[Federal Register Volume 74, Number 7 (Monday, January 12, 2009)]
[Rules and Regulations]
[Pages 1494-1549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-148]
[[Page 1493]]
-----------------------------------------------------------------------
Part IV
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
42 CFR Parts 422 and 423
Medicare Program; Medicare Advantage and Prescription Drug Benefit
Programs: Negotiated Pricing and Remaining Revisions; Final Rule;
Medicare Program; Prescription Drug Benefit Program: Payments to
Sponsors of Retiree Prescription Drug Plans; Proposed Rule
Federal Register / Vol. 74, No. 7 / Monday, January 12, 2009 / Rules
and Regulations
[[Page 1494]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 422 and 423
[CMS-4131-FC;-RIN 0938-AP24]
Medicare Program; Medicare Advantage and Prescription Drug
Benefit Programs: Negotiated Pricing and Remaining Revisions
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: This rule contains final regulations governing the Medicare
Advantage (MA) program (Part C) and prescription drug benefit program
(Part D), and interim final regulations governing certain aspects of
the Retiree Drug Subsidy (RDS) Program, and reflecting new statutory
definitions relating to Special Needs Plans under Part C. The final
regulations revising the Part C and Part D regulations include
provisions regarding medical savings account (MSA) plans, cost-sharing
for dual eligible enrollees in the MA program, the prescription drug
payment and novation processes in the Part D program, and the
enrollment and appeals processes for both programs. This final rule
with comment period also responds to public comments on the May 16,
2008 proposed rule and takes into account statutory revisions contained
in the Medicare Improvements for Patients and Providers Act of 2008
(MIPPA).
DATES: Effective Date: These regulations are effective on March 13,
2009.
Applicability Date: The revisions to the definition of ``negotiated
prices'' in Sec. 423.100, with the exception of the revision to
include a reference to ``other network dispensing provider,'' which is
applicable on March 13, 2009, are applicable for contract year 2010.
The revisions to the definitions of ``administrative costs,''
``allowable risk corridor costs,'' and ``gross covered prescription
drug costs'' in Sec. 423.308 are also applicable for contract year
2010.
Comment Period: We will consider comments on the provisions
concerning the new statutory definitions relating to special needs
plans (see section II.A.1 of the preamble to this final rule with
comment period) and those concerning negotiated prices and retained
rebates under the Retiree Drug Subsidy (RDS) program (see section
II.B.5.e. of the preamble to this final rule with comment period),
provided that they are received at one of the addresses provided below
no later than March 13, 2009.
ADDRESSES: In commenting, please refer to file code CMS-4131-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed).
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.regulations.gov. Follow the
instructions under the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4131-FC, P.O. Box 8013, Baltimore, MD
21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4131-FC, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201;
(Because access to the interior of the Hubert H. Humphrey (HHH)
Building is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7197 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Change of Ownership: Scott Nelson, 410-786-1038.
Civil Money Penalties: Christine Reinhard, 410-786-2987.
Definitions related to the Part D drug benefit, Subparts F and G:
Deondra Moseley, 410-786-4577, or Meghan Elrington, 410-786-8675.
Definitions related to the Part D drug benefit, Subpart R: David
Mlawsky, 410-786-6851.
Enrollment: Jeff Maready, 415-744-3523.
Low-Income Cost-Sharing: Christine Hinds, 410-786-4578.
Medicare Medical Savings Account Plans: Anne Manley, 410-786-1096.
Payment: Frank Szeflinski, 303-844-7119.
Reconsiderations: John Scott, 410-786-3636, or Kathryn McCann
Smith, 410-786-7623.
Special Needs Plans: LaVern Baty, 410-786-5480.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will be also available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
I. Background and Legislative History
The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established
a new ``Part C'' in the Medicare statute (sections 1851 through 1859 of
the Social Security Act (the Act)) that established the Medicare+Choice
(M+C) program. Under section 1851(a)(1) of the Act, every individual
entitled to Medicare Part A and enrolled under Medicare Part B, except
for most individuals with end-stage renal disease (ESRD), could elect
to receive benefits either through the original Medicare program or an
M+C plan, if one was offered where he or she lived.
[[Page 1495]]
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA), (Pub. L. 106-111), amended the M+C provisions of the BBA.
Further amendments were made to the M+C program by the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), enacted December 21, 2000.
Subsequently, the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted on
December 8, 2003. This landmark legislation established the Medicare
prescription drug benefit program (Part D) and made significant
revisions to the provisions in Medicare Part C, governing what was
renamed the Medicare Advantage (MA) program (formerly Medicare+Choice).
The MMA directed that important aspects of the new Medicare
prescription drug benefit program under Part D be similar to and
coordinated with regulations for the MA program. The MMA also created a
subsidy program involving payments to sponsors of Retiree Prescription
Drug Programs, or the Retiree Drug Subsidy (RDS) Program. This program
allows subsidy payments to sponsors of qualified retiree prescription
drug plans for Part D drug costs for individuals who are eligible for,
but not enrolled in, a Medicare Part D plan.
The MMA also specified that implementation of the prescription drug
benefit and revised MA program provisions take place by January 1,
2006. Thus, we published final rules for the MA and Part D prescription
drug programs in the Federal Register on January 28, 2005 (70 FR 4588
through 4741 and 70 FR 4194 through 4585, respectively). (For further
discussion of these revisions, see the respective final rules (70 FR
4588 through 4741) and (70 FR 4194 through 4585).)
Since the publication of these rules, we have gained a great deal
of experience with all aspects of these programs. Based on this
experience, as well as on recommendations from representatives of both
the organizations that provide care and the Medicare beneficiaries that
they serve, we determined that proposed changes to the existing Part C,
Part D, and RDS regulations were warranted. We believed that these
changes would help plans understand and comply with our policies for
all three programs, and aid MA organizations and Part D and RDS plan
sponsors in implementing their health care and prescription drug
benefit plans in ways that will better serve the Medicare population.
Thus, on May 16, 2008, we published a proposed rule (73 FR 28556)
that would revise certain aspects of both the MA, Part D, and RDS
programs. Many of these proposed revisions were designed to clarify
existing policies or codify current guidance for these programs.
Subsequent to the publication of that proposed rule, the Medicare
Improvements for Patients and Providers Act (MIPPA) (Pub. L. 110-275)
was enacted on July 15, 2008. MIPPA included a number of provisions
that addressed the same requirements that we had addressed in the
proposed rule. In some cases, the MIPPA provisions paralleled our
proposed requirements and in other instances they complemented or
superseded them. Thus, in order to implement both the new MIPPA
provisions and those proposed in our May 2008 proposed rule, we have
published a series of rules to set forth the appropriate regulatory
changes.
In the September 18, 2008 Federal Register (73 FR 54208), we
published a final rule that finalized certain marketing provisions,
effective October 1, 2008, that paralleled provisions in MIPPA. In the
same issue of the Federal Register (73 FR 54226), we also published a
separate interim final rule that addressed the other provisions of
MIPPA impacting the MA and Part D programs.
This final rule responds to comments on the May 16, 2008 proposed
rule and generally finalizes provisions of that rule that were not
addressed in either of the rules published on September 18, 2008. We
received over 100 comments on the proposed rule. Commenters included
managed care and prescription drug plans and their representatives,
provider groups, and Medicare beneficiary advocates. The comments
ranged from general support or opposition to the proposed provisions,
to very specific questions or comments regarding a proposed change.
Some of these comments have been addressed in the rules discussed
above. All comments pertaining to the provisions set forth in this
final rule are discussed below. We are providing brief summaries of
each proposed provision, a summary of the public comments we received,
and our responses to the comments.
II. Analysis of and Response to Public Comments
In the sections that follow, we discuss the changes to the
regulations in parts 422 and 423 governing the MA and prescription drug
benefit programs that were proposed in our May 16, 2008 rule, and the
comments we received on those provisions as well as conforming changes
to the regulations to reflect two new statutory definitions affecting
the MA program that were enacted in MIPPA. Several of the revisions and
clarifications discussed below affect both the MA and prescription drug
benefit programs.
A. Changes to Part 422--Medicare Advantage Program
1. Special Needs Plans
The MMA first authorized special needs plans (SNP), a type of MA
plan designed to exclusively, or disproportionately, enroll individuals
with special needs. The three types of special needs individuals
eligible for enrollment identified in the MMA include--(1)
Institutionalized individuals (defined in 42 CFR 422.2 as an individual
residing or expecting to reside for 90 days or longer in a long term
care facility); (2) individuals entitled to medical assistance under a
State plan under title XIX; and (3) other individuals with severe or
disabling chronic conditions that would benefit from enrollment in a
SNP.
The number of SNPs approved as of January 2008, is 787. This figure
includes 442 dual eligible SNPs, 256 chronic care SNPs, and 89
institutional SNPs.
a. Definitions: Institutional-Equivalent and Severe or Disabling
Chronic Condition (Sec. 422.2)
Section 164 of MIPPA contained two new statutory definitions that
relate to eligibility for SNPs. Although these definitions were not
included in our May 18 proposed rule, we are discussing these new
definitions here in the context of the more general SNP-eligibility
provisions, and incorporating these new definitions in interim final
regulations as part of this rule.
Although the statute governing SNPs has always referred to
individuals eligible to enroll in SNPs based on institutional status or
on having a severe or disabling chronic condition, the statute
previously did not define these terms. We believe that discussing these
new definitions in this rule will both aid the understanding of the new
statutory requirements and complement the eligibility requirements from
the proposed rule that we are publishing as final regulations in this
rule. In addition, because we received public comment on the May 2008
proposed rule closely related to eligibility for institutional-level
and chronic care individuals, we believe that in order to fully respond
to these comments it is important to discuss all of the provisions
relating to chronic care and
[[Page 1496]]
institutional care eligibility. Public comments related to
institutional and chronic care SNP eligibility are addressed below.
(1) Institutional-Equivalent Individual
Section 164 of MIPPA adds a new paragraph (2) to section 1859(f) of
the Act related to eligibility requirements for institutional SNPs.
Beginning on January 1, 2010, institutional SNPs that enroll a special
needs individual who is living in the community but requires an
institutional level of care (LOC) (i.e., an ``institutional-equivalent
individual'') must meet two new eligibility requirements.
First, the determination of institutional LOC must be made using a
State assessment tool. States have extensive experience in making LOC
determinations, as demonstrated by a recently published survey \1\ of
State LOC assessment, which references several other investigative
sources. The study describes varying State instruments and
methodologies, and may be an important resource for institutional SNPs
that are not already aware of existing State LOC assessment tools. In
States and territories that have not designed a specific tool, SNPs
must use the same LOC determination methodology employed in the
respective State or territory in which the SNP is authorized to enroll
eligible beneficiaries.
---------------------------------------------------------------------------
\1\ Henderickson, L. Kyzr-Sheeley, G. (2008). Determining
Medicaid Nursing Home Eligibility: A Survey of State Level Care
Assessment. Retrieved July 27, 2008 from http://www.hcbs.org/moreInfo.php/nb/doc/2216/.
---------------------------------------------------------------------------
Second, the SNP must arrange to have the LOC assessment conducted
by an entity other than the respective MA organization. We believe this
entity must be both impartial and have the requisite professional
knowledge to accurately identify institutional LOC criteria.
As a result of MIPPA provisions concerning institutionalized care,
we have revised our definitions section in Sec. 422.2 to incorporate
the new statutory definition of ``institutional equivalent'' set forth
in MIPPA.
(2) Severe or Disabling Chronic Condition
Section 164 of MIPPA also adds a new clause to section
1859(b)(6)(B)(iii) of the Act to clarify the eligibility requirements
for chronic condition SNPs. Beginning on January 1, 2010, chronic
condition SNPs that enroll a special needs individual who has a severe
or disabling chronic condition must determine that the individual has
one or more co-morbid and medically complex chronic condition(s) that
are substantially disabling or life-threatening, has a high risk of
hospitalization or other significant adverse health outcomes, and
requires specialized delivery systems across domains of care. We have
also updated our definitions in Sec. 422.2 to incorporate this new
statutory definition of severe or disabling chronic condition.
We note that the statute also directs the Secretary to convene a
panel of clinical advisors to determine which chronic conditions meet
this clarified definition. We will issue separate guidance describing
the operational process the Secretary will use to comply with this
directive.
b. Ensuring Special Needs Plans Serve Primarily Special Needs
Individuals (Sec. 422.4)
The MMA generally authorized SNPs that ``exclusively'' serve
individuals with the above-described special needs. However, section
231(d) of MMA provided the Secretary with the ``authority'' to
designate MA plans as SNPs if the SNP only ``disproportionately
serve[s] special needs individuals,'' while also serving non-special
needs enrollees. Section 231(d) of the MMA provides that ``the
Secretary may provide'' for such plans in regulations implementing the
SNP provisions. In the final rule implementing this MMA provision, we
exercised this discretion in Sec. 422.4(a)(iv)(B), providing that a
SNP could be a plan that ``[e]nrolls a greater proportion of special
needs individuals than occur nationally in the Medicare population * *
*.''
In the May 16, 2008 proposed rule, we proposed to amend Sec.
422.4(a) to require that MA organizations offering ``disproportionate
share'' SNPs ensure that at least 90 percent of new plan membership
consist of individuals that fell into the appropriate special needs
category for the plan in question, as defined in Sec. 422.2. Thus, no
more than 10 percent of a plan's new enrollees could be non-special
needs individuals. Based on the comments received on this proposal, and
in light of the fact that section 164 of MIPPA eliminates the authority
for disproportionate share SNPs effective January 1, 2010, we are
revising the regulations to specify that all new SNP enrollees must be
special needs individuals. In other words, we are declining to permit
disproportionate share SNPs as permitted, at our discretion, under
section 231(d) of MMA. As discussed below, we are amending Sec. Sec.
422.2 and 422.4 to reflect these changes.
Comment: All commenters agreed that the current regulation
permitting an MA plan to be designated a SNP if it enrolled special
needs individuals in a higher proportion than they exist in the
Medicare population diminishes the intended focus of special needs
plans on providing care and services to special needs individuals.
Commenters generally supported our proposal that at least 90 percent of
new enrollees consist of individuals with the targeted condition or
status. Many commenters, however, argued for a higher threshold. Some
commenters suggested establishing a 95 percent threshold, as
recommended by the Medicare Payment Advisory Commission (MedPAC). Still
others suggested requiring that entire plan membership (100 percent) be
in the targeted special needs group, or at least that all new enrollees
fall into the targeted category of individuals. These commenters
correctly noted that although section 231(d) of MMA allows plans to
enroll a certain portion of members from the non-targeted population,
there is no requirement that non-special needs individuals be permitted
to join an SNP. Many commenters also indicated that having to monitor
the proportion of plan membership that fell into the appropriate
category would pose an administrative challenge, and was unnecessarily
complex.
Response: After considering all comments, and in light of the fact
that disproportionate share SNPs will no longer be authorized as of
January 1, 2010, we agree with the commenters who urged that SNPs
should not be permitted to enroll individuals who do not meet the
qualifying targeted conditions (dual eligibility for Medicare and
Medicaid, institutional status, or severe or disabling chronic
conditions). Thus, taking into consideration the MIPPA changes and the
public comments described above, we are revising our proposal to
prohibit the enrollment of nonqualifying members into all SNP plans. We
believe that this change will emphasize the need for SNPs to focus on
providing care and services to their targeted population.
We recognize that this means that a spouse of an individual in a
chronic care SNP generally will not be able to join the same plan
(unless the spouse has the same condition), which has been presented in
the past as a reason to permit some non-special need individuals to
enroll in SNPs. Note that a plan may not disenroll a non-special needs
individual who has already enrolled in the SNP consistent with the
current disproportionate percentage methodology. Such individuals may
[[Page 1497]]
remain in their plans unless and until they choose to disenroll. Note
that they would not be permitted to re-enroll in another SNP unless
they had a qualifying condition. We are revising Sec. Sec. 422.2 and
422.4 to reflect these changes.
Comment: One commenter requested that the 90 percent
disproportionate percentage requirement be measured on an aggregate
basis for a given calendar year, rather than on a monthly or day-to-day
basis.
Response: Since we are eliminating use of any disproportionate
percentage methodology in the future, this issue has become moot.
Comment: Several commenters were confused by the wording of the
proposed regulations and asked that CMS clarify whether the proposed 90
percent rule applied only to new members, or applied to the overall
membership in the plan. Given the current proportions of special needs
individuals in many SNPs, they noted that establishing an overall
target of 90 percent would effectively require that all new enrollees
be members of the appropriate category in any event.
Response: We recognize that the wording of the proposed
requirements left some room for confusion as to the precise intent of
the provisions in question. Our proposal would only have applied to new
enrollees, so regardless of how many current members were special needs
individuals, 10 percent of new enrollees could have been non-special
needs individuals under our proposal. However, as explained above, the
final regulations clearly specify that the 100 percent requirement
applies only to new members.
c. Ensuring Eligibility To Elect an MA Plan for Special Needs
Individuals (Sec. 422.52)
We proposed in Sec. 422.52 that MA organizations be required to
establish a process approved by CMS to verify that potential SNP
enrollees meet the SNP's eligibility requirements. While this issue is
addressed, to some degree, in our manual guidance (section 20.11 of
Chapter 2 of the Medicare Managed Care Manual), we believe that it is
important to set forth in regulations our explicit authority to
establish verification requirements. The proposed regulations were also
intended to ensure that plans were aware of, and met, their obligations
to verify an applicant's eligibility prior to enrolling individuals in
a SNP. As discussed below, we are adopting these changes in final
regulations as proposed and, as noted above, we are in interim final
regulations codifying the related MIPPA eligibility requirements
concerning institutional-level and chronic care SNP. We are also making
a conforming change to Sec. 422.52(f) by deleting the currently
existing paragraph, which refers to SNPs serving disproportionately
special needs individuals.
Comment: Commenters did not object to our proposal to establish in
regulations that SNPs must use a CMS-approved process to verify SNP
eligibility. However, several commenters requested that we revise
either the proposed regulations or manual guidance to specify that SNPs
have 60 days to verify enrollment for individuals with special needs.
Alternatively, the commenters suggested that CMS take into
consideration the amount of time for verifying enrollment status when
monitoring plan compliance with the SNP provisions. Another commenter
recommended that CMS maintain the previous requirements (established in
our May 31, 2007 HPMS memo) for time frames and sources for
verification of Chronic Care SNP enrollment qualifications. The
commenter suggested that the 30-day timeframe now established in the
manual is impractical, and they further recommended that sources other
than providers be allowed for verification of chronic care SNP
enrollees' eligibility for the SNP.
Response: We are strongly committed to ensuring that SNPs carry out
proper verification of all eligibility criteria, consistent with the
requirements discussed above concerning SNP enrollment requirements.
Thus, we are adopting the proposed requirement that SNPs follow a CMS-
approved verification process. Note that although we are not setting
out specific verification requirements in the regulations, manual
current guidance already requires that prompt verification take place
(generally either before enrollment or no later than the end of the
first month of enrollment). We continue to believe that prompt
verification is necessary to prevent large numbers of subsequent,
unnecessary disenrollments from SNPs of individuals who never should
have been enrolled.
As noted in the May 2008 proposed rule (73 FR 28559), we have given
plans a number of options for meeting the verification requirements,
including post-enrollment confirmation under certain circumstances
(such as when a pre-enrollment qualification assessment tool is used,
as opposed to direct contact with a provider). In addition, to assist
SNP plans in obtaining timely verification from appropriate medical
professional personnel, we have made clear in subregulatory guidance
(Chapter 2, Section 20-11, Medicare Advantage Manual) that for the
purposes of verification of chronic care SNP eligibility, verification
may be obtained through a provider or provider's office. This includes
any licensed health care professional in a position to validate and
verify the beneficiary's medical history and status, such as nurse
practitioners or pharmacists. However, we are concerned that the use of
organizational data alone, such as claims or medical records, may not
always be sufficient to confirm SNP eligibility. Thus, we intend to
continue to evaluate the issue of when and how data may be
appropriately used to verify SNP eligibility and we are willing to
consider reasonable alternative proposals presented by plans to verify
eligibility. Still, given that the underlying intent of chronic care
SNPs is to provide care services to a population with a need for
carefully managed services, we do not believe it is unreasonable to
expect early contact with a suitable health care professional.
Comment: A commenter suggested that CMS include language addressing
pre-enrollment qualification assessment tools and post-enrollment
confirmation of eligibility procedures as aspects of the SNP
eligibility verification process for all SNPs, not just chronic care
SNPs.
Response: We do not believe that such changes are warranted or
necessary for non-chronic care SNPs, given the other available sources
of eligibility verification. As discussed in our recent interim final
rule (73 FR 54228), in accordance with the recent MIPPA legislation,
dual-eligible SNPs and institutional SNPs must have arrangements with
the appropriate entities to verify Medicaid eligibility or
institutional status in an ongoing and routine manner.
Comment: A commenter described our suggestion in the preamble of
the proposed rule that dual-eligible SNPs be required to enter into an
agreement with state agencies as ``impractical.'' The commenter further
suggested that CMS establish a process similar to that used under the
Part D low-income subsidy status for determining dual eligibility
status for Part C dual-eligible SNP plans, or as an alternative
establish a best available evidence policy for dual-eligible SNP plans.
Thus, rather than the SNP plan being responsible for obtaining Medicaid
eligibility information, the commenter requested that CMS furnish the
eligibility information to dual-eligible SNP plans.
Response: The establishment of successful partnerships and
processes to
[[Page 1498]]
share information about dual status with State Medicaid agencies is a
key aspect of the SNP's ability to provide specialized services to this
population, ensure beneficiary understanding of both programs'
benefits, and provide meaningful coordination between the Medicare and
Medicaid programs. Furthermore, section 164 of MIPPA requires dual
eligible SNPs to have a contract with a State Medicaid Agency effective
as of January 1, 2010, to provide benefits (or arrange for benefits to
be provided) that an individual is entitled to receive under the
Medicaid program.
With respect to the commenter's suggestion that we establish a
process similar to our current Part D ``Best Available Evidence''
policy to allow plans to provide evidence of dual-eligibility status,
we decline to establish such a process at this time. We believe that
beneficiaries and SNPs would be better served by an arrangement with
States to exchange eligibility information on a regular basis. Such
arrangements could be incorporated into the contracts between SNPs and
the appropriate State Medicaid Agency that will now be required as of
January 1, 2010.
d. Model of Care (Sec. 422.101(f))
In order to ensure that SNPs were providing care targeted to such
special needs beneficiaries, under our authority in section 1856(b)(1)
of the Act to establish standards by regulation, we proposed that SNPs
develop a model of care specific to the special needs population they
are serving. In order to more clearly establish and clarify delivery of
care standards for SNPs and to codify standards which we have included
in other CMS guidance and instructions (the 2008 and 2009 Call Letters,
``Special Needs Plan Solicitation'' \2\), we proposed to add new
paragraph (f) to Sec. 422.101. This proposed paragraph specified that
SNPs have networks with clinical expertise specific to the special
needs population of the plan; use performance measures to evaluate
models of care; and be able to coordinate and deliver care targeted to
the frail/disabled, and those near the end of life based on appropriate
protocols. Section 164 of the MIPPA subsequently added care management
requirements for all SNPs as directed in section 1859(f)(5) of the Act
(42 U.S.C. 1395w-28(f)). The new mandate required dual-eligible,
institutional, and chronic condition SNPs to implement an evidence-
based model of care having two explicit components. The first component
was an appropriate network of providers and specialists to meet the
specialized needs of the SNP target population. The second component
was a battery of case management services that includes-- (1) A
comprehensive initial health risk assessment and annual reassessments;
(2) an individualized plan of care having goals and measurable
outcomes; and (3) an interdisciplinary team to manage care. This law
laid a statutory foundation for much of our proposed regulatory
standards for the model of care. Therefore, we address the comments we
received on our proposals from both a statutory and regulatory basis.
---------------------------------------------------------------------------
\2\ The solicitation may be found at http://www.cms.hhs.gov/SpecialNeedsPlans.
---------------------------------------------------------------------------
Comment: The overwhelming majority of commenters expressed support
for a required SNP model of care. However, many argued that the
proposed language was too weak to permit genuine oversight of SNPs or
assure adequate protection for vulnerable beneficiaries. They urged us
to require a more prescriptive model of care similar to the PACE
program or state integrated care waiver demonstration projects. Among
their recommendations were that we require that model of care include
elements such as: Care coordination through an individualized care
plan; at least one network physician with network hospital privileges
and one network provider with access to diagnostics and ancillary
health services; transition coverage across care settings, providers,
and services to ensure continuity of care; a comprehensive risk
assessment on which to base the individualized care plan; public
reporting of performance data as evidence that remuneration pays for
services actually delivered; a complaint/grievance process used in
monitoring activities; SNP staff trained on the respective state
Medicaid program; and mandatory publishing of the SNP model of care in
marketing materials. One of these commenters specifically advocated
that pharmacists be an integral member of a SNP provider network, but
was countermanded by another commenter that who opposed prescribing the
provider network composition. Finally, one commenter suggested that we
require all MA organizations, not just SNPs, to serve enrollees that
are frail/disabled or near the end of life.
Response: Over the past 2 years, we collected and reviewed models
of care from existing SNPs. We also reviewed models of care such as
medical home models and chronic care models published in healthcare
books, peer-reviewed journals, and advocacy group and industry reports.
Based on our extensive review of models of care for vulnerable
populations, we agree with the majority of commenters who indicated
that a required SNP model of care that contains certain minimal
elements is necessary to provide regulatory oversight and effective
monitoring of SNPs. MIPPA demonstrated further support that care
management required an organizational structure represented by the
model of care. Specifically, MIPPA required SNPs to conduct initial and
annual comprehensive health risk assessments, develop and implement an
individualized plan of care, and implement an interdisciplinary care
team for each beneficiary. We believe that combination of MIPPA's
statutory elements and our regulatory prescription for the SNP model of
care establishes the standardized architecture for effective care
management, yet gives plans the flexibility to design the unique
services and benefits that enable them to meet the identified needs of
their target population. To illustrate this balance between the model
of care architecture and its plan-specific components, we present the
following examples. All SNPs must have an interdisciplinary team to
coordinate the delivery of services and benefits; however, one SNP may
choose to contract with an interdisciplinary team to deliver care in
community health clinics and another SNP may hire its team to deliver
care in the home setting. Under our final regulations, all SNPs must
coordinate the delivery of services and benefits through integrated
systems of communication among plan personnel, providers, and
beneficiaries; however, one SNP may coordinate care through a
telephonic connection among all stakeholders and a second SNP may
coordinate care through an electronic system using Web-based records
and electronic mail accessed exclusively by the plan, network
providers, and beneficiaries. All SNPs must coordinate the delivery of
specialized benefits and services that meet the needs of their most
vulnerable beneficiaries; however, dual-eligible SNPs may need to
provide state-identified services while an institutional SNP may need
to facilitate hospice care for its beneficiaries near the end of life.
These examples demonstrate the variety of ways SNPs currently implement
their systems of care. We will continue to study SNP models of care and
issue guidance through our Call Letters and informational memoranda to
facilitate improvement in the SNP model of care framework.
[[Page 1499]]
Comment: One commenter noted that our proposed language required
the model of care to deliver services to targeted enrollees as well as
those who are frail/disabled or near the end of life. The entity
clarified that SNPs do not ``deliver'' care, but provide access to care
practitioners.
Response: We acknowledge the distinction that most SNPs are not
healthcare providers, but are entities that coordinate care through
provider networks. We believe that our references to delivering care
can reasonably be read as referring to delivering services through such
networks.
Comment: Several commenters supported a requirement for the use of
evidence-based or nationally recognized clinical protocols in the
delivery of care to special needs beneficiaries. One commenter argued
that, if we were to prescribe specific disease management protocols for
SNPs in the future, we should do so through published regulations that
would permit the medical community to comment. A second commenter urged
us to clarify ``protocols'' to include process as well as clinical
protocols because nationally recognized protocols do not exist for all
clinical conditions.
Response: We agree that SNPs must coordinate and deliver care with
healthcare professionals that use protocols, whether clinical or
administrative in nature, which are evidence-based or, where possible,
derived from nationally recognized guidelines. We refer beneficiaries,
plans, and providers to the Agency for Healthcare Research and Quality
(http://www.ahrq.gov/) which provides public access to both an
extensive repository of evidence-based protocols through its National
Guidelines Clearinghouse, as well as discussions regarding ongoing
research on clinical practice. If we propose future regulation related
to the use of clinical or administrative protocols, we will elicit
appropriate public comments from all stakeholders. Presently, we expect
SNPs to have personnel (employed, contracted, or non-contracted)
prepared to discuss their implemented protocols at monitoring visits or
other oversight activities. Because we have not prescribed the use of
specific protocols, the comment that we should do so through rulemaking
does not apply.
Comment: A few commenters proposed that we work with recognized
standards organizations to develop better ways to monitor SNPs and
inform the public about plan performance. However, one commenter
cautioned that, in developing SNP-specific measures, we must address
the broad range of special care needs and the limitations of available
data sources.
Response: We have contracted with the National Committee for
Quality Assurance (NCQA) to develop, collect, analyze, and report on
SNP-specific performance measures at the plan benefits package (PBP)
level. We will continue to work with NCQA and other quality measurement
experts such as the Geriatric Measurement Advisory Panel to explore
valid and reliable ways to measure and improve SNP performance. As we
identify new directions in quality measurement for vulnerable
populations, we will elicit public, professional, and beneficiary
comment to inform our regulatory and informational guidance to SNPs.
e. Special Needs Plans and Other MA Plans With Dual Eligibles:
Responsibility for Cost-Sharing (Sec. 422.504(g)(1))
In order to protect beneficiaries and ensure that providers do not
bill for cost-sharing that is not the beneficiary's responsibility, we
proposed to amend Sec. 422.504(g)(1)(i) and (g)(1)(ii) to require that
all MA organizations, including SNPs, with enrollees who are eligible
for both Medicare and Medicaid specify in their contracts with
providers that enrollees would not be held liable for Medicare Parts A
and B cost sharing when the State is liable for the cost-sharing. Plans
may not impose cost-sharing that exceeds the amount of cost-sharing
that would be permitted with respect to the individual under title XIX
if the individual were not in such plan. We also proposed therefore,
that contracts with providers state that the provider will do this by
either accepting the MA plan payment in full (Sec.
422.504(g)(1)(iii)(A)) or by billing the appropriate State source (for
example, Medicaid) (Sec. 422.504(g)(1)(iii)(B)). Additionally, we
proposed that all MA organizations with enrollees eligible for both
Medicare and Medicaid must inform providers of the Medicare and
Medicaid benefits and rules for enrollees eligible for Medicare and
Medicaid (Sec. 422.504(g)(1)(iii)). Section 165 of MIPPA only required
that full benefit dual-eligible individuals and qualified Medicare
beneficiaries in SNPs for dual-eligibles not be held liable for
Medicare Parts A and B cost-sharing. Our proposal included all MA plans
that have dual eligibles enrolled in their plan.
The above proposals have been superseded in part by section 165 of
MIPPA, ``Limitation on Out-of-Pocket Costs for Dual Eligibles and
Qualified Medicare Beneficiaries Enrolled in a Specialized Medicare
Advantage Plan for Special Needs Individuals,'' which establishes that
for full benefit-dual-eligible individuals or qualified Medicare
beneficiaries enrolled in a special needs plan, an MA organization may
not impose cost-sharing that exceeds the amount of cost-sharing that
would be permitted if the individual were under title XIX and were not
enrolled in a special needs plan. The effective date of this provision
is January 1, 2010.
After considering comments discussed below, we are finalizing our
proposal to impose the requirement that MIPPA imposed in the case of
dual-eligible SNPs on duals in all MA plans, and on all dual Medicaid
eligibility categories for which a State provides a zero cost-share.
Consistent with the MIPPA requirements that apply to dual-eligible
SNPs, we are specifying in the regulations that these provisions are
effective on January 1, 2010.
Comment: Several commenters supported CMS' effort to protect dual
eligible individuals from being charged for cost sharing under Medicare
Parts A and B when the state is responsible. However, many requested
that CMS either allow MA plans to send a notification to the providers
of this change or to allow MA organizations to amend contracts at the
end of the contract term, in 2 years, or whenever the contracts are
renegotiated. Some commenters requested that CMS establish a process
for Medicare Advantage Organizations to work with CMS to develop and
disseminate this information. Other commenters stated that CMS should
go further by requiring all MA plans to provide to all of their
physicians and other providers with specific information about when
dual eligibles are not liable for cost-sharing and include the matrix
CMS developed on cost-sharing and the dual eligibility types.
Several commenters also stated that CMS should go further by
requiring plans to have a designated contact person who is
knowledgeable about the Medicaid programs who can answer cost sharing
questions for providers and that plans should be required to refund any
cost-sharing that has been inappropriately charged to dual eligible
individuals. One commenter recommended that CMS require this of dual-
eligible SNPs only and not all plans that serve dual eligible
individuals.
Response: We do not believe it would sufficiently protect dual-
eligible enrollees to simply require notice to providers. We also do
not believe that these protections should be delayed for up to 2 years,
particularly when MIPPA
[[Page 1500]]
imposes them in the case of enrollees in dual eligible SNPs effective
January 1, 2010. However, we do not believe that it is necessary to
require that SNPs necessarily designate a specific person to address
dual-eligible issues. We believe that MA organizations should have
flexibility in complying with these requirements. As noted above, we
disagree with the commenter who believed that these requirements should
only apply to dual SNPs as the MIPPA requirement did, because we
believe that all dual eligibles need these protections.
2. MA Medical Savings Accounts (MSA) Transparency (Sec. 422.103(e))
Consistent with the best practices of health savings accounts
(HSAs) and other high-deductible health plans, we proposed in a new
Sec. 422.103(e) to require that all medical savings account (MSA)
plans provide enrollees with information on the cost and quality of
services and provide information to CMS on how they would provide this
information to enrollees.\3\
---------------------------------------------------------------------------
\3\ HSAs are health insurance plans with a high deductible and a
savings account for the under 65 population and are administered by
the U.S. Department of the Treasury. Medicare MSAs are a type of
medical savings account, also with a high deductible and a savings
account, designed for the Medicare population and are administered
by the U.S. Department of Health and Human Services, Centers for
Medicare & Medicaid Services. HSAs and MSAs are governed by
different statutes, and while these health insurance products are
similar in many ways, there are also important differences between
them. For further information on HSAs, go to http://www.ustreas.gov/offices/public-affairs/hsa/.
---------------------------------------------------------------------------
Comment: We received a number of public comments on the proposed
cost and quality transparency requirements for Medicare MSA plans.
Several commented on the developing and pioneering nature of reporting
on cost and quality of health care information. Some comments simply
expressed general support for the proposal. One comment from a state
government human services department expressed general support for this
proposal. One comment from a pharmacy association expressed support for
providing consumers with cost and quality information.
Three comments were from health insurance plans with experience
with Medicare MSAs, which also expressed support for this proposal, but
requested flexibility for plans in development of cost and quality
transparency information. One organization argued against separate
standards for Internet vs. other forms of communication to allow
flexibility in how information is communicated. Another comment from a
health plan not currently participating as an Medicare MSA indicated
its concern for the burden on health plans of transparency, and thought
we intended to require that information be sent to all enrollees.
Two comments from major physician organizations requested that
providers and other stakeholders have input into the reporting of cost
and quality reporting measures. The physician organizations
specifically reference guidelines from the Consumer-Purchaser
Disclosure Project's ``Patient Charter for Physician Performance
Measurement, Reporting and Tiering Programs.''
A number of consumer groups, including organizations representing
the disabled, requested that cost and quality information be linked so
that consumers can readily see where they meet, and so that consumers
are not steered solely by price considerations. Consumer groups were
also interested in information being posted on the out-of-pocket costs
for enrollees in MSA plans, as well as on information for enrollees on
how accounts operate and on any account fees or interest rates.
Response: Public comments indicate support for the proposal, and
also indicate interest in making information useful for enrollees and
equitable to health care providers on whom the information is reported.
We acknowledge these comments of general support. We also understand
comments requesting that stakeholders and consumers be allowed input
and their interest in making the information fully useful to consumers.
As indicated in the proposed rule in the discussion of calculation
of burden on health plans, we are expecting plans to provide the same
level of information on cost and quality of services that they provide
to commercial enrollees and to provide whatever information is
available. Therefore, we are anticipating that the burden level would
not be undue on health plans. We hope that consumers will also provide
input because they are the parties intended to use the information, and
so we expect that consumer demand will shape the design of reporting
standards over time. Therefore, we agree with the comment that plans
should have flexibility in design of transparency standards. We are not
specifying standards for Internet or for other forms of communication
at this time. It also makes sense for physicians and other providers
and any interested stakeholders to provide input directly to plans or
to CMS.
We do not want to specify further requirements at this time for
transparency and want primarily to allow plans to work with enrollees
to develop that information. Note that the statutory exemption from
quality improvement programs for MSAs at section 1852(e) of the Act was
recently eliminated by section 163 of MIPPA. MSA and PFFS plans must
participate in quality improvement programs beginning in 2010. This new
quality improvement requirement implemented in regulations at Sec.
422.152(a), will work in conjunction with transparency efforts and
enable transmission of information directly to enrollees of these
health care plans.
B. Changes to Part 423--Medicare Prescription Drug Benefit Program
1. Passive Election for Full Benefit Dual Eligible Individuals Who Are
Qualifying Covered Retirees (Sec. 423.34)
We proposed to revise Sec. 423.34(d) to establish an exception to
our normal auto-enrollment procedures for full benefit dual eligible
individuals who we know to be enrolled in a qualifying employer group
plan. Rather than auto-enrolling these individuals into a PDP (no
individuals are auto-enrolled into MA-PD), we proposed that such
individuals would be deemed to decline Part D coverage if, following a
notice of their options, they do not indicate that they wish to receive
it. As discussed below, this final rule adopts the proposed regulatory
changes to Sec. 423.34(d) in their entirety.
Comment: All commenters supported the policy where full benefit
dual-eligible individuals (eligible for both Medicare and Medicaid),
who are also qualifying covered retirees, would not be automatically
enrolled in a Medicare Part D plan by CMS. Although commenters
expressed no objections to the proposed regulatory changes, several
commenters objected to a statement in the preamble to the proposed
regulation (73 FR 28562) indicating that if a full benefit dual
eligible individual with qualifying retiree coverage decided to enroll
in a Part D plan at a later time, that enrollment could be made
effective retroactively to the date of the dual eligibility. The
commenters asserted that retroactive Part D coverage would
inappropriately shift the liability for past drug spending to a Part D
plan. Other commenters supported the option of retroactive coverage.
Response: Consistent with our proposal, this final rule establishes
that full benefit dual eligible individuals with qualified retiree
coverage will not be automatically enrolled in a Medicare Part D plan.
(That is, we will not auto-enroll individuals for whom we have approved
a group health plan sponsor to receive the Retiree Drug Subsidy (RDS)
[[Page 1501]]
described in 42 CFR Part 423, Subpart R for the period of time the
automatic enrollment in Part D would otherwise cover.) Instead, we will
send these individuals a notice informing them that they will be deemed
to have declined such enrollment unless they take an affirmative action
to choose a plan or opt for auto-enrollment. They may choose to enroll
in a Medicare Part D plan at any time, as long as they retain that dual
status, but we will not automatically enroll them in a Part D plan.
