cost is on the monthly premium would be less
TABLE 10—ESTIMATED COSTS AND SAVINGS BY PROVISION FOR CYS 2010–2015

[$ in millions]
Calendar year
2010 2011 2012 2013 2014 2015 2010–2015
RADV ............................................................................... $3.98 $3.98 $3.98 $3.98 $3.98 $3.98 $23.88

Quality .............................................................................. 36.9 36.9 36.9 36.9 36.9 36.9 221.4
MSP ................................................................................. 77.9 77.9 77.9 77.9 77.9 77.9 467.4
Validation of Reporting Requirements ............................. 45.6 45.6 45.6 45.6 45.6 45.6 273.6
CAHPS ............................................................................. 0.0 3.1 3.1 3.1 3.1 3.1 15.5
Written Notifications ......................................................... 17.0 17.0 17.0 17.0 17.0 17.0 102.0
MIPPA 176 ....................................................................... 0.0 ¥90.0 ¥210.0 ¥300.0 ¥340.0 ¥380.0 ¥1,320.0
Organization Determinations ........................................... 15.2 15.2 15.2 15.2 15.2 15.2 91.2
Transition Process ........................................................... 6.8 6.8 6.8 6.8 6.8 6.8 40.8
Drug Utilization Management .......................................... 112.5 112.5 112.5 112.5 112.5 112.5 675.0
Pharmacy Use of Standard Technology .......................... 5.8 0.0 0.0 0.0 0.0 0.0 5.8
Total Cost/Savings ........................................................... 321.68 228.98 108.98 18.98 ¥21.02 ¥61.02 596.58
C. Expected Benefits reconciliation process. The technical equates to 19,250 burden hours at
Beginning in CY 2014, we expect net correction to the definition of gross approximately $59.20/hour (based on
savings due to the combined impact of covered prescription drug costs will also U.S. Department of Labor statistics for
these new proposed provisions. We help PBMs with calculating a hourly wages for management
expect that the net impact across the 6- beneficiary’s gross covered prescription analysts)—or, an aggregate annual dollar
year period from CY 2010 through CY drug costs. burden on the MA industry of
2015 will be a cost of $596.58 million. $1,139,600. RADV audit statistics to
D. Analysis by Provision date indicate that approximately 55
Many of the new requirements
involve clarifications of existing With regard to part 422, Risk percent of RADV audit errors are of the
regulations and policies. As such, they Adjustment Data Validation (RADV), we type that may be eligible for
should help plans to improve their estimate that we will audit documentation dispute. Clearly there is
administrative operational functions approximately 110 MA organizations for a financial incentive for MA
which will streamline the Medicare risk adjustment data validation (RADV) organizations to pursue documentation
Prescription Drug program and in FYs 2010 and 2011. We estimate that dispute in an attempt to avoid incurring
strengthen beneficiary protections at least 50 percent of these a RADV audit error. Utilizing the same
within the program. Specifically, we organizations—55 MA organizations— statistics regarding the number of
believe that the proposed requirements will pursue one of the options presented organizations that we expect to undergo
will improve coordination of care, in these proposed rules for disputing or RADV audit annually (that is, 110
increase quality of data reporting, appealing their RADV audit findings— organizations), we estimate that 100
increase ability to comply with existing via attestation, documentation dispute, percent of these organizations will
regulations and policies, enhance or RADV payment error calculation pursue documentation dispute. Each
appeal and grievance procedures, and appeal. Our experience to date indicates MA organization that undergoes RADV
curtail illegal marketing practices. that approximately 25 percent of HCCs audit is on average asked to validate
Additional benefits include clarification audited under RADV audit procedures approximately 700 HCCs for 200
of timeframes and notification result in signature and credential- beneficiaries audited. Therefore, we can
requirements. Some of the new related medical record review errors. expect each organization that undergoes
requirements may lead to changes in Each MA organization that undergoes a RADV audit to pursue documentation
health plan service areas. RADV audit is on average asked to dispute for 385 HCCs. This equates to an
We anticipate that several of the validate approximately 700 HCCs for overall volume of 42,350 document
proposed requirements will be 200 beneficiaries selected for audit. dispute requests annually. We estimate
beneficial to PBMs when assisting Part Since signature and credential-related that it will take approximately 1 hour to
D sponsors with administering the Part errors comprise such a large overall prepare the necessary documentation to
D benefit. Proposed codification of percentage of RADV error, there is dispute one HCC via documentation
transition process requirements and clearly an incentive for MA dispute. This equates to 42,350 burden
establishment of protected classes will organizations to submit attestations hours at approximately $59.20/hour
assist PBMs in applying the Part D along with medical records missing (based on U.S. Department of Labor
requirements consistently across Part D signatures/credentials to avoid incurring (DOL) statistics for hourly wages for
plans and managing the Part D sponsor’s a RADV audit error. With approximately management analysts) or an aggregate
benefit packages more efficiently. 110 organizations expected to undergo annual dollar burden on the MA
Establishing cut-off limits for RADV audit annually, we can estimate industry of $2,507,120.
coordination of benefits and requiring that MA organizations will seek to Finally, regarding requests for RADV
Part D sponsors to report other payer produce roughly 19,250 attestations (or payment error calculation appeals,
information in a timely fashion to CMS’ 175 attestations per audit). We estimate based upon existing RADV audit data,
COB contractors will improve the that it will take 1 hour to prepare and we estimate that 100 percent of MA
administrative burden of the payment submit one attestation to CMS. This organizations that undergo RADV audit
will appeal CMS’ RADV payment error management analysts)—or, an aggregate records missing signatures/credentials
calculation since we anticipate the annual dollar burden on the MA to avoid incurring a RADV audit error.
RADV audit process to uncover industry of $32,560. With approximately 110 organizations
significant MA program overpayments. Lastly, in seeking CMS Administrator expected to undergo RADV audit
Currently, MA organizations do not review, we estimate that MA annually, we can estimate that MA
have this appeal right so the estimates organizations will take approximately 5 organizations will seek to produce
that we provide in this regard are hours to prepare the necessary roughly 19,250 attestations (or 175
altogether new and unique to the documentation to submit to the CMS attestations per audit). We estimate that
proposed appeals process. Beyond the Administrator for his/her review of it will take physicians and other
costs associated with appealing the CMS’ RADV payment error calculation. practitioners 15 minutes (or one-quarter
RADV payment error calculation, there This equates to 550 burden hours at of an hour) or less to review a medical
is little financial incentive to not appeal approximately $59.20/hour (based on record, make a determination whether
this error calculation. As specified at DOL statistics for hourly wages for the medical record originated from the
proposed § 422.311(c)(3), the RADV management analysts) or an aggregate physician or practitioner in question,
payment error calculation appeal annual dollar burden on the MA sign and date the CMS attestation, and
process is a three-pronged appeal industry of $32,560. Together, we return the attestation to the requesting
process comprised of reconsideration, estimate that MA organizations will in MA organization. This equates to 4,813
hearing and Administrator-review steps. the aggregate incur costs approximating burden hours at approximately $59.20/
MA organizations can be expected to $97,680. hour (based on U.S. Department of
incur costs in preparing appeals at each In totaling the burden for attestations, Labor statistics for hourly wages for
level of the appeal process. For the first documentation dispute and RADV management analysts) or an aggregate
step in the appeal process—the payment error calculation appeal, we annual dollar burden on other providers
reconsideration step—we estimate that estimate the aggregate annual burden on of $284,930. We estimate no burden to
MA organizations will take the MA industry to be: $1,139,600 for other providers for either the
approximately 5 hours to prepare the attestations; $2,507,120 for documentation dispute proposal or the
necessary reconsideration documentation dispute; and $97,680 for RADV payment error calculation appeal
documentation necessary to appeal RADV payment error calculation appeal. proposal since providers will not be
CMS’ RADV payment error calculation. Together, we estimate the total burden called-upon to participate in these
This equates to 550 burden hours at to the MA industry to be approximately activities.
approximately $59.20/hour (based on $3.74 million as shown in Table 11. The proposed attestation and
DOL statistics for hourly wages for We anticipate effects on entities other documentation dispute processes will
management analysts)—or, an aggregate than MA organizations. RADV-eligible have an overwhelmingly net-positive
annual dollar burden on the MA physicians and other practitioners, impact on the Medicare program
industry of $32,560. For step two—the including hospitals, will be impacted by through the ultimate lowering of MA
hearings step—since the proposed the attestation and documentation- program payment errors. Our experience
hearing is an on-the-record hearing that dispute-related provisions of this to date in conducting RADV audits and
is limited to the documentation proposed rule. We note that while MA upon consultation with medical record
submitted to CMS and the CMS organizations are not required to submit review-industry experts leads us to
reconsideration official—we do not attestations, we anticipate that most will estimate that MA organizations will
anticipate MA organizations incurring at least attempt to do so, given the high submit attestations for up to 65 percent
substantial costs in submitting the likelihood of overturning RADV errors. of attestation-eligible RADV errors. We
documentation necessary to invoke their However, we do not believe that this likewise estimate that we will overturn
RADV payment error calculation impact will be significant. Our approximately 15 percent of
hearing rights. We again estimate that experience to date indicates that documentation-dispute-eligible RADV
MA organizations will take approximately 25 percent of HCCs errors via the documentation dispute
approximately 5 hours to prepare the audited under RADV audit procedures process. Together, these MA program
necessary hearings documentation result in signature and/or credential- error-rate reductions will have a net
necessary to appeal CMS’ RADV related medical record review errors. positive impact on the Medicare
payment error calculation and the Each MA organization that undergoes program.
determination of the CMS RADV audit is on average asked to Since the proposed appeals process
reconsideration official. This equates to validate approximately 700 HCCs for has not been piloted as part of the
550 burden hours at approximately 200 beneficiaries audited. Clearly, there RADV audit process to date, there is no
$59.20/hour (based on U.S. Dept. of is an incentive for MA organizations to way to realistically estimate its impact
Labor statistics for hourly wages for submit attestations along with medical on the Medicare program.
TABLE 11—RADV BURDEN FOR ATTESTATIONS (PART 422): TOTAL ESTIMATED IMPACT FOR CYS 2010 THROUGH 2015
[$ in millions]
Calendar year
Total
2010 2011 2012 2013 2014 2015
Estimated Impact on MA Organizations .............................. $3.74 $3.74 $3.74 $3.74 $3.74 $3.74 $22.44
Estimated Impact on All Other Providers ............................ 0.28 0.28 0.28 0.28 0.28 0.28 1.68
Total .............................................................................. 3.98 3.98 3.98 3.98 3.98 3.98 23.88
We are also proposing to require in administrative overhead. MA sponsor to procure and support the
§ 422.152 that each MAO contract organizations that faithfully pursue and auditor is therefore: 120 x $43.14 =
conduct CCIPs in patient populations recover from liable third parties will $5,177. Since the number of sponsors is
and quality improvement projects in have lower medical expenses. Lower estimated to be 710, the overall
areas identified by CMS and also collect medical expenses make such plans more estimated cost across all sponsors to do
and report new quality measures. The attractive to enrollees. The lower the the work involved in procuring and
mean estimated burden per contract as medical expenses in an MA plan, the supporting the auditing contractors is:
indicated in section III. of this proposed higher the potential rebate. The rebate is 710 × $5,177 = $3,675,670.
rule is 1,000 hours. The estimated mean calculated as the difference between the The total estimated burden hours
cost per hour for these contracts is cost of Medicare benefits and the related to the time and effort for all
$59.20 (wages, fringe benefits, and benchmark for that plan. The auditing organizations to perform the
overhead). The mean cost per contract benchmark is a fixed amount. Therefore, annual audit for both Part C and Part D
is: 1,000 × $59.20 = $59,200. Since the as the cost of Medicare benefits go down data validation is estimated to be
number of contracts is estimated to be (with the benchmark remaining 215,840. The mean cost per hour
624, the overall estimated cost across all constant), the larger the rebate. (includes direct wages, fringe benefits,
contracts is: 624 × $59,200 = Therefore, as more MSP dollars are overhead costs, general and
$36,940,800. collected or avoided, medical expense administrative expenses, and fee) is
Regarding the Medicare Secondary go down and rebates go up, allowing the estimated to be $194.21. Therefore, the
Payer (MSP) Procedures (§ 422.108), in sponsoring MA organization to offer estimated annual cost for auditing
2007 original Medicare estimated total potential enrollees additional non- contracts involving all 710 sponsors is:
savings due to MSP at $6.5 billion. This Medicare benefits funded by rebate 215,840 × $194.21 = $41,918,287. The
included $2.9 billion recovered or dollars. Such non-Medicare benefits total estimated annual cost for auditing
avoided for working-aged individuals, include reductions in cost sharing. contracts and for the procurement and
$1.9 billion for working-disabled Since cost sharing is generally audit support time and effort of the
individuals, $877 million for workers’ expressed as a percentage of medical sponsors is: $41,918,287 + 3,675,670=
compensation, $278 million for ESRD costs, such cost sharing will also be $45,593.956. The auditing costs will be
beneficiaries, and another $485 million proportionally lower as overall medical allowable costs in the plan’s bid.
recovered or avoided for liability and costs go down—providing MA We are also proposing that beginning
other insurers. In 2007, there were organizations offering such plans with in 2011 MA organizations and Part D
approximately 8.5 million MA enrollees an additional competitive edge. sponsors will begin paying for the data
and 44 million total Medicare enrollees collection costs of the CAHPS annual
(an MA penetration rate of Regarding validation of reporting survey. Data collection is to be
approximately 19 percent). The $6.5 requirements (§ 422.516 and § 423.514), performed by a contractor hired by the
billion in MSP savings can be attributed the main focus will be on how the MAO or part D sponsor. The mean
to 35.5 million original Medicare sponsor collects, stores, and reports the estimated burden per contract as
enrollees, which equates to new Part C and Part D data indicated in section III. of this proposed
approximately $183 per original requirements. Standards and procedures rule is 51 hours. The estimated mean
Medicare enrollee that can be attributed will also focus on how sponsors cost per contract is $5,023. The overall
to MSP savings. In 2009 MA penetration compile data, and verify calculations, estimated annual cost across 624
is higher, with approximately 11 million computer code, and algorithms. The contracts is: 624 × $5,023 = $3,134,352.
MA enrollees out of approximately 45 estimated mean hourly burden per Regarding written notices of a
million total Medicare enrollees—or affected part C and Part D sponsor to favorable standard coverage
about 24 percent MA penetration. We procure an auditing organization and to determination (§ 423.568(d)), the burden
assume a similar MSP rate for MA support the auditing organization in its is the time and effort necessary for each
enrollees as obtains in original data collection efforts including staff of an estimated 456 PDP sponsors to
Medicare, and therefore project total interviews is 120 hours as indicated in disclose the necessary information in
savings from MSP in the MA program in section III. of this proposed rule. We writing to an enrollee. (Note: plan
2007 as close to $1.5 billion and by 2010 believe the auditor that is hired by the sponsors have always been required to
at approximately $2 billion. plan will typically have a team formulate a decision and notify the
The estimated impact of MSP on 624 consisting of a management analyst, two enrollee of that decision, so the
MA organizations and 456 PDPs based senior auditors, a senior claims analyst, additional burden is only related to
on 3.1158 million burden hours at a senior statistician, an IT systems communicating the favorable decision
approximately $25/hour (based on U.S. analyst, a computer programmer, and a in writing). We estimated an annual
Department of Labor (DOL) statistics for word processor. We used May 2008 burden of 380,206 hours. At an
the hourly wages of claims analysts of wage statistics supplied by the estimated cost of $40.00 per hour
$22.20/hour and for management Department of Labor, Bureau of Labor (salary/wages, fringe benefits,
analysts of $59.20/hour), is Statistics to develop estimates of direct overhead), the estimated total annual
approximately $77.9 million. We expect wages. We also added fringe benefits, cost of this proposed change is
an MA organization to use overhead costs, and general and $15,208,240.
approximately 1.5 FTEs to implement administrative expenses using The burden associated with providing
Part C MSP procedures related to percentages that are consistent with written notice of a favorable expedited
avoiding costs, reporting data, and CMS contracts. Based on our experience coverage determination (§ 423.572(b)) is
collecting from liable third parties and in consultant with program experts, the time and effort necessary for each of
related to MSP. We expect the work mix we developed an estimate of the hourly an estimated 456 PDP sponsors to
to be completed approximately 90 burden. The estimated mean cost per disclose the necessary information in
percent by the claims analyst and 10 hour for these sponsors is $43.14 writing to an enrollee (given that plan
percent by the management analyst. (wages, fringe benefits, and overhead). sponsors have always been required to
We note that MAOs claim expenses The estimated mean number of hours formulate favorable and adverse
related to MSP recoveries as part of their per sponsor is 120. The mean cost per expedited decisions, notify enrollees of
those decisions, and follow-up in definitions, as outlined in this proposed impose for Part A and B services. These
writing if the decision is adverse, the rule, provide further precision with proposed changes are significant in that
additional burden is only related to respect to the MIPPA criteria leading to they will help beneficiaries to
communicating the favorable decision a reduced likelihood of certain disease understand and anticipate their possible
in writing). categories qualifying as protected health care expenditures. However, we
The total estimated annual burden classes. do not believe these changes will by
associated with this requirement was The FY 2010 President’s Budget themselves have a significant impact on
43,550 hours. At an estimated cost of estimated cost of this provision was either plan participation or plan costs.
$40.00 per hour, the estimated total about $4.9 billion for FYs 2010 through We will set the parameters for the cost
annual cost of this proposed change is 2019. This is the amount that was built sharing and spending cap and this
$1,742,000. Therefore, the total into our FY 2010 budget projections.
estimated annual cost for these two should make it easier for MA plans to
The revised cost estimate is roughly
provisions is $15,208,240 + $1,742,000 compete on a level playing field and as
$1.6 billion over the same period. As a
= $16,950,240. The total estimated previously noted enhance transparency
result, the modifications made in the
annual cost for years 2010–2015 is $102 rule will save Part D an estimated $3.3 for prospective enrollees. We note that
million. billion for FYs 2010 through 2019 while there will be cost sharing limits
Additionally, regarding written relative to our current Budget baseline. and a catastrophic cap. We are not
notices, proposed § 423.590(d)(2) states Regarding the Transition Process setting a cap on the monthly plan
that if a Part D plan sponsor first notifies (§ 423.120), proposed § 423.120 would premium beyond the overall actuarial
an enrollee of an adverse or favorable require sponsors to provide enrollees limit (determined annually by CMS) on
expedited redetermination decision with appropriate notice regarding their the amount of cost sharing that MA
orally, it must mail written confirmation transition process within a reasonable plans may impose on its enrollees. In
to the enrollee within 3 calendar days amount of time after providing a other words, MA plans will still have
of the oral notification. The burden temporary supply of non-formulary Part the option of collecting the maximum
associated with this requirement is the D drugs (including Part D drugs that are allowed actuarial amount of cost sharing
time and effort necessary for a Part D on a sponsor’s formulary but require from beneficiaries in terms of premium,
plan sponsor to notify an enrollee (and prior authorization or step therapy and costs sharing amounts for plan
the prescribing physician or other under a sponsor’s utilization covered benefits.
prescriber involved, as appropriate) in management rules). We estimated the
writing of an adverse or favorable annual hourly burden to be 337,500 2. Alternatives Considered
expedited redetermination decision. We hours in section III. of this proposed
estimate that each year the 456 Part D a. Strengthening CMS’ Ability To Take
rule. At an estimated average $20 cost Timely, Effective Contract
plan sponsors will issue a total of about per hour for the fully loaded labor of an
21,232 written adverse and favorable Determinations or Intermediate
administrative assistant, we estimate the Sanctions (Part C & D)
expedited notifications. We further yearly cost to be $6,750,000 in CY 2010.
estimate that it will take a Part D plan Regarding drug utilization We are proposing to modify the
sponsor 30 minutes to distribute a single management, quality assurance, and regulations to more clearly and
notice. The estimated annual burden medication therapy management accurately clarify our existing statutory
associated with the requirement in programs (MTMPs), proposed § 423.153
§ 423.590(d)(2) is 10,616 hours. At an authority to terminate a contract. The
states that Part D plans must offer a existing enumerated list of
estimated cost of $40.00 per hour, the minimum level of medication therapy
estimated total annual cost of this determinations that could support a
management services for each decision to terminate a contract is not
proposed change is $424,640. The total beneficiary enrolled in the MTMP that
estimated annual cost for years 2010– all inclusive. Therefore, we are
includes but is not limited to annual proposing to remove the enumerated
2015 is $2.5 million.
comprehensive medication reviews with list. Also, we are proposing to revise the
With regard to standard timeframes
written summaries. We estimated that
and notice requirements for regulatory language to clarify that
organization determinations (§ 422.568 the total annual burden associated with
failure to comply with any of the
and § 423.568), the total estimated this requirement is 937,500 hours. At an
regulatory requirements contained in
annual burden is 380,206 hours. At an average cost of $120 per hour, we
estimate the yearly cost to be parts 422 and 423 or failure to meet our
estimated average hourly cost of $40.00, performance requirements, may
the total annual estimated cost for CY $112,500,000.
Regarding the Use of Standardized constitute a basis for CMS to determine
2010 is $15,208,240. that the MA Organization or Part D
Regarding the MIPPA 176 protected Technology under Part D (§ 423.120)
requirements, we estimated an annual sponsor meets the requirements for
drug class provisions, we project that
burden of 38,640 hours, with a cost of contract termination in accordance with
future utilization and hence future costs
$150 per hour. The estimated one time the statutory standard. We considered
will be lower than estimated in the
cost impact for CY 2010 is $5.80 modifying or adding to the existing list
Medicare Advantage and Prescription
Drug Programs: MIPPA–Related million. of determinations that could support
Marketing Revisions interim final rule termination (which included 12 items in
E. Anticipated Effects
with comment period published in the parts 422 and 11 items in parts 423).
January 16, 2009 Federal Register (74 FR 1. Effects of Cap on Out-of-Pocket Costs However, we believe that continuing to
2881). This is because the proposed and Cost Sharing Amounts add to the existing list may fail to make
provisions may be somewhat more We are proposing to establish and sufficiently clear to sponsoring
restrictive than those in the January 16, require local MA plans to have an organizations that all violations of our
2009 IFC. That is, in the January 16, annual catastrophic cap on members regulations and/or contract and
2009 IFC, we had not proposed out-of-pocket cost sharing and that we performance requirements may be used
definitions of associated with MIPPA will also establish limits on the cost to support a termination decision.
protected classes criteria. The sharing amounts that MA plans can
b. Changing the Standards of Review, because the sponsoring organization accordance with CMS specifications in
Clarifying the Standard of Proof and bears the burden of proof, under any order to provide accurate and reliable
Burden of Proof for Appeals, and briefing schedule determined by the information to CMS. This would benefit
Modifying the Conduct of Hearing for hearing officer, it must first present the sponsoring organization by
Contract Decisions (Including Denials of evidence and argument to the hearing improving the process for removing a
Initial Applications to Contract, Service officer before we present our evidence sanction, which may reduce the
Area Expansions for Existing Contracts, and argument. We considered leaving duration of the sanction. A similar
Contract Non-Renewals and the existing regulations unchanged. approach is used by the Office of
Terminations, and Intermediate Inspector General (OIG) in their
c. Clarify That CMS May Require a
Sanctions) Corporate Integrity Agreements and/or
‘‘Test Period’’ During an Enrollment/
We are proposing to change the Self-Disclosure Protocol processes.
Marketing Sanction We considered leaving the regulations
standards of review and clarify the We are proposing to provide that in unchanged. This existing regulatory
standard of proof when an appeal of a instances where an enrollment and/or scheme requires us to rely solely on its
contract determination or intermediate marketing suspension has been internal resources to assess whether the
sanction is requested and an evidentiary imposed, we may determine that it is underlying deficiencies that form the
hearing is conducted. The current appropriate to subject the MA basis of an intermediate sanction have
standards of review require the hearing organization or Part D sponsor to a ‘‘test been corrected and are not likely to
officer to determine whether the period’’ whereby the organization or recur. Given our experience with the
sponsoring organization can sponsor will, for a limited time, engage nature and extent of some compliance
demonstrate ‘‘substantial compliance’’ in marketing activities and/or accept deficiencies (for example, those caused
with Part C and/or Part D requirements enrollments in order to assist us in by information technology issues or lack
on the ‘‘earliest of’’ the following three making a determination as to whether of adequate internal controls) and the
dates: The date the organization the bases for the sanctions have been need to obtain the level of skill and
received written notice of contract corrected and are not likely to recur. experience necessary to conduct an
determination or intermediate sanction, Currently, our experience has shown exhaustive audit and verification of the
the date of the most recent onsite audit, that we are limited in our ability to correction of these deficiencies, we
or the date of the alleged breach of adequately determine if marketing and believe this additional flexibility and
current contract or past substantial enrollment deficiencies have been access to expertise (such as a qualified
noncompliance. In practice, these corrected while marketing and independent auditor) is appropriate and
standards of review (‘‘substantial enrollment sanctions are in place. If the will benefit both plan sponsors and
compliance’’ and ‘‘earliest of test’’) have test of the Part D sponsor or MA CMS.
led to confusion among parties to the organization’s marketing/enrollment Another option considered is not
hearing and have been difficult for the processes reveals that deficiencies have requiring certain sponsoring
hearing officer to apply. Additionally, not been corrected and/or are likely to organizations to hire an independent
though the existing regulations recur, the sanction will continue to auditor. Instead, we would consider
explicitly state that the sponsoring remain in place. using results obtained by an
organization bears the burden of proof, We considered leaving the existing independent auditor hired under a
it does not provide the standard of proof regulations unchanged. However, we sponsoring organization’s own initiative
that is to be applied by the hearing believe this proposal will strengthen our to evaluate its compliance with our
officer. Therefore, we are proposing to ability to adequately assess compliance requirements. We may consider the
delete the ‘‘substantial compliance’’ and with our requirements. The proposal sponsoring organization’s initiative to
‘‘earliest of’’ test and revise the will also help us to avoid situations obtain an independent audit similar to
regulations to explicitly state the where, because we do not have the a ‘‘safe harbor’’ and may be afforded
standard of proof and provide clear ability to perform adequate testing of an some weight in CMS’ determination of
standards of review for each type of organization’s systems/processes (such whether the bases for the sanction have
contract determination or intermediate as information systems testing) to been corrected and are not likely to
sanction. ensure the deficiencies have been recur. We invite comments from
First, we are proposing to explicitly corrected, we lift a sanction and then sponsors and the industry about this
state that the hearing officer must apply find that we have to re-engage in the alternative proposal and suggestions on
the ‘‘preponderance of the evidence’’ statutory and regulatory process for other options we could implement to
standard of proof when weighing the reinstituting the sanction. accomplish the desired outcome.
evidence at all hearings for contract
determinations or intermediate d. Right for CMS To Require an e. The Ability for CMS To Require
sanctions. Second, we are proposing to Independent Audit of Sponsoring Sponsors To Disclose to Current and
clarify the standards of review, which Organizations Under Intermediate Potential Enrollees Compliance and
vary according to the type of contract Sanction Performance Deficiencies
determination or intermediate sanction. We are proposing that we have the We are proposing to require certain
In particular, the proposed change flexibility to require certain Part D sponsors to disclose their current
makes the distinction between how the sponsors and MA organizations, under compliance and/or performance
evidentiary standard of review is to be intermediate sanctions, to hire an deficiencies to existing and potential
applied to appeals of CMS independent auditor to evaluate enrollees. This disclosure option could
determinations involving Part C or D whether the bases for a sanction have be exercised by CMS either when a
contract qualification applications, been corrected and are not likely to sponsor is sanctioned or when a
those involving the termination or non- recur before we come to a determination sponsor’s compliance deficiencies rise
renewal of a Part C or D sponsor as to whether lifting of the sanction to a certain level such that we make the
contract, and those involving the would be appropriate. The independent determination that existing or potential
imposition of intermediate sanctions. auditor would be hired by the enrollees should be notified of these
Finally, we are proposing to clarify that sponsoring organization and work in deficiencies. This level of transparency
will provide additional incentives for appropriate’’ as specified in section sponsors. One such regulatory change
sponsors to make improvements to their 1857(e)(1) of the Act (see also section was the audit requirement of Part C and
operations and also provide relevant 1860D–12(b)(3)(D) of the Act Part D measures. We considered not
information to beneficiaries and the (incorporating section 1857(e)(1) of the requiring an audit. However, because
public concerning plan choices. Act by reference for Part D.) In addition, we believe that an audit is required to
We considered not adding this we are using our authority under section ensure that the Part C and Part D
disclosure authority to the existing 1860D–11(d)(2)(B) of the Act as further measures are consistent with our
regulations. However, we believe this support for our authority to propose specifications, are reliable, valid, and
change is necessary to provide us with regulations imposing ‘‘reasonable comparable, and are credible to
another tool to strengthen our minimum standards’’ on Part D
stakeholders, this alternative was
compliance and oversight authority and sponsors.
provide appropriate transparency One alternative would be to make no rejected. A second such regulatory
concerning compliance and/or changes to our current regulations change was requiring MAOs and Part C
performance deficiencies to regarding bid submission and review sponsors to assume a portion of the cost
beneficiaries and the public. and to continue our current efforts to of the annual CAHPs survey that would
eliminate duplicative or low enrollment result from hiring contractors to conduct
f. Section 176 of the MIPPA—Formulary the data collection. We considered not
plan options. However, since our
and Protected Classes Requirements requiring MAOs and Part C sponsors to
current regulations do not explicitly
(Part D) hire contractors to perform the CAHPs
address the issue of eliminating
The critical policy decision was how duplicative or low enrollment plans, we data collection. However, we rejected
broadly or narrowly we interpret believe that codifying our authority to this alternative, because we believe that
specific terms in the MIPPA provisions. do so will provide us with more the benefits obtained through this
Interpreted broadly, the provisions in leverage over plans during the bid regulatory change outweigh the costs
section 176 of the MIPPA might easily submissions, review, negotiation, and incurred by the MAOs and Part C
encompass many classes of drugs and approval processes. sponsors.
significantly increase costs to the Part D Another alternative would be to
program by eliminating the need for provide more detail in regulation text F. Accounting Statement
manufacturers to aggressively rebate regarding the specific criteria we would
their products for formulary placement. use to eliminate duplicative or low As required by OMB Circular A–4
Only a narrow interpretation of these enrollment plan options. We believe (available at http://
criteria would limit the number of addressing the issue generally in www.whitehouse.gov/omb/circulars/
classes ‘‘protected’’ under MIPPA. regulations text, but containing most of a004/a-4.pdf ), in the Table 13, we have
the discussion regarding specific criteria prepared an accounting statement
g. Reducing Duplicative and Low showing the classification of the
to the preamble, maintains our
Enrollment Plans (Parts C & D)
flexibility to adjust our review processes expenditures associated with the
We are proposing to implement and criteria consistent with current provisions of this proposed rule. Table
regulations to reduce duplicative benefit market trends. 13 provides our best estimate of the
packages based upon our authority to costs and savings as a result of the
add such additional terms to its h. Validation of Part C and Part D
Reporting Requirements changes.
contracts with Medicare Advantage
organizations or Part D plan sponsors as Several of the proposed changes do
we ‘‘may find necessary and involve costs to MAOs and Part D
TABLE 13—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM CY 2010 TO CY 2015

[$ in millions]
Transfers
Category Units discount rate

Year dollar Period covered
7% 3%
Annualized Monetized Transfers .................................................................. 2009 $¥204.45 $¥213.23 CYs 2010–2015
From Whom to Whom? ................................................................................ Federal Government to MAO and Part D Sponsors.
Annualized Costs to MAOs and Part D Sponsors ....................................... 2009 $319.51 $319.46 CYs 2010–2015
G. Conclusion savings on an annual basis. For the List of Subjects

We expect that the cost of entire estimated time period, CY 2010
42 CFR Part 417
implementing these provisions will be through 2015, we expect the overall
$321.68 million in CY 2010. Sponsors impact to be a cost of $596.58 million. Administrative practice and
will experience additional costs which In accordance with the provisions of procedure, Grant programs—health,
they are likely to pass on to us through Executive Order 12866, this proposed Health care, Health insurance, Health
direct subsidy payments and to rule was reviewed by the Office of maintenance organizations (HMO), Loan
beneficiaries through increases in Management and Budget. programs—health, Medicare, and
premiums as reflected in their bids. Reporting and recordkeeping
Beginning in CY 2013, we expect that requirements.
these provisions will generate a net
42 CFR Part 422 (i) The HMO or CMP must comply (C) of the Act, not by the provisions in
Administrative practice and with the requirements at § 422.152(b)(5). part 422 of this chapter.
procedure, Health facilities, Health (j) All coordinated care contracts
(including local and regional PPOs and Subpart O—Medicare Payment: Cost
Maintenance Organizations (HMO),
contracts with exclusively SNP benefit Basis
Medicare, Penalties, Privacy, and
Reporting and recordkeeping packages, cost contracts under section
7. Section 417.564 is amended by
requirements. 1876 of the Act, private fee-for-service
adding new paragraphs (b)(2)(iii) and (c)
contracts, and MSA contracts with 600
42 CFR Part 423 to read as follows:
or more enrollees in July of the prior
Administrative practice and year) must contract with approved § 417.564 Apportionment and allocation of
procedure, Emergency medical services, Medicare Consumer Assessment of administrative and general costs.
Health facilities, Health maintenance Healthcare Providers and Systems * * * * *
organizations (HMO), Health (CAHPS) survey vendors to conduct the (b) * * *
professionals, Medicare, Penalties, Medicare CAHPS satisfaction survey of (2) * * *
Privacy, Reporting and recordkeeping MA plan enrollees in accordance with
(iii) For the costs incurred under
requirements. CMS specifications and submit the
paragraphs (b)(1)(i) through (iv) of this
survey data to CMS.
42 CFR Part 480 section that include personnel costs, the
Health care, Health professions, organization must be able to identify the
revising paragraph (b)(2) to read as
Health records, Peer Review person hours expended for each
follows:
Organizations (PRO), Penalties, Privacy, administrative task and the rate of pay
and Reporting and recordkeeping § 417.492 Nonrenewal of contract. for those persons performing the tasks.
requirements. * * * * * Administrative tasks performed and rate
(b) * * * of pay for the persons performing those
For the reasons set forth in the
(2) Notice of appeal rights. CMS gives tasks must match in terms of the skill
preamble, the Centers for Medicare &
the HMO or CMP written notice of its level needed to accomplish those tasks.
Medicaid Services proposes to amend
right to appeal the nonrenewal decision, This information must be made
42 CFR chapter IV as set forth below:
in accordance with part 422 subpart N available to CMS upon request.
PART 417—HEALTH MAINTENANCE of this chapter, if CMS’s decision was (c) Costs excluded from
ORGANIZATIONS, COMPETITIVE based on any of the reasons specified in administrative costs. In accordance with
MEDICAL PLANS, AND HEALTH CARE § 417.494(b). section 1861(v) of the Act, the following
PREPAYMENT PLANS 5. Section 417.494 is amended by costs must be excluded from
revising paragraph (b)(2) to read as administrative costs:
1. The authority citation for part 417 follows: (1) Donations.
continues to read as follows:
(2) Fines and penalties.
Authority: Sec. 1102 and 1871 of the Social § 417.494 Modification or termination of
contract. (3) Political and lobbying activities.
Security Act (42 U.S.C. 1302 and 1395hh),
(4) Charity or courtesy allowances.
secs. 1301, 1306, and 1310 of the Public * * * * *
Health Service Act (42 U.S.C. 300e, 300e–5, (b) * * * (5) Spousal education.
and 300e–9), and 31 U.S.C. 9701. (2) If CMS decides to terminate a (6) Entertainment.
contract, it sends a written notice (7) Return on equity.
Subpart K—Enrollment, Entitlement,
informing the HMO or CMP of its right
and Disenrollment Under Medicare Subpart R—Medicare Contract Appeals
to appeal the termination in accordance
Contract
with part 422 subpart N of this chapter. 8. Section § 417.640 is revised to read
2. Section 417.428 is revised to read * * * * * as follows:
as follows: 6. Section 417.500 is revised to read
as follows: § 417.640 Applicability.
§ 417.428 Marketing activities.
(a) The rights, procedures, and
(a) With the exception of § 422.2276 § 417.500 Intermediate sanctions for and
requirements relating to contract
of this chapter, the procedures and civil monetary penalties against HMOs and
CMPs. determinations and appeals set forth in
requirements relating to marketing
part 422 subpart N of this chapter also
requirements set forth in subpart V of (a) Except as provided in paragraph
apply to Medicare contracts with HMOs
part 422 of this chapter also apply to (c) of this section, the rights,
or CMPs under section 1876 of the Act.
Medicare contracts with HMOs and procedures, and requirements related to
CMPs under section 1876 of the Act. intermediate sanctions and civil money (b) In applying paragraph (a) of this
(b) In applying those provisions, penalties set forth in part 422 subparts section, references to part 422 of this
references to part 422 of this chapter O and T of this chapter also apply to chapter must be read as references to
must be read as references to this part, Medicare contracts with HMOs or CMPs this part and references to MA
and references to MA organizations as under sections 1876 of the Act. organizations must be read as references
references to HMOs and CMPs. (b) In applying paragraph (a) of this to HMOs or CMPs.
section, references to part 422 of this § 417.642 through § 417.694 [Removed]
Subpart L—Medicare Contract chapter must be read as references to