In general, we believe that dual eligible individuals who decide to
enroll in a Medicare Part D plan at a later time should do so on a
prospective basis, like most other enrollment elections. These
individuals have made an election initially to not enroll in a Medicare
Part D plan and instead to remain in their current employer plan. Thus,
there is no ``coverage gap'' involved, which obviates the usual premise
for retroactive Medicare coverage for dual eligibles. We agree with
commenters that retroactive coverage under Medicare Part D could lead
to an inappropriate shift of beneficiary drug expenditures to the
Medicare program. However, as currently occurs under both the MA and
Part D programs, we acknowledge that special circumstances may arise
which would justify a retroactive enrollment into Medicare Part D. We
will issue clarifying guidance on the appropriateness for retroactive
coverage and consider those requests on a case-by-case basis.
Comment: Several commenters requested that other individuals who
are automatically enrolled into a Medicare Part D plan, such as
individuals eligible for one of the Medicare Savings Programs, also be
exempted from automatic enrollment when they have qualified retiree
coverage.
Response: Other individuals with qualified retiree coverage, such
as non-dual eligible individuals who are also eligible for low-income
subsidy assistance under the Medicare Savings Programs, are already
excluded from automatic enrollment under Medicare Part D.
Comment: Several commenters suggested that the regulations specify
that the notice individuals receive advise them to discuss the impact
of Medicare Part D coverage with their group health plan administrator
or personnel office. They also suggested that we share the model
beneficiary notice with beneficiary representatives for their review.
Response: We do not believe it is necessary or appropriate to
specify in the regulations the exact content of the notice that will be
sent to the affected individuals, such as where individuals should turn
to receive information to help them make a decision. However, in the
notice that we send to beneficiaries, we will specify that individuals
should discuss their drug benefits with the appropriate retiree staff
who handle their coverage and benefits. We will be pleased to share the
model beneficiary notice in draft with beneficiary representatives to
obtain their input and guidance.
Comment: Several commenters requested we revise the regulations to
specify that the notice will be provided to the individual or their
representatives to the extent that we are aware that the individual has
someone acting on his/her behalf. They expressed concern that some of
the affected individuals may lack the capacity to understand the notice
and the action to be taken.
Response: We are not modifying the regulations to include this
suggested change, because we have no way to collect and retain address
information for an individual authorized to act on behalf of a
beneficiary, or verify that someone asserting such status is in fact so
authorized.
Comment: Several commenters requested that CMS extend the process
for non-automatic enrollment into Medicare Part D to full benefit dual
eligible individuals with non-qualifying retiree coverage in addition
to those individuals with qualifying retiree coverage.
Response: Currently, we receive information only for individuals
who have qualifying retiree prescription drug coverage, and for whom we
have approved a group health sponsor to receive the RDS. The
information we receive, among other data, specifies that the
individual's retiree drug coverage is at least equal to the actuarial
value of the Medicare Part D defined standard prescription drug
coverage, and records are maintained for audit purposes (Sec.
423.884). We do not have similar information for non-qualifying retiree
prescription drug coverage, and thus would be unable to extend the non-
automatic enrollment process to cover those situations. To accomplish
the request would require soliciting information on the other coverage,
verifying its authenticity, and entering it into the database which
includes creditable coverage information. Should this information
become readily available, we would consider this proposal. However, we
note that we would not be certain, in the case of other retiree
coverage, whether the coverage had a value to beneficiaries at least as
good as that they would get if defaulted to a Part D plan. This would
also be a factor for us to consider.
Comment: Several commenters requested that CMS establish a special
enrollment period for retroactive disenrollment from Medicare Part D
plans for any beneficiary who was auto-enrolled in a plan that
conflicted with a retiree plan.
Response: Our current Medicare Prescription Drug Plan guidance
permits full benefit dual eligible individuals to opt out of Medicare
Part D coverage at any time. If the beneficiary makes the request prior
to the effective date of auto-enrollment, then the enrollment is
cancelled and the individual is considered not enrolled. If the
effective date of the auto-enrollment is retroactive, the beneficiary
may request a retroactive cancellation as long as the request is made
by the 15th of the month after the month in which auto-enrollment
occurred. If the request occurs after those dates, then the
disenrollment would be effective with the last day of the month in
which the request is made. With the retroactive cancellations, we
caution individuals or their representatives to be careful to ensure
individuals do not have a gap in prescription drug coverage, given that
we have no authority to require that employer plans accept re-
enrollments from former members of such plans. We also caution that
such a disenrollment would not necessarily retroactively restore
eligibility under an employer plan if that eligibility is lost as the
result of an enrollment in a Part D plan.
2. Part D Late Enrollment Penalty (Sec. 423.46)
Under section 1860D-13(b) of the Act, a Part D late enrollment
penalty (LEP) generally applies when a Medicare beneficiary has a
continuous period of 63 days or longer without creditable prescription
drug coverage subsequent to the beneficiary's initial enrollment
period. This requirement is codified in regulations at Sec. 423.46.
Although Sec. 423.46 describes which individuals are subject to a
penalty, it does not specify the role of the Part D plan in the LEP
determination process. We have subsequently outlined plan
responsibilities in our existing guidance (Chapters 4 and 18 Sec.
80.7.1, of the Medicare Prescription Drug Benefit Manual), and in our
May 16, 2008 proposed rule we proposed to clarify the general
responsibilities of Part D plans in the regulations.
First, we proposed to clarify under Sec. 423.46(b) that Part D
plans must obtain information on prior creditable coverage from all
enrolled or enrolling
[[Page 1502]]
beneficiaries. Under this process, plans must first query CMS systems
for previous plan enrollment information, which is a standard part of
the beneficiary enrollment process. When there is a qualifying gap in
creditable coverage, however, the process for obtaining creditable
coverage information must also include plan interaction with the
beneficiary. This is due in large part to the limited information
available in CMS' systems about forms of creditable coverage other than
Part D coverage or coverage through an employer group under the retiree
drug subsidy (RDS). Therefore, it is critical that plans obtain
historical creditable coverage information from the beneficiary in
order to determine the number of uncovered months, if any, and retain
any information collected concerning that determination (as specified
under proposed Sec. 423.46(d)).
The related requirement that we proposed under Sec. 423.46(b) is
that plans must then report creditable coverage information in a manner
specified by CMS. Specifically, plans would report the number of
uncovered months to CMS, which would then calculate the penalty and
report the penalty back to the plan. The plan would then notify the
beneficiary of the determination of the LEP amount and of their ability
to request a reconsideration of this determination.
We also proposed under Sec. 423.46(c) that, consistent with
section 1860(D)-13(b) of the Act, individuals who are determined to
have a late enrollment penalty have the opportunity to ask for a
reconsideration of this determination. (Note that existing Sec.
423.56(g) briefly references the ability to ``apply to CMS'' when an
individual believes that he or she was not adequately informed that his
or her prescription drug coverage was not creditable, and we would
cross-reference that section here.) We believe that the statute clearly
intends that individuals have an opportunity to provide CMS with
additional information related to prior prescription drug coverage in
support of a request for reconsideration of a late enrollment penalty
determination. While the statute expressly provides for this
opportunity only with respect to an argument that proper notice was not
given concerning whether existing coverage was creditable, we believe
that the same rationale could apply to other arguments that the penalty
should not apply (for example, an argument that the individual had
prior creditable prescription drug coverage that the enrollee believes
may not have been considered).
Finally, we proposed to specify that a beneficiary would not have
the right to further administrative review of the reconsideration
decision of CMS, or the independent review entity acting under CMS'
authority. However, we would, have the discretion to reopen, review,
and revise such a decision.
Comment: Several commenters support the regulatory changes
proposed; several other commenters, however, raised concerns about the
role of Medicare Part D plan sponsors in the creditable coverage period
determination process associated with the Part D LEP. Two of these
commenters stated that having plans obtain and validate the required
information could create inconsistencies in acceptable documentation,
possible errors in reports to the government, and additional burden to
plans. These two respondents suggested that CMS be responsible for the
creditable coverage period determination, and one of them stated that
the reporting process should be the same as the one for the Medicare
Part B premium surcharge. Additionally, one of these commenters also
suggested that, at the very least, and until such time as CMS is able
to conduct this verification process without plan involvement, CMS
should enhance its current Beneficiary Eligibility Query (BEQ) to
provide the number of uncovered months rather than covered months. The
commenter suggests that plans would then be able to simply transfer
this information to the attestation form that must be sent to the
beneficiary rather than have to convert it.
Response: The structure of the Medicare Part D program differs
significantly from the Supplementary Medical Insurance program
(Medicare Part B) in that beneficiaries interact directly with Part D
plan sponsors to enroll in Part D coverage. In contrast, the majority
of beneficiaries are automatically enrolled in Part B, while the rest
apply at the Social Security Administration. Moreover, since we do not
have information about all of the possible forms of creditable coverage
for individual beneficiaries, this information has to come directly
from beneficiaries. Since Part D plans correspond directly with their
members at various times (for example, when the enrollment request is
submitted and accepted by the plan), they are better able to determine
whether the beneficiary is enrolling late and, if so, whether the
beneficiary had creditable coverage. Thus, we continue to believe that
plans are the appropriate entity to administer the initial stages of
the LEP process.
With respect to the commenter's request that we enhance our BEQ to
provide the number of uncovered months rather than covered months, we
modified its system to include information about prior creditable
coverage so that plans could query our data through the BEQ mentioned
above. During this modification, we opted to include the date ranges
that correspond to the months in which the individual has, or had, Part
D coverage or when the retiree drug subsidy (RDS) is being claimed by
an employer for that individual. This creditable coverage history that
we provide in the BEQ is based on information we can confirm (that is,
Part D or RDS coverage). Therefore, when there is a qualifying gap
outside of these covered months, we are unable to determine whether an
individual had other creditable coverage during the period in question.
Since Part D plan sponsors correspond directly with their members when
the enrollment request is submitted and accepted by the plan, they are
better able to obtain creditable coverage information from the
beneficiary about these uncovered months. Therefore, we decline to
change the query at this time.
Additionally, we have developed operational procedures and policies
that are intended to be as simple and straightforward as possible and
impose minimal administrative burden on plans and beneficiaries. Most
recently, on April 11, 2008, we released a memorandum, ``Updated
Guidance on Creditable Coverage Determinations and the Late Enrollment
Penalty'' via our Health Plan Management System (HPMS). This memorandum
further clarified and expanded operational and policy guidance in a
number of areas based on our experience implementing this policy and in
response to questions and concerns raised. One significant change we
made was to allow Part D plan sponsors to accept telephonic
attestations in place of a missing or incomplete written attestation.
We also expanded the existing timeframes that Part D plan sponsors have
to report the creditable coverage information to us, thus affording
Part D plan sponsors more time to follow up with beneficiaries to
obtain the appropriate information.
Comment: Several commenters suggested that we simplify our
creditable coverage documentation requirements for beneficiaries who
change plans. For example, enrollees should be able to simply state on
their enrollment application that they have had drug coverage, and CMS
should then be responsible for verifying this information, since CMS
should have
[[Page 1503]]
records of all the drug plans in which they were enrolled.
Response: We have already limited the scope of the plans' review
when there is prior Part D plan or RDS enrollment in order to further
simplify documentation requirements for plans and beneficiaries. If the
beneficiary has prior Part D or RDS plan coverage, the plan only needs
to determine whether the member has any months without creditable
coverage since the date that he or she disenrolled from his or her
prior Part D or RDS plan. That is, the current plan does not have to
repeat the work done by the prior plan, and beneficiaries do not need
to attest again to prior coverage when they simply change plans.
Additionally, if the individual, on his/her own initiative,
includes creditable coverage information or documentation or both with
the enrollment form, the plan must take that information into account
when determining whether there has been a gap in coverage. As mentioned
previously, we believe plans are in the best position to make
creditable coverage determinations and report such determinations to
CMS. We will continue to improve the process in response to comments
and concerns from plans and beneficiaries.
Comment: One commenter stated that, although information about an
individual's LEP is sent to the beneficiary, many beneficiaries do not
open or read their mail. The commenter suggested that the beneficiary's
LEP status be included in the Plan Finder, so that the beneficiary (and
others assisting the beneficiary) could access such information. The
commenter suggests that the Plan Finder include an indication as to
whether or not an LEP has been assessed; the percentage of the penalty;
and where applicable, LEP exempt status due to low income subsidy (LIS)
eligibility.
Response: We appreciate the commenter's suggestion for using the
Plan Finder as a tool to display information about a beneficiary's late
enrollment penalty, and will consider whether this is viable in the
future. However, no changes in the Plan Finder are possible in 2008. In
the meantime, we have developed a ``Tip Sheet'' for Partners that
provides key points for those assisting beneficiaries to use when
answering questions from beneficiaries about the penalty. We are also
developing another ``Tip Sheet'' that will focus on beneficiaries' role
in responding to information received from their Part D plan sponsor,
such as the attestation form. We have also simplified the current
attestation form and included a new checklist designed to focus
beneficiaries' attention on the form and emphasize the urgency of
completing the attestation process. We expect these changes will
improve beneficiaries' understanding of the importance of providing
information about prior creditable coverage to their Part D plan
sponsor.
Comment: Several commenters urged that the regulations include
waiver of the LEP for individuals receiving the low income subsidy
(LIS).
Response: Section 114 of the MIPPA eliminates the penalty for these
individuals. Therefore, we have amended our regulations at Sec.
423.46(a) and Sec. 423.780(e) in a separate interim final rule to
reflect this change. (See the September 15, 2008 interim final rule
with comment period (73 FR 54226)). (Note that, under an existing Part
D payment demonstration, CMS has not imposed an LEP on LIS
beneficiaries.)
Comment: Several commenters urged that individuals have the full
array of appeal rights available with respect to a decision subject to
the Part D beneficiary appeals process, including ALJ hearings, and
should not be limited to the reconsideration level of review. These
commenters also believed that the regulation should contain more
information about the reconsideration process, such as procedures and
required timeframes for requesting a reconsideration, and that the
regulation should at least set out a simple procedure whereby a
beneficiary can submit evidence at any time to eliminate or reduce a
late enrollment penalty. One commenter asked that members be provided
LEP reconsideration rights when they are informed of their LEP. Another
commenter indicated support for the existing process, with
beneficiaries being permitted to seek reconsideration of their LEP.
Response: We have carefully considered this issue and believe that
the current independent review process is sufficient and appropriate.
Thus, we do not believe we need to offer beneficiaries expanded LEP
appeal rights for several reasons.
First, we are offering significantly more due process to enrollees
to dispute the imposition of an LEP than the law requires. The Part D
beneficiary appeals process does not by its own terms apply to a
decision on the applicability of an LEP, but only to decisions on
whether drugs are covered, or how much a beneficiary is required to pay
for covered drugs. With respect to the imposition of an LEP, the
statute only provides individuals with an opportunity to apply to CMS
to have their coverage treated as creditable upon establishing to CMS
that they were not adequately informed that their prescription drug
coverage was not creditable. (See section 1860D-13(b)(6)(C) of the
Act.) Providing a reconsideration process to resolve other LEP-related
matters, such as the question of whether an individual was enrolled in
another plan offering creditable prescription drug coverage, is not
required by the statute and is an added beneficiary protection under
our current process.
Second, Chapter 18, Sec. 80.7.1 of the Medicare Prescription Drug
Benefit Manual and CMS' April 11, 2008 memorandum (cited above) provide
beneficiaries with numerous added protections that are intended to help
reduce the need for beneficiaries to seek reconsideration of their LEP.
For example, plans must submit corrections when they receive a late
attestation form that indicates the member had creditable coverage for
the period in question if the plan has already reported uncovered
months to CMS.
As described above, we have improved the attestation process by
simplifying the creditable coverage attestation form, adding a new
model checklist, and permitting Part D plan sponsors to allow
beneficiaries or their representatives to complete the entire
attestation process over the telephone. In addition, CMS guidance now
affords Part D plan sponsors additional time to attempt to obtain
information missing from the creditable coverage attestation form and
to report their creditable coverage determinations to CMS.
Finally, as we noted in the proposed rule, we have the discretion
to reopen, review and revise an LEP reconsideration decision.
Reopenings are discretionary but may be granted, for example, upon
presentation of new and material evidence. Given the flexibility
afforded plans in making corrections to previously reported uncovered
months if an enrollee submits an untimely attestation or other evidence
of prior creditable prescription drug coverage, there should be a
minimal need to look at decisions again.
Additionally, we disagree with the comment that we should detail
all aspects of the reconsideration process in the regulation. We
believe it is more practical to establish timeframes and other specific
procedural and operational requirements related to LEP reconsiderations
in CMS guidance so that necessary revisions can be made to ensure the
needs of beneficiaries and plans are met in a timely manner. Updates to
Chapters 4 and 18, Sec. 80.7.1 of the Medicare Prescription Drug
[[Page 1504]]
Benefit Manual will be incorporated, as needed.
Lastly, we agree with the comment that member reconsideration
rights should be provided to a beneficiary who is informed of his or
her LEP. Plans now are required to provide both the LEP reconsideration
notice and LEP reconsideration request form at the time they notify the
enrollee of his/her LEP. See Chapters 4 and 18 Sec. 80.7.1 of the
Medicare Prescription Drug Benefit Manual for additional information.
Comment: A number of commenters suggested that the regulations
confirm that CMS has the ultimate authority to determine whether
previous coverage is creditable, thereby obviating the imposition of
the late enrollment penalty. One commenter urged CMS to monitor the
implementation of the proposed regulations to ensure that plans
adequately inform beneficiaries of the importance of providing evidence
of creditable coverage and work with beneficiaries to ensure an
adequate timeframe to do so.
Response: We have retained the ability to deem coverage creditable
in certain situations, and has defined the procedures for documenting
such coverage at Sec. 423.56. Therefore, we decline to take additional
steps to address this comment in this regulation. With respect to the
commenter's request that we ensure that plans adequately inform
beneficiaries of the importance of providing evidence of creditable
coverage and work with the beneficiaries to ensure they have adequate
time to do so, we have already modified our attestation form and
process, which addresses concerns such as these. For example, as
previously described, our updated guidance allows Part D plan sponsors
more time to follow up with beneficiaries when plans do not receive the
beneficiaries' attestation or the attestation form is incomplete. This
extended timeframe is in addition to the 30 calendar days beneficiaries
already have to attest to prior creditable coverage. Also, if a
beneficiary attests to having creditable coverage beyond the prescribed
timeframe, again, we require Part D plan sponsors to accept the late
attestation and make any corrections to the number of uncovered months
previously reported to CMS. Lastly, as with other requirements, we will
continue to monitor plans' compliance in this area and will follow up
with those when problem areas are identified.
3. Subpart C--Benefits and Beneficiary Protections (Definitions)
a. Incurred Costs
In our May 16, 2008 proposed rule, we proposed to amend the
definition of ``incurred costs'' to reflect our current policy that
certain nominal co-payments assessed by manufacturer Patient Assistance
Programs (PAPs) can be applied toward an enrollee's true out-of-pocket
costs (TrOOP) balance or total drug spend (the accumulated total prices
for covered Part D drugs paid by the plan or by or on behalf of the
beneficiary). We allow PAPs to provide assistance for covered Part D
drugs to Part D enrollees outside the Part D benefit. This means that
payments made by PAPs do not count toward enrollees' TrOOP or total
drug spend balances. However, if a PAP requires their enrollees--
including those enrolled in a Part D plan--to pay a nominal copayment
when they fill a prescription for a covered Part D drug for which the
PAP provides assistance, such amounts would count toward TrOOP if the
plan is notified of the copayment. As explained in Appendix C of
Chapter 14 (Coordination of Benefits) of the Prescription Drug Benefit
Manual, these nominal PAP copayment amounts, when paid by or on behalf
of a Part D enrollee, are applicable to the enrollee's TrOOP and total
drug spend balances, provided the enrollee submits appropriate
documentation to their Part D plan.
Based on the numerous comments we received, we are finalizing the
proposed definition of incurred costs to indicate that nominal PAP
copayments are included in ``incurred costs.'' This revision to the
definition of ``incurred costs'' in Sec. 423.100 is consistent with
the proposed changes to the definition of ``gross covered prescription
drug costs'', which is also being revised to ensure that nominal PAP
copayments are included in ``gross covered prescription drug costs''
and allowable reinsurance costs.
Comment: Several commenters expressed strong support for this
proposed change to the definition of ``incurred costs,'' saying it
would ensure that nominal PAP copayments are included in TrOOP and
total drug spend balances. However, many of these commenters also
expressed concern about the potential burden for beneficiaries in
submitting these claims to their Part D plans. Some commenters asked us
to draft a model form for submitting these claims, and asked us to
encourage all Part D sponsors to adopt this model form. In addition, we
were asked to provide this model form to SHIPs and other organizations
that provide aid to LIS beneficiaries. Other commenters recommended
that we require or encourage PAPs to provide one standard form to Part
D beneficiaries. We were also asked to encourage pharmacies to fill out
the required forms for Part D beneficiaries.
Response: We will consider developing a model form which Part D
sponsors could provide to their enrollees. We would make this form
available to PAPs, pharmacies, SHIPs, and other organizations as
appropriate.
Comment: Some commenters asked us to require Part D sponsors to
include instructions regarding the process for submitting the
appropriate documentation of nominal PAP co-payments in the Evidence of
Coverage (EOC) and other member-communications with Part D
beneficiaries. One commenter recommended that we set uniform timelines
for plans to include instructions for submitting this documentation in
the EOC. This commenter also asked us to give sponsors broad authority
for setting timeframes for the submission of PAP claims.
Response: Currently Part D sponsors are required to provide
information on how to submit a paper claim to have beneficiary
copayments that are paid under a PAP outside the Part D benefit accrue
toward an enrollee's TrOOP and gross drug spend balances. Part D
sponsors have flexibility in setting reasonable timeframes for the
submission of such paper claims, keeping in mind CMS deadlines for
submission of prescription drug event (PDE) records for purposes of the
Part D payment reconciliation process.
Comment: We received one comment asking us to encourage PAPs to
develop a means for transmitting the appropriate documentation
electronically--in order to reduce the burden for beneficiaries.
Response: Currently, the Health Insurance Portability and
Accountability Act (HIPAA) standard for claims submission does not
accommodate the e-transmission of this claim information by PAPs or
network pharmacies. We would support any industry efforts to streamline
the submission of these and other paper claims.
Comment: One commenter asked that we provide a definition of a
Patient Assistance Program (PAP) in order to help differentiate a PAP
from a manufacturer sponsored pharmacy benefits card program.
Response: We use the term PAP with respect to pharmaceutical
manufacturer sponsored patient assistance programs
[[Page 1505]]
that provide free products or assistance through in kind product
donations to low income patients--particularly those with incomes below
200 percent of the Federal poverty level (FPL)--with no or insufficient
prescription drug coverage. Manufacturer PAPs operate outside of the
Medicare Part D program.
Comment: One commenter expressed concern that PAPs tend to promote
brand drugs which is inconsistent with the efforts of Part D sponsors
to promote generics.
Response: We appreciate the commenter's concern but note that we do
not have any regulatory authority over PAPs. To the extent that Part D
sponsors learn that their enrollees are purchasing brand drugs outside
of the Medicare prescription drug benefit through a PAP, the sponsors
may undertake efforts to promote any generic equivalents or
therapeutically equivalent drugs available on Part D plan formularies.
Comment: We received a few comments regarding the automation of
``true out-of-pocket costs'' (TrOOP) reporting. One commenter asked
that we continue to address challenges associated with TrOOP tracking.
Another commenter recommended that we work with the National Council
for Prescription Drug Programs (NCPDP) to update HIPAA Standards in
order to automate TrOOP reporting and help pharmacies better support
the Medicare Part D program.
Response: We are currently working with the industry to implement
an automated TrOOP balance transfer process to better facilitate the
tracking of TrOOP. Additional guidance regarding this effort will be
provided at a future date.
Comment: One commenter noted that in the case of LIS enrollees, it
is possible that the nominal PAP co-pay will exceed the LIS cost
sharing due from the beneficiary. The commenter asked that we clarify
that in such cases, Part D sponsors should reflect the cost sharing due
as the LIS cost sharing amount and that we require the Part D sponsors
to send the LIS beneficiary a check for the difference between the PAP
co-payment and LIS cost sharing amount.
Response: We disagree with this recommendation. LIS beneficiaries
do not receive the low-income cost sharing subsidy for drugs they
obtain through PAPs because these programs operate outside of the
Medicare Part D program. Therefore, there is no coordination of
benefits between a PAP and Part D sponsors. Sponsors cannot make
adjustments through refund or otherwise to nominal co-payments assessed
by PAPs to LIS eligible enrollees. The proposed change to the
definition of ``incurred costs'' simply allows affected beneficiaries
to have their nominal PAP co-payments included in their TrOOP and gross
drug spend balances.
b. Negotiated Prices
In order to address questions that have arisen since the
Prescription Drug Benefit final rule was issued, we proposed to amend
the definition of ``negotiated prices'' (to be effective for Part D
contract year 2010) to require that Part D sponsors base beneficiary
cost sharing and price reporting to CMS on the price ultimately
received by the pharmacy or other dispensing provider, also known as
the pass-through price. We received questions regarding whether Part D
sponsors of prescription drug plans (PDPs) and Medicare Advantage
prescription drug plans (MA-PDs) who utilize the lock-in pricing
approach when contracting with a pharmacy benefit manager (PBM) may
base beneficiary cost sharing on the price paid to the PBM, also known
as the lock-in price. The lock-in pricing approach is a contract method
by which the sponsor agrees to pay the PBM a set rate for a particular
drug and the PBM negotiates with pharmacies to achieve the best
possible price, which may vary from the rate paid to the PBM. Under the
lock-in pricing approach, the price paid to the PBM or lock-in price is
often greater than the price paid by the PBM to the pharmacy (the pass-
through price) due to the inclusion of a ``risk premium'' which the
Part D sponsor pays to the PBM to mitigate market risk and shield the
Part D sponsor from price variability between pharmacies. This ``risk
premium'' is analogous to the cost of drug utilization management, drug
price negotiation, and other administrative costs incurred by Part D
sponsors. Therefore, the lock-in price includes an administrative fee
paid to the PBM by the Part D sponsor.
Beneficiary cost sharing is a function of the negotiated price,
either directly as in coinsurance percentages of the negotiated price,
or indirectly, as co-payments which are ultimately tied to actuarial
equivalence requirements based on negotiated prices. We believe that it
is important to ensure that negotiated prices are based upon the actual
drug price paid at the point-of-sale and do not include any of the
administrative fees paid by Part D sponsors to their intermediary
contracting organizations because higher negotiated prices advance
beneficiaries through the phases of the Part D benefit more quickly
such that a greater number of beneficiaries reach the coverage gap
phase of the benefit. In addition, using lock-in prices to determine
negotiated prices increases the low-income cost sharing and reinsurance
subsidy payments made by the Federal government. The low-income cost
sharing subsidy is calculated based on the difference between the
maximum cost sharing amounts for LIS beneficiaries as defined by the
statute and, if greater, the beneficiary cost sharing charged under the
Part D plan. Thus, higher beneficiary cost sharing leads to higher low-
income cost sharing subsidy amounts. The reinsurance subsidy, which is
calculated as 80 percent of allowable reinsurance costs, is increased
as negotiated prices, and therefore, allowable reinsurance costs
increase. We believe that continuing to permit Part D sponsors to use
lock-in prices as the basis for determining beneficiary cost sharing,
and reporting drug costs to CMS could also have the following
undesirable results:
Cost shifting from the government to beneficiaries in the
form of higher beneficiary out-of-pocket costs.
Interference with market competition among Part D
sponsors.
Beneficiary confusion over actual drug prices.
Difficulties for pharmacies in explaining drug prices to
customers and managing cash transfers to Part D sponsors or their
intermediary contracting organizations.
Government risk sharing on amounts that reflect
administrative costs, contrary to Congressional intent to exclude risk-
sharing on administrative expenses.
Please see the preamble to the May 16, 2008 proposed rule for a more
detailed discussion of the potential impact of using lock-in prices to
determine negotiated prices and beneficiary cost sharing.
For these reasons, we proposed to revise Sec. 423.100 so that the
first part of the definition of ``negotiated prices'' would state that
negotiated prices are prices that the Part D sponsor (or other
intermediary contracting organization) and the network dispensing
pharmacy, or other network dispensing provider, have negotiated as the
amount the network dispensing pharmacy or other network dispensing
provider, will receive, in total, for a particular drug. The term
``intermediary contracting organization'' refers to organizations such
as PBMs that contract with plan sponsors to perform one or both of the
following functions: (1) Pay pharmacies and other dispensers of Part D
drugs provided to enrollees in the Part D
[[Page 1506]]
sponsor's plan, regardless of whether the intermediary contracting
organization negotiates pharmacy contracts on behalf of the plan
sponsor or on its own behalf; or (2) negotiate rebates or other price
concessions with manufacturers for Part D drugs provided to enrollees
in the Part D sponsor's plan, regardless of whether the intermediary
contracting organization negotiates on behalf of the plan sponsor or on
its own behalf.
Under this proposed definition, Part D sponsors who utilize the
lock-in pricing approach when contracting with a PBM would no longer be
permitted to base beneficiary cost sharing on the price paid to the PBM
(the lock-in price). Thus, our proposed definition would exclude any
differential between the price paid to the pharmacy and the price paid
to the PBM or other intermediary contracting organization, and instead
would treat that differential (or ``risk premium'') as an
administrative cost paid to the PBM or intermediary contracting
organization rather than as a drug cost under Part D.
We also proposed to revise the definition of ``negotiated prices''
(to be effective upon the effective date of the final rule) to include
prices for covered Part D drugs negotiated between the Part D sponsor
(or its intermediary contracting organization) and other network
dispensing providers. Part D sponsors can contract with providers other
than a pharmacy to dispense covered Part D drugs by including them in
their network. Therefore, we proposed to amend the definition of
negotiated prices to reflect the prices for covered Part D drugs that
Part D sponsors (or their intermediary contracting organizations)
negotiate with all of their network dispensing providers.
Our proposed changes to the definition of negotiated prices would
not interfere with the negotiations between Part D sponsors, pharmacy
benefit managers, and pharmacies for covered Part D drugs. Rather, Part
D sponsors would be required to use the price ultimately received by
the pharmacy (or other dispensing provider) as the basis for
calculating beneficiary cost sharing, total drug spend, and cost
reporting to CMS. The proposed definition would not require a Part D
sponsor to use a particular pricing approach in its contracting
agreements with PBMs. Part D sponsors could continue to use either the
pass-through or lock-in pricing approach when contracting with a PBM--
provided that beneficiary cost sharing, total drug spend, and the drug
costs reported to CMS are based on the price ultimately received by the
pharmacy, or other dispensing providers. To the extent that Part D
sponsors believe that the lock-in pricing approach reduces their total
costs, we indicated that we expected that they would continue to use it
when contracting with a PBM.
While we did receive some comments in opposition to the proposed
changes to the definition of negotiated prices, most of the comments
received were in strong support of our proposals. Based on the comments
received and the responses provided below, we are finalizing the
revisions to the definition of ``negotiated prices'' in Sec. 423.100
as proposed. The change to the definition of ``negotiated prices'' to
include prices for covered Part D drugs negotiated between the Part D
sponsor (or its intermediary contracting organization) and other
network dispensing providers is effective upon the effective date of
this final rule. The revision to the definition of ``negotiated
prices'' to require Part D sponsors to base beneficiary cost sharing on
the price paid to the pharmacy or other dispensing provider will be
effective for Contract Year 2010.
Comment: Several commenters agreed with our assertion that the
proposed changes to the definition of negotiated prices would increase
transparency. One commenter supported the proposed change because it
would improve transparency but still allow Part D sponsors to utilize
the lock-in pricing approach. Another commenter indicated that the
increased transparency would serve as an effective tool for helping to
control prescription drug costs. Another commenter indicated that the
benefits of transparency and the enhanced ability of beneficiaries to
manage their benefit that would result from the proposed changes would
outweigh the advantages of lock-in pricing for Part D sponsors. A
commenter stated that often plan sponsors are not fully aware of the
``PBM spread.'' This commenter and other commenters recommended that we
require PBMs to be compliant and fully transparent with Part D sponsors
about pricing structures, rebating, formulary management incentives,
marketing, and compliance requirements.
Response: We agree with commenters that the proposed revision to
the definition of ``negotiated prices'' would increase transparency by
ensuring that the drug prices paid to pharmacies are transparent to
beneficiaries and Part D sponsors. We believe that this transparency
will help Part D sponsors to better manage their drug costs and
negotiate lower drug costs and administrative fees by making them fully
aware of the ``PBM spread'' or ``risk premium'' which they are paying
to their PBMs. This transparency will also be helpful to beneficiaries
as they evaluate and choose among Part D plans. While we understand the
final commenter's concern about transparency, we do not have the
authority to regulate Part D sponsors' first tier, downstream and
related entities to this degree. We contract with Part D sponsors, not
with first tier, downstream and related entities, such as a sponsor's
PBM, for the provision of the Medicare prescription drug benefit.
Therefore, we do not have the direct authority to require PBMs and
other intermediary contracting organizations to be fully transparent
regarding their pricing structures. However, we strongly encourage Part
D sponsors to include provisions in their contracts with first tier,
downstream and related entities that ensure compliance with our
reporting requirements and enhance transparency. We note that all plan
contracts with PBMs must include provisions that allow us to review
their financial statements, books, and records.
Comment: Some commenters asserted that the Medicare Part D program
currently has transparency in the form of ``price transparency,'' where
the prices paid by Part D sponsors are fully known to sponsors and
beneficiaries and are also listed on the CMS Medicare Web site. The
commenters asserted that the proposed changes to the definition of
negotiated prices would instead create ``cost transparency.'' The
commenters stated that there are several studies concluding that ``cost
transparency'' increases prices because, when aware of one another's
costs or discount agreements, competitors no longer offer special or
deep discounts that are unnecessary to win the competition.
Response: We disagree. The use of lock-in prices reduces ``price
transparency'' for Part D sponsors by combining the administrative fees
charged by PBMs with the drug price. The proposed changes to the
definition of negotiated prices would increase ``price transparency''
by ensuring that only the actual drug price is used to determine
beneficiary cost sharing and report drug costs to CMS. We believe that
the competitive nature of the Part D program will continue to provide
incentives for Part D sponsors and their contracted PBMs to negotiate
with pharmacies and other dispensing providers for lower drug prices.
In addition, the revised definition of negotiated prices will provide
an additional incentive for Part D sponsors
[[Page 1507]]
to negotiate with PBMs for lower administrative fees.
Comment: One commenter stated that under pass-through pricing, Part
D sponsors have less transparency regarding their ultimate drug costs
because the drug prices are not fixed. The commenter asserted that this
makes it difficult for Part D sponsors to predict their drug costs,
which could lead to higher risk sharing payments by the Federal
government.
Response: We disagree. We do not believe that requiring Part D
sponsors to develop their Part D bids and report drug costs to CMS
using pass-through prices will make it significantly more difficult for
Part D sponsors to predict their drug costs, such that risk sharing
will be higher. In addition, Part D sponsors may take several steps to
alleviate this concern, including negotiating their drug prices prior
to developing their Part D bids and using the lock-in pricing approach
when contracting with a PBM.
Comment: Several commenters indicated that the proposed changes to
the definition of ``negotiated prices'' would achieve beneficiary cost
savings. One commenter indicated that these beneficiary cost savings
would ensure improved access to prescription drugs for beneficiaries.
In addition, commenters stated that the proposed changes would protect
beneficiaries from being prematurely advanced into the coverage gap.
However, several commenters stated that elimination of the ``risk
premium'' received by PBMs would not decrease out-of-pocket costs for
beneficiaries. These commenters stated the ``risk premium'' provides
incentives for PBMs to control costs and negotiate deep discounts on
prescription drugs that are then passed on by Part D plans to
beneficiaries.
Response: We agree with those commenters who believe that the
proposed changes would create cost savings for beneficiaries. We
believe that lock-in prices are generally higher than the prices paid
to pharmacies due to the inclusion of the ``risk premium'' paid to the
PBM for shielding the Part D sponsor from price variability. These
higher drug prices lead to higher cost sharing for Part D
beneficiaries. In addition, beneficiaries are advanced more quickly
through the Part D benefit such that a greater number of beneficiaries
enter the coverage gap phase where they pay 100 percent of the higher
drug price. As a result, we believe that beneficiaries enrolled in Part
D plans which currently utilize the lock-in pricing approach generally
will experience cost savings under the proposed revision to the
definition of ``negotiated prices'' that would require Part D sponsors
to base negotiated prices and beneficiary cost sharing on the price
paid to the pharmacy, which is generally lower than the lock-in price.
We acknowledge that the ``risk premium'' may provide an incentive
for PBMs to negotiate for lower drug prices which would reduce drug
costs. Under the revised definition of ``negotiated prices,'' Part D
sponsors may continue to pay ``risk premiums'' to PBMs provided that
the amount of these risk premiums is appropriately categorized as
administrative cost and not drug cost. In addition, Part D sponsors may
include other incentives in their contracts with PBMs whereby PBMs
would receive higher administrative fees for better managing drug
expenditures and reducing overall drug costs. We also note that the
increased transparency created under the proposed changes to the
definition of negotiated prices would provide Part D sponsors with
information regarding administrative fees and the cost of drugs that
they can use to negotiate more effectively with PBMs to further reduce
the cost of providing the prescription drug benefit.
Comment: One commenter asserted that lock-in pricing is more
equitable to beneficiaries than pass-through pricing because it
protects beneficiaries who live in less competitive or underserved
areas by providing uniform pricing to beneficiaries irrespective of
where they live.
Response: While we acknowledge that the uniform pricing provided
under the lock-in pricing approach may provide lower cost sharing for
some beneficiaries, we believe that using lock-in prices to determine
beneficiary cost sharing generally results in higher cost sharing for
most beneficiaries. As a result, we believe that requiring plans to
determine beneficiary cost sharing based upon the pass-through price
paid to the pharmacy or other dispensing provider will reduce out-of-
pocket costs for most beneficiaries and slow their advance through the
initial coverage phase of the benefit.
Comment: Another commenter agreed with our assertion that Part D
premiums may be lower under the lock-in pricing approach. The commenter
indicated that these lower premiums result in a more robust benefit
that covers more beneficiaries and therefore, results in a healthier
population at an overall lower cost to the government.
Response: We agree that lower beneficiary premiums may help to
encourage healthier beneficiaries to enroll in Medicare Part D.
However, we do not think that it is appropriate to inflate the cost
sharing paid by beneficiaries with higher drug utilization in order to
reduce premiums for healthier beneficiaries. The goal of the Medicare
Prescription Drug Benefit is to make prescription drugs more affordable
for all Part D beneficiaries, not just those who are healthier and have
lower drug utilization. The proposed revision to the definition of
``negotiated prices'' will lead to higher Part D bids and therefore,
higher premiums, for Part D plans which currently utilize the lock-in
pricing approach. This increase in Part D bids will increase the direct
subsidy payments made by the Federal government as well as the premiums
paid by beneficiaries. However, these additional costs to the Federal
government would be partially offset by reductions in the low-income
cost sharing and reinsurance subsidy payments made by the Federal
government. A reduction in low-income cost sharing subsidy payments is
expected due to lower beneficiary cost sharing. The reinsurance
subsidy, which is calculated as 80 percent of allowable reinsurance
costs, is expected to decrease due to lower negotiated prices and
therefore, lower allowable reinsurance costs. Moreover, while the
beneficiary premiums will increase for plans using the ``lock-in''
pricing methodology, cost sharing would be lower for all beneficiaries
enrolled in these plans.
Comment: Some commenters indicated that they agreed with our
assertion that the lock-in pricing approach currently creates an uneven
playing field for Part D sponsors. They explained that generally
beneficiaries tend to weigh premiums more than cost sharing so that
plans utilizing the lock-in pricing approach may appear more cost
effective to some beneficiaries. However, these commenters stated that,
in the end, such plans cost enrollees considerably more than plans
using the pass through pricing approach as a result of increased cost
sharing.
Response: We agree with the commenter that plans which have lower
beneficiary premiums due to the lock-in pricing approach may ultimately
be more costly for beneficiaries due to higher beneficiary cost
sharing. To ensure that beneficiaries have the resources necessary to
assess the premiums and cost sharing of different plan options and make
informed plan choices, we will continue our current outreach and
education efforts, including the plan comparison information available
on the plan finder.
Comment: A few commenters indicated that they would prefer that
[[Page 1508]]
CMS retain the current flexibility for Part D sponsors to choose either
the pass-through or lock-in pricing approach, and the continued
flexibility to reflect lock-in prices as part of drug costs. Commenters
indicated that maintaining this flexibility would preserve the
competitive nature of the Part D program.
Response: We agree that competition is an important aspect of the
Part D program. We believe that this competition will be retained under
our proposed approach as Part D sponsors will continue to have the
incentive to negotiate for the lowest possible drug prices in order to
keep their premiums low and encourage beneficiaries to enroll in their
plans. We note that Part D sponsors will continue to have the option to
use either pricing approach when contracting with a PBM. However, we
believe that the advantages for beneficiaries under the proposed
revision to the definition of ``negotiated prices'' outweigh the
possible benefits Part D sponsors would receive from continuing to use
the lock-in pricing approach.
Comment: One commenter asserted that Part D sponsors are fully
aware of the potential that drug costs under the lock-in pricing
approach include a risk premium paid to the PBM and understand the
value this premium brings in reducing their drug costs.
Response: To the extent that this statement is true, we would
expect Part D sponsors to continue providing this risk premium to their
contracted PBMs. Even if Part D sponsors are aware that there is a
potential for risk premium under the lock-in pricing approach, however,
it is unlikely they know the actual amount of the risk premium they are
paying if they are not made aware of the price actually paid to the
pharmacy. This incomplete information makes it difficult for a Part D
sponsor to fully quantify the value of paying this risk premium to a
contracted PBM in the first place. The proposed revision to the
definition of ``negotiated prices'' would provide Part D sponsors with
the increased transparency they need to fully quantify the value of
paying the risk premium. We believe that this transparency will provide
Part D sponsors with the information needed to more effectively
negotiate with PBMs to reduce their risk premiums as well as other
administrative fees.
Comment: One commenter indicated that the proposed changes violate
the non-interference requirement of the MMA at Section 1860D-11(i)(2),
which prohibits CMS interference with negotiations between sponsors and
manufacturers or pharmacies and the institution of a price structure
for the reimbursement of covered Part D drugs.
Response: Our proposed changes to the definition of negotiated
prices do not interfere with the negotiations between Part D sponsors
and pharmaceutical manufacturers and pharmacies, nor do they institute
a price structure for reimbursement of covered Part D drugs. While Part
D sponsors will be required to use the price ultimately received by the
pharmacy (or other dispensing provider) as the basis for calculating
beneficiary cost sharing and reporting drug costs, Part D sponsors will
not be required to use a particular pricing approach in their
contractual agreements with PBMs. Part D sponsors may continue to use
the pass-through or lock-in pricing approach when contracting with a
PBM, provided that beneficiary cost sharing and the drug costs reported
to us are based on the price ultimately received by the pharmacy or
other dispensing provider.
Comment: We received a few comments indicating that the proposed
changes essentially mandate a price structure because it is not
feasible to compensate PBMs under the lock-in pricing approach and yet
price drugs using pass-through pricing. The commenters assert that this
dichotomy would require PBMs to build parallel claims adjudication
modules and keep track of a parallel universe of claims.
Response: While we understand that the proposed revisions to the
definition of negotiated prices may require some PBMs to implement
certain system changes in order to accommodate the requirement to
report the price paid to the pharmacy, it is unclear to us why this
would not be feasible. Currently, PBMs that offer the lock-in pricing
approach have the capacity for dual pricing as they must track both the
price they paid to the pharmacy and the lock-in price they received
from the Part D sponsor. The proposed changes to the definition of
``negotiated prices'' would simply change which of these two prices is
reported to CMS.
Comment: Several commenters indicated that it was not Congress'
intent to permit plans to charge higher prices under the lock-in
pricing approach as a result of the PBM spread. We received a few
comments indicating that the lack of transparency in the spread allows
the intermediary to manipulate the spread amount to its advantage which
ultimately works against beneficiaries. One commenter recommended that
we consider requiring that Part D plans use a fiscal intermediary which
will have no personal interest in what the pharmacy is paid.
Response: We agree that a lack of transparency may lead PBMs to
charge plans a higher drug price under the lock-in pricing approach in
order to generate greater profit for the PBM, and that these higher
prices are passed on to beneficiaries and the Medicare program. We
believe that the proposed changes to the definition of ``negotiated
prices'' would increase transparency for Part D sponsors and enhance
their ability to negotiate with PBMs for lower administrative costs by
ensuring that they are informed of the actual drug price (the price
paid to the pharmacy) and the administrative fees paid to the PBM.
Thus, this increase in transparency could affect drug costs. However,
we acknowledge that the direct subsidy paid by the Medicare program and
the premiums paid by beneficiaries may be somewhat higher under the
pass through pricing approach than under the lock-in approach. CMS does
not have the authority to require Part D sponsors to use a specific
fiscal intermediary or approach when negotiating prices and contracts
with pharmacies. Furthermore, in response to the suggestion that we
consider requiring Part D plans to use a fiscal intermediary with no
personal interest in the amount paid to the pharmacy, we note that it
may not be beneficial to the Medicare Part D program to require Part D
sponsors to use fiscal intermediaries with no personal interest in the
price paid to the pharmacy.
Comment: One commenter indicated that the ``PBM spread'' represents
an additional profit for PBMs which will be reduced with greater
transparency in pricing. However, we received a few comments which
stated that the proposed changes could increase program costs for
Medicare Part D by increasing Part D sponsors' administrative costs.
One commenter expressed concerns that the proposed changes would
require Part D sponsors to re-negotiate their contracts with PBMs. As a
result of these negotiations, the commenter stated, PBMs could charge
Part D sponsors higher administrative fees, which would lead to higher
beneficiary premiums.
Response: While we acknowledge that the administrative fees paid by
Part D sponsors to PBMs will be higher as a result of the proposed
changes, we believe that when the ``risk premium'' that is currently
included in drug prices under the lock-in model is taken into account,
overall the administrative fees paid by Part D sponsors will not change
significantly. We also believe that the increased transparency would
help Part D sponsors negotiate more effectively
[[Page 1509]]
with PBMs. In addition, the competitive nature of the Medicare Part D
program will continue to provide ample incentives for Part D sponsors
to minimize their costs in order to keep their beneficiary premiums
low.
Comment: Two commenters indicated that the proposed changes may not
reduce costs for the Medicare Part D program, but may in fact increase
costs. The commenters explained that the proposed changes would not
permit PBMs to utilize all of the tools and incentives needed to
provide prescription drug trend management programs, which are benefit
management tools designed to keep drug costs down while maintaining and
improving beneficiary health outcomes.
Response: It is unclear to us how the proposed changes to the
definition of ``negotiated prices'' would prohibit PBMs from providing
services to help Part D sponsors manage drug costs. The proposed
changes would in no way prohibit Part D sponsors from paying PBMs for
these services. To the extent that prescription drug trend management
programs provide an important and valued resource for managing and
reducing drug costs, CMS would expect Part D sponsors to continue
paying administrative fees to PBMs for the provision of such services.
The proposed changes to the definition of ``negotiated prices'' would
simply ensure that Part D sponsors appropriately report these fees as
administrative costs and not as drug costs.
Comment: In the preamble to the proposed rule, we explained that an
argument could be made that the lock-in model is discriminatory to the
extent it may favor low drug utilizers over high drug utilizers. One
commenter asserted that a plan should not be considered discriminatory
if it affects certain utilizers more than others. If such plans were
considered discriminatory, the commenter argued, any plan type other
than defined standard coverage could be considered discriminatory. The
commenter stated that Congressional intent was to allow for choice in
this regard. Another commenter indicated that differences in plan
design and cost sharing cannot be equated with discrimination. There is
no discrimination, this commenter stated, against a beneficiary because
each beneficiary may make an informed plan choice with all relevant
information available.
Response: We continue to believe that certain differences in plan
design and cost-sharing can be discriminatory. While it is important to
maintain a variety of drug plan choices in Medicare Part D, it is also
important for CMS to review plan designs to ensure that they do not
inappropriately discourage the enrollment of less healthy beneficiaries
or high drug utilizers in certain plans in order to maintain a robust
risk pool and preserve the concept of community rating in the Medicare
Part D program. It is also of paramount importance for CMS to ensure
that there is a level playing field so that true competition can occur
that benefits all parties--the taxpayer, beneficiaries, and plans. The
actuarial equivalence test for basic Part D coverage is intended to
ensure that there is a level playing field between plan types. However,
currently two different price bases (pass-through prices and lock-in
prices) may be used when determining actuarial equivalence.
Furthermore, because Part D plan sponsors that use the lock-in
methodology are paying a ``risk premium'' as part of drug costs, they
often can negotiate a lower administrative fee with their PBMs. As a
result, these plans can submit lower bids in order to receive lower
premiums. These lower bids may increase the likelihood that a plan's
premium will be below the regional low-income subsidy benchmarks such
that the plan will qualify for auto-enrollment and facilitated
enrollment of LIS-eligible individuals. As a result, we continue to
believe that providing Part D sponsors with the option to develop their
Part D bids using either the pass-through approach or the lock-in
approach creates an uneven playing field for Part D sponsors who
utilize the pass-through pricing approach.
Comment: One commenter indicated that it was unclear why we
believed that lock-in pricing would shift costs from the government to
beneficiaries in the form of higher beneficiary out-of-pocket costs.
The commenter explained that in their observation, the lock-in model
has been the dominant pricing model in the commercial market. The
``risk premium'' allows PBMs to carry out a broad spectrum of services
which favorably influence overall drug spending trends. The commenter
also stated that this pricing model is preferred in the commercial
market because it holds PBMs accountable for the drug costs incurred.
The commenter indicated that the ``regulated transparency'' resulting
from the proposed changes would be less effective in reducing drug
costs than vigorous PBM competition. Another commenter indicated that
the lock-in pricing approach may generate deeper discounts than the
pass-through pricing approach.
Response: The use of lock-in prices to develop Part D bids shifts
administrative costs that would be paid primarily by the Federal
government as part of the direct subsidy to drug costs paid by
beneficiaries through higher cost sharing. The proposed revision to the
definition of ``negotiated prices'' would ensure that these
administrative costs are not paid by beneficiaries through beneficiary
cost sharing. We note that Part D sponsors will continue to have the
option to utilize the lock-in pricing approach in their contracts with
PBMs, provided that the pass-through price is used to determine
beneficiary cost sharing and to report drug costs to CMS. To the extent
that the lock-in pricing approach generates deeper discounts or reduces
total drug costs, we would expect Part D sponsors to continue using
this pricing approach when contracting with PBMs.
Comment: In the preamble to the proposed rule, we requested
comments regarding the impact of the proposed changes on pharmacies,
particularly small independent pharmacies. We received comments from
several pharmacist associations as well as pharmacies. The commenters
were generally very supportive of the proposed changes and noted that
the proposed changes will not have a negative effect on pharmacies. One
commenter indicated that lock-in pricing negatively impacts the ability
of pharmacies to serve beneficiaries. Another commenter indicated that
the additional transparency created by the proposed changes to the
definition of ``negotiated prices'' would likely make competition more
difficult for small pharmacies although these pharmacies would not be
removed from Part D sponsors' networks due to CMS' pharmacy access
standards. Another commenter indicated that small independent
pharmacies do not tend to receive higher reimbursement rates and
therefore, would not be negatively impacted by the proposed change. The
commenter explained that independent pharmacies are often forced to
accept whatever price is offered by the PBM. However, because of their
size, chain pharmacies are often able to negotiate higher reimbursement
rates. One commenter indicated that the proposed change would not have
an adverse effect or increased burden on LTC pharmacies. Another
commenter expressed concern that the decrease in beneficiary cost
sharing resulting from the proposed changes could reduce the
operational cash-flow for pharmacies. This commenter recommended
developing guidance regarding prompt payment to
[[Page 1510]]
pharmacies to help alleviate this concern.
Response: Based on the comments received from pharmacies and
pharmacists' associations, which were very supportive of the proposed
changes, we have concluded that the proposed changes would not
negatively impact pharmacies, including small independent pharmacies.
Rather, we believe that the proposed changes will help pharmacies by
reducing the administrative burden associated with tracking lock-in
prices and addressing beneficiary confusion resulting from
discrepancies between the pass-through price charged by the pharmacy
and the lock-in price reflected on the beneficiary's EOB. With respect
to the comment suggesting that CMS develop guidance regarding prompt
payment to pharmacies, we note that section 171 of MIPPA establishes
timely claims payment requirements for Part D plans that will become
effective for plan years beginning 2010. CMS is currently developing
and implementing guidance to ensure prompt payment to pharmacies.
Comment: One commenter expressed concern that Part D sponsors may
believe that the proposed revisions to the definition of ``negotiated
prices'' will require Part D sponsors to set negotiated prices equal to
340B prices for 340B-participating Part D network pharmacies. The
commenter explained that making drugs available to non-340B patients at
340B prices will create significant losses for 340B pharmacies, which
must obtain these drugs at prices above 340B levels. Therefore, the
commenter asked CMS to clarify that Part D sponsors may not require
340B providers to provide 340B prices to Part D plans under Sec.
423.104(g)(1).
Response: The proposed definition of negotiated prices does not
require Part D sponsors to set negotiated prices at 340B prices for
340B-participating Part D network pharmacies. While we understand the
commenter's concern that Part D plans may try to require pharmacies to
make drugs available to Part D beneficiaries at 340B prices, we note
that we generally do not interfere in plan-pharmacy contract
negotiations or opine on the reasonableness or relevancy of specific
contractual terms. Instead, we use our oversight authority to ensure
that Part D sponsors abide by our rules and allow appropriate access to
their pharmacy networks. A Part D sponsor offering less than
satisfactory or unclear contract terms to a pharmacy would likely find
it difficult to retain enough pharmacies to meet our network
requirements, and would therefore be unable to renew its Medicare Part
D contract. We urge pharmacies to ensure that they understand and agree
with all terms of a pharmacy network contract before contracting with a
Part D sponsor.
Comment: In the proposed rule, we asked for comments regarding the
lack of transparency and the potential for beneficiary confusion as a
result of lock-in prices. We received several comments indicating that
the proposed changes to the definition of negotiated prices would
create greater transparency for beneficiaries. Commenters also
expressed concern that lock-in prices may lead to beneficiary
confusion. One commenter explained that pharmacies are often unable to
customize receipts to reflect the lock-in price. The discrepancy
between the lock-in price reflected in the Explanation of Benefits
(EOB) and the pharmacy price reflected on the receipt often leads to
beneficiary anger and confusion. The commenter asserted that as a
result of the additional time spent with beneficiaries to explain the
discrepancy, pharmacies' administrative costs have increased. Other
commenters stated that lock-in prices do not generate more beneficiary
confusion than pass-through prices. These other commenters asserted
that pass-through pricing generates greater beneficiary confusion than
lock-in pricing by establishing different prices from pharmacy to
pharmacy. In addition, these commenters stated that the full retail
price is not usually shown on the customer receipt, rather, just the
amount due from the beneficiary is shown. As a result, it is rare that
the pharmacy receipt would reflect a drug price that conflicts with a
lock-in price on the EOB.
Response: We acknowledge that pass-through pricing may result in
different prices at different pharmacies, which could create some
confusion for Part D beneficiaries. However, it is customary for
different pharmacies to charge different drug prices. We believe that
the use of lock-in prices may lead to more significant beneficiary
confusion due to the discrepancy between the pass-through price charged
by the pharmacy and the lock-in price reflected on the beneficiary's
EOB. We are aware of a number of cases where beneficiaries have
received pharmacy receipts which show prices that differ from the
prices indicated on their EOB due to lock-in prices. We also understand
the burden this discrepancy places on pharmacies that must try to
address beneficiary confusion. We believe implementing the proposed
changes to the definition of negotiated prices will help to alleviate
this burden.
Comment: One commenter indicated that pharmacies incur significant
administrative costs tracking the lock-in price collected from the
beneficiary and transferring the additional amounts to the PBM. This
burden is exacerbated by the fact that pharmacies are often forced to
sell drugs to PBMs at prices below their acquisition cost. Another
commenter indicated that the lock-in pricing approach does not require
pharmacies to expend more staff resources than the pass-through pricing
approach. This commenter explained that pharmacies are required to have
accounting processes and the capability to conduct ongoing
reconciliations under any pricing approach. Furthermore, the commenter
indicated that typically pharmacies are not required to remit payments
to PBMs since the amounts owed by the pharmacy are generally offset by
the far greater amounts owed to the pharmacy by the PBM.
Response: We agree with the second commenter that pharmacies would
not incur additional administrative costs under the lock-in pricing
approach from transferring additional amounts to PBMs because generally
pharmacies are required to conduct ongoing reconciliations with PBMs
and plan sponsors under either pricing approach. However, we believe
that pharmacies do incur additional administrative costs from tracking
the lock-in price, ensuring that this is the price conveyed to the
beneficiary (rather than the price actually paid to the pharmacy by the
PBM), and addressing beneficiary confusion regarding the drug price. We
believe that the proposed changes to the definition of ``negotiated
prices'' would help alleviate some of this administrative burden for
pharmacies by ensuring that beneficiary cost sharing is based on the
price negotiated with the pharmacy.
Comment: Several commenters recommended that until the proposed
changes are made effective in 2010, CMS should require Part D sponsors
that utilize the lock-in pricing approach to indicate this policy in
their marketing materials in order to create greater transparency for
Part D beneficiaries. In addition, they recommended that we require
Part D sponsors to inform their enrollees whenever they purchase a drug
that is more highly priced because of lock-in prices, and that we
require Part D sponsors to advise enrollees of their right to pay a
lower cash price during all phases of the benefit.
Response: We agree with the commenters' desire to provide greater
transparency for beneficiaries and believe that the changes to the
[[Page 1511]]
definition of ``negotiated prices'' to require the reporting of pass
through prices effective in 2010 will achieve that result. However, the
commenters' recommendations would require Part D sponsors using the
lock-in approach to incur significant administrative costs for plan
year 2009. Given that these requirements would only be applicable for
one year, we do not believe that it would be worthwhile to implement
the commenters' recommendations.
Comment: A commenter expressed concern that the proposed changes to
the definition of ``negotiated prices'' would make calculating the
negotiated price too complicated and therefore requested clarification
that the negotiated price does not include post-hoc rebates, price
concessions, or other adjustments to prices.
Response: Under the proposed definition of ``negotiated prices'',
Part D sponsors would only apply the price concessions that they elect
to pass through at the point of sale. We understand the difficulty in
applying price concessions that are received after the point of sale
purchase to the negotiated price at the point of sale. Part D sponsors
would not be required to apply post-hoc rebates or price concessions to
the negotiated price at the point of sale. Rather, these post-hoc
rebates or price concessions must be reported to CMS outside the drug
claim, consistent with our DIR reporting instructions, ``Medicare Part
D DIR Reporting Requirements for Payment Reconciliation''.
Comment: Several commenters expressed concern that the proposed
definition of negotiated prices would not prevent retail or mail order
pharmacies that are wholly-owned by Part D sponsors from charging
inflated drug prices under the Part D sponsors' plans. It was
recommended that CMS and OIG exercise oversight over related parties to
ensure that they are charging prices that are reasonable relative to
the underlying drug cost.
Response: We appreciate these concerns and will continue reviewing
the prices charged by pharmacies that are wholly-owned by Part D
sponsors and other related parties to ensure that their prices are
comparable to those offered under other Part D plans, particularly when
reviewing Part D bids.
Comment: Several commenters indicated that the proposed definition
fails to protect Part D beneficiaries from higher drug prices by not
requiring Part D sponsors to pass through rebates and price concessions
at the point of sale. They asserted that allowing Part D sponsors not
to pass through rebates at the point of sale dilutes the insurance
principle of the Part D program by shifting cost to the sickest
beneficiaries and not giving these beneficiaries the benefit of the
rebates which they generated through their higher volume of drug
purchases.
Response: As stated in the January 2005 final rule (70 FR 4244), we
interpret the definition of the term negotiated prices in section
1860D-2(d)(1)(B) of the Act as requiring Part D sponsors to pass
through some, but not necessarily all, price concessions to Part D
beneficiaries at the point of sale. Section 1860D-2(d)(1)(B) of the Act
specifically requires that negotiated prices ``shall take into account
negotiated price concessions, such as discounts, direct or indirect
subsidies, rebates, and direct or indirect remunerations * * *'' A
phrase other than ``take into account'' would have been used, had the
intent been to include all price concessions in the negotiated prices
made available to Part D beneficiaries at the point of sale. The plain
language of this provision demonstrates Congress' intent to be
permissive--that Part D sponsors are permitted to choose how much of
their negotiated price concessions to pass through to Part D
beneficiaries at the point of sale. Generally speaking, however,
rebates and certain price concessions are determined after the point of
sale purchase, making it difficult for Part D sponsors to always apply
these amounts to the negotiated price at the point of sale.
Comment: One commenter recommended that we delay the implementation
date for this proposed definition until 2011 in order to provide PBMs
with sufficient time to adapt their information systems. This delay
would especially help sponsors that wish to continue using the lock-in
pricing approach. Another commenter supported the proposed effective
date because it would provide sufficient time for Part D sponsors and
PBMs to make any appropriate adjustments in reimbursement to
pharmacies.
Response: We understand that the proposed definition may require
PBMs to implement some changes in their information systems. However,
we believe the effective date of 2010 will provide sufficient time for
PBMs to implement any necessary systems changes.
Comment: One commenter asked whether Part D sponsors would be
permitted to apply a negative adjustment to their administrative costs
in cases where the lock-in price is lower than the pass-through price,
rather than being higher.
Response: Part D sponsors would be permitted to adjust their
administrative cost estimates appropriately for the PBM spread when
developing their Part D bids. However, we note that it is unlikely that
overall lock-in prices will be lower than the pass-through prices.
Comment: One commenter indicated that the proposed changes to the
definition of ``negotiated prices'' would increase overall program
costs, sponsors' '' administrative costs, Part D bids, and beneficiary
premiums. The commenter asserted that these cost increases would defeat
the purpose of the Medicare Part D program, which is to keep
prescription drugs affordable for Medicare beneficiaries.
Response: The goal of the Medicare Part D program is to serve
Medicare beneficiaries and make prescription drugs affordable for them.
The proposed changes will generally reduce cost sharing for
beneficiaries, particularly those who have high drug utilization and,
as a result, are most in need of assistance in purchasing prescription
medications. We also believe that the increase in Federal costs due to
higher plan bids will be balanced by the reduction in costs for
Medicare Part D beneficiaries.
Comment: A commenter indicated that the proposed changes to the
definition of ``negotiated prices'' should apply equally to prices
negotiated with network retail pharmacies and network mail order
pharmacies.
Response: We agree. The proposed definition of negotiated prices
does not make a distinction between network retail pharmacies and
network mail order pharmacies. Thus, the revised definition of
``negotiated prices'', as implemented, would apply to all network
pharmacies and other dispensing providers, including network mail order
pharmacies.
Comment: One commenter recommended revising the proposed definition
of negotiated prices by adding ``any'' before the term ``other network
dispensing provider'' to indicate that the term ``negotiated prices''
includes prices negotiated with all network dispensing providers.
Response: We agree that negotiated prices include prices negotiated
with all network dispensing providers. However, we believe that the
proposed definition appropriately conveys this policy. Therefore, we do
not believe that the change proposed by the commenter is necessary.
Thus, we are finalizing the proposed revisions to the definition
``negotiated prices'' without modification.
[[Page 1512]]
4. Subpart G--Payments to Part D Plan Sponsors for Qualified
Prescription Drug Coverage (Definitions and Terminology, Sec. 423.308)
a. Actually Paid (Sec. 423.308)
In the proposed rule, we proposed to include language in the
definition of ``actually paid'' that would codify and clarify our
previous guidance, and provide that direct or indirect remuneration
includes discounts, chargebacks or rebates, cash discounts, free goods
contingent on a purchase agreement, up-front payments, coupons, goods
in kind, free or reduced-price services, grants, or other price
concessions or similar benefits from manufacturers, pharmacies or
similar entities obtained by an intermediary contracting organization
with which the Part D sponsor has contracted for administrative
services, regardless of whether the intermediary contracting
organization retains all or a portion of the direct and indirect
remuneration or passes on the entire direct and indirect remuneration
to the Part D sponsor. Similarly, we proposed to clarify that this
definition of ``actually paid'' would apply regardless of the terms of
the contract between the plan sponsor and any intermediary contracting
organization.
After reviewing the comments we received regarding this proposal,
which are discussed below, we are implementing the clarifications to
the definition of ``actually paid'' as proposed with one change.
Comment: A commenter expressed concern that the term ``intermediary
contracting organization'' as described in the preamble of the notice
of proposed rulemaking is too broad. The commenter stated that the
proposed rule seems to suggest that all contractors that provide
administrative services to a Part D sponsor could be considered
``intermediary contracting organizations.'' Based on this
interpretation of the term, the commenter stated, remuneration received
by entities with which Part D sponsors have contracted for audit
services, as well as pharmacies that provide administrative services
such as utilization management, could be considered to contribute to
DIR which must be excluded from a sponsor's allowable costs. The
commenter recommended limiting the term ``intermediary contracting
organization'' to only those organizations that provide administrative
services, negotiate drug prices, and also make payments to dispensing
entities on behalf of Part D sponsors.
Response: We agree with some of the concerns expressed by the
commenter. It is not our intent to use the term ``intermediary
contracting organization'' to refer to all organizations with which
Part D sponsors may contract for administrative services. The term
``intermediary contracting organization'' encompasses any entity that
contracts with a plan sponsor to perform one or both of the following
functions: (1) Pay pharmacies and other dispensers of Part D drugs
provided to enrollees in the Part D sponsor's plan, regardless of
whether the intermediary contracting organization negotiates pharmacy
contracts on behalf of the plan sponsor or on its own behalf; or (2)
negotiate rebates or other price concessions with manufacturers for
Part D drugs provided to enrollees in the Part D sponsor's plan,
regardless of whether the intermediary contracting organization
negotiates on behalf of the plan sponsor or on its own behalf. We have
revised the proposed definition of ``actually paid'' to reflect this
clarification. Specifically, we are removing the phrase ``for
administrative services'' from the second sentence of the proposed
definition of ``actually paid'' such that it now states that ``Direct
and indirect remuneration includes discounts, chargebacks or rebates,
cash discounts, free goods contingent on a purchase agreement, up-front
payments, coupons, goods in kind, free or reduced-price services,
grants, or other price concessions or similar benefits from
manufacturers, pharmacies or similar entities obtained by an
intermediary contracting organization with which the Part D plan
sponsor has contracted, regardless of whether the intermediary
contracting organization retains all or a portion of the direct and
indirect remuneration or passes the entire direct and indirect
remuneration to the Part D plan sponsor and regardless of the terms of
the contract between the plan sponsor and the intermediary contracting
organization''.
Comment: We received several comments in support of the proposed
changes to the definition of ``actually paid.'' One commenter agreed
that rebates retained by PBMs and price concessions received from
manufacturers should be treated as part of the true drug cost. Another
commenter expressed support for this change as a logical follow-on to
our guidance in the April 2006 Call Letter on rebates retained by PBMs.
Another commenter stated that the proposed clarification would reduce
the overall cost of the Medicare prescription drug benefit and
facilitate future efforts to reduce or eliminate the coverage gap from
the Part D benefit design.
Response: We appreciate the support received for this
clarification. This clarification will help to ensure that all of each
sponsor's administrative costs are excluded from allowable reinsurance
costs and allowable risk corridor costs as required by sections 1860D-
15(b)(3) and 1860D-15(e)(1) of the Act. In addition, this clarification
will preserve the competitive nature of the Part D program by ensuring
a level playing field for Part D sponsors regardless of their
contractual arrangements with PBMs.
Comment: A commenter requested that we delay the effective date of
the proposed change until the 2010 contract year to provide Part D
sponsors with sufficient time to identify any contractors, other than
PBMs, that are covered by the new language in the rule and to allow
them to revise their contracts accordingly.
Response: The proposed change to the definition of ``actually
paid'' reflects current Part D policy regarding the reporting of
rebates retained by PBMs. Therefore, we do not believe that a delay in
the effective date of this clarification is warranted.
Comment: One commenter requested clarification regarding whether
bona fide service fees are considered direct and indirect remuneration.
Response: All rebates, grants, settlement amounts, or other price
concessions received directly or indirectly from pharmaceutical
manufacturers (with the exception of bona fide service fees) are
considered price concessions that serve to reduce the drug costs
incurred by the Part D sponsor and, therefore, must be reported to CMS
as direct and indirect remuneration (DIR). Bona fide service fees are
fees paid by a manufacturer to an entity, such as a Part D sponsor or
the subcontractor of a Part D sponsor, that represent fair market value
for a bona fide, itemized service actually performed on behalf of the
manufacturer that the manufacturer would perform (or contract for) in
the absence of the service arrangement and that are not passed on, in
whole or in part, to a client or customer, whether or not the entity
takes title to the drug. As a result, bona fide service fees do not
reduce the drug costs incurred by the Part D sponsor and therefore, are
not considered DIR.
Comment: A commenter recommended changing the definition of
``actually paid'' to reflect the fact that PBMs are actually a source
of remuneration.
[[Page 1513]]
Response: We disagree with this recommendation. While Part D
sponsors may in fact receive remuneration from a PBM, we do not think
that it is necessary to revise the definition of ``actually paid'' to
reflect this. The definition of ``actually paid'' already indicates
that Part D sponsors may receive remuneration from any source.
Comment: One commenter stated that it is widely believed that PBMs
collect more in rebates than they report. The commenter stated that
PBM-retained rebates may provide incentives for less cost-effective
drugs to be placed on preferred formulary lists. This works against
both beneficiaries and plan sponsors by increasing their drug costs.
Response: We agree with the commenter that the additional
transparency created by the proposed changes to the definition of
``actually paid'' would allow Part D sponsors to better identify the
most cost effective drugs for inclusion on preferred formulary lists.
By providing Part D sponsors with additional cost information, the
additional transparency will help Part D sponsors in their negotiations
with manufacturers and PBMs.
Comment: A commenter asked that we limit the proposed definition of
``actually paid'' so that it would only apply to basic Part D coverage
and not to enhanced alternative benefits.
Response: We disagree with this request. The definition of
``actually paid'' must be applied uniformly across the Part D benefit
to ensure the accurate and consistent reporting of drug costs for
Medicare Part D.
Comment: A commenter asked for clarification regarding the
appropriate classification of rebates retained by a PBM.
Response: Rebates received from a manufacturer, whether directly or
indirectly through a PBM, are price concessions that reduce the drug
costs incurred by the Part D sponsor and therefore, are considered
direct and indirect remuneration (DIR). To the extent that rebates are
retained by a PBM, the dollar amount retained by the PBM represents an
administrative fee which the Part D sponsor has paid to the PBM. Thus,
the Part D sponsor essentially uses the remuneration from the
manufacturer that the PBM retains to pay a portion of the Part D plan's
administrative costs. As a result, when developing Part D bids, Part D
sponsors should report this amount as an administrative cost.
Comment: A commenter stated that manufacturer rebates negotiated
and earned by a PBM are not earned or received by the plan sponsor. The
commenter stated that the proposed definition of ``actually paid'' is
too narrow in that it defines ``price concessions'' to include amounts,
such as PBM-retained rebates, that the plan neither receives nor is
entitled to receive, and therefore, cannot properly be viewed as
reducing the amount the plan ``actually paid'' for drug costs. Thus,
the commenter stated, the proposed changes are inconsistent with the
statute and are beyond the scope of authority granted by Congress. The
commenter concluded that Congress did not authorize CMS to force a Part
D plan to account for rebates earned by a third-party intermediary.
Response: We do not agree. While sponsors may not directly receive
such remuneration from the manufacturer, sponsors do receive the amount
indirectly through reduced administrative costs. Congress requires CMS
to exclude all rebates from allowable costs, including those rebates
that are received indirectly. See sections 1860D-15(b)(2) and 1860D-
15(e)(1) of the Act. Similarly, we are also required to exclude
administrative costs from allowable costs. See sections 1860D-15(b)(3)
and 1860D-15(e)(1) of the Act. Thus, in order to calculate accurately
the costs ``actually paid'' by a plan, the costs incurred by a plan
must be adjusted to reflect any rebates retained by an intermediary in
exchange for reduced administrative costs.
b. Administrative Costs (Sec. 423.308)
In the May 16, 2008 proposed rule, we proposed adding a definition
for the term ``administrative costs'' in order to clarify what costs we
consider ``administrative'' as well as to provide additional
transparency to Part D plan pricing. We proposed to define
``administrative costs'' as the Part D sponsor's costs other than those
costs incurred to purchase or reimburse the purchase of Part D drugs
under the Part D plan. Any costs incurred by Part D plans on drug
claims that differ from the price charged by a dispensing entity for
covered Part D drugs would be included in the definition of
``administrative costs.'' We received several comments on this proposed
definition. However, most of the comments received (including those
opposed to the proposed definition) and our responses to them are
discussed in the Negotiated Prices section of this final rule, as the
policies are closely related. Comments that are related solely to the
proposed definition of ``administrative costs'' are summarized below
along with our responses. While we did receive some comments in
opposition to the proposed definition (see below), several of the
comments received were in support of the proposed definition. For the
reasons discussed in the preamble to the proposed rule and in our
responses to comments, we continue to believe that in order to ensure a
level playing field for all Part D plan sponsors, the administrative
costs reported by Part D plan must include any risk premium that is
paid to an intermediary contracting organization. Therefore, we are
implementing the new definition of ``administrative costs'' as
proposed, to be effective for Part D contract year 2010.
Comment: We received several comments in support of adding the
proposed definition for the term ``administrative costs''. One
commenter agreed with our assertion that the proposed definition would
create transparency and reduce beneficiary cost sharing. Another
commenter expressed support for including the difference between the
lock-in price and the price paid to the pharmacy in administrative
costs, provided that CMS allowed Part D sponsors to continue using the
lock-in pricing approach when contracting with a PBM.
Response: We agree that the proposed definition of ``administrative
costs'' would increase transparency and reduce beneficiary cost sharing
by requiring Part D plan sponsors to report the difference between the
lock-in price paid to the PBM and the price paid to the dispensing
pharmacy as an ``administrative cost.'' Thus, beneficiary cost sharing
and reinsurance and risk sharing payments by the Federal government
under the Medicare Part D program will be computed based solely upon
actual drug costs. As we stated in the discussion of ``Negotiated
Prices'' above and in the proposed rule, Part D sponsors may continue
to use the lock-in pricing approach when contracting with a PBM
provided that the price paid to the pharmacy or other dispensing
provider is used to develop the Part D bid, determine beneficiary cost
sharing, and report drug costs to CMS. We appreciate the support
received for this clarification.
Comment: One commenter expressed concern that certain aspects of
the proposed definition of ``administrative costs'' are ambiguous and
overly broad. Specifically, the commenter asked that we define the term
``drug costs'' in the regulations and clarify whether dispensing fees
would constitute ``administrative costs'' under the proposed
definition. The commenter also requested clarification regarding
whether there are any other categories of Part D costs, other than
``drug costs'' and ``administrative costs''.
[[Page 1514]]
Response: ``Drug costs'' consist of the ingredient cost, dispensing
fee, and sales tax paid to a pharmacy or other dispensing provider for
a prescription drug. We do not believe that it is necessary to include
a definition for the term ``drug costs'' in the regulation at this
time, as the definitions of ``gross covered prescription drug costs''
and ``allowable risk corridor costs'' already provide sufficient
context for this term. Since dispensing fees are already considered
drug costs under these definitions, such amounts are not considered
``administrative costs''. Any cost incurred by a Part D sponsor under
the Medicare Part D program which does not represent ``gross covered
prescription drug cost'' incurred by the sponsor to purchase or
reimburse the purchase of Part D drugs is considered an
``administrative cost''. Therefore, there is currently no additional
category of Part D costs.
Comment: One commenter expressed concern that the proposed
definition could lead Part D sponsors to reduce their administrative
costs and Medication Therapy Management (MTM). The commenter stated
that the proposed definition would shift the ``PBM spread'' (the
difference between the lock-in price and the price received by the
pharmacy) from drug cost to administrative cost. This change would
potentially increase the Part D bids for sponsors who utilize the lock-
in pricing approach. The commenter stated that Part D sponsors may
elect to reduce their MTM services in order to keep their Part D
premiums competitive. The commenter asked that we remind Part D
sponsors of MTM program requirements.
Response: We appreciate the concerns expressed by the commenter.
The proposed definition may increase Part D bids for sponsors who
utilize the lock-in pricing approach by shifting the ``PBM spread''
from drug cost to administrative cost. However, these potential
increases may be offset partially by reductions in Part D sponsors'
costs due to sponsors negotiating lower drug prices and administrative
costs as a result of increased transparency. Furthermore, the proposed
change is necessary in order to ensure that these administrative costs
are not included in sponsors' allowable reinsurance and risk corridor
costs as required by sections 1860D-15(b)(3) and 1860D-15(e)(1) of the
Act. We note that the proposed definition does not change the MTM
program requirements in any way. Part D sponsors must continue to
comply with the MTM program requirements.
Comment: A commenter indicated that the proposed definition of
``administrative costs'' inappropriately includes the PBM spread as an
administrative cost. The commenter asserted that the cost to purchase
drugs (versus paying for a service) is a drug cost, regardless of from
whom the drug is purchased. Generally, the commenter stated, the profit
retained by the seller is not considered an administrative cost but
rather a part of the drug cost. The commenter explained that regardless
of whether PBMs actually take title to prescription drugs, they incur
many of the risks of ownership of these drugs. Their role in the supply
chain cannot be considered merely ``administrative'' in nature. The
commenter indicated that the profit retained by the PBM should be
considered a drug cost, just as the profit retained by pharmacies and
wholesalers is considered a part of the Part D sponsor's drug cost.
Response: We disagree. The PBM spread represents an amount paid by
Part D sponsors to PBMs as a service fee for negotiating prices on
behalf of the Part D sponsor or providing other administrative
services, and thus represents an administrative cost and not a drug
cost paid to a seller.
c. Gross Covered Prescription Drug Costs and Allowable Risk Corridor
Costs (Sec. 423.308)
We proposed revising the definitions of ``gross covered
prescription drug costs'' and ``allowable risk corridor costs'' to
establish that the amount received by the dispensing pharmacy or other
dispensing provider (whether directly or through an intermediate
contracting organization) and not the amount paid by the Part D sponsor
to the PBM, is the basis for determining the drug costs that must be
reported to CMS. This change will ensure that all administrative costs
incurred by Part D sponsors, including the ``risk premium'' paid to
PBMs to mitigate market risk around the cost of drugs, are excluded
from the drug costs used to determine reinsurance and risk sharing
payments. In addition, we proposed revising the definition of ``gross
covered prescription drug costs'' to clarify that when a beneficiary is
responsible for 100 percent of the cost for a covered Part D drug (as
in any applicable deductible or coverage gap of a basic plan), and the
beneficiary obtains that covered Part D drug at a network pharmacy for
a price below the plan's negotiated price, the beneficiary's out-of-
pocket costs that are considered ``incurred costs'' for covered Part D
drugs count toward both TrOOP and total drug spend.