Requirements 9. Remove § 417.642 through
this part and references to MA
§ 417.694.
3. Section 417.472 is amended by organizations must be read as references
adding paragraphs (i) and (j) to read as to HMOs or CMPs. Subpart U—Health Care Prepayment
follows: (c) In applying paragraph (a) of this Plans
section, the amounts of civil money
§ 417.472 Basic contract requirements. penalties that can be imposed are 10. Section 417.840 is revised to read
* * * * * governed by section 1876(i)(6)(B) and as follows:
§ 417.840 Administrative review that an organization submitted for HCC on a face-to-face encounter with a
procedures. validation. provider deemed acceptable for risk
The HCPP must apply § 422.568 * * * * * adjustment and documentation of this
through § 422.626 of this chapter to— Hierarchical condition categories encounter must be reflected in the
(a) Organization determinations and (HCC) means disease groupings medical record.
fast-track appeals that affect its consisting of disease codes (currently 13. Amend § 422.4 by—
Medicare enrollees; and ICD–9–CM codes) that predict average A. Revising paragraphs (a)(1)(v) and
(b) Reconsiderations, hearings, healthcare spending. HCCs represent the (a)(2)(i)(A).
disease components of the enrollee risk B. Redesignating paragraph (a)(2)(i)(B)
Medicare Appeals Council review, and
score that are applied to MA payments. as paragraph (a)(2)(i)(C).
judicial review of the organization
C. Adding new paragraphs (a)(2)(i)(B)
determinations and fast-track appeals * * * * * and (a)(3)(iv).
specified in paragraph (a) of this Point of service (POS) means a benefit The revisions and additions read as
section. option that an MA HMO plan can offer follows:
to its Medicare enrollees as an
PART 422—MEDICARE ADVANTAGE additional, mandatory supplemental, or § 422.4 Types of MA plans.
PROGRAM optional supplemental benefit. Under * * * * *
11. The authority citation for part 422 the POS benefit option, the HMO plan (a) * * *
continues to read as follows: allows members the option of receiving (1) * * *
specified services outside of the HMO (v) A PPO plan is a plan that—
Authority: Secs. 1102 and 1871 of the plan’s provider network. In return for (A) Has a network of providers that
Social Security Act (42 U.S.C. 1302 and this flexibility, members typically have have agreed to a contractually specified
1395hh).
higher cost-sharing requirements for reimbursement for covered benefits with
Subpart A—General Provisions services received and, when offered as the organization offering the plan;
a mandatory or optional supplemental (B) Provides for reimbursement for all
12. Section 422.2 is amended by— benefit, may also be charged a premium covered benefits regardless of whether
A. Adding the definitions of for the POS benefit option. the benefits are provided within the
‘‘Attestation process,’’ ‘‘documentation * * * * * network of providers;
dispute process,’’ and ‘‘Hierarchical RADV payment error calculation (C) Only for purposes of quality
condition categories.’’ appeal process means an administrative assurance requirements in § 422.152(e),
B. Revising the definition of ‘‘Point of process that enables MA organizations is offered by an organization that is not
service.’’ that have undergone RADV audit to licensed or organized under State law as
C. Adding the definitions of ‘‘RADV appeal the CMS calculation of an MA an HMO; and
organization’s RADV payment error. (D) Does not permit prior notification
payment error calculation appeal
for out-of-network services—that is, a
process’’ and ‘‘Risk adjustment data * * * * * reduction in the plan’s standard cost-
validation (RADV) audit.’’ Risk adjustment data validation sharing levels when the out-of-network
D. Revising the introductory text of (RADV) audit means a CMS- provider from whom an enrollee is
the definition of ‘‘Service area’’. administered payment audit of a receiving plan-covered services
E. Adding the definition of ‘‘The one Medicare Advantage (MA) organization voluntarily notifies the plan prior to
best medical record’’. that ensures the integrity and accuracy furnishing those services, or the enrollee
The additions and revision read as of risk adjustment payment data. voluntarily notifies the PPO plan prior
follows: * * * * * to receiving plan-covered services from
Service area means a geographic area an out-of-network provider.
§ 422.2 Definitions. that for local MA plans is a county or (2) * * *
Attestation process means a CMS- multiple counties, and for MA regional (i) * * *
developed RADV audit-related dispute plans is a region approved by CMS (A) Pays at least for the services
process that enables MA organizations within which an MA-eligible individual described in § 422.101, after the enrollee
undergoing RADV audit to submit CMS- may enroll in a particular MA plan has incurred countable expenses (as
generated and physician practitioner offered by an MA organization. specified in the plan) equal in amount
signed attestations for medical records Facilities in which individuals are to the annual deductible specified in
with missing or illegible signatures or incarcerated are not included in the § 422.103(d);
credentials. Physicians/practitioners service area of an MA plan. Each MA (B) Does not permit prior
who documented health care services in plan must be available to all MA-eligible notification—that is, a reduction in the
the specific medical record under RADV individuals within the plan’s service plan’s standard cost-sharing levels when
review will be allowed to attest that area. In deciding whether to approve an the provider from whom an enrollee is
they provided and documented the MA plan’s proposed service area, CMS receiving plan-covered services
health care services evidenced in the considers the following criteria: * * * voluntarily notifies the plan prior to
specific medical record. * * * * * furnishing those services, or the enrollee
* * * * * The one best medical record for the voluntarily notifies the MSA plan prior
Documentation dispute process purposes of Medicare Advantage Risk to receiving plan-covered services from
means a dispute process that enables Adjustment Validation (RADV) is a provider; and
MA organizations that have undergone defined as: the clinical documentation * * * * *
a RADV audit to dispute medical record for a single encounter for care (that is, (3) * * *
discrepancies that pertain to incorrect a physician office visit, an inpatient (iv) Does not permit prior
ICD–9–CM coding by allowing affected hospital stay, or an outpatient hospital notification—that is, a reduction in the
MA organizations to submit formal visit) that occurred for one patient plan’s standard cost-sharing levels when
written disputes regarding discrepancy during the data collection period. The the provider from whom an enrollee is
findings for the initial medical record single encounter for care must be based receiving plan-covered services
voluntarily notifies the plan prior to paragraph consistent with Medicare through an HMO plan must report
furnishing those services, or the enrollee access and availability requirements at enrollee utilization data at the plan level
voluntarily notifies the PFFS plan prior § 422.112 of this part. by both plan contracting providers (in-
to receiving plan-covered services from * * * * * network) and by non-contracting
a provider. providers (out-of-network) including
* * * * * Subpart C—Benefits and Beneficiary enrollee use of the POS benefit, in the
Protections form and manner prescribed by CMS.
Subpart B—Eligibility, Election, and 18. Section 422.108 is amended by
Enrollment 15. Section 422.100 is amended by revising paragraph (b)(3) to read as
adding new paragraphs (f)(4) and (f)(5) follows:
14. Section 422.74 is amended by to read as follows:
revising paragraphs (d)(1)(i)(B) and § 422.108 Medicare secondary payer (MSP)
(d)(4)(iii) to read as follows: § 422.100 General requirements. procedures.
* * * * * * * * * *
§ 422.74 Disenrollment by the MA (f) * * * (b) * * *
organization.
(4) All local MA plans must establish (3) Coordinate its benefits to Medicare
* * * * * an out-of pocket maximum for Medicare enrollees with the benefits of the
(d) * * * A and B services that is no greater than primary payers, including reporting, on
(1) * * * the annual limit set by CMS. an ongoing basis, information obtained
(i) * * *
(B) Providing the individual with a (5) Cost sharing for Medicare A and B related to requirements in paragraphs
grace period, that is, an opportunity to services does not exceed levels annually (b)(1) and (b)(2) of this section in
pay past due premiums in full. The determined by CMS to be accordance with CMS instructions.
length of the grace period must be at discriminatory. * * * * *
least 2 months, beginning on the first * * * * * 19. Section 422.111 is amended by
day of the month for which the 16. Section 422.103 is amended by adding a new paragraph (g) to read as
premium is unpaid. adding a new paragraph (d)(3) to read as follows:
* * * * * follows:
§ 422.111 Disclosure requirements.
(4) * * * § 422.103 Benefits under an MA MSA plan. * * * * *
(iii) Exception. If the MA plan offers (g) CMS may require an MA
a visitor/traveler benefit when the * * * * *
(d) * * * organization to self-disclose to its
individual is out of the service area but enrollees or potential enrollees, the MA
within the United States (as defined in (3) Is pro-rated for enrollments
occurring during a beneficiary’s initial organization’s performance and contract
§ 400.200 of this chapter) for a period of compliance deficiencies in a manner
consecutive days longer than 6 months coverage election period as described at
§ 422.62(a)(1) of this part. specified by CMS.
but less than 12 months, the MA 20. Section 422.112 is amended by
organization may elect to offer to the * * * * *
adding a new paragraph (a)(10) to read
individual the option of remaining 17. Section 422.105 is amended by
as follows:
enrolled in the MA plan if— revising paragraphs (b), (c), and (f) to
(A) The individual is disenrolled on read as follows: § 422.112 Access to services.
the first day of the 13th month after the * * * * *
§ 422.105 Special rules for self-referral and
individual left the service area (or point of service option. (a) * * *
residence, if paragraph (d)(4)(i)(B) of (10) Prevailing patterns of community
this section applies); * * * * * health care delivery. Coordinated care
(B) The individual understands and (b) Point of service option. As a and PFFS MA plans that meet Medicare
accepts any restrictions imposed by the general rule, a POS benefit is an option access and availability requirements
MA plan on obtaining these services that an MA organization may offer in an through direct contracting network
while absent from the MA plan’s service HMO plan to provide enrollees with providers must do so consistent with
area for the extended period, consistent additional choice in obtaining specified the prevailing community pattern of
with paragraph (d)(4)(i)(C) of the health care services. The organization health care delivery in the areas where
section; may offer A POS option— the network is being offered. Factors
(C) The MA organization makes this (1) Before January 1, 2006, under a making up community patterns of
visitor/traveler option available to all coordinated care plan as an additional health care delivery that CMS will use
Medicare enrollees who are absent for benefit as described in section as a benchmark in evaluating a
an extended period from the MA plan’s 1854(f)(1)(A) of the Act; proposed MA plan health care delivery
service area. MA organizations may (2) Under an HMO plan as a network include, but are not limited
limit this visitor/traveler option to mandatory supplemental benefit as to—
enrollees who travel to certain areas, as described in § 422.102(a); or (i) The number and geographical
defined by the MA organization, and (3) Under an HMO plan as an optional distribution of eligible health care
who receive services from qualified supplemental benefit as described in providers available to potentially
providers who directly provide, arrange § 422.102(b). contract with an MAO to furnish plan
for, or pay for health care; and (c) Ensuring availability and covered services within the proposed
(D) The MA organization furnishes all continuity of care. An MA HMO plan service area of the MA plans.
Medicare Parts A and B services and all that includes a POS benefit must (ii) The prevailing market conditions
mandatory and optional supplemental continue to provide all benefits and in the service area of the MA plan.
benefits at the same cost sharing levels ensure access as required under this Specifically, the number and
as apply within the plan’s service area; subpart. distribution of health care providers
and * * * * * contracting with other health care plans
(E) The MA organization furnishes the (f) POS-related data. An MA (both commercial and Medicare)
services in paragraph (D) of this organization that offers a POS benefit operating in the service area of the plan.
(iii) Whether the service area is (e) * * * differences relative to a sponsor’s other
comprised of rural or urban areas or (2) * * * bid submissions.
some combination of the two. (ii) Collect, analyze, and report * * * * *
(iv) Whether the MA plan’s proposed quality performance data identified by (b) * * *
provider network meet Medicare time CMS that are of the same type as those (5) Actuarial valuation. The bid must
and distance standards for member described under paragraph (e)(2)(i) of be prepared in accordance with CMS
access to health care providers this section. actuarial guidelines based on generally
including specialties. accepted actuarial principles.
(v) Other factors that CMS determines * * * * *
22. Section 422.153 is added to read (i) A qualified actuary must certify the
are relevant in setting a standard for an plan’s actuarial valuation (which may
acceptable health care delivery network as follows:
be prepared by others under his or her
in a particular service area. § 422.153 Use of quality improvement direction or review).
* * * * * organization review information. (ii) To be deemed a qualified actuary,
CMS will acquire from quality the actuary must be a member of the
Subpart D—Quality Improvement American Academy of Actuaries.
improvement organizations (QIOs) as
21. Section 422.152 is amended by— described in part 480 of this chapter (iii) Applicants may use qualified
A. Revising paragraphs (a)(1) and quality review study information as outside actuaries to prepare their bids.
(a)(2). defined in § 480.101(b) and subject to * * * * *
B. Redesignating paragraph (b)(3)(ii) the requirements in § 480.140(g). CMS 25. Section 422.256 is amended by
as paragraph (b)(3)(iii). will acquire this information, as needed, adding a new paragraph (b)(4) to read as
C. Adding new paragraph (b)(3)(ii). and use it for the following limited follows:
D. Adding new paragraph (b)(5). functions:
F. Redesignating paragraphs (e)(2)(ii) § 422.256 Review, negotiation, and
(a) Enable beneficiaries to compare
and (e)(2)(iii) as paragraphs (e)(2)(iii) approval of bids.
health coverage options and select
and (e)(2)(iv), respectively. * * * * *
H. Adding a new paragraph (e)(2)(ii). among them.
(b) * * *
The revisions and additions read as (b) Evaluate plan performance.
(4) Substantial differences between
follows: (c) Ensure compliance with plan bids.
requirements under this part. (i) General. CMS approves a bid only
§ 422.152 Quality improvement program. (d) Develop payment models. if it finds that the benefit package and
(a) * * * (e) Other purposes related to MA
(1) Have a chronic care improvement plan costs represented by that bid are
plans as specified by CMS. substantially different from the MA
program that meets the requirements of 23. Section 422.156 is amended by
paragraph (c) of this section concerning organization’s other bid submissions. In
revising paragraphs (b)(7) and (f) to read order to be considered ‘‘substantially
elements of a chronic care program and
as follows: different,’’ each bid must be
addresses populations identified by
CMS based on a review of current § 422.156 Compliance deemed on the
significantly different from other plans
quality performance; basis of accreditation. of its plan type with respect to
(2) Conduct quality improvement premiums, benefits, or cost-sharing
* * * * *
projects that can be expected to have a structure.
(b) * * * (ii) Transition period for MA
favorable effect on health outcomes and (7) The requirements listed in
enrollee satisfaction, meet the organizations with new acquisitions.
§ 423.165 (b)(1) through (3) for MA After a 2-year transition period, CMS
requirements of paragraph (d) of this
organizations that offer prescription approves a bid offered by an MA
section, and address areas identified by
drug benefit programs. organization (or by a parent organization
CMS; and
* * * * * to that MA organization) that recently
* * * * *
(b) * * * (f) Authority. Nothing in this subpart purchased (or otherwise acquired or
(3) * * * limits CMS’ authority under subparts K merged with) another MA organization
(ii) Collect, analyze, and report and O of this part, including but not only if it finds that the benefit package
quality performance data identified by limited to, the ability to impose and plan costs represented by that bid
CMS that are of the same type as those intermediate sanctions, civil money are substantially different, as provided
under paragraph (b)(3)(i) of this section. penalties, and terminate a contract with under paragraph (b)(4)(i) of this section,
* * * * * an MA organization. from any benefit package and plan costs
(5) All coordinated care contracts represented by another bid submitted by
(including local and regional PPOs and Subpart F—Submission of Bids, the same MA organization (or parent
contracts with exclusively SNP benefit Premiums, and Related Information organization to that MA organization).
packages, cost contracts under section and Plan Approval * * * * *
1876 of the Act, private fee-for-service 24. Section 422.254 is amended by
contracts, and MSA contracts with 600 adding new paragraphs (a)(4) and (b)(5) Subpart G—Payments to Medicare
or more enrollees in July of the prior to read as follows: Advantage Organizations
year) must contract with approved 26. Section 422.306 is amended by
Medicare Consumer Assessment of § 422.254 Submission of bids.

revising paragraph (a) to read as follows:
Healthcare Providers and Systems * * * * *
(CAHPS) survey vendors to conduct the (a) * * * § 422.306 Annual MA capitation rates.
Medicare CAHPS satisfaction survey of (4) Substantial differences between * * * * *
MA plan enrollees in accordance with bids. An MA organization’s bid (a) Minimum percentage increase rate.
CMS specifications, and submit the submissions must reflect differences in The annual capitation rate for each MA
survey data to CMS. benefit packages and plan costs that local area is equal to the minimum
* * * * * CMS determines to represent substantial percentage increase rate, which is the
annual capitation rate for the area for (iii) RADV audit-related errors documentation dispute process will
the preceding year increased by the ineligible for attestation process. apply only to the operational processing
national per capita MA growth (A) Attestations from providers, for of those medical records selected for
percentage (defined at § 422.308(a)) for the purpose of resolving coding RADV audit. In order to be eligible for
the year, but not taking into account any discrepancies or other medical record documentation dispute, medical records
adjustment under § 422.308(b) for a year documentation, will not be permitted. have to have been submitted to CMS by
before 2004. (B) The introduction of new HCCs for the CMS-established deadline.
* * * * * payment that were not previously (ii) RADV-related audit errors
27. A new § 422.311 is added to read identified by CMS for RADV audit will ineligible for documentation dispute
as follows. not be eligible for attestation. process.
(C) Inpatient provider-type medical (A) Medical record coding
§ 422.311 RADV audit dispute and appeal records are not eligible for attestation. discrepancies.
processes. (iv) Manner and timing of a request (B) MA organizations may not use the
(a) Risk Adjustment Data Validation for attestation. documentation dispute process to
(RADV) audits. In accordance with (A) At the time CMS notifies an MA submit new medical records in place of
§ 422.2 and § 422.310 et seq., CMS organization that it has been selected for previously-submitted medical records.
annually conducts RADV audits to RADV audit, CMS provides the MA (C) MA organizations may not use the
ensure risk adjusted payment integrity organization with the attestation forms documentation dispute process to
and accuracy. and instructions regarding the introduce new HCCs for payment that
(b) RADV audit results. submission of attestations. were not earlier identified by CMS for
(1) MA organizations that undergo (B) If an organization decides to audit.
RADV audits will be issued an audit submit attestations completed by (D) MA organizations may not submit
report post medical record review that physicians or other practitioners, the medical records for HCCs that were in
describes the results of the RADV audit MA organization must submit the error because the MA organization
as follows: attestations to CMS at the same time failed to meet the medical record
(i) Detailed enrollee-level information that the MA organization is required to submission deadline established by
relating to confirmed enrollee HCC submit related medical records for CMS.
discrepancies. RADV audit. (iii) Manner and timing of a request
(ii) The contract-level RADV payment (v) Attestation content. An attestation for documentation dispute.
error estimate in absolute dollars. must accompany and correspond to the (A) At the time CMS issues its RADV
(iii) The contract-level payment medical record submitted for RADV audit report to affected MA
adjustment amount to be made in organizations, CMS notifies affected MA
audit and must meet the following
absolute dollars. organizations of any RADV errors that
requirements:
(iv) An approximate timeframe for the (A) Only CMS-generated attestations are eligible for documentation dispute.
(B) MA organizations have 30 days
payment adjustment. will be accepted by CMS.
from date of issuance of the RADV audit
(v) An enrollee-level description of (B) The CMS attestation form may not
report to request documentation
HCC-level discrepancies that will be be altered unless otherwise instructed
dispute.
eligible for dispute. and agreed-upon in writing by CMS. (iv) Documentation dispute review
(vi) A description of the MA (C) Attestations must be completed
and notification procedures.
organization’s RADV audit appeal and be signed and dated by the RADV- (A) CMS reviews documentation
rights. physician/practitioner whose medical submitted by MA organizations to
(2) Compliance date. The compliance record accompanies the attestation. determine whether it supports
date for meeting RADV medical record (D) Attestations must be based upon overturning errors listed in the MA
submission requirements for the medical records that document face-to- organization’s RADV audit report.
validation of risk adjustment data is the face encounters between beneficiaries (B) CMS provides written notice of its
due date when MA organizations and RADV-eligible physicians/ determination(s) to the MA organization
selected for RADV audit must submit practitioners. and notifies the MA organization of its
medical records to CMS or its (vi) Attestation review and aggregate determinations regarding
contractors. determination procedures. overturning errors listed in the MA
(c) RADV audit dispute and appeal (A) CMS reviews each submitted organization’s RADV audit report and
processes. attestation to determine if it meets CMS recalculating the MA organization’s
(1) Attestation process. requirements and is acceptable for use RADV payment error.
(i) MA organizations— during the medical record review. (v) Effect of CMS documentation
(A) May submit CMS-generated (B) CMS provides written notice of its dispute determination. CMS’
attestations from physician/ determination(s) regarding submitted documentation dispute determination is
practitioner(s) in order to dispute attestations to the MA organization at final and binding.
signature or credential-related RADV the time CMS issues its RADV audit (3) RADV payment error calculation
errors. report. appeal process.
(B) That submit CMS-generated (vii) Effect of CMS’ attestation (i) MA organizations may appeal
attestations must do so in accordance determination. CMS’ attestation CMS’ RADV payment error calculation.
with the rules under this section. determination is final and binding. (ii) RADV payment error-related
(C) Are not obligated to submit (2) Documentation dispute process. issues ineligible for appeal.
attestations to CMS. An MA organization may choose to (A) MA organizations may not appeal
(ii) RADV audit-related errors eligible dispute CMS’ operational processing of RADV medical record review-related
for attestation process. CMS will only RADV medical records using a CMS- errors.
accept an attestation to support a administered documentation dispute (B) MA organizations may not appeal
physician or outpatient medical records process. physician/practitioner signature or
with missing or illegible signatures or (i) RADV-related errors eligible for credential-related medical record review
missing or illegible credentials or both. documentation dispute process. The errors.
(C) MA organizations may not reconsideration official not otherwise decides whether the reconsideration
introduce new HCCs to CMS for involved in the RADV payment error official’s decision was correct, and
payment consideration in the context of calculation to review the sends a written decision to CMS and the
their RADV payment error calculation reconsideration determination. MA organization, explaining the basis
appeal. (vii) Decision of the CMS for the decision.
(D) MA organizations may not appeal reconsideration official. The CMS (v) Effect of the Hearing Officer’s
RADV errors that result from an MA reconsideration official informs the MA decision. The Hearing Officer’s decision
organization’s failure to submit a organization and CMS in writing of the is final and binding, unless the decision
medical record. decision of the CMS reconsideration is reversed or modified by the
(E) MA organizations may not appeal official. Administrator in accordance with
CMS’ RADV payment error calculation (viii) Effect of the CMS paragraph (c)(5) of this section.
methodology. reconsideration official. The written (5) Review by the CMS Administrator.
(iii) Manner and timing of a request reconsideration decision is final and (i) At his or her discretion, the CMS
for appeal. binding unless a request for a hearing is Administrator can choose to either
(A) At the time CMS issues its RADV filed by CMS or the appellant MA review or not review a case.
audit report, CMS notifies affected MA organization in accordance with (ii) CMS or an MA organization that
organizations in writing of their appeal paragraph (c)(4) of this section. has received a Hearing Officer decision
rights around the RADV payment error (4) Right to a hearing. CMS or an MA upholding or overturning a CMS initial
calculation. organization dissatisfied with the or reconsideration-level RADV payment
(B) MA organizations have 30 days written decision of the CMS error calculation determination may
from the date of this notice to submit a reconsideration official is entitled to a request review by the Administrator
written request for reconsideration of its hearing as provided in this section. within 30 days of receipt of the Hearing
RADV payment error calculation. (i) Manner and timing for request. A Officer’s decision.
(iv) Burden of proof. The MA request for a hearing must be made in (iii) If the CMS Administrator chooses
organization bears the burden of proof writing and filed with CMS within 30 to review the case, the CMS
in demonstrating that CMS failed to days of the date CMS and the MA Administrator reviews the Hearing
follow its stated RADV payment error organization receives CMS’ written Officer’s decision, any written
calculation methodology. reconsideration decision. documents submitted by CMS or the
(v) Content of request. The written (ii) Content of request. The written MA organization to the Hearing Officer,
request for reconsideration must specify request for hearing must include a copy as well as any other information
the issues with which the MA of the written decision of the CMS included in the record of the Hearing
organization disagrees and the reasons reconsideration official and must Officer’s decision and determines
for the disagreements. specify the findings or issues in the whether to uphold, reverse, or modify
(A) Excluding evidence pertaining to reconsideration decision with which the Hearing Officer’s decision.
issues described at § 422.311(c) (1) and either CMS or the MA organization (iv) The Administrator’s
(2), the written request for disagrees and the reasons for the determination is final and binding.
reconsideration may include additional disagreement.
documentary evidence the MA (iii) Hearing procedures. Subpart K—Contracts With Medicare
organization wishes CMS to consider. (A) The hearing will be held on the Advantage Organizations
(B) CMS does not accept record, unless the parties request,
28. Section 422.501 is amended by—
reconsiderations for issues with the subject to the hearing officer’s
A. Redesignating paragraphs (b)
methodology applied in any part of the discretion, a live or telephonic hearing.
through (e) as paragraphs (c) through (f),
RADV audit. The hearing officer may schedule a live
respectively.
(vi) Conduct of written or telephonic hearing on his/her own B. Adding a new paragraph (b).
reconsideration. motion. C. Revising newly redesignated
(A) In conducting the written (B) The hearing is conducted by an paragraph (c)(1) introductory text and
reconsideration, CMS reviews all of the official from the CMS’ Office of paragraph (c)(2).
following information: Hearings (CMS Hearing Officer) who The addition and revisions read as
(1) The RADV payment error neither receives testimony nor accepts follows:
calculation. any new evidence that was not
(2) The evidence and findings upon presented with the request for § 422.501 Application requirements.
which they were based. reconsideration. The CMS Hearing * * * * *
(3) Any other written evidence Officer is limited to the review of the (b) Completion of a notice of intent to
submitted by the MA organization. record that was before CMS when CMS apply.
(B) CMS ensures that a third party— made its initial RADV payment error (1) An organization submitting an
either within CMS or a CMS calculation determination and when the application under this section for a
contractor—not otherwise involved in CMS reconsideration official issued the particular contract year must first
the RADV payment error calculation written reconsideration decision. submit a completed Notice of Intent to
reviews the written request for (C) The hearing officer has full power Apply by the date established by CMS.
reconsideration. to make rules and establish procedures, CMS will not accept applications from
(C) The third party recalculates the consistent with the law, regulations, and organizations that do not first submit a
payment error in accordance with CMS CMS rulings. These powers include the timely Notice of Intent to Apply.
RADV payment calculation procedures authority to dismiss the appeal with (2) Submitting a Notice of Intent to
described in CMS’ RADV payment error prejudice or take any other action which Apply does not bind that organization to
calculation standard operating the hearing officer considers appropriate submit an application for the applicable
procedures. for failure to comply with such rules contract year.
(D) The third party described in and procedures. (c) * * *
paragraph (B) of this paragraph provides (iv) Decision of the CMS Hearing (1) In order to obtain a determination
his or her determination to a CMS Officer. The CMS Hearing Officer on whether it meets the requirements to
become an MA organization and is (3) * * * (3) The governing body of the MA

qualified to provide a particular type of (iii) The applicant’s right to request a organization must be knowledgeable
MA plan, an entity, or an individual hearing in accordance with the about the content and operation of the
authorized to act for the entity (the procedures specified in subpart N of compliance program and must exercise
applicant) must fully complete all parts this part. reasonable oversight with respect to the
of a certified application, in the form 30. Section 422.503 is amended by— implementation and effectiveness of the
and manner required by CMS, including A. Revising paragraph (b)(4)(vi). compliance programs.
the following: B. Adding new paragraph (b)(7). (C)(1) Each MA organization must
The revisions and addition read as establish and implement effective
* * * * * follows:
(2) The authorized individual must training and education between the
thoroughly describe how the entity and § 422.503 General provisions. compliance officer and organization
MA plan meet, or will meet, all the employees, the MA organization’s chief
* * * * *
requirements described in this part. (b) * * * executive or other senior administrator,
(4) * * * managers and governing body members,
* * * * *
(vi) Adopt and implement an effective and the MA organization’s first tier,
29. Section 422.502 is amended by—
A. Revising paragraphs (a)(1), (a)(2), compliance program, which must downstream, and related entities. Such
and (b). include measures that prevent, detect, training and education must occur at a
B. Adding a new paragraph (c)(2)(iii). and correct non-compliance with CMS’ minimum annually and must be made a
C. Revising paragraph (c)(3)(iii). program requirements as well as part of the orientation for a new
D. Removing paragraph (d). measures that prevent, detect, and employee, new first tier, downstream
The revisions read as follows: correct fraud, waste, and abuse. The and related entities, and new
compliance program must, at a appointment to a chief executive,
§ 422.502 Evaluation and determination manager, or governing body member.
procedures. minimum, include the following core
requirements: (2) First tier, downstream, and related
(a) * * * (A) Written policies, procedures, and entities who have met the fraud, waste,
(1) With the exception of evaluations and abuse certification requirements
standards of conduct that—
conducted under paragraph (b) of this (1) Articulate the organization’s through enrollment into the Medicare
section, CMS evaluates an application commitment to comply with all program are deemed to have met the
for an MA contract solely on the basis applicable Federal and State standards; training and educational requirements
of information contained in the (2) Describe compliance expectations for fraud, waste, and abuse.
application itself and any additional as embodied in the standards of (D) Establishment and
information that CMS obtains through conduct, implementation of effective lines of
other means such as on-site visits. (3) Implement the operation of the communication, ensuring
(2) After evaluating all relevant compliance program; confidentiality, between the compliance
information, CMS determines whether (4) Provide guidance to employees officer, members of the compliance
the applicant’s application meets all the and others on dealing with potential committee, the MA organization’s
requirements described in this part. compliance issues; employees, managers and governing
(b) Use of information from a current (5) Identify how to communicate body, and the MA organization’s first
or prior contract. If an MA organization compliance issues to appropriate tier, downstream, and related entities.
fails during the 14 months preceding the compliance personnel; Such lines of communication must be
deadline established by CMS for the (6) Describe how potential accessible to all and allow compliance
submission of contract qualification compliance issues are investigated and issues to be reported including a
applications to comply with the resolved by the organization; and method for anonymous and confidential
requirements of the Part C program (7) Include a policy of non- good faith reporting of potential
under any current or prior contract with intimidation and non-retaliation for compliance issues as they are identified.
CMS under title XVIII of the Act or fails good faith participation in the (E) Well-publicized disciplinary
to complete a corrective action plan compliance program, including but not standards through the implementation
during the 14 months preceding the limited to reporting potential issues, of procedures which encourage good
deadline established by CMS for the investigating issues, conducting self- faith participation in the compliance
submission of contract qualification evaluations, audits and remedial program by all affected individuals.
applications, CMS may deny an actions, and reporting to appropriate These standards must include policies
application based on the applicant’s officials. that:
failure to comply with the requirements (B) The designation of a compliance (1) Articulate expectations for
of the Part C program under any current officer and a compliance committee reporting compliance issues and assist
or prior contract with CMS even if the who report directly to the organization’s in their resolution,
applicant currently meets all of the chief executive or other senior (2) Identify noncompliance or
requirements of this part. administrator. unethical behavior; and
(c) * * * (1) The compliance officer, vested (3) Provide for timely, consistent, and
(2) * * * with the day-to-day operations of the effective enforcement of the standards
(iii) If CMS does not receive a revised compliance program, must be an when noncompliance or unethical
application within 10 days from the employee of the MA organization. behavior is determined.
date of the notice, or if after timely (2) The compliance officer and the (F) Establishment and implementation
submission of a revised application, compliance committee must of an effective system for routine
CMS still finds the applicant does not periodically report directly to the monitoring and identification of
appear qualified to contract as an MA governing body of the MA organization compliance risks. The system should
organization or has not provided enough on the activities and status of the include internal monitoring and audits
information to allow CMS to evaluate compliance program, including issues and, as appropriate, external audits, to
the application, CMS will deny the identified, investigated, and resolved by evaluate the MA organization, including
application. the compliance program. first tier entities’, compliance with CMS
requirements and the overall noncompliance, CMS may determine that formed the basis for the
effectiveness of the compliance that a MA organization is out of determination to non-renew the
program. compliance when its performance contract.
(G) Establishment and represents an outlier relative to the (iii) The MA organization is solely
implementation of procedures and a performance of other MA organizations. responsible for the identification,
system for promptly responding to 32. Section 422.506 is amended by— development, and implementation of its
compliance issues as they are raised, A. Revising paragraph (a)(2)(ii). corrective action plan and for
investigating potential compliance B. Removing paragraph (a)(2)(iii). demonstrating to CMS that the
problems as identified in the course of C. Revising paragraph (a)(3)(i). underlying deficiencies have been
self-evaluations and audits, correcting D. Adding a new paragraph (b)(1)(iv). corrected within the time period
such problems promptly and thoroughly E. Revising paragraph (b)(2)(ii). specified by CMS in the notice
to reduce the potential for recurrence, F. Removing paragraph (b)(2)(iii). requesting corrective action.
and ensure ongoing compliance with G. Revising paragraph (b)(3).
* * * * *
CMS requirements. The revisions and addition read as
follows:
* * * * * adding paragraph (c) to read as follows:
(7) Not have terminated a contract by § 422.506 Nonrenewal of contract.
§ 422.508 Modification or termination of
mutual consent under which, as a (a) * * * contract by mutual consent.
condition of the consent, the MA (2) * * *
organization agreed that it was not * * * * *
(ii) Each Medicare enrollee by mail at (c) Agreement to limit new MA
eligible to apply for new contracts or least 90 calendar days before the date on
service area expansions for a period of applications. As a condition of the
which the nonrenewal is effective. The consent to a mutual termination CMS
2 years per § 422.508(c) of this subpart. MA organization must also provide will require, as a provision of the
* * * * * information about alternative termination agreement language
31. Section 422.504 is amended by— enrollment options by doing one or prohibiting the MA organization from
A. Redesignating paragraph (e)(1)(ii) more of the following: applying for new contracts or service
and (e)(1)(iii) as paragraph (e)(1)(iii) and (A) Provide a CMS approved written area expansions for a period of 2 years,
(e)(1)(iv), respectively. description of alternative MA plan absent circumstances warranting special
B. Adding a new paragraph (e)(1)(ii). options available for obtaining qualified consideration.
C. Revising newly redesignated Medicare services within the 34. Section 422.510 is amended by
paragraph (e)(1)(iii). beneficiaries’ region. revising paragraphs (a), (b) introductory
D. Revising paragraph (i)(2)(i). (B) Place outbound calls to all affected text, (b)(2)(i), (b)(2)(ii), and (c) to read as
E. Add a new paragraph (m). enrollees to ensure beneficiaries know
The additions and revisions read as follows:
who to contact to learn about their
follows: enrollment options. § 422.510 Termination of contract by CMS.
(3) * * * (a) Termination by CMS.
§ 422.504 Contract provisions.
(i) The MA organization notifies its (1) CMS may at any time terminate a
* * * * * Medicare enrollees in accordance with contract if CMS determines that the MA
(e) * * * paragraph (a)(2)(ii) of this section; and organization meets any of the following:
(1) * * *
* * * * * (i) Has failed substantially to carry out
(ii) Compliance with CMS
(b) * * * the contract.
requirements for maintaining the
(1) * * * (ii) Is carrying out the contract in a
privacy and security of personal health (iv) The contract must be nonrenewed manner that is inconsistent with the
information and other personally as to an individual MA plan if that plan efficient and effective administration of
identifiable information of Medicare does not have a sufficient number of this part.
enrollees; enrollees to establish that it is a viable (iii) No longer substantially meets the
(iii) The facilities of the MA independent plan option. applicable conditions of this part.
organization to include computer and (2) * * * (2) CMS may determine, in
other electronic systems; and (ii) To each of the MA organization’s accordance with paragraph (a)(1) of this
* * * * * Medicare enrollees by mail at least 90 section, that a basis exists to terminate
(i) * * * calendar days before the date on which an MA organization’s contract if—
(2) * * * the nonrenewal is effective, or at the (i) The MA organization fails to
(i) HHS, the Comptroller General, or conclusion of the appeals process if comply with any of the regulatory
their designees have the right to audit, applicable. requirements contained in this part or
evaluate, and inspect any books, (3) Opportunity to develop and part 423 of this chapter or both;
contracts, computer or other electronic implement a corrective action plan. (ii) The MA organization fails to meet
systems, including medical records and (i) Before providing a notice of intent CMS performance requirements in
documentation of the first tier, of nonrenewal of the contract, CMS will carrying out the regulatory requirements
downstream, and related to CMS’ provide the MA organization with a contained in this part or part 423 of this
contract with the MA organization. notice specifying the deficiencies and chapter or both including, but not
* * * * * reasonable opportunity to develop and limited to, when CMS determines that
(m)(1) CMS may determine that an implement a corrective action plan to an analysis of data related to the
MA organization is out of compliance correct the deficiencies that form the organization’s performance indicates it
with Part C when the organization fails basis for the determination to non- is an outlier relative to that of other
to meet performance standards renew the contract. organizations; or
articulated in the Part C statutes, (ii) CMS affords the MA organization (iii) There is credible evidence to
regulations, or guidance. with at least 30 calendar days in which show that the MA organization has
(2) If CMS has not already articulated to develop and implement a corrective committed or participated in false,
a measure for determining action plan to correct the deficiencies fraudulent, or abusive activities
affecting the Medicare, Medicaid, or The revision and addition to read as (1) The request may be made orally or
other State or Federal health care follows: in writing, except as provided in
programs, including submission of false paragraph (a)(2) of this section.
§ 422.516 Validation of Part C reporting
or fraudulent data. (2) Requests for payment must be
requirements.
(b) Notice. If CMS decides to made in writing (unless the MA
terminate a contract it gives notice of * * * * * organization or entity responsible for
the termination as follows: (g) Data validation. Each Part C
making the determination has
(1) * * * sponsor must subject information
implemented a voluntary policy of
(2) Expedited termination of contract collected under paragraph (a) of this
accepting oral payment requests).
by CMS. (i) If CMS determines that a section to a yearly independent audit to
determine their reliability, validity, * * * * *
delay in termination, resulting from (e) Written notice for MA organization
compliance with the procedures completeness, and comparability in
accordance with specifications denials.
provided in this part prior to (1) If an MA organization decides to
termination, would pose an imminent developed by CMS.
deny a service or payment in whole or
and serious risk to the health of the Subpart M—Grievances, Organization in part, or discontinue or reduce the
individuals enrolled with the MA Determinations, and Appeals level of care for an authorized course of
organization, the effective date of treatment, the organization must give
termination will be specified, in writing, 36. Section 422.561 is amended by
the enrollee written notice of the
by CMS. revising the definition of
determination.
(ii) If a termination is effective in the ‘‘Representative’’ to read as follows:
(2) If an enrollee requests an MA
middle of a month, CMS has the right § 422.561 Definitions. organization to provide an explanation
to recover the prorated share of the of a practitioner’s denial of an item or
capitation payments made to the MA * * * * *
Representative means an individual service, in whole or in part, the MA
organization covering the period of the organization must give the enrollee a
appointed by an enrollee or other party,
month following the contract written notice.
or authorized under State or other
termination.
applicable law, to act on behalf of an * * * * *
* * * * * enrollee or other party involved in the 39. Section 422.574 is amended by
(c) Opportunity to develop and grievance or appeal. Unless otherwise revising paragraph (a) to read as follows:
implement a corrective action plan. stated in this subpart, the representative
(1) General. (i) Before providing a will have all the rights and § 422.574 Parties to the organization
notice of intent to terminate the responsibilities of an enrollee or party determination.
contract, CMS will provide the MA in filing a grievance, and in obtaining an * * * * *
organization with a notice specifying organization determination or in dealing (a) The enrollee (including his or her
the deficiencies and reasonable with any of the levels of the appeals representative);
opportunity to develop and implement process, subject to the applicable rules * * * * *
a corrective action plan to correct the described in part 405 of this chapter. 40. Section 422.622 is amended by
deficiencies that form the basis for the 37. Section 422.566 is amended by revising paragraph (f)(3) to read as
determination to terminate the contract. revising paragraph (b)(4) to read as follows:
(ii) CMS affords the MA organization follows:
with at least 30 calendar days in which § 422.622 Requesting immediate QIO
to develop and implement a corrective § 422.566 Organization determinations. review of the decision to discharge from the
action plan to correct the deficiencies * * * * * inpatient hospital.
that formed the basis for the (b) * * * * * * * *
determination to terminate the contract. (4) Discontinuation or reduction of a (f) * * *
(iii) The MA organization is solely service or an authorized course of (3) If the QIO determines that the
responsible for the identification, treatment. enrollee still requires inpatient hospital
development, and implementation of its * * * * * care, the hospital must provide the
corrective action plan and for 38. Section 422.568 is amended by— enrollee with a notice consistent with
demonstrating to CMS that the A. Redesignating paragraphs (a) § 422.620(c) of this subpart when the
underlying deficiencies have been through (f) as paragraphs (b) through (g), hospital or MA organization once again
corrected within the time period respectively. determines that the enrollee no longer
specified by CMS in the notice B. Adding a new paragraph (a). requires inpatient hospital care.
requesting corrective action. C. Revising newly redesignated
* * * * *
(2) Exceptions. If CMS determines paragraph (e).
The addition and revision read as 41. Section 422.624 is amended by
that a delay in termination, resulting revising paragraph (c)(1) to read as
from compliance with the procedures follows:
follows:
provided in this part prior to § 422.568 Standard timeframes and notice
termination, would pose an imminent requirements for organization § 422.624 Notifying enrollees of
and serious risk to the health of the determinations. termination of provider services.
individuals enrolled with the MA (a) Method and place for filing a * * * * *
organization, the MA organization will request. An enrollee must ask for a (c) * * *
not be provided with an opportunity to standard organization determination by (1) The enrollee (or the enrollee’s
develop and implement a corrective making a request with the MA representative) has signed and dated the
action plan prior to termination. organization or, if applicable, to the notice to indicate that he or she has
* * * * * entity responsible for making the received the notice and can comprehend
35. Section 422.516 is amended by— determination (as directed by the MA its contents; and
A. Revising the section heading. organization), in accordance with the * * * * *
B. Adding a new paragraph (g). following: 42. Section 422.626 is amended by—
A. Redesignating paragraph (f) as § 422.641(a) of this subpart, the with the procedures provided in this
paragraph (g). applicant has the burden of proving by part prior to termination, would pose an
B. Redesignating paragraph (e)(5) as a preponderance of the evidence that imminent and serious risk to the health
paragraph (f) and revising the newly CMS’ determination was inconsistent of individuals enrolled with the MA
redesignated paragraph (f). with the requirements of § 422.501 and organization, the date of termination
The revisions read as follows: § 422.502 of this part. will not be postponed if the MA
(2) During a hearing to review a organization requests a hearing.
§ 422.626 Fast-track appeals of service
terminations to independent review entities
contract determination as described at 47. Section 422.670 is revised to read
(IREs). § 422.641(b) of this subpart, the MA as follows:
organization has the burden of proving
* * * * * § 422.670 Time and place of hearing.
(f) Responsibilities of the provider. If by a preponderance of the evidence that
CMS’ determination was inconsistent (a) The hearing officer—
an IRE reverses an MA organization’s
with the requirements of § 422.506 of (1) Fixes a time and place for the
termination decision, the provider must
provide the enrollee with a new notice this part. hearing, which is not to exceed 30
(3) During a hearing to review a calendar days after the receipt of the
consistent with § 422.624(b) of this
contract determination as described at request for the hearing; and
subpart.
§ 422.641(c) of this subpart, the MA (2) Sends written notice to the parties
* * * * * organization has the burden of proving that informs the parties of the general
by a preponderance of the evidence that and specific issues to be resolved, the
Subpart N—Medicare Contract
CMS’ determination was inconsistent burden of proof, and information about
Determinations and Appeals
with the requirements of § 422.510 of the hearing procedure.
43. Section 422.644 is amended by this part. (b)(1) The hearing officer may, on his
revising paragraph (c) to read as follows: (4) During a hearing to review the or her own motion, change the time and
imposition of an intermediate sanction place of the hearing.
§ 422.644 Notice of contract determination. as described at § 422.750 of this part, the (2) The hearing officer may adjourn or
* * * * * MA organization has the burden of postpone the hearing.
(c) CMS-initiated terminations. proving by a preponderance of the (c)(1) The MA organization or CMS
(1) General rule. CMS mails notice to evidence that CMS’ determination was may request an extension by filing a
the MA organization 90 calendar days inconsistent with the requirements of written request no later than 5 calendar
before the anticipated effective date of § 422.752 of this part. days prior to the scheduled hearing.
the termination. (c) Timing of favorable decisions.
(2) Exception. For terminations where (2) When either the MA organization
Notice of any decision favorable to the or CMS requests an extension, the
CMS determines that a delay in MA organization appealing a
termination, resulting from compliance hearing officer will provide a one-time
determination that it is not qualified to 15 calendar day extension.
with the procedures provided in this enter into a contract with CMS must be
part prior to termination, would pose an (3) Additional extensions may be
issued by September 1 for the contract granted at the discretion of the hearing
imminent and serious risk to the health in question to be effective on January 1
of the individuals enrolled with the MA officer.
of the following year.
organization, CMS notifies the MA 48. Section 422.676 is amended by
organization of the date that it will revising paragraph (d) to read as
revising paragraphs (a) and (b) to read
terminate the MA organization’s as follows: follows:
contract. § 422.676 Conduct of hearing.
§ 422.662 Request for hearing.
* * * * * * * * * *
44. Section § 422.660 is revised to (a) Method and place for filing a
request. (1) A request for a hearing must (d) The MA organization bears the
read as follows: burden of going forward and must first
be made in writing and filed by an
§ 422.660 Right to a hearing, burden of authorized official of the contract present evidence and argument before
proof, standard of proof, and standards of applicant or MA organization that was CMS presents its evidence and
review. the party to the determination under the argument.
(a) Right to a hearing. The following appeal. 49. Section 422.682 is revised to read
parties are entitled to a hearing: (2) The request for the hearing must as follows:
(1) A contract applicant that has been be filed in accordance with the
determined to be unqualified to enter § 422.682 Witness lists and documents.
requirements specified in the notice.
into a contract with CMS under Part C (b) Time for filing a request. A request Witness lists and documents must be
of Title XVIII of the Act in accordance for a hearing must be filed within 15 identified and exchanged at least 5
with § 422.501 and § 422.502. calendar days after the receipt of the calendar days before the scheduled
(2) An MA organization whose notice of the contract determination or hearing.
contract has been terminated under intermediate sanction. 50. Section 422.692 is amended by
§ 422.510 of this part. revising paragraphs (a) and (c) to read as
* * * * *
(3) An MA organization whose 46. Section 422.664 is amended by follows:
contract has not been renewed under revising paragraph (b)(2) to read as § 422.692 Review by the Administrator.
§ 422.506 of this part.
follows: (a) Request for review by