We received several comments in support of the proposed changes to
the definitions of ``gross covered prescription drug costs'' and
``allowable risk corridor costs.'' In addition, we received some
comments which opposed the proposed changes. Most of the comments
received also included comments on our related proposal regarding the
definition of ``negotiated prices'', and, as a result, these comments
and our responses to them are discussed in the Negotiated Prices
section of this final rule. Comments that relate solely to the
definitions of ``gross covered prescription drug costs'' and
``allowable risk corridor costs'' are summarized below along with our
responses. Based on our review of all of the comments received on this
issue, we are implementing the changes to the definitions of ``gross
covered prescription drug costs'' and ``allowable risk corridor costs''
as they appeared in the May 2008 proposed rule to be effective for Part
D contract year 2010.
Comment: We received several comments in support of the proposed
changes to the definitions of ``gross covered prescription drug costs''
and ``allowable risk corridor costs.'' These commenters indicated that
the revised definitions along with the revised definition of
``negotiated prices'' would increase transparency and decrease
beneficiary cost sharing.
Response: We appreciate the comments received in support of the
proposed changes. We agree that the proposed changes to the definitions
of ``gross covered prescription drug costs'' and ``allowable risk
corridor costs'' would increase transparency by ensuring that CMS and
Part D sponsors are aware of actual Part D drug costs. In addition,
Part D sponsors would be made aware of the administrative fees which
they pay to their PBMs as part of the ``risk premium''.
Comment: Two commenters recommended that CMS take additional
actions to improve transparency and ensure that the appropriate drug
costs are reported to CMS. Specifically, one commenter suggested that
CMS require Part D sponsors to identify hidden fees which are taken
back from pharmacies by PBMs during check cycle payments, such as
transaction fees and pharmacy network fees. Another commenter expressed
continued concern that the proposed changes may require Part D sponsors
that utilize the lock-in pricing approach to depend on information
traditionally held exclusively by PBMs. This commenter urged CMS to
work with Part D sponsors to ensure compliance from PBMs. One commenter
recommended that CMS sample
[[Page 1515]]
pharmacy payments and compare them to the prices reported by PBMs on
the PDE records to ensure that PBMs are accurately reporting the pass-
through price paid to the pharmacy and not the lock-in price.
Response: We will consider what further changes may be necessary to
address concerns regarding transparency in the Medicare Prescription
Drug Benefit. In addition, we will continue to provide information
regarding the appropriate amounts to include in the reporting of drug
costs and direct and indirect remuneration (DIR) in subregulatory
guidance, such as the Medicare Part D DIR Reporting Requirements for
Payment Reconciliation, and the Prescription Drug Event Data Training
Participant's Guide. We currently conduct audits of plans' PDE data to
ensure that drug costs are accurately reported to us. In the future,
these audits will help us to identify discrepancies between the amount
paid to the pharmacy and the drug costs reported on the PDE records. We
will determine the appropriate corrective actions or penalties for Part
D sponsors in cases where inaccurate or incorrect data have been
provided. As indicated in the proposed rule, however, we contract with
Part D sponsors, not with sponsors' first tier, downstream and related
entity(ies), for the provision of the Medicare prescription drug
benefit. Under Sec. 423.505(i)(4)(ii), a Part D sponsor is required to
include in its contract with downstream contractors and related
entities a provision that either revokes the delegation of a Part D
reporting responsibility or specifies other remedies if either CMS or
the Part D sponsor determines that the downstream contractor or related
entity has not performed satisfactorily. CMS may seek revocation of a
delegation of the reporting responsibility or any other remedy provided
for in the contract between the Part D sponsor and the PBM for non-
compliance with delegated reporting responsibilities.
Nevertheless, the Part D sponsor has ultimate responsibility for
compliance with the terms of its contract with us, including reporting
accurate Part D data. While we will continue to work with Part D
sponsors to ensure that the data submitted to us is accurate, we
reiterate that Part D sponsors that choose to contract with a PBM or
any other third party administrator must take steps necessary to ensure
that the data submitted to us on their behalf is accurate and timely.
In the May 16, 2008 proposed rule (73 FR 28571), we also noted that
Sec. 423.308 includes a definition of the term ``target amount.'' Due
to a technical formatting error, this definition appears to be the
second paragraph of the definition of ``gross covered prescription drug
costs.'' To clarify that the definition of ``target amount'' is not a
component of the definition of ``gross covered prescription drug
costs'', but is a separate definition of a different term, we proposed
to revise the current discussion of ``target amount'' and to provide an
amendatory instruction to add the definition in Sec. 423.308. We also
proposed to make technical edits to this definition to ensure that the
structure of the definition is similar to that of other definitions in
this section. We proposed no substantive changes to the definition.
We received no comments on the proposed technical edits to the
definition of ``target amount.'' Therefore, we are finalizing the
technical edits to this definition as proposed.
5. Subpart R: Payments to Sponsors of Retiree Prescription Drug
Programs (Definitions, Sec. 423.882)
We proposed to make the following additions and revisions to
regulations at Sec. 423.882 governing the retiree drug subsidy (RDS)
program in order to be consistent with the corresponding existing and
proposed Part D definitions under Sec. 423.100 and Sec. 423.308. The
proposed definitions under Sec. 423.882 included codification of some
of our existing guidance for the RDS program.
a. Actually Paid
We proposed to add this definition to the RDS regulations in order
to mirror the proposed revised Part D definition under Sec. 423.308,
with the exception of technical changes and clarifications to reflect
its application to the RDS program. Specifically, we proposed to define
actually paid to mean that the costs must be actually incurred by the
qualified retiree prescription drug plan (and/or the qualifying covered
retiree) and must be net of any direct or indirect remuneration from
any source (including manufacturers, pharmacies, qualifying covered
retirees, or any other person) that would serve to decrease the costs
incurred under the qualified retiree prescription drug plan. Similarly,
we also proposed including language in this definition that would
provide that direct or indirect remuneration includes discounts,
chargebacks or rebates, cash discounts, free goods contingent on a
purchase agreement, up-front payments, coupons, goods in kind, free or
reduced-price services, grants, or other price concessions or similar
benefits from manufacturers, pharmacies or similar entities obtained by
an intermediary contracting organization with which the sponsor of the
qualified retiree prescription drug plan has contracted for
administrative services, regardless of whether the intermediary
contracting organization retains all or a portion of the direct and
indirect remuneration or passes the entire direct and indirect
remuneration to the sponsor of the qualified retiree prescription drug
plan. Similarly, we clarified that this definition of actually paid
applies regardless of the terms of the contract between the sponsor of
the qualified retiree prescription drug plan and any intermediary
contracting organization.
b. Administrative Costs
We proposed to add this definition to the RDS regulations in order
to mirror the proposed revised Part D definition under Sec. 423.308,
with the exception of minimal changes to reflect the RDS terminology.
Specifically, we proposed to define administrative costs to mean costs
incurred by a qualified retiree prescription drug plan that are not
drug costs incurred to purchase or reimburse the purchase of Part D
drugs and that differ from the amount paid by or on behalf of the plan
to a pharmacy or other entity that is the final dispenser of the drug.
Similarly, we proposed to include language in this definition that any
profit or loss retained by the intermediary contracting organization
(through discounts, rebates, or other direct or indirect price
concessions) when negotiating prices with dispensing entities is
considered an administrative cost.
c. Allowable Retiree Costs
We proposed to make changes to the existing RDS definition of
allowable retiree costs to mirror the relevant portions of the existing
Part D definition of ``allowable reinsurance costs'' under Sec.
423.308. Specifically, we proposed to revise the definition of
allowable retiree costs under Sec. 423.882 by clarifying that
allowable retiree costs are the subset of gross covered retiree plan-
related prescription drug costs actually paid by the qualified retiree
prescription drug plan or by or on behalf of a qualifying covered
retiree.
d. Gross Covered Retiree Plan-Related Prescription Drug Costs
We proposed to revise the existing definition of ``gross covered
retiree plan-related prescription drug costs'' (or ``gross retiree
costs'') to mirror the proposed Part D definition of ``gross covered
prescription drug costs'' under Sec. 423.308, with the exception of
minimal changes to reflect the RDS terminology. Specifically, we
proposed
[[Page 1516]]
to revise our RDS program definition of gross retiree costs to clarify
that these costs equate to the sum of the negotiated prices (as defined
in the definition) actually paid by the qualified retiree prescription
drug plan (and/or qualifying covered retirees) and received by the
dispensing pharmacy (or other dispensing entity), or received by other
entities pursuant to the plan's coordination of benefits (COB)
activities. As with our existing definition of gross retiree costs, our
proposed definition excluded administrative costs from gross retiree
costs.
e. Negotiated Prices
We proposed to add this definition to the RDS regulations in order
to mirror the Part D definition of negotiated prices under Sec.
423.100, with the exception of minimal changes to reflect RDS
terminology. Specifically, we proposed to define negotiated prices for
Part D drugs as the prices that the qualified retiree prescription drug
plan (or other intermediary contracting organization) and the network
dispensing pharmacy or other network dispensing provider have
negotiated as the amount such network entity will receive, in total,
for a particular drug, net of discounts, direct or indirect subsidies,
rebates, other price concessions, and direct or indirect remuneration
that the qualified retiree prescription drug plan has elected to pass
through to qualifying covered retirees at the point of sale. Similarly,
we proposed that negotiated prices include any dispensing fees.
Under the foregoing proposed definitions, payments made to RDS plan
sponsors of qualified retiree prescription drug plans (or ``RDS
sponsors'') would be reported based upon ``pass-through'' prices and
not the ``lock-in'' prices that the RDS plan sponsor pays to a PBM or
other intermediary contracting organization.
Comment: Two commenters supported the requirement to report
negotiated (that is, pass-through) prices for purposes of the RDS
program (``negotiated price policy''). Two other commenters objected to
extending this negotiated price policy to the RDS program. One of these
latter commenters contended that mandating that costs be reported only
based on pass-through pricing could cause RDS sponsors to leave the RDS
program and place their retirees in the Medicare Part D program. The
other commenter objecting to applying the negotiated price policy to
the RDS program predicted that doing so would likely result in
employers and unions dropping retiree health coverage of drugs
altogether. One of these commenters noted that large employers
constitute a majority of RDS sponsors, and that they are sophisticated
purchasers with a great amount of leverage, and are in the best
negotiating position to decide which pricing structure is most
appropriate for them. The other commenter reported that such large
employers have been using the lock-in approach for many years. Both of
these commenters also believed that many employers seek to keep health
benefits the same for active employees and retirees, and that requiring
reporting based on pass-through prices only would effectively be
imposing this one model on active employee plans as well.
Response: As stated in the preamble to the proposed rule (73 FR
28571), the rule requiring reporting based on pass-through costs was
proposed for RDS sponsors for many of the same policy considerations
that underlie our revisions to the Part D definitions of ``negotiated
prices,'' ``administrative costs'', ``allowable risk corridor costs'',
and ``gross prescription drug costs''. Specifically, the RDS payment is
calculated based on allowable retiree costs, which in turn are a subset
of gross retiree costs. The statute requires us to exclude
administrative costs from the calculation of gross covered retiree
plan-related prescription drug costs. Subsidizing the portion of the
lock-in price that as a practical matter amounts to an administrative
cost paid to the PBM or intermediary contracting organization would
therefore arguably be inconsistent with the statutory requirement to
exclude administrative costs from the calculation of gross covered
retiree plan-related prescription drug costs.
However, we share the commenters' concern about the possible impact
of applying the Part D negotiated price policy to the RDS program,
particularly about the possibility that this could cause employers
currently participating in the RDS program to either move their
retirees to Part D, or drop coverage altogether. In response to these
and other concerns expressed by commenters discussed below, we are
considering the question of whether we have the statutory discretion to
adopt a different policy for the RDS program than the policy we are
finalizing in this final rule for the Part D program, and are hereby
re-opening the comment period with respect to our proposal to apply
this Part D negotiated price policy to the RDS program. Specifically,
we are inviting comments on the question of whether we have discretion
under the statute to retain the current policy for the RDS program
(that is, reporting of lock-in or pass-through prices) while adopting
the new negotiated price policy being finalized in this final rule for
the Part D program. We discuss three possible legal theories below
that, if one or more are found to be valid, would provide us with
discretion to maintain the status quo under the RDS program, while
making the changes made in this final rule to the Part D program. We
accordingly are deferring a final decision on our proposal to apply the
new Part D policy to the RDS program pending the outcome of our
consideration of comments we receive on our legal authority.
We specifically invite comment from the public on the following
three legal theories under which it might be argued that we have
discretion to adopt a different policy for RDS than for Part D with
respect to the way drug costs are reported:
(1) Legal Theory 1: Interpretation of ``Actually Paid''
The first legal theory on which we invite public comment is the
argument that we could interpret ``actually paid,'' as used in the RDS
statutory definition of ``allowable retiree costs'' at section 1860D-
22(a)(3)(C)(i) of the Act, to exclude any difference between the lock-
in and pass-through amount, so that either the lock-in or the pass-
through amount can be reported. The RDS subsidy payment is paid based
on ``the portion of the retiree's gross covered retiree plan-related
prescription drug costs'' that exceeds a specified cost threshold
amount and does not exceed a specified cost limit amount for a given
year. The actual payment is ``an amount equal to 28 percent of the
allowable retiree costs * * * attributable to such gross covered
prescription drug costs.'' section 1860D-22(a)(3)(A) of the Act.
The statute defines ``gross covered retiree plan-related
prescription drug costs'' as ``the costs incurred under the plan, not
including administrative costs, but including costs directly related to
the dispensing of part D drugs. * * *'' Id. at subsection
(a)(3)(C)(ii). The statute defines the term ``allowable retiree costs''
to mean ``with respect to gross covered prescription drug costs under a
qualified retiree prescription drug plan by a plan sponsor, the part of
such costs that are actually paid (net of discounts, chargebacks, and
average percentage rebates) by the sponsor. * * *'' Id. at subsection
(a)(3)(C)(i). While section 1860D-22 of the Act does not itself define
the term ``gross covered prescription drug costs,'' this term is
defined in section 1860D-15 of the Act, however, which describes
subsidy payments to Part D plan sponsors. For
[[Page 1517]]
purposes of that section, ``gross covered prescription drug costs'' are
defined as ``the costs incurred under the plan, not including
administrative costs, but including costs directly related to the
dispensing of covered part D drugs. * * *'' section 1860D-15(b)(3) of
the Act.
Under the legal theory upon which we are inviting comment, it would
be argued that when an RDS plan sponsor makes a payment to an entity
(such as a PBM) that includes amounts for Part D drug ingredient and
dispensing costs and amounts to manage the sponsor's drug benefit plan,
the amount of that payment is the ``costs that are actually paid * * *
by the sponsor'' for purposes of calculating the subsidy. Under this
argument, we would not need to look behind the payment to the PBM to
determine how the cost of drugs was determined under the arrangement;
rather, it would be sufficient for CMS to calculate the subsidy payment
based upon the RDS plan sponsor's payment to the PBM, excluding
discounts, chargebacks and average percentage rebates. Under this
approach, RDS plan sponsors would be able to use either the ``lock-in''
or ``pass-through'' price for reporting drug costs for purposes of
subsidy payments.
A potential problem with this theory is that it arguably reads out
of the statute the phrase ``for the portion of the retiree's gross
covered retiree plan-related prescription drug costs.'' As noted, the
definition of ``gross covered retiree plan-related prescription drug
costs'' makes clear that such costs do not include administrative
costs, and the ``lock-in'' price may well effectively include
administrative costs, since any difference between that amount and the
negotiated amount could be retained to cover administrative expenses.
(2) Legal Theory 2: Prohibition on Interference With Benefit Design of
Retiree Drug Coverage
The second legal theory on which we invite public comment is the
argument that the RDS statute prohibits CMS from interfering in the
benefit design of retiree drug coverage, and that, as suggested by a
commenter below, requiring use of the ``pass-through'' methodology to
report drug costs would interfere with the benefit design of qualified
retiree prescription drug plans.
Section 1860D-22(a)(6) of the Act provides a rule of construction
for interpreting the RDS section of the statute. Subparagraph (D) of
that section provides that ``[n]othing in this section shall be
construed as * * * preventing employers to provide for flexibility in
benefit design * * * so long as the actuarial equivalence requirement *
* * is met.'' It has been suggested by a commenter (see comment below)
that a CMS mandate that an RDS plan sponsor report drug costs using the
``pass-through'' methodology interferes with the ability of employers
``to provide for flexibility in benefit design'' of an RDS plan. Under
this argument, requiring reporting of the ``pass-through'' price would
be administratively burdensome, create an incentive for employers to
redesign their RDS plans and their contractual arrangements with PBMs,
and perhaps encourage employers to opt out of the RDS Program entirely.
This argument rests on the assumption that--(1) Contractual
arrangements between an RDS plan sponsor and a PBM are ``benefit
design[s]''; and (2) requiring an RDS plan sponsor to report the
``pass-through'' price for purposes of the subsidy would ``prevent''
employers from providing flexibility in those benefit designs. Again,
there is a potential problem with this legal theory. Arguably, section
1860D-22(a)(6)(D) of the Act is most reasonably interpreted to prohibit
CMS from mandating a certain benefit package in retiree drug plans, and
not to prohibit CMS from mandating requirements that relate only to
reporting costs to CMS. The context of the rule of construction in
paragraph (6) suggests that Congress was concerned only that CMS not
restrict the ability of RDS-covered individuals to enroll in part D; of
having their part D premiums paid by an RDS plan sponsor; or from
receiving coverage that is more generous than part D. All of these
things relate to the benefit design of a retiree drug plan itself, and
not to the relationships between an RDS plan sponsor and a contracting
partner. Further, even if such contractual relationships could be
construed as ``benefit design[s],'' by requiring RDS plan sponsors to
report the ``pass-through'' price for drug costs, we arguably would not
be preventing RDS plan sponsors from adopting any particular
contractual relationship with intermediaries. RDS plan sponsors would
still be able to use either the ``lock-in'' or ``pass-through''
arrangement with PBMs, however, they would be required to report the
``pass-through'' price for purposes of subsidy payments.
(3) Legal Theory 3: Change in Interpretation of Waiver Authority
The third legal theory on which we are inviting public comment
would involve a change in our interpretation of waiver authority in
section 1860D-22(b) of the Act, and the use of that authority to modify
requirements for RDS plan sponsors. If we were to adopt this theory, we
would need to do so through notice and comment rulemaking, as it would
change the interpretation of section 1860D-22(b) of the Act that is set
forth in current regulations.
The waiver authority in section 1860D-22(b) of the Act appears in a
section of the Act that is otherwise devoted entirely to provisions
that apply to the RDS program. In this context, section 1860D-22(b) of
the Act provides that employer group waiver provisions in section
1857(i) of the Act (Medicare Part C) ``shall apply with respect to
prescription drug plans in relation to employment based retiree health
coverage in a manner similar to the manner in which they apply to an
MA- plan in relation to employers. * * *'' (Emphasis added.) It is
noteworthy that this subsection uses the term ``prescription drug
plans'' rather than ``qualified retiree prescription drug plans,''
since section 1860D-41(a)(8) of the Act defines ``prescription drug
plan'' as a plan offered ``under a policy contract or plan that has
been approved under section 1860D-11(e)'' and ``by a PDP sponsor
pursuant to, and in accordance with, a contract between the Secretary
and the sponsor under section 1860D-12(b).'' This clearly describes a
Part D plan, not an RDS plan, that is, a qualified retiree prescription
drug plan (QRPDP).
Under ordinary principles of statutory construction, when a term is
defined in statute, that definition applies when the same statute
employs that term. However, given the fact that this waiver authority
appears in a section otherwise devoted to the RDS program, and that the
term ``qualified retiree prescription drug plan'' includes the three
words, ``prescription drug plan,'' an argument might be made as a
matter of statutory construction that in this case the term
``prescription drug plan'' was intended to encompass both a Part D
``prescription drug plan'' and a qualified retiree ``prescription drug
plan'' (that is, this waiver authority extends both to PDPs and
QRPDPs), as long as the plan is offered ``in relation to employment-
based retiree health coverage'' in either case.
As noted above, however, we have already interpreted the waiver
authority in section 1860D-22(b) of the Act as applying only to Part D
prescription drug plans. The employer group waiver authority in section
1860D-22(b) of the Act is set forth in regulation in Sec. 423.458 of
Subpart J, which governs PDPs and MA-PDs, rather than subpart R, which
governs QRPDPs under the
[[Page 1518]]
RDS program. The final rule preamble discussion of Subpart J states
that, for purposes of the discussion that follows in Subpart J, the
term ``employer sponsored group prescription drug plan'' means ``a
prescription drug plan under a contract between a PDP sponsor or MA
organization offering an MA-PD plan and employers, labor organizations,
or the trustees of funds established by one or more employers or labor
organizations (or combination thereof) to furnish prescription drug
benefits under employment based retiree health coverage.'' (See the
January 28, 2005 final rule (70 FR 4320)). In other words, the preamble
expressly states in its discussion of ``terminology'' that when we use
the term ``employer sponsored group prescription drug plan,'' it is
referring to a PDP or MA-PD, and not to a QRPDP under the RDS program.
In the discussion of the regulatory provision implementing the
waiver authority in section 1860D-22(b) of the Act specifically, the
preamble expressly states that ``[s]ection 1860D-22(b) of the Act
extends the waiver authority that is provided for MA organizations
related to Part C under section 1857(i) of the Act * * * to
prescription drug plans.'' (Emphasis added.) (See the January 28, 2005
final rule (70 FR 4323).) The next sentence states that ``[t]his waiver
authority is intended to provide employment-based retiree health
coverage an opportunity to furnish prescription drug benefits to its
participants or beneficiaries through Part D in the most efficient and
effective manner possible.'' Id. (emphasis added). Part D and the RDS
program are mutually exclusive. An employer may either offer drug
coverage through Part D, or receive an RDS payment for coverage it
offers independent of Part D, but may not do both in the case of the
same Medicare beneficiaries. We also discuss in the preamble only a
``process'' for ``authorizing waivers for employer sponsored
prescription drug plans.'' Id. (emphasis added). As noted above, this
term was defined in the preamble as limited to a PDP or MA-PD.
Finally, Sec. 423.454, defines an ``Employer-sponsored group
prescription drug plan'' as a plan ``approved by CMS as a prescription
drug plan'' (a PDP). Section 423.458(c) specifically provides only for
waiving provisions that hinder the design or offering of, or enrollment
in, an ``employer-sponsored group prescription drug plan.'' Thus, we
believe that the current regulations unambiguously construe the
authority in section 1860D-22(b) of the Act as applying only to PDPs
and MA-PDs, and not to QRPDPs participating in the RDS program. As a
result, if after considering public comments we wished to adopt the
interpretation of section 1860D-22(b) of the Act discussed above, we
would need to do so through notice and comment rulemaking. In order to
preserve our option of implementing this third legal theory, today's
Federal Register also contains a separate notice of proposed rulemaking
seeking public comment as to whether we should adopt the change in our
interpretation of section 1860D-22(b) set forth above.
Comment: In objecting to the proposed requirement that RDS sponsors
report drug prices by using the pass-through method, one commenter
stated: ``As a threshold matter, we do not believe that the
administration and operation of drug programs offered in the commercial
market are subject to CMS' purview.'' The commenter believes that among
the objectives of the RDS program is to allow RDS sponsors flexibility
and the ability to maintain their current plan designs (provided the
plan is actuarially equivalent to standard Medicare Part D coverage).
Response: We agree with the commenter that among the objectives of
the RDS program is to allow RDS sponsors flexibility and the ability to
maintain their current plan designs, and share the commenter's concern
that requiring reporting on a ``pass-through'' basis could result in
sponsors believing that they have to change existing arrangements or
possibly leaving the RDS program. As discussed above, for this reason
we are exploring the issue of whether we have statutory authority to
allow RDS sponsors to continue to report either on a lock-in or pass-
through basis, and are specifically inviting comment on whether the
rule of construction in section 1860D-22(a)(6)(D) of the Act could be
interpreted to allow us to not mandate the Part D negotiated price
policy for the RDS program, under the theory that doing so would
inhibit employer flexibility in violation of section 1860D-22(a)(6)(D)
of the Act, as suggested by the commenter.
Comment: One commenter suggested that RDS sponsors should have at
least 1 year lead time for implementation of any changes to the RDS
program, while another commenter suggested that CMS grandfather any
pre-existing contractual relationships that utilize the ``lock-in''
pricing method until they are renegotiated after the rule becomes
effective. Another commenter urged that the ``pass through'' reporting
provisions of the proposed rule, as they apply to the RDS Program, not
apply to plan years that begin before January 1, 2011. ``This will
allow plans [presumably insurers] * * * to become familiar with and
renegotiate their commercial business insurance contracts with PBMs so
that they can submit the required data.'' This commenter stated that
``Plans and their respective employers will need time to make the
necessary revisions to these business relationships.''
Response: We acknowledge that entities such as RDS sponsors and
insurers may need to change the terms of their contracts with PBMs to
accommodate the pass-through reporting requirement. As discussed, we
are deferring finalizing the Part D negotiated price policy for RDS, so
no such changes will have to be made in the short term.
Comment: A commenter supported all the proposed revisions to the
RDS provisions of the regulations, including the provisions on
reporting rebates retained by a PBM or other intermediary contracting
organization.
Response: While we appreciate the commenter's support for our
proposal, as noted above, we share concerns expressed by other
commenters about the possible implications of applying the Part D
policies in question to the RDS program, and are considering whether we
have the statutory discretion to adopt a different approach for the RDS
program than that adopted in this final rule for the Part D program.
Comment: A commenter objected to the definition of ``actually
paid'' in the proposed regulations. Specifically, the commenter
objected to the fact that the definition states that this amount is net
of any direct or indirect remuneration obtained by an intermediary
contracting organization with which the RDS sponsor has contracted for
administrative services, regardless of whether the intermediary
contracting organization retains all or a portion of the direct or
indirect remuneration or passes it along to the RDS sponsor, and
regardless of the terms of the contract between the RDS sponsor and the
intermediary contracting organization. The commenter stated that the
requirement for the RDS sponsor to report retained direct or indirect
remuneration should not apply in instances where the intermediary
contracting organization negotiates such remuneration (or price
concessions) on its own behalf, and not on behalf of the RDS sponsor.
In such cases, the commenter states, the RDS sponsor has no rights in,
or to, the price concessions, and only has a right to any price
concessions the intermediary contracting organization agrees to
[[Page 1519]]
provide the RDS sponsor in its contract with the sponsor. The commenter
states that ``CMS assumes that the rebates and other price concessions
received by an intermediary organization reduce the plan's drug
costs''. (Emphasis in original.)
Response: We believe that the policy on retained rebates and the
policy on negotiated price are linked, and that the same approach
should be applied in both cases. In both cases, the policy does not
recognize the structure of the arrangements made between the parties,
and requires that costs be reported as if a different arrangement were
in place. In both cases, amounts available to a third party (in the
difference between the negotiated price and lock-in price in one case,
and the difference between the total rebate and the amount passed on in
the other) are treated as administrative costs when there are arguments
that the amounts are different in nature and CMS should not require
that they be treated as administrative fees. Also in both cases, there
is a question as to whether CMS has the discretion under the statute to
adopt one rule for Part D and another for the RDS program.
We believe that the three legal theories discussed above in
connection with negotiated price could also have applicability to the
issue of rebate amounts that are retained and not directly passed on to
a sponsor. We therefore invite comment on whether these arguments would
provide CMS with the discretion to adopt a different rule for RDS than
for Part D with respect to retained rebate amounts, and if so whether
we should do so. As in the case of the negotiated price policy, we will
defer our adoption of the Part D retained rebate policy in the RDS
regulations pending our consideration of these comments. Again, this
will require changes to the proposed regulations text that ensure that
the regulatory changes that we are finalizing in Part D regarding
retained rebates are not applicable to RDS.
Comment: One commenter observed that CMS indicated in the proposed
rule that certain provisions clarify existing guidance. To the extent
any such provisions in fact clarify existing guidance, and apply
retroactively, the commenter asserts that CMS has violated the prior
notice and comments requirements of the Administrative Procedure Act.
Response: As noted above, we are reconsidering our proposed rule
applying the Part D policy on the treatment of retained rebate amounts
to the RDS program. This also extends to our existing guidance. The
commenter's concerns are now moot, as we will make any final decision
on our approach for RDS through rulemaking after consideration of
public comments.
f. Subpart R Changes Adopted in the Final Regulations
As previously mentioned, we are deferring finalizing the proposed
requirements that would have required RDS sponsors to report negotiated
prices, and to report direct or indirect remuneration retained by a PBM
or other intermediary contracting organization, pending the receipt of
comments on the legal arguments previously mentioned. However, to
otherwise make RDS regulatory definitions more consistent with Part D
regulatory definitions and to ensure that the changes in the Part D
regulatory provisions regarding negotiated prices and retained rebates
do not affect RDS, we are making the following changes to definitions
in Subpart R:
Adding a definition of ``actually paid'' that includes
portions of the proposed RDS definition, but excludes the portion that
would operate to require the reporting of direct or indirect
remuneration retained by a PBM or other intermediary contracting
organization.
Adding a definition of ``administrative costs'' that
includes portions of the proposed RDS definition, but that excludes,
from the definition, the difference between the amounts paid by the
sponsor to an intermediary contracting organization for Part D drugs
dispended to qualifying covered retirees, and the amount paid by the
intermediary contracting organization to the pharmacy or other entity
that is the final dispenser of the Part D drugs.
Revising the definition of ``allowable retiree costs'' as
proposed without modification.
Revising the definition of ``gross covered retiree plan-
related prescription drug costs, or gross retiree costs,'' to include
portions of the proposed RDS definition, but to exclude the reference
to ``negotiated prices.'' This revised definition includes the term
``intermediary contracting organization,'' which for purposes of the
revised definition is intended to encompass any entity that contracts
with an RDS sponsor to perform one or both of the following functions:
(1) Pays pharmacies and other dispensers of Part D drugs provided to
qualifying covered retirees in the sponsor's plan; or (2) negotiates
rebates or other price concessions with manufacturers for Part D drugs
provided to qualifying covered retirees in the sponsor's plan.
Additionally, we are slightly revising Sec. 423.888(b)(5)(i) so
that it references the term ``gross covered plan-related retiree
prescription drug costs,'' which is a term defined in Subpart R, rather
than ``gross prescription drug costs,'' which is not.
6. Limiting Copayments to a Part D Plan's Negotiated Price (Sec.
423.104)
In our May 16, 2008 proposed rule, we proposed to revise the
requirements related to qualified prescription drug coverage at Sec.
423.104(g) to make clear that Part D sponsors must provide enrollees
with access to, or make available at the point-of-sale, their
negotiated prices for covered Part D drugs when the covered Part D
drugs' cost share is more than the Part D sponsor's negotiated price.
The final rule adopts the revisions to Sec. 423.104(g)(1) set forth in
our proposed rule.
Comment: A number of commenters supported our clarification that
the negotiated price for a covered Part D drug be made available to
Part D enrollees when that price is less than a plan's applicable cost-
sharing. Most of these commenters emphasized that CMS should monitor
negotiated pricing issues and take corrective action against plans that
do not assess their enrollees the negotiated price per the revision.
One commenter in particular recommended that the policy be clearly
explained in the Medicare handbook and all other materials that are
distributed to beneficiaries by CMS and Part D plan sponsors related to
their Part D coverage.
Several commenters noted concerns with this policy given that
pharmacies' reimbursements may be lowered when the negotiated price for
a drug is less than a Part D plan's applicable cost-sharing. While
these commenters supported beneficiary access to negotiated prices,
they believed it was equally important that pharmacies be adequately
compensated for the drugs they dispense. They argued that pharmacies
may experience net losses if the total revenue received from Part D
enrollees is not sufficient to cover the costs of participating in the
program--particularly given the average cost of dispensing
prescriptions and the fact that the dispensing fee does not vary
regardless of the negotiated price. They also asserted that
implementing this policy could result in higher costs for plans and
beneficiaries in the form of higher premiums, and could ultimately
threaten pharmacy participation in some sponsors' networks. Two
commenters, therefore, recommended that CMS modify the changes to
[[Page 1520]]
Sec. 423.104(g)(1) and instead clarify that Part D sponsors and their
network pharmacies should be able to freely negotiate patient copayment
obligations in order to allow for lower overall patient spending.
Response: We believe that a policy under which the plan sponsor
charges the beneficiary the lesser of the applicable cost-sharing
amount or the negotiated price for a covered Part D drug is most
consistent with the intent of section 1860D-2(d)(1) of the Act, which
requires Part D sponsors to offer their enrollees access to negotiated
prices for covered Part D drugs. Although we have previously given Part
D sponsors the option of applying either the applicable copayment (if
the sponsor elected to charge a flat co-payment rather than coinsurance
as part of its benefit design) or the actual negotiated price of a
formulary drug when that amount is lower than the copayment, we have
actually found that the majority of Part D sponsors have administered
the benefit such that they apply the lesser of the co-payment or the
negotiated price to the enrollee at the point of sale. Therefore, we
disagree that our revision at Sec. 423.104(g) will result in
undermining the utilization effects of tiered cost-sharing benefit
structures, increasing Part D program costs, or significant changes in
Part D sponsor pharmacy network participation.
We will monitor beneficiary complaints on this issue, and will take
appropriate corrective action against sponsors to the extent that we
learn they are not limiting cost-sharing to negotiated prices as
required under Sec. 423.104(g)(1). In addition, we will assess our
current CMS beneficiary materials, including the Medicare & You
handbook, and Part D sponsor marketing models to ensure that this
information is clearly and accurately conveyed to Part D enrollees.
Comment: A commenter expressed concern about requiring a 340B
pharmacy to charge a 340B drug's price as patient cost-sharing when the
340B price is lower than a plan's cost-sharing. This commenter asserted
that when patients know that certain brand-name drugs can be obtained
for nominal amounts, they are more likely to request normally more
expensive brand name drugs in all cases. The commenter asked that CMS
clarify the application of this rule to specify that Part D sponsors
may not require 340B providers to provide the 340B price to Part D
plans under Sec. 423.104(g)(1).
Response: CMS generally does not interfere in plan-pharmacy
contract negotiations or opine on the reasonableness or relevancy of
specific terms. Instead, we use our oversight authority to ensure that
Part D sponsors abide by our rules and allow appropriate access to
their pharmacy networks. A Part D sponsor offering less than
satisfactory or unclear contract terms to a pharmacy would likely find
it difficult to retain enough pharmacies to meet our network
requirements, and would therefore be unable to renew its Medicare Part
D contract. We urge pharmacies to ensure that they understand all terms
of a pharmacy network contract before contracting with a Part D
sponsor.
7. Timeline for Providing Written Explanation of Plan Benefits (Sec.
423.128)
In our May 16, 2008 proposed rule, we proposed to revised Sec.
423.128(e)(6) to require sponsors to provide an explanation of benefits
(EOB) no later than the end of the month following the month in which
an enrollee uses his or her Part D benefits. We believe that our
proposed revision to Sec. 423.128(e)(6), which we are finalizing in
this rule, strikes a reasonable balance between Part D sponsor
production constraints and the timely provision of claims information
to Part D enrollees. Below are public comments we received on our
proposal and our responses.
Comment: Many of the comments received on the EOB timeline
suggested that plans continue to be required to send the EOB no later
than the 15th of the month following the month in which an enrollee
uses Part D benefits.
Response: We have reviewed this comment and have concluded that
plan sponsors need the additional time in the month following to
process claims from the month in which the beneficiary utilized
prescription drug services. Therefore, to ensure that plan sponsors are
able to furnish accurate information to beneficiaries for drug benefits
utilized within a particular month, CMS clarified that the EOB must be
sent no later than the end of the month following any month when
prescription drug benefits are provided.
8. Low-Income Subsidy Provisions
a. Low-Income Cost-Sharing and Payment Adjustments for Qualified
Prescription Drug Coverage (Sec. 423.329)
In the May 16, 2008 proposed rule, we stated that we currently make
prospective payments to Part D plan sponsors of the low-income cost
sharing subsidy (LICS) based solely on estimates provided as part of
the annual bidding process. When LICS estimates are too high, excessive
prospective payments are made that (under our current process) are not
recovered until the year end reconciliation. We proposed to add to the
end of Sec. 423.329(d)(2)(i) the following qualifying statement: ``or
by an alternative method that CMS determines.'' In its report
``Medicare Part D Sponsors: Estimated Reconciliation Amounts for 2006''
released October 2007, the HHS Office of the Inspector General
recommended that CMS explore other payment methodologies to recoup
excessive LICS payments earlier. This revision would afford CMS
additional flexibility to make mid-year LICS payment adjustments or
other modifications to the LICS interim payment methodology, as
appropriate. After reviewing and responding to comments (below) we will
implement this provision. A summary of the comments and responses are
provided below.
Comment: Many commenters supported the change, as it will result in
more accurate payments during the actual plan year.
Response: We appreciate the commenters support.
Comment: Many commenters wanted more information on the methodology
that CMS will use for mid-year LICS payment adjustments and other
modifications to the LICS interim payment methodology that might arise
due to the proposed change. Commenters asked that CMS involve
stakeholders in any changes it makes to the methodology. Commenters
believed interim payment reconciliation would be burdensome to plans
and CMS. Others offered suggestions for the methodology such as
adjusting payments to Part D plan sponsors in the event that the agency
determines interim payments are too low.
Response: This change will correct a technical error in the
existing regulation. We are making this change in order to establish a
parallel between this section and that relating to the reinsurance
subsidy described at Sec. 423.329(c)(2). The language of Sec.
423.329(d)(2)(i) regarding interim payments of the LICS subsidies as
currently written has proven overly restrictive and has had the
unintended effect of requiring us to make payments to Part D plan
sponsors that are subsequently determined to have been significantly
different from their actual costs. Some overpayments have not been
recovered until payment reconciliation is completed, some years later.
In some cases there have also been administrative delays in recognizing
or reconciling underpayments. We also recognize, however, that as the
program matures, actual costs in this area will come closer to the bid
amount. We agree
[[Page 1521]]
with the commenter that stakeholder input is necessary.
b. Lesser of Policy for Low-Income Subsidy Individuals (Sec. 423.782)
To ensure low-income subsidy eligible beneficiaries are not harmed
when the statutory low-income subsidy cost-sharing amounts are higher
than the cost-sharing imposed under their plan's benefit package, we
proposed in the May 16, 2008 proposed rule to codify our existing
guidance on this situation in regulation. Specifically, we proposed
adding a new paragraph (c) to Sec. 423.782 which would clarify that
the cost-sharing subsidy under Sec. 423.782(a) and (b) is not
available when an individual's out-of-pocket costs, under his or her
Part D sponsor's plan benefit package, are less than the amounts
described in Sec. 423.782(a) and (b). After considering public
comments on our proposal, we are adopting Sec. 423.782(c) without
further modification into this final rule.
Comment: A number of commenters supported our proposal that would
require a Part D sponsor to charge the ``lesser of'' the low-income
subsidy cost sharing amount or the beneficiary's out-of-pocket costs
under the plan. However, one commenter wanted CMS to more explicitly
provide that beneficiaries entitled to the low-income subsidy be
charged the plan's cost-sharing amount when that amount is less than
the statutory low-income subsidy cost-sharing amount.