(4) An MA organization who has had
an intermediate sanction imposed in § 422.664 Postponement of effective date Administrator. CMS or an MA
accordance with § 422.752(a) through of a contract determination when a request organization that has received a hearing
(b) of this part. for a hearing is filed timely. decision may request a review by the
(b) Burden of proof, standard of proof, * * * * * Administrator within 15 calendar days
and standards of review at a hearing. (b) * * * after receipt of the hearing decision as
(1) During a hearing to review a (2) If CMS determines that a delay in provided under § 422.690(b). Both the
contract determination as described at termination, resulting from compliance MA organization and CMS may provide
written arguments to the Administrator § 422.752 Basis for imposing intermediate been corrected and are not likely to
for review. sanctions and civil money penalties. recur.
* * * * * (a) All intermediate sanctions. For the (i) CMS may require that the MA
(c) Notification of Administrator violations listed in this paragraph, CMS organization hire an independent
determination. The Administrator may impose one or more of the auditor to provide CMS with additional
notifies both parties of his or her sanctions specified in § 422.750(a) of information to determine if the
determination regarding review of the this subpart on any MA organization deficiencies that are the basis for the
hearing decision within 30 calendar with a contract. The MA organization sanction determination have been
days after receipt of request for review. may also be subject to other remedies corrected and are not likely to recur.
If the Administrator declines to review authorized under law. The independent auditor must work in
the hearing decision or the (1) Fails substantially to provide accordance with CMS specifications and
Administrator does not make a medically necessary items and services must be willing to attest that a complete
determination regarding review within that are required (under law or under and full independent review has been
30 calendar days, the decision of the the contract) to be provided to an performed.
hearing officer is final. individual covered under the contract, if (ii) In instances where marketing or
the failure has adversely affected (or has enrollment or both intermediate
* * * * *
the substantial likelihood of adversely sanctions have been imposed, CMS may
affecting) the individual. require an MA organization to market or
revising the section heading and
paragraph heading for paragraph (a) to * * * * * to accept enrollments or both for a
read as follows: (3) Acts to expel or refuses to re-enroll limited period of time in order to assist
a beneficiary in violation of the CMS in making a determination as to
§ 422.696 Reopening of a contract provisions of this part. whether the deficiencies that were the
determination or decision of a hearing (4) Engages in any practice that would bases for the intermediate sanctions
officer or the Administrator. reasonably be expected to have the have been corrected and are not likely
(a) Contract determination. * * * effect of denying or discouraging to recur.
* * * * * enrollment (except as permitted by this (A) If, following this time period,
part) by eligible individuals with the CMS determines the deficiencies have
Subpart O—Intermediate Sanctions organization whose medical condition not been corrected or are likely to recur,
or history indicates a need for the intermediate sanctions will remain
52. Section 422.750 is amended by substantial future medical services.
revising paragraph (a) to read as follows: in effect until such time that CMS is
* * * * * assured the deficiencies have been
§ 422.750 Types of intermediate sanctions 54. Section 422.756 amended by— corrected and are not likely to recur.
and civil money penalties. A. Revising paragraph (b). (B) The MA organization does not
(a) The following intermediate B. Removing paragraph (c). have a right to a hearing under
sanctions may be imposed and will C. Redesignating paragraphs (d) § 422.660(a)(4) of this part to challenge
continue in effect until CMS is satisfied through (f) as paragraphs (c) through (e), CMS’ determination to keep the
that the deficiencies that are the basis respectively. intermediate sanctions in effect.
for the sanction determination have D. Revising the newly redesignated * * * * *
been corrected and are not likely to paragraphs (c)(1) and (c)(3).
recur: The revisions read as follows: Subpart V—Medicare Advantage
(1) Suspension of the MA § 422.756 Procedures for imposing
Marketing Requirements
organization’s enrollment of Medicare intermediate sanctions and civil money
beneficiaries. 55. Section 422.2260 is amended by
penalties.
(2) Suspension of payment to the MA revising paragraph (5)(vii) of the
* * * * * definition of ‘‘Marketing materials’’ to
organization for Medicare beneficiaries (b) Hearing. (1) The MA organization
enrolled after the date CMS notifies the read as follows:
may request a hearing before a CMS
organization of the intermediate hearing officer. § 422.2260 Definitions concerning
sanction. (2) A written request must be received marketing materials.
(3) Suspension of all marketing by the designated CMS office within 15 * * * * *
activities to Medicare beneficiaries by calendar days after the receipt of the (5) * * *
an MA organization. notice. (vii) Membership activities—Current
* * * * * (3) A request for a hearing under enrollee communication materials.
53. Section 422.752 is amended by— § 422.660 does not delay the date Current enrollee communication
A. Revising paragraphs (a) specified by CMS when the sanction materials include any informational
introductory text, (a)(1), (a)(3), and becomes effective. materials that are—
(a)(4). (4) The MA organization must follow (A) Targeted to current enrollees; and
B. In paragraph (c)(1), removing the the right to a hearing procedure as
specified at § 422.660 through § 422.684. (B) Customized or limited to a subset
cross-reference ‘‘422.510(a)(4)’’ and
(c) Effective date and duration of of enrollees or apply to a specific
adding the cross-reference
situation; or
‘‘§ 422.510(a)(2)(iii) of this part’’ in its sanction. (1) Effective date. The
place. effective date of the sanction is the date (C) Cover claims processing or other
specified by CMS in the notice. operational issues.
C. In paragraph (c)(2)(iii), removing
the phrase ‘‘pursuant to 422.510(a)(4)’’ * * * * * 56. Section 422.2262 is amended by—
and adding the phrase ‘‘under (3) Duration of sanction. The sanction A. Revising paragraphs (a)(1) and (b).
§ 422.510(a)(2)(iii) of this part’’ in its remains in effect until CMS is satisfied B. Adding new paragraphs (c) and (d).
place. that the deficiencies that are the basis The revisions and additions read as
The revisions read as follows: for the sanction determination have follows:
§ 422.2262 Required use of standardized Full-benefit dual-eligible individual. (3) Exception for individuals who are
model materials. For purposes of this section, a full- qualifying covered retirees.
(a) * * * benefit dual eligible individual means (i) Full benefit dual eligible
(1) Except as provided in paragraph an individual who is— individuals who are qualifying covered
(b) of this section, an MA organization (1) Determined eligible by the State retirees as defined in § 423.882 of this
may not distribute any marketing for— part, and for whom CMS has approved
materials (as defined in § 422.2260 of (i) Medical assistance for full-benefits the group health plan sponsor to receive
this subpart), or election forms, or make under Title XIX of the Act for the month the retirement drug subsidy described in
such materials or forms available to under any eligibility category covered subpart R of this part, also are
individuals eligible to elect an MA under the State plan or comprehensive automatically enrolled in a Part D plan,
organization unless— benefits under a demonstration under consistent with this paragraph, unless
(i) At least 45 days (or 10 days if using section 1115 of the Act; or they elect to decline that enrollment.
certain types of marketing materials that (ii) Medical assistance under section (ii) Before effectuating such an
use, without modification, proposed 1902(a)(10)(C) of the Act (medically enrollment, CMS provides notice to
model language and format, including needy) or section 1902(f) of the Act such individuals of their choices and
standardized language and formatting, (States that use more restrictive advises them to discuss the potential
as specified by CMS) before the date of eligibility criteria than are used by the impact of Medicare Part D coverage on
distribution the MA organization has SSI program) for any month if the their group health plan coverage. The
submitted the material or form to CMS individual was eligible for medical notice informs individuals that they will
for review under the guidelines in assistance in any part of the month. be deemed to have declined to enroll in
§ 422.2264 of this subpart; and (2) Eligible for Part D in accordance Part D unless they affirmatively enroll
(ii) CMS does not disapprove the with § 423.30(a) of this subpart. in a Part D plan or contact CMS and
distribution of new material or form. Low-income subsidy-eligible confirm that they wish to be auto-
individual. For purposes of this section, enrolled in a PDP. Individuals who elect
* * * * *
(b) File and use. The MA organization a low-income subsidy eligible not to be auto-enrolled, may enroll in
may distribute certain types of individual means an individual who Medicare Part D at a later time if they
marketing material, designated by CMS, meets the definition of full subsidy choose to do so.
5 days following their submission to eligible (including full benefit dual (iii) All other low-income subsidy
CMS if the MA organization certifies eligible individuals) or other subsidy eligible beneficiaries who are qualified
that in the case of these marketing eligible in § 423.772 of this part. covered retirees are not enrolled by
(c) Reassigning low-income subsidy- CMS into PDPs.
materials, it followed all applicable
eligible individuals. Notwithstanding (e) Declining enrollment and
marketing guidelines and, when
§ 423.32(e) of this subpart, during the disenrollment. Nothing in this section
applicable, used model language
annual coordinated election period, prevents a low-income subsidy eligible
specified by CMS without modification.
CMS may reassign certain low-income individual from—
(c) Standardized model marketing
subsidy-eligible individuals in another (1) Affirmatively declining enrollment
materials. When specified by CMS,
PDP if CMS determines that the further in Part D; or
organizations must use standardized
enrollment is warranted. (2) Disenrolling from the Part D plan
formats and language in model
(d) Enrollment rules. in which the individual is enrolled and
materials. (1) General rule. Except for low-
(d) Current enrollee communication electing to enroll in another Part D plan
income subsidy eligible individuals during the special enrollment period
materials. Current enrollee who are qualifying covered retirees with
communication materials may be provided under § 423.38.
a group health plan sponsor as specified (f) Effective date of enrollment for
reviewed by CMS, which may upon in paragraph (d)(3) of this section, CMS
review determine that such materials full-benefit dual eligible individuals.
enrolls those individuals who fail to Enrollment of full-benefit dual eligible
must be modified, or may no longer be enroll in a Part D plan into a PDP
used. individuals under this section must be
offering basic prescription drug effective as follows:
PART 423—MEDICARE PROGRAM; coverage in the area where the (1) January 1, 2006 for individuals
MEDICARE PRESCRIPTION DRUG beneficiary resides that has a monthly who are full-benefit dual-eligible
PROGRAM beneficiary premium amount that does individuals as of December 31, 2005.
not exceed the low-income subsidy (2) The first day of the month the
57. The authority citation for part 423 amount (as defined in § 423.780(b) of individual is eligible for Part D under
continues to read as follows: this part). In the event that there is more § 423.30(a)(1) for individuals who are
Authority: Secs. 1102, 1860D–1 through than one PDP in an area with a monthly Medicaid eligible and subsequently
1860D–42, and 1871 of the Social Security beneficiary premium at or below the become newly eligible for Part D under
Act (42 U.S.C. 1302, 1395w–101 through low-income premium subsidy amount, § 423.30(a)(1) on or after January 1,
1395w–152, and 1395hh). individuals are enrolled in such PDPs 2006.
on a random basis. (3) For individuals who are eligible
Subpart B—Eligibility and Enrollment (2) Individuals enrolled in an MSA for Part D under § 423.30(a)(1) of this
58. Section 423.34 is revised to read plan or one of the following that does subpart and subsequently become newly
as follows: not offer a Part D benefit. Low-income eligible for Medicaid on or after January
subsidy eligible individuals enrolled in 1, 2006, enrollment is effective with the