Response: We believe our regulatory language is sufficiently clear
and decline to further amend it. The language in section Sec.
423.782(c) stipulates that out-of-pocket costs for a covered Part D
drug under a Part D sponsor's plan benefit package be less than the
maximum allowable copayment, coinsurance or deductible amounts under
423.782(a) and (b). Out-of-pocket costs include any cost-sharing
amounts (copayment, coinsurance or deductible) the beneficiary would
incur under the plan's benefit package.
Comment: Several commenters disagreed with our regulatory revision
that would require a Part D sponsor to charge the ``lesser of'' low-
income subsidy cost sharing or beneficiary's out-of-pocket costs. The
commenters argue that altering statutory cost-sharing rules and their
application would undermine a sponsor's ability to limit inappropriate
utilization and may discourage the use of generics or certain other
low-cost medications. In addition, they assert that pharmacies would be
forced to accept reimbursement that could be below cost of dispensing
the drug.
Response: We disagree with these commenters. The low-income subsidy
cost sharing amounts established in regulation at Sec. 423.782 are
maximum amounts charged to beneficiaries eligible for the low-income
subsidy. They are not minimum amounts that must be charged even if the
ordinary plan cost-sharing that would otherwise apply is lower. The
intent of the revised regulation is to provide low-income subsidy
beneficiaries access to covered Part D drugs consistent with the out-
of-pocket costs incurred by members not eligible for the low-income
subsidy and enrolled in the same prescription drug plan. To do
otherwise would result in a Part D sponsor violating its contractual
obligation to provide the benefit package approved by CMS as defined
under Sec. 423.100. We also believe that if the Part D sponsor did
charge cost-sharing amounts above that provided under its basic (or
when applicable, supplemental) prescription drug coverage, this would
violate the uniform benefit requirements at Sec. 423.104, which
requires the sponsor offering the prescription drug plan to offer that
plan to all Part D eligible beneficiaries in the plan's service area.
We also disagree with the commenter that because of this revision,
pharmacies will be forced to accept reimbursement below the cost of
dispensing the covered Part D prescription medication. This revision to
the regulation in no way impedes the pharmacy's ability to negotiate
appropriate reimbursement for dispensing prescription medications
directly with the Part D sponsors.
Comment: One commenter in particular noted that this proposal would
require 340B pharmacies to charge Part D plan sponsors the same drug
price as is available under 340B.
Response: We disagree. This rule does not require that 340B
pharmacies charge the 340B drug price; this is an issue that should be
the subject of negotiations between the pharmacy and the sponsor.
However, as stated elsewhere in this preamble, we note that CMS
generally does not interfere in plan-pharmacy contract negotiations or
opine on the reasonableness or relevancy of specific terms. Rather, we
use our oversight authority to ensure that Part D sponsors abide by our
rules and allow appropriate access to their pharmacy networks.
Comment: One commenter requested clarification that this rule
applies to all phases of Part D drug coverage, including the pre-
initial coverage (deductible) phase. The commenter asserts that
individuals eligible for the low-income subsidy should not be required
to pay low-income subsidy cost sharing when the approved cost sharing
during a deductible phase is less.
Response: The commenter's assumption is correct. An LIS individual
will not be required to pay the maximum low-income subsidy cost sharing
amounts when the cost-sharing under the plan's benefit package during
the deductible period (presumably the negotiated price of the Part D
covered drug) is less.
c. Using Best Available Evidence To Determine Low-Income Subsidy
Eligibility Status (Sec. Sec. 423.772, 423.800)
The ``best available evidence'' policy derives from the fact that,
while section 1860D-14(c)(1)(A) of the Act provides for CMS to inform
sponsors of low-income subsidy eligibility, the sponsor's obligation
under section 1860D-14(c)(1)(B) of the Act to reduce premiums and cost-
sharing for all such individuals is not contingent upon CMS doing so.
While we attempt to identify all subsidy eligible individuals to the
full extent possible as soon as possible, experience has shown that
this does not necessarily result in every such individual being
successfully identified as subsidy eligible. We believe, therefore,
that the sponsors have an obligation to take reasonable steps to
respond to documentation that identifies such individuals as subsidy
eligible when they have not yet been identified by us, in order to
fulfill their statutory obligation to reduce premiums and cost-sharing
for such individuals.
Given the importance of this policy, we proposed in our May 16,
2008 proposed rule to codify the policy derived from section 1860D-
14(c) of the Act in Sec. 423.800(b) and (d). Specifically, we proposed
including in regulations text the guidance (Part D Guidance--Low-Income
Subsidy (LIS) Status Corrections Based on Best Available Evidence,
dated June 27, 2007), available at http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/Final%20Sponsor%20Guidance%20on%20BAE%20062707.zip) that we have issued
to Part D sponsors concerning our best available evidence (BAE) policy.
We proposed amending the regulations to require that Part D
sponsors use BAE to substantiate a beneficiary's eligibility for a
reduction in premiums and/or cost-sharing in the case of individuals
who indicate they are eligible for the low-income subsidy. These
include full-benefit dual eligible individuals, partial dual eligible
individuals (that is, those who are enrolled in a Medicare Savings
Program as a Qualified Medicare Beneficiary,
[[Page 1522]]
Specified Low-Income Medicare Beneficiary or Qualifying Individual),
people who receive Supplemental Security Income (SSI) benefits but not
Medicaid, and people who apply for and are determined eligible for a
subsidy. Under the BAE policy we proposed to incorporate into the
regulations, sponsors are required to accept and use BAE to correct the
beneficiary's low-income subsidy data in the sponsor's system and, as
applicable, document requests for CMS to correct the beneficiary's low-
income subsidy data in our system or for CMS to work with the Social
Security Administration (SSA) to correct the data in their systems,
where appropriate, when the change has not occurred as a result of
routine reporting.
We anticipate that the BAE policy will remain in place for the
indefinite future. As a result, we proposed to modify Sec. 423.800 by
adding a fourth paragraph, consistent with our current policy, that
would require Part D sponsors to use the CMS-developed BAE process to
establish the appropriate cost-sharing for low-income beneficiaries
whose information in CMS systems is not correct.
We proposed to define BAE at Sec. 423.772 as documentation or
information that is directly tied to authoritative sources, confirms
that an individual meets the requirements for the low-income subsidy,
and is used to support a change in an individual's low-income subsidy
status. We did not propose to specify in the regulation the specific
documents that would meet these criteria, as there may be documents
that meet these criteria in the future that do not currently exist.
Comment: A number of commenters supported our best available
evidence policy and our proposal to codify the policy in regulation. In
expressing support for the policy, some commenters noted the importance
of the BAE policy to low-income, subsidy-eligible individuals and
recommended that CMS strictly enforce sponsor compliance.
Response: We appreciate the support expressed for our policy and
the proposed provision. We also recognize its importance to the low-
income subsidy eligible population and, as a result, will monitor
beneficiary complaints on this issue and take appropriate corrective
action against sponsors to the extent that we learn they are not
compliant with the BAE policy as specified in Sec. 423.800(d).
Comment: Some commenters expressed agreement with the definition of
``best available evidence'' in Sec. 423.772. One commenter suggested
we provide as specific information as possible on what is acceptable
BAE. Two commenters, noting the difference between community and
institutional pharmacy operations, recommended expanding the definition
to specify that an attestation by a provider would qualify as
documentation from an authoritative source. One commenter urged CMS to
revise the definition to add that authoritative sources are those
``approved by CMS.'' Another commenter believed the definition was
unnecessarily restrictive and encouraged CMS to permit information from
non-authoritative sources whenever possible.
Response: As we have noted previously, we are not specifying in
regulation the particular documents or types of information that meet
the definitional criteria as there may be additional documents in the
future that meet these criteria. However, we do believe that the
definition would be clearer by specifying the sources of the
documentation that we have determined are authoritative. Therefore, we
have revised the definition to indicate that BAE documentation or other
information must be tied directly to the State or SSA systems.
Comment: We received a number of comments recommending that we add
regulatory language to incorporate guidance that provides for Part D
sponsors to assist individuals who claim to be subsidy eligible but
cannot provide acceptable evidence of subsidy eligibility.
Response: Since the intent behind the regulation, as stated in the
proposed rule, is to codify our BAE policy, we agree with the
commenters that the regulation should address the provision of
assistance to individuals without documentation. However, under the
process we established for the provision of this assistance, Part D
sponsors do not directly assist beneficiaries in securing acceptable
documentation. Instead, sponsors are to follow CMS-established
procedures, referring the request to the CMS Regional Office, and
informing the beneficiary of the results of the CMS inquiry. Therefore,
we have added a requirement for Part D sponsors to respond to requests
for assistance in securing best available evidence from beneficiaries
or the beneficiary's pharmacist, advocate representative, family member
or other individual acting directly on behalf of the beneficiary in
accordance with the process established by CMS. As described in our
memo entitled ``Best Available Evidence Policy--UPDATE'' (available at
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/MemoClarifiedBAEGuidance_08%2004%2008_wROconts.pdf), by ``respond''
we mean fulfilling a process specified by CMS to refer to CMS an
individual beneficiary who claims subsidy eligibility status and
specifically requests assistance obtaining required documentation. This
process is intended to assist a beneficiary (or other individual on the
beneficiary's behalf) when a specific request for assistance is
received by the plan, either directly via a call to plan member
services, or indirectly via contact by a pharmacist to the plan's
pharmacy help desk line seeking to assist the beneficiary (or other
individual on the beneficiary's behalf) making this request at the
point of sale. This process is not intended to serve as a general
alternative to the subsidy eligibility confirmation process and does
not permit pharmacy organizations or any other parties to send
beneficiary records to the plan for research in the absence of a
request for assistance from the beneficiary (or other individual on the
beneficiary's behalf) and in lieu of making reasonable efforts to
acquire the documentation from or on behalf of the beneficiary. We note
that this process should place virtually no additional burden on the
Part D sponsors.
Comment: One commenter recommended that CMS establish a mechanism
for correcting CMS data for LIS applicants based on an LIS award letter
from SSA presented by the beneficiary.
Response: While we had previously expressed an intention to
establish a mechanism for manually correcting the CMS data for
beneficiaries awarded LIS based on an application for the subsidy, the
establishment of a correction mechanism was not addressed in the
proposed provision. We believe this is a topic more appropriately
addressed in operational guidance. We are currently working with SSA to
improve our data reporting processes and will discuss any process
improvements, including a correction mechanism, if established, in
future operational guidance.
Comment: Two commenters recommended expanding the list of
acceptable documentation for best available evidence to include SSA
letters showing the beneficiary receives Supplemental Security Income
(SSI).
Response: We agree with these commenters. In addition, in listing
the documentation that constitutes best available evidence in the
preamble to the proposed rule, we neglected to include an award letter
to a beneficiary who applied for the low-income subsidy. Therefore, we
are including an amended list of evidence sufficient to
[[Page 1523]]
make a change to a beneficiary's low-income status. Currently, any one
of the following forms of evidence must be accepted:
A copy of the beneficiary's Medicaid card that includes
the beneficiary's name and an eligibility date during a month after
June of the previous calendar year.
A copy of a State document that confirms active Medicaid
status during a month after June of the previous calendar year.
A print-out from the State electronic enrollment file
showing Medicaid status during a month after June of the previous
calendar year.
A screen print from the State's Medicaid systems showing
Medicaid status during a month after June of the previous calendar
year.
Other documentation provided by the State showing Medicaid
status during a month after June of the previous calendar year.
A letter from SSA showing that the individual receives
SSI.
For individuals who are not deemed eligible, but who apply
and are found LIS eligible, a copy of the SSA award letter.
Further, in order to establish that a beneficiary is
institutionalized and qualifies for zero cost-sharing any one of the
following forms of evidence must be accepted:
A remittance from the facility showing Medicaid payment
for a full calendar month for that individual during a month after June
of the previous calendar year.
A copy of a State document that confirms Medicaid payment
on behalf of the individual to the facility for a full calendar month
after June of the previous calendar year.
A screen print from the State's Medicaid systems showing
that individual's institutional status based on at least a full
calendar month stay for Medicaid payment purposes during a month after
June of the previous calendar year.
Comment: One commenter recommended that we clarify that, if a
beneficiary has been auto-enrolled by CMS or was charged a low-income
subsidy level cost-sharing level prior to being admitted to an
institution, it is not necessary for the individual to provide BAE
establishing Medicaid eligibility. The commenter also recommended that,
under such circumstances, CMS not require BAE to establish the
beneficiary's eligibility for an institutional cost-sharing level since
this could be determined from the date of admission to the facility.
Response: We confirm BAE is not necessary to establish an
institutionalized beneficiary's Medicaid eligibility if that status is
currently reflected in the CMS system, for example, as would be the
case if the beneficiary had been auto-enrolled in a month after June of
the previous year. However, documentation would be required to
establish the beneficiary as an institutionalized individual as defined
in Sec. 423.772, and therefore qualified for a zero cost-sharing
level. We disagree with the commenter that documentation should not be
required to substantiate eligibility for the zero cost-sharing.
Comment: Three commenters believed the provision represents an
inappropriate transfer to Part D sponsors of responsibility for
determining beneficiary low-income subsidy eligibility. These
commenters recommended that if sponsors are to have this
responsibility, the sponsors should be protected from liability when
good faith efforts are made to determine low-income subsidy
eligibility. Another commenter recommended that the regulation make it
clear that the primary parties in the BAE process are CMS and the
beneficiaries and the only role of the Part D sponsor is to update its
system with the eligibility information provided by CMS.
Response: We disagree with the commenters. We recognize that
section 1860D-14(c)(1) of the Act requires us to establish a process to
notify the Part D sponsor when an individual is low-income subsidy
eligible. We have established such a process and we continue to work to
improve the data reporting processes. However, we also recognize that
the process we employ does not necessarily result in every individual
being successfully identified. Therefore, we believe that sponsors have
an obligation to take reasonable steps to respond to documentation that
identifies such individuals when they have not yet been identified by
CMS, in order that the sponsors fulfill their statutory obligation
under section 1860D-14(c)(1)(B) of the Act to reduce premiums and cost-
sharing for low-income subsidy eligible individuals.
Comment: Several commenters recommended that CMS convene a
workgroup of Part D sponsors, pharmacists, beneficiary advocates and
State Medicaid representatives to refine and improve our BAE policy,
including identifying other reliable evidence of Medicaid eligibility
and institutional status.
Response: Our BAE policy is important to ensure low-income subsidy
eligible individuals have access to covered Part D drugs at a reduced
cost-sharing level. Therefore, we will continue to aggressively respond
to complaints from beneficiaries and others acting on their behalf
alleging sponsor non-compliance with our policy. We will also consider
other ways of monitoring our BAE policy to ensure appropriate access
for low-income subsidy eligible beneficiaries.
Comment: Another commenter recommended CMS implement educational
outreach programs to augment the regulation.
Response: We plan to undertake a number of initiatives to inform
interested parties regarding the requirements associated with our BAE
policy. For example, we recently created a BAE page on our Web site
containing our policy guidance, and, pursuant to our memorandum
mentioned above, Part D sponsors must establish a link to this page on
their Web sites and make information about the BAE policy readily
available for those who contact the plan's call center.
Comment: A few commenters urged CMS to extend the requirement in
Sec. 422.52(g) that special needs plans verify an individual's
Medicaid eligibility to all Part D sponsors as a means of curtailing
the need for BAE.
Response: The requirement in Sec. 422.52(g) is specific to
Medicare Advantage plans for special needs individuals and is intended
to ensure that the individuals wishing to enroll in a dual eligible
special needs plan are eligible for both Medicare and Medicaid. The
verification of Medicaid eligibility is a required element of the
plan's enrollment process. The extension of this requirement for all
Part D sponsors would be inappropriate as sponsors are required to
accept BAE only in those situations in which CMS systems do not reflect
a beneficiary's correct low-income subsidy eligibility.
Comment: One commenter noted the rule did not address situations in
which a beneficiary's Medicaid application is pending and recommended
CMS reaffirm our guidance for handling claims and co-payments in these
cases.
Response: We recognize that many LTC pharmacies hold receivable
balances in Medicaid-pending situations for cost sharing amounts that
will be paid by the Part D sponsor once Medicaid eligibility is
determined and we require sponsors to use the date of the Medicaid
notification to establish a new timely claims filing period to ensure
third party payers and other parties have the opportunity to request
reimbursement for claims incurred during the retroactive period.
[[Page 1524]]
9. Certification of Allowable Costs (Sec. 423.505)
We proposed to revise Sec. 423.505(k)(5), to clarify that the
certification of allowable costs for risk corridor and reinsurance
information includes direct and indirect remuneration that serves to
decrease the costs incurred by a Part D sponsor for a Part D drug. The
submission of accurate and complete data regarding direct and indirect
remuneration that reduces a Part D sponsor's costs for Part D drugs
under the Medicare prescription drug benefit is necessary to ensure
accurate reinsurance and risk corridor payments. We received several
comments on this provision, all of which expressed support for this
proposed clarification. Therefore we are implementing this
clarification, as proposed.
Comment: Several commenters supported our proposed clarification.
One commenter agreed with the policy that the Chief Executive Officer
or Chief Financial Officer must certify that the data reported for the
purposes of determining allowable costs is accurate. However, this
commenter expressed concern that CMS would need to establish penalties
for violations in order to ensure compliance with this policy.
Response: We agree with the commenter's concern. We are currently
conducting audits of the data reported for determining allowable costs
in order to evaluate whether the data submitted (and attested to by the
CEO or CFO) by Part D sponsors are accurate, complete, and truthful. In
cases where inaccurate or incomplete data have been provided, we will
determine the appropriate corrective action or penalties for Part D
sponsors. In cases where there were misrepresentations or omissions in
the information provided to us for determining allowable costs, we may
refer such cases to Federal law enforcement for potential Federal civil
action or criminal prosecution or both.
10. Change of Ownership Provisions (Sec. 423.551)
We are amending the change of ownership provisions in Sec.
423.551, by adding paragraph (g) to clarify that PDP sponsors may not
sell or transfer individual beneficiaries or groups of beneficiaries
enrolled in any of their plan benefit packages (PBPs). This new
provision is simply a clarification of an existing restriction on PDP
sponsors' ability to sell portions of their Part D lines of business.
We are adding Sec. 423.551(g) to provide necessary clarification
on this change of ownership issue. During the first 2 years of the Part
D program, several PDP sponsors have requested our approval of
transactions involving the sale of beneficiaries. This clarification
will minimize the number of sponsors that mistakenly begin negotiations
on such sale agreements.
Comment: We received comments in support of this provision from
several Medicare beneficiary advocacy organizations. A commenter from a
Part D sponsor requesting a clarification that the provision does not
prohibit a sponsor from transferring members from one wholly-owned
subsidiary to another wholly-owned subsidiary (or from one contract to
another contract) when a consolidation is required by CMS-imposed
limits on the number of offerings a sponsor may have.
Response: The Part D sponsor's comment is in reference to requests
CMS has made to certain PDP sponsors to adjust their bid submissions
for an upcoming contract year to ensure that the sponsor is offering
only those Part D plans that afford beneficiaries a meaningful choice
among the sponsor's plan offerings. We advise that this change in the
regulation will have no impact on our policies concerning the cross-
walking, auto-enrollment, or reassignment of beneficiaries.
Comment: A Part D sponsor noted that the regulation is not as clear
as the preamble in stating CMS' intent that we would recognize the sale
of one or more plan benefit packages (PBPs) as a line of business
rather than requiring a sponsor to sell all PBPs under a contract.
Also, the regulation does not contain the condition that the sale
cannot be apart from the rights and obligations related to the PBP.
Response: We agree that we could make clearer, through regulatory
language, our intention that beneficiaries may not be transferred to
another sponsor's plan pursuant to a novation without the acquiring
sponsor assuming the selling sponsor's PBP obligations as well.
Accordingly, we are revising the language of this regulatory provision
to incorporate this comment.
We acknowledge the commenter's suggestion regarding the
qualification of the sale of fewer than all of a sponsor's PBPs under a
PDP sponsor contract as constituting an asset sale that we would
recognize through the execution of a novation agreement. We believe
this comment addresses an issue outside the scope of the regulation,
which was intended solely to ensure that sponsors and potential
sponsors understand that a sale of a Part D line of business must
include the transfer of the seller's PBP obligations to the acquiring
sponsor. We indicated in the preamble of the January 28, 2005 final
rule (70 FR 4341), that we could not define all possible business
arrangements and transactions and that the rules in Subpart N were
intended as a framework, with guidance to be provided on a case-by-case
basis. We continue that policy here by declining to accept the
commenter's suggestion.
D. Changes to the MA and Prescription Drug Benefit Programs
1. Authorization of Automatic or Passive Enrollment Procedures (Sec.
Sec. 422.60 and 423.32)
In our May 16, 2008 proposed rule, we explained that there are some
situations in which we have exercised our authority under section
1851(c)(1) of the Act to establish the method for electing to enroll in
an MA plan by providing for ``passive'' enrollment procedures, under
which an individual is notified that he or she can elect an enrollment
into a particular plan by taking no action. We have done this only in
cases in which we believed it was clear that enrollment in that plan
was in the best interests of the average individual who did not focus
on making an affirmative plan choice (generally in situations where the
existing plan was being terminated or non-renewed). We proposed to
revise the regulations to codify this practice in a new Sec. 422.60(g)
and Sec. 423.32(g), in which the regulations would specify that CMS
may authorize plans to carry out ``passive'' enrollment procedures in
certain situations, including those involving immediate plan
terminations, as well as those in which a failure to elect the
enrollment in question would result in potential harm to beneficiaries.
Comments on this passive enrollment provision are discussed below.
Comment: Although some commenters supported the provision as
proposed, most commenters objected to the policy reflected in our
proposal. In particular, several commenters opposed aspects of any
process that would passively enroll members of a terminating or non-
renewing MA plan into another MA plan. They argued that the passive
enrollment process violates section 1851(a)(1) of the Act, which
provides for beneficiaries to choose to receive their care either under
Original Medicare (fee-for-service Medicare) or with a Medicare
Advantage plan. These commenters contended that beneficiaries that have
chosen an MA plan have chosen that specific plan, and not necessarily
the MA program generally. They expressed concerns with what they
describe as a wide variation in MA plan quality, network, benefits,
cost sharing and other plan
[[Page 1525]]
policies. They suggest that a beneficiary who fails to elect a specific
MA plan should always be defaulted to Original Medicare. Additionally,
the commenters expressed concern that some beneficiaries do not
understand the information provided in notices about passive
enrollments and therefore, such notices do not serve as an effective
protection against possible beneficiary harm and confusion.
The same commenters did agree that beneficiaries in a stand-alone
PDP should be passively enrolled into another stand-alone PDP when
their current PDP has been terminated or non-renewed, as these
individuals would otherwise be left without prescription drug coverage.
However, overall, the commenters argued that, in the event that an MA
plan offering Part D benefits is terminated or non-renewed, these
individuals should be disenrolled from the terminating or non-renewing
MA plan, passively enrolled into a stand-alone PDP, and ``defaulted''
into Original Medicare, rather than being re-enrolled into another MA
plan that offers Part D coverage.
Response: We disagree that our policy is inconsistent with section
1851(a)(1) of the Act. As noted in the preamble to the proposed rule,
section 1851(c)(1) of the Act grants the Secretary the authority to
``establish a process'' for making the ``elections described in
[section 1851(a)] are made and changed, including the form and manner
in which such elections are made and changed.'' Under normal
circumstances, the manner in which elections are made is for the
beneficiary affirmatively to elect a plan, and to default a beneficiary
to original Medicare if they fail to do so.
In some cases, however, a beneficiary could be substantially harmed
by a failure to elect a particular MA plan, and it is clear that a
reasonable beneficiary in such circumstances would elect that plan if
they made an informed, affirmative choice. For example, a beneficiary
with good employer wrap-around coverage may lose his or her wrap-around
coverage if the employer plan changes the MA plan that it wraps around,
and provides in its rules that an employee or retiree who fails to
choose the new plan would lose his or her wrap-around benefits. In such
cases, employees receive notice that they may elect the new MA plan
under which they would keep their wrap-around benefits by taking no
action, and would need to make an affirmative choice to make an
election that would result in them losing their employee coverage.
Similarly, MA enrollees could be in plans that buy down their Part B
premium or provide other key benefits that would remain available only
through another, similar, MA plan. As discussed below, we would require
appropriate notice in those situations as well.
We view this as an appropriate exercise of our authority to
establish the form and manner for electing an MA plan. In all cases in
which this method is adopted, enrollees who determine that they do not,
in fact, wish to make this election are permitted to decline this
enrollment and enroll in an arrangement of their choice.
As explained in the proposed rule, this process also has been
applied in situations in which a beneficiary's MA plan of choice has
been suddenly terminated, and there is not adequate time to have a
normal special election period. We expect these situations to continue
to be limited in occurrence and scope.
In these situations, we consider the plan options available to
affected beneficiaries, including the type and cost of such coverage,
and the provider networks, and how such coverage and networks compare
to those in their current plan. In many such cases, if beneficiaries
were to be ``defaulted'' to original Medicare, their costs for Medicare
Part A and B services could increase dramatically to a level some of
them could not afford. These beneficiaries were relying on the lower
out-of-pocket costs and additional benefits provided by their MA plan,
which they would lose if suddenly placed into Original Medicare. Rather
than have such beneficiaries automatically face large, and in some
cases possibly bankrupting, out of pocket costs, we have arranged for
them to elect a comparable MA plan by taking no action. We have, where
warranted, required that plan to cover services provided by their
existing providers and pharmacies during a transition period that would
allow them to take the time to make an informed choice of plan options.
Organizations are required to notify affected beneficiaries of the
``passive'' enrollment prior to the effective date of the enrollment or
as soon as possible after the enrollment effective date if prior
notification is not possible under the circumstances. The notices are
approved by CMS, explain the beneficiary's right to choose another
plan, describe the costs and benefits of the new plan and how to access
care under the plan, and discuss any other conditions of enrollment
established by CMS (such as the right to continue seeing non-network
providers while paying network cost-sharing amounts). We may also
require that the organization notify the affected beneficiaries through
other means, such as by telephone, where appropriate. In addition, we
also ensure that any form of notification includes important contact
information for beneficiaries to use to obtain assistance or additional
information.
We believe the above process preserves the beneficiary choice
provided for under section 1851(a)(1) of the Act, while also preserving
the lower cost Part A and Part B benefits upon which MA plan
beneficiaries have been relying in the case of those failing to make a
choice, just as passively enrolling beneficiaries in a terminating PDP
into another comparable PDP protects their Part D coverage. In both
cases, the default is to a plan that we believe clearly would be in the
average enrollee's best interests. For these reasons, we are finalizing
the proposed regulatory provision specifying our passive enrollment
authority.
Comment: Most commenters suggested that, when enrolling affected
beneficiaries into a stand-alone PDP, CMS use existing Prescription
Drug Event (PDE) data to ensure that beneficiaries are enrolled in the
least expensive available PDP that covers all of their current
medications.
Response: As stated above, when contemplating passive enrollment,
we consider all aspects of the various plan options available to
affected beneficiaries, including the type and cost of such coverage,
the provider networks, and how these items compare to those of the
beneficiary's current plan. Given the limited time typically available
in those situations where passive enrollment is appropriate, we do not
believe we would have sufficient time to incorporate beneficiary-
specific PDE data into our analysis, particularly given the significant
lag time between actual drug usage and the submission and analysis of
such data. We will consider using such data in the future, if the
circumstances allow.
Comment: Most of the commenters advised that CMS grant a special
enrollment period (SEP) to individuals who are passively enrolled, and
that this SEP last 6 months or until the end of the next Annual
Election Period (AEP), whichever is later. They also suggested that the
SEP allow the beneficiary to choose to have coverage effective
retroactively, but no earlier than the first day of the first month
after plan termination, in order to minimize disruption of coverage.
Response: We agree that individuals who are passively enrolled
should be provided with an SEP, and already provide an SEP to these
individuals.
[[Page 1526]]
Generally, this SEP begins the month in which the beneficiary is
notified of the passive enrollment, and extends for an additional two
months. Generally, we believe that such a 3-month SEP is sufficient and
we do not believe it is appropriate or necessary to establish a 6-month
SEP in the regulation, as suggested by commenters. However, in keeping
with our authority under the current regulations, we will retain the
flexibility to extend the SEP based on the unique circumstances of each
termination or non-renewal. We also decline to amend the regulations to
allow affected beneficiaries to choose to have alternative plan
coverage elected under an SEP begin retroactively. Our experience has
been that retroactive enrollment changes often are not in the best
interests of the beneficiary, given the potential adverse consequences
of retroactive cost-sharing and premium liability; thus, we believe
that permitting unfettered retroactive changes on a blanket basis could
prove problematic. Instead, we will continue to allow retroactive
enrollment changes on a case-by-case basis.
Comment: A commenter suggested that, where passive enrollment is
provided for, CMS launch an aggressive outreach and education campaign
and provide special support to community based counseling
organizations, such as local State Health Insurance Assistance Programs
(SHIPs) and Area Agencies on Aging (AAA). Several commenters also
advised that CMS notify local SHIPs in the affected area of the names
and address of all enrollees in a terminating plan who will lose
coverage and the effective date of the termination of this coverage.
Response: We recognize that such organizations are important
partners in our efforts to educate and reach out to affected
beneficiaries, and will continue to work closely with our partners when
such situations occur. We will continue to work to provide them with
information about such situations as soon as possible, in order to
ensure beneficiaries have access to the important counseling services
provided by these organizations. However, we decline to commit to
providing SHIPs with the names and addresses of all impacted
individuals, as we believe that these individuals' privacy concerns,
and the administrative burden associated with collecting and
disseminating such information, outweigh the potential benefits of
sharing such information with these organizations.
Comment: A commenter requested that the passive enrollment
provisions be expanded to apply to dual eligible individuals who have
actively chosen a plan if the plan premium of that plan is no longer
below the amount in which CMS provides the full amount of extra help.
Response: The commenter is actually referring to one aspect of our
annual ``reassignment'' process, whereby we reassign LIS-eligible
individuals if they are in a plan that will no longer have a premium at
or below the LIS benchmark. However, our policy is to reassign only
individuals who remain in a plan to which they were auto-enrolled, as
opposed to individuals who have actively chosen their existing plan. We
considered reassigning these individuals (so-called ``choosers'') to
another Part D plan, but decided to honor the individual's choice and
allow him or her to make a subsequent choice on his/her own. These
individuals receive notice in October of every year from their current
plan that advises them of any changes in the plan's benefits and costs,
and they have until the end of the calendar year to take action to
change plans. Additionally, LIS-eligible individuals have an ongoing
SEP that enables them to make changes at any time during the year; so,
if an LIS-eligible individual is unaware that a premium will be owed
and then decides to change plans upon receiving an unexpected bill for
a plan premium, he or she is always free to do so. Note that even in
this situation, the subsidized copayments would still apply and the
premium due would represent only the difference between the LIS subsidy
and the actual premium.
Comment: A commenter recommended that CMS distribute the terminated
membership equally among all plans available in the area.
Response: When effectuating a passive enrollment, we review
information about the available plans in the affected area, including
their benefit packages, provider networks, and cost-sharing premium
amounts, in an effort to ensure that beneficiaries who are passively
enrolled maintain a level of coverage equal to or better than their
current coverage, without incurring additional costs. In cases where
these considerations are generally equal, our preference generally
would be that affected beneficiaries are distributed equally among the
remaining plans in the area. However, in other cases, only one plan may
be available that meets these criteria. Therefore, we decline to adopt
the commenter's suggestion as a general rule, so that we can continue
to exercise appropriate discretion to ensure that affected
beneficiaries are enrolled in the most appropriate plans.
2. Involuntary Disenrollment for Nonpayment of Premium (Sec. Sec.
422.74 and 423.44)
We proposed revising the MA and Part D regulations in Sec.
422.74(d)(1) and Sec. 423.44(d)(1) by adding a new paragraph
(d)(1)(iv) to each section to prohibit plans from disenrolling
individuals for failure to pay premiums if they either have requested
the premium withhold option, or if they are already in premium withhold
status. Plans may initiate disenrollments for failure to pay premium
only after an individual in ``direct bill'' status has been notified of
the premium owed and, in the case of MA plans, provided the grace
period required under Sec. 422.74(d)(1)(i)(B), as currently outlined
in the MA and Part D regulations discussed above. For Part D, the plan
must have made reasonable efforts to collect the unpaid amount, as
provided in Sec. 423.44(d)(1)(i), before disenrollment may be
initiated. Based on the comments received on our proposal, we are
revising the language in Sec. 422.74(d)(1)(iv) and Sec.
423.44(d)(1)(iv) to conform with the changes made to Sec. 422.262(g)
and Sec. 422.293(e).
Comment: Numerous commenters supported the provisions as an
important beneficiary protection. However, several commenters also
expressed concerns with the operational issues experienced with the
implementation of the premium withhold option, and the subsequent
beneficiary confusion that may arise from these issues. Several of
these commenters recommend that CMS define a clear process to resolve
withhold problems.
Response: We continue to work in collaboration with the Social
Security Administration and our contracting partners to refine the
premium withhold process in order to ensure a more timely and equitable
outcome for all. We continue to work on this process and have resolved
most premium pass-through payment delays. To the extent that problems
remain unresolved, however, we will consider what other steps we might
take when member premiums are being withheld from SSA checks, but they
are not being passed through to the appropriate plan.
Comment: Several commenters proposed that any beneficiary who is in
direct bill status despite having requested premium withhold be
protected from disenrollment for failure to pay premiums for the
duration of the plan year.
Response: In some cases, a request for premium withhold is not
implemented
[[Page 1527]]
properly when requested, and a beneficiary may be in direct bill status
when he or she should be in withhold status. We believe that
beneficiaries remain financially responsible for the premium amounts
due to the plan. If these amounts are not being withheld from their
checks, they remain responsible for payment. Members of an MA or Part D
plan who are being billed for payment are subject to involuntary
disenrollment (if plan uses that option), after being provided due
process--including the opportunity to pay premiums within grace period.
In operational guidance, we have asked that our contracting plans make
good faith efforts to work with beneficiaries who owe back premiums and
to allow members to arrange for repayment over time. That process was
viewed as protective of both the beneficiary and plan financial
interests.
Comment: Many commenters expressed opposition to the prohibition on
involuntary disenrollment due to non-payment of premium while premium
withhold is in place. One commenter believed that it does not treat all
members in the plan equally, requiring members in direct bill status to
pay premiums timely, while those who have elected premium withhold are
protected even when the plan does not receive payment.
Response: We disagree that beneficiaries are treated unequally. All
members are required to pay premiums timely. By choosing the premium
withhold option, beneficiaries have demonstrated their commitment to
meet their financial obligation to the plan. In either case, the
beneficiary assumes the financial responsibility--whether through
direct withholding from his/her Social Security benefit check, or by
direct billing by the plan and remittance to the plan by the
beneficiary.
Comment: A commenter believed that the prohibition on
disenrollments adds more administrative burden to the plan and dictates
plan financial policies.
Response: We do not believe this requirement places an undue
additional burden on plans. We provide plans with critical information
on its membership on a routine, ongoing basis. Plans are required to
react to this information as part of the plans' contractual
obligations. Further, we disagree that this requirement dictates plan
financial policies as these requirements to maintain enrollment for an
individual who is in premium withhold status do not waive or otherwise
eliminate plan premiums.
Comment: A few commenters suggested that beneficiaries identified
with withhold problems be moved to direct bill. One commenter suggested
the same, but with a finer point that would allow plans to initiate a
move to direct billing when the SSA withhold has not worked for a
reasonable period (for example, 60 days). Another commenter recommended
that we allow plans to send notices to beneficiaries to inform them
that withholding is not working and that a balance is accruing.
Response: We appreciate these suggestions and will take them into
consideration as we continue to examine the extent and duration of
withhold issues.
Comment: A few commenters requested that CMS establish similar
provisions to protect plans from a negative financial impact when the
premium withhold process is not successful, since MA organizations
sometimes experience delays in payment from CMS. One commenter
recommended that CMS institute performance guarantees for SSA payments
and/or requiring SSA to pay interest to MA plans for late payments.
Response: As described previously, we continue to work with our
internal processes, Social Security, and our contracting partners to
refine the premium withhold system. We continue to discuss this process
with our contracting partners and will develop operational strategies
to successfully implement this process, including timely premium
payment to plans.
Comment: Another commenter did not agree with the CMS' legal
interpretation to exclude premium payment option from the nonpayment of
premium provisions established in statute at section 1851(g)(3)(A) of
the Act. The commenter further questions the Congressional intent of
such a provision, since neither the statute, as established by the
Balance Budget Act of 1997 (BBA), nor the supporting congressional
interpretation of the BBA, provides specific exception to exclude
premium withhold from this disenrollment provision.
Response: We are not prohibiting involuntary disenrollment solely
on the basis that the individual has selected his/her premiums to be
withheld from an SSA, RRB, or OPM benefit check. Rather, we are
prohibiting such disenrollment when that request has not yet been
successfully processed due to a system processing issue within CMS or
between CMS and SSA (or RRB and OPM, when that occurs in the future).
We are simply establishing this provision to protect the individual
beneficiary from negative consequences (involuntary disenrollment)
based on a system's issue that is beyond his or her control. This
provision in no way relieves the individual of any premiums owed to the
plan. The statutory authority at 1851(g)(3)(B)(i) of the Act provides
Medicare Advantage organizations the option to disenroll individuals
who fail to pay plan premiums, which is also applied to Part D plans--
as directed by 1860-D1(b)(1)(A) of the Act to apply rules to Part D
program similar to the ones established for the MA program.
With regard to paying the premium, we have established that the
individual, by selecting the premium withhold option, is deemed to have
made a payment to the plan and therefore is not subject to this
involuntary disenrollment for non-payment of premium provision.
Comment: A commenter believed that all members should be treated
the same for nonpayment of premium, regardless of the payment method
chosen.
Response: We agree and believe that the provision, as written,
supports that all individuals are treated equitably.
Comment: Several commenters requested that CMS expand this rule to
include other automatic payment situations involving system issues,
such as errors with electronic fund transfers or checking accounts.
Response: We decline to extend this provision to include errors
that may occur from other financial institutions and maintain that this
provision is limited to the premium withhold option, as described at
Sec. 422.265(f) and Sec. 423.293.
Comment: Several commenters urged CMS to include additional
protections for low-income individuals, specifically, that plans would
not be allowed to involuntarily disenroll low-income individuals who
receive extra help from Medicare in paying all or part of their Part D
plan premiums. In addition, commenters requested that we allow
beneficiaries to provide evidence to the plan that supports their low-
income status to prevent the disenrollment, if the plan is not aware
that the individual receives extra help.
Response: As explained above, section 1851(g)(3)(B)(i) of the Act
provides MA plans the option to disenroll members who fail to pay
premiums, and this option is also available to Part D plans, as
directed by 1860-D1(b)(1)(A) of the Act. Therefore, we cannot prohibit
plans from exercising this option if they so choose. However, if a plan
chooses to exercise this option, our existing enrollment guidance
permits plans to exclude their low-income subsidy eligible members from
this policy and allow them to remain enrolled in the plan.
[[Page 1528]]
Comment: Several commenters believed that this provision should be
extended to beneficiaries whose premiums are paid by a third-party
funding source, such as a State Pharmaceutical Assistance Program
(SPAP). Further, if involuntary disenrollment occurs when there is such
a funding source, one commenter recommends that the individual be
reinstated into the plan once the plan is notified of the third-party
payer.
Response: We already have provisions in place to prohibit
organizations from disenrolling or initiating the disenrollment
process, if those organizations have been notified that the Part D
portion of the premiums is being paid by an SPAP or other payer and the
organization has not coordinated the receipt of the premium payment
directly with the SPAP or other payer. Details of these requirements
can be found in Chapter 14 of the CMS Medicare Prescription Drug
Benefit Manual.
Comment: One commenter requested that disenrollment under the
involuntary disenrollment for non-payment of premium provision only
occur if the premium in arrears is above a certain threshold, for
example at least 2 months premiums are past-due. Otherwise, the
commenter believes that plans would be allowed to terminate these
important benefits over what amounts to a very insignificant sum of
money to the plan.
Response: The commenter raises an interesting issue; however, small
amounts, in aggregate, could prove substantial to the organization. To
ensure that all beneficiaries are treated equitably, we have
established in sub-regulatory guidance that if plans choose to
implement this option to disenroll individuals for non-payment of past-
due premiums, that they must apply the rule consistently to all
similarly situated individuals and for any amount owed and not paid
during the grace period.
Comment: CMS should clarify that the prohibition to disenroll
enrollees is applicable only to those premiums due after the date the
enrollee requested premium withhold status.
Response: We agree that the prohibition on disenrollment is
applicable to individuals only for those premiums due after the
individual selects the premium withhold option. If, prior to requesting
premium withhold, and individual's premiums are already in arrears, the
plan can initiate involuntary disenrollment for non-payment of premium
related to the premiums that were already past-due at the time premium
withhold was requested.
Comment: Commenters urged CMS to add a provision allowing the plan
to bill CMS for the amount of any premiums due, including reasonable
interest, for the period in which the premiums are owed.
Response: We disagree that we should pay the individual's portion
of the plan premium or interest on these premiums, and maintain that
the individual is ultimately responsible for his/her premiums.
3. Retroactive Premium Collections and Beneficiary Repayment Options
(Sec. Sec. 422.262 and 423.293)
We proposed to amend the MA regulations at Sec. 422.262 by adding
new paragraph (h) and the Part D regulations at Sec. 423.293 by
revising paragraph (a) to expressly provide for the proration of past-
due premiums over a period of monthly payments when the reason for the
premium arrearage is other than a member's willful refusal to remit the
premium. In making this proposal, we stated that we believed that
beneficiaries should be able to spread out their obligation in such
cases over at least the same period as the one during which past-due
premiums were accruing. That is, if 7 months of premiums are due, then
the member should have at least 7 months to repay. The final rule
adopts these revisions by adding a new paragraph (h) to Sec. 422.262
and in Sec. 423.293 by revising paragraph (a) as set forth in our
proposed rule. Based on comments, we modified our proposed language to
clarify that other mutually acceptable means of repayment of past-due
premiums are also permissible.
Comment: Many commenters agreed with the proposed rule. One
commenter agreed with the proposed rule, but suggested we clarify that
failure to stay current with a repayment agreement would constitute
grounds for involuntary disenrollment.
Response: We believe Sec. 422.74(b)(1)(i) already provides ample
authority to initiate involuntary disenrollment procedures for a member
that does not stay current with his or her repayment agreement.
Comment: Some commenters stated that allowing enrollees to repay
past-due premiums over time would place a financial burden on plans.
Some stated that direct billing is labor-intensive and that plans
should be permitted to charge interest to members on past-due premiums
to make up for the lost cash-flow.
Response: We do not have authority to permit plans to charge
interest for past-due premiums. The recourse for plans established in
statute and codified in regulation is that plans can initiate
involuntary disenrollment of members that do not remit premium in a
timely manner. Note that direct billing is already a member option, so
the burden on plans will be mitigated by systems for direct billing
that are already in use.
Comment: Some commenters stated that determinations of ``fault''
would be difficult to make, and that enrollee complaints would
increase, including complaints about the disparate treatment of
members. Others stated that we should not establish a separate
``right'' for individuals who ``fail'' premium withhold, while not
providing the same ``right'' to others who have past-due premiums.
Other commenters suggested requiring plans to ``waive'' premiums when
the plan sponsor was ``at fault'' in creating the premium arrearage.
Some commenters suggested we include a definition of ``without fault''
and include all situations where the individual could not reasonably be
expected to make premium payments, including hospitalizations or other
situations beyond the beneficiary's control.
Response: We have not further defined ``without fault'' since we
believe the language of the regulation is clear. To the extent the
member has not been previously notified of proposed involuntary
disenrollment for non-payment of premium, the member is ``without
fault'' in creating the premium arrearage. In such cases, where the
premium arrearage is for more than a single month, the sponsoring
organization must permit installment payments. We do not believe this
provision will cause disparate treatment of members. Rather, all
members with premium arrearages of more than a month and who were not
responsible for having created them by either failing to respond to a
remittance notice, or by failing to use a coupon book to send in their
monthly premium, will have the same ``right'' to installment payment of
past-due amounts. We are not further enumerating the possible ``without
fault'' situations at this time. That said, we do not believe that
being hospitalized would necessarily, in and of itself, constitute a
case of ``without fault.'' Note that premiums are due monthly. In the
event a hospitalization or lengthy illness prevents timely payment of
premium, we would want and expect plan sponsors to be reasonable in
their collection efforts.
Comment: Some commenters suggested that while ``without fault''
determinations are being made there should be no recourse against an
enrollee. These commenters also suggested developing an appeal process
[[Page 1529]]
related to ``without fault'' determinations.
Response: Disputes related to premium payments and involuntary
disenrollment actions are already subject to the plan's internal
grievance process.
Comment: One commenter stated that members are aware of their
monthly premium liability upon enrollment in a plan and therefore
should not be permitted to delay payment, when premium arrearages
occur. Another commenter stated that extended payment plans are a
hardship for beneficiaries.
Response: In some cases members believe they owe no premium or that
their premium is being paid through premium withhold or through some
other mechanism. In such cases premium arrearages can accrue through no
fault of the member. In other words, it is not always the case that
knowing premium liability is tantamount to delaying payment. In the
case where a member finds hardship in an extended payment plan,
remittance by lump sum is also possible.
Comment: Some commenters complained that extending repayment plans
beyond the current plan year could result in members still owing past-
due premiums at their renewal date. The commenter also stated that some
members might disenroll from the plan during the Annual Election Period
before they had completely repaid their premiums. Some commenters
suggested that repayment plans, therefore, be limited to the number of
months left in the current plan year.
Response: All members are free to select a new plan during the
Annual Election Period and therefore have an opportunity to stop paying
premium toward the end of a plan year, especially if they are
considering enrollment in a new plan. Therefore, we do not agree that
the potential for selection of a new plan during the Annual Election
Period provides a compelling argument that installment plans always
guarantee repayment before the end of the current plan year.
Comment: One commenter suggested adding additional options for
members to repay past-due premiums, beyond the two mentioned in
proposed regulation text.
Response: We agree with this comment and in response to this
comment now indicate in the final regulation text that other mutually-
agreeable repayment methods, beyond lump-sum and monthly installments,
are acceptable.
Comment: One commenter recommended allowing plan sponsors to
require repayment of the full past-due amount if it represents less
than 2 months.
Response: We agree with this comment. It was not our intention to
allow repayment of past-due premium amounts over a greater period of
time than the number of months during which the past-due premiums
accrued. If the premium arrearage is for a single month, then the
member must pay the entire amount in a single payment.
Comment: One commenter suggested allowing the plan sponsor to
exercise flexibility in working with members, that mandating specific
member rights was inappropriate and that it might lead to premium
payment abuses by members.
Response: While we rely on and assume plan reasonableness, we also
assume member integrity. We believe we have achieved the correct
balance between a plan sponsor's right to impose premium and a plan
member's responsibility for payment of such premium.
Comment: One commenter stated that sections 1854(d)(1) and (2) of
the Act did not support the interpretation that members should be
permitted to pay past-due premiums over time.
Response: We do not agree. Section 1854(d)(1) of the Act is clear
in requiring a plan sponsor to permit the payment of premium ``on a
monthly basis.'' If, due to a system interface problem, or if, due to
the failure, oversight or mistake of another party--for instance, a
plan sponsor might neglect to provide a monthly billing statement to a
member--and if a member's premium arrearage exceeds a single month,
then the member should nevertheless retain the right to pay premiums on
a monthly basis.
Comment: One commenter expressed concern that in cases where past-
due premiums are owed but members are currently in premium withhold
status, that computer systems would not currently support installment
payments.
Response: It was never our intent to permit installment payments of
past-due premiums through premium withhold. Many premium arrearages are
caused by ``failures'' in the premium withhold system. It would be
illogical to call on the premium withhold system to withhold past-due
premiums that the premium withhold systems caused in the first place.
Comment: Some commenters stated we should limit liability for past-
due premiums to three months, where the plan sponsor made no prior
effort to collect. Some suggested requiring ``waiver'' of past-due
premiums in cases of ``hardship.'' One commenter suggested having the
Social Security Administration pay enrollee premiums during periods of
temporary cessation of SSA checks--when, for instance, the enrollee is
a resident of a State psychiatric institution. Finally, some commenters
suggested limiting involuntary disenrollment to only cases where
premium arrearages were for two months or more.
Response: We have no authority to limit liability for past-due
premiums to only 3 months, regardless of the circumstances surrounding
a specific case. Similarly, CMS has no authority to ``waive'' past-due
premiums, nor can we require a plan sponsor to do so. Under Part D,
there is the income-related subsidy program that would limit premium
liability for most low-income individuals. However, there is no premium
subsidy program under Part C. We also have no authority to require the
Social Security Administration to pay premiums on enrollee's behalf,
where premiums have not first been deducted from enrollee's Social
Security checks. Finally, we have no authority to restrict involuntary
disenrollment to only those cases where more than a single month's
premium is past-due.
Comment: Some commenters suggested imposing fines or civil monetary
penalties that would be payable to plan members on plan sponsors that
send incorrect notices to members related to premiums.
Response: We do not have the authority to require plan sponsors to
pay plan members fines or civil monetary penalties for incorrect
notices related to plan premiums.
4. Prohibiting Improper Billing of Monthly Premiums (Sec. Sec.
422.262 and 423.293)
We proposed to amend the MA regulations by adding new paragraph (g)
to Sec. 422.262, and the Part D regulations by adding new paragraph
(e) to Sec. 423.293, to explicitly prohibit improper billing. We
stated it was inappropriate for an MAO or Part D plan to double bill
members who have submitted a request that premiums be withheld under
section 1860D-13(c) of the Act for Part D or section 1854(d) of the Act
for Part C, and who are already having their premiums taken out of
their Social Security payments. The final rule adopts the revisions to
Sec. 422.262 and Sec. 423.293 with modifications based on comments.
Specifically, based on comments we received, we have modified the
language to clarify that we only intend to prohibit billing a
beneficiary a second time for premiums that the beneficiary has already
paid through premium withhold.
[[Page 1530]]
Comment: All commenters supported CMS's position that members
should not be billed for premiums that had already been paid through
premium withhold. However, some commenters suggested that the plan
should be paid interest by Social Security or CMS, when the premium was
actually withheld from a member's Social Security check, but the
premium was not passed on to the plan sponsor in a timely manner.
Response: We will continue to work with plans to ensure timely
payment of amounts due. In the case of premium withhold, we are
exploring additional systems implementation options that include more
robust reporting of premium withhold data, as well as more timely
reconciliation of premium pass-through issues.
Comment: Some commenters suggested that when there is a premium
withhold ``failure'' that members should be indemnified for the
remainder of the plan year.
Response: We do not have the authority to indemnify such members
from responsibility for premiums that they actually owe. On the other
hand, to the extent members have already paid premiums through premium
withholding, we fully intend to protect them from double billing and,
in another part of this rule, from improper involuntary disenrollment.
Comment: Some commenters objected to the fact that a plan enrollee
could simply request premium withhold and thereby avoid premium
liability during the time it takes the plan to set-up premium withhold.
Response: We agree with this comment, and in response to this
comment have clarified the regulation text to state that it is only in
cases where premiums have already been paid by the member through
premium withhold that it is prohibited under this regulation for a plan
to bill a member more than once for such premiums.
5. Non-Renewal Notification Timelines (Sec. Sec. 422.506 and 423.507)
We proposed revising Sec. 422.506(a)(2)(ii), (a)(2)(iii),
(b)(2)(ii), and (b)(2)(iii) of the MA regulations and Sec.
423.507(a)(2)(ii), (a)(2)(iii), (b)(2)(ii) and (b)(2)(iii) of the Part
D regulations, to change the beneficiary and public notice requirement
from at least 90 days to at least 60 days, thus allowing more time for
the contract non-renewal process to conclude, and any administrative
appeal to conclude, while still allowing for a sufficient beneficiary
notice period, prior to January 1st. This change will help ensure that
all non-renewal decisions are final, prior to the start of marketing
and enrollment activities.
Comment: Numerous comments opposed the reduction of the beneficiary
and public notice period. The commenters stated that the reduction of
days for beneficiaries to understand the impact of the non-renewal,
evaluate their options, and make informed decisions would be difficult.
The commenters urge CMS to maintain the 90 day notice period.
Response: The change in beneficiary and public notification
timeframes was made to allow time for the notification process to
conclude prior to the beginning of open enrollment, since the date for
notifying plans regarding nonrenewals is now August 1 of each year. The
60-day beneficiary and public notification may not occur prior to the
conclusion of the administrative appeal of a non-renewal determination.
Shortening the notification period to 60 days will also increase the
likelihood that any administrative appeal and the notification period
can conclude prior to the start of the new plan year on January 1.
We believe a 60-day notice is sufficient for beneficiaries to make
choices. Currently, beneficiaries cannot enroll, during the annual
enrollment period, in a plan until November 15th of each year. The
change in the notification timeframe does not limit the enrollment
period for beneficiaries. The decrease in the beneficiary notification
period only affects the amount of time plans may market to
beneficiaries. We believe 60 days is a sufficient amount of time for
beneficiaries to make a new health care choice. Therefore, we will not
be making any changes based on this comment.
6. Reconsiderations (Sec. Sec. 422.578, 422.582, 423.560, 423.580)
a. Medicare Advantage Program (Sec. Sec. 422.578 and 422.582)
We proposed to revise Sec. Sec. 422.578 and 422.582 to allow a
beneficiary's physician to request a standard plan reconsideration on
the beneficiary's behalf without having been appointed as his or her
representative. The final rule adopts the revisions to Sec. Sec.
422.578 and 422.582 as set forth in our proposed rule.
Comment: Many commenters agreed with the proposed change allowing a
treating physician, with the enrollee's consent, to request a standard
pre-service reconsideration. In addition to supporting the proposed
change, one commenter recommended further revising Sec. 422.584 of the
regulations to specify that the physician making an expedited request
must be currently providing treatment to the enrollee.
Response: We appreciate the commenters' support for this provision,
and believe that permitting physicians to request standard pre-service
appeals on their patients' behalf will help to make the appeals process
more accessible to enrollees. However, we can not revise Sec. 422.584
of the regulations to specify that the physician making an expedited
request must be currently providing treatment to the enrollee because
section 1852(g)(3)(A)(ii) of the Act permits any physician, regardless
of his or her status as an enrollee's treating physician, to request an
expedited determination or reconsideration on an enrollee's behalf.
Comment: A commenter requested that CMS clarify in the regulations
that only a primary care physician (PCP) would be allowed to request a
standard reconsideration of a pre-service request on behalf of the
enrollee, not a specialty care physician.
Response: The term ``physician'', as used in subpart M, has the
same meaning given to the term in section 1861(r) of the Act. Thus, the
term includes any physician who is providing treatment to the enrollee.
Therefore, it would be inappropriate to allow only PCPs to request
standard pre-service reconsiderations. We continue to believe that any
physician who is involved in providing care to an enrollee is in a good
position to know whether a request for plan reconsideration is
warranted and in the enrollee's best interest. Accordingly, we are not
adopting the commenter's suggested revision.
Comment: A commenter asked CMS to clarify in the MA regulations
that an enrollee's treating physician is limited to requesting a
standard plan reconsideration of a pre-service request on an enrollee's
behalf without being the enrollee's appointed representative.
Response: As currently drafted, we believe Sec. 422.578 of this
final rule already makes this limitation clear. It states in relevant
part that a physician is limited to requesting ``a standard
reconsideration of a pre-service request for reconsideration on the
enrollee's behalf.'' (See 73 FR 28594).
Comment: A commenter was concerned that removing the need for an
enrollee to actively appoint a representative could have serious
implications for beneficiary rights. This same commenter also noted
that the proposed change would raise significant operational issues.
For example, the commenter questioned what would happen in a situation
where an enrollee objects to being represented by the
[[Page 1531]]
physician, and asked whether there are limits on the representation,
and if the initial representation would enable the physician to
continue the appeals process through additional levels of appeal.
Finally, the commenter questioned whether such representation is
limited to disputes relating to services provided by the appealing
physician. Given these concerns, the commenter suggested that the
proposal be given further review prior to implementation.
Response: We appreciate the commenter raising these important
issues concerning enrollee rights, limitations on physician
representation of an enrollee, and the potential operational issues
resulting from this policy. In the MA program, physicians have long
been permitted to file coverage requests and plan level expedited
appeals on their patients' behalf. The proposed policy represents a
modest expansion of that right, but still limits the physician's
ability to act on the enrollee's behalf only to plan level appeals,
unless the physician is the enrollee's representative. As stated in the
preamble to the proposed rule (73 FR 28579), we believe that for any
appeal beyond the plan level, the enrollee should be directly involved
in a decision to disclose his or her private health information to
adjudicators because those adjudicators do not have the same
relationship with the enrollee that the plan has. Accordingly, if an
enrollee wishes his or her physician to request higher levels of appeal
on his or her behalf, the physician must also be the enrollee's
representative. If an enrollee does not want his or her physician to
request an appeal, we believe the proposed rule addresses the
commenter's concern. Consistent with Sec. 422.578, the physician must
notify the enrollee before filing the appeal request. We believe this
policy will afford the enrollee sufficient opportunity to express any
objections about the physician filing the appeal or to refuse the
physician's representation. Given our experience with the MA and Part D
programs, it is reasonable to believe that in the overwhelming number
of cases, the enrollee will welcome the physician's willingness to
pursue an appeal on the enrollee's behalf.
With respect to the commenter's question about whether the
representation is limited to disputes relating to services provided by
that physician, Sec. 422.578 states that a physician who is providing
treatment to an enrollee may, upon providing notice to the enrollee,
request a standard reconsideration of a pre-service request on the
enrollee's behalf. As the commenter notes, the regulation is not
prescriptive about the relationship between the care the physician is
providing to the enrollee and the need for the reconsideration request.
However, we believe that given the treating physician's knowledge of
and access to the medical information needed to support such a request,
it is reasonable to presume that, in most instances, the treating
physician will be the physician requesting the pre-service
reconsideration. Finally, we note the receipt of numerous comments from
beneficiary advocacy groups and medical associations in support of this
provision as an appropriate means of allowing physicians to assist
enrollees with the MA and Part D appeals processes. Accordingly, we
have finalized the provision as proposed.
Comment: Many commenters asked CMS to clarify what type of
documentation a physician would be required to produce to demonstrate
that he or she is an enrollee's treating physician.
Response: Since the inception of the MA and Part D programs, we
have received numerous comments asking us to make the appeals process
more enrollee-friendly by allowing physicians to make initial
determination and appeals requests on their patients' behalf without
going through the formal appointment of representation process. We
developed the proposed policy in response to those requests, and the
overwhelming number of comments we received were supportive. Our
proposal is a very limited extension of a physician's current appeal
rights under the regulations (a physician currently has the right to
request an initial determination or an expedited plan-level appeal on
behalf of an enrollee without being his or her appointed
representative). We merely proposed to extend this right to include
standard pre-service plan-level appeals under MA and standard plan-
level appeals under Part D. Thus, the process for handling physician-
initiated plan-level appeal requests should be the same process that is
currently being used to process and adjudicate expedited plan-level
appeal requests. In addition, because we intended to make filing a
standard plan-level appeal request easier for a physician than if he or
she were filing as the enrollee representative, we expect the processes
that plans to adopt for verifying a physician's status as the treating
physician to be much simpler and more flexible than the process used to
verify appointed representative status. If necessary based on
experience under this final rule, we believe the proper place to
further address this issue is in operational guidance. As such, we will
consider the commenters' concerns as we develop future policy guidance,
and will update Chapter 13 of the Managed Care Manual and Chapter 18 of
the Prescription Drug Benefit Manual as appropriate.
b. Prescription Drug Benefit Program (Sec. 423.560 and 423.580)
(1) Definitions (Sec. 423.560)
We proposed to revise the regulation text of Sec. 423.560 by
adding a new definition for ``other prescriber'' that encompasses
health care professionals, other than physicians, with the requisite
authority under State law or other applicable law to write
prescriptions for Medicare beneficiaries. In conjunction with the
proposed new definition, we proposed to add ``or other prescriber''
after ``prescribing physician'' or ``physician'' throughout subpart M
of part 423 in order to authorize these other prescribers to perform
the same functions that prescribing physicians are allowed to perform
with respect to the coverage determination and appeals processes as set
out in subpart M of part 423. This final rule with comment period
adopts the revisions to Sec. 423.560 set forth in our proposed rule.
Comment: A few commenters requested further clarification regarding
who could qualify as an ``other prescriber.'' One commenter suggested
CMS ensure the definition of other prescriber is consistent with the
definitions of treating physician and treating practitioner used in
section 1861(r) of the Act.
Response: As noted in the preamble to the proposed rule (73 FR
28579), we believe it is important to provide enrollees who have
prescriptions written by health care professionals, other than
physicians, with prescribing authority under State law or other
applicable law the same protections and assistance in the coverage and
appeals processes that are currently available to enrollees whose
prescriptions are written by a physician. We believe it is appropriate
to defer to State law or other applicable law to determine who is
considered an ``other prescriber'' under subpart M of the regulations
because States are responsible for licensing and regulating such
professionals. Although we may provide examples of other health care
professionals who have prescribing authority under State or other
applicable law in our guidance, any such list would not be exhaustive.
Thus, it is ultimately a Part D plan sponsor's responsibility to ensure
a health care professional making a request on behalf of an enrollee
has
[[Page 1532]]
prescribing authority under State law or other applicable law.
(2) Right to a Redetermination (Sec. 423.580)
We proposed to revise the regulation text of Sec. 423.580 to
provide prescribing physicians and other prescribers with the ability
to request standard redeterminations on behalf of enrollees, and
require them to notify enrollees that they are taking this action. The
final rule adopts the revisions to Sec. 423.580 set forth in our
proposed rule.
Comment: Although many commenters supported our proposal to allow
physicians and other prescribers to request, upon notice to the
enrollee, a standard redetermination, we received one comment opposing
the proposal. The corresponding change that was proposed, and is being
finalized in this rule, for the MA program allows a treating physician
to request a plan-level appeal (reconsideration) on behalf of the
enrollee for a pre-service request, but does not allow a treating
physician to request a standard plan-level appeal for payment. The
distinction between pre-service claims and claims for payment in the MA
program was made due to the financial interest a treating physician may
have in a claim for payment under the MA program. Under existing Sec.
422.574(b), if the physician or other provider that furnished a service
to an enrollee formally waives any right to payment from the enrollee
for that service, the physician or other provider becomes a party to
the organization determination and may request a plan-level appeal. The
commenter opposing the proposal disagreed with the statement made in
the preamble to the proposed rule that prescribing physicians do not
have a financial interest in the payment of Part D claims because a
physician who has a relationship with a pharmaceutical manufacturer may
be more likely to prescribe one of the manufacturer's drugs. Finally,
the commenter also believes that if an enrollee wants a physician or
other prescriber to seek a redetermination on his or her behalf, then
the enrollee should make that request to the provider in writing.
Response: We appreciate the comments received in support of this
provision. We believe a policy of allowing prescribing physicians and
other prescribers to request standard redeterminations on behalf of
enrollees will help to make the appeals process more accessible to
enrollees. With respect to the comment opposing this provision, we
understand the commenter's concern about the potential for a prescriber
to have some financial interest, but continue to believe that a
physician or other prescriber requesting an appeal under Part D does
not have a financial interest in the outcome of an appeal in the same
manner as a physician requesting an appeal under the MA program. As
noted in the preamble, the MA rules already allow a provider who has
furnished a service to an enrollee to request a plan-level appeal if
the provider waives any right to payment from the enrollee. Under the
Part D program, a physician or other prescriber is generally not
entitled to payment for the prescribed drug from either the enrollee or
the plan and, therefore, is not in the same position as an MA provider
with respect to a potential financial interest. Finally, we do not
agree with the commenter's suggestion that an enrollee should submit a
written request to his or her provider asking the provider to represent
him or her in the redetermination process. Adding this requirement
would essentially create a process identical to the appointment of
representative process, which would not serve to enhance beneficiaries'
access to the Part D appeals process.
Comment: A few commenters asked CMS to clarify the process a
physician must use to inform an enrollee that he or she is requesting a
standard redetermination on the enrollee's behalf. One commenter asked
how the physician's notice to the enrollee is communicated to the Part
D plan sponsor, and how receipt of such information impacts the
adjudication timeframe.
Response: As noted previously, our intention is to make this
process flexible for enrollees, providers, and plans. Thus, we have not
included in regulation any requirements regarding the format of the
physician's notice to either the enrollee or the plan. We believe this
approach will allow plans to determine how to best implement these
requirements. However, we will take these comments into consideration
when developing any necessary operational guidance. If we determine
that additional clarification is necessary, we will include any
appropriate information in our operational manuals. Therefore, any
additional polices we develop related to the issues raised by the
commenters above will be added to Chapter 18 of the Prescription Drug
Benefit Manual.
c. Miscellaneous Comments
Comment: We received one comment suggesting the provision in Sec.
423.582 requiring prescribing physicians to submit written requests for
redeterminations is an unnecessary formality that will frustrate the
practitioner's ability to provide the best care for his or her patient.
Response: We believe the commenter's suggestion is outside the
scope of the proposed rule because we did not propose to modify the
written request requirement in Sec. 423.582. We note that, although
the written request requirement in Sec. 423.578 was carried over from
Sec. 422.578 in accordance with section 1860D-4(g) of the Act, nothing
in the Act or regulations prohibits an MA organization or a Part D plan
sponsor from also accepting verbal requests. Rather, the regulations
explicitly provide that the MA organization or Part D plan sponsor may
adopt a policy for accepting oral requests. (See Sec. 422.582(a) and
Sec. 423.582(a)).
Comment: A commenter suggested that a physician in the same
specialty or subspecialty as the prescribing physician must be
responsible for reviewing a medical necessity denial under Sec. Sec.
423.590(f)(2) and 423.600(e).
Response: The commenter's suggestion is outside the scope of the
changes proposed in this rule because we did not propose to modify
Sec. 423.590(f)(2) or Sec. 423.600(e). We note that the physician
reviewer requirements contained in Sec. 423.590(f)(2) and Sec.
423.600(e) are consistent with Sec. 422.590(g) of the regulations,
which requires the reviewing physician to have ``expertise in the field
of medicine that is appropriate for the services at issue'' but ``need
not, in all cases, be of the same specialty or subspecialty as the
treating physician.'' We continue to believe that the level of review
provided by a physician having expertise in the field of medicine
appropriate for the services at issue is sufficient for medical
necessity denials under Part D. The regulatory language also makes it
clear that a physician of the same specialty or subspecialty as the
prescribing physician may need to review a Part D drug medical
necessity denial in some situations.
Comment: Several commenters provided comments on the MA
reconsideration process at the independent review entity (IRE) level of
review. The commenters stated that IRE reconsiderations are generally
limited to evidence and arguments submitted to the IRE by the MA plan
and that beneficiaries often have difficulty contacting the IRE and are
discouraged from participating in the process. The commenters requested
that Sec. 422.592 be amended to include a provision giving
beneficiaries the right to submit allegations of fact and law to the
IRE
[[Page 1533]]
and that such information could be submitted by telephone, fax or
electronic mail.
Response: Amending Sec. 422.592 of the MA appeals regulations is
outside the scope of this final rule. However, we will consider the
commenters' remarks for future rulemaking that involves the MA appeals
process. We would like to note that, under the existing standard
reconsideration process, when the IRE receives a case file from an MA
plan, it sends an acknowledgement letter to the enrollee. The
acknowledgement letter informs the enrollee that his or her appeal is
being reviewed by the IRE and includes a comprehensive explanation of
the enrollee's rights, including the right to provide the IRE with
information that may help the enrollee's case.
Comment: We received comments urging CMS to revise Sec. 423.578 to
require uniform coverage determination and reconsideration procedures.
In addition to making it easier for physicians, advocates, and
beneficiaries to navigate the system, the commenters believe uniform
requirements will make it easier for CMS to monitor plan performance.
Response: We appreciate the commenters' suggestion, however,
amending Sec. 423.578 as suggested is outside the scope of revisions
contained in this rule. Moreover, we believe the Part D appeals process
established in Subpart M of Part 423 largely establishes a uniform
coverage determination and appeals process including, but not limited
to, required adjudication timeframes for the plans and the IRE,
requirements related to the timing, form and content of notices, and
rules related to the exceptions process.
Comment: We received comments urging CMS to amend the Part D
regulations at Sec. 423.590 to allow the enrollee to request IRE
review if a plan fails to meet its adjudication timeframe and also
fails to forward the enrollee's request to the IRE within 24 hours of
the expiration of the adjudication timeframe.
Response: We appreciate the commenters' suggestion, however,
amending Sec. 423.590 as suggested is outside the scope of this rule.
However, we will consider this suggestion for future rulemaking
regarding the Part D appeals process.
Comment: We received a comment that expressed concern that, except
for retrospective self-reporting by plans, there is no mechanism for
the IRE or CMS to monitor whether plans are meeting their decisional
deadlines. Beneficiaries not represented by persistent advocates who
know the rules may face unacceptable delays. The commenter urged CMS to
develop a mechanism whereby coverage determinations are tracked in real
time so that beneficiary rights to timely action can be protected.
Response: We concur that plans' timely decision-making for coverage
determinations and redeterminations are two important areas for
monitoring; however, there may be operational barriers to monitoring
these transactions in real-time. As the commenter stated, the Part D
Plan Reporting Requirements Exceptions and Appeals reporting sections
require plans to report data related to these processes, including
failure to meet decision timeframes. We consider these plan-reported
data, along with other information sources, important first indicators
for Plans failing to meet these requirements.
Comment: A commenter stated that to aid in monitoring, as well as
to assist beneficiaries who are not receiving promised services, CMS
should institute an effective complaint process for beneficiaries. The
commenter also stated that complaints should be investigated and also
used in CMS monitoring activities and reports. When available,
beneficiaries should be allowed to have denied grievances appealed to
state independent medical review processes.
Response: The commenter's suggestion to require that beneficiaries
should be allowed to have denied grievances appealed to state
independent medical review processes is beyond the scope of this rule.
However, we note that we implemented a centralized Complaint Tracking
Module (CTM) in 2006 in order to help capture and resolve complaints
received from Medicare beneficiaries experiencing difficulties with
their Part D benefit. The CTM allows CMS and Plan sponsors to work
together to investigate and resolve complaints in a timely manner.
Beneficiaries can also file a grievance directly with the plan sponsor.
Plan sponsors, in turn, report grievance data to CMS as specified in
the Part D Plan Reporting Requirements for CMS' monitoring and
oversight.
In addition to contract monitoring and oversight, complaint data
are incorporated in Part D plan ratings. Part D plan ratings include
various operational and quality areas in which Plans' performances are
rated for display on the Medicare Options Compare and the Medicare
Prescription Drug Plan Finder at http://www.medicare.gov. These ratings
empower beneficiaries to compare Medicare health and prescription drug
plans in their geographic area.
7. Civil Money Penalties (Sec. Sec. 422.760 and 423.760)
We proposed to clarify our regulations relating to CMPs in both
Sec. 422.760 and Sec. 423.760 by adding paragraph (b)(2) of the
respective sections to state that CMS may impose a penalty of not more
than $25,000 for each enrollee covered under the organization's
contract that is adversely affected or substantially likely to be
adversely affected by the organization's deficiency (or deficiencies).
When determining the amount of a penalty per determination, up to the
$25,000 maximum, we will continue to take into account factors such as
the severity of the infraction, the evidence supporting the infraction,
the amount of harm caused to the Medicare beneficiary, and the
organization's past conduct.
Our proposed change is aimed at protecting enrollees by clarifying
that penalties can be substantial for noncompliance. CMS has the
discretion to establish guidance on how CMPs will be calculated and the
monetary limits of CMPs for violations.
Assessing CMPs at the level of each enrollee covered under the
organization's contract--which enables the Agency to continue to levy
CMPs at the ``per contract'' level--will help provide the necessary
flexibility for CMS to better match CMP amounts to the specific
violation underlying a CMP. However, we acknowledge that there may be
alternative or additional approaches to the ``per beneficiary'' and
``per contract'' schema described here that would likewise meet the
Agency's goals of providing meaningful penalties that deter violations
of Medicare program requirements and protect Medicare beneficiaries.
For example, tying CMP amounts to the number of days that violations
existed may likewise be an effective approach for assessing meaningful
CMPs. In our proposed rule, we therefore sought comments on our
proposed clarification as well as whether any other approaches would
more effectively deter MA organizations and Part D sponsors from
engaging in conduct which violates CMS requirements. We also requested
comments on the appropriate monetary range for CMPs imposed on MA
organizations and Part D sponsors and whether some upper limit should
exist on the total amount of a penalty imposed on an organization when
a deficiency has adversely impacted a large number of enrollees covered
by an MA organization or Part D sponsor. As discussed below, we
received approximately 30 comments on CMP-related issues, but we did
not receive
[[Page 1534]]
substantive suggestions on approaches or monetary ranges for CMPs.
Comment: One commenter supported CMS' clarification to the term
``determination'' when referring to CMPs. The commenter suggested that
no upper limit for CMPs be specified. The commenter suggested that CMS
have the flexibility to impose an appropriate monetary penalty without
the constraint of an arbitrary cap.
Response: We agree that we need the flexibility to impose
meaningful CMPs on plans. We have decided not to impose an upper limit
for CMPs at this time.
Comment: One commenter stated that moving from calculating a
penalty based on an organizational level to a membership level imposes
significant increased business risk to plans that contract with CMS.
This commenter also stated that this would allow CMPs to be levied not
on the violation itself but on the membership.
Response: The proposed regulation does not change the basis for the
CMP. The basis of the violation remains the same. The proposed
regulation clarifies how the penalty is assessed. That is, we proposed
to clarify that under some circumstances, determinations can be based
on the number of adversely affected, or potentially adversely affected,
enrollees. In such instances, a CMP would only be assessed on the
number of adversely affected, or potentially adversely affected,
enrollees, not the total number of enrollees in the plan. We are not
making any changes based on this comment.
Comment: A few commenters stated that CMS' proposal is not
appropriate for violations that are unintentional and/or do no harm to
beneficiaries. The commenters stated that this level of CMPs would only
be appropriate in rare circumstances when an organization intentionally
and deliberately violated program rules or where the violations are
egregious, knowingly, or willfully undertaken.
Response: The commenters were concerned about CMPs levied for an
organization's unintentional acts and/or acts that do not involve harm
to members. The current regulations clearly state that to impose a CMP
on an organization, we must make a determination that a violation
adversely affects, or potentially adversely affects, one or more of the
organization's enrollees, regardless of whether such harm was
intentional or not. The proposed regulations do not change this current
requirement. As for violations that are found to be ``egregious,
knowingly, or willfully undertaken,'' the statute and current
regulations permit CMS to take into account such types of violations as
one of, but not the sole governing factor when determining a civil
money penalty. We are not making any changes to the proposed regulation
based on these comments.
Comment: A few comments concerning the phrase ``substantial
likelihood'' were received. One commenter stated that they were not
sure what criteria or standards we would apply to determine when there
is a substantial likelihood of a violation adversely affecting members.
Another commenter requested guidance on what is meant by ``substantial
likelihood of being adversely affected by a deficiency.''
Response: The language of ``substantial likelihood of adversely
affecting'' comes directly from section 1857(g) of the Act. We must
have the discretion to interpret this language when evaluating whether
to impose a CMP, since each case may present a different set of
circumstances and any determination of likely adverse effects on
enrollees could depend on the specific facts of the case. We are not
making changes based on these comments. We will consider whether future
guidance should incorporate criteria to help determine when a
deficiency has a substantial likelihood of adversely affecting an
organization's members.
Comment: A commenter requested clarification to determine what the
threshold for willful and purposeful neglect was.
Response: The term ``willful and purposeful neglect'' was not used
in the proposed regulation with respect to civil money penalties. CMS
is unsure what the commenter is referring to.
Comment: A commenter stated that the regulation should list what
types of recourse the MA organization or Part D sponsor has prior to
CMS imposing a civil money penalty.
Response: Civil money penalties are imposed for various violations.
Some violations may be one time violations that have significant
harmful effects on enrollees. In such cases, CMS may not consider it
appropriate to offer recourse (such as a corrective action plan), given
that the violation has already taken place and has significantly harmed
enrollees, even if it is not likely to reoccur. We are not required to
provide for recourse, such as a CAP prior to the issuance of a CMP.
However, the regulations do provide for appeal rights for those
organizations who believe we have inappropriately imposed a CMP.
Therefore, we are not making any changes based on this comment.
Comment: One commenter urged CMS to continue to take into account
an organization's past conduct when assessing the need for a CMP.
Response: We agree with the commenter and will continue to take
into account an organization's past conduct when assessing the need
for, or the amount of, a CMP.
Comment: One commenter stated that the language allows for
assessment at both the contract level and the enrollee level.
Response: We developed the language to provide for discretion to
impose a CMP at either the contract level or the enrollee level. This
flexibility is necessary to ensure violations and penalties are
appropriately matched.
Comment: A commenter was uncertain whether the deficiency's adverse
effects are related only to those who are enrolled in a plan or also to
individuals who have expressed interest in a plan.
Response: The statute states that any adverse or substantial
likelihood of adverse effect be on ``an individual covered under the
organization.'' We believe that this language requires that the
individual be an enrollee of the plan and not just one who has
expressed interest in the plan.
Comment: A few commenters were concerned that the proposed changes
could result in massive penalties for relatively minor infractions if
those infractions affect a large number of enrollees.
Response: To impose a CMP, current regulations require us to make a
determination that a violation adversely affects or has the likelihood
of adversely affecting an enrollee. In addition, we may impose a CMP
only for deficiencies that could lead to termination under Sec.
422.510(a) or Sec. 423.509(a) (but not under Sec. 422.510(a)(4) or
Sec. 423.509(a)(4)). Sections 422.510(a) and 423.509(a) do not
contemplate a termination for a relatively minor infraction.
Comment: One commenter supports CMS' stated intention to consider
the severity of the infraction and other extenuating circumstances in
determining the amount of the penalty. The commenter also stated that
CMS should recognize that PDP revenue is significantly lower than MA
revenue and penalties should be tempered accordingly.
Response: Our regulations currently permit us to consider
additional factors, as appropriate, in determining the amount of a CMP.
These factors include the nature of the conduct, the degree of
culpability of the organization, the harm which resulted or could have
resulted, the financial condition of the
[[Page 1535]]
organization, the history of prior offenses, and other matters as
justice requires. Although we may consider the financial condition of
an organization, the relative revenue of a PDP sponsor compared to an
MA organization would have no bearing on CMS' decision on a CMP.