§ 423.34 Enrollment of low-income an MA private fee-for-service plan or first day of the month when the
subsidy eligible individuals. cost-based HMO or CMP that does not individuals become eligible for both
(a) General rule. CMS must ensure the offer qualified prescription drug Medicaid and Part D.
enrollment into Part D plans of low- coverage or an MSA plan and who fail (g) Effective date of enrollment for
income subsidy eligible individuals to enroll in a Part D plan must be non-full-benefit dual-eligible
who fail to enroll in a Part D plan. enrolled into a PDP plan as described in individuals who are low-income
(b) Definitions. paragraph (d)(1) of this section. subsidy-eligible individuals. The
effective date for non-full-benefit dual- Drug category or class means, for the § 423.112 Establishment of prescription
eligible individuals who are low-income purpose of § 423.120(b)(2)(v) of the drug plan sponsor service areas.
subsidy-eligible individuals is no later subpart, the identification of a drug (a) Service area for prescription drug
than the first day of the second month grouping that is reasonable to identify plan sponsors. The service area for a
after CMS determines that they meet the the applicable drug products. prescription drug plan sponsor other
criteria for enrollment under this * * * * * than a fallback prescription drug plan
section. Major or life threatening clinical sponsor consists of one or more PDP
59. Section 423.38 is amended by consequences means consequences in regions as established under paragraphs
revising paragraph (c)(4) to read as which serious clinical events may arise (b) and (c) of this section.
follows: as a result of not taking a drug that can * * * * *
lead to patient hospitalization, or a 64. Section 423.120 is amended by—
§ 423.38 Enrollment periods.
persistent or significant disability or A. Revising paragraph (a).
* * * * * B. Redesignating paragraph (b)(1)(ix)
incapacity, or that can result in death.
(c) * * * as paragraph (b)(1)(x).
(4) The individual is a full-subsidy Multiple drugs mean two or more Part
D drugs. C. Adding a new paragraph (b)(1)(ix).
eligible individual or other subsidy- D. Revising paragraph (b)(2)(v).
eligible individual as defined in * * * * * E. Adding new paragraph (b)(2)(vi).
§ 423.772 of this part. Restricted access means, for the F. Revising paragraph (b)(3).
* * * * * purposes of § 423.120(b)(2)(v)(A) of this G. Redesignating paragraph (c) as
60. Section 423.44 is amended by— subpart, an enrollee who but for paragraph (c)(1).
A. Redesignating paragraphs (d)(1)(iii) § 423.120(b)(2)(v) of this subpart H. Adding new paragraphs (c)(2)
and (d)(1)(iv) as paragraphs (d)(1)(iv) urgently requires a Part D drug but is through (c)(4).
and (d)(1)(v), respectively. waiting for an expedited The revisions and additions read as
B. Adding a new paragraph (d)(1)(iii). redetermination by a Part D plan or an follows:
C. Redesignating the introductory text CMS independent review entity with
respect to coverage of that drug. § 423.120 Access to covered Part D drugs.
of paragraph (d)(5) as paragraph
* * * * * (a) Assuring pharmacy access—(1)
(d)(5)(i).
Standards for convenient access to
D. Adding new paragraph (d)(5)(ii). Significant need for access to multiple
network pharmacies. Except as provided
The revisions and additions read as drugs means instances in which —
in paragraph (a)(7) of this section, a Part
follows: (1) There is a need for simultaneous D sponsor (as defined in § 423.4 of this
use of drugs within a drug grouping part) must have a contracted pharmacy
§ 423.44 Involuntary disenrollment by the
PDP.
because such drugs work in network consisting of retail pharmacies
combination with each other; or sufficient to ensure that, for
* * * * *
(2) There is a strong likelihood of beneficiaries residing in each State in a
(d) * * *
sequential use of drugs within a class or PDP sponsor’s service area (as defined
(1) * * *
category within a short period of time in § 423.112(a) of this part), each State
(iii) The PDP sponsor provides the
due to the unique effects the drugs have in a regional MA-organization’s service
individual with a grace period, that is,
on various individuals. area (as defined in § 422.2 of this part),
an opportunity to pay past due
premiums in full. The grace period * * * * * the entire service area of a local MA
must— 62. Section 423.104 is amended by— organization (as defined in § 422.2 of
(A) Be at least 2 months; and A. Revising paragraph (b). this chapter) or the entire geographic
(B) Begin on the first day of the month B. Adding a new paragraph (d)(2)(iii). area of a cost contract (as defined in
for which the premium is unpaid. The revision and addition read as § 417.401 of this chapter) all of the
* * * * * follows: following requirements are satisfied:
(i) At least 90 percent of Medicare
(5) * * * § 423.104 Requirements related to beneficiaries, on average, in urban areas
(ii) Special rule. If the individual has qualified prescription drug coverage. served by the Part D sponsor live within
not moved from the PDP service area,
* * * * * 2 miles of a network pharmacy that is
but has been absent from the service
(b) Availability of prescription drug a retail pharmacy or a pharmacy
area for more than 12 consecutive
plan. A PDP sponsor offering a described under paragraph (a)(2) of this
months, the PDP sponsor must disenroll
prescription drug plan must offer the section.
the individual from the plan effective on
plan— (ii) At least 90 percent of Medicare
the first day of the 13th month after the
(1) To all Part D eligible beneficiaries beneficiaries, on average, in suburban
individual left the service area.
residing in the plan’s service area; and areas served by the Part D sponsor live
* * * * * within 5 miles of a network pharmacy
(2) At a uniform premium, with
uniform benefits and level of cost- that is a retail pharmacy or a pharmacy
Subpart C—Benefits and Beneficiary
sharing throughout the plan’s service. described under paragraph (a)(2) of this
Protections
* * * * * section.
61. Section 423.100 is amended by (iii) At least 70 percent of Medicare
(d) * * *
adding the definitions of ‘‘Drug category beneficiaries, on average, in rural areas
(2) * * * served by the Part D sponsor live within