Comment: One commenter stated that penalties could be excessive for
large plans. The commenter stated that CMS should reduce the amount
proposed, revise the formula, or not have assessments on a per member
per violation basis. The commenter stated that if CMS chooses to retain
the per member per violation basis, then CMPs should only be assessed
for the most egregious, deliberate, and willful violations of the law
or regulations.
Response: The formula to calculate a CMP based on $25,000 per
violation is taken from section 1857(g) of the Act. Therefore, a
statutory change would be required to change that dollar amount or
formula. If an MA organization or Part D sponsor believes a CMP is
excessive, the organization or sponsor has the right to request an
appeal of the amount before an ALJ prior to paying a CMP.
Comment: A commenter recommended modifying Sec. 422.760(b)(2) and
Sec. 423.760(b)(2) to be consistent with Sec. 422.760(b)(1) and Sec.
423.760(b)(1), which require that the deficiency adversely affects or
has the substantial likelihood of adversely affecting one or more
enrollees.
Response: We did not revise nor intend to revise Sec.
422.760(b)(2) and 423.760(b)(2). We appreciate the comment and will
consider it for future proposed regulations. We believe the general
public should be provided an opportunity to comment on a change such as
this.
Comment: A few commenters stated that there should be a maximum
penalty amount designated or that the proposal should indicate that CMS
has the discretion to issue guidance establishing a range or a cap for
the calculations under this provision.
Response: At this time, we have not provided for maximum penalties.
However, we have added language into the preamble stating that we may,
if determined necessary, issue additional guidance for the range of
penalties or caps associated with violations.
Comment: A number of commenters supported CMS' proposal, allowing
CMS to calculate CMPs based upon each enrollee ``directly adversely
affected (or with a substantial likelihood of being adversely
affected).'' These commenters opposed upper limits on penalties and
stated that the penalty should reflect the noncompliance of the
organization. These commenters stated that the penalty should be more
than the cost of compliance.
Response: We appreciate your comments. CMS also believes that the
penalty should better reflect the infractions and the number of
beneficiaries affected by the infraction.
Comment: A number of commenters stated that CMS should develop
regulatory mechanisms to require Medicare Advantage and Part D plans to
make financial compensation to beneficiaries who are harmed.
Response: Currently, there is no statutory authority to permit us
to require Part C and Part D plans to compensate beneficiaries who are
harmed by MA organizations and Part D sponsors. Such a requirement to
compensate beneficiaries could violate section 1854(d)(1) of the Act,
which prohibits cash payments to beneficiaries. In addition, there is
no statutory provision that permits premiums to be waived. Thus, we
believe such a change would require statutory amendment.
Comment: A number of commenters suggested that CMS repeal Sec.
423.760(b)(2), which limits the penalty for uncorrected deficiencies to
no more than $10,000 per week. The commenters stated that this penalty
is remarkably low for uncorrected deficiencies and that the amount must
be large enough to encourage organizations to correct deficiencies.
Response: We appreciate the comment and will consider it for future
proposed regulations. CMS believes the general public should be
provided an opportunity to comment on a change such as this.
Comment: A number of commenters stated that CMS should repeal Sec.
423.760(b)(3), which limits the total penalty to $100,000. The
commenters also stated that regulations at Sec. 423.758 authorize a
penalty of $250 per enrollee, or $100,000, whichever is greater. The
commenters also stated that there is no reason to create an upper limit
for plans with large enrollees.
Response: We believe that the commenters misunderstood the
regulations. The regulations at Sec. 423.760(b)(3) provide for
penalties of $250 per enrollee, or $100,000, whichever is greater.
Therefore, no upper limit exists for penalties.
Comment: Several commenters requested that CMS amend Sec. 423.762
to set limitations on the settlement of CMPs. The commenters suggested
that no more than 35 percent of the penalty may be deducted in any
settlement.
Response: We appreciate the comment and will consider it for future
proposed regulations. We believe the general public should be provided
an opportunity to comment on a change such as this.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Listed below is the discussion of the information collection
requirements contained in this rule. Previously, we solicited public
comments on the requirements in the proposed rule that published on May
16, 2008 (73 FR 28556). However, we are interested in receiving
additional public comments pertaining to these requirements; therefore,
we are re-soliciting public comments on the following:
A. ICRs Regarding Eligibility To Elect an MA Plan for Special Needs
Individuals (Sec. 422.52)
Section 422.52(g) requires a SNP to establish a process to verify
the Medicaid eligibility and special needs status of an individual
prior to enrolling the individual in a form and manner specified by
CMS. The associated cost with this provision is a time one time event
in calendar year 2010, as the provision expires on December 31, 2010.
This may require collaborative meetings between MA plan staff and State
Medicaid staff to establish the process. This process could include
calling the Medicaid eligibility verification system (EVS) and
reviewing appropriate used to determine an individual's special need.
The burden associated with this requirement is the time and effort
put forth by the SNP to establish a process and to verify eligibility.
We estimate it would take one SNP approximately (4680 minutes/78 hours)
to comply with
[[Page 1536]]
this requirement. The total number of respondents affected would be 324
organizations offering SNPs; therefore, the total annual burden is
estimated to be 25,272 hours.
B. ICRs Regarding the Election Process (Sec. 422.60)
Section 422.60(g)(2) requires the organization that receives the
enrollment to provide notification that describes the costs and
benefits of the plan and the process for assessing care under the plan.
The notification must be provided to all potential enrollees prior to
the enrollment effective date (or as soon as possible after the
effective date if prior notice is not practical), in a form and manner
determined by CMS. Providing notification may include mailing a
brochure or fact sheet with the aforementioned information and
contacting potential enrollees to respond to any questions regarding
the mailer.
The burden associated with this requirement is the time and effort
put forth by the organization to provide notification that meets the
requirements specified by CMS. We estimate it would take one MA
organization (30 minutes/.5 hours) to comply with this requirement. The
total number of organizations affected is 5; therefore, total annual
burden hours associated with the requirement is 2.5 hours.
C. ICR Regarding Benefits Under an MA MSA Plan (Sec. 422.103)
Section 422.103(e) requires all MA organizations offering MSA plans
to provide enrollees with available information on the cost and quality
of services in their service area, and to submit to CMS for approval a
proposed approach to providing such information.
The burden associated with this requirement is the time and effort
put forth by the MA organization offering MSA plans to provide
information to enrollees and to submit the proposed approach to
providing such information to CMS. About 3,300 Medicare beneficiaries
are enrolled in Medicare MSA plans in 2008.
We expect that the burden upon health plans to develop cost and
quality data for use by MSA enrollees would depend upon what data is
available in their area. As stated in the preamble, we expect that
organizations that already have mechanisms in place in connection with
their commercial lines of business for providing their beneficiaries
with cost or quality information could offer similar services to
Medicare beneficiaries.
We estimate the burden associated with this requirement in terms of
time and effort necessary for the two organizations offering MSA plans
to develop the information and to submit this information to CMS as a
start-up cost of 100 hours per organization to develop this
information, with half of that cost occurring in subsequent years for
organizations to maintain and update this information. In addition,
expected additional entry by organizations in future years would add
start-up costs in the initial year that plans enter. The total burden
would be 200 hours in year 1 and 100 hours in subsequent years. While
this burden is subject to the PRA, it is currently approved under OMB
control number 0938-0753 with an expiration date of November 30, 2011.
D. ICRs Regarding Contract Provisions (Sec. 422.504)
Section 422.504(g)(1)(iii) establishes requirements that MA
organizations specify in contracts with providers that enrollees are
protected from incurring liability for payment of fees that are the
legal obligations of the State. CMS proposed in the May 16, 2008, NPRM
(73 FR 28556-28604) that all MA organizations with enrollees eligible
for both Medicare and Medicaid, specify in contracts with providers
that these enrollees will not be held liable for Medicare Part A and B
cost sharing when the State is responsible for paying such amounts.
MIPPA established a limitation on cost sharing for full-benefit
dual eligible individuals and qualified Medicare beneficiaries in dual
eligible special needs plans. The MIPPA required that organizations
offering these plans not impose cost-sharing that exceeds the amount of
cost-sharing that would be permitted with respect to the individual
under Title XIX if the individual were not enrolled in such a plan. The
interim final rule with comment period that was published on September
18, 2008, (73 FR 54225-54254) implemented the MIPPA provisions. The
discussion of the burden hours associated with Sec. 422.504 in the
interim final rule with comment period should have explained that the
requirement was specific to MA organizations with special needs plans.
The burden was imposed on the 269 MA organizations offering a total of
436 full-benefit and qualified Medicare beneficiary plans. The total
burden associated with Sec. 422.504 in the interim final rule with
comment period should have been 90,688 hours for 2010. This final rule
with comment period also imposes information collection requirements
contained in Sec. 422.504. The requirements associated with this rule
affect the remaining 363 MA organizations with a total of 2,964 (non-
SNP) plans that were not addressed in the interim final rule with
comment period. The burden affecting the 363 MA organizations is
616,512 hours for 2010.
The burden table at the end of this section reflects the burden
imposed by Sec. 422.504 on non-SNP plans. While the burden is subject
to the PRA, it is currently approved under OMB control number 0938-0753
with an expiration date of November 30, 2011. Moreover, the cost
associated with this provision is a one time event in calendar year
2010, as the provision expires on December 31, 2010.
E. ICRs Regarding Right to a Reconsideration (Sec. 422.578)
Section 422.578 states that any party to an organization
determination may request that the determination be reconsidered under
the procedures described in 422.582.
While there is burden associated with this requirement, burden
associated with reconsiderations is exempt as stated under the
Paperwork Reduction Act of 1995. In particular, 5 CFR 1320.4 excludes
collection activities during the conduct of administrative actions such
as redeterminations, reconsiderations, and/or appeals. Specifically,
these actions are taken after the initial determination or a denial of
payment.
F. ICRs Regarding the Enrollment Process (Sec. 423.32)
Section 423.32(g)(2) requires an organization that receives the
enrollment to provide notification that describes the costs and
benefits of the new plan and the process for assessing care under the
plan and the beneficiary's ability to decline the enrollment or choose
another plan. Such notification must be provided to all potential
enrollees prior to the enrollment effective date.
The burden associated with this requirement is the time and effort
put forth by the organization to provide such notification. We estimate
it would take one organization 207 hours to comply with this
requirement. We estimate 42 organizations would be affected annually by
this requirement; therefore, the total annual burden associated with
this requirement is 8,694 hours.
G. ICRs Regarding the Late Enrollment Penalty (Sec. 423.46)
Section 423.46(b) states that Part D sponsors must obtain
information on prior creditable coverage from all enrolled or enrolling
beneficiaries and
[[Page 1537]]
report this information to CMS in a form and manner determined by CMS.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to obtain the required information. To
comply with this requirement, Part D sponsors would expend 15 minutes
per new Part D enrollee. We estimate that there will be approximately
500,000 new Part D enrollees. Therefore the total annual burden
associated with this requirement will be 125,000 hours/7,500,000
minutes for all enrollees.
Section 423.46(d) requires the Part D plan sponsor to retain all
information collected concerning a credible coverage period
determination in accordance with the enrollment records retention
requirements described in subpart K, Sec. 423.505(e)(1)(iii).
The burden associated with this requirement is the time and effort
put forth by the Part D plan sponsor to retain the required
information. To comply with this requirement, Part D sponsors would
expend 5 minutes per new Part D enrollee. There are approximately
500,000 enrollees. We estimate the total annual burden associated with
this requirement will be 41,667 hours/2,500,000 minutes for all new
Part D enrollees.
H. ICRs Regarding Contract Provisions (Sec. 423.505)
Section 423.505(k)(5) states that the Chief Executive Officer,
Chief Financial Officer, or an individual delegated the authority to
sign on behalf of one of these officers, and who reports directly to
the officer, must certify that the information provided is accurate,
complete, and truthful and fully conforms to the requirements in
Sec. Sec. 423.336 and 423.343 and acknowledge that this information
will be used for the purposes of obtaining Federal reimbursement. While
there is burden associated with this requirement, we feel the burden
associated with these requirements is exempt from the requirements of
the Paperwork Reduction Act of 1995 (PRA) as defined in 5 CFR
1320.3(h)(1).
I. ICRs Regarding the Right to a Redetermination (Sec. 423.580)
Section 423.580 provides information on the ways for an enrollee to
seek a redetermination. We made minor changes to this section that
would permit a non-physician prescriber to request a redetermination on
behalf of a beneficiary. This change would not have any information
collection effects, but in any case the burden associated with a
redetermination is exempt from the PRA as stipulated under 5 CFR
1320.4.
J. Burden Associated With the ICRs
We received no public comments on the burden estimates associated
with the information collections described above. However, we have
eliminated the estimates associated with provisions that are no longer
included in this final rule (such as marketing provisions, effective
October 1, 2008, that paralleled provisions in MIPPA and were set forth
in our September 18, 2008 final rule (73 FR 54208)) and we have revised
our estimates of the number of respondents who will be affected by some
of the provisions in this rule, as detailed in the table below. We
estimate that the aggregate annual burden associated with the
collection of information section for this rule totals 200,835.5 hours
for FY 2010 and 175,463.5 hours for each of the years in FY 2011
through 2018:
----------------------------------------------------------------------------------------------------------------
Number of Total annual Total annual
OMB No. Requirements respondents Burden hours burden hours cost **
----------------------------------------------------------------------------------------------------------------
0938-0753.................... 422.52(g)....... 324 78............. 25,272 $549,161
0938-0753.................... 422.60(g)(2).... 5 .5............. 2.5 549,161
0938-0753.................... 422.103(e)...... 2 100............ 200 10,996
0938-0753.................... 422.504(g)(1)... 363 208............ 616,512* 33,895,829*
None/Exempt.................. 422.578......... N/A N/A............ N/A N/A
0938-0964.................... 423.32(g)(2).... 42 207............ 8,694 188,920
0938-0964.................... 423.46(b)....... 500,000 15 min......... 125,000 2,716,250
0938-0964.................... 423.46(d)....... 500,000 5 min.......... 41,667 905,423
None/Exempt.................. 423.505(k)(5)... N/A N/A............ N/A N/A
None/Exempt.................. 423.580......... N/A N/A............ N/A N/A
----------------------------------------------------------------------------------------------------------------
* The burden associated with requirement 422.504(g)(1) is already accounted for in the regulation CMS-4138-IFC.
** We provide more detail on how we estimate the cost burden associated with these provisions in the regulatory
impact analysis section.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this rule; or
2. Mail copies to the address specified in the ADDRESSES section of
this rule and to the Office of Information and Regulatory Affairs,
Office of Management and Budget, Room 10235, New Executive Office
Building, Washington, DC 20503, Attn: CMS Desk Officer, CMS-4131-FC
@omb.eop.gov. Fax (202) 395-6974.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued. Section
II.A.1 of this final rule with comment period addresses section 164 of
the Medicare Improvements for Patients and Providers Act of 2008
(MIPPA) (Pub. L. 110-275) which became law after publication of the May
16, 2008 proposed rule. In this section of the final rule with comment
period, we specify that we are adding definitions related to special
needs plans to conform our regulations to section 164 of the MIPPA.
Because these changes are in accordance with the statutory amendments,
we find that it would be unnecessary and contrary to public interest to
seek prior public
[[Page 1538]]
comment on these provisions. Therefore, we find good cause to waive the
notice of proposed rulemaking and to issue these provisions on an
interim basis. We are providing a 60-day public comment period.
VI. Regulatory Impact Analysis
A. Overall Impact
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Order 12866 (as amended) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
Though we are not finalizing the changes originally proposed for the
RDS program in the May 16, 2008 rule, we estimate that this rule will
have economically significant effects: The provisions in this final
rule, associated with our revision to the beneficiary cost sharing and
reinsurance subsidy payments, are estimated to cost $30 million in FY
2010 and a total cost of $530 million in FYs 2010 through 2018.
Accordingly, we have prepared an RIA.
We provide a separate estimate of the costs associated with the
other provisions not related to the Part D definitions in this final
rule. This estimate includes costs regarding: (1) Eligibility to elect
an MA plan for special needs individuals (Sec. 422.52); (2) the
election process (Sec. 422.60); (3) benefits under an MA MSA Plan
(Sec. 422.103); (4) contract provisions (Sec. 422.504); (5)
enrollment process (Sec. 423.32); and (6) the late enrollment penalty
(Sec. 423.46). In estimating the cost of all the other provisions not
related to the Part D definitions discussed in this final rule, we
utilize, as appropriate, the figures of $14.68 (based on the United
States Department of Labor (DOL) statistics for the hourly wages of
word processors and typists) and $37.15 (based on DOL statistics for a
management analyst)\4\ plus the added OMB figures of 12 percent for
overhead and 36 percent for benefits, respectively, to represent
average costs to plans, sponsors and downstream entities. (Note that
the wages cited for the provisions below include the hourly wage + an
additional 48 percent to reflect overhead, benefit costs for total
wages of $21.73 and $54.98, respectively). Using these figures the
estimated total cost will be approximately $4,381,800 in fiscal year
2010 and $3,821,643 per year in fiscal years 2011 through 2018. This
cost will be spread more or less evenly across participating plans, and
hence will impose negligible burden on any plan in relation to existing
administrative costs.
---------------------------------------------------------------------------
\4\ The hourly rates for the burden requirement were developed
using the Department of Labor, Bureau of Labor Statistics for May
2006 (National Occupational Employment and Wage Estimates).
---------------------------------------------------------------------------
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most hospitals and most other providers and
suppliers are small entities, either by nonprofit status or by having
revenues of $7.0 million to $34.5 million in any 1 year. Individuals
and States are not included in the definition of a small entity. MA
organizations and Part D sponsors, the only entities that will be
affected by the provisions of this rule, are not generally considered
small business entities. They must follow minimum enrollment
requirements (5,000 in urban areas and 1,500 in non-urban areas) and
because of the revenue from such enrollments, these entities generally
are above the revenue threshold required for analysis under the RFA.
While a very small rural plan could fall below the threshold, we do not
believe that there are more than a handful of such plans.
A fraction of MA organizations and sponsors are considered small
businesses because of their non-profit status. For an analysis to be
necessary, however, 3 to 5 percent of their revenue would have to be
affected by the provisions. We do not believe that any of these
provisions rise to that threshold. Again, most of the provisions we are
implementing are clarifications of existing policy or require minimal
costs. Because MA organizations and Part D sponsors are the only
entities that will be affected by the provisions and because of the
minimal associated costs, we are not preparing an analysis for the RFA
because the Secretary has determined, and we certify, that this rule
will not have a significant economic impact on a substantial number of
small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis, if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing an
analysis for section 1102(b) of the Act because the Secretary has
determined, and we certify, that this rule will not have a significant
impact on the operations of a substantial number of small rural
hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year by
State, local or tribal governments, in the aggregate, or by the private
sector of $100 million in 1995 dollars, updated annually for inflation.
That threshold level is currently approximately $130 million. This rule
does not contain mandates that will impose spending costs on State,
local, or tribal governments, in the aggregate, or on the private
sector, of $130 million.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a final rule that imposes
substantial direct requirement costs on State and local governments,
preempts State law, or otherwise has Federalism implications. This rule
will not have a substantial direct effect on State or local
governments, preempt States, or otherwise have a Federalism
implication.
With respect to economic benefits, we have no reliable basis for
estimating the effects of these changes. Many of the changes clarify or
codify existing policies though such clarification could contribute to
greater plan efficiency and compliance with program regulations.
Accordingly, we estimate that while there could be economic benefits
associated with this final rule with comment period, they are difficult
to gauge at this time.
Because there are costs to plans and sponsors associated with
several provisions of this rule, however, we indicate general areas
affected and specify the costs associated with these. For specific
burden associated with the requirements and the bases for our
[[Page 1539]]
estimates, see section III of this final rule with comment period.
B. Specific Impacts
1. Special Needs Plans
Several of the provisions set forth in this final rule with comment
period concern special needs plans, in particular the requirement that
special needs plans enroll only the appropriate special needs
individuals and that they verify that individuals are eligible for the
plan into which they wish to enroll. We estimate the total cost of the
provision requiring verification of Medicaid eligibility or SNP status
prior to beneficiary enrollment as $549,161 ($21.73 x 25,272 hours =
$549,161). This cost is only in fiscal year 2010. (As noted above,
other proposed provisions related to SNPs, such as the State
coordination requirement, are not part of this final rule with comment
period and thus have no projected impact for purposes of this rule.)
2. Medicare Medical Savings Account Plans (MSAs)
Costs associated with this provision are for reporting cost and
quality information about the plans to enrollees. We estimate the total
cost of these provisions as $10,996 ($54.98 x 200 hours) for the first
year a plan provides such information, and half that cost in subsequent
years to maintain and update the information.
3. Enrollment
We are setting forth requirements concerning Part D sponsor
notification of full benefit dual eligible beneficiaries about
enrollment options in addition to automatic enrollment. This provision
requires that Part D sponsors obtain from Part D plan enrollees or
those considering enrolling information concerning prior creditable
coverage, and retain information collected concerning creditable
coverage period determinations. We estimate the total cost of these
provisions as $3,810,593. The annual costs for specific provisions are
as follows:
Notifying dual-eligible beneficiaries of enrollment
options in addition to automatic enrollment ($21.73 x 8,694 hours =
$188,920).
Obtaining prior creditable coverage information ($21.73 x
125,000 hours = $2,716,250).
Retaining prior creditable coverage information ($21.73 x
41,667 hours = $905,423).
4. Marketing
This rule no longer contains any marketing provisions and thus the
projected impact is no longer applicable for purposes of this final
rule with comment period.
5. Part D Definitions
With respect to the revisions to the Part D definitions, we do not
expect a significant impact on small businesses, such as small
pharmacies, as a result of changes to the definitions under Part D of
negotiated prices, gross covered drug costs, and allowable risk
corridor costs in this rule. These changes primarily impact which drug
costs are reported to us and how plans calculate beneficiary cost
sharing. Moreover, we assume they will require minimal, if any, changes
in health plan, PBM and pharmacy operational systems. Even with the
changes to the way in which beneficiary cost sharing is calculated
resulting from these definition changes, health plans will still be
required to ensure that pharmacies receive their contracted rate. We
believe that health plans will account for any additional costs
associated with the change in the way beneficiary costs are calculated
in their Part D bids. As a result, we expect that these changes will
increase Part D bids and Federal Government payments such that the
total impact estimate for FYs 2010 through 2018 is $530 million.
However, we do not expect these changes to significantly increase
health plan costs.
With respect to the changes impacting which drug costs are reported
to CMS and how Part D plans calculate beneficiary cost-sharing, we
believe that the impact on pharmacies will be minimal, as the total
compensation received by pharmacies should remain unaffected. However,
Part D plans will need to include administrative costs paid to PBMs,
which were previously included as drug costs, as administrative cost in
their bids. They will also need to factor reductions in beneficiary
cost sharing and reinsurance subsidy payments into their bids. The
changes in beneficiary cost sharing and reinsurance subsidy payments
are expected to increase Part D bids due to increased plan liability
and therefore will increase the direct subsidy payments made by the
Federal government to health plans. The changes regarding the reporting
of drug costs are also expected to reduce the reinsurance payments and
low-income cost sharing subsidy payments made by the Federal
government. Specifically, the reinsurance subsidy, which is calculated
as 80 percent of allowable reinsurance costs, is expected to decrease
due to lower negotiated prices and therefore, lower allowable
reinsurance costs. A reduction in the low-income cost sharing subsidy
payments made by the Federal government is expected due to lower
beneficiary cost sharing. We estimate the net cost of these changes to
be $30 million for FY 2010 and a total cost of $530 million for FYs
2010 through 2018. These estimated costs reflect an increase in the
direct subsidy payments made by the Federal Government and are net of
reductions in Federal reinsurance payments and low-income cost sharing
subsidy payments. These estimated costs are based on the assumption
that overall program costs will remain the same. They do not include
any potential reductions in plan administrative costs due to the
ability of plan sponsors to negotiate lower administrative fees with
PBMs as a result of increased transparency in drug prices.
In addition, we expect that the clarifications may require a small
number of Part D sponsors to renegotiate their contracts with their
PBMs to account for system changes to reflect the appropriate
beneficiary cost sharing. We believe that most PBMs will be unaffected
by the changes in reporting drug costs and the calculation of
beneficiary cost sharing. Thus, we expect that the financial impact of
the rule on PBMs will be minimal. However, certain PBMs that typically
use the lock-in pricing approach could experience a financial impact
from the drug cost reporting changes.
The proposed rule would have resulted in a decrease of $510 million
in payments under the Retiree Drug Subsidy Program over 10 years, due
to the requirement in the proposed rule that RDS sponsors report, and
receive subsidy based on, pass-through rather than lock-in pricing.
Because that requirement is not being adopted in this final rule, this
decrease does not apply.
With respect to the changes impacting how Part D plans calculate
beneficiary cost sharing, we believe that these changes will increase
beneficiary premiums for plans that utilize the lock-in pricing
approach but this increase will be more than offset by a decrease in
beneficiary cost sharing under these plans. As a result, we expect that
certain beneficiaries enrolled in these plans with very low drug
utilization will see some increase in the total costs they pay for
their prescription drug coverage. However, we expect that most
beneficiaries, particularly those with high drug utilization, will see
a decrease in the total costs they pay for their prescription drug
coverage as a result of reduced beneficiary cost sharing.
C. Alternatives Considered
We considered whether or not the cost to codify these policies
outweighed
[[Page 1540]]
the need to do so. With one possible exception, we determined that the
cost to plans and sponsors to clarify and codify our policies would be
minimal and outweighed the minimal costs to implement these.
With respect to the provisions concerning Medicare medical savings
account plans, we considered the costs to plans of providing cost and
quality information. We believe that such information is readily
available to most MSA plans and that it will not be an undue burden on
plans to provide such information. As discussed in detail in section
II.A.2 of this final rule with comment period, commenters did not
dispute this assessment and we have not made any changes to our impact
assessment.
As discussed previously, many of the provisions clarify or codify
current policy which we discuss in section II. of the preamble to this
final rule with comment period. As such, we considered whether or not
the cost to codify these policies outweighed the need to do so. With
one possible exception, we determined that the cost to plans and
sponsors to clarify and codify our policies are minimal and outweigh
the minimal costs to implement these provisions.
With respect to the changes to the drug cost-related definitions in
the Part D program, we have discussed the two alternatives at length in
the preamble section of both the proposed and final rules. The two
alternatives are--(1) The current approach of allowing both pass-
through and lock-in prices, and (2) the approach of permitting only
pass-through prices as the basis for Part D costs. As we discuss in
section II.B, we believe there may be significant negative impacts on
beneficiaries, market competition, pharmacies, and government
expenditures associated with maintaining the current dual pricing
approach and, therefore, we will allow only the single ``pass-through''
pricing approach as originally intended in the final rule establishing
the Part D prescription drug benefit.
D. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in the Table 1 below,
we have prepared an accounting statement showing the classification of
the expenditures associated with the provisions of this final rule with
comment period. This table provides our best estimate of the increase
in costs as a result of the changes. The costs represent transfers by
the Federal Government to Part D plans. Also, the cost for all other
provisions not related to the Part D definitions is included in Table
1.
Table 1--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
Category Transfers (in millions)
------------------------------------------------------------------------
Increase in Federal Payments, FYs 2010--2018
------------------------------------------------------------------------
Annualized Monetized Transfers Using the $55.8.
7% Discount Rate.
Annualized Monetized Transfers Using the 57.5.
3% Discount Rate.
From Whom To Whom?...................... Federal Government to Part D
Plans.
------------------------------------------------------------------------
Category Costs
($ Millions)
------------------------------------------------------------------------
Cost for All Other Provisions Not Related to the Part D Definitions for
FY 2010-2018
------------------------------------------------------------------------
Annualized Monetized Costs Using the 7% $3.9.
Discount Rate.
Annualized Monetized Costs Using the 3% 3.9.
Discount Rate.
Who is Affected?........................ MAOs/Part D Sponsors.
------------------------------------------------------------------------
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 422
Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.
42 CFR Part 423
Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMOs), Medicare,
Penalties, Privacy, Reporting and recordkeeping.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 422--MEDICARE ADVANTAGE PROGRAM
0
1. The authority citation for part 422 continues to read as follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Provisions
0
2. Section 422.2 is amended by--
0
A. Adding the definitions for ``Institutionalized-equivalent'' and
``Severe or disabling chronic condition'' in alphabetical order.
0
B. Revising the definition of ``Specialized MA Plans for Special Needs
Individuals''.
The additions and revision read as follows:
Sec. 422.2 Definitions.
* * * * *
Institutionalized-equivalent means for the purpose of defining a
special needs individual, an MA eligible individual who is living in
the community but requires an institutional level of care. The
determination that the individual requires an institutional level of
care (LOC) must be made by--
(1) The use of a State assessment tool from the State in which the
individual resides; and
(2) An assessment conducted by an impartial entity and having the
requisite knowledge and experience to accurately identify whether the
beneficiary meets the institutional LOC criteria. In States and
territories that do not have an existing institutional level of care
assessment tool, the individual must be assessed using the same
methodology that State uses to determine institutional level of care
for Medicaid nursing home eligibility.
* * * * *
[[Page 1541]]
Severe or disabling chronic condition means for the purpose of
defining a special needs individual, an MA eligible individual who has
one or more co-morbid and medically complex chronic conditions that are
substantially disabling or life-threatening, has a high risk of
hospitalization or other significant adverse health outcomes, and
requires specialized delivery systems across domains of care.
* * * * *
Specialized MA Plans for Special Needs Individuals means an MA
coordinated care plan that exclusively enrolls special needs
individuals as set forth in Sec. 422.4(a)(1)(iv) and that provides
Part D benefits under Part 423 of this chapter to all enrollees; and
which has been designated by CMS as meeting the requirements of an MA
SNP as determined on a case-by-case basis using criteria that include
the appropriateness of the target population, the existence of clinical
programs or special expertise to serve the target population, and
whether the proposal discriminates against sicker members of the target
population.
0
3. Amend Sec. 422.4 by revising paragraph (a)(1)(iv) to read as
follows:
Sec. 422.4 Types of MA plans.
(a) * * *
(1) * * *
(iv) A specialized MA plan for special needs individuals (SNP)
includes any type of coordinated care plan that meets CMS's SNP
requirements and exclusively enrolls special needs individuals as
defined in Sec. 422.2 of this subpart.
* * * * *
Subpart B--Eligibility, Election, and Enrollment
0
4. Amend Sec. 422.52 by revising paragraph (f) to read as follows:
Sec. 422.52 Eligibility to elect an MA plan for special needs
individuals.
* * * * *
(f) Establishing eligibility for enrollment. A SNP must employ a
process approved by CMS to verify the eligibility of each individual
enrolling in the SNP.
0
5. Amend Sec. 422.60 by adding paragraph (g) to read as follows:
Sec. 422.60 Election process.
* * * * *
(g) Passive enrollment by CMS. In situations involving either
immediate terminations as provided in Sec. 422.510(a)(5) or other
situations in which CMS determines that remaining enrolled in a plan
poses potential harm to the members, CMS may implement passive
enrollment procedures.
(1) Passive enrollment procedures. Individuals will be considered
to have elected the plan selected by CMS unless they--
(i) Decline the plan selected by CMS, in a form and manner
determined by CMS, or
(ii) Request enrollment in another plan.
(2) Beneficiary notification. The organization that receives the
enrollment must provide notification that describes the costs and
benefits of the plan and the process for accessing care under the plan
and clearly explains the beneficiary's ability to decline the
enrollment or choose another plan. Such notification must be provided
to all potential enrollees prior to the enrollment effective date (or
as soon as possible after the effective date if prior notice is not
practical), in a form and manner determined by CMS.
(3) Special election period. All individuals will be provided with
a special election period, as described in Sec. 422.62(b)(4).
0
6. Section 422.74 is amended by--
0
A. Revising paragraph (d)(1) introductory text.
0
B. Adding a new paragraph (d)(1)(iv).
The revision and addition read as follows:
Sec. 422.74 Disenrollment by the MA organization.
* * * * *
(d) * * *
(1) Except as specified in paragraph (d)(1)(iv) of this section, an
MA organization may disenroll an individual from the MA plan for
failure to pay basic and supplementary premiums under the following
circumstances:
* * * * *
(iv) An MA organization may not disenroll an individual who had
monthly premiums withheld per Sec. 422.262(f)(1) and (g) of this part,
or who is in premium withhold status, as defined by CMS.
* * * * *
Subpart C--Benefits and Beneficiary Protections
0
7. Amend Sec. 422.101 by adding paragraph (f)(2) to read as follows:
Sec. 422.101 Requirements relating to basic benefits.
* * * * *
(f) * * *
* * *
(2) MA organizations offering SNPs must also develop and implement
the following model of care components to assure an effective
management structure:
(i) Target one of the three SNP populations defined in Sec. 422.2
of this part.
(ii) Have appropriate staff (employed, contracted, or non-
contracted) trained on the SNP plan model of care to coordinate and/or
deliver all services and benefits.
(iii) Coordinate the delivery of care across healthcare settings,
providers, and services to assure continuity of care.
(iv) Coordinate the delivery of specialized benefits and services
that meet the needs of the most vulnerable beneficiaries among the
three target special needs populations as defined in Sec. 422.2 of
this part, including frail/disabled beneficiaries and beneficiaries
near the end of life.
(v) Coordinate communication among plan personnel, providers, and
beneficiaries.
0
8. Amend Sec. 422.103 by adding new paragraph (e) to read as follows:
Sec. 422.103 Benefits under an MA MSA plan.
* * * * *
(e) All MA organizations offering MSA plans must provide enrollees
with available information on the cost and quality of services in their
service area, and submit to CMS for approval a proposed approach to
providing such information.
Subpart F--Submission of Bids, Premiums, and Related Information
and Plan Approval
0
9. Amend Sec. 422.262 by adding new paragraphs (g) and (h) to read as
follows:
Sec. 422.262 Beneficiary premiums.
* * * * *
(g) Prohibition on improper billing of premiums. MA organizations
shall not bill an enrollee for a premium payment period if the enrollee
has had the premium for that period withheld from his or her Social
Security, Railroad Retirement Board or Office of Personnel Management
check.
(h) Retroactive collection of premiums. In circumstances where
retroactive collection of premium amounts is necessary and the enrollee
is without fault in creating the premium arrearage, the Medicare
Advantage organization shall offer the enrollee the option of payment
either by lump sum, by equal monthly installment spread out over at
least the same period for which the premiums were due, or through other
arrangements mutually acceptable to the enrollee and the Medicare
Advantage organization. For monthly
[[Page 1542]]
installments, for example, if 7 months of premiums are due, the member
would have at least 7 months to repay.
Subpart K--Application Procedures and Contracts for Medicare
Advantage Organizations
0
10. Subpart K heading is revised to read as set forth above.
0
11. Amend Sec. 422.504 by revising paragraph (g)(1) to read as
follows:
Sec. 422.504 Contract provisions.
* * * * *
(g) * * *
(1) Effective January 1, 2010, each MA organization must adopt and
maintain arrangements satisfactory to CMS to protect its enrollees from
incurring liability (for example, as a result of an organization's
insolvency or other financial difficulties) for payment of any fees
that are the legal obligation of the MA organization. To meet this
requirement, the MA organization must--
(i) Ensure that all contractual or other written arrangements with
providers prohibit the organization's providers from holding any
enrollee liable for payment of any such fees;
(ii) Indemnify the enrollee for payment of any fees that are the
legal obligation of the MA organization for services furnished by
providers that do not contract, or that have not otherwise entered into
an agreement with the MA organization, to provide services to the
organization's enrollees; and
(iii) For all MA organizations with enrollees eligible for both
Medicare and Medicaid, specify in contracts with providers that such
enrollees will not be held liable for Medicare Part A and B cost
sharing when the State is responsible for paying such amounts, and
inform providers of Medicare and Medicaid benefits, and rules for
enrollees eligible for Medicare and Medicaid. The MA plans may not
impose cost-sharing that exceeds the amount of cost-sharing that would
be permitted with respect to the individual under title XIX if the
individual were not enrolled in such a plan. The contracts must state
that providers will--
(A) Accept the MA plan payment as payment in full, or
(B) Bill the appropriate State source.
* * * * *
0
12. Amend Sec. 422.506 by revising paragraphs (a)(2)(ii), (a)(2)(iii),
(b)(2)(ii), and (b)(2)(iii) to read as follows:
Sec. 422.506 Non-renewal of contract.
(a) * * *
(2) * * *
(ii) Each Medicare enrollee by mail at least 60 days before the
date on which the non-renewal is effective. This notice must include a
written description of alternatives available for obtaining Medicare
services within the service area, including alternative MA plans,
Medigap options, and original Medicare and must receive CMS approval
prior to issuance; and,
(iii) The general public, at least 60 days before the date on which
the non-renewal is effective, by publishing a notice in one or more
newspapers of general circulation in each community or county located
in the MA organization's service area.
* * * * *
(b) * * *
(2) * * *
(ii) To each of the MA organization's Medicare enrollees by mail at
least 60 days before the date on which the non-renewal is effective;
and
(iii) To the general public, at least 60 days before the date on
which the non-renewal is effective, by publishing a notice in one or
more newspapers of general circulation in each community or county
located in the MA organization's service area.
* * * * *
Subpart M--Grievances, Organization Determinations and Appeals
0
13. Revise Sec. 422.578 to read as follows:
Sec. 422.578 Right to a reconsideration.
Any party to an organization determination (including one that has
been reopened and revised as described in Sec. 422.616) may request
that the determination be reconsidered under the procedures described
in Sec. 422.582, which address requests for a standard
reconsideration. A physician who is providing treatment to an enrollee
may, upon providing notice to the enrollee, request a standard
reconsideration of a pre-service request for reconsideration on the
enrollee's behalf as described in Sec. 422.582. An enrollee or
physician (acting on behalf of an enrollee) may request an expedited
reconsideration as described in Sec. 422.584.
0
14. Revise Sec. 422.582 to read as follows:
Sec. 422.582 Request for a standard reconsideration.
(a) Method and place for filing a request. A party to an
organization determination or, upon providing notice to the enrollee, a
physician who is treating an enrollee and acting on the enrollee's
behalf, must ask for a reconsideration of the determination by making a
written request to the MA organization that made the organization
determination. The MA organization may adopt a policy for accepting
oral requests.
(b) Timeframe for filing a request. Except as provided in paragraph
(c) of this section, a request for reconsideration must be filed within
60 calendar days from the date of the notice of the organization
determination.
(c) Extending the time for filing a request. (1) General rule. If a
party or physician acting on behalf of an enrollee shows good cause,
the MA organization may extend the timeframe for filing a request for
reconsideration.
(2) How to request an extension of timeframe. If the 60-day period
in which to file a request for reconsideration has expired, a party to
the organization determination or a physician acting on behalf of an
enrollee may file a request for reconsideration with the MA
organization. The request for reconsideration and to extend the
timeframe must--
(i) Be in writing; and
(ii) State why the request for reconsideration was not filed on
time.
(d) Parties to the reconsideration. The parties to the
reconsideration are the parties to the organization determination, as
described in Sec. 422.574, and any other provider or entity (other
than the MA organization) whose rights with respect to the organization
determination may be affected by the reconsideration, as determined by
the entity that conducts the reconsideration.
(e) Withdrawing a request. The party or physician acting on behalf
of an enrollee who files a request for reconsideration may withdraw it
by filing a written request for withdrawal at one of the places listed
in paragraph (a) of this section.
Subpart O--Intermediate Sanctions
0
15. Amend Sec. 422.760 by--
0
A. Redesignating paragraphs (b)(2) and (b)(3) as paragraphs (b)(3) and
(b)(4), respectively.
0
B. Adding new paragraph (b)(2) to read as follows:
Sec. 422.760 Determinations regarding the amount of civil money
penalties and assessment imposed by CMS.
* * * * *
(b) * * *
(2) If the deficiency on which the determination is based has
directly adversely affected (or has the substantial likelihood of
adversely affecting) one or more MA enrollees, CMS may calculate
[[Page 1543]]
a CMP of up to $25,000 for each MA enrollee directly adversely affected
(or with the substantial likelihood of being adversely affected) by a
deficiency.
* * * * *
PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
0
16. The authority citation for part 423 continues to read as follows:
Authority: Secs. 1102, 1860D-1 through 1860D-42, and 1871 of the
Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152,
and 1395hh).
Subpart B--Eligibility and Enrollment
0
17. Amend Sec. 423.32 by adding paragraph (g) to read as follows:
Sec. 423.32 Enrollment process.
* * * * *
(g) Passive enrollment by CMS. In situations involving either
immediate terminations as provided in Sec. 423.509(a)(5) or Sec.
422.510(a)(5) of this chapter, or other situations in which CMS
determines that remaining enrolled in a plan poses potential harm to
plan members, CMS may implement passive enrollment procedures.
(1) Passive enrollment procedures. Individuals will be considered
to have enrolled in the plan selected by CMS unless individuals--
(i) Decline the plan selected by CMS, in a form and manner
determined by CMS; or
(ii) Request enrollment in another plan.
(2) Beneficiary notification. The organization that receives the
enrollment must provide notification that describes the costs and
benefits of the new plan and the process for accessing care under the
plan and the beneficiary's ability to decline the enrollment or choose
another plan. Such notification must be provided to all potential
enrollees prior to the enrollment effective date (or as soon as
possible after the effective date if prior notice is not practical), in
a form and manner determined by CMS.
(3) Special election period. All individuals will be provided with
a special enrollment period, as described in Sec. 423.38(c)(8)(ii).
0
18. Amend Sec. 423.34 by--
0
A. Revising paragraph (d)(1).
0
B. Adding paragraph (d)(3).
The revision and addition reads as follows:
Sec. 423.34 Enrollment of full-benefit dual eligible individuals.
* * * * *
(d) Automatic enrollment rules. (1) General rule. Except for full-
benefit dual eligible individuals who are qualifying covered retirees
with a group health plan sponsor as specified in paragraph (d)(3) of
this section, CMS automatically enrolls full-benefit dual eligible
individuals who fail to enroll in a Part D plan into a PDP offering
basic prescription drug coverage in the area where the individual
resides that has a monthly beneficiary premium amount (as defined in
Sec. 423.780(b) of this part). In the event that there is more than
one PDP in an area with a monthly beneficiary premium at or below the
low-income premium subsidy amount, individuals are enrolled in such
PDPs on a random basis.
* * * * *
(3) Exception for full-benefit dual eligible individuals who are
qualifying covered retirees. (i) Full-benefit dual eligible individuals
who are qualifying covered retirees as defined in Sec. 423.882, and
for whom CMS has approved the group health plan sponsor to receive the
Retiree Drug Subsidy described in Subpart R of this Part, also are
automatically enrolled in a Part D plan, consistent with this
paragraph, unless they elect to decline that enrollment.
(ii) Before effectuating such an enrollment, however, CMS will
provide notice to such individuals of their choices and advise them to
discuss the potential impact of Medicare Part D coverage on their group
health plan coverage. This notice informs such individuals that they
will be deemed to have declined to enroll in Part D unless they
affirmatively enroll in a Part D plan or contact CMS and confirm that
they wish to be auto-enrolled in a PDP. Individuals who elect not to be
auto-enrolled, may enroll in Medicare Part D at a later time if they
choose to do so.
* * * * *
0
19. Amend Sec. 423.44 by revising paragraph (d)(1) introductory text
and adding paragraph (d)(1)(iv) as follows:
Sec. 423.44 Involuntary disenrollment by the PDP.
* * * * *
(d) * * *
(1) Except as specified in paragraph (d)(1)(iv) of this section, a
PDP sponsor may disenroll an individual from the PDP for failure to pay
any monthly premium under the following circumstances:
* * * * *
(iv) A PDP sponsor may not disenroll an individual who had monthly
premiums withheld per Sec. 423.293(a) and (e) of this part or who is
in premium withhold status, as defined by CMS.
* * * * *
0
20. Amend Sec. 423.46 by adding paragraph (b) through (d) to read as
follows:
Sec. 423.46 Late enrollment penalty.
* * * * *
(b) Role of Part D plan in determination of the penalty. Part D
sponsors must obtain information on prior creditable coverage from all
enrolled or enrolling beneficiaries and report this information to CMS
in a form and manner determined by CMS.
(c) Reconsideration. Individuals determined to be subject to a late
enrollment penalty may request reconsideration of this determination,
consistent with Sec. 423.56(g) of this part. Such review will be
conducted by CMS, or an independent review entity contracted by CMS, in
accordance with guidance issued by CMS. Decisions made through this
review are not subject to appeal, but may be reviewed and revised at
the discretion of CMS.
(d) Record retention. Part D plan sponsors must retain all
information collected concerning a creditable coverage period
determination in accordance with the enrollment records retention
requirements described in Sec. 423.505(e)(1)(iii).
Subpart C--Benefits and Beneficiary Protections
0
21. Section 423.100 is amended by--
0
A. Revising the definition of ``incurred costs.''
0
B. Revising the definition of ``negotiated prices.''
The revision reads as follows:
Sec. 423.100 Definitions.
* * * * *
Incurred costs means costs incurred by a Part D enrollee for--
(1)(i) Covered Part D drugs that are not paid for under the Part D
plan as a result of application of any annual deductible or other cost-
sharing rules for covered Part D drugs prior to the Part D enrollee
satisfying the out-of-pocket threshold under Sec. 423.104(d)(5)(iii),
including any price differential for which the Part D enrollee is
responsible under Sec. 423.124(b); or
(ii) Nominal cost-sharing paid by or on behalf of an enrollee,
which is associated with drugs that would otherwise be covered Part D
drugs, as defined in Sec. 423.100, but are instead paid for, with the
exception of said nominal cost-sharing, by a patient assistance program
providing assistance outside the Part D benefit, provided that
documentation of such nominal cost-sharing has been submitted to the
Part D plan consistent with the plan
[[Page 1544]]
processes and instructions for the submission of such information; and
(2) That are paid for--
(i) By the Part D enrollee or on behalf of the Part D enrollee by
another person, and the Part D enrollee (or person paying on behalf of
the Part D enrollee) is not reimbursed through insurance or otherwise,
a group health plan, or other third party payment arrangement, or the
person paying on behalf of the Part D enrollee is not paying under
insurance or otherwise, a group health plan, or third party payment
arrangement;
(ii) Under a State Pharmaceutical Assistance Program (as defined in
Sec. 423.454 of this part); or
(iii) Under Sec. 423.782 of this part.
* * * * *
Negotiated prices means prices for covered Part D drugs that--
(1) The Part D sponsor (or other intermediary contracting
organization) and the network dispensing pharmacy or other network
dispensing provider have negotiated as the amount such network entity
will receive, in total, for a particular drug;
(2) Are reduced by those discounts, direct or indirect subsidies,
rebates, other price concessions, and direct or indirect remuneration
that the Part D sponsor has elected to pass through to Part D enrollees
at the point of sale; and
(3) Includes any dispensing fees.
* * * * *
0
22. Amend Sec. 423.104 by revising paragraph (g)(1) to read as
follows:
Sec. 423.104 Requirements related to qualified prescription drug
coverage.
* * * * *
(g) * * *
(1) Access to negotiated prices. A Part D sponsor is required to
provide its Part D enrollees with access to negotiated prices for
covered Part D drugs included in its Part D plan's formulary.
Negotiated prices must be provided even if no benefits are payable to
the beneficiary for covered Part D drugs because of the application of
any deductible or 100 percent coinsurance requirement following
satisfaction of any initial coverage limit. Negotiated prices must be
provided when the negotiated price for a covered Part D drug under a
Part D sponsor's benefit package is less than the applicable cost-
sharing before the application of any deductible, before any initial
coverage limit, before the annual out-of-pocket threshold, and after
the annual out-of-pocket threshold.
* * * * *
0
23. Revise Sec. 423.128(e)(6) to read as follows:
Sec. 423.128 Dissemination of Part D plan information.
* * * * *
(e) * * *
(6) Be provided no later than the end of the month following any
month when prescription drug benefits are provided under this part,
including the covered Part D spending between the initial coverage
limit described in Sec. 423.104(d)(3) and the out-of-pocket threshold
described in Sec. 423.104(d)(5)(iii).
Subpart F--Submission of Bids and Monthly Beneficiary Premiums;
Plan Approval
0
24. Amend Sec. 423.293 by adding new paragraphs (a)(4) and (e) to read
as follows:
Sec. 423.293 Collection of monthly beneficiary premium.
(a) * * *
(4) Retroactive collection of premiums. In circumstances where
retroactive collection of premium amounts is necessary and the enrollee
is without fault in creating the premium arrearage, the Medicare
Advantage organization shall offer the enrollee the option of payment
by lump sum, by equal monthly installment spread out over at least the
same period for which the premiums were due, or through other
arrangements mutually acceptable to the enrollee and the Medicare
Advantage organization. For monthly installments, for example, if 7
months of premiums are due, the member would have at least 7 months to
repay.
* * * * *
(e) Prohibition on improper billing of premiums. Part D plan
sponsors shall not bill an enrollee for a premium payment period if the
enrollee has had the premium for that period withheld from his or her
Social Security, Railroad Retirement Board or Office of Personnel
Management check.
Subpart G--Payments to Part D Plan Sponsors for Qualified
Prescription Drug Coverage
0
25. Amend Sec. 423.308 by--
0
A. Revising the definition of ``actually paid.''
0
B. Adding the definition of ``administrative costs.''
0
C. Revising the definitions of ``allowable risk corridor costs,''
``gross covered prescription drug costs,'' and ``target amount''.
The addition and revisions read as follows:
Sec. 423.308 Definitions and terminology.
* * * * *
Actually paid means that the costs must be actually incurred by the
Part D sponsor and must be net of any direct or indirect remuneration
(including discounts, charge backs or rebates, cash discounts, free
goods contingent on a purchase agreement, up-front payments, coupons,
goods in kind, free or reduced-price services, grants, or other price
concessions or similar benefits offered to some or all purchasers) from
any source (including manufacturers, pharmacies, enrollees, or any
other person) that would serve to decrease the costs incurred under the
Part D plan. Direct and indirect remuneration includes discounts,
chargebacks or rebates, cash discounts, free goods contingent on a
purchase agreement, up-front payments, coupons, goods in kind, free or
reduced-price services, grants, or other price concessions or similar
benefits from manufacturers, pharmacies or similar entities obtained by
an intermediary contracting organization with which the Part D plan
sponsor has contracted, regardless of whether the intermediary
contracting organization retains all or a portion of the direct and
indirect remuneration or passes the entire direct and indirect
remuneration to the Part D plan sponsor and regardless of the terms of
the contract between the plan sponsor and the intermediary contracting
organization.
Administrative costs means costs incurred by a Part D sponsor in
complying with the requirements of this Part for a coverage year and
that are not drug costs incurred to purchase or reimburse the purchase
of Part D drugs. Administrative costs include amounts paid by the Part
D sponsor to an intermediary contracting organization for covered Part
D drugs dispensed to enrollees in the sponsor's Part D plan that differ
from the amount paid by the intermediary contracting organization to a
pharmacy or other entity that is the final dispenser of the covered
Part D drugs. For example, any profit or loss retained by an
intermediary contracting organization (through discounts, rebates, or
other direct or indirect price concessions) when negotiating prices
with dispensing entities is considered an administrative cost.
* * * * *
Allowable risk corridor costs means--
(1) The subset of costs incurred under a Part D plan (not including
administrative costs, but including dispensing fees) that are
attributable to basic prescription drug coverage only and that are
incurred and actually paid by the Part D sponsor to--
[[Page 1545]]
(i) A dispensing pharmacy or other dispensing provider (whether
directly or through an intermediary contracting organization) under the
Part D plan;
(ii) The parties listed in Sec. 423.464(f)(1) of this part with
which the Part D sponsor must coordinate benefits, including other Part
D plans, as the result of any reconciliation process developed by CMS
under Sec. 423.464 of this part; or
(iii) An enrollee (or third party paying on behalf of the enrollee)
to indemnify the enrollee when the reimbursement is associated with
obtaining drugs under the Part D plan; and
(2) These costs must be based upon imposition of the maximum amount
of copayments permitted under Sec. 423.782 of this part. The costs for
any Part D plan offering enhanced alternative coverage must be adjusted
not only to exclude any costs attributable to benefits beyond basic
prescription drug coverage, but also to exclude any prescription drug
coverage costs determined to be attributable to increased utilization
over standard prescription drug coverage as the result of the insurance
effect of enhanced alternative coverage in accordance with CMS
guidelines on actuarial valuation.
* * * * *
Gross covered prescription drug costs mean those actually paid
costs incurred under a Part D plan, excluding administrative costs, but
including dispensing fees, during the coverage year. They equal the sum
of the following:
(1) The share of negotiated prices (as defined by Sec. 423.100 of
this part) actually paid by the Part D plan that is received as
reimbursement by the pharmacy, or other dispensing entity,
reimbursement paid to indemnify an enrollee when the reimbursement is
associated with an enrollee obtaining covered Part D drugs under the
Part D plan, or payments made by the Part D sponsor to other parties
listed in Sec. 423.464(f)(1) of this part with which the Part D
sponsor must coordinate benefits, including other Part D plans, or as
the result of any reconciliation process developed by CMS under Sec.
423.464 of this part.
(2) Nominal cost-sharing paid by or on behalf of an enrollee which
is associated with drugs that would otherwise be covered Part D drugs,
as defined in Sec. 423.100 of this part, but are instead paid for,
with the exception of said nominal cost-sharing, by a patient
assistance program providing assistance outside the Part D benefit,
provided that documentation of such nominal cost-sharing has been
submitted to the Part D plan consistent with the plan processes and
instructions for the submission of such information.
(3) All amounts paid under the Part D plan by or on behalf of an
enrollee (such as the deductible, coinsurance, cost sharing, or amounts
between the initial coverage limit and the out-of-pocket threshold) in
order to obtain Part D drugs that are covered under the Part D plan. If
an enrollee who is paying 100 percent cost sharing (as a result of
paying a deductible or because the enrollee is between the initial
coverage limit and the out-of-pocket threshold) obtains a covered Part
D drug at a lower cost than is available under the Part D plan, such
cost-sharing will be considered an amount paid under the plan by or on
behalf of an enrollee under the previous sentence of this definition,
if the enrollee's costs are incurred costs as defined under Sec.
423.100 of this part and documentation of the incurred costs has been
submitted to the Part D plan consistent with plan processes and
instructions for the submission of such information. These costs are
determined regardless of whether the coverage under the plan exceeds
basic prescription drug coverage.
Target amount means the total amount of payments (from both CMS and
by or on behalf of enrollees) to a Part D plan for the coverage year
for all standardized bid amounts as risk adjusted under Sec.
423.329(b)(1) of this part, less the administrative expenses (including
return on investment) assumed in the standardized bids.
0
26. Amend Sec. 423.329 by revising paragraph (d)(2)(i) to read as
follows:
Sec. 423.329 Determination of payments.
* * * * *
(d) * * *
(2) * * *
(i) Interim payments. CMS establishes a payment method by which
interim payments of amounts under this section are made during a year
based on the low-income cost-sharing assumptions submitted with plan
bids under Sec. 423.265(d)(2)(iv) of this part and negotiated and
approved under Sec. 423.272 of this part, or by an alternative method
that CMS determines.
* * * * *
Subpart K--Application Procedures and Contracts With Part D Plan
Sponsors
0
27. Amend Sec. 423.505 by revising paragraph (k)(5) to read as
follows:
Sec. 423.505 Contract provisions.
* * * * *
(k) * * *
(5) Certification of allowable costs for risk corridor and
reinsurance information. The Chief Executive Officer, Chief Financial
Officer, or an individual delegated the authority to sign on behalf of
one of these officers, and who reports directly to the officer, must
certify (based on best knowledge, information, and belief) that the
information provided for purposes of supporting allowable costs as
defined in Sec. 423.308 of this part, including data submitted to CMS
regarding direct or indirect remuneration (DIR) that serves to reduce
the costs incurred by the Part D sponsor for Part D drugs, is accurate,
complete, and truthful and fully conforms to the requirements in Sec.
423.336 and Sec. 423.343 of this part and acknowledge that this
information will be used for the purposes of obtaining Federal
reimbursement.
* * * * *
0
28. Amend Sec. 423.507 by revising paragraphs (a)(2)(ii), (a)(2)(iii),
(b)(2)(ii) and (b)(2)(iii) to read as follows:
Sec. 423.507 Nonrenewal of contract.
(a) * * *
(2) * * *
(ii) Each Medicare enrollee by mail at least 60 days before the
date on which the non-renewal is effective. This notice must include a
written description of alternatives available for obtaining qualified
prescription drug coverage within the PDP region, including MA-PD
plans, and other PDPs, and must receive CMS approval prior to issuance;
and
(iii) The general public, at least 60 days before the date on which
the non-renewal is effective, by publishing a notice in one or more
newspapers of general circulation in each community or county located
in the Part D plan sponsor's service area.
* * * * *
(b) * * *
(2) * * *
(ii) To each of the Part D plan sponsor's Medicare enrollees by
mail at least 60 days before the date on which the non-renewal is
effective; and
(iii) To the general public, at least 60 days before the date on
which the non-renewal is effective, by publishing a notice in one or
more newspapers of general circulation in each community or county
located in the Part D plan sponsor's service area.
* * * * *
[[Page 1546]]
Subpart L--Effect of Change of Ownership or Leasing of Facilities
During Term of Contract
0
29. Amend Sec. 423.551 by adding paragraph (g) to read as follows:
Sec. 423.551 General provisions.
* * * * *
(g) Sale of beneficiaries not permitted: CMS will not recognize as
a sale or transfer of a PDP line of business (qualifying as a change of
ownership) a transaction that consists solely of the sale or transfer
of individual beneficiaries or groups of beneficiaries enrolled in a
pharmacy benefit package offered by a PDP sponsor apart from the rights
and obligations related to the pharmacy benefit package (PBP).
Subpart M--Grievances, Coverage Determinations, and Appeals
0
30. Amend Sec. 423.560 by adding, in alphabetical order, the
definition for ``Other prescriber'' to read as follows:
Sec. 423.560 Definitions.
* * * * *
Other prescriber means a health care professional other than a
physician who is authorized under State law or other applicable law to
write prescriptions.
* * * * *
0
31. Amend Sec. 423.566 by revising paragraph (c)(3) to read as
follows:
Sec. 423.566 Coverage determinations.
* * * * *
(c) * * *
(3) The prescribing physician or other prescriber, on behalf of the
enrollee.
0
32. Amend Sec. 423.568 by revising paragraph (a) to read as follows:
Sec. 423.568 Standard timeframe and notice requirements for coverage
determinations.
(a) Timeframe for requests for drugs benefits. When a party makes a
request for a drug benefit, the Part D plan sponsor must notify the
enrollee (and the prescribing physician or other prescriber involved,
as appropriate) of its determination as expeditiously as the enrollee's
health condition requires, but no later than 72 hours after the receipt
of the request, or, for an expedited request, the physician's or other
prescriber's supporting statement.
* * * * *
0
33. Amend Sec. 423.570 by--
0
A. Revising paragraph (a).
0
B. Revising paragraph (b).
0
C. Revising paragraph (c)(1).
0
D. Revising paragraph (c)(3) introductory text.
0
E. Revising paragraph (c)(3)(ii).
0
F. Republishing paragraph (d) introductory text.
0
G. Revising paragraph (d)(1).
0
H. Revising paragraph (d)(2) introductory text.
0
I. Revising paragraph (d)(2)(iii).
The revisions read as follows:
Sec. 423.570 Expediting certain coverage determinations.
(a) Request for expedited determination. An enrollee or an
enrollee's prescribing physician or other prescriber may request that a
Part D plan sponsor expedite a coverage determination involving issues
described in Sec. 423.566(b) of this part. This does not include
requests for payment of Part D drugs already furnished.
(b) How to make a request. (1) To ask for an expedited
determination, an enrollee or an enrollee's prescribing physician or
other prescriber on behalf of the enrollee must submit an oral or
written request directly to the Part D plan sponsor or, if applicable,
to the entity responsible for making the determination, as directed by
the Part D plan sponsor.
(2) A prescribing physician or other prescriber may provide oral or
written support for an enrollee's request for an expedited
determination.
(c) * * *
(1) An efficient and convenient means for accepting oral or written
requests submitted by enrollees, prescribing physicians, or other
prescribers.
* * * * *
(3) A means for issuing prompt decisions on expediting a
determination, based on the following requirements:
* * * * *
(ii) For a request made or supported by an enrollee's prescribing
physician or other prescriber, provide an expedited determination if
the physician or other prescriber indicates that applying the standard
timeframe for making a determination may seriously jeopardize the life
or health of the enrollee or the enrollee's ability to regain maximum
function.
(d) Actions following denial. If a Part D plan sponsor denies a
request for expedited determination, it must take the following
actions:
(1) Make the determination within the 72-hour timeframe established
in Sec. 423.568(a) for a standard determination. The 72-hour period
begins on the day the Part D plan sponsor receives the request for
expedited determination, or, for an exceptions request, the physician's
or other prescriber's supporting statement.
(2) Give the enrollee and prescribing physician or other prescriber
prompt oral notice of the denial that--
* * * * *
(iii) Informs the enrollee of the right to resubmit a request for
an expedited determination with the prescribing physician's or other
prescriber's support and
* * * * *
0
34. Amend Sec. 423.572 by revising paragraph (a) to read as follows:
Sec. 423.572 Timeframes and notice requirements for expedited
coverage determinations.
(a) Timeframe for determination and notification. Except as
provided in paragraph (b) of this section, a Part D plan sponsor that
approves a request for expedited determination must make its
determination and notify the enrollee (and the prescribing physician or
other prescriber involved, as appropriate) of its decision, whether
adverse or favorable, as expeditiously as the enrollee's health
condition requires, but no later than 24 hours after receiving the
request, or, for an exceptions request, the physician's or other
prescriber's supporting statement.
* * * * *
0
35. Amend Sec. 423.578 by--
0
A. Revising paragraphs (a) introductory text and (a)(2) introductory
text.
0
B. Revising paragraphs (a)(2)(i) and (a)(3)
0
C. Revising paragraphs (a)(4) introductory text and (a)(5).
0
D. Revising paragraphs (b) introductory text and (b)(2) introductory
text.
0
E. Revising paragraphs (b)(2)(i), (b)(4), (b)(5) introductory text, and
(b)(6).
0
F. Revising paragraphs (c)(3)(i), (c)(4)(i) introductory text, and
(c)(4)(i)(A).
0
G. Revising paragraph (f).
The revisions read as follows:
Sec. 423.578 Exceptions process.
(a) Request for exceptions to a plan's tiered cost-sharing
structure. Each Part D plan sponsor that provides prescription drug
benefits for Part D drugs and manages this benefit through the use of a
tiered formulary must establish and maintain reasonable and complete
exceptions procedures subject to CMS' approval for this type of
coverage determination. The Part D plan sponsor grants an exception
whenever it determines that the non-preferred drug for treatment of the
enrollee's condition is medically necessary, consistent with the
physician's or other prescriber's
[[Page 1547]]
statement under paragraph (a)(4) of this section.
* * * * *
(2) The exceptions criteria of a Part D plan sponsor must include,
but are not limited to--
(i) A description of the criteria a Part D plan sponsor uses to
evaluate a determination made by the enrollee's prescribing physician
or other prescriber under paragraph (a)(4) of this section.
* * * * *
An enrollee or the enrollee's prescribing physician or other
prescriber may file a request for an exception.
(4) A prescribing physician or other prescriber must provide an
oral or written supporting statement that the preferred drug for the
treatment of the enrollee's conditions--
* * * * *
(5) If the physician or other prescriber provides an oral
supporting statement, the Part D plan sponsor may require the physician
or other prescriber to subsequently provide a written supporting
statement to demonstrate the medical necessity of the drug. The Part D
plan sponsor may require the prescribing physician or other prescriber
to provide additional supporting medical documentation as part of the
written follow-up.
* * * * *
(b) Request for exceptions involving a non-formulary Part D drug.
Each Part D plan sponsor that provides prescription drug benefits for
Part D drugs and manages this benefit through the use of a formulary
must establish and maintain exceptions procedures subject to CMS'
approval for receipt of an off-formulary drug. The Part D plan sponsor
must grant an exception whenever it determines that the drug is
medically necessary, consistent with the physician's or other
prescriber's statement under paragraph (b)(5) of this section, and that
the drug would be covered but for the fact that it is an off-formulary
drug. Formulary use includes the application of cost utilization tools,
such as a dose restriction, including the dosage form, that causes a
particular Part D drug not to be covered for the number of doses
prescribed or a step therapy requirement that causes a particular Part
D drug not to be covered until the requirements of the plan's coverage
policy are met, or a therapeutic substitution requirement.
* * * * *
(2) The exception criteria of a Part D plan sponsor must include,
but are not limited to--
(i) A description of the criteria a Part D plan sponsor uses to
evaluate a prescribing physician's or other prescriber's determination
made under paragraph (b)(5) of this section;
* * * * *
(4) An enrollee, the enrollee's appointed representative, or the
prescribing physician or other prescriber (on behalf of the enrollee)
may file a request for an exception.
(5) A prescribing physician or other prescriber must provide an
oral or written supporting statement that the requested prescription
drug is medically necessary to treat the enrollee's disease or medical
condition because--
* * * * *
(6) If the physician or other prescriber provides an oral
supporting statement, the Part D plan sponsor may require the physician
or other prescriber to subsequently provide a written supporting
statement. The Part D plan sponsor may require the prescribing
physician or other prescriber to provide additional supporting medical
documentation as part of the written follow-up.
(c) * * *
(3) * * *
(i) The enrollee's prescribing physician or other prescriber
continues to prescribe the drug.
* * * * *
(4) * * *
(i) The Part D plan sponsor may not require the enrollee to request
approval for a refill, or a new prescription to continue using the Part
D prescription drug after the refills for the initial prescription are
exhausted, as long as--
(A) The enrollee's prescribing physician or other prescriber
continues to prescribe the drug;
* * * * *
(f) Implication of the physician's or other prescriber's supporting
statement. Nothing in this section should be construed to mean that the
physician's or other prescriber's supporting statement required for an
exceptions request will result in an automatic favorable decision.
0
36. Revise Sec. 423.580 to read as follows:
Sec. 423.580 Right to a redetermination.
An enrollee who has received a coverage determination (including
one that is reopened and revised as described in Sec. 423.634) may
request that it be redetermined under the procedures described in Sec.
423.582, which address requests for a standard redetermination. The
prescribing physician or other prescriber (acting on behalf of an
enrollee), upon providing notice to the enrollee, may request a
standard redetermination under the procedures described in Sec.
423.582. An enrollee or an enrollee's prescribing physician or other
prescriber (acting on behalf of an enrollee) may request an expedited
redetermination as specified in Sec. 423.584.
0
37. Revise Sec. 423.582 to read as follows:
Sec. 423.582 Request for a standard redetermination.
(a) Method and place for filing a request. An enrollee or an
enrollee's prescribing physician or other prescriber (acting on behalf
of the enrollee) must ask for a redetermination by making a written
request with the Part D plan sponsor that made the coverage
determination. The Part D plan sponsor may adopt a policy for accepting
oral requests.
(b) Timeframe for filing a request. Except as provided in paragraph
(c) of this section, a request for a redetermination must be filed
within 60 calendar days from the date of the notice of the coverage
determination.
(c) Extending the time for filing a request--(1) General rule. If
an enrollee or prescribing physician or other prescriber acting on
behalf of an enrollee shows good cause, the Part D plan sponsor may
extend the timeframe for filing a request for redetermination.
(2) How to request an extension of timeframe. If the 60-day period
in which to file a request for a redetermination has expired, an
enrollee or a prescribing physician or other prescriber acting on
behalf of an enrollee may file a request for redetermination and
extension of time frame with the Part D plan sponsor. The request for
redetermination and to extend the timeframe must--
(i) Be in writing; and
(ii) State why the request for redetermination was not filed on
time.
(d) Withdrawing a request. The person who files a request for
redetermination may withdraw it by filing a written request with the
Part D sponsor.
0
38. Amend Sec. 423.584 by revising paragraphs (a), (b), (c)(2)(ii),
and (d)(2)(iii) to read as follows:
Sec. 423.584 Expediting certain redeterminations.
(a) Who may request an expedited redetermination. An enrollee or an
enrollee's prescribing physician or other prescriber may request that a
Part D plan sponsor expedite a redetermination that involves the issues
specified in Sec. 423.566(b). (This does not include requests for
payment of drugs already furnished.)
[[Page 1548]]
(b) How to make a request. (1) To ask for an expedited
redetermination, an enrollee or a prescribing physician or other
prescriber acting on behalf of an enrollee must submit an oral or
written request directly to the Part D plan sponsor or, if applicable,
to the entity responsible for making the redetermination, as directed
by the Part D plan sponsor.
(2) A prescribing physician or other prescriber may provide oral or
written support for an enrollee's request for an expedited
redetermination.
(c) * * *
(2) * * *
(ii) For a request made or supported by a prescribing physician or
other prescriber, the Part D plan sponsor must provide an expedited
redetermination if the physician or other prescriber indicates that
applying the standard timeframe for conducting a redetermination may
seriously jeopardize the life or health of the enrollee or the
enrollee's ability to regain maximum function.
(d) * * *
(2) * * *
(iii) Informs the enrollee of the right to resubmit a request for
an expedited redetermination with the prescribing physician's or other
prescriber's support; and
* * * * *
0
39. Section 423.586 is revised to read as follows:
Sec. 423.586 Opportunity to submit evidence.
The Part D plan sponsor must provide the enrollee or the
prescribing physician or other prescriber, as appropriate, with a
reasonable opportunity to present evidence and allegations of fact or
law, related to the issue in dispute, in person as well as in writing.
In the case of an expedited redetermination, the opportunity to present
evidence is limited by the short timeframe for making a decision.
Therefore, the Part D plan sponsor must inform the enrollee or the
prescribing physician or other prescriber of the conditions for
submitting the evidence.
0
40. Amend Sec. 423.590 by revising paragraphs (d)(1), (e), and (f)(2)
to read as follows:
Sec. 423.590 Timeframes and responsibility for making
redeterminations.
* * * * *
(d) Expedited redetermination. (1) Timeframe. A Part D plan sponsor
that approves a request for expedited redetermination must complete its
redetermination and give the enrollee (and the prescribing physician or
other prescriber involved, as appropriate), notice of its decision as
expeditiously as the enrollee's health condition requires but no later
than 72 hours after receiving the request.
* * * * *
(e) Failure to meet timeframe for expedited redetermination. If the
Part D plan sponsor fails to provide the enrollee or the prescribing
physician or other prescriber, as appropriate, with the results of its
expedited redetermination within the timeframe described in paragraph
(d) of this section, the failure constitutes an adverse redetermination
decision, and the Part D plan sponsor must forward the enrollee's
request to the IRE within 24 hours of the expiration of the
adjudication timeframe.
(f) * * *
(2) When the issue is the denial of coverage based on a lack of
medical necessity (or any substantively equivalent term used to
describe the concept of medical necessity), the redetermination must be
made by a physician with expertise in the field of medicine that is
appropriate for the services at issue. The physician making the
redetermination need not, in all cases, be of the same specialty or
subspecialty as the prescribing physician or other prescriber.
* * * * *
0
41. Amend Sec. 423.600 by revising paragraphs (b), (c), and (e) to
read as follows:
Sec. 423.600 Reconsideration by an independent review entity (IRE).
* * * * *
(b) When an enrollee files an appeal, the IRE is required to
solicit the views of the prescribing physician or other prescriber. The
IRE may solicit the views of the prescribing physician or other
prescriber orally or in writing. A written account of the prescribing
physician's or other prescriber's views (prepared by either the
prescribing physician, other prescriber, or IRE, as appropriate) must
be contained in the IRE's record.
(c) In order for an enrollee to request an IRE reconsideration of a
determination by a Part D plan sponsor not to provide for a Part D drug
that is not on the formulary, the prescribing physician or other
prescriber must determine that all covered Part D drugs on any tier of
the formulary for treatment of the same condition would not be as
effective for the individual as the non-formulary drug, would have
adverse effects for the individual, or both.
* * * * *
(e) When the issue is the denial of coverage based on a lack of
medical necessity (or any substantively equivalent term used to
describe the concept of medical necessity), the reconsideration must be
made by a physician with expertise in the field of medicine that is
appropriate for the services at issue. The physician making the
reconsideration need not, in all cases, be of the same specialty or
subspecialty as the prescribing physician or other prescriber.
Subpart O--Intermediate Sanctions
0
42. Amend Sec. 423.760 by--
0
A. Redesignating paragraphs (b)(2) and (b)(3) as paragraphs (b)(3) and
(b)(4), respectively.
0
B. Adding new paragraph (b)(2) to read as follows:
Sec. 423.760 Determinations regarding the amount of civil money
penalties and assessment imposed by CMS.
* * * * *
(b) * * *
(2) If the deficiency on which the determination is based has
directly adversely affected (or has the substantial likelihood of
adversely affecting) one or more Part D enrollees, CMS may calculate a
CMP of up to $25,000 for each Part D enrollee directly adversely
affected (or with a substantial likelihood of being adversely affected)
by a deficiency .
* * * * *
Subpart P--Premiums and Cost-Sharing Subsidies for Low-Income
Individuals
0
43. Amend Sec. 423.772 by adding the definition of ``Best available
evidence'', in alphabetical order, to read as follows:
Sec. 423.772 Definitions.
* * * * *
Best available evidence means evidence recognized by CMS as
documentation or other information that is directly tied to State or
Social Security Administration systems that confirm an individual's
low-income subsidy eligibility status, and that must be accepted and
used by the Part D sponsor to change low-income subsidy status.
* * * * *
0
44. Amend Sec. 423.782 by adding new paragraph (c) to read as follows:
Sec. 423.782 Cost-sharing subsidy.
* * * * *
(c) When the out-of-pocket cost for a covered Part D drug under a
Part D sponsor's plan benefit package is less than the maximum
allowable copayment, coinsurance or deductible amounts under paragraphs
(a) and (b) of
[[Page 1549]]
this section, the Part D sponsor may only charge the lower benefit
package amount.
0
45. Amend Sec. 423.800 by--
0
A. Revising paragraph (b).
0
B. Adding a new paragraph (d).
The revision and addition read as follows:
Sec. 423.800 Administration of subsidy program.
* * * * *
(b) Reduction of premium or cost-sharing by PDP sponsor or
organization. Based on information provided by CMS under paragraph (a)
of this section, or obtained under paragraph (d) of this section, the
Part D sponsor offering the Part D plan in which a subsidy eligible
individual is enrolled must reduce the individual's premiums and cost-
sharing as applicable, and provide information to CMS on the amount of
those reductions, in a manner determined by CMS. The Part D sponsor
must track the application of the subsidies under this subpart to be
applied to the out-of-pocket threshold.
* * * * *
(d) Use of the best available evidence process to establish cost-
sharing. Part D sponsors must--
(1) Accept best available evidence as defined in Sec. 423.772 of
this part received from beneficiaries or other individuals acting
directly on their behalf; and
(2) Update the subsidy eligible individual's LIS status. and
respond to requests for assistance in securing acceptable evidence of
subsidy eligibility from beneficiaries or other individuals acting
directly on their behalf in accordance with the process(es) established
by CMS, and within the reasonable timeframe(s) as determined by CMS.
Subpart R--Payment to Sponsors of Retiree Prescription Drug Plans
0
46. Section 423.882 is amended by--
0
A. Adding the definition of ``actually paid'' in alphabetical order.
0
B. Adding the definition of ``administrative costs'' in alphabetical
order.
0
C. Revising the definition of ``allowable retiree costs''.
0
D. Revising the definition of ``gross covered retiree plan-related
prescription drug costs'', or ``gross retiree costs''.
The additions and revisions read as follows:
Sec. 423.882 Definitions.
* * * * *
Actually paid means that the costs must be actually incurred by the
qualified retiree prescription drug plan and must be net of any direct
or indirect remuneration (including discounts, charge backs or rebates,
cash discounts, free goods contingent on a purchase agreement, up-front
payments, coupons, goods in kind, free or reduced-price services,
grants, or other price concessions or similar benefits offered to some
or all purchasers) from any manufacturer or pharmacy that would serve
to decrease the costs incurred under the qualified retiree prescription
drug plan.
Administrative costs means costs incurred by a qualified retiree
prescription drug plan that are not drug costs incurred to purchase or
reimburse the purchase of Part D drugs.
Allowable retiree costs means the subset of gross covered retiree
plan-related prescription drug costs actually paid by the sponsor of
the qualified retiree prescription drug plan or by (or on behalf of) a
qualifying covered retiree under the plan.
* * * * *
Gross covered retiree plan-related prescription drug costs, or
gross retiree costs, means those Part D drug costs incurred under a
qualified retiree prescription drug plan, excluding administrative
costs, but including dispensing fees, during the coverage year. They
equal the sum of the following:
(1) The share of prices paid by the qualified retiree prescription
drug plan that is received as reimbursement by the pharmacy or by an
intermediary contracting organization, and reimbursement paid to
indemnify a qualifying covered retiree when the reimbursement is
associated with a qualifying covered retiree obtaining Part D drugs
under the qualified retiree prescription drug plan.
(2) All amounts paid under the qualified retiree prescription drug
plan by or on behalf of a qualifying covered retiree (such as the
deductible, coinsurance, or cost sharing) in order to obtain Part D
drugs that are covered under the qualified retiree prescription drug
plan.
* * * * *
0
47. Revise Sec. 423.888(b)(5)(i) to read as follows:
Sec. 423.888 Payment methods, including provision of necessary
information.
* * * * *
(b) * * *
(5) Special rule for insured plans. (i) Interim Payments. Sponsors
of group health plans that provide benefits through health insurance
coverage (as defined in 45 CFR 144.103) and that choose either monthly
payments, quarterly payments or an interim annual payment in paragraphs
(b)(1) and (b)(2) of this section, may elect to determine gross covered
plan-related retiree prescription drug costs for purposes of the
monthly, quarterly or interim annual payments based on a portion of the
premium costs paid by the sponsor (or by the qualifying covered
retirees) for coverage of the covered retirees under the group health
plan. Premium costs that are determined, using generally accepted
actuarial principles, may be attributable to the gross covered plan-
related retiree prescription drug costs incurred by the health
insurance issuer (as defined in 45 CFR 144.103) for the sponsor's
qualifying covered retirees, except that administrative costs and risk
charges must be subtracted from the premium.
* * * * *
Authority: (Catalog of Federal Domestic Assistance Program No.
93.778, Medical Assistance Program) (Catalog of Federal Domestic
Assistance Program No. 93.773, Medicare--Hospital Insurance; and
Program No. 93.774, Medicare--Supplementary Medical Insurance
Program)
Dated: November 7, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: November 13, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E9-148 Filed 1-6-09; 4:15 pm]
BILLING CODE 4120-01-P