or class,’’ ‘‘Major or life threatening
(iii) Tiered cost sharing under 15 miles of a network pharmacy that is
clinical consequences,’’ ‘‘Multiple
paragraph (d)(2)(ii) of this section may a retail pharmacy or a pharmacy
drugs,’’ ‘‘Restricted access,’’ and
not exceed levels annually determined described under paragraph (a)(2) of this
‘‘Significant need for access to multiple
by CMS to be discriminatory. section.
drugs’’ to read as follows:
* * * * * (2) Applicability of some non-retail
§ 423.100 Definitions. 63. Section 423.112 is amended by pharmacies to standards for convenient
* * * * * revising paragraph (a) to read as follows: access. Part D sponsors may count
I/T/U pharmacies and pharmacies (i) An MA organization or cost applicable to that covered Part D drug
operated by Federally Qualified Health contract (as described in section 1876(h) at the network pharmacy that is a mail-
Centers and Rural Health Centers of the Act) that provides its enrollees order pharmacy.
toward the standards for convenient with access to covered Part D drugs (b) * * *
access to network pharmacies in through pharmacies owned and (1) * * *
paragraph (a)(1) of this section. operated by the MA organization or cost (ix) Reviews and approves all clinical
(3) Access to non-retail pharmacies. A contract, provided the organization’s or prior authorization criteria, step therapy
Part D sponsor’s contracted pharmacy plan’s pharmacy network meets the protocols, and quantity limit restrictions
network may be supplemented by non- access standard set forth— applied to each covered Part D drug.
retail pharmacies, including pharmacies (A) At § 422.112 of this chapter for an * * * * *
offering home delivery via mail-order MA organization; or (2) * * *
and institutional pharmacies, provided (B) At § 417.416(e) of this chapter for (v) Beginning with contract year 2011,
the requirements of paragraph (a)(1) of a cost contract. except as provided in paragraph
this section are met. (ii) An MA organization offering a (b)(2)(vi) of this section, a Part D
(4) Access to home infusion private fee-for-service plan described in sponsor’s formulary will include all Part
pharmacies. A Part D sponsor’s § 422.4 of this chapter that— D drugs in a category or class for which
contracted pharmacy network must (A) Offers qualified prescription drug both of the following apply:
provide adequate access to home coverage; and (A) Restricted access to the drugs in
(B) Provides plan enrollees with the category or class would have major
infusion pharmacies consistent with
access to covered Part D drugs or life threatening clinical consequences
written policy guidelines and other
dispensed at all pharmacies, without for individuals who have a disease or
CMS instructions. A Part D plan must
regard to whether they are contracted disorder treated by drugs in such
ensure that such network pharmacies, at
network pharmacies and without category or class; and
a minimum meet all the following
charging cost-sharing in excess of that (B) There is a significant need for
requirements:
described in § 423.104(d)(2) and (d)(5). such individuals to have access to
(i) Are capable of delivering home- (8) Pharmacy network contracting
infused drugs in a form that can be multiple drugs within a category or
requirements. In establishing its class due to unique chemical actions
administered in a clinically appropriate contracted pharmacy network, a Part D
fashion. and pharmacological effects of the drugs
sponsor offering qualified prescription within a category or class.
(ii) Are capable of providing infusible drug coverage— (vi) Exceptions to paragraph (b)(2)(v)
Part D drugs for both short-term acute (i) Must contract with any pharmacy of this section are as follows:
care and long-term chronic care that meets the Part D sponsor’s standard (A) Drug products that are rated as
therapies. terms and conditions; and therapeutically equivalent (under the
(iii) Ensure that the professional (ii) May not require a pharmacy to Food and Drug Administration’s most
services and ancillary supplies accept insurance risk as a condition of recent publication of ‘‘Approved Drug
necessary for home infusion therapy are participation in the Part D sponsor’s Products with Therapeutic Equivalence
in place before dispensing Part D home contracted pharmacy network. Evaluations,’’ also known as the Orange
infusion drugs. (9) Differential cost-sharing for Book).
(iv) Provide delivery of home infusion preferred pharmacies. A Part D sponsor (B) Utilization management processes
drugs within 24 hours of discharge from offering a Part D plan that provides that limit the quantity of drugs due to
an acute care setting, or later if so coverage other than defined standard safety.
prescribed. coverage may reduce copayments or (C) Other drugs that CMS specifies
(5) Access to long-term care coinsurance for covered Part D drugs through a process that is based upon
pharmacies. A Part D sponsor must offer obtained through a preferred pharmacy scientific evidence and medical
standard contracting terms and relative to the copayments or standards of practice (and, in the case of
conditions, including performance and coinsurance applicable for such drugs antiretroviral medications, is consistent
service criteria for long-term care when obtained through a non-preferred with the Department of Health and
pharmacies that CMS specifies, to all pharmacy. Such differentials are taken Human Services Guidelines for the Use
long-term care pharmacies in its service into account in determining whether the of Antiretroviral Agents in HIV–1–
area. The sponsor must provide requirements under § 423.104(d)(2) and Infected Adults and Adolescents) and
convenient access to long-term care (d)(5) and § 423.104(e) are met. Any which permits public notice and
pharmacies consistent with written cost-sharing reduction under this comment.
policy guidelines and other CMS section must not increase CMS (3) Transition process. A Part D
instructions. payments to the Part D plan under sponsor must provide for an appropriate
(6) Access to I/T/U pharmacies. A § 423.329. transition process for enrollees
Part D sponsor must offer standard (10) Level playing field between mail- prescribed Part D drugs that are not on
contracting terms and conditions order and network pharmacies. A Part D its Part D plan’s formulary (including
conforming to the model addendum that sponsor must permit its Part D plan Part D drugs that are on a sponsor’s
CMS develops, to all I/T/U pharmacies enrollees to receive benefits, which may formulary but require prior
in its service area. The sponsor must include a 90-day supply of covered Part authorization or step therapy under a
provide convenient access to I/T/U D drugs, at any of its network plan’s utilization management rules).
pharmacies consistent with written pharmacies that are retail pharmacies. A The transition process must:
policy guidelines and other CMS Part D sponsor may require an enrollee (i) Be applicable to all of the
instructions. obtaining a covered Part D drug at a following:
(7) Waiver of pharmacy access network pharmacy that is a retail (A) New enrollees into Part D plans
requirements. CMS waives the pharmacy to pay any higher cost-sharing following the annual coordinated
requirements under paragraph (a)(1) of applicable to that covered Part D drug election period.
this section in the case of either of the at the network pharmacy that is a retail (B) Newly eligible Medicare enrollees
following: pharmacy instead of the cost-sharing from other coverage.
(C) Individuals who switch from one (4) A part D sponsor must assign a (d) * * *
plan to another after the start of the unique— (1) * * *
contract year. (i) Part D BIN or RxBIN and Part D (v) Must enroll targeted beneficiaries
(D) Current enrollees remaining in the processor control number (RxPCN) using an opt-out method of enrollment
plan affected by formulary changes. combination to its Medicare line of only.
(ii) Ensure access to a temporary business; and (vi) Must target beneficiaries for
supply of drugs within the first 90 days (ii) Part D cardholder identification enrollment in the MTMP at least
of coverage under a new plan. This 90- number (RxID) to each Medicare Part D quarterly during each plan year.
day timeframe applies to retail, home enrollee to clearly identify Medicare (vii) Must offer a minimum level of
infusion, long-term care and mail-order Part D beneficiaries. medication therapy management
pharmacies, 65. Section 423.128 is amended by services for each beneficiary enrolled in
(iii) Ensure the provision of a adding a new paragraph (f) to read as the MTMP that includes all of the
temporary fill when an enrollee requests follows: following:
a fill of a non-formulary drug during the (A) Interventions for both
time period specified in paragraph (ii) of § 423.128 Dissemination of Part D plan beneficiaries and prescribers.
this paragraph (including Part D drugs information. (B) Annual comprehensive
that are on a plan’s formulary but * * * * * medication reviews with written
require prior authorization or step (f) Disclosure requirements. CMS may summaries. The comprehensive medical
therapy under a plan’s utilization require a Part D plan sponsor to disclose review must include an interactive,
management rules). to its enrollees or potential enrollees, person-to-person consultation
(A) In the outpatient setting, the one- the Part D plan sponsor’s performance performed by a pharmacist or other
time, temporary supply of non- and contract compliance deficiencies in qualified provider unless the beneficiary
formulary Part D drugs (including Part a manner specified by CMS. is in a long-term care setting.
D drugs that are on a sponsor’s 66. Section 423.132 is amended by— (C) Quarterly targeted medication
formulary but require prior A. Revising the introductory text of reviews with follow-up interventions
authorization or step therapy under a paragraph c. when necessary.
sponsor’s utilization management rules) B. In paragraphs (c)(2) and (c)(3), (2) Targeted beneficiaries. Targeted
must be for at least 30 days of removing the ‘‘;’’ and adding a ‘‘.’’ in its beneficiaries for the MTMP described in
medication, unless the prescription is place. paragraph (d)(1) of this section are
written by a prescriber for less than 30 C. In paragraph (c)(4), removing ‘‘; enrollees in the sponsor’s Part D plan
days and requires the Part D sponsor to and’’ and adding a ‘‘.’’ in its place. who—
allow multiple fills to provide up to a D. Redesignating paragraph (c)(5) as (i) Have multiple chronic diseases,
total of 30 days of medication. (c)(6). with three chronic diseases being the
(B) In the long-term care setting, the E. Adding a new paragraph (c)(5). maximum number a Part D plan sponsor
temporary supply of non-formulary Part F. Revising paragraph (d). may require for targeted enrollment;
D drugs (including Part D drugs that are The revisions and additions read as (ii) Are taking multiple Part D drugs,
on a sponsor’s formulary but require follows: with eight Part D drugs being the
prior authorization or step therapy maximum number of drugs a Part D
§ 423.132 Public disclosure of plan sponsor may require for targeted
under a sponsor’s utilization pharmaceutical prices for equivalent drugs.
management rules) must be for up to 90 enrollment; and
* * * * * (iii) Are likely to incur costs for
days in 31-day supply increments
(c) Waiver of public disclosure covered Part D drugs that exceed the
(unless the prescription is written for
requirement. CMS waives the initial coverage limit for the Part D
less than 31 days).
(iv) Ensure written notice is provided requirement under paragraph (a) of this defined standard benefit for the
to each affected enrollee within 3 section in any of the following cases: applicable Part D plan year.
business days of the temporary fill. * * * * * * * * * *
(v) Ensure that reasonable efforts are (5) A long-term care network 68. Section 423.156 is revised to read
made to notify prescribers of affected pharmacy. as follows:
enrollees who receive a transition notice (d) Modification of timing
§ 423.156 Consumer satisfaction surveys.
under paragraph (b)(3)(iv) of this requirement. CMS modifies the
requirement under paragraph (b) of this Part D contracts with 600 or more
section.
(c) * * * section under circumstances where enrollees as of July of the prior year
(2) When processing Part D claims, a CMS deems compliance with this must contract with approved Medicare
Part D sponsor or its intermediary must requirement to be impossible or Consumer Assessment of Healthcare
comply with the electronic transaction impracticable. Providers and Systems (CAHPS) survey
standards established by 45 CFR vendors to conduct the Medicare
162.1102. CMS will issue guidance on Subpart D—Cost Control and Quality CAHPS satisfaction survey of Part D
the use of conditional fields within such Improvement Requirements plan enrollees in accordance with CMS
standards. specifications and submit the survey
67. Section 423.153 is amended by— data to CMS.
(3) A Part D sponsor must require its A. Adding paragraphs (d)(1)(v)
network pharmacies to submit claims to 69. Section 423.165 is amended by—
through (vii). A. Removing paragraph (b)(4).
the Part D sponsor or its intermediary B. Revising paragraph (d)(2). B. Revising paragraph (f).
whenever the card described in The additions and revisions read as The revision reads as follows:
paragraph (c)(1) of this section is follows:
presented or on file at the pharmacy § 423.165 Compliance deemed on the
unless the enrollee expressly requests § 423.153 Drug utilization management, basis of accreditation.
that a particular claim not be submitted quality assurance, and medication therapy * * * * *
to the Part D sponsor or its management programs (MTMPs). (f) Authority. Nothing in this limits
intermediary. * * * * * CMS’ authority under subparts K and O
of this part, including, but not limited Subpart G—Payments to Part D Plan amounts being held for payment, by
to the ability to impose intermediate Sponsors for Qualified Prescription other individuals or entities. Part D
sanctions, civil money penalties, and Drug Coverage sponsors must have systems to track and
terminate a contract with a Part D plan report adjustment transactions and to
sponsor. § 423.308 [Amended] support all of the following:
72. Section 423.308 is amended in (1) Adjustments involving payments
Subpart F—Submission of Bids and paragraph (1) of the definition of ‘‘gross by other plans and programs providing
Monthly Beneficiary Premiums: Plan covered prescription drug costs’’ by prescription drug coverage have been
Approval removing the phrase ‘‘The share of made.
70. Section 423.265 is amended by negotiated prices’’ and adding in its (2) Reimbursements for excess cost-
revising paragraph (b) to read as follows: place ‘‘The share of actual costs’’. sharing and premiums for low-income
subsidy eligible individuals have been
§ 423.265 Submission of bids and related Subpart J—Coordination Under Part D processed in accordance with the
information. Plans With Other Prescription Drug requirements in § 423.800(c).
* * * * * Coverage (3) Recoveries of erroneous payments
(b) Bid submission. (1) General. Not 73. Section 423.462 is amended by— for enrollees as specified in
later than the first Monday in June, each A. Redesignating the existing text as § 423.464(f)(4) have been sought.
potential Part D sponsor must submit paragraph (a). 75. A new § 423.466 is added to
bids and supplemental information B. Adding a paragraph heading for subpart J to read as follows:
described in this section for each Part D paragraph (a) and new paragraph (b).
plan it intends to offer in the subsequent The additions read as follows: § 423.466 Timeframes for coordination of
calendar year. benefits.
(2) Substantial differences between § 423.462 Medicare secondary payer (a) Retroactive claims adjustments,
bids. Potential Part D sponsors’ bid procedures. underpayment refunds, and
submissions must reflect differences in * * * * * overpayment recoveries. Whenever a
benefit packages and plan costs that (a) General rule. * * * sponsor receives information that
CMS determines to represent substantial (b) Reporting requirements. A Part D necessitates a retroactive claims
differences relative to a sponsor’s other sponsor must report credible new or adjustment, the sponsor must process
bid submissions. In order to be changed primary payer information to the adjustment and issue refunds or
considered ‘‘substantially different,’’ the CMS Coordination of Benefits recovery notices within 45 days of the
each bid must be significantly different Contractor in accordance with the sponsor’s receipt of complete
from the sponsor’s other bids with processes and timeframes specified by information regarding claims
respect to beneficiary out-of-pocket CMS. adjustment.
costs and formulary structures. 74. Section 423.464 is amended by (b) Coordination of benefits. Part D
* * * * * adding new paragraphs (a)(3), (e)(1)(vi), sponsors must coordinate benefits with
71. Section 423.272 is amended by and (g) to read as follows: SPAPs, other entities providing
adding a new paragraph (b)(3) to read as § 423.464 Coordination of benefits with prescription drug coverage,
follows: other providers of prescription drug beneficiaries, and others paying on the
§ 423.272 Review and negotiation of bid coverage. beneficiaries’ behalf for a period not to
and approval of plans submitted by (a) * * * exceed 3 years from the date on which
potential Part D sponsors. (3) Retroactive claims adjustments, the prescription for a covered Part D
* * * * * underpayment reimbursements, and drug was filled.
(b) * * * overpayment recoveries as described in
(3) Substantial differences between paragraph (g) of this section and Subpart K—Application Procedures
bids—(i) General. CMS approves a bid § 423.466(a) of this subpart. and Contracts With PDP Sponsors
only if it finds that the benefit package * * * * * 76. Section 423.502 is amended by—
and plan costs represented by that bid (e) * * * A. Redesignating paragraphs (b)
are substantially different as provided (1) * * * through (d) as (c) through (e),
under § 423.265 (b)(2) of this subpart (vi) Does not engage in midyear plan respectively
from the benefit package represented by or noncalendar year plan enrollment B. Adding a new paragraph (b).
another bid submitted by the same Part changes on behalf of a substantial C. Revising newly redesignated
D sponsor. number of its members when authorized paragraph (c)(1) introductory text and
(ii) Transition period for PDP to do so on the beneficiary’s behalf. paragraph (c)(2).
sponsors with new acquisitions. After a * * * * * The addition and revisions reads as
2-year transition period, as determined (g) Responsibility to account for other follows:
by CMS, CMS approves a bid offered by providers of prescription drug coverage
a PDP sponsor (or by a parent when a retroactive claims adjustment § 423.502 Application requirements.
organization to that PDP sponsor) that creates an overpayment or * * * * *
recently purchased (or otherwise underpayment. When a Part D sponsor (b) Completion of a notice of intent to
acquired or merged with) another Part D makes a retroactive claims adjustment, apply.
sponsor if it finds that the benefit the sponsor has the responsibility to (1) An organization submitting an
package and plan costs represented by account for SPAPs and other entities application under this section for a
that bid are substantially different from providing prescription drug coverage in particular contract year must first
any benefit package and plan costs reconciling the claims adjustments that submit a completed Notice of Intent to
represented by another bid submitted by create overpayments or underpayments. Apply by the date established by CMS.
the same Part D sponsor (or parent In carrying out these reimbursements CMS will not accept applications from
organization to that Part D sponsor). and recoveries, Part D sponsors must organizations that do not submit a
* * * * * also account for payments made, and for timely Notice of Intent to Apply.
(2) Submitting a Notice of Intent to (2) * * * who report directly to the Part D plan
Apply does not bind that organization to (iii) If CMS does not receive a revised sponsor’s chief executive or other senior
submit an application for the applicable application within 10 days from the administrator.
contract year. date of the notice, or if after timely (1) The compliance officer, vested
(c) * * * submission of a revised application, with the day-to-day operations of the
(1) In order to obtain a determination CMS still finds the applicant does not compliance program, must be an
on whether it meets the requirements to appear qualified to contract as a Part D employee of the Part D plan sponsor.
become a Part D plan sponsor, an entity, plan sponsor or has not provided (2) The compliance officer and the
or an individual authorized to act for enough information to allow CMS to compliance committee must
the entity (the applicant), must fully evaluate the application, CMS denies periodically report directly to the
complete all parts of a certified the application. governing body of the Part D plan
application in the form and manner (3) * * * sponsor on the activities and status of
required by CMS, including the (iii) The applicant’s right to request a the compliance program, including
following: hearing in accordance with the issues identified, investigated, and
* * * * * procedures specified in subpart N of resolved by the compliance program.
(2) The authorized individual must this part. (3) The governing body of the Part D
describe thoroughly how the entity is 78. Section 423.504 is amended by— plan sponsor must be knowledgeable
qualified to meet the all requirements A. Revising paragraph (b)(4)(vi). about the content and operation of the
described in this part. B. Redesignating paragraph (b)(6) as compliance program and must exercise
* * * * * paragraph (b)(7). reasonable oversight with respect to the
77. Section 423.503 is amended by— C. Adding a new paragraph (b)(6). implementation and effectiveness of the
A. Revising paragraphs (a)(1), (a)(2), The revisions and addition read as compliance programs.
and (b). follows: (C)(1) Each Part D plan sponsor must
B. Adding a new paragraph (c)(2)(iii). § 423.504 General provisions. establish, implement and provide
C. Revising paragraph (c)(3)(iii). effective training and education for its
D. Removing paragraph (d). * * * * *
employees including, the chief
The revisions and addition read as (b) * * *
(4) * * * executive and senior administrators or
follows: managers; governing body members;
(vi) Adopt and implement an effective
§ 423.503 Evaluation and determination compliance program, which must and first tier, downstream, and related
procedures for applications to be include measures that prevent, detect, entities.
determined qualified to act as a sponsor. and correct noncompliance with CMS’ (2) The training and education must
* * * * * program requirements as well as occur at a least annually and be a part
(a) * * * measures that prevent, detect, and of the orientation for new employees
(1) With the exception of evaluations correct fraud, waste, and abuse. The including, the chief executive and
conducted under paragraph (b) of this compliance program must, at a senior administrators or managers;
section, CMS evaluates an entity’s minimum, include the following core governing body members; and first tier,
application solely on the basis of requirements: downstream, and related entities.
information contained in the (A) Written policies, procedures, and (D) Establishment and
application itself and any additional standards of conduct that— implementation of effective lines of
information that CMS obtains through (1) Articulate the Part D plan communication, ensuring
on-site visits. sponsor’s commitment to comply with confidentiality, between the compliance
(2) After evaluating all relevant all applicable Federal and State officer, members of the compliance
information, CMS determines whether standards; committee, the Part D plan sponsor’s
the application meets all the (2) Describe compliance expectations employees, managers and governing
requirements described in this part. as embodied in the standards of body, and the Part D plan sponsor’s first
(b) Use of information from a current conduct; tier, downstream, and related entities.
or prior contract. If a Part D plan (3) Implement the operation of the Such lines of communication must be
sponsor fails during the 14 months compliance program; accessible to all and allow compliance
preceding the deadline established by (4) Provide guidance to employees issues to be reported including a
CMS for the submission of contract and others on dealing with potential method for anonymous and confidential
qualification applications (or in the case compliance issues; good faith reporting of potential
of a fallback entity, the previous 3-year (5) Identify how to communicate compliance issues as they are identified.
contract) to comply with the compliance issues to appropriate (E) Well-publicized disciplinary
requirements of the Part D program compliance personnel; standards through the implementation
under any current or prior contract with (6) Describe how potential of procedures which encourage good
CMS under title XVIII of the Act or fails compliance issues are investigated and faith participation in the compliance
to complete a corrective action plan resolved by the Part D plan sponsor; and program by all affected individuals.
during the 14 months preceding the (7) Include a policy of non- These standards must include policies
deadline established by CMS for the intimidation and non-retaliation for that—
submission of contract qualification good faith participation in the (1) Articulate expectations for
applications, CMS may deny an compliance program, including but not reporting compliance issues and assist
application based on the applicant’s limited to reporting potential issues, in their resolution;
failure to comply with the requirements investigating issues, conducting self- (2) Identify non-compliance or
of the Part D program under any current evaluations, audits and remedial unethical behavior; and
or prior contract with CMS even if the actions, and reporting to appropriate (3) Provide for timely, consistent, and
applicant currently meets all of the officials. effective enforcement of the standards
requirements of this part. (B) The designation of a compliance when non-compliance or unethical
(c) * * * officer and a compliance committee behavior is determined.
(F) Establishment and implementation (2) * * * (A) Provide a CMS approved written
of an effective system for routine (i) HHS, the Comptroller General, or description of alternative PDP plan
monitoring and identification of their designees have the right to audit, options available for obtaining qualified
compliance risks. The system should evaluate, and inspect any books, prescription drug coverage within the
include internal monitoring and audits contracts, computer or other electronic beneficiaries’ region.
and, as appropriate, external audits, to systems, including medical records and (B) Place outbound calls to all affected
evaluate the Part D plan sponsors, documentation of the first tier, enrollees to ensure beneficiaries know
including first tier entities’, compliance downstream, and related to CMS’ who to contact to learn about their
with CMS requirements and the overall contract with the Part D sponsor. enrollment options.
effectiveness of the compliance * * * * * * * * * *
program. (m)(1) * * * (b) * * *
(G) Establishment and (iii) * * * (1) * * *
implementation of procedures and a (C) Plan identifier elements on the (iii) The contract must be nonrenewed
system for promptly responding to claim are encrypted or unavailable for as to an individual PDP if that plan does
compliance issues as they are raised, release to external entities with the not have a sufficient number of
investigating potential compliance exception of HHS grantees that CMS enrollees to establish that it is a viable
problems as identified in the course of determines meet all of the following independent plan option.
self-evaluations and audits, correcting (2) * * *
criteria: (ii) To each of the Part D plan
such problems promptly and thoroughly (1) The plan identifier is essential to
to reduce the potential for recurrence, sponsor’s Medicare enrollees by mail at
the study. least 90 calendar days before the date on
and ensure ongoing compliance with (2) The study is key to the mission of
CMS requirements. which the nonrenewal is effective, or at
the sponsoring agency. the conclusion of the appeals process if
* * * * * (3) The study provides significant applicable.
(6) Not have terminated a contract by benefit to the Medicare program.
mutual consent under which, as a (4) The requestor attests that any * * * * *
(3) Opportunity to develop and
condition of the consent, the Part D plan public findings or publications will not
implement a corrective action plan. (i)
sponsor agreed that it was not eligible identify plans.
Before providing a notice of intent of
to apply for new contracts or service * * * * * nonrenewal of the contract, CMS will
area expansions for a period up to 2 (n)(1) CMS may determine that a Part provide the Part D plan sponsor with a
years per § 423.508(e) of this subpart. D plan sponsor is out of compliance notice specifying the deficiencies and
* * * * * with a Part D requirement when the reasonable opportunity to develop and
79. Section 423.505 is amended by— sponsor fails to meet performance implement a corrective action plan to
A. Redesignating paragraph (e)(1)(ii) standards articulated in the Part D correct the deficiencies that form the
and (e)(1)(iii) as paragraph (e)(1)(iii) and statutes, regulations, or guidance. basis for the determination to non-
(e)(1)(iv), respectively. (2) If CMS has not already articulated renew the contract.
B. Adding a new paragraph (e)(1)(ii). a measure for determining (ii) CMS affords the Part D plan
C. Revising newly redesignated noncompliance, CMS may determine sponsor at least 30 calendar days in
paragraph (e)(1)(iii). that a Part D sponsor is out of which to develop and implement a
D. Revising paragraph (f)(3) compliance when its performance corrective action plan to correct the
introductory text. represents an outlier relative to the deficiencies that formed the basis for the
E. Revising paragraphs (i)(2)(i) and performance of other Part D sponsors. determination to nonrenew the contract.
(m)(1)(iii)(C). 80. Section 423.507 is amended by— (iii) The Part D plan sponsor is solely
F. Add a new paragraph (n). A. Revising paragraph (a)(2)(ii). responsible for the identification,
The additions and revisions read as B. Removing paragraph (a)(2)(iii). development, and implementation of its
follows: C. Adding a new paragraph (b)(1)(iii). corrective action plan and for
§ 423.505 Contract provisions. D. Revising paragraph (b)(2)(ii). demonstrating to CMS that the
E. Removing (b)(2)(iii). underlying deficiencies have been
* * * * *
F. Redesignating paragraph (b)(2)(iv) corrected within the time period
(e) * * *
as (b)(2)(iii). specified by CMS in the notice
(1) * * *
G. In newly redesignated paragraph requesting corrective action.
(ii) Compliance with CMS
(b)(2)(iii), removing the reference * * * * *
requirements for maintaining the
‘‘paragraphs (b)(2)(ii) and (iii) of this 81. Section 423.508 is amended by
privacy and security of personal health
section’’ and add the reference adding a new paragraph (e) to read as
information and other personally
‘‘paragraph (b)(2)(ii) of this section’’ in follows:
identifiable information of Medicare
its place.
enrollees; § 423.508 Modification or termination of
H. Revising paragraph (b)(3).
(iii) The facilities of the Part D contract by mutual consent.
The revisions and addition read as
sponsor to include computer and other * * * * *
follows:
electronic systems; and (e) Agreement to limit new Part D
* * * * * § 423.507 Nonrenewal of a contract. applications. As a condition of the
(f) * * * (a) * * * consent to a mutual termination, CMS

(3) All data elements included in all (2) * * * will require, as a provision of the
its drug claims for purposes deemed (ii) Each Medicare enrollee by mail at termination agreement language
necessary and appropriate by the least 90 calendar days before the date on prohibiting the Part D plan sponsor from
Secretary, including, but not limited to which the nonrenewal is effective. The applying for new contracts or service
the following: sponsor must also provide information area expansions for a period up to 2
* * * * * about alternative enrollment options by years, absent circumstances warranting
(i) * * * doing one or more of the following: special consideration.
82. Amend § 423.509 by revising (1) General. (i) Before providing a (2) CMS will not recognize or allow a
paragraphs (a), introductory text of notice of intent to terminate the sale or transfer that consists solely of the
paragraph (b), (b)(2), and (c) to read as contract, CMS will provide the Part D sale or transfer of individual
follows: plan sponsor with a notice specifying beneficiaries, groups of beneficiaries
the deficiencies and reasonable enrolled in a pharmacy benefit package,
§ 423.509 Termination of contract by CMS. opportunity to develop and implement or one contract if the sponsor holds
(a) Termination by CMS. a corrective action plan to correct the more than one PDP contract.
(1) CMS may at any time terminate a deficiencies that form the basis for the
contract if CMS determines that the Part determination to terminate the contract. Subpart M—Grievances, Coverage
D plan sponsor meets any of the (ii) CMS will afford the Part D plan Determinations, and Appeals
following: sponsor at least 30 calendar days in
(i) Has failed substantially to carry out 85. Section 423.568 is revised to read
which to develop and implement a
the contract. as follows:
corrective action plan to correct the
(ii) Is carrying out the contract in a deficiencies that formed the basis for the § 423.568 Standard timeframe and notice
manner that is inconsistent with the determination to terminate the contract. requirements for coverage determinations.
efficient and effective administration of (iii) The Part D plan sponsor is solely (a) Method and place for filing a
this part. responsible for the identification, request. An enrollee must ask for a
(iii) No longer substantially meets the development, and implementation of its standard coverage determination by
applicable conditions of this part. corrective action plan and for making a request with the Part D plan
(2) CMS may determine, in demonstrating to CMS that the sponsor in accordance with the
accordance with paragraph (a)(1) of this underlying deficiencies have been following:
section, that a basis exists to terminate corrected within the time period (1) Except as specified in paragraph
a Part D sponsor’s contract if— specified by CMS in the notice (a)(2) of this section, the request may be
(i) The Part D plan sponsor fails to requesting corrective action. made orally or in writing..
comply with any of the regulatory (2) Exceptions. If CMS determines (2) Requests for payment must be
requirements contained in this part. that a delay in termination, resulting made in writing (unless the Part D plan
(ii) The Part D plan sponsor fails to from compliance with the procedures sponsor has implemented a voluntary
meet CMS performance requirements in provided in this part prior to policy of accepting oral payment
carrying out the regulatory requirements termination, would pose an imminent requests).
contained in this part, including, but and serious risk to the health of the (b) Timeframe for requests for drug
not limited to, when CMS determines individuals enrolled with the Part D benefits. When a party makes a request
that an analysis of data related to the plan sponsor, the Part D plan sponsor for a drug benefit, the Part D plan
sponsor’s performance indicates it is an will not be provided with an sponsor must notify the enrollee (and
outlier relative to that of other sponsors; opportunity to develop and implement the prescribing physician or other
or. a corrective action plan prior to prescriber involved, as appropriate) of
(iii) There is credible evidence to termination. its determination as expeditiously as the
show that the Part D plan sponsor has * * * * * enrollee’s health condition requires, but
committed or participated in false, 83. Section 423.514 is amended by— no later than 72 hours after receipt of
fraudulent, or abusive activities A. Revising the section heading. the request, or, for an exceptions
affecting the Medicare, Medicaid, or B. Adding a new paragraph (g).
request, the physician’s or other
other State or Federal health care The revision and addition to read as
prescriber’s supporting statement.
programs, including submission of false follows:
(c) Timeframe for requests for
or fraudulent data. § 423.514 Validation of Part D reporting payment. When a party makes a request
(b) Notice. If CMS decides to requirements. for payment, the Part D plan sponsor
terminate a contract it gives notice of must notify the enrollee of its
* * * * *
the termination as follows: (g) Data validation. Each Part D determination and make payment (when
* * * * * sponsor must subject information applicable) no later than 14 calendar
(2) Expedited termination of contract collected under paragraph (a) of this days after receipt of the request.
by CMS. (i) If CMS determines that a section to a yearly independent audit to (d) Written notice for favorable
delay in termination, resulting from determine its reliability, validity, decisions by a Part D plan sponsor. If a
compliance with the procedures completeness, and comparability in Part D plan sponsor makes a completely
provided in this part prior to accordance with specifications favorable decision under paragraph (b)
termination, would pose an imminent developed by CMS. of this section, it must give the enrollee
and serious risk to the health of the written notice of the determination. The
individuals enrolled with the Part D Subpart L—Effect of Change of initial notice may be provided orally, so
plan sponsor the effective date of Ownership or Leasing of Facilities long as a written follow-up notice is
termination will be specified, in writing, During Term of Contract sent within 3 calendar days of the oral
by CMS. notification.
(ii) If a termination in is effective in (e) Form and content of the approval
adding a new paragraph (g) to read as
the middle of a month, CMS has the notice. The notice of any approval
follows:
right to recover the prorated share of the under paragraph (d) of this section must
capitation payments made to the Part D § 423.551 General provisions. explain the conditions of the approval
plan sponsor covering the period of the * * * * * in a readable and understandable form.
month following the contract (g) Sale of beneficiaries not permitted. (f) Written notice for denials by a Part
termination. (1) CMS will only recognize the sale or D plan sponsor. If a Part D plan sponsor
* * * * * transfer of an organization’s entire PDP decides to deny a drug benefit, in whole
(c) Opportunity to develop and line of business, consisting of all PDP or in part, it must give the enrollee
implement a corrective action plan. contracts held by the PDP sponsor. written notice of the determination.
(g) Form and content of the denial the notice must explain the conditions before the anticipated effective date of
notice. The notice of any denial under of the approval in a readable and the termination.
paragraph (f) of this section must meet understandable form. (2) Exception. For terminations where
the following requirements: (2) If the determination is not CMS determines that a delay in
(1) Use approved notice language in a completely favorable to the enrollee, the termination, resulting from compliance
readable and understandable form. notice must— with the procedures provided in this
(2) State the specific reasons for the (i) Use approved language in a part prior to termination, would pose an
denial. readable and understandable form; imminent and serious risk to the health
(i) For drug coverage denials, describe (ii) State the specific reasons for the of the individuals enrolled with the Part
both the standard and expedited denial; D plan sponsor, CMS notifies the Part D
redetermination processes, including (iii) Inform the enrollee of his or her plan sponsor of the date that it will
the enrollee’s right to, and conditions right to a redetermination; terminate the Part D plan sponsor’s
for, obtaining an expedited (iv) Describe— contract.
redetermination and the rest of the (A) Both the standard and expedited * * * * *
appeals process. redetermination processes, including 90. Section 423.650 is revised to read
(ii) For payment denials, describe the the enrollee’s right to request an as follows:
standard redetermination process and expedited redetermination;
the rest of the appeals process. (B) Conditions for obtaining an § 423.650 Right to a hearing, burden of
(3) Inform the enrollee of his or her expedited redetermination; and proof, standard of proof, and standards of
right to a redetermination. (C) Other aspects of the appeal review.
(4) Comply with any other notice process. (a) Right to a hearing. The following
requirements specified by CMS. * * * * * parties are entitled to a hearing:
(h) Effect of failure to meet the 88. Section 423.590 is amended by— (1) A contract applicant that has been
adjudicatory timeframes. If the Part D A. Redesignating paragraph (d)(2) as determined to be unqualified to enter
plan sponsor fails to notify the enrollee paragraph (d)(3). into a contract with CMS under Part D
of its determination in the appropriate B. Adding a new paragraph (d)(2). of Title XVIII of the Act in accordance
timeframe under paragraphs (b) or (c) of C. Revising the introductory text of with § 423.502 and § 423.503 of this
this section, the failure constitutes an paragraph (g). part.
adverse coverage determination, and the D. Adding a new paragraph (h). (2) A Part D sponsor whose contract
plan sponsor must forward the The revisions and additions read as has been terminated under § 423.509 of
enrollee’s request to the IRE within 24 follows: this part.
hours of the expiration of the (3) A Part D sponsor whose contract
adjudication timeframe. § 423.590 Timeframes and responsibility has not been renewed in accordance
86. Section 423.570 is amended by for making redeterminations. with § 423.507 of this part.
revising paragraph (d)(1) to read as * * * * * (4) A Part D sponsor who has had an
follows: (d) * * * intermediate sanction imposed in
(2) Confirmation of oral notice. If the accordance with § 423.752(a) and (b) of
§ 423.570 Expediting certain coverage Part D plan sponsor first notifies an this part.
determinations. enrollee of an adverse or favorable (b) Burden of proof, standard of proof,
* * * * * expedited redetermination orally, it and standard of review at hearing.
(d) * * * must mail written confirmation to the (1) During a hearing to review a
(1) Make the determination within the enrollee within 3 calendar days of the contract determination as described at
72 hour timeframe established in oral notification. § 423.641(a) of this subpart, the
§ 423.568(b) for a standard applicant has the burden of proving by
* * * * *
determination. The 72 hour period a preponderance of the evidence that
(g) Form and content of an adverse
begins on the day the Part D plan CMS’ determination was inconsistent
redetermination notice. The notice of
sponsor receives the request for with the requirements of § 423.502 and
any adverse determination under
expedited determination, or, for an § 423.503 of this part.
paragraphs (a)(2), (b)(2), (d)(1) or (d)(2)
exceptions request, the physician’s or (2) During a hearing to review a
of this section must—
other prescriber’s supporting statement. contract determination as described at
* * * * * § 423.641(b) of this part, the Part D plan
* * * * * (h) Form and content of a completely
87. Section 423.572 is amended by sponsor has the burden of proving by a
favorable redetermination notice. The preponderance of the evidence that
revising paragraphs (b) and (c) to read notice of any completely favorable
as follows: CMS’ determination was inconsistent
determination under paragraphs (a)(1), with the requirements of § 423.507 of
§ 423.572 Timeframes and notice (d)(1) or (d)(2) of this section must this part.
requirements for expedited coverage explain the conditions of the approval (3) During a hearing to review a
determinations. in a readable and understandable form. contract determination as described at
* * * * * § 423.641(c) of this subpart, the Part D
(b) Confirmation of oral notice. If the Subpart N—Medicare Contract plan sponsor has the burden of proving
Part D plan sponsor first notifies an Determinations and Appeals by a preponderance of the evidence that
enrollee of an adverse or favorable 89. Section 423.642 is amended by CMS’ determination was inconsistent
expedited determination orally, it must revising paragraph (c) to read as follows: with the requirements of § 423.509 of
mail written confirmation to the this part.
enrollee within 3 calendar days of the § 423.642 Notice of contract determination. (4) During a hearing to review the
oral notification. * * * * * imposition of an intermediate sanction
(c) Content of the notice of expedited (c) CMS-initiated terminations—(1) as described at § 423.750 of this part, the
determination. (1) If the determination General rule. CMS mails notice to the Part D sponsor has the burden of
is completely favorable to the enrollee, Part D plan sponsor 90 calendar days proving by a preponderance of the
evidence that CMS’ determination was (2) The hearing officer may adjourn or § 423.668 Reopening of a contract
inconsistent with the requirements of postpone the hearing. determination or decision of a hearing
§ 423.752 of this part. officer or the Administrator.
(c)(1) The Part D plan sponsor or CMS
(c) Timing of favorable decision. may request an extension by filing a (a) Contract determination. * * *
Notice of any decision favorable to the written request no later than 5 calendar * * * * *
Part D sponsor appealing a days prior to the scheduled hearing.
determination that it is not qualified to Subpart O—Intermediate Sanctions
(2) When either the Part D plan
enter into a contract with CMS must be
sponsor or CMS requests an extension 98. Section 423.750 is amended by
issued by September 1 for the contract
the hearing officer will provide a one- revising paragraph (a) to read as follows:
in question to be effective on January 1
time 15-calendar day extension.
of the following year. § 423.750 Types of intermediate sanctions
(3) Additional extensions may be and civil money penalties.
* * * * *
91. Section 423.651 is amended by granted at the discretion of the hearing
(a) The following intermediate
revising paragraphs (a) and (b) to read officer.
sanctions may be imposed and will
as follows: 94. Section 423.658 is amended by continue in effect until CMS is satisfied
revising paragraph (d) to read as that the deficiencies that are the basis
§ 423.651 Request for hearing. follows: for the sanction determination have
(a) Method and place for filing a been corrected and are not likely to
request. (1) A request for a hearing must § 423.658 Conduct of hearing.
recur:
be made in writing and filed by an * * * * *
(1) Suspension of the Part D plan
authorized official of the contract (d) The Part D sponsor bears the sponsor’s enrollment of Medicare
applicant or Part D plan sponsor that burden of going forward and must first beneficiaries.
was the party to the determination present evidence and argument before (2) Suspension of payment to the Part
under the appeal. CMS presents its evidence and D plan sponsor for Medicare
(2) The request for the hearing must argument. beneficiaries enrolled after the date
be filed in accordance with the 95. Section 423.661 is revised to read CMS notifies the organization of the
requirements specified in the notice. as follows: intermediate sanction.
(b) Time for filing a request. A request (3) Suspension of all marketing
for a hearing must be filed within 15 § 423.661 Witnesses lists and documents.
activities to Medicare beneficiaries by a
calendar days after the receipt of the Witness lists and documents must be Part D plan sponsor.
notice of the contract determination or identified and exchanged at least 5
intermediate sanction. * * * * *
calendar days prior to the scheduled 99. Section 423.752 is amended by—
* * * * * hearing. A. Revising the paragraphs (a)
92. Section 423.652 is amended by introductory text, (a)(1), (a)(3), and
revising paragraph (b)(2) to read as (a)(4).
revising paragraphs (a) and (c) to read as
follows: B. In paragraph (c)(1), removing the
follows:
§ 423.652 Postponement of effective date cross-reference ‘‘423.509(a)(4)’’ and
§ 423.666 Review by the Administrator. adding the cross-reference
of a contract determination when a request
for a hearing is filed timely. (a) Request for review by ‘‘§ 422.509(a)(2)(iii) of this part’’ in its
* * * * * Administrator. CMS or a Part D plan place.
(b) * * * sponsor that has received a hearing C. In paragraph (c)(2)(ii), removing the
(2) If CMS determines that a delay in decision may request a review by the phrase ‘‘pursuant to 423.509(a)(4)’’ and
termination, resulting from compliance Administrator within 15 calendar days adding the phrase ‘‘under
with the procedures provided in this after receipt of the hearing decision as § 422.509(a)(2)(iii) of this part’’ in its
part prior to termination, would pose an provided under § 423.665(b) of this place.
imminent and serious risk to the health subpart. Both the Part D plan sponsor
§ 423.752 Basis for imposing intermediate
of individuals enrolled with the Part D and CMS may provide written sanctions and civil money penalties.
plan sponsor, the date of termination arguments to the Administrator for
will not be postponed if the Part D plan review. (a) All intermediate sanctions. For the
sponsor requests a hearing. violations listed in this paragraph (a),
* * * * * CMS may impose one or more of the
* * * * * (c) Notification of Administrator sanctions specified in § 423.750(a) of
93. Section 423.655 is revised to read determination. The Administrator this subpart on any Part D plan sponsor
as follows: notifies both parties of his or her with a contract. The Part D plan sponsor
§ 423.655 Time and place of hearing. determination regarding review of the may also be subject to other remedies
hearing decision within 30 calendar authorized under law.
(a) The hearing officer—
days after receipt of request for review. (1) Fails substantially to provide
(1) Fixes a time and place for the
If the Administrator declines to review medically necessary items and services
hearing, which is not to exceed 30
the hearing decision or the that are required (under law or under
calendar days after the receipt of request
Administrator does not make a the contract) to be provided to an
for the hearing;
determination regarding review within individual covered under the contract, if

(2) Sends written notice to the parties
30 calendar days, the decision of the the failure has adversely affected (or has
that informs the parties of the general
hearing officer is final. the substantial likelihood of adversely
and specific issues to be resolved, the
burden of proof, and information about * * * * * affecting) the individual.
the hearing procedure. 97. Section 423.668 is amended by * * * * *
(b)(1) The hearing officer may, on his revising the section heading and the (3) Acts to expel or refuses to re-enroll
or her own motion, change the time and paragraph heading for paragraph (a) to a beneficiary in violation of the
place of the hearing. read as follows: provisions of this part.
(4) Engages in any practice that would have been corrected and are not likely 103. Section 423.2262 is amended
reasonably be expected to have the to recur. by—
effect of denying or discouraging (A) If, following this time period, A. Revising paragraph (a)(1)(i).
enrollment (except as permitted by this CMS determines the deficiencies have
B. Adding new paragraphs (c) and (d)
part) by eligible individuals with the not been corrected or are likely to recur,
to read as follows:
organization whose medical condition the intermediate sanctions will remain
or history indicates a need for in effect until such time that CMS is § 423.2262 Review and distribution of
substantial future medical services. assured the deficiencies have been marketing materials.
* * * * * corrected and are not likely to recur. * * * * *
100. Section 423.756 is amended by— (B) The Part D plan sponsor does not (a) * * *
A. Revising paragraph (b). have a right to a hearing under
§ 423.650(a)(4) of this subpart to (1) * * *
B. Removing paragraph (c).
C. Redesignating paragraphs (d) challenge CMS’ determination to keep (i) At least 45 days (or 10 days if using
through (f) as paragraphs (c) through (e), the intermediate sanctions in effect. certain types of marketing materials that
respectively. * * * * * use, without modification, proposed
D. Revising the newly redesignated model language and format, including
paragraphs (c)(1) and (c)(3). Subpart P—Premium and Cost-Sharing standardized language and formatting,
The revisions read as follows: Subsidies for Low-Income Individuals as specified by CMS) before the date of
distribution, the Part D sponsor submits
§ 423.756 Procedures for imposing 101. Section 423.773 is amended by the material or form to CMS for review
intermediate sanctions and civil money revising paragraph (c)(2) to read as under the guidelines in § 423.2264 of
penalties. follows: this subpart; and
(b) Hearing. (1) The Part D plan
§ 423.773 Requirements for eligibility. * * * * *
sponsor may request a hearing before a
CMS hearing officer. * * * * * (c) Standardized model marketing
(2) A written request must be received (c) * * * materials. When specified by CMS,
by the designated CMS office within 15 (2) CMS notifies an individual treated organizations must use standardized
calendar days after the receipt of the as a full-subsidy eligible under this formats and language in model
notice. paragraph (c) that he or she does not materials.
(3) A request for a hearing under need to apply for the subsidies under (d) Current enrollee communication
§ 423.650 of this part does not delay the this subpart, and, at a minimum, is materials. Current enrollee
date specified by CMS when the deemed eligible for a full subsidy as communication materials may be
sanction becomes effective. follows: reviewed by CMS, which may upon
(4) The Part D plan sponsor must (i) For an individual deemed eligible review determine that such materials
follow the right to a hearing procedure between January 1 and June 30 of a must be modified, or may not longer be
as specified at § 423.650 through calendar year, the individual is deemed used.
§ 423.662 of this part. eligible for a full subsidy for the
(c) * * * remainder of the calendar year. PART 480—ACQUISITION,
(1) Effective date. The effective date of (ii) For an individual deemed eligible PROTECTION, AND DISCLOSURE
the sanction is the date specified by between July 1 and December 31 of a QUALITY IMPROVEMENT
CMS in the notice. calendar year, the individual is deemed ORGANIZATION REVIEW
* * * * * eligible for the remainder of the INFORMATION
(3) Duration of sanction. The sanction calendar year and the following
remains in effect until CMS is satisfied calendar year. 104. The authority citation for part
that the deficiencies that are the basis * * * * * 480 continues to read as follows:
for the sanction determination have Authority: Secs. 1102 and 1871 of the
been corrected and are not likely to Subpart V—Part D Marketing Social Security Act (42 U.S.C. 1302 and
recur. Requirements 1395hh).
(i) CMS may require that the Part D 102. Section 423.2260 is amended by 105. Section 480.140 is amended by
plan sponsor hire an independent revising paragraph (5)(vii) of the adding a new paragraph (g) to read as
auditor to provide CMS with additional definition ‘‘Marketing materials’’ to read follows.
information to determine if the as follows:
deficiencies that are the basis for the § 480.140 Disclosure of quality review
sanction determination have been § 423.2260 Definitions concerning study information.
corrected and are not likely to recur. marketing materials. * * * * *
The independent auditor must work in * * * * * (g) The QIO must disclose quality
accordance with CMS specifications and Marketing materials. * * * review study information with
must be willing to attest that a complete (5) * * * identifiers of MA plan beneficiaries,
and full independent review has been (vii) Membership activities. Current providers, practitioners, and services to
performed. enrollee communication materials CMS when CMS requests this
(ii) In instances where marketing or include any informational materials that information for the sole purpose of
enrollment or both intermediate are— conducting activities related to MA

sanctions have been imposed, CMS may (A) Targeted to current enrollees, and organizations as described in § 422.153
require a Part D plan sponsor to market (B) Customized or limited to a subset of this chapter.
or to accept enrollments or both for a of enrollees or apply to a specific
Authority: (Catalog of Federal Domestic
limited period of time in order to assist situation; or Assistance Program No. 93.773, Medicare—
CMS in making a determination as to (C) Cover claims processing or other Hospital Insurance; and Program No. 93.774,
whether the deficiencies that were the operational issues. Medicare—Supplementary Medical
bases for the intermediate sanctions * * * * * Insurance Program)
Dated: August 13, 2009.

Charlene Frizzera,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: September 1, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9–24756 Filed 10–9–09; 4:15 pm]
BILLING CODE 4120–01–P

DHHS CMS Rule Changes Medicare Strengthen Rules

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Thursday,

October 22, 2009

42 CFR Parts 417, 422, 423 et al.

Notice of Intent to Apply ......................................... Subpart K .. § 422.501 ................................... Subpart K .. § 423.502.

staff. Clearly, we do not intend to entities. compared through electronic mapping

in which individuals are incarcerated.

added). organization is sanctioned, or when a access to MA plan services, as required

TABLE 3—PROVISIONS TO ENSURE MEANINGFUL DIFFERENCES IN PLAN OFFERINGS

1. Bid Submissions—Ensuring We do not propose to specify in and B services out of network.

TABLE 4—IMPROVING PAYMENT RULES AND PROCESSES

TABLE 5—IMPROVE DATA COLLECTION FOR OVERSIGHT AND QUALITY ASSESSMENT

TABLE 6—REVISIONS TO IMPLEMENT NEW POLICY

TABLE 7—CLARIFICATIONS OF VARIOUS SPONSOR PROGRAM PARTICIPATION REQUIREMENTS

TABLE 7—CLARIFICATIONS OF VARIOUS SPONSOR PROGRAM PARTICIPATION REQUIREMENTS—Continued

d. Deemed Approval (§ 422.2266)

TABLE 8—CHANGES TO IMPLEMENT CORRECTIONS AND OTHER TECHNICAL CHANGES

require a Part D plan sponsor to self- burden is currently approved under

BILLING CODE 4120–01–C

TABLE 10—ESTIMATED COSTS AND SAVINGS BY PROVISION FOR CYS 2010–2015

2010 2011 2012 2013 2014 2015 2010–2015

RADV ............................................................................... $3.98 $3.98 $3.98 $3.98 $3.98 $3.98 $23.88

Total .............................................................................. 3.98 3.98 3.98 3.98 3.98 3.98 23.88

TABLE 13—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM CY 2010 TO CY 2015

Category Units discount rate

Annualized Monetized Transfers .................................................................. 2009 $¥204.45 $¥213.23 CYs 2010–2015

G. Conclusion savings on an annual basis. For the List of Subjects

Subpart L—Medicare Contract chapter must be read as references to

Medicare Consumer Assessment of § 422.254 Submission of bids.

become an MA organization and is (3) * * * (3) The governing body of the MA

follows: (a) Request for review by

subsidy eligible individuals enrolled in 1, 2006, enrollment is effective with the

(2) * * * served by the Part D sponsor live within

(f) * * * (a) * * * consent to a mutual termination, CMS

determination regarding review within individual covered under the contract, if

enrollment or both intermediate are— conducting activities related to MA

Dated: August 13, 2009.

